Economic Crime (Transparency and Enforcement) Bill

Lord Faulks Excerpts

2nd reading
Wednesday 9th March 2022 Lords Chamber

[Lord Faulks (Non-Afl)]

My Lords, I am not sure I can follow that. I should declare an interest as a practising barrister, but not one with any relevant interests so far as this debate is concerned. We of course understand why the Bill is being rushed through Parliament, but I fail to understand why the Government have taken so long to respond to what was staring them in the face.

To take up the story from the noble Lord, Lord Rooker, I was excited by the Criminal Finances Bill in 2016. It borrowed ideas from other jurisdictions but did not, in my view, go far enough. The noble Baroness, Lady Williams, not currently in her place, will recall the criticisms I offered then of unexplained wealth orders and of the omission altogether of a property register that would help to identify the true owners of choice London property. My amendments were not accepted by the Government. Sadly, not many in your Lordships’ House, with notable exceptions—I see some of them here today—seemed particularly interested in that Bill.

Then came the Sanctions and Anti-Money Laundering Bill in 2018, which attracted rather more interest—although most noble Lords seemed concerned to protect those who might be capriciously or unfairly sanctioned. The noble Lord, Lord Hodgson, and I put down amendments in 2018, once again to set up a property register—mysteriously omitted from the Bill. I was prepared to vote against my own party on this. I was placed under considerable pressure to withdraw my amendment. I was told, among other things, that it was too complicated to do in the 12 months I suggested in the amendment. I was given lavish assurances by the Government, and a timetable. Neither the assurances nor the timetable were adhered to.

In the meantime, other noble Lords had rather more luck with their amendments to the Sanctions and Anti-Money Laundering Bill. The noble Lord, Lord Pannick, who has recently been much criticised in the newspapers, and the noble and learned Lord, Lord Judge, put down amendments that were in fact perfectly conventional, rule-of-law safeguards. They were supported in those amendments by the Labour Party and the Liberal Democrats. In fact, the Liberal Democrats wanted to go further; it seemed to me that the effect of one of their amendments would have made areas of our foreign policy justiciable. This is partly explicable by the fact that the debate on these sanctions came immediately after Brexit, and everybody’s minds, at least for the most part, were not directed towards Russia.

In Committee and on Report I spoke against all the amendments. It was not that I wanted arbitrary imposition of sanctions, but it seemed to me that our foreign policy needed a degree of flexibility. It must be remembered that sanctions are essentially a tool of foreign policy. The Government were wrong to compromise, as they did, in relation to these amendments. The position now, of course, is that the oligarchs we wish to sanction will have the benefit of the finest legal minds that money can buy to represent them.

I recommend that noble Lords read pages 46 and 47 of the Explanatory Notes to the Bill. They are certainly the longest Explanatory Notes I have ever read in relation to the European Court of Human Rights. It seems to me that the civil servants advising the Minister have said that, as a result of the amendments to the Sanctions and Anti-Money Laundering Act and elsewhere, it will be very difficult indeed to sanction anybody. Paragraph 230 says that Part 3 of the Bill

“potentially engages the following provisions of the European Convention on Human Rights: Article 6 (right to a fair trial), Article 8 (right to respect for private and family life) and A1P1 (respect for peaceful enjoyment of possessions).”

I am sure we all hope that the oligarchs can have peaceful enjoyment of their possessions. The European Convention on Human Rights was not designed to protect people like them.

I hope the Minister can assure me that the government amendments will be enough to defeat the legal might of the oligarchs. In this context I recommend the suggestion made by Professor Ekins and Sir Stephen Laws in their Policy Exchange paper, published this week in the Spectator, about a way of doing this without encountering some of the difficulties I foresee.

On the subject of the Human Rights Act, in 2015, together with the now Deputy Prime Minister, I was given policy responsibility for a British Bill of Rights. It never saw the light of day, despite our best efforts. In your Lordships’ House I was regularly upbraided at the Dispatch Box for even contemplating an amendment to the Human Rights Act, let alone leaving the Council of Europe. I was told it would send a bad message to Russia and Belarus as fellow members. We are still members of the council, but it does not seem to have much inhibited Russia or Belarus as they trample over the human rights of the brave people of Ukraine.

Then there was the Joint Committee, which I was privileged to chair, with the noble and learned Lord, Lord Garnier, as a member. It was entirely apolitical in the sense that all parties agreed to a number of important things that we thought could be done to the draft Bill, including verification—already much mentioned—and trying to get rid of the problems of trusts that could be used to bypass some of the protections. We stressed how important the timing was and how urgent it was. The timetable is in fact recorded in our report—a timetable not adhered to by the Government.

We have allowed ourselves to be the receivers of stolen goods in this country. We have seen the murder of Litvinenko and the Salisbury poisonings. Reputable sources suggest that as many as 10 or more murders are attributable to Russia. Ukraine is not our fault, but we have embraced the Russian oligarchs and Putin’s henchmen.

The Explanatory Notes say the Bill has been introduced as part of Her Majesty’s Government’s

“urgent response to the Russian invasion of Ukraine.”

It contains some useful provisions, which I thoroughly support and which can no doubt be improved when the next Bill comes along. But it should never have been necessary to come to this.

Economic Crime (Transparency and Enforcement) Bill

Lord Faulks Excerpts

Committee stage
Monday 14th March 2022 Lords Chamber

Moving on to the fabled Amendment 92—

[Lord Faulks (Non-Afl)]

I am very grateful to the noble Lord for giving way. He talks, understandably, about a transition period and the need for everybody to adjust to the new provisions. However, while Ukraine may have come as a surprise, the existence, or likely existence, of this register cannot fall into that category. I am sure the noble Lord would agree with me that anybody who had owned property would have had years to prepare themselves since it was first mentioned in 2016. It was mentioned in the Criminal Finances Act and again in the Sanctions and Anti-Money Laundering Act. Why is there so much need for further transition, when anybody would have been aware of these provisions?

[Lord Callanan (Con)]

The noble Lord will know from his time in Government that the law officers provide confidential legal advice to Ministers. I can only say to him that I am personally satisfied that this six-month period is appropriate. We are taking a severe step with this legislation; we are retrospectively interfering with property rights. Whether the legislation has been flagged in advance—I think David Cameron first promised it in 2015—does not, as I understand it, alter the legal case that somebody who wished to purchase expensive legal help to challenge the legislation would be able to do so under the Human Rights Act. I can do no more than assure the noble Lord that the officials and I are acting under the legal advice that we have received about the appropriate period. I can assure him that I wish to bring this in as quickly as I can. He will be aware that the Government originally proposed a period of 18 months. Following fairly significant political pressure, we have taken further advice and have managed to reduce it to six months. I am seriously concerned that, if we reduced it further, we could be subject to legal challenge. I am happy to speak to him outside the House.

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[Lord Faulks (Non-Afl)]

I am sorry, but I had not quite got an answer. I absolutely appreciate the Minister’s sincerity in wanting to get this register ready. My point was that the transition would come as no surprise. His answer—as I understood it—was that the Government are concerned about possible legal action, which is not quite the same thing, because I think he is talking about a possible challenge under Article 1 of Protocol 1 to the European convention. I respectfully suggest to him that lawyers are being extremely cautious about this because, in the circumstances, it would be quite a brave court that would decide that the time allowed for transition was so short that they would be allowed to retain possessions.

[Lord Callanan (Con)]

I thank the noble Lord for his legal advice; I should not let my prejudices against lawyers get in the way here, but no doubt there are others who one might want to employ who might give a different opinion. All I can say is that we are acting under the advice that we have received. I am told that while people may have had an idea in advance that we would be introduce such legislation, the fact of Parliament actually passing it will, I suspect, be the legal test for when the register starts and when the requirements come into force—whether or not it had been flagged up in advance. However, that would be my opinion as a mere engineer, not a lawyer; I am sure that other opinions are no doubt available.

I turn now to Amendment 92—

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The statutory requirement would also pose the financial resources question: does Companies House have the financial resources to do the job? If it does not, then, as pointed out by the Institute for Government in its discussion of the Bill, we have all been wasting our time. Making verification a statutory requirement would place the financing question at centre stage. It just cannot be fudged. Of course, even a thorough verification system will not be infallible, but, without it, all our efforts this afternoon will have been in vain. I beg to move.

[Lord Faulks (Non-Afl)]

My Lords, I entirely support what the noble Lord, Lord Eatwell, said. It is very much along the lines of the recommendations of the Joint Committee which I had the privilege of chairing. I quote just one paragraph:

“It is regrettable that, as currently conceived, the proposed Register of Overseas Entities will have insufficient verification checks to deter criminals who wish to submit false information. It therefore seriously risks failing in its central policy aim: to provide a reliable and transparent record of the beneficial ownership information of overseas entities investing in the UK property market.”


We discussed a number of the points that the noble Lord made so eloquently at Second Reading and today, including placing a greater burden on professionals to verify information. It is clearly fundamental; without verification, the Bill will not be as successful as it should be.

[Baroness Kramer (LD)]

My Lords, I will speak briefly on this issue, because I am very much of the opinion, as are many in the Committee, that a combination of both a public register—so that civil society groups, journalists, activists and people in different countries will have access to different kinds of information—and vigorous verification is the kind of safeguard we need if we are to end the history of the London laundromat and prevent London remaining a magnet for a great deal of dirty money that is floating around the globe.

Like many people, when I heard that there would be a register of beneficial owners of property that would have a verification component and that verification would be introduced at Companies House, I was elated. Then I actually read the language in the Bill and it seemed, as the noble Lord, Lord Faulks, said, so light touch that there might be something vigorous, but on an exceptional basis and not as a matter of routine. As there is little in the Bill to strengthen the responsibilities of the enablers, I am worried that we will end up with the worst of all worlds—a headline that makes it looks as though we are taking significant and serious action, but implementation that completely misses the mark.

I know the Minister has sometimes said that we have plenty of legislation to deal with enablers, and which has been strengthened somewhat, but if we had adequate legislation to deal with enablers we would not have a single instance of money laundering in this country, because nobody bringing in dirty money is able to buy a single piece of property, take control of a company or engage in any other activities without using an enabler. You need the lawyers, accountants and property developers. We clearly cannot choke off that particular avenue to sustain the London laundromat. All these things come together. I hope the Minister will look again at verification. It will partly be a matter of resources—those absolutely matter—but it also has to be standard practice that a very high level of verification is embedded to deal with every item in the register.

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[Lord Hope of Craighead (CB)]

My Lords, as someone who takes a close interest in devolution matters, I am delighted with these amendments. I have quite often moved amendments in similar terms and not been successful. It is a pleasure to see the Minister produce amendments in the very terms that I would have liked to have seen in the Bill. I very much welcome them both.

[Lord Faulks (Non-Afl)]

As a fellow member of the Constitution Committee, I endorse what the noble and learned Lord said. This is one of the points that we as a committee regularly make: it is one thing to have the Sewel convention in primary legislation; it is another to have it in subordinate legislation. We very much welcome this as a matter of practice.

[Lord Fox (LD)]

Never has the noble Lord, Lord Callanan, received such glowing praise, in my experience, and here am I to heap more of it on. These amendments are very welcome, as is the legislative consent from the Scottish Government. I have one point that I am sure the Minister will be able to confirm: I hope the Government will be able to continue the level of consultation the Minister could show through the regulation-making process and the statutory instruments.

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[Baroness Williams of Trafford (Con)]

I am very happy to explore the cost landscape after this Bill because, as I said, I am principally not at odds with the noble Lord at all.

[Lord Faulks (Non-Afl)]

I was somewhat concerned by the lack of response to what the noble Lord, Lord Fox, said about UWOs being a niche activity. I hope the Minister can reassure the Committee that one of the effects of the change in the Bill will be that they will very much not be a niche activity. Certainly the original intention—I understand, having read the legislation that brought them in—was that there would be 20 per year. Can we have some reassurance that there are going to be a great deal more and it will not be a niche activity?

[Baroness Williams of Trafford (Con)]

I share the sentiment of my noble friend that they will not be a niche activity. The measures in this Bill, particularly in terms of costs, will make it far easier for our law enforcement agencies to not be stymied by costs in bringing these things forward.