Economic Crime and Corporate Transparency Bill

Debate between Liam Byrne and Baroness Hodge of Barking

Consideration of Lords message
Wednesday 25th October 2023 Commons Chamber

[Dame Margaret Hodge]

That is an interesting point. The simple response is that, obviously, the drafting of the “failure to prevent” offence needs further improvement to ensure that it covers that sort of instance.

There were similar arguments about the burden on SMEs when we introduced the Bribery Act 2010. In 2015, a survey of SMEs found that nine out of 10 had no concerns or problems with the Act, and 90% also said that it did not affect their ability to export. Although fears are expressed before legislation is introduced, once it is on the statute book people find that it actually helps them. Under the terms of the Bill, SMEs already have an appropriate defence, as the Minister well knows: that they should only take actions that are reasonable in all circumstances. That test of reasonableness would protect microbusinesses and SMEs from having to engage in overly bureaucratic procedures.

Although the argument is overwhelming, the Minister does not agree. We had hoped that the Government would support and accept our amendment. If they were to do so, we would not put all these amendments to the vote. This means that the next Government—a Labour Government, we all hope—will seize the opportunity that the Minister has missed and grasp the issue. Labour will become the anti-corruption champions, saving our country and our economy.

This Bill arrived in a sorry state and we have improved it—I accept that—with the identification doctrine, clauses on strategic lawsuits against public participation, the improvement of accountability with an annual report to Parliament, and the reluctant acceptance that there may be an increase in fees for Companies House. But there are still large gaps. Trusts have not been covered, as they should be, and authorised corporate services providers could end up with a future dud register. Cost caps, which other hon. Members have alluded to, are not in there, the whistleblower regime is not in place, and asset seizure still has to be tackled.

We hear whispers that there is a third economic crime Bill. I am pleased about that, but if we had achieved more with this Bill, we might not have needed another one. After all the work that all of us have done to achieve cross-party consensus, and given the values that we all share, I would hope that the Minister would be bold enough to accept our tiny little compromise and put this Bill to bed so that the proposed legislation could be passed by the time we prorogue.

[Liam Byrne]

I rise to speak in favour of the amendment tabled by my right hon. Friend the Member for Barking (Dame Margaret Hodge), which gives me an opportunity to thank her for her extraordinary leadership on this agenda. Our country is safer and stronger for the work that she has helped lead in this House over a long period.

Like other right hon. and hon. Members, I am grateful to the Minister for ensuring that, by and large, we have approached this Bill in the spirit of compromise. My right hon. Friend is absolutely right to say that, unfortunately, the Bill arrived in this place in a sorry state. Of course, the best way to examine that is to look at the fantastic manifesto of the all-party parliamentary group on anti-corruption and responsible tax, which, of course, the Minister used to co-chair. When I look at that manifesto, which we launched together in Westminster Abbey not too long ago, I see that this Bill covers a fair number of its proposals, but not all of them. That is why something of a mystery still hangs over the Chamber today, and that mystery is that we know that the Minister probably wanted to go much further in this Bill. He has been collegiate enough not to explain to us, either in public or in private, just how his hands were tied and why he has pulled his punches on so many of the policy proposals, including those that we are debating this afternoon.

I want to underline why the “failure to prevent” clauses are so important and why the responsibility for failing to prevent fraud and money laundering should apply to all companies, not just 9% of UK plc. We know, as my right hon. Friend said, that unfortunately this country is now one of the two global centres for money laundering and fraud. That is a badge of shame. There are think-tanks in places such as Washington that now write reports about what they call the UK kleptocracy problem. That is because we have left our financial services and Companies House too weak to police what is a growing problem.

To underline how fast the risk to our country is growing, I asked the House of Commons Library to look at the amount of foreign direct investment that was coming into our country. Foreign direct investment comes into Britain through companies that are set up at a moment’s notice, from UK offshore accounts, from dictatorships and from countries that are only partially free, and the reality is that that money has grown fivefold since 2010. A quarter of a trillion pounds of foreign direct investment has come into Britain from UK offshore accounts, dictatorships and countries that are only partially free. Overwhelmingly, I am sure, that money is clean and good, but we all know in this House that some of it is not. We have a responsibility in this place to make sure that our regime for policing corrupt money is as strong as it possibly can be. This Bill, although it makes progress, still leaves weaknesses in the argument.

The Minister has based his arguments more recently on whether we are creating undue, over-burdensome costs to business. Like him, I was in business previously—I was in the wrong place at the wrong time—and was elected to this place in 2004. I know what it is like to grow a business from two people around a table to a multi-million pound enterprise that employs lots people. I know about the responsibilities on company directors, but we grant special privileges to company directors in this country and we grant special privileges to companies. That regime was introduced in 1855. When Viscount Palmerston moved that legislation through the House, he said that the Limited Liability Act 1855 was important, because it would act for the common good of the country. Yet, if we have a regime that does not ensure that directors have responsibilities that match those privileges, frankly, that common good is undermined.

As my right hon. Friend said, we already have a regime in this country that bestows some important responsibilities on directors, including the failure to prevent bribery and the failure to prevent tax evasion. Therefore, there are already important regulatory requirements on directors, which we as a House have judged to be essential to keep our economy clean. Asking those directors to take one more responsibility, which is to prevent fraud, is not a significant extra burden.

[Dame Margaret Hodge]

Does my right hon. Friend not agree that if we are to have a successful financial services sector, we will never get it on the back of dirty money? Therefore, it is ever more important that, in relation to both fraud and money laundering, we have a “failure to prevent” offence, which is not about banging up people in prison but about changing the behaviour of companies and those who work in them?

[Liam Byrne]

My right hon. Friend is absolutely right. This is a point of cross-party consensus. I know it is a point of cross-party consensus because it was the Minister who used to use precisely the same argument to argue for some of the changes that we see in the Bill.

We all know that our country does well, because, by and large, we have a reputation for clean trade around the world. When companies file and incorporate in this country, that is a credential that does them well around the world. That is a credential that we must do everything in this House to protect, which is why the amendment is so important. We cannot leave a weakness in our armour as crime and fraud multiplies.

The Minister said that the proposal would be a cost to British business that we could not withstand or sustain, but the truth is that, while it might be a cost to some British businesses, it would also be a saving to British business, to the British economy and to British taxpayers, because it is always cheaper and more effective to prevent fraud in the first place than to have to police it or to prosecute fraud after the event. When 64% of businesses—small businesses—in this country are victims of fraud, we can only imagine how widespread that cost of fraud has now become. That average is much higher than international averages and therefore there is an additional argument that we need to go that one step further to make sure that we are doing everything in our power to prevent fraud from arising in the first place.

All we ask in this amendment is for the Minister to face the facts. He should bring the facts together, put them in a report, assess them, analyse them and present some conclusions to the House. How can we have a situation where the Minister is essentially asking for the freedom to look away? That simply cannot be the basis of good policy. I am grateful to my new colleagues on the Business and Trade Committee who agreed yesterday that we will ask representatives of Companies House to come before us for hearings. Frankly, if the Minister is not prepared to put the facts around fraud in one place, I shall ask the Select Committee to do the job for him.

Economic Crime and Corporate Transparency Bill

Debate between Liam Byrne and Baroness Hodge of Barking

Report stage
Tuesday 24th January 2023 Commons Chamber

[Liam Byrne]

Does my right hon. Friend agree that if the Minister does not agree with new clause 20, he is in effect asking for powers without giving the House any confidence that we can actually summon the resources to implement those powers if we so grant them?

[Dame Margaret Hodge]

Absolutely. The Minister always assures us that he will be on top of it, but he will not be there forever, much as he might like to be. We therefore have to embed these issues in legislation, otherwise we will never to the position where funding for the enforcement of economic crime will be a priority for a Government of any colour. That is why setting it here is really important. I have to say to the Minister that I just do not believe that the figures are not around. I think that by this stage in the cycle, he will have figures that demonstrate how much is required. If we have more duties, it may go up. That is not a bad thing, because if it goes up it means we will be more effective at policing the system, and therefore preventing and detecting.

Economic Crime and Corporate Transparency Bill (Eighteenth sitting)

Debate between Liam Byrne and Baroness Hodge of Barking

Committee stage
Thursday 24th November 2022 Public Bill Committees

[Liam Byrne]

The hon. Member is not just a practising solicitor, but clearly also a recovering solicitor. The SRA has been on the front foot in wanting to crack down on some of the bad behaviour. We had this debate in January on the Floor of the House; it was one of the best debates I have seen in 18 years in this place. What became clear was that, although there are some in the legal profession who do have to operate on that cab-rank rule—they have to step forward and plea in favour of people who are at the front of the queue—there are others who have choices about who they represent. The truth is that here in London there are groups of lawyers, such as Schillings—there are many others—who are making millions out of some very bad people. In fact, those people are so bad that they have subsequently been sanctioned, in this country and around the world.

[Dame Margaret Hodge]

Does my right hon. Friend agree that if the SRA were to fine those solicitors who engaged in that sort of false litigation—it is phony litigation—it would be a little cost on business given the millions they are making? Abramovich, for example, is worth, as far as we know, £12 billion. If he spends £50 million on a legal case, it is peanuts to him, and it is certainly peanuts to the solicitors who are subject to fines by the SRA.

[Liam Byrne]

My right hon. Friend is absolutely right that the whole strategy behind a strategic legal action against the public participant is not to win: they just want to damage their opponent to such an extent that they cannot afford to tell the truth.

It has been a disappointing debate, and it will disappoint many of the people who are watching and following it. It is unfortunate timing, because the anti-SLAPP coalition is coming together for its second annual conference on Monday, when it will publish a draft and more comprehensive law. We have not had a date from the Minister as to when the Government may have listened and brought forward a more comprehensive argument. If the argument is that the measures I am moving today are too fragmented or nugatory, that is fine, but let us hear the date for when a more comprehensive solution will be proposed. The Secretary of State for Justice has said it will be forthcoming but has not provided the date. That was the point of the new clauses: we want to know the date.

Economic Crime and Corporate Transparency Bill (Eleventh sitting)

Debate between Liam Byrne and Baroness Hodge of Barking

Committee stage
Tuesday 15th November 2022 Public Bill Committees

[Dame Margaret Hodge]

I know it is, but most of that comes from the economic crime levy. The £300 million comes from the economic crime levy; £100 million comes from the Government’s coffers. Correct me if I am wrong, but that is my understanding of it, so a third of that—£32 million or £33 million—is the Government’s annual contribution out of taxation. That is where I got the figure from. If I am wrong, I stand to be corrected, but that is my understanding.

Looking across the world, even the British Virgin Islands, our favourite secrecy jurisdiction, charges £1,000 to people who wish to create a company there; I cannot think that that has put anyone off using the BVI if they want a secrecy jurisdiction to support them. Australia charges £247; in the USA, in California, it is £150; in Delaware, another secrecy jurisdiction, it is £590; in New York, £570; Italy, £2,000; and Germany, £383. Even with our new clause, we would still be a cheap place in which to do business.

That is all I need to say at this point. We brought in new clause 40 because we think that should also be embedded. The Minister may tell me that it happens, but we think it should be embedded in legislation so that no future Government are ever tempted to take the money they earn from fees and put it towards other purposes. I hope that the Minister will accept that.

Again, correct me if I am wrong, but I have not seen anything in legislation that ensures that money raised in fees goes directly to enforcement. The Minister may want to do that, but his successors may not feel the same. The issue is never a high political priority so it is important that we get sustainability for the issue over time. That is the reason for the new clause.

[Liam Byrne (Birmingham, Hodge Hill) (Lab)]

It is a pleasure to speak with you in the Chair, Mr Robertson. It is fantastic for the Minister to be able to kick off today with this debate—surely there has never been a Minister as lucky as this one is in taking this Bill through Committee. Here we have an entire Opposition side of the Committee united in wanting to give the Minister the tools to do the job—the job for which he has argued for years and years in this House.

We want to send the Minister into the spending review, with his colleague the Chancellor of the Exchequer, with his hands bound. We want to ensure that he goes into those conversations with the law of the land changed, so that he is required to put up the fees for Companies House and actually has the money he needs to do the job. We know that that is not going to damage the business investment environment in this country. How? Because it could not get any worse than it is today.

The business investment level in this country over the last 12 years has now been the worst in the G7, so it is unlikely to get any worse if fees at Companies House are put up a little bit: it is already spectacularly bad. That underlines a simple point: that the level of economic crime in this country is now so infamous around the world that it could be damaging the level of business investment here. If we are known around the world—certainly, in Washington and in European capitals—as a global epicentre of dirty money, how does that help us become a great, global hub of business investment in years to come? Obviously, it does not. There is a competitive advantage to be had by becoming one of the great capitals of clean trade. Here we are, an Opposition united in wanting to help the Minister achieve that ambition and make sure that he has the resources to do the job.

In the public evidence sessions, we heard a clear set of arguments as to why these amendments need to be made. We heard that our country has now become the centre of the Russian laundromat, the Troika laundromat and the Azerbaijan laundromat. Indeed, the Security Minister and I were on the Foreign Affairs Committee together when we heard the most appalling evidence that some of the biggest money-laundering scandals have involved UK corporate structures more than anything else; I think I am right that about 40% of the billions laundered through Danske Bank came through UK corporate structures. That is truly a mark of shame, and why Bill Browder was absolutely right when said in evidence to this Committee that it is appalling—a matter of shame—that there has been only one prosecution for money-laundering around economic crime in this country. That truly is an appalling record of law enforcement.

Worse than that, we also heard from the Independent Reviewer of Terrorism Legislation that the situation is not simply bad news for economic crime, but a national security issue. When the Independent Reviewer of Terrorism Legislation tells the Committee that it is a matter of national security that we clean up the dark mass of economic crime in this country, we as Members of Parliament ought to listen and do something about it. Then we heard from a range of police specialists who said, first, that they thought the problem was getting much worse quite quickly, and secondly, that they did not have the resources they needed to enforce the law in this area.

All that evidence points in one direction: Companies House needs more money. When we took evidence from representatives of Companies House, we heard, startlingly, that they have not even discussed their budget with the Treasury for the next financial year, which is due to start in only a few months’ time. They mooted the idea of asking for cash for an extra 100 people, which the dogs in the street know is not going to be enough to enforce the measures in the Bill.

With all his native cunning and wit, the Minister needs to find a way to make the concessions the Opposition are asking for and to agree to the amendment, so that he can be the great, historic, legendary, reforming Minister who took the bull by the horns once and for all and helped make sure that this country is once more renowned around the world as a capital of clean trade—all because of the efforts, cunning and wisdom of the Minister in accepting the amendment before him today.

Economic Crime and Corporate Transparency Bill (Tenth sitting)

Debate between Liam Byrne and Baroness Hodge of Barking

Committee stage
Tuesday 8th November 2022 Public Bill Committees

[Dame Margaret Hodge]

The Minister is misinterpreting our approach. I am sorry if he reads it that way, but I agree that we are not asking for 100%. He calls it a risk-based assessment; I call it a risk assessment. Apologies for the difference in language.

[Liam Byrne]

If we were having this debate in my constituency, my constituents would say to me and, indeed, to the Minister, “We want to hire a police officer to stop crime.” If we look at a definition of what a police officer does, they maintain law and order in local areas, prevent crime, reduce fear of crime and improve the quality of life for all citizens. We want Companies House to stop economic crime and that is what my right hon. Friend’s amendments seek to achieve.

[Dame Margaret Hodge]

And presumably the policeman does not knock on every door.

--- Later in debate ---

[Dame Margaret Hodge]

I have to say we disagree, but I will come back to this issue. I think our proposals strengthen the Bill.

I tabled my amendments to clause 88 because I do not support the wording of

“as the registrar considers appropriate”.

I have to say to the Minister that we discovered in this morning’s sitting that the company registrar has so far registered 3,000 properties for a register that has now been in place since August. In three months, she has done 3,000, but there are 138,000 to deal with. At that rate—if she does 12,000 a year—she will be there till doomsday, so putting a little bomb underneath her to ensure that she takes action is important.

[Liam Byrne]

My right hon. Friend is making a brilliant speech. If anything, the Minister has caused more alarm than he might have intended this afternoon by referring to the language in the Bill that says the registrar must take account of the information that she holds. There is no way that we would ask a police officer to police Hodge Hill simply with reference to the information that that police officer happens to hold. We would ask the police officer to look at the crime environment in the constituency as a whole, taking account of all kinds of perspectives, not simply the information that he or she happened to have in their little black book.

[Dame Margaret Hodge]

I will move on to new clause 37, which has the aim of checking that the stated person of significant control really is the person who controls the company. Powers to get information, to reject documents, to require information and to remove documents all sit in the Bill. The new clause would ensure that, through a risk-based assessment—I just reiterate that for the Minister—Companies House would proactively check that the person named as the PSC was the PSC in reality. Current legislation requires the ID verification of a company owner, but not the verification of their status as a company owner, so the risk remains that nominees will continue to be put forward as owners of companies despite the real control being elsewhere. The risk is heightened if the Minister does not move to ensure that company service providers are properly regulated, supervised and vetted before the whole system comes into force.

In the current system, there are endless examples that demonstrate the extent of the problem that the Minister and the Government are trying to tackle—we are trying to contribute to that process. One is the famous dentist in Belgium. From an interrogation of the Companies House register, we know that five beneficial owners control more than 6,000 companies, which is a huge red flag. Some 4,000 of them are under the age of two, and 400,000 companies—almost 10% of the total—still do not declare a person of significant control. We have the Azerbaijan laundromat example, where a lorry driver in Baku was named as the person of significant control and had no idea that kleptocrats from Azerbaijan were taking all the money out of the banks and money laundering it elsewhere.

There is one filing in Companies House for which I thought I would name the person of significant control. The company is called Global Risks Reduction Funding Ltd, and the name is listed as—I will take a deep breath—

“Neutral-Claimant-Federal-Witness-Director-Captain-Postmaster-Bank-Banker-Plenipotentiary-Notary-Judge-Vassalee For The Vessel-Phouthone-Thone: Siharath.”

I do not think anybody has questioned that as the person of significant control. The whole thing is absurd.

An important point for the Minister is that, in 2019, Transparency International did a quick Google search and found 23 active company service providers that were offering the service of nominee persons of significant control—that was one quick search of one directory. When Global Witness undertook research on Scottish limited partnerships, it found that 40% of the beneficial owners of Scottish limited partnerships were either a national of a former Soviet country, or a company incorporated in the former Soviet Union.

Economic Crime and Corporate Transparency Bill (Ninth sitting)

Debate between Liam Byrne and Baroness Hodge of Barking

Committee stage
Tuesday 8th November 2022 Public Bill Committees

[Dame Margaret Hodge]

Ah, that is a valid point, and I think the article deals with it. Some entities will own more than a few properties, but—sorry, I am just looking to see whether the article does make that point. The article demonstrates the enormous importance of Executive action. That is why the Opposition feel strongly that action should take place; there is no point in just putting legislation in place. There is a desire to monitor that action, and toughen up the provision to ensure that the action happens. I hope that the Minister bears that in mind. No matter how many entities own more than one property, 3,000 is still a long way from the 138,000, assuming that figure is accurate.

I am getting muddled by all these amendments. Will the Minister or his officials provide us with a list of what information will be on the register? What will we see? If we had that, we could take a view on whether that information is sufficient for all our purposes.

[Liam Byrne]

It is a pleasure to see you in the Chair, Ms Bardell. I fully appreciate the Government’s need to table amendments—the grind of Committee exposes all kinds of opportunities to improve and strengthen legislation—but this is a good example of the kind of measure that it would have been helpful to see at the beginning of the process, not halfway through, not least because we are all worried about Companies House and its capacity to hunt and root out badness. All of us have in our time, and in our own way, relied on journalists’ investigative capacity to flag bad activity. It is important to the Opposition and, I am sure, the Government, to hear from journalists and investigators on whether the measures that the Minister is introducing jeopardise or constrain their ability to conduct the investigations that they have carried out so admirably over the last few years.

I hope that the Minister will take up the suggestion of my right hon. Friend the Member for Barking and set out very clearly for us what information will be available. The whole Committee would be interested to hear, perhaps informally, from journalists on whether that information will constrain their ability to investigate; we can then decide whether to come back to this issue on Report.

Economic Crime and Corporate Transparency Bill (Seventh sitting)

Debate between Liam Byrne and Baroness Hodge of Barking

Committee stage
Thursday 3rd November 2022 Public Bill Committees

[Liam Byrne]

The Minister probably did not intend to set hares running, but he certainly has with his suggestions this morning. I know he will be alive to the Foreign Affairs Committee report on illicit finance that was published under the chairmanship of the right hon. and gallant Member for Tonbridge and Malling (Tom Tugendhat), who is now the Minister for Security, but I wish to share some of its headlines to underline a point that was wholly missing from the Minister’s presentation.

Let us start with the really bad news. First, the Select Committee concluded that

“assets laundered through the UK are financing President Putin’s war in Ukraine.”

Secondly, the report said:

“The Government’s unwillingness to bring forward legislation to stem the flow of dirty money is likely to have contributed to the belief in Russia that the UK is a safe haven for corrupt wealth.”

It is very welcome that the Government introduced sanctions and have brought forward this Bill, but I am afraid the Foreign Affairs Committee came to the conclusion that our sanctions regime was “underprepared and under-resourced.” We on the Select Committee found that there was not the capacity in the FCDO to match the speed and power of the sanctions regime brought into force by our American colleagues and, indeed, the EU. That is why the House was treated to the spectacle of a piece of enabling legislation that allowed us simply to copy and paste the sanctions regime from other countries into UK law.

There is a serious worry that the FCDO is not equipped to drive through the requisite disqualification of directors at the speed at which it should if it takes decisions on sanctions. I hear what the Minister says about creating some—I guess he would say—safeguards against the automatic suspension of directors, but in the absence of such a regime there is a real concern about an enforcement gap, because the FCDO sanctions and compliance team simply does not have the capacity to work things through with Companies House to ensure that the consequentials are followed through and that directors are disqualified when it is appropriate.

Among the measures that we in the House have previously invented are some of the provisions that I took through in the UK Borders Act 2007. We basically wrote into law the automatic consideration of sanctions such as the suspension of directorships. Many Opposition Members would be an awful lot more confident that bad people would be disqualified from directorships if they were sanctioned if we had some kind of legislative provision that created a duty, and therefore a burden, on Ministers and their officials to automatically consider people for the suspension of their directorships if a sanction of any description was imposed upon them.

This Committee is a chance for us to air different points of view about how we ensure that, as the Minister wants, London is a world capital of clean trade. I put this case before him so that he can reflect on it and perhaps come back to the Committee with further thoughts.

[Dame Margaret Hodge]

It is a pleasure to serve under your chairship, Ms Elliott.

I rise to speak to amendment 83. I did not quite understand the Minister’s attack on or dismissal of it on the basis that it was somehow an attempt to provide a detailed way for authorities to act. That is way beyond what we are attempting to do; all we want to do is make sure the authorities are aware. The Minister and I know, from working in this policy area for a long, long time, how poor all the enforcement agencies are at sharing information. When whistleblowers and others provide information about wrongdoing, too often that falls between the various enforcement agencies, gets lost and nothing ever gets done. We are not here to tell those agencies how to carry out their work, but to ensure that there is better communication.

The amendment addresses some of the issues my right hon. Friend the Member for Birmingham, Hodge Hill just raised. It tries to strengthen the sanctions regime against individuals and to stop those individuals moving their assets before they get sanctioned. Under the FCDO, the sanctions process inevitably takes a long time and people know they are about to be on the sanctions list, so they have time to rearrange their affairs so their assets cannot be frozen.

All the amendment would do—it is very simple—is put a duty on Companies House to tell the enforcement authority, whether that is the Foreign, Commonwealth and Development Office, the Office of Financial Sanctions Implementation, the National Crime Agency or whoever, about any changes that may have occurred in the accounts held by Companies House of individuals who have been sanctioned and whose assets have been frozen in the three months prior to those sanctions being put in place. That is crucial, but why?

In July 2022, OFSI and other UK Government agencies, together with the Joint Money Laundering Intelligence Taskforce, issued a red alert, which I hope the Minister has had a chance to look at. His colleague, the Minister for Security, the right hon. Member for Tonbridge and Malling (Tom Tugendhat), will certainly have done that. It sets out the evasion tactics that individuals use and that enablers, whom my hon. Friend the Member for Aberavon mentioned, take to support that evasion. The action that designated individuals take, supported by their advisers, includes the transfer of assets, such as shareholdings, to trusted proxies, such as relatives or friends. To quote the red alert, they will

“sell or transfer assets at a loss in order to realise their value before sanctions take effect”

and they will

“divest investments to ensure ownership stakes are below the 50% threshold”

needed for sanctions.

There are numerous other examples—the red alert includes a list of about 15 such examples—of ways that people avoid sanctions and avoid their assets being taken. The individuals may seem to have got rid of their assets, but they will retain control. They will have simply hidden their control and the form that that control takes, but in reality they will still have control. In some instances, assets have been transferred or directed to jurisdictions where sanctions are not in place, such as China, Brazil, India or the United Arab Emirates, or have been converted into cryptoassets, which we will come to later in our discussions about the Bill.

I came upon such tactics in the case of Usmanov, as we have discussed before, who dodged the sanctions, particularly in relation to his Mayfair mansion—I cannot remember how many millions that is worth. The shares in his London property firm were transferred to his Russian business empire on 21 February, less than a fortnight before he was sanctioned. The transfer involved property owned by Klaret Services UK Limited being sold to Russia’s largest iron ore company, Metalloinvest, in which Usmanov has a 49% share. That is just below the 50% threshold, although it is in Russia. That transfer is legal—he was able to act legally and within our law—and he was able to do it because we were so slow to sanction.

The sanctions against Usmanov did not cover his companies, so when he transferred the Mayfair property to a company, a different mechanism would have had to be adopted to capture its owner. As he had a 49% share in that company, it would have been difficult to pursue that. Both the shareholding in the company and the transfer mattered. Under our amendment, Usmanov would not have got rid of the property. Companies House would have had to give the enforcement agencies information about the transactions that had been undertaken in the three months prior to the sanctions, and those agencies could have taken action on it.

Economic Crime and Corporate Transparency Bill (Sixth sitting)

Debate between Liam Byrne and Baroness Hodge of Barking

Committee stage
Tuesday 1st November 2022 Public Bill Committees

[Liam Byrne (Birmingham, Hodge Hill) (Lab)]

It is a pleasure to serve under your chairmanship, Ms Bardell. I support the amendment, and that tabled by my right hon. Friend the Member for Barking, because in many ways they go to the heart of whether the Minister is serious about stripping economic criminals of their balaclavas and cloaks of anonymity, which currently allow them to perpetrate some of the worst economic crime on the planet.

I said this morning that when we offer privileges to people in this country, whether benefits or a visa, we put them through the most substantial identification checks. We put those applying for visas for this country through a whole set of biometric checks, which I introduced. When we introduced them the first time around, and began washing those biometric checks against police computers, we discovered that visas had been issued in the past to some of the most obnoxious criminals on earth.

Verification checks are a good thing. I would say that they are required if we are to grant individuals the economic privileges that come through limited liability. That is the privilege that we are giving people when they register a company at Companies House. It is not just a free-for-all; it is a privilege that we created for the common good, and we should therefore ensure that we give it to not just anybody who happens to turn up but people we know. That is why we need a very clear story from the Minister about the regime that he will bring forward to ensure that the cloak of anonymity—these balaclavas on economic criminals—are gone once and for all. Unless we have that reassurance, the Bill will not be worth the paper that it is written on.

[Dame Margaret Hodge]

I rise to support amendment 86 and to speak to amendment 94 in my name. I have to say to the Minister that this is the first debate where there is a flaw in how the legislation is drafted, such that when the Bill becomes active, it will not serve the purpose that we all desire of it. I can see how we got there, but I ask him to consider looking at it in another way.

--- Later in debate ---

[Liam Byrne]

When my right hon. Friend has those conversations with the Minister, will she ensure she also talks to the Minister for Security? He was Chair of the Foreign Affairs Committee when it took evidence from a number of witnesses who explicitly called for a duty to verify addresses. That point was underlined in the Foreign Affairs Committee’s last report on illicit finance.

[Dame Margaret Hodge]

I am very happy to do that. I think we all want the same thing. All we are trying to do is find the best way of doing it. I will be pressing this amendment to a vote, I am afraid. My warning to the Minister is that if he does not do the work in this area, he will find that he has left a very wide loophole, which will be exploited by those who want to use us as a destination for illicit finance.

Economic Crime and Corporate Transparency Bill (Fourth sitting)

Debate between Liam Byrne and Baroness Hodge of Barking

Committee stage
Thursday 27th October 2022 Public Bill Committees

[Dame Margaret Hodge]

Q You give advice on what makes good supervision.

Peter Swabey: We give advice on what is good governance for organisations, not on the supervisory role.

[Liam Byrne]

Q I want to pursue that point for a moment. In the interests of good governance, would it not make sense to strengthen some of the obligations on directors to include, for example, a duty to take steps to prevent corruption in their organisations? We have similar measures on corruption; we do not have similar measures on economic crime and fraud.

Peter Swabey: You have the directors’ duties under section 171 of the Companies Act and so on. Those are there, but it is difficult to identify exactly how those directors’ duties can be pursued against any defaulting director. For me, that is one of the challenges. Were you to introduce something extra on that, that would be a solution, but again you would need to look at how that could actually be enforced.

--- Later in debate ---

[Liam Byrne]

Q I do not know whether you can see it, but the Bill is called the Economic Crime and Corporate Transparency Bill. How credible do you think corporate transparency in this country will be if we do not amend the Bill to include the protection of journalists like you, who have worked so hard and bravely to reveal the truth only to face legal action in English courts that sought to silence you?

Catherine Belton: I think it will be half-baked if it does not include that amendment. Obviously, it is great to have better laws, but when financial watchdogs, public oversight bodies and journalists are still unable to cast a light on some of the financial transactions of the super-rich, from fear of these crushing lawsuits, it means that you have a system that is only half working. Law enforcement relies, and has relied in the past, to a great degree on journalistic investigations, including for instance by the OCCRP; its reporting has led to some very important cases.

[Dame Margaret Hodge]

Q I will ask one question, Catherine, because many have been asked. I join with others who have met you, or read your book, and are full of admiration for your courage. For those who have not, and do not know your story, will you quickly tell us what happened to you in relation to the SLAPPs, and why it is important that we try to tackle those in the Bill? You can do it very briefly; I am conscious of time.

Catherine Belton: I wrote a book called “Putin’s People”, which was about Putin’s rise to power, the continued role of the KGB and how Russia was using oligarchs—Russian businessmen—to further Russian influence in the world. I was writing precisely about how many of the oligarchs, such as Roman Abramovich, were essentially forced to act as arms of the Kremlin, because otherwise their wealth could be jeopardised. Putin’s hold on power was such that anybody who did not obey his orders could face jail or the seizure of their companies.

Abramovich was very upset when I suggested in the book, quoting three former associates, that he had acquired Chelsea football club on Putin’s orders, in order to acquire soft power and influence in the UK. That, I believe, was public interest reporting. The allegation had been put to his spokesperson, and the response was in the book. He announced that he was suing me personally and HarperCollins—a statement that was swiftly followed by lawsuits from three other Russian billionaires, and then one from the Kremlin oil company Rosneft. The cases were very difficult to grapple with, because there were so many of them all at the same time.

--- Later in debate ---

[Dame Margaret Hodge]

Q The Italians appear to have conquered this—I do not know if you know about that—through the stuff they have done on the mafia. The Canadians appear to have introduced a new power that might take them there. The Americans are trying to think about it. The Europeans are. There is quite a lot of thinking. I am just picking your brain. Is there anything you have done in this field that could add value as we try to think about it?

Professor Jason Sharman: I think not, and I think that the British Government, at least when it comes to sanctioning oligarch assets, which I realise are different from state assets, are in a bind. I think they will have to return those assets to the oligarchs and that they may have to pay damages to the oligarchs. That would be a terrible injustice, but I really worry about what the end game for sanctions is.

[Liam Byrne]

Q Jason, you are a political scientist. Why are we in this position where we have such weakness? Why has our political system failed to address these weaknesses for so long?

Professor Jason Sharman: This is probably a typical social science answer, but there are quite a few reasons that make it difficult, because no one corrective, in and of itself, is going to fix the situation. There have been solutions, such as the persons of significant control registry, the unexplained wealth orders and so on, where it has been like, “This is the thing that will unlock the problem”. But instead it is a combination. First off, it is appropriately difficult to take away people’s property. Secondly, the bureaucratic incentives do not favour it. You have this very risk-averse culture within law enforcement agencies. Thirdly, as I said, there is a failure to harness the incredible investigative resources that lie outside the state, in the not-for-profit sector but also in the for-profit sector.

Economic Crime and Corporate Transparency Bill (Fourth sitting)

Debate between Liam Byrne and Baroness Hodge of Barking

Thursday 27th October 2022 Public Bill Committees

[Dame Margaret Hodge]

Q You give advice on what makes good supervision.

Peter Swabey: We give advice on what is good governance for organisations, not on the supervisory role.

[Liam Byrne]

Q I want to pursue that point for a moment. In the interests of good governance, would it not make sense to strengthen some of the obligations on directors to include, for example, a duty to take steps to prevent corruption in their organisations? We have similar measures on corruption; we do not have similar measures on economic crime and fraud.

Peter Swabey: You have the directors’ duties under section 171 of the Companies Act and so on. Those are there, but it is difficult to identify exactly how those directors’ duties can be pursued against any defaulting director. For me, that is one of the challenges. Were you to introduce something extra on that, that would be a solution, but again you would need to look at how that could actually be enforced.

--- Later in debate ---

[Liam Byrne]

Q I do not know whether you can see it, but the Bill is called the Economic Crime and Corporate Transparency Bill. How credible do you think corporate transparency in this country will be if we do not amend the Bill to include the protection of journalists like you, who have worked so hard and bravely to reveal the truth only to face legal action in English courts that sought to silence you?

Catherine Belton: I think it will be half-baked if it does not include that amendment. Obviously, it is great to have better laws, but when financial watchdogs, public oversight bodies and journalists are still unable to cast a light on some of the financial transactions of the super-rich, from fear of these crushing lawsuits, it means that you have a system that is only half working. Law enforcement relies, and has relied in the past, to a great degree on journalistic investigations, including for instance by the OCCRP; its reporting has led to some very important cases.

[Dame Margaret Hodge]

Q I will ask one question, Catherine, because many have been asked. I join with others who have met you, or read your book, and are full of admiration for your courage. For those who have not, and do not know your story, will you quickly tell us what happened to you in relation to the SLAPPs, and why it is important that we try to tackle those in the Bill? You can do it very briefly; I am conscious of time.

Catherine Belton: I wrote a book called “Putin’s People”, which was about Putin’s rise to power, the continued role of the KGB and how Russia was using oligarchs—Russian businessmen—to further Russian influence in the world. I was writing precisely about how many of the oligarchs, such as Roman Abramovich, were essentially forced to act as arms of the Kremlin, because otherwise their wealth could be jeopardised. Putin’s hold on power was such that anybody who did not obey his orders could face jail or the seizure of their companies.

Abramovich was very upset when I suggested in the book, quoting three former associates, that he had acquired Chelsea football club on Putin’s orders, in order to acquire soft power and influence in the UK. That, I believe, was public interest reporting. The allegation had been put to his spokesperson, and the response was in the book. He announced that he was suing me personally and HarperCollins—a statement that was swiftly followed by lawsuits from three other Russian billionaires, and then one from the Kremlin oil company Rosneft. The cases were very difficult to grapple with, because there were so many of them all at the same time.

--- Later in debate ---

[Dame Margaret Hodge]

Q The Italians appear to have conquered this—I do not know if you know about that—through the stuff they have done on the mafia. The Canadians appear to have introduced a new power that might take them there. The Americans are trying to think about it. The Europeans are. There is quite a lot of thinking. I am just picking your brain. Is there anything you have done in this field that could add value as we try to think about it?

Professor Jason Sharman: I think not, and I think that the British Government, at least when it comes to sanctioning oligarch assets, which I realise are different from state assets, are in a bind. I think they will have to return those assets to the oligarchs and that they may have to pay damages to the oligarchs. That would be a terrible injustice, but I really worry about what the end game for sanctions is.

[Liam Byrne]

Q Jason, you are a political scientist. Why are we in this position where we have such weakness? Why has our political system failed to address these weaknesses for so long?

Professor Jason Sharman: This is probably a typical social science answer, but there are quite a few reasons that make it difficult, because no one corrective, in and of itself, is going to fix the situation. There have been solutions, such as the persons of significant control registry, the unexplained wealth orders and so on, where it has been like, “This is the thing that will unlock the problem”. But instead it is a combination. First off, it is appropriately difficult to take away people’s property. Secondly, the bureaucratic incentives do not favour it. You have this very risk-averse culture within law enforcement agencies. Thirdly, as I said, there is a failure to harness the incredible investigative resources that lie outside the state, in the not-for-profit sector but also in the for-profit sector.

Economic Crime and Corporate Transparency Bill (Second sitting)

Debate between Liam Byrne and Baroness Hodge of Barking

Tuesday 25th October 2022 Public Bill Committees

[Dame Margaret Hodge]

Q Good. Thank you for that. I recognise that you have all made an incredibly important contribution to the debate, so thank you for that, and for the support that you have given us in developing our thinking. I sincerely mean that. I think we all see the Bill as a start, and we would like to add to it. The pragmatic reality is that we have to prioritise what we add in. For each of you, what are your three top priorities for what could be added to strengthen the effort against economic crime? It is a bit of a tough one. I have a list that is longer than three, but I would be interested in your top three.

Dr Hawley: I would say that that is the easiest. It is a great question and I will jump in, because I have my three. It would be really fantastic if Parliament signalled that its intention is not to pass a Bill that will just stay on paper; it needs to be properly resourced and make a real difference in terms of economic crime. There are three different cost-neutral ways of doing that, some of which you mentioned in earlier discussions. One is cost protection across civil recovery for law enforcement. The US-style system really works. If we want US-style enforcement, we need US-style rules.

Another way is to increase Companies House fees to match the scale of verification that we need. The other way is to invest far more. In the US, 100% of forfeiture goes into a central fund, and local police get up to 80%. We heard earlier that the NCA gets 50%; some police forces only get 18%. We also desperately need to find ways to match the money that law enforcement brings in. Law enforcement brought in £3.9 billion over the last six years. If that had been reinvested in law enforcement, we would have top capability in this country.

There are two other things. I have mentioned AML supervision already. If we could make the Office for Professional Body Anti-Money Laundering Supervision a body that genuinely raises the consistency of supervision across the board while the Treasury works out the bigger picture on supervision, it would make a really big difference. OPBAS could name and shame supervisors who were not performing, and that needs to apply not just to the legal and accounting sectors, but to HMRC and the FCA.

Finally, there is corporate liability reform, which you also referred to earlier. We have been waiting for it. It was in 2015 that there was the first Conservative party manifesto commitment to have a failure to prevent economic crime offence. The Law Commission has now spoken; we have been waiting a long time for it. Ideally, you would have a failure to prevent fraud offence, a failure to prevent false accounting offence and a failure to prevent money laundering offence, but you also need to bring in a change in the identification doctrine for the schedule 8 offences to make this work.

Thom Townsend: Unsurprisingly, verification—the first thing would be to think very hard about whether it is the trusts and service providers sector that we want to do that, to think much more broadly about what other mechanisms are available to us, and to cast the net widely around the world; there is a lot happening.

Secondly, the statements of beneficial ownership and significant control should be verified too. That is a far harder task, because the world has not figured out entirely how to do that. There are some really good examples; places such as Austria are doing good work, but it is largely about using data from across Government to make sure that you can red flag those statements.

Thirdly, we probably also need something in the Bill about having a more permissive data-sharing environment, to make sure that Companies House is getting what it wants. If you look at how the Bill is currently drafted, we have data that is “in the registrar’s possession” or “available to the registrar”. It is very unclear what that means, and it needs to be much broader than that.

A supplementary fourth point is to think long and hard about how we are using an identity, once verified, persistently in a lifelong way. Australia, New Zealand and India issue unique identifiers to directors—and, in Australia’s case, to beneficial owners—for life, which makes the investigation process much more straightforward. There is a lot of good practice out there. We need to look very hard at that and think about how we incorporate it into what the UK is doing.

John Cusack: As far as the Bill goes, I have mentioned one point already, which is the item in relation to beefing up the obligation on the registrar. The second piece is on the information-sharing provision in the Bill—I think it is clause 148. It is a limited information sharing item that essentially requires a SAR to be filed before private information sharing can take place. There is also the exit, pretty much, of the customer, which is potentially problematic. We are going to find that one potential bad actor leaving one bank cannot then open an account somewhere else, but we will also find that innocent people will be involved in that. I would rather have something broader, which allows the detection of unidentified financial crime, whereas, in this particular case, we are going to get identified suspicion being shared, which will potentially lead to some very serious unintended consequences, even though I am very supportive of the provision.

The last thing that I would say outside the Bill is that, ultimately, it is about asset confiscations and asset seizures. The UK is doing okay, but it is not doing anywhere near as well as it should be, and it is certainly underperforming compared with a number of important countries. I will give you one example. Italy not only seizes the amounts that Susan was talking about, but over four or five years it seizes almost £10 billion a year in asset confiscations, because it treats the Italian mafia as a matter of national security and targets its resources accordingly. I would like to see not a change in the law, but the rightsizing of the resources across the piece, whereby they are directed toward the tip of the spear, so that law enforcement FIUs in the UK and asset recovery can be prioritised and targets set, and we get close to the Italians, rather than being where we are today.

[Liam Byrne]

Q Susan, can I ask you to spell out what will happen if we do not align the verification procedures in the Bill with the obligations that currently bite on the AML sector?

Dr Hawley: I alluded to one point earlier, which is that if this is not a registry that companies and people can rely on, it will have been a waste of time and money. I alluded earlier to SMEs particularly not having the resources and having to rely on Companies House in a way that large companies would not; they would do their own intelligence. It will be bad for business and the business community, and it will be bad for the UK’s competitiveness. If you look at our competitiveness rating under the World Economic Forum measures, we are pretty good on quite a lot of things—in the top 10 —but for tackling serious and organised crime we are 70 out of 141. That is a competitiveness rating, so it will dent our competitiveness. Actually going for gold standard practice will be good for the economy, and will make us more competitive.

--- Later in debate ---

[Liam Byrne]

Yes, it is a gap in the Bill.

Thomas Mayne: Absolutely, and many thanks for bringing up the case. As you mentioned, none of the authors had any say in the matter and we did not think it was justified, as the evidence we put in the report is entirely accurate. This is a perfect opportunity for some kind of anti-SLAPP legislation to be put in the Bill. Dame Margaret spoke at a recent debate with David Davis; some other examples were given there. If we do not put it into this Bill, will it just be mothballed and we miss our chance? Meanwhile, more journalists are being threatened, and a lot of information is not being put into the public domain because of the threat of a SLAPP. The Bill is related to transparency, as you say, so is there an opportunity to put that sort of measure in the Bill?

Professor Heathershaw: Obviously, I would agree with that. Our report has been subject to these issues. We have also seen many threatening letters over the years. I think it is fair to say that we are some of the leading researchers in the UK on this specific area, at some of the UK’s leading universities. Professionally, it is shocking for me to find that we could be subject to such aggressive letters. The risks were so great, simply because the costs could not be limited.

I think there is a need to introduce a merits test early on to dismiss legislation. I think there is also a need to cap the costs for defendants, because at the moment you have to get very expensive libel insurance to protect yourself, which can be very difficult. Even then, there are huge costs involved.

The question about whether there should be specific legislation from the Ministry of Justice is interesting. At present, that has not been tabled to Parliament and so the opportunity that presents itself—to amend Bills, to provide certain measures, to introduce costs—would definitely be within scope. When you see these cases, many of the people from outside a Government service who have given evidence today—I am sure Oliver Bullough or Bill Browder would speak to this themselves—have been subject to those actions for things they have written that are entirely accurate and in the public interest. In that sense, such a measure is within scope.

It is also within scope because money laundering of this type is always accompanied by reputation laundering, which means seeking to clean the public record of questions about your sources of wealth and misdeeds of the past. It is very much within scope and it would be great for the Bill to consider things like a merits test and a cost cap for defendants in defamation counter-claims.

[Dame Margaret Hodge]

Q Can I follow that up? I am grateful to Liam for raising this point. I think it is in scope. The case in relation to Chatham House is shocking, because of the cost to you as an organisation, which you will have to bear personally. It is particularly concerning that in the case of a journalist like Catherine Belton, whom we are seeing on Thursday, six or seven attempts were made; Charlotte Leslie, who was a Member of Parliament, is also being challenged, as are existing Members of Parliament. You are the experts on kleptocrats. This reputation cleaning, or protection of reputation, that they go in for, is an element that we had not really studied in detail before, until it all hit us individually. Do you have any other ideas? We think it is within scope of the Bill. We think there are clauses that have been developed that could quite easily be added. Is there any other action that you think we should take?

Thomas Mayne: I mentioned earlier the PR industry. I think there is a debate going on, following the Russian invasion, about whether there should be transparency over who you represent. Should it be put on record and in what sense? There are membership organisations in the PR world, but you do not have to sign up to them, so there is an internal discussion going on about whether that should become mandatory. Do you somehow put PR under the scope of money laundering regulations? Maybe that is going too far, but some kind of oversight and transparency of such PR agencies, who sometimes represent the kleptocrats and use their wealth to threaten journalists, should certainly be considered.

Professor Heathershaw: It is my understanding that there was a consultation on a foreign influence registration scheme under an earlier, different Home Office Bill. That is where you may have something equivalent to what the US has in the Foreign Agents Registration Act. If you are looking specifically at kleptocrats linked to foreign regimes, or who are themselves part of foreign regimes, PR agencies are working on their behalf to clean their reputations, potentially in a wider public realm with public institutions, and, of course, to specifically target Government officials to potentially donate to political parties—a non-British citizen can do that while retaining overseas citizenship.

Those things would be in scope of a foreign influence registration scheme. Again, that crosses over into the territory of the Bill. It has previously been proposed as part of another Bill, but I think it is very much needed for the PR industry.

Economic Crime and Corporate Transparency Bill (First sitting)

Debate between Liam Byrne and Baroness Hodge of Barking

Committee stage
Tuesday 25th October 2022 Public Bill Committees

[Liam Byrne]

That was not the question. Are we investing enough?

Andy Gould: Well, as a police officer, I will always say that you are never investing enough.

[Dame Margaret Hodge]

Q Lots of us are trying to get our brains around this. I had a session yesterday with a whole load of people in the crypto industry who tried to convince me that there is actually better transparency because it is open—you can go in and see it—and there ought to be a way in which, with the right algorithms, you could follow the money more easily than in other ways. Is that true? Were they conning me, or is that vaguely true?

Andy Gould: No, there is definitely an element of truth in that. If you have a public blockchain, you can see where it is moving, and that is very open—Bitcoin is the most obvious open public blockchain and the most popular crypto. However, that does not mean that you necessarily know who it is that starts and finishes. That is the issue, and with a lot of the different criminal services available, it is becoming harder and harder to manage. It is becoming more tricky. So, the answer to your question is probably yes and no.

Economic Crime and Corporate Transparency Bill (Second sitting)

Debate between Liam Byrne and Baroness Hodge of Barking

Committee stage
Tuesday 25th October 2022 Public Bill Committees

[Dame Margaret Hodge]

Q Good. Thank you for that. I recognise that you have all made an incredibly important contribution to the debate, so thank you for that, and for the support that you have given us in developing our thinking. I sincerely mean that. I think we all see the Bill as a start, and we would like to add to it. The pragmatic reality is that we have to prioritise what we add in. For each of you, what are your three top priorities for what could be added to strengthen the effort against economic crime? It is a bit of a tough one. I have a list that is longer than three, but I would be interested in your top three.

Dr Hawley: I would say that that is the easiest. It is a great question and I will jump in, because I have my three. It would be really fantastic if Parliament signalled that its intention is not to pass a Bill that will just stay on paper; it needs to be properly resourced and make a real difference in terms of economic crime. There are three different cost-neutral ways of doing that, some of which you mentioned in earlier discussions. One is cost protection across civil recovery for law enforcement. The US-style system really works. If we want US-style enforcement, we need US-style rules.

Another way is to increase Companies House fees to match the scale of verification that we need. The other way is to invest far more. In the US, 100% of forfeiture goes into a central fund, and local police get up to 80%. We heard earlier that the NCA gets 50%; some police forces only get 18%. We also desperately need to find ways to match the money that law enforcement brings in. Law enforcement brought in £3.9 billion over the last six years. If that had been reinvested in law enforcement, we would have top capability in this country.

There are two other things. I have mentioned AML supervision already. If we could make the Office for Professional Body Anti-Money Laundering Supervision a body that genuinely raises the consistency of supervision across the board while the Treasury works out the bigger picture on supervision, it would make a really big difference. OPBAS could name and shame supervisors who were not performing, and that needs to apply not just to the legal and accounting sectors, but to HMRC and the FCA.

Finally, there is corporate liability reform, which you also referred to earlier. We have been waiting for it. It was in 2015 that there was the first Conservative party manifesto commitment to have a failure to prevent economic crime offence. The Law Commission has now spoken; we have been waiting a long time for it. Ideally, you would have a failure to prevent fraud offence, a failure to prevent false accounting offence and a failure to prevent money laundering offence, but you also need to bring in a change in the identification doctrine for the schedule 8 offences to make this work.

Thom Townsend: Unsurprisingly, verification—the first thing would be to think very hard about whether it is the trusts and service providers sector that we want to do that, to think much more broadly about what other mechanisms are available to us, and to cast the net widely around the world; there is a lot happening.

Secondly, the statements of beneficial ownership and significant control should be verified too. That is a far harder task, because the world has not figured out entirely how to do that. There are some really good examples; places such as Austria are doing good work, but it is largely about using data from across Government to make sure that you can red flag those statements.

Thirdly, we probably also need something in the Bill about having a more permissive data-sharing environment, to make sure that Companies House is getting what it wants. If you look at how the Bill is currently drafted, we have data that is “in the registrar’s possession” or “available to the registrar”. It is very unclear what that means, and it needs to be much broader than that.

A supplementary fourth point is to think long and hard about how we are using an identity, once verified, persistently in a lifelong way. Australia, New Zealand and India issue unique identifiers to directors—and, in Australia’s case, to beneficial owners—for life, which makes the investigation process much more straightforward. There is a lot of good practice out there. We need to look very hard at that and think about how we incorporate it into what the UK is doing.

John Cusack: As far as the Bill goes, I have mentioned one point already, which is the item in relation to beefing up the obligation on the registrar. The second piece is on the information-sharing provision in the Bill—I think it is clause 148. It is a limited information sharing item that essentially requires a SAR to be filed before private information sharing can take place. There is also the exit, pretty much, of the customer, which is potentially problematic. We are going to find that one potential bad actor leaving one bank cannot then open an account somewhere else, but we will also find that innocent people will be involved in that. I would rather have something broader, which allows the detection of unidentified financial crime, whereas, in this particular case, we are going to get identified suspicion being shared, which will potentially lead to some very serious unintended consequences, even though I am very supportive of the provision.

The last thing that I would say outside the Bill is that, ultimately, it is about asset confiscations and asset seizures. The UK is doing okay, but it is not doing anywhere near as well as it should be, and it is certainly underperforming compared with a number of important countries. I will give you one example. Italy not only seizes the amounts that Susan was talking about, but over four or five years it seizes almost £10 billion a year in asset confiscations, because it treats the Italian mafia as a matter of national security and targets its resources accordingly. I would like to see not a change in the law, but the rightsizing of the resources across the piece, whereby they are directed toward the tip of the spear, so that law enforcement FIUs in the UK and asset recovery can be prioritised and targets set, and we get close to the Italians, rather than being where we are today.

[Liam Byrne]

Q Susan, can I ask you to spell out what will happen if we do not align the verification procedures in the Bill with the obligations that currently bite on the AML sector?

Dr Hawley: I alluded to one point earlier, which is that if this is not a registry that companies and people can rely on, it will have been a waste of time and money. I alluded earlier to SMEs particularly not having the resources and having to rely on Companies House in a way that large companies would not; they would do their own intelligence. It will be bad for business and the business community, and it will be bad for the UK’s competitiveness. If you look at our competitiveness rating under the World Economic Forum measures, we are pretty good on quite a lot of things—in the top 10 —but for tackling serious and organised crime we are 70 out of 141. That is a competitiveness rating, so it will dent our competitiveness. Actually going for gold standard practice will be good for the economy, and will make us more competitive.

--- Later in debate ---

[Liam Byrne]

Yes, it is a gap in the Bill.

Thomas Mayne: Absolutely, and many thanks for bringing up the case. As you mentioned, none of the authors had any say in the matter and we did not think it was justified, as the evidence we put in the report is entirely accurate. This is a perfect opportunity for some kind of anti-SLAPP legislation to be put in the Bill. Dame Margaret spoke at a recent debate with David Davis; some other examples were given there. If we do not put it into this Bill, will it just be mothballed and we miss our chance? Meanwhile, more journalists are being threatened, and a lot of information is not being put into the public domain because of the threat of a SLAPP. The Bill is related to transparency, as you say, so is there an opportunity to put that sort of measure in the Bill?

Professor Heathershaw: Obviously, I would agree with that. Our report has been subject to these issues. We have also seen many threatening letters over the years. I think it is fair to say that we are some of the leading researchers in the UK on this specific area, at some of the UK’s leading universities. Professionally, it is shocking for me to find that we could be subject to such aggressive letters. The risks were so great, simply because the costs could not be limited.

I think there is a need to introduce a merits test early on to dismiss litigation. I think there is also a need to cap the costs for defendants, because at the moment you have to get very expensive libel insurance to protect yourself, which can be very difficult. Even then, there are huge costs involved.

The question about whether there should be specific legislation from the Ministry of Justice is interesting. At present, that has not been tabled to Parliament and so the opportunity that presents itself—to amend Bills, to provide certain measures, to introduce costs—would definitely be within scope. When you see these cases, many of the people from outside a Government service who have given evidence today—I am sure Oliver Bullough or Bill Browder would speak to this themselves—have been subject to those actions for things they have written that are entirely accurate and in the public interest. In that sense, such a measure is within scope.

It is also within scope because money laundering of this type is always accompanied by reputation laundering, which means seeking to clean the public record of questions about your sources of wealth and misdeeds of the past. It is very much within scope and it would be great for the Bill to consider things like a merits test and a cost cap for defendants in defamation counter-claims.

[Dame Margaret Hodge]

Q Can I follow that up? I am grateful to Liam for raising this point. I think it is in scope. The case in relation to Chatham House is shocking, because of the cost to you as an organisation, which you will have to bear personally. It is particularly concerning that in the case of a journalist like Catherine Belton, whom we are seeing on Thursday, six or seven attempts were made; Charlotte Leslie, who was a Member of Parliament, is also being challenged, as are existing Members of Parliament. You are the experts on kleptocrats. This reputation cleaning, or protection of reputation, that they go in for, is an element that we had not really studied in detail before, until it all hit us individually. Do you have any other ideas? We think it is within scope of the Bill. We think there are clauses that have been developed that could quite easily be added. Is there any other action that you think we should take?

Thomas Mayne: I mentioned earlier the PR industry. I think there is a debate going on, following the Russian invasion, about whether there should be transparency over who you represent. Should it be put on record and in what sense? There are membership organisations in the PR world, but you do not have to sign up to them, so there is an internal discussion going on about whether that should become mandatory. Do you somehow put PR under the scope of money laundering regulations? Maybe that is going too far, but some kind of oversight and transparency of such PR agencies, who sometimes represent the kleptocrats and use their wealth to threaten journalists, should certainly be considered.

Professor Heathershaw: It is my understanding that there was a consultation on a foreign influence registration scheme under an earlier, different Home Office Bill. That is where you may have something equivalent to what the US has in the Foreign Agents Registration Act. If you are looking specifically at kleptocrats linked to foreign regimes, or who are themselves part of foreign regimes, PR agencies are working on their behalf to clean their reputations, potentially in a wider public realm with public institutions, and, of course, to specifically target Government officials to potentially donate to political parties—a non-British citizen can do that while retaining overseas citizenship.

Those things would be in scope of a foreign influence registration scheme. Again, that crosses over into the territory of the Bill. It has previously been proposed as part of another Bill, but I think it is very much needed for the PR industry.

Sanctions and Anti-Money Laundering Bill [Lords]

Debate between Liam Byrne and Baroness Hodge of Barking

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 1st May 2018 Commons Chamber

[Dame Margaret Hodge]

I thank my hon. Friend for his kind words, but it really has been a team effort, with people from throughout the House and across all the political tribes.

New clause 6 would simply put into legislation proposals that David Cameron first articulated in 2013, when he spoke about ripping aside the “cloak of secrecy” and repeated the well-known mantra, “sunlight is the best disinfectant”. It would do no more and no less than fulfil the commitment made by the then Prime Minister five years ago.

Britain sits at the hub of the world’s largest network of secretive jurisdictions, and British tax havens are central to the movement of illicit moneys around the world. The secrecy under which they currently operate facilitates wrongdoing on an industrial scale. We have a weak regulatory regime, some of which was enacted by the previous Labour Government and needs reform, and sadly we have lax policing of our system. Couple that with the secrecy that prevails, and Britain and our overseas territories have increasingly become the most attractive destination for crooks, kleptocrats and corrupt individuals who engage in financial skulduggery. If we do not accept new clause 6, we will be in danger of sacrificing our traditional reputation as a reliable jurisdiction by our failure to challenge the secrecy.

[Liam Byrne]

I very much echo the sentiments of my hon. Friend the Member for Chesterfield (Toby Perkins). Does my right hon. Friend agree that it is impossible for us to get unexplained wealth orders to work unless we put in place registers not only for our countries and the overseas dependencies, but for the Crown dependencies, too?

[Dame Margaret Hodge]

I entirely concur with my right hon. Friend’s important point.

Let me take Members through the argument, because it is important that we understand what we are dealing with. First, on the scale of the problem we are tackling, the National Crime Agency reckons that around £90 billion a year is laundered through the UK. We know that developing countries lose three times as much in tax avoidance as they get in all the international aid that is available to them. Half the entities cited in the Panama papers were corporations registered in just one of our overseas territories: the British Virgin Islands. We know that, in the past 10 years, £68 billion has flowed out of Russia into our overseas territories. That is seven times more going to the overseas territories than has come to Britain. We know that there are 85,000 properties here in the UK that are owned by companies registered in our tax havens, half of which are in just two constituencies in London, and a sample survey done by Transparency International suggests that two out of five of those properties have Russian owners.