Economic Crime and Corporate Transparency Bill

Lord Faulks Excerpts

2nd reading
Wednesday 8th February 2023 Lords Chamber

[Lord Faulks (Non-Afl)]

My Lords, it is a pleasure to follow the noble Lord, Lord McDonald, not least because of his reference to the chronology of the Government’s attempts—and they are, I am afraid, attempts —to deal with the scourge of economic crime.

Let me begin with the positives. This Bill is a remarkable achievement in fundamentally altering the role of Companies House. Historically, it has been remarkably uninformative and provided very little, if any, protection against fraud. Its new powers have the potential to make matters very much more transparent. When I had the privilege of chairing the Joint Committee on the Draft Registration of Overseas Entities Bill, we had a great deal of evidence about what more could be achieved by a different role for Companies House, and I am very glad to see that reflected in the Bill.

The noble Lord, Lord McDonald, referred to the chronology. I welcome the noble Lord, Lord Johnson, to his position; he will perhaps not know the entire history of the matter—it happened before he came to his post. I am afraid the Government’s response, following the fine words in 2016, was not impressive—not at all impressive, in fact. I particularly welcome tonight’s engagement by so many noble Lords in this important area; it was not always the case.

In the Criminal Finances Act 2017, which represented an earlier attempt to try to deal with these problems, various new instruments were introduced—in particular, unexplained wealth orders, which were borrowed from other jurisdictions. They have not, I am afraid, been a great success. I think—I will be corrected if I am wrong—there has been only one this year. That is disappointing. I know that they are expensive. There was an attempt in the 2022 Act to make them less prohibitive, cost-wise. I think we might be able to go further and perhaps have an order for costs only if the authority has been wholly unreasonable in seeking to carry out one of these unexplained wealth orders.

During the debates on the Criminal Finances Bill, I was particularly concerned about the astonishingly opaque ownership, often by overseas entities, of substantial swathes of valuable property, primarily—but not exclusively—in London and the south-east. I put down amendments to the Bill to establish a register and was given blandishments that a proper register would be on its way shortly. I did so again in the Sanctions and Anti-Money Laundering Bill and was given a similar reassurance, this time even with a timetable—but nothing happened. Then I was given the privilege of chairing a committee on a draft Bill; the noble and learned Lord, Lord Garnier, was on that committee. We reported and urged speed, but still nothing happened. It was only when Russia invaded Ukraine that suddenly the impossible became possible. We now at last have this register of overseas property—although there have been a number of missed deadlines, as we have heard. I am glad to see that there are various improvements contained in this Bill, including introducing some control over trusts. We can explore that in Committee.

One of the advantages of real property, obtained far too often with dirty money, is that it is less easy to dispose of than more liquid assets. The same, I suppose, could be said of superyachts. I look forward to hearing from the Minister what progress, if any, is being made to realise the proceeds of sales of property bought with dirty money and whether it is possible to establish a link between unexplained wealth orders and the greater information we now should have, at least, about the ownership of property.

Further, now we have imposed sanctions, I would welcome—as the noble and learned Lord, Lord Brown, said—some comments on the suggestion which I think originated from Spotlight on Corruption and RUSI that, in addition to the provisions of POCA, a new duty could be created for designated persons to disclose their assets, accompanied by the creation of a criminal offence for failure to do so. I note the Private Member’s Bill brought by Sir Chris Bryant, which may also make a valuable contribution to this area.

For far too long we have allowed this country to be a laundromat for dirty money. Those noble Lords who have watched the excellent BBC documentary series “Putin vs the West” will have shuddered, as I certainly did at one point. After the annexation of Crimea and the initial invasion of Ukraine, other EU countries—we were in the EU then—were concerned that we in this country might lack resolve towards Russia because of our fondness for the presence of Russian oligarchs bringing money into the country. They had a point. Murders took place on our soil. We allowed the country to be a handler of stolen goods and did nothing. I particularly recall the response of your Lordships’ House when the Sanctions and Anti-Money Laundering Bill was being debated. This was necessary legislation, post Brexit, so that we could have our own system of sanctions. Noble Lords seemed preoccupied with the human rights of those whom we might sanction and passed legislation which fettered the Government’s right to sanction with so many hindrances that sanctions, which are essentially a tool of foreign policy, became a sort of civil remedy hedged around with protections from the Human Rights Act. We seemed to be concerned that oligarchs should not have their A1P1 rights in any way infringed.

When, finally, Russia launched its full-scale invasion of Ukraine a year ago, it was realised that this legislation made it much more difficult to sanction anybody in this country than in other European countries. Legislation enacted in 2022 then had to be rapidly introduced to facilitate sanctions and to introduce the property register. At that time a further Bill was promised. That promise has now been fulfilled, which I welcome. I look forward to the debates about the “failure to prevent” provision. I will not add to what has already been said; I think the noble and learned Lord, Lord Garnier, will say something about that shortly.

There has also been much reference to SLAPPs. I understand that the Government’s position is that they are enthusiastic about legislation, but not yet. I have also heard that the House of Commons authorities considered that the relevant amendment was a matter that was outside the scope of the Bill and that there might be difficulties here, given the Long Title. Given the grand title of the Bill, it is a bit surprising that it cannot be included. It may be that the House of Lords authorities are a little more generous—or, indeed, as the noble Lord, Lord Thomas, suggested, there could be an amendment to the Long Title. However, I am glad that the Government are thinking. As a matter of fact, the observations of Dominic Raab seem to be very much along the right lines. I would welcome any indications from the Minister as to what the plans are.

The problem, of course, is the real threat to freedom of speech that this bullying litigation can represent. It is nothing new; one thinks of Robert Maxwell, Sir James Goldsmith and others who have tried to silence criticism by bullying through litigation. The most recent egregious example is Yevgeny Prigozhin. The truth of the matter may not matter very much, but its effect on people, as has been described by the noble Lord, Lord Cromwell, can be very dramatic in every sense—although I think it was perhaps not quite right to talk about full-scale libel trials. They are a very rare beast indeed. But, even before we get to that stage, there is a chilling effect from this sort of litigation.

It is important to record that judges have a part to play in policing abusive litigation, and applications can and should be made to the courts where appropriate. The courts have inherent powers to control their own processes to prevent abuse. I also wonder whether there should not be some tighter directions, whereby these sorts of claims could be decided by alternative dispute resolution at modest or capped prices, such as—I am grateful to the noble Lord, Lord Agnew—we offer at IPSO. Of course, all sorts of other alternative dispute resolutions are available; I declare an interest as the chair of IPSO. Full-scale litigation is not a sensible way of dealing with these matters.

I read with interest the briefing from the Solicitors Regulation Authority on this Bill, and I notice that the SRA has taken a number of steps against solicitors in this space. That is reassuring, and I hope it is a timely reminder to those solicitors who have got rich on the back of corrupt bullies that they have a duty as officers of the court which transcends being a mouthpiece for their clients. That is not to say that unpopular people are not allowed representation. However, the combination of existing money laundering provisions, and the new enhanced provisions provided by the Bill will, I hope, particularly in the climate of justified hostility to Russia, make solicitors very wary before taking on certain cases.

There is one particular thing I would like to ask the noble Lord, Lord Wallace of Saltaire, which may cause him some surprise. He has always spoken very vigorously and effectively on tax havens and the undesirability of them, and on the transparency of registers. I know he is winding up on this particular issue, which is why I am addressing this comment in his direction, as well as to the House as a whole. Does he share my disappointment with what the ECJ recently decided? The Bill is designed to make companies much more transparent so that identities can be verified, but the ECJ found that the

“public’s access to information on beneficial ownership constitutes a serious interference with the fundamental rights to respect for private life and to the protection of personal data”.

A number of countries have taken solace from this and are now less likely, I think, to be co-operative. This is a matter we ought to explore, because I share what I suspect is his and probably the House’s general interest to try to make these matters more transparent.

To revert briefly to litigation, I am intensely proud of our reputation in this country for the rule of law and the integrity of our judges and the vast majority of lawyers who operate within the system. It is something of an irony that one of the reasons for the success of our legal system is its integrity and fairness—something that we should not take for granted. It therefore attracts litigants from less happy lands. But, if our system is abused, our reputation will itself suffer damage and one of the strongest elements of our soft power will be diminished.

Welcome though this legislation is, it needs proper resourcing and follow-up. I support the requirement of a regular update to Parliament about how the fight against economic crime is progressing. I do not underestimate the difficulty in assembling evidence and contending with well-resourced lawyers. However, whoever is in government in the years to come needs to make this battle—or should I say war?—against economic crime a priority.