Economic Crime and Corporate Transparency Bill

Lord Coaker Excerpts

Committee stage
Tuesday 9th May 2023 Grand Committee

[Lord Alton of Liverpool (CB)]

Oh, is he not? I am sorry; I had better put my spectacles back on.

[Lord Coaker (Lab)]

Specsavers.

[Lord Alton of Liverpool (CB)]

I apologise to the noble Lord, Lord Evans. It seems that the noble Lord, Lord Johnson, is still travelling back from Hong Kong, but I can see that the noble Lord, Lord Sharpe of Epsom, is sitting in his place. He dealt with our debate last week; no one in this Committee knows more about Hong Kong than he does, having worked there. He will recall the discussions that we had not just on that occasion but on other occasions as well.

The matter was very much on my mind when reading the reports about the visit of the noble Lord, Lord Johnson. I wondered how the imprisonment of more than 1,000 legislators and lawmakers in Hong Kong has been dealt with during that visit, not least the position of Jimmy Lai, who is a British citizen. Indeed, in this very Room, sitting at the back of our proceedings just a couple of weeks ago was Sebastian Lai, his son. I know from our subsequent discussion that he felt deeply that not enough had been done by the United Kingdom in raising the case of his imprisoned father, who might well die in prison. I hope again as I press the Minister, as I did last week, that he will be able to tell us what the response has been from James Cleverly, the Foreign Secretary, and the Prime Minister, to the requests that have been made. Mr Sebastian Lai, who is also a British citizen, and his international legal team should have the opportunity to discuss his case, the role of assets and why no one in Hong Kong has been sanctioned, whereas British parliamentarians have been sanctioned. Despite the sanctioning of the former leader of the Conservative Party Sir Iain Duncan Smith and colleagues such as the noble Baroness, Lady Kennedy of The Shaws, we nevertheless continue business as usual by promoting closer and deeper business links, as the noble Lord, Lord Johnson, has been doing in Hong Kong. How does that link to the need for us to assess the assets that are held in this country by people who have been responsible for the incarceration of pro-democracy legislators and activists, more than 1,000 of whom are currently in jails in Hong Kong?

The main purpose of the amendment that I moved last week and of Amendment 91A before us today is to concentrate on the sanctions regime that has been imposed as a result of the war in Ukraine. I pay tribute to the Government for what they have tried to do, often in exacting circumstances, after the war erupted, but when I went to see the noble Lord, Lord Sharpe, and a member of his Bill team to discuss this last week, he was very straightforward in saying that there is nothing new in Amendment 91A and that it entrenches the current situation. It could be said to be sending a signal, but legislation is about more than semaphore and sending signals. Will the Minister say what is new in this amendment that is not already on the statute book?

Britain’s sanctions regime is broken, which is why some of the players who have been involved in the appalling events in Ukraine have been getting away with murder. Brave people have been laying down their lives defending not just their own country but our shared values of democracy and freedom. From the outset, we must recognise that our sanctions have always been held back by murky layers of financial secrecy in this country, which is why we need more than what is in Amendment 91A and why I hope that the noble Lord, Lord Sharp of Epsom, in particular, will continue to engage with those who spoke in favour of the amendment that I moved last week—they included the noble Lords, Lord Coaker and Lord Leigh, my noble friend Lord Fox and the noble Baroness, Lady Altmann. I therefore hope that Amendment 85 in its fullness, or something like it, will be put in place of Amendment 91A when the Bill comes back on Report.

It feels like every week we get a new story about this oligarch putting his wealth “in the hands of his young children” or that oligarch shrouding his UK assets behind so many shell companies and opaque trusts that we simply cannot track them down. I mentioned Roman Abramovich as a particularly high-profile example. The so-called oligarch files which were leaked earlier this year revealed how he was allegedly able rapidly to move at least $4 billion of his wealth away from law enforcement by transferring the beneficial ownership of several secretive trusts to his children just before he was slapped with sanctions by the Government.

We do not need to take a much closer look at the network of professional enablers who make this type of wrongdoing possible to see what is involved. There are accountants, lawyers and bankers who wilfully subvert our sanctions regime in exchange for tainted roubles. This is all absolutely legal. We have built a financial services sector in which people have been able to play an interminable game of cat and mouse with law enforcement, where the official owner of a given asset—if we can identify who that is in the first place—can change with little more than a stroke of the pen and no questions asked. Now we are finding that those same people—oligarchs, kleptocrats, call them what you will —know the rules of this game and its loopholes better than we do.

Accepting that our existing sanctions policy is not fit for purpose is important, but right now we can and should find a way to make sure that what sanctioned Russian assets we have managed to identify and freeze are taken away from these oligarchs and put towards Ukrainian reconstruction efforts. As it stands, if the war in Ukraine were to end tomorrow, we would have little choice but to hand back £18 billion of frozen assets to their dubious owners, with no questions asked. This is the distinction between freezing and seizing. We simply cannot allow that to happen. Ukrainian schools, hospitals and homes need to be rebuilt in their thousands and scores of unexploded bombs and mines need to be cleared to do so.

The question for us is whether this amendment goes anywhere at all towards achieving that. The cost of rebuilding the country could top £1 trillion, according to recent estimates. Ukraine’s death toll is 60,000 and rising, with millions more people displaced. Under international law, Russia has to pay for the damage that it has caused, yet so far it is the British taxpayer who has forked out £2.3 billion in military support and another £220 million in humanitarian aid. Secrecy and inertia are enabling this—two main reasons why our sanctions regime is not working and why we need to do more than what is contained in this amendment.

I have sympathy with the Government. The sanctions regime relating to Russia was hastily constructed, as I suggested at the outset of my remarks, in the wake of a conflict that has shocked the world. The seizure of assets that belong to individuals is certainly a complex issue. The rule of law, due process and property rights should all be considered, as I discussed with the noble Lord, Lord Sharpe. This is exactly why the Government must not miss the opportunity in this Bill to make a difference, without violating any of these principles.

Our allies have already put wheels in motion. The European Union is looking to seize €300 billion of frozen Russian central bank reserves and €19 billion in oligarch assets that it holds, while Canada has made good progress on a law to allow the seizure of frozen assets. What study have we made of what is happening elsewhere in the world? Should we not emulate those pieces of legislation and ensure that we act in concert? If the Minister thinks that I am asking the UK Government to go it alone on these things, I can assure him that he is mistaken. I recognise that we have to do this with others, but others seem to be ahead of the game. As it currently stands, I do not feel that this amendment is the way we should proceed. I look forward to hearing what the Minister has to say in response.

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Moved by

[Lord Coaker]

93: After Clause 187, insert the following new Clause—
“Unexplained Wealth Orders and Vulnerable Adults
(1) The Secretary of State must commission a report each year on Unexplained Wealth Orders where the wealth or property in question was obtained through economic crime.(2) The report must record all cases where Unexplained Wealth Orders have been used in the previous year and revealed cases where property or wealth has been taken from—(a) older people;(b) people living with disabilities;(c) people who use adult social care;(d) adults who lack mental capacity.(3) This first report must be laid before each House of Parliament one year after this Act is passed.(4) Thereafter it must be produced annually.”Member’s explanatory statement
This amendment probes current data kept by the government on property and wealth obtained through economic crime being taken from vulnerable adults.

[Lord Coaker (Lab)]

In the absence of my noble friend Lord Hunt, and with his apologies, I move Amendment 93 in his name. I shall leave the noble Lord, Lord Faulks, and the noble and learned Lord, Lord Garnier, to speak to their amendments, but I agree very much with the points made in Amendment 95.

This is one of those parts of the Bill that we are dealing with in Committee which seems like a very small part of a huge reform that the Government are undertaking with respect to economic crime. However, given that unexplained wealth and the proceeds of crime are an affront to us all, successive Governments—because under the last Labour Government I was involved in the passage of the Proceeds of Crime Act —have singularly failed to ensure that those who benefit from crime do not somehow evade their ill-gotten gains being taken back from them by the state. That is despite the Proceeds of Crime Act and the unexplained wealth orders—and the first part of the amendment would require a report from the Government on unexplained wealth orders.

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[Lord Sharpe of Epsom (Con)]

I am certainly happy to take my noble friend’s concerns back but, as regards targets, that would invite me to stray into operational matters, which I will not do.

[Lord Coaker (Lab)]

I thank the Minister for his reply, although I also share that disappointment. I should have thought that the focus of the noble Lord, Lord Young, speaking on behalf of the noble Lord, Lord Faulks, and the noble and learned Lord, Lord Garnier—as I am speaking on behalf of my noble friend Lord Hunt—was to ask the Government to bring a report, even if that is not the appropriate way of doing it, and say to them that the operation of UWOs is simply not working as they expected. It is perfectly reasonable for a Minister of the Crown, while of course not interfering with the operational independence of the police or any other law enforcement agency, to look at the legislation and see whether it is working as the Government expected. Clearly, it is not, so it would be a perfectly reasonable response to say that nine applications, four cases and the odd bit since is simply not what anybody would have thought acceptable or thought would happen.

This happens with legislation; even if we had the Government of our dreams, laws would be passed that did not function or operate in the way we would want—but that is the purpose of Committees such as this. This is where, to be frank, Ministers listen to what is said and respond that they will take the matter back and that it is unacceptable, rather than come off saying that it is one tool in the box of government in dealing with the issue.

The Minister had a pop at me. I was only using the facts that are available in a government document called Fact Sheet: Unexplained Wealth Order Reforms. If the facts I am giving the Minister are wrong then, frankly, the Government should have updated the facts, because this is what all of us use in these debates. I have not made it up—I have read the Government’s material. The Minister then turns around and says that the noble Lord, Lord Coaker, has not got it right, because the up-to-date figures are X, Y and Z against POCA. It might have been helpful to have the key facts.

Again, I read out,

“the Proceeds of Crime Act 2002 is a complex and technical Act and reform requires careful consideration and consultation”.

Then the Minister had a go at me and laid out four Acts of Parliament that have been done since. Why were they not included in the key facts? It would have been helpful to everyone to understand the way in which it had been reformed to see whether it is now working and functioning as the Government want it to. I do not have five floors of civil servants providing me with a brief that says there are four pieces of legislation which have updated and improved it. The serious point is that, when I and other members of the Committee depend on the government document setting out the key facts in relation to what we are discussing, it should be up to date. That is the only point I want to make.

I do not know whether the figure that I was going to use is out of date. A number of members of the Committee made the point to the Minister that, if it is hundreds of millions that have been recovered over a number of year, that is peanuts. The reason I say it is peanuts—the Minister will correct me if I have got this wrong—is that Fact Sheet: Unexplained Wealth Order Reforms says under the heading “Key Facts”

“Serious and organised crimes … for example”—


and lays out various things—

“are estimated to cost the UK economy £37 billion per year”.

That is not my figure. The key facts document published by His Majesty’s Government says it is £37 billion a year. I should have thought that the response to what are clearly probing amendments about reports would be, “It is £37 billion a year, we are getting a few hundred million there, we are getting £100 million there, £50 million there”. Why are we not making more of a dent into what we all, including the Minister, regard as simply and utterly unacceptable? The Minister will think it is unacceptable that we have that.

Of course, I shall not move the amendments, but I hope the Minister will take back the bureaucratic point about ensuring that the key facts documents that we use in our deliberations are updated. I hope that he will also talk about the point that unexplained wealth orders were brought in as a way for the Government to address the problem, which the noble Lord, Lord Young, and others mentioned, that huge sums of money surround individuals who have no legal way of explaining how on earth they got them.

I shall raise one other point, because it drove me mad when I was a Member of Parliament and before that a local councillor. On estate after estate, on housing area after housing area, it drove people who went to work mad to look down the road and see somebody who did not go to work driving a Ferrari, or something like that. At an individual level, that is exactly what all of us feel more generally about what is happening nationally and internationally, where people are playing the system. The vast majority of law-abiding business men and women and businesses conform to the law, pay their taxes and do their best—but £37 billion a year is lost to fraud. In answer to the noble Lords, Lord Fox and Lord Young, and me, the Minister talked about getting £10 million here and £100 million there. I am pleased that we got that, but it is peanuts compared to the amount of money that we are talking about. I hope the Minister can take that back—

[Lord Sharpe of Epsom (Con)]

As the noble Lord has drawn on the key facts document, it is important for me to provide a bit of clarification. It was published on 4 March 2022 for the previous Bill, not this Bill. Those numbers were correct at the time of publication. On UWOs, they have been applied for—I have said how many times—and two of the applications have been made since the Government reformed the UWO regime last week, which I should have said while I was answering noble Lords. Perhaps that provides a bit more clarity. On the key facts, the three floors of civil servants are in the clear.

[Lord Coaker (Lab)]

On the various facts that the Minister has brought forward, I just went to the latest fact sheets. For example, I have an overarching fact sheet for the Economic Crime and Corporate Transparency Bill. It was updated on 11 April 2023. If that one can be updated, this one can. Are we going to play at dates? All I do is go to the latest available fact sheet. I have another one here, which I shall use in our next debate—and I hope that that was updated on 11 April 2023. So the fact sheet that I cited was from 4 March 2022; I understand what the Minister said. However, these are the latest facts that I have used. What is a member of the Committee supposed to use, if they cannot use a fact sheet and cannot find the latest one? One assumes that it is the right fact sheet. It does not say, “Fact sheet: unexplained wealth order reforms as per a particular Bill”. Oh, I correct myself—it says that at the top. But the truth of this is that what all of us seek to do is to use facts, and all I did was to use the most up-to-date fact sheet. I hope that the one dated 11 April 2023 is the latest one and there is not one from 4 May 2023, which the Minister would be able to correct me about again.

I beg leave to withdraw the amendment.

Amendment 93 withdrawn.

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[Baroness Bennett of Manor Castle (GP)]

We will not get into that one. The noble Lord, Lord Wallace, has been an absolute bulldog in pursuing this issue over a number of years. The reason why I chose to attach my name to this amendment is that I worked with the noble Lord on this issue, during my modest role in what became the Financial Services Act 2021. As the noble Lord, Lord Fox, outlined so clearly, we must be able to diagnose the illness fully if we are to find the medicine we need to deal with it. At the moment, we are not being allowed to see that diagnosis; we are getting a very rough, top-line kind of summary.

As the noble Lord, Lord Fox, said, we know that more than half of the visas issued—some 6,000—were being reviewed in 2022 for possible national security risks. Being told about a small minority does not get us anywhere near where we need to go. We are looking at this particularly in the context of the Russian attack on Ukraine and the current geopolitical situation. More than 200 Russian millionaires bought their way into the UK in the seven years after the scheme was supposedly tightened, before it was finally closed. We have to look at that with respect to security issues as well; we are talking about economic crime here but economic crime and security are surely interrelated. We need to know about those issues.

This amendment deals only with the review relating to economic crime. I am sure that that is because the Bill Office said that anything broader would be out of scope—I have no doubt about that—but it is worth putting on the record that, to learn lessons for the future, we need to assess the impact of the scheme much more broadly. I do not know whether the Home Office report looked at this—I cannot see it—but it would be interesting to see what impact it has had on our current housing crisis and on house prices; surely it has had an impact.

It is also worth highlighting the broader impact of entrenching wealth-based and racialised inequality in the UK. Take the contrast between the 250 family members and dependents of the Russian millionaires who came in versus the fact that so many British people are unable to live in their own country with their foreign spouse or partner because they do not earn enough money to be able to do so. That contrast is really shocking; we should be looking at the impacts of that on our society. These golden visas were a disaster. We can only understand that disaster and seek to deal with its effects if we are open about the Government’s own report.

[Lord Coaker (Lab)]

My Lords, I support much of what the noble Baroness, Lady Bennett, and the noble Lord, Lord Fox, have said. In speaking to my amendments in this group, I start by welcoming the publication of the fraud strategy last week. I know that the Minister has been pushing for it to be published as speedily as possible; its publication is helpful to the Committee.

The fundamental question behind much of what I am going to say is this: how will the fraud strategy published last week answer some of the problems that have been raised—indeed, that I will raise? My Amendments 106B, 106EA and 106EB are clearly probing amendments but they have at their heart the question posed by the noble Lord, Lord Fox: how will the Government bring together all this legislation, statutory instruments, enforcement papers, reforms of Companies House and so on? How is all of that in the landscape of government being brought together, co-ordinated and made effective? It is not an easy question to answer but, looking at all these things, they seem cluttered, to say the least. Even with this Bill, things are cluttered. Some sort of review or report to Parliament to try to do something about that would be helpful. Does the fraud strategy do that? How will the strategy report to Parliament to see whether it has been successful or not?

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There is a well-established government structure that oversees the response to economic crime across the system, thereby ensuring effective oversight of both enforcement and supervision agencies. This is co-ordinated by regular departmental and private public forums, most notably through the Economic Crime Strategic Board, which is co-chaired by the Chancellor and the Home Secretary. So, I hope that the noble Lord, Lord Coaker is reassured—

[Lord Coaker (Lab)]

Does that committee do an annual report? How often does it meet?

[Lord Sharpe of Epsom (Con)]

I do not know. I will find out and write to the noble Lord. For now, I hope he will accept that it is not the role of the Government to set up parliamentary committees and so will not seek to press his amendment.

I turn now to Amendment 106EB concerning the Serious Fraud Office. Once again, I thank the noble Lord, Lord Coaker, for tabling this amendment, which would require the Government to lay in Parliament an annual report on the Serious Fraud Office. The effectiveness of the agencies tasked with fighting economic crime, including the SFO, is of critical importance and of interest to both Houses. That is why the SFO annual report and accounts—these set out much of the information in which the noble Lord is interested—are routinely laid in Parliament.

The law officers of England and Wales superintend the SFO. They oversee the performance of the SFO, including steps that they can take to improve that performance. Through the superintendence process, the law officers identified the need to expand the SFO’s pre-investigation powers, a change that appears in Clause 185 of this Bill. The law officers take steps to ensure transparency, including participating in Attorney-General’s Questions in the other place; publishing summaries of minutes from SFO ministerial strategic boards online; and addressing issues promptly through Written Ministerial Statements.

This is complemented by the work of HM Crown Prosecution Service Inspectorate, which inspects the SFO and publishes its findings alongside a set of recommendations. HMCPSI recently published an inspection of the SFO’s case progression—that is, the organisation’s ability to deliver its cases efficiently and effectively. Given our previous discussions, the tone of the debate and the views expressed, I understand that the intention of this amendment is to probe the Government on the resourcing of the SFO.

The noble Lord, Lord Faulks, made a very interesting point; he may have noticed that I wrote my note on the wrong page when I referred to it earlier. I am coming back to it now; it is an interesting idea and I will definitely take it back. There is a process in place to recruit a new director-general of the SFO. I would imagine that acute matters, human resources and future resources are a part of the remit for that person but the noble Lord certainly makes an interesting point. To go back to a conversation during a debate that the Lord, Lord Browne, and I had last week, my personal point of view is that it is about time we all sat down and started to think about recruitment in law enforcement more generally.

[Lord Agnew of Oulton (Con)]

Given that my noble friend the Minister is going to take the comments made by the noble Lord, Lord Faulks, on recruitment back, I encourage him to look at the report by Andrew Cayley KC, Chief Inspector of the Crown Prosecution Service, who has also done a report recently. Some of the problems in the SFO are case workers not being paid enough, churn and so on, which led to the collapse of the case against G4S. There is big piece of work there that we could be doing stuff with.

[Lord Coaker (Lab)]

What is the Government’s view on whether the SFO is working?

[Lord Sharpe of Epsom (Con)]

Those are good questions; I will come on to them.

Funding and resourcing is a subject that is covered in the fraud strategy. I will not go over the details. At the most recent spending review, the SFO received an uplift to its core budget that is supporting its operations. In addition, the SFO continues to have access to reserve funding to fund specific high-cost cases if needed. This enables the SFO to obtain additional funding for any case that exceeds 4% of the core vote funding for the year.

My noble friend Lord Agnew and the noble Lord, Lord Coaker, referred to the G4S case. Obviously, it is always disappointing when a case has to be brought to an end before it is concluded but, like other agencies, the SFO is right to end an investigation or prosecution when it is no longer in the public interest. The SFO has acknowledged that there were disclosure challenges in the case that was closed earlier this year, R v Morris, Preston and Jardine. The SFO has made good progress on implementing the disclosure changes recommended by Sir David Calvert-Smith and Brian Altman KC in their independent reviews, published last year. The Crown Prosecution Service Inspectorate, the agency that inspects the SFO, has been asked to expedite a planned review of SFO disclosure, which will provide further independent assurance of the SFO’s processes.

Further to that, in Economic Crime Plan 2, which was published on 30 March, the Government set out their intention to explore reforms to the disclosure system to ensure that it supports a fair criminal justice system because cases that are lost on procedural grounds are, as noble Lords have noted, a loss to victims, taxpayers and, of course, society.

The noble Lord, Lord Coaker, just asked me whether the Government have faith in the Serious Fraud Office. The answer is yes.

[Lord Coaker (Lab)]

Is it working?

[Lord Sharpe of Epsom (Con)]

I would say that it is the same thing; perhaps we can debate that as well.

The Serious Fraud Office investigates and prosecutes the most complex cases of fraud, bribery and corruption. That is a very challenging remit. It has delivered some outstanding outcomes. For example, last year, it secured the conviction of Glencore for bribery and corruption in five countries, with the company ordered to pay £280 million—the highest ever ordered in a corporate criminal conviction in the UK—as well as eight convictions for five cases of fraud and bribery worth more than £500 million. It consistently recovers some of the largest amounts of proceeds of crime, despite being a fraction of the size of many other national agencies.

It is also important to note the SFO’s role in fighting economic crime globally. In the last financial year, the SFO took steps to assist overseas jurisdictions in their investigations by working on more than 60 incoming money-laundering requests. I think that the statistics answer the question—yes, we have faith, and yes, it is working. I hope that my explanations have provided some reassurance. I therefore ask the noble Lord not to press his amendment.

I turn to the final amendment in this group, Amendment 106EA, again tabled by the noble Lord, Lord Coaker. I come to this amendment last as it seeks to bring into one amendment much of what the other amendments in this group also attempt. I will not repeat myself too much here, especially considering how long I have gone on so far. The amendment would require the Government to issue a report on the performance of agencies and departments in tackling economic crime. However, I can assure noble Lords that this is already being done. As I have mentioned, the Government, regulators and law enforcement already regularly give evidence to parliamentary committees. The National Crime Agency is required under the Crime and Courts Act to publish an annual report and lay it before Parliament, further adding to the available scrutiny of operational bodies. The Government already conduct a range of threat and risk assessments to develop our understanding of economic crime. The NCA’s national strategic assessment assesses the economic crime threats facing the UK on an annual basis. As required under the money-laundering regulations, the UK also conducts periodic national risk assessments of money laundering and terrorist financing, which provide an overview of the risks and likelihood of an activity occurring. We have already discussed in detail the establishment of a fund to tackle economic crime so I will not repeat that debate again.

Regarding the amendment’s calls for a strategy on tackling economic crime, this March, the Government published Economic Crime Plan 2. Through 43 actions, it sets out how the public and private sectors will work together to transform the UK’s response to economic crime. Obviously, the fraud strategy is a part of that overarching economic crime strategy.

As regards the quality of the data in the fraud strategy, which was referenced by the noble Lord, Lord Browne, I have just had a quick flick through and it is more recent than six years. I should also reassure the noble Lord that one of the commitments in the fraud strategy is to improve the quality and collection of data, so this can be regarded as a baseline.

There are numerous ways in which the Government report on their performance with regard to tackling economic crime. This amendment is duplicative of them and therefore unnecessary. I ask the noble Lord to withdraw his amendment.