Sanctions and Anti-Money Laundering Bill [HL]

Lord Faulks Excerpts

Wednesday 17th January 2018 Lords Chamber

Moved by

[Lord Faulks]

75: After Clause 41, insert the following new Clause—
“Public register of beneficial ownership of UK property by companies and other legal entities registered outside the UK
(1) In addition to the provisions made under paragraph 6 of Schedule 2, for the purpose of preventing money laundering in the UK property market and public procurement, the Secretary of State must create a public register of beneficial ownership information for companies and other legal entities registered outside of the UK that own or buy UK property, or bid for UK government contracts.(2) The register must be implemented within 12 months of the day on which this Act is passed.”

--- Later in debate ---

[Lord Faulks (Con)]

My Lords, in May 2016 at the international anti-corruption summit, the Government committed to create a new register showing the beneficial owners of overseas companies that own, or want to buy, property in the United Kingdom. This was to encourage transparency and was intended to play a significant role in combating corruption and money laundering. Many noble Lords feel a sense of dismay, as I do, that large parts of central London and other parts of the country are dark at night, with property wholly unoccupied or occupied for brief periods only. Who owns these properties? We simply do not know, there being no obligation to identify beneficial ownership of foreign companies which own property yet no restriction on foreign ownership.

We may not know, but we have strong suspicions. Transparency International says that £4 billion-worth of property in London is bought with suspicious wealth. Edward Lucas, a Times journalist with considerable knowledge of this subject, has written that,

“colossal sums of money, stolen from the Russian people”,

have flowed,

into the City of London and into the luxury end of the property market”.

All this at a time when young people struggle to get on to the property ladder and to live anywhere remotely near their place of work.

During the passage of the Criminal Finances Bill, I put down an amendment in similar terms to the one now before your Lordships’ House. That was in April 2017, and I could not follow through because of the wash-up. I was, however, given reassurance by my noble friend Lady Williams that the matter was in hand and would be taken forward,

“as soon as parliamentary time allows”.—[Official Report, 25/4/17; col. 1334.]

In July 2017, I asked an Oral Question about progress with the register. I was reassured this time by my noble friend Lord Young of Cookham—few are more reassuring than he is—that:

“Good progress is being made”,


and that the Government were,

“determined to honour the commitment to introduce such a register”.—[Official Report, 10/7/17; col. 1081.]

Then I put down an amendment to this Bill, as it was plainly in scope. When my noble friend Lord Hodgson of Astley Abbotts moved the amendment in my absence, he also was reassured, this time by my noble friend Lord Bates, who did not commit the Government to any timetable but did say that the Government would publish the response to calls for evidence,

“early in the New Year”. —[Official Report, 6/12/17; col. 1085.]

The responses have been in since March 2017.

I thank my noble friend Lord Hodgson for his support in this matter and the noble Baroness, Lady Bowles, and the noble Lord, Lord Collins, who have also put their names to this amendment. I also thank my noble friend Lord Freeman for his support and the noble Lord, Lord Rooker, who is sadly not in his place, but who left the House spellbound with his description of a kleptocracy tour around central London. I also pay tribute to the Minister, the noble Lord, Lord Ahmad, who has shown characteristic willingness to meet us, and to the Bill team and others across government who have endeavoured to explain how complex this all is.

However, the time has come not for reassuring words but for action. Something more substantial is needed. It is a supreme irony that this country’s adherence to the rule of law encourages criminals and fraudsters to invest here, when in their own countries there may be little or no respect for the rule of law. Are we to stand idly by and to act in effect like a handler of stolen goods? My amendment would allow the Government 12 months from the passing of the Act to set up the register. Given that the Bill has not yet even started in the Commons, there is some time to go before the clock starts ticking. I believe this House is very concerned about this issue. I beg to move.

[Lord Hodgson of Astley Abbotts]

My Lords, my name is on this amendment, and I rise with a sense of what I can only describe as weary resignation to speak in support of it once again. My feelings can probably best be summarised by that oft-quoted remark from a famous football manager—I forget which one—that, “I have a sense of déjà vu all over again”. We have been round this topic many times, both on this Bill and, as my noble friend said, during the proceedings of the Criminal Finances Bill in the spring of last year. My noble friend Lord Faulks has laid out the case with his well-known surgical precision, so I am forced to remember that other famous saying, this time about your Lordships’ House: “Everything that can be said on this topic has been said, but not everybody has yet said it”. Brevity is the order of the day, so I will just set out five quick facts.

First, given this country’s long-standing respect for property rights, stretching back now over 300 years, the UK is a particularly attractive place in which to invest in property assets. Secondly, this country has an extensive and well-resourced financial services sector, in which large transactions can be, if not hidden, at least made to not appear unduly large. Thirdly, a substantial number of investors from all corners of the globe have invested in property in both London and our other leading cities. Fourthly, a number of overseas investors have chosen to make their investments in UK property through a company, so enabling them to conceal their identity. Fifthly, recognising the potentially malign confluence of the above in 2016—two years ago, as my noble friend has mentioned—the Government committed to the creation of a register enabling the identification of the beneficial owners of those overseas companies that had investments in UK property. Those are five facts on which I believe there is general agreement, but still nothing has happened. In another phrase, there has been lots of jaw-jaw but so far no war-war. There have been extensive consultations and discussions of technical difficulties but no clearly timetabled way forward.

--- Later in debate ---

[Lord Ahmad of Wimbledon]

My Lords, this amendment seeks to set down in legislation the commitment made at the 2016 anti-corruption summit to establish a public register of company beneficial ownership information for foreign companies that already own or buy property in the UK or that bid on UK central government contracts.

As we have readily acknowledged in various debates during the passage of this Bill and others, the UK is a world leader in promoting corporate transparency. As I said in the previous debate, we are the only country in the G20 to have established a fully publicly accessible company beneficial ownership register. I assure noble Lords that the Government are committed to leading the world in improving this transparency.

First—and here, I refer to my noble friends Lord Faulks and Lord Hodgson but also to noble Lords across the House—I know this issue has been debated and discussed through various vehicles. I congratulate them on ensuring that the Government remain accountable and the issue remains in the public eye. Let me assure my noble friends and all noble Lords that the Government appreciate the work that all have done in this respect, particularly my noble friend. I assure him that we share his desire, the desire expressed by all noble Lords, to reduce the opportunity for money laundering through UK property as swiftly and effectively as possible. We all acknowledge that it is a serious issue, so let me address that question head-on.

First, what has happened? Following last year’s call for evidence, the Department for Business, Energy and Industrial Strategy sent more than 100 pages of drafting instructions to the Office of the Parliamentary Counsel, and work preparing the clauses for the Bill is under way. The drafting instructions prepared so far cover just the application of the land registration elements of the policy in England and Wales. Once the clauses for England and Wales are complete, an exercise will be undertaken to make specific provision for how they will apply in Scotland and Northern Ireland, both of which have different land registration systems and their own Land Registries. The approaches taken to land registration and overseas entities by the Land Registries have differed until now, so all three approaches will need to be brought together to deliver a streamlined policy, consistent across the UK. I anticipate that exercise taking some months and it will involve expertise from many different teams across the UK Government and the devolved Administrations.

The department has also commissioned a piece of research on potential impacts of the policy, including on investment decisions. That research is ongoing and will feed directly into an impact assessment, work on which is also under way. I am sure my noble friend will agree that this is a crucial moment for the UK’s future trading relationship with the rest of the world, and we must proceed with as good an understanding as possible of the potential impacts on legitimate inward investment.

Having brought noble Lords up to date with the Government’s work so far, let me turn to our next steps. Since our last debate on the matter in Committee, the Government have considered carefully the proposals in front of us and had detailed discussion with my noble friend in this regard. Noble Lords were quite right to point out that the anti-corruption strategy published last month stated that we would publish a draft Bill during the current Session of Parliament. Doing so will help to ensure that any potential weaknesses in the policy are spotted and addressed in what will be new and complex legislation.

Let me now provide some of the certainty requested by my noble friends Lord Faulks and Lord Hodgson. I can confirm that we will publish the draft Bill by the Summer Recess this year. I can also confirm that formal introduction of the Bill will be a priority for the second Session of this Parliament. We anticipate that being in summer 2019, and doing so will put us on track to implement the register itself, which will be operational by early 2021. I further recognise noble Lords’ concern for greater certainty of the Government’s intention. We will shortly formally confirm our intention to meet these deadlines—a point mentioned by the noble Lord, Lord Collins—through a Written Ministerial Statement. We will continue to look at both legislative and delivery timetables for opportunities to implement sooner if at all possible.

Let me say why publishing a Bill in draft is the right approach. As I have said before, the register will be first of its kind in the world and will affect people’s property rights. A robust enforcement mechanism will be essential. As set out in last year’s call for evidence, the Government believe that criminal sanctions may not be sufficient in isolation, but that additional enforcement through land registration law will also be needed if the register is to have teeth. A key proposal is that those who own property who do not comply with the register’s requirements will lose the ability to sell the property or create a long lease or legal charge over it. This will be reflected in a restriction on the register of title.

I am sure that my noble friend will recognise that these are significant steps and will constitute a robust enforcement mechanism. As such, the regime must be able to withstand legal challenge from those who have the means and motive to make such a challenge. That is a key reason why delivering the register through dedicated primary legislation, in accordance with the will of Parliament, is preferable to doing so through secondary regulations to the Bill we are debating today. It is also the key reason why this House should welcome the fullest possible scrutiny of the draft clauses and the mechanisms behind a regime which will be a world first.

But that is not the only reason. New functions must be delegated to Companies House and the land registries, and we must ensure they have the tools and time needed to deliver this successfully. A protection regime must be established, balancing legitimate concerns for personal safety with the need for transparency. All those issues were considered in last year’s call for evidence, but only once we can scrutinise the draft clauses can we really stress-test whether they are going to be effective. We anticipate there being in excess of 50 clauses in the Bill.

Let me say why early 2021 is the appropriate timescale. First, it is because a dedicated primary Bill is the right way of delivering such a policy, and that will take time, given other pressures on Parliament at present. The Government will therefore introduce legislation as soon as possible, but it is impossible for me to make commitments to do so in the very near term—and I have already indicated the specific timetable, which will also be qualified in the Written Ministerial Statement.

Secondly, it is appropriate because that must be followed by secondary regulations, in which we will set out the more technical details underpinning the regime, such as the essential changes needed to the land registration rules. New systems must also be built between Companies House and the three land registries. Their design will depend on the precise content of those regulations. While much preparatory work will be done while the legislation and secondary regulations are passed, there are some inevitable lead times, because the systems and processes can be finalised only after Parliament has approved the legislation.

Finally, an appropriate transition period will be needed to ensure that lenders and other stakeholders can adjust to the new requirements. We believe that the policy must be robust, but fair. Overseas entities that have bought property in the UK, in some cases many years ago, will not have had this in their contemplation at the time. In most cases, the property will have been bought for legitimate and innocent purposes and by those who expected the degree of privacy offered by ownership through a legal entity. We should give those entities, and their beneficial owners, time to understand the requirements and consider their options.

There is a parallel with the development of the register of people with significant control. That policy was announced in 2013, following several rounds of consultation and primary and secondary legislation, and a fully populated register was delivered by June 2017. It may have taken four years, but it still put the UK’s framework in a world-leading position. The new register will take a similar path, but there are numerous additional considerations.

I hope that the detail that I have outlined and the timetable that I have given provide the House and my noble friend in particular with the reassurance of the Government’s continued commitment to enact this policy. But to go slightly further, my intention is also to bring forward an amendment on Third Reading to require the Government to provide regular updates to Parliament on progress on the timetable that I have outlined.

I hope that my noble friend feels that we have had a productive engagement and that what I have offered today from the Dispatch Box are not just warm words but specifics. For those reasons, I hope that he is minded to withdraw his amendment.

[Lord Faulks]

My Lords, I am grateful to all those who have spoken—and, indeed, to many others who might have spoken but who exercised restraint on this matter. I am also very grateful to my noble friend the Minister for giving, for the first time, an actual timetable for this legislation. A number of queries have provoked soothing words and not much else. We now have a timetable, although it is not happening as fast as many of us would like—but he has explained in some detail the difficulties involved in setting up this register.

I would have been a little more impressed had this been the first time that this issue was raised. We are talking about an undertaking by the Government in 2016, so with respect I should have thought that much of this could have been done a great deal earlier. For example, why do we need to commission an inquiry into the danger of inward investment being put off from coming to this country when the whole idea is to stop inward investment of corrupt proceeds from Russia and the like? I found that one of the less impressive parts of the reassurance given by my noble friend.

My noble friend cites the difficulty of setting up the register and uses the fact that the previous register of persons of significant control took four years to set up. My response to that is that, presumably, a great deal of the work that was done in setting up that register would enable a great deal of piggy-backing to go on in setting up this register—something of a dry run, I should have thought. However, despite that minor carping on my part, I want this legislation to succeed and I want the obscenity of having our property market corrupted to be stopped—and I want it done effectively, as I am sure other noble Lords do.