Economic Crime and Corporate Transparency Bill

Lord Alton of Liverpool Excerpts

Report stage
Tuesday 27th June 2023 Lords Chamber

Moved by

[Lord Alton of Liverpool]

107: After Clause 187, insert the following new Clause—
“Duty to disclose funds and economic resources
After section 16 of the Sanctions and Anti-Money Laundering Act 2018, insert—“16A Duty to disclose funds and economic resources(1) Any regulations made under section 1 (power to make sanctions regulations) must, for the purposes of preventing an offence under those regulations, make provision requiring designated persons—(a) to report to the Treasury or another competent authority, within three months after such regulations are made or within three months from the date of designation, whichever is the latest, the funds or economic resources that—(i) are currently held, owned or controlled by them within the United Kingdom, and(ii) were held, owned or controlled by them within the United Kingdom six months prior to the date of designation, and(b) to cooperate with the Treasury or other competent authority in any verification of such information.(2) A failure to comply with a requirement in subsection (1) may be considered as participation in activities the object or effect of which is (whether directly or indirectly) to circumvent such requirement.(3) Where a designated person has been convicted of an offence by virtue of subsection (2), a court proceeding under section 6, 92 or 156 of the Proceeds of Crime Act 2002 (confiscation orders) must consider such person as benefitting by the value of any assets concealed through such criminal conduct. (4) Assets concealed as a result of a failure to comply with a requirement in subsection (1) constitute recoverable property for the purposes of Part 5 of the Proceeds of Crime Act 2002 (civil recovery of the proceeds etc. of unlawful conduct).(5) A court may only make an order for the confiscation or forfeiture of concealed assets if, or to the extent that, it would not be just and equitable to require the designated person to pay the amount recoverable under subsection (3) or to forfeit the property recoverable under subsection (4).(6) Regulations under subsection (1) may also be made in relation to a person who is subject to an International Criminal Court warrant for an offence that would constitute an economic crime in the United Kingdom.””Member’s explanatory statement
This amendment says that sanctions regulations must, for the purposes of preventing an offence under those regulations, require designated persons to disclose all assets they own or control in the UK. Failure to disclose such assets is defined as a form of sanctions evasion, which is already criminalized under UK law, and which could result in asset recovery under the Proceeds of Crime Act.

[Lord Alton of Liverpool (CB)]

Amendment 107 enjoys all-party support, and its purpose is to insert a new clause imposing a duty to disclose funds and economic resources. In a nutshell, the amendment would require that sanctions regulations must, for the purposes of preventing an offence under those regulations, require designated persons to disclose all assets that they own or control in the United Kingdom. Failure to disclose such assets is defined as a form of sanctions evasion, which is already criminalised under UK law and which could result in asset recovery under the Proceeds of Crime Act.

The amendment is in line with the one debated in Grand Committee. One change has been made to reflect the Minister’s helpful view about proportionality— I am particularly grateful to the noble and learned Lord, Lord Garnier, and the noble Lord, Lord Faulks, for their helpful suggestion that the best way in which to ensure proportionality would be to incorporate the words “just and equitable”, as we have done in the revised amendment. In thanking the noble Lord and the noble and learned Lord, I thank also the co-sponsors, the noble Lords, Lord Leigh of Hurley, Lord Coaker and Lord Fox. Their input and wisdom have been invaluable. The Minister and his really excellent Bill team have engaged through meetings and in a flurry of emails and exchanges, which have been admirable, and I am grateful to them too. I hope that we can come to an amicable conclusion this evening.

The topicality and urgency of this amendment was underlined by the Statement made in another place yesterday, and repeated here last night, on the Ukraine Recovery Conference. We have all been shocked by the sheer scale of the destruction unleashed by Putin’s illegal war—the massive loss of life and the ruination of cities, towns and villages, and the destruction of the country’s agricultural base. In this lamentable context, we are right to plan for the future. The European Union has set aside a €50 billion recovery fund, and the United Kingdom has said that we will provide loans worth $3 billion over the next three years. Globally, some 500 businesses from 42 countries have pledged more than $5.2 trillion to back Ukraine’s recovery. However, as the Prime Minister made clear to that conference, Russia must pay for the destruction that it has inflicted. In that respect, the Foreign Secretary has said that the United Kingdom is working with allies to explore lawful routes to use frozen and immobilised Russian assets to fund Ukrainian reconstruction. It was to enable that to happen that the movers of this amendment raised this question in Grand Committee.

--- Later in debate ---

[Lord Sharpe of Epsom (Con)]

My Lords, I thank the noble Lord, Lord Alton of Liverpool, for this amendment, for his constructive engagement throughout the passage of the Bill through this House and, of course, for his typically thoughtful and powerful introduction. I also pay tribute to noble Lords from all sides of the House, and Members in the other place, for continuing to pursue this important issue and engage with the Government on a cross-party basis, not least the APPG on Anti-Corruption and Responsible Tax. I can reassure the noble Lord that the Government are supportive of mechanisms to deprive sanctioned individuals, where appropriate, of their assets, with a view to funding the recovery and reconstruction of Ukraine. More broadly, the Government want to drive further transparency on assets held by sanctioned persons in the UK.

On 19 June, the Government announced four new commitments which reaffirm that Russia must pay for the long-term reconstruction of Ukraine. This includes new legislation, laid the same day by the Foreign Secretary, to enable sanctions to remain in place until Russia pays compensation for damage caused. In this announcement the Government also confirmed that we will lay new legislation requiring persons and entities in the UK, or UK persons and entities overseas, who are designated under the Russia financial sanctions regime to disclose any assets they hold in the UK. The Government are firmly committed to bringing forward this secondary legislation, subject to the made affirmative procedure, and to introducing this measure before the end of 2023, subject to the usual parliamentary scheduling. This will strengthen transparency of assets and make it clear that the UK will not allow assets to be hidden in this country.

Sanctioned individuals who fail to disclose their assets could receive a financial penalty or have their assets confiscated. This demonstrates our continued commitment to penalising those who make deliberate attempts to conceal funds or economic resources. The new power builds on and strengthens the UK’s existing powers around transparency of designated persons’ assets. HMG already use the annual review of the Office of Financial Sanctions Implementation, known as OFSI, to collect and detail assets frozen under UK financial sanctions. Additionally, relevant firms such as banks, other financial institutions, law firms and estate agents have an ongoing obligation to report to OFSI if they know or reasonably suspect that a person is a designated person or has committed offences under financial sanctions regulations, where that information is received in the course of carrying on their business. Those firms must provide information about the nature and amount of any funds or economic resources held by them for the customer.

The designated person reporting measure will act as a dual verification tool by enabling the comparison of disclosures against existing reporting requirements that bite on relevant firms. This will tighten the net around those who are not reporting and are evading their reporting requirements.

On asset seizure, prosecutors and/or law enforcement agencies can currently apply to confiscate or permanently seize assets where someone has benefited from their offending, or the assets have links to criminality, by making use of powers under the Proceeds of Crime Act 2002. Importantly, the new measures will also give His Majesty’s Government the ability to impose fines. Overall, this designated person reporting measure will be focused on strengthening the UK’s compliance toolkit while giving options for penalising those who seek to hide their assets.

The noble Lord’s amendment includes a specific provision which would require the designated person also to report assets which were held six months prior to the designation. The Government are still fully developing the non-disclosure measure and I can assure the noble Lord that we are carefully considering this suggestion. Although not retrospective in terms of regulating or criminalising conduct that occurred before the measure came into force, requiring designated persons to provide a snapshot of their assets at a historical point in time is necessarily more onerous than a forward look requirement. The Government will need carefully to consider the design of the measure and the proportionality and additional value of so-called retrospective reporting to ensure that it is operationally deliverable and legally robust. This will include working with relevant law enforcement agencies to determine how such information would be used.

Before laying these regulations, the Government will complete their ongoing evaluation of possible operational or implementation challenges to help ensure the successful delivery of this measure. For example, investigating non-compliance will require significant resources from the enforcing agency. We want to ensure that it has all the capability, skills and resources to succeed.

I note the interest in and strength of feeling on this issue. The Government will continue to work collaboratively and constructively with interested parties in the lead-up to bringing forward the legislation, including on reporting assets which were held prior to a designation. We will continue to engage with the civil society organisations that have campaigned for this measure, and I would be happy to work with the noble Lord, Lord Alton, and other parliamentarians to keep them informed of progress ahead of it being formally introduced.

Again, I am grateful to the noble Lord for bringing this issue forward for debate and for the continued interest and engagement of many stakeholders. I hope that, given the reasons I have outlined and the action the Government are already taking, he will consider withdrawing his amendment.

[Lord Alton of Liverpool (CB)]

My Lords, I am extremely grateful to the noble Lord, Lord Sharpe, for the manner in which he has addressed this issue and the House this evening. He was right to pay tribute to the All-Party Parliamentary Group on Anti-Corruption and Responsible Tax; I would link with that the specific work of Dame Margaret Hodge MP, the Royal United Services Institute and many of those in civil society to which the Minister has referred. I was especially pleased to hear what he said about working collaboratively with those organisations that have been involved in taking this amendment forward.

I do not underestimate the importance of what the Minister has said to the House. He said that he will look at the outstanding issue of the six-month retrospective period; although he gave no guarantees or assurances on that front, at least we will be able to discuss and examine it further. However, he has agreed to introduce secondary legislation before the end of the year—not “at a time to be agreed” or some possibility of legislation coming in the next nine or 10 months, but by the end of this year. I welcome that very much. He also told the House that it would be done under the affirmative procedure, which will give us the chance to come back again. Significant progress has been made on this and I am very grateful to the Minister. I am very happy to withdraw the amendment.

Amendment 107 withdrawn.