Economic Crime (Transparency and Enforcement) Bill

Lord Coaker Excerpts

Committee stage
Monday 14th March 2022 Lords Chamber

[Lord Coaker (Lab)]

I thank the Minister for the way in which he has engaged with his officials to try to address some of the concerns which have been raised.

I will also pick up the point made by the noble Lord, Lord Vaux, about something which concerns all noble Lords about this Bill: it is going through on an emergency process because we face an emergency, yet not all of it concerns emergency legislation. Of course, the sanctions part is, but many of the other parts of the Bill about overseas entities have been on the stocks for years—as the noble Lord, Lord Agnew, said. Yet the Government have failed to act before now and it is only in the face of this emergency that they have done so. While that is to be welcomed, in some respects, it affects many of the things on which we would want to vote and would want to discuss in great detail, and many of the amendments which your Lordships have quite rightly brought forward which would improve the Bill. On the basis of not tying up this House or preventing this legislation from passing, in the face of the current national emergency, the Bill will go forward in a way which is not as good as it could be. I think that this is a feeling which is generally held across the House. It is certainly how we feel. Of course, we will support the Government in putting this legislation through—but that is not to say that we do not have very serious concerns about aspects of it.

Many noble Lords on Labour Benches and other Benches have raised these issues. Therefore, I very much agree with the noble Lord, Lord Vaux, that the Government need to recognise that the amendments being put forward—even though most, if not all, of them will be withdrawn—seek to do so from a position of needing to strengthen this Bill; it is about time we got hold of a problem which has been identified by many different reports over a number of years. As the noble Lords, Lord Agnew and Lord Clement-Jones, pointed out, transparency is everything. As we go through parts of this legislation and we see exemptions, and parts of the Bill where full disclosure is not to be statutory or guaranteed, one wonders whether it goes as far as it could.

The amendments tabled by the noble Lords, Lord Agnew of Oulton and Lord Clement-Jones, deal with related issues around nominees. We hope that the Minister can offer a full response to the points made by both noble Lords, because they are really important. A lay person reading this would be concerned about the fact that it provides a way to circumvent the regulations.

I thank the Minister for the clarification he made around government Amendments 45 and 47. I am sorry to detain noble Lords, but I briefly remind the House that this is a public document. What if you are not an accountant or someone trained in financial matters? This is the Government’s explanatory statement on government Amendment 45. The Minister has clarified it for me, but many people would think that there is something concerning about the amendment when it says:

“This amendment means that the required information about trusts will be unavailable for inspection on the public register.”


That is the Government’s only explanation of an amendment which they are passing. The Minister has just outlined this.

Similarly, government Amendment 46 states:

“This amendment excludes information about trusts from the definition of ‘protected’ date of birth and residential address information.”


I am sure that there are proper explanations for that. However, sometimes Governments need to be careful. I know the amendment was drafted in haste, but there must have been a better way of doing it.

I accept that there will be many valid reasons for excluding certain trusts from the public register—for example, if one has been established to benefit a child later in life. However, if we had proper time to debate this, an amendment surely could have been brought forward—I would have brought one forward—saying that the exemption could be tied to a specific criterion, rather than being drawn in such a general nature, as it has been. This is another example of the sorts of ways many of us would wish to see this legislation tightened.

We will not stand in the way of these amendments but, as we go forward, I hope that the Minister can give further thought to the very real concerns which have been raised by noble Lords.

[Lord Cromwell (CB)]

I will just underline one point that the noble Lord, Lord Coaker, made. At Second Reading we got the impression that there was quite a limited list of items that were going to go into the second economic crime Bill. Can we have an assurance at this opening stage from the Minister that he will remain open-minded as to the shopping list of items—if I may use the phrase—which will need to be included, some of which may be revisiting what we have done today but others of which will be entirely new? Can he assure us that it is not a short shopping list?

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[Lord Fox (LD)]

My Lords, this is the first time I have spoken today. I will make a couple of points from the Front Bench that reflect on the other groups as we debate them.

We on these Benches share the hopes of the Government and, indeed, Her Majesty’s loyal Opposition to get this Bill on to the statute book as quickly as we can. For that to happen, the Government seem to be moving on a number of issues, which will be helpful. For our part, we have had to suspend the level of scrutiny that this Bill would normally attract. That has been difficult for us because, as we heard at Second Reading and have already heard in debate on the first group, much could be done to improve and extend the Bill.

As such, and as we have already heard from the noble Lords, Lord Vaux, Lord Cromwell, Lord Cormack and Lord Empey, there are a number of solid assurances that the Minister can give us—he hinted without necessarily assuring in his response to the previous group. We would appreciate an undertaking from the Minister that, when we return to this topic on the second part of this Bill, or ECB 2 as we now have to know it, there will be a frank assessment from the Government as to the operations of ECB 1, and a chance to debate and modify ECB 1 in the light of that frank assessment.

Further, the four planned elements of ECB 2 were set out by the noble Baroness, Lady Williams, at Second Reading. They indicate a fairly narrow—indeed, dangerously narrow—focus for that Bill. A commitment from the Government that they will enable that Bill to be broadened, and that some of the issues we have already heard and some more that we will hear later will be added to the curriculum of that Bill, will be very important.

This is a large group of amendments; noble Lords will be pleased to know that I will not take them one by one and summarise them all. There are a number of amendments from the Government, which we welcome, but I will briefly highlight Amendment 24 in the names of the noble Lord, Lord Vaux and Lord Cromwell. We have heard from them so I will not reiterate their speeches. We believe that this important issue is possible and do not see why it is not something the Government could easily incorporate in the current form of the Bill.

I will primarily speak on my noble friend Lord Clement-Jones’s Amendment 53, to which the noble Baroness, Lady Chapman, and I have added our names. We have heard today and at Second Reading that this is the issue that hits at the heart of the problem we face, and the scale of the infiltration of stolen wealth that has come into the United Kingdom. It is why the kleptocrats have been so comfortable here: they have been feather-bedded by a welcoming committee of enablers, anxious to claim new clients and get some of the money. For some so-called enablers—indeed, most of them—that temptation was outweighed by their moral and practical concerns. We should note that clearly. Unfortunately, for others, such as the sorts that the noble Lord, Lord Vaux, identified, the temptation has been too great. A significant minority of practitioners have taken the “ask no questions and tell me no lies” philosophy to doing business.

This amendment would really do no more than reinforce what should be happening already, but it restates it in a different way. Within each of these enabler services, there needs to be a senior partner or director who signs off on the due diligence and is accountable to the law for doing so.

In closing, I note a briefing from the Law Society that arrived in my inbox this morning. It expressed concern about this amendment. The pressure group said that the amendment appears to extend a duty of due diligence to all stages of client take-on and transactional/advisory work. Its concern was that it would

“create a significant burden on professional services such as law firms that would be difficult for them to meet”.

In other words, this due diligence would be too hard to do. That tells us that there is work to be done in this area.

[Lord Coaker (Lab)]

My Lords, this is yet another group of amendments with contributions from across the Chamber that signifies some of the problems we have in fast-tracking this part of the Bill. Many noble Lords, including my noble friend Lord Sikka, have put forward sensible amendments that would improve the Bill, but we cannot accept them because we are in a rush to get it through. They are common-sense amendments. I take very much the point that the noble Lord, Lord Empey, made: if we are not careful we will have a situation where we pass the Bill and, in a week or a couple of months’ time, there will be an oligarch, a kleptocrat or whatever you want to call them—somebody living off dirty money—on the front pages of the papers parading themselves as having got round what the Government have only just passed.

Of course, that is the whole purpose of the amendments that so many noble Lords have put forward: to say to the Government that they have to address some of this. If they cannot address it in this Bill, which clearly they will not be able to do because it is emergency legislation—we all accept the crisis in front of us—let us have a cast-iron guarantee that the second economic crime Bill will come quickly to address these various issues and that we will be able to come back to them. Those are the reassurances that so many of us are looking for from the Government. I do not think that is too much to ask.

As my noble friend Lord Rooker pointed out, with his normal passionate use of the English language, we do not want a situation where people—I cannot remember who he referred to—parade around saying, “Look, we’re cleverer than the regulator.” That undermines democracy and Parliament. It undermines all of us. That is how serious it is when people flaunt their ability to circumvent the law. That is not in our interest, whatever the crisis we face. I know that the Minister would accept that.

I am grateful to all noble Lords who have tabled amendments in this group, which cover a variety of non-trust provisions relating to the register of overseas entities. I should give my noble friend Lady Chapman’s apologies. She cannot participate in proceedings for personal reasons, but she tabled Amendment 23, which, like Amendment 24 in the name of the noble Lord, Lord Vaux, seeks to accelerate the reporting of changes in beneficial ownership, for reasons ably supported by my noble friend Lord Eatwell. Again, this seems absolutely common sense; it does not seem to be a point of argument.

The Government are keen to stress that the vast majority of entities that apply to join the register will be entirely above board. We accept much of that. However, under the current provisions, a shell company could be registered under certain ownership on day 1, with new appointments to the board made on days 2 and 3, but it would be required to report that only 12 months later. That is clearly not acceptable or sensible. As my noble friends Lord Sikka and Lord Eatwell, the noble Lord, Lord Vaux, and others said, something should be done about that. The Government should see what changes they can make.

There are legitimate questions about enforcement, but do the Government agree that there should be a general principle that entities need to be proactive in reporting changes? The Minister should accept Amendment 23, or indeed Amendment 24, but if not, he should commit to giving this further thought as the Government begin to draft the next piece of legislation.

We are also sympathetic to other amendments in the group, including Amendment 3 from the noble Lord, Lord Agnew, and Amendment 53 from the noble Lord, Lord Clement-Jones, supported by my noble friend Lady Chapman and the noble Lord, Lord Fox, which tries to start to deal with enablers. On so-called enablers, it would be helpful to understand what steps, if any, the Government have taken since Russia invaded Ukraine. As this is an emergency piece of legislation, what emergency action have the Government taken with respect to enablers? There have long been stories of lawyers and estate agents who purposely avoid asking their clients probing questions because they know that the answers would preclude them from doing business with them. It is time to say, “Enough is enough and we will seek you out and do something about it.”

We know that some individuals have sought to urgently offload their UK-based interests and, if they are seeking to rush sales through, we would hope that estate agents and others were already querying the reasons for that. In addition to any steps that might have already been taken, what steps do the Government plan to take over the coming days and weeks to deal with that problem? This series of amendments asks various questions, but ultimately seeks to tighten up a Bill that is in all our interests.

[Lord Callanan (Con)]

First, I thank all noble Lords who have contributed to this debate. Before I address the amendments tabled, I reiterate the point I made earlier. This will be almost the first register of its kind in the world. We should accept that we are leading on this. I completely accept that we may not have everything perfect, but we will learn as we go—just as we did, in the example I cited, when we implemented the people with significant control requirements for domestic companies. We had to learn and iterate that, and now many other countries have followed our lead. That is a good thing. I re-emphasise that we will be perfectly willing to revisit these measures if it transpires that we have not got everything quite right.

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This Government have not portrayed this as an amnesty—earlier, the Minister portrayed it as, “It was somehow administratively convenient”—but it is actually an amnesty. There is nothing else to it: the Government’s amnesty means that we will never know the true owners of these companies. Rather than adding transparency, the Government are adding opacity, and that is unacceptable. My amendment therefore seeks to remove that amnesty and make sure that all overseas owners with a beneficial interest in UK property—no matter where they are—are held to account and identified.

[Lord Coaker (Lab)]

My Lords, it is a pleasure to follow my noble friend Lord Sikka, who again comes forward with a number of amendments that are common sense and seek to shine a light on what is actually going on, and would deliver the transparency that so many of us seek in the Bill. We come to the transition period and the retrospective application, which is the subject of one of the most important groups, if not the most important group, of amendments this evening. It relates to the speed at which the register is implemented, as well as new measures that will apply during a proposed six-month transition period.

My noble friend Lady Chapman, along with the noble Lord, Lord Fox—we are grateful for his support—tabled Amendments 56, 61, 80 and 83. They seek to accelerate the implementation of the register of overseas entities, requiring initial registration within 28 days of commencement—again, seeking to avoid a situation where individuals or entities simply circumvent the law. This is not just a view held by us: the ICAEW, an accountants’ body, in the briefing that it sent your Lordships, also supported three months as a new transition period, with the ability to extend it for a further three months, were there a need to do so.

It is also worth noting that the sanction provisions—Part 1 of the Bill—will not commence on Royal Assent. Rather, they will require a commencement order laid by the Secretary of State. We understand that various steps need to be taken before that order can be laid. Can the Minister indicate how many steps there might be and roughly how long that will take? Is the upcoming Prorogation of Parliament, for example, likely to delay the introduction of any of the enabling regulations? When the Government moved from 18 months to six months in the other place, that left many thinking that the register would be active before the year end. Could it not actually be longer, given the need to implement various IT changes, inform people of the new requirements and so on? The House requires some reassurance about the commencement: in other words, when do the six months actually start? It could be six months now before the six months start: that would be a year for the implementation period. That is of real concern to us all, given the concerns that there are about the six months; so while we welcome the measures outlined in government Amendments 86 and 87, they do not prevent land being sold, gifted or transferred, and neither do they further reduce the current six-month implementation window. As many noble Lords said at Second Reading, a register of overseas entities has been promised for a number of years, and we certainly do not want any further delay, but there are serious questions to be asked.

Along with the noble Baroness, Lady Kramer, we also tabled Amendment 92. This is an evolution of the David Davis amendment considered in the other place. We accept that one very high-profile person of interest was Roman Abramovich. He is now subject to sanctions, and he plans to leave Chelsea under whatever arrangements he manages to make—or not, given the sanctions on him. However, one of the concerns around his case was that the Home Office was actually studying his affairs, but had no powers to take interim action while that assessment was being carried out. Is there therefore not a great deal of merit in our amendment, which seeks to freeze assets on an interim basis where there is good reason for doing so? In other words, if we are looking to sanctioning somebody, surely we would want to freeze their assets to prevent them from getting rid of them before a full order is put in place. At the moment, as I understand it, that cannot happen. I am not sure that under the Bill it would able to take place either, without this amendment. The Government might wish to look at the interim freezing of assets.

It might be, for example, that a person of interest hails from Belarus, which continues to enable the actions of Russia’s armed forces. What can be done about that? Does the legislation cover people in that situation as well? Again, we pose these questions to be helpful to the Government and raise serious concerns. We want the initiatives to succeed, but it is only with scrutiny—and the Government reacting and responding to the scrutiny, and acting on the various amendments that noble Lords have put forward from across this House—that we can have confidence in them. There might be only a few bad individuals among the applicants to the new register but the truth is, as my noble friend Lord Sikka and others have said, that we simply will not know what the case is unless there is maximum transparency. That transparency cannot come quickly enough.

[Baroness Kramer (LD)]

My Lords, my colleagues are doing all the heavy lifting from these Benches, and I am incredibly grateful to them. I have signed Amendment 92 in the name of the noble Lord, Lord Coaker, which I think found itself in drifting into the wrong group: it is actually part of group 3. One of the reasons why I signed it is this frustration, which I know the Government share, that, before a sanction is actually put in place, the individual who is likely to be sanctioned has, in a sense, plenty of warning signs and can use that opportunity to move various resources to a safe haven.

Much of the conversation around this Bill has been on fixed assets that are difficult to liquidate—property or complex companies—and I can understand why they might be less concerned about people knowing they are about to be sanctioned having the opportunity to move those. However, those same individuals tend to have very large investments in far more easily transportable assets—cash equivalents. I know that the Government are going to be looking at cryptocurrencies, which I have been very concerned about, when they get to the second phase of this Bill. It would, however, also be wrong to ignore such assets as jewellery and art. That is not just a tale from an Agatha Christie novel. I was a banker for many years in the mid-west, and most of my clients were exemplary people, but we certainly had one scoundrel who made the slight mistake of trying to impress a very charming young woman with an English accent and, as a consequence and with the aid of specialists, I was able to seize something worth close to half a billion dollars in artwork and jewellery against an attempt to defraud the bank. I ask therefore that the Minister think about these liquid assets, which play a part of the picture, but have been very little part of the discussion.

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[Lord Vaux of Harrowden (CB)]

I will quickly add to the comments from the noble Lord, Lord Pannick. Clause 16 sets out the regulations must

“make provision … about the information that must be verified … about the person by whom the information must be verified … requiring a statement, evidence or other information to be delivered to the registrar for the purposes of sections”

et cetera. Perhaps the Minister could enlighten us as to what he has in mind there.

[Lord Coaker (Lab)]

My Lords, I am grateful to my noble friend Lord Eatwell for moving Amendment 42. As we all know, he has a huge amount of experience in this field, having overseen many of these matters in another jurisdiction. He has long pressed the Government to introduce a register of this kind, but Amendment 42 calls for proper data verification. As we have heard from a number of noble Lords—the noble Lords, Lord Vaux and Lord Cromwell, the noble Baroness, Lady Kramer, and others—it is essential to the credibility of this Bill to ensure that any data is verified and accurate, as my noble friend Lord Eatwell put it.

The Government moved a little on this topic when the Bill was in the House of Commons, passing what was then Amendment 49, as we heard from other noble Lords, requiring the Secretary of State to lay regulations outlining the verification process before the register goes live. We welcome that move as it provides greater certainty, but as we have already heard, it prompts a number of supplementary questions and, in our view, does not go far enough. That is what Amendment 42, which we support, seeks to address.

When will we see the regulations? Will the process be based on previous consultations or require a separate engagement exercise? What if they are brought forward and the envisaged process is deemed inadequate? What if we end up getting the Bill before the SI has been laid? As with the earlier group on the transition period, we need greater clarity on process and timescales. Surely, accurate, verified data as required by my noble friend Lord Eatwell’s Amendment 42 is essential; without it, the Bill simply will not succeed.

[Lord Callanan (Con)]

I first thank the noble Lord, Lord Eatwell, for tabling Amendment 42 and for his thoughtful contribution at Second Reading on the same subject. He is, of course, absolutely right: I agree wholeheartedly that ensuring the public can be confident that the data on the register is reliable is of the utmost importance. That is why, as has been referred to, the Bill already provides for the making of regulations to create a robust and effective verification mechanism.

Clause 16 sets out that:

“The Secretary of State must by regulations make provision requiring the verification of information”,


which must be in place before an overseas entity can undertake certain actions. These actions include applying for registration to, or removal from, the register. Clause 16 sets out that these regulations can include provisions about

“the information that must be verified … the person by whom the information must be verified … requiring a statement, evidence or other information to be delivered to the registrar for the purposes”

of registration, updating of information and removal from the register.

This amendment seeks to add a statutory responsibility on the registrar to ensure the verification of any information provided to the registrar in accordance with the regulations made under Clause 16. The amendment would place responsibility for ensuring that information is verified on to the registrar, which means that the registrar would have to be satisfied that the information provided at the application stage is verified. We believe that such an addition would be nugatory to the already robust verification process that will be set out in regulations attached to this Bill once it has passed through Parliament.

The regulations that will be made under Clause 16 include the ability to specify the types of statements and evidence that the registrar can require in order to be satisfied that the information submitted to the register is appropriately verified. We expect that UK professionals regulated under the money laundering regulations will have a role to play in the verification process. We are, of course, aware of concerns raised in this House about enablers who might seek to undermine our systems. The verification process that will be set out in regulations will ensure that, whatever process is used, it cannot be undermined by enablers of unlawful activity. To support this, as was referred to by the noble Lord, Lord Coaker, we have also put forward an amendment that would ensure that, where anyone submits information that is false or misleading without reasonable excuse, they can be held to account for that.

I would also direct noble Lords’ attention to the amendment tabled by the Government in the other place, which committed to bringing regulations made under Clause 16 into force before any applications for registration may be made under Section 4(1). Therefore, creating a specific statutory requirement for the registrar to secure verification, as the amendment proposes, is in my opinion not necessary. The verification mechanism already contained in the Bill will ensure that those engaging with the regime have confidence in the information held on the register. I therefore hope that the noble Lord will feel able to withdraw his amendment.

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[Lord Agnew of Oulton (Con)]

My Lords, in view of that, I will not press my Amendment 44.

[Lord Coaker (Lab)]

It would be appropriate to thank the Minister for agreeing to accept the amendment in my name and that of the noble Lord, Lord Fox, so I put that on the record, and we will come back to it on Report.

[Lord Fox (LD)]

I said it would be swift, but I had not calculated that it would be quite this swift, so I thank the Minister for meeting us in this way and making this move; it is much appreciated. With that, I beg leave to withdraw Amendment 43. I will bring it back on Report.