Sanctions and Anti-Money Laundering Bill [HL]

Lord Collins of Highbury Excerpts

Committee: 3rd sitting (Hansard): House of Lords
Wednesday 6th December 2017 Lords Chamber

[Baroness Kramer]

My Lords, everything that can be said has been said brilliantly. I hope that we will get an update from the Government which convinces us that this issue is back on track.

[Lord Collins of Highbury (Lab)]

My Lords, I note that the Minister was about to stand up but I cannot allow him to jump in so soon.

I congratulate the noble Lord, Lord Hodgson, on moving this amendment. I was disappointed that the noble Lord, Lord Faulks, was not present but he has done a grand job and a very persuasive one. Like my noble friend, I congratulate the former Prime Minister, David Cameron, on initiating consideration of this issue. We are talking not just about government policy but about a government commitment. The noble Lord, Lord Hodgson, is absolutely right—there is no better place than this Bill for this commitment to be delivered. That is why we wholeheartedly support this amendment.

I am glad that the noble Lord, Lord Bates, will respond to the amendment because he knows only too well the cost arising from this money flooding into London. We talk about the impact on London property prices and about corruption but we know that the poorest countries lose an estimated trillion pounds a year through tax evasion and corruption. The poorest in our world suffer as a result. That is why we must see the Government deliver on this solid commitment. My noble friend gave clear examples of what is happening and we have received briefs from Transparency International, but you have only to look down the river from the Terrace here to see St George Tower, a fantastic round tower. Two-thirds of it is in foreign ownership and a quarter is held through offshore companies based in tax havens. We only have to look there to see what is going on. This was a commitment of the former Prime Minister and it is an appropriate Bill. The commitment was that it would be introduced by April 2018.

We have heard how long it is since the consultation was concluded. The sad fact that the consultation has not been published is a bit of an indication about the timetable for any proposed legislation. We have an opportunity here and I hope the noble Lord, Lord Bates, will take it up. In previous Committee sittings we heard from the noble Lord, Lord Ahmad, about how he has been in listening mode and will take the opportunity to take this away. This is a perfect example of how we can deliver on a clear commitment made by the former Prime Minister.

Regarding commitments, at the Anti-Corruption Summit there was also a commitment to update the anti-corruption strategy by the end of 2016. That strategy is now long overdue. I hope the Minister will take the opportunity to say how the Government are committing to this general, overall strategy, because all these things are linked. I look forward with interest to hearing from the Minister how this commitment will be met.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, my noble friend Lord Hodgson began his remarks by welcoming me as a fresh face to this topic. That will probably turn out to be classic understatement, but I am delighted to be here on a very important topic.

I first pay tribute to all noble Lords—in particular to the noble Lord, Lord Hodgson, for standing in for the noble Lord, Lord Faulks, and for the energy and commitment they have both shown on this topic over some time. I guess noble Lords will want to hear about the current position so let me get straight to it.

This amendment would set down in legislation a commitment made at the 2016 Anti-Corruption Summit, which the UK convened, to establish a public register of company beneficial ownership information for foreign companies which already own or buy property in the UK, or which bid on UK central government contracts. This was a point referred to by the noble Lord, Lord Rooker.

The Government remain committed to this policy and our intention is to act in this space; that intention has not faltered since the noble Baroness, Lady Williams, gave a commitment earlier this year. My noble friend Lord Hodgson is right to table this amendment—just as my noble friend Lord Faulks and other noble Lords are right to support it—to remind the Government of this commitment. I welcome him doing so.

The UK is a world leader in promoting corporate transparency. We legislated in 2015 to establish a public register of company beneficial ownership—that was how we described it, and it was actually done. We remain the only country in the G20 to have established such a register. The noble Baroness, Lady Bowles, said that the eyes of the EU are on us. I hope they are because we are leading on this; we are not following. We have recently expanded the register to include other forms of legal entity established in the UK, and we remain committed to this agenda.

Earlier this year, the Department for Business, Energy and Industrial Strategy published a call for evidence on the design and implementation of the register of overseas companies that own UK property. As that call for evidence noted, this register will be the first of its type in the world, reflecting the Government’s continued commitment to being a world leader in this area.

The innovative nature of the register does, however, bring with it issues of legal complexity. The Department for Business, Energy and Industrial Strategy has identified that it will require complex amendments to the existing company law framework in the UK, with new functions being delegated to the Registrar of Companies, as well as the three land registries in England and Wales, Scotland and Northern Ireland. I will ensure that the comments about downloads are relayed to the Land Registry. Consideration will also need to be given to the acquisition, use and processing of information.

In addition, a robust enforcement mechanism will be essential, and the Government propose to implement this via the land registration system. Careful consideration will be needed as to how this will be applied to new and existing landowners, while ensuring appropriate protection for third parties. It will also require consideration of the appropriate penalty regime to be applied to persons who fail to comply with the obligation to include the necessary details on the register. These and other issues relating to the operation of the register were raised by respondents to the Government’s call for evidence earlier this year. We have been considering these so as to inform the design of the register.

I make it clear that the Government remain committed to establishing this register and to fulfilling our commitment at the 2016 Anti-Corruption Summit. My noble friend Lady Williams reiterated this commitment yesterday, speaking at the inaugural Global Forum on Asset Recovery in Washington DC. The Department for Business, Energy and Industrial Strategy expects to respond formally to the call for evidence early in the new year. That response will focus, as did the call for evidence, on how the register will be established and not on whether it will be established.

So as to fully take account of the extensive work that the Government, private sector and civil society have already conducted, and continue to conduct, on the design of this register, it is right that we allow the Department for Business, Energy and Industrial Strategy to conclude the process that is already well advanced and to publish its response to the call for evidence early in the new year. This will ensure that the register is well designed, takes full account of the representations received and provides a legally robust mechanism for registering the beneficial owners of overseas companies that own UK property. So as to further inform the response from the Department for Business, Energy and Industrial Strategy, I will ensure that it is fully aware of the points made by noble Lords today in support of establishing the register.

I should add that earlier my noble friend Lord Ahmad gave a commitment to meet my noble friends Lord Hodgson and Lord Freeman and other noble Lords who are interested in this area to update them on matters and to get further information on what they would like to see.

I hope that I have given the Committee some reassurance on our intention to act and on the next steps that we have planned, and that noble Lords can have confidence that no provision is required in this Bill to secure the progress that my noble friends Lord Faulks and Lord Hodgson seek. Therefore, I ask my noble friend to withdraw the amendment.

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[Lord Naseby]

My Lords, I declare an interest as vice-chairman of the All-Party Parliamentary Group for the Cayman Islands. In addition, a member of my family lives in the Cayman Islands. I very much support what the noble Earl, Lord Kinnoull, has just said.

We have come a long way in the best part of 18 months from a situation in which there was no statutory methodology whereby United Kingdom law enforcement agencies could get information from any of the overseas territories in a reasonable length of time and know that it had been properly produced. Speaking only from my knowledge of the Cayman Islands, that information is now available 24 hours a day, 365 days a year. That is rather better than Her Majesty’s Companies House is capable of doing. I think that is a great advance.

I deeply regret what the noble Baroness, Lady Kramer, said: namely, that when Cayman Islands representatives went over to Brussels recently, they were protected by Her Majesty’s Government. They went on their own, put their material before the authorities there, and, quite rightly, the authorities listened properly and recognised the progress that had been made. That is why the Cayman Islands are not on the blacklist. Of course, the volume of financial operations in Bermuda and the Cayman Islands is extensive—so, understandably, anybody who is concerned about financial transactions will keep a watch on what is happening. That is absolutely right and justified.

The noble Earl, Lord Kinnoull, rightly referred to Luxembourg. Top four—not the bottom four. What about other parts of the world? The USA is probably in the clear, as I am sure that the central government of the USA is in the clear. However, it is totally incapable of controlling Delaware, Nevada and half a dozen other states. We are supposed to have a special relationship with the United States. That is not much good if we accept an amendment such as this and find that all the people in our overseas territories are thrown out of business as their legitimate business is undercut totally by Delaware and Nevada—particularly Delaware.

Therefore, I say to your Lordships, “Tread carefully. Recognise that huge progress has been made in the last 18 months and that we now have a situation where our authorities can get concrete evidence when it is required”. We are not getting that out of the present system of control in the United Kingdom. We can go out of this Chamber tonight, go through the smart parts of central London and see how many of those houses are unlit. Do none of us wonder who owns those houses? Do we think the British own them? We all know in our heart of hearts that they are not owned by British people, and almost certainly not by continentals. That money has come from somewhere. It seems to me pretty likely that it is hot money. So I ask noble Lords to think long and hard before they start to destroy these overseas territories.

I was sorry that the noble Baroness who introduced this amendment brought in human rights. I have had the privilege of working and living in Pakistan, India and Sri Lanka and I know that part of the world extremely well. Legitimate British companies working there are not exploiting people. They have brought employment there, better living conditions and all the rest. The noble Baroness is quite wrong to suggest that every company operating there—or the vast majority—is exploiting these poorer countries. I ask the noble Baroness and others to find some real, concrete examples rather than generic ones. That is why I will resist the idea of a public register until such time as we have given the existing one time to work, and until such time as the EU and the United Kingdom persuade the United States to join in with producing uniform reporting. I say to my noble friend on the Front Bench that I hope Her Majesty’s Government will tread carefully and recognise the work that has been achieved so far in a pretty short measure of time.

[Lord Collins of Highbury]

My Lords, I thank all noble Lords who have contributed to this debate. I very much appreciate the comments that the noble Baroness, Lady Stern, made in moving this amendment. She is probing at this stage. We want to find out exactly what has happened—because, unlike the noble Lord, Lord Naseby, I do not think that progress has been made quickly. We have been making demands on these issues since 2013.

When we are talking about cost, it is not just criminal activity that we are talking about but tax evasion. Sometimes it is called tax avoidance but the cost of tax evasion to developing countries runs to billions of pounds. Again, I come back to the vital point that those who can least afford it are suffering the most from the activities of territories that hide people’s activity. We should not be racing to the bottom. Transparency is about good business and doing good business. That is what this amendment is about. It is not about trying to punish territories or communities that have been trying to develop or extend their economy.

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[The Earl of Kinnoull]

Before the noble Lord sits down, could he give some comment on the Sewel convention-type points that I made? I was making a constitutional point and it would be very helpful to understand the Opposition’s view.

[Lord Collins of Highbury]

The Opposition’s view, in terms of global economic theft, for want of a better word—the noble Baroness, Lady Kramer, raised this point—is that we are not talking about domestic industries or domestic activities. We are talking about transactions that are going global in terms of what I would call international crime. Not only the Panama papers but also the Paradise papers are showing that these activities are causing far more damage.

I believe that the overseas territories have an obligation to comply with international agreements, certainly regarding our UN obligations on sanctions. If we sanction a country for corrupt activities, the overseas territories have to comply. If it is good enough for sanctions, it is important that we consider it important enough for some of the crimes we have heard described this afternoon.

[Lord Ahmad of Wimbledon]

My Lords, I thank all noble Lords who have taken part in this debate. In particular I thank the noble Baroness, Lady Stern, for tabling this amendment. It would require the Secretary of State to provide all reasonable assistance to the Governments of certain of the British Overseas Territories with significant financial centres to enable each of those named overseas territories to establish a public register of company beneficial ownership. It further provides that if, by 1 January 2019, such overseas territories have not established such a register, the Secretary of State should take all reasonable steps to ensure that the Privy Council legislates to require each relevant overseas territory to do so. With your Lordships’ indulgence, I shall refer to the overseas territories as the OTs to save a degree of time.

I also appreciate that, as the noble Baroness articulated in moving the amendment, it was a probing amendment. That allows me to outline what steps have been taken. The OTs, as you know, are separate jurisdictions with their own democratically elected governments. They are not represented in this Parliament and so it has only been in exceptional circumstances that we have legislated for the OTs without their consent.

Financial services are the domestic responsibility of territory Governments. This creates an entirely different relationship from examples where we have had to legislate. For example, we have acted over international human rights obligations and, indeed, on decriminalising homosexuality. On the governance structures in which these territories work, as the noble Earl and my noble friend Lord Naseby have indicated, and as the territories and the House will recognise, legislating for the OTs without their consent would effectively disfranchise their own elected representatives. It would create considerable ill-feeling, which the Government do not wish to do.

Legislating to require certain OTs to establish public registers of company beneficial ownership when they do not wish to do so of their own volition would also mean that the territories would be less keen to maintain their current level of co-operation. This would jeopardise the progress—which I shall come to in a moment—that has already been made in this area and the spirit of working in partnership that we have fostered with them. The noble Lord, Lord Collins, said that I was running off to the joint ministerial council—I think I ran from it. We covered this subject; indeed, it was also covered by my right honourable friend the Prime Minister in her meeting with the overseas territories. Jeopardising progress in this respect is not something any of us want to do. Given the necessary lead-in period for establishing any new register of beneficial ownership, this would set back UK law enforcement’s ability to access information relating to the beneficial ownership of companies in the OTs.

Let me assure noble Lords that this does not mean we are content for no action to be taken in this space. It simply means that we wish to take action within the existing framework of friendly co-operation, building on the progress already made. The noble Baroness, Lady Stern, made the point that I am the Minister for Overseas Territories. I have been dealing quite extensively with them, as noble Lords will understand, particularly certain territories, because of the tragic hurricanes that struck. We raised these issues directly, and we have seen good progress.

As noble Lords will know, the UK is a global leader in the cause of corporate transparency. We are the only country among the G20 to have a fully established public register of company beneficial ownership, and we continue to push for this to become a global standard. The international standards set by the Financial Action Task Force do not require it, however, reflecting the lack of international consensus in this area. These standards require only that:

“Countries should ensure that there is adequate, accurate and timely information on the beneficial ownership and control of legal persons that can be obtained or accessed in a timely fashion by competent authorities”.


Nevertheless, should public registers become the global standard, we would expect the OTs to meet it. The UK is far ahead of other countries in this area. The current EU framework does not require all member states to establish public registers of company beneficial ownership, so many have chosen not to do so. There is already progress in this area and we need to build on it within the existing framework of friendly co-operation, to which I have alluded. Under the arrangements that we concluded with the OTs in 2016, overseas territories with significant financial centres committed to hold beneficial ownership information in central registers or similarly effective systems, and to provide UK law enforcement authorities with automatic access to such information within 24 hours of a request being made, or within one hour in urgent cases.

These arrangements—also known as the “exchange of notes”—came into effect on 30 June this year and are in the process of being fully implemented by the OTs. An important point is that effective implementation of these arrangements will put the OTs ahead of many G20 members and many individual states of the United States—a point made well by my noble friend Lord Naseby.

I am pleased to report that Bermuda, the British Virgin Islands, the Cayman Islands and Gibraltar have central registers of beneficial ownership information or similarly effective systems in place, and they are taking forward population of their systems with beneficial ownership data.

We are also providing support to the Government of Anguilla to establish an electronic search platform providing access to beneficial ownership information, as well as support in drafting underpinning legislation. We are now working with Anguilla to finalise a memorandum of understanding on the terms for provision of our support, and we expect its beneficial ownership system to be established in the spring of 2018, notwithstanding the current rebuilding challenges it is facing following the hurricane. Work on establishing a central register in the Turks and Caicos Islands has been delayed owing to the impact of Hurricane Irma, but we expect this to be in place soon.

We did not seek a bilateral arrangement with Montserrat, as we had with the other OTs with financial centres, because Montserrat had already committed in November 2015 to include beneficial ownership information in its existing public companies register. A Bill requiring the inclusion of beneficial ownership information in the existing register will be introduced to Montserrat’s Legislative Assembly this month. The target date for the addition of that information to the register is 1 April 2018.

Having heard that detail, I hope your Lordships will agree that it demonstrates what can be achieved by working consensually with the OTs. It is right, therefore, that we focus on the implementation of the existing arrangements and that future work in this area be carried out within the existing framework of friendly co-operation, rather than generating ill will by imposing upon the OTs without their consent.

We are committed to following up on these arrangements to ensure that they deliver in practice, are implemented effectively and meet our law enforcement objectives. There is explicit provision in the exchange of notes for the operation of the arrangements to be reviewed six months after they came into force—that is, at the end of this year—and subsequently on an annual basis. These formal review processes are in addition to ongoing monitoring of the practical application of the exchange of notes by the UK and each relevant OT.

In addition, noble Lords will recall that Section 9 of the Criminal Finances Act 2017 amended Part 11 of the Proceeds of Crime Act 2002 to establish a statutory review process for the implementation of the exchange of notes. This report must be prepared before 1 July 2019 and relate to the implementation of the exchange of notes from 1 July 2017 to the end of December 2018. Once prepared, it will be published and laid before Parliament. The Government are clear that OTs with significant financial centres must fully implement the exchange of notes to which they have each agreed. The noble Baroness, among others, asked whether this matter had been raised. I have already said that it was raised at the JMC, and the Prime Minister reiterated this at her meeting with the leaders of the OTs last week. These arrangements have been made and must be honoured.

A key feature of the Government’s approach has been to maintain a level playing field between the OTs with financial centres and the Crown dependencies. As I am sure noble Lords reflecting on my contribution will see, we have robust review processes for the implementation of these arrangements, both on an ongoing basis with the Crown dependencies and the OTs and through the Criminal Finances Act. If these review processes demonstrated that full implementation of the exchange of notes was not taking place in any individual jurisdiction, it would be right for us to consider the issue further.

My noble friend Lord Patten, who I see in his place, raised the EU blacklist. Perhaps I may, first, give some factual information. I will check Hansard but I believe that he mentioned that Bermuda was on the blacklist. Bermuda is not on it; nor are the Cayman Islands or the Crown dependencies. Bermuda, the Cayman Islands and the Crown dependencies are on a separate list—I am quoting here—of co-operative jurisdictions which have been assessed by the EU as being unsuitable for the blacklist. They have also further committed to address any remaining concerns by the end of 2018. I can be quite specific in saying that this is not a grey list; on the contrary, it is a demonstration of the progress and positive commitments that have been made and are being achieved.