Economic Crime and Corporate Transparency Bill

Lord Gold Excerpts

2nd reading
Wednesday 8th February 2023 Lords Chamber

[Lord Gold (Con)]

My Lords, I congratulate my noble friend the Minister on his position. I wish him much success and joy as our Minister here. Understandably, there is considerable support across the political spectrum for the Government’s campaign to tighten up measures tackling economic crime. The Bill is far-reaching: much of what it seeks to do is uncontroversial and should be supported. For example, the proposed reforms increasing the powers of Companies House so that it has a bigger role in ensuring corporate transparency and guarding against economic crime, and generally provides a better service, are to be welcomed.

However, as the Government acknowledge, for this reform to be achieved, there has to be a transformation at Companies House. Its culture, systems, processes and capabilities will all have to change. The Government’s aim that Companies House moves from being a

“largely passive recipient of information to a much more active gatekeeper over company creation and custodian of more reliable data”

is a giant step. It must have the right personnel in place and the will to achieve this if it is to succeed.

All this comes at a cost and will take considerable time to achieve, as other noble Lords have said. The Government’s impact assessment estimated the total cost of the corporate transparency and Companies House reforms at £289 million. As was said earlier, the cost for the Companies House part of that is £63 million. I would not be surprised if that is an underestimate. While I do not advocate providing a blank cheque, will the Minister confirm that if further money is required to achieve these reforms, the Government will find it?

I have some concerns about how effective this new Companies House will be, even with the new personnel. As we have heard from the noble Lord, Lord Sikka, the way in which Companies House has been operating is really quite extraordinary—horrific, in some ways. We have to move it away from being hopeless but at the same time not make it oppressive. The changes should not be such that businessmen who want to incorporate companies and do good business in this country are put off doing so. We should keep in mind that we have to get the balance right.

It is also very important to achieve proper accountability for Companies House; as my noble friend Lord Agnew stated, this is essential. Companies House, in its new role, will have to be supervised; bringing it here for our scrutiny is one factor, but we cannot do that in a proper way. We can look at it only from time to time, so there has to be a proper system of accountability in place. I hope that the Minister will give us some comfort that that will be done.

I turn to the proposal that there should be added to the Bill a new “failure to prevent” offence, modelled on the Bribery Act Section 7 offence. The Government have indicated that this is being actively considered and it is anticipated that it will come forward at a later stage, I think in Committee. Obviously, this is very important; it is right that we should look at it most carefully. At the same time, I hope that the Government will demonstrate that such a provision is likely to reduce the incidence of fraud. There have been very few Section 7 Bribery Act prosecutions and, while this measure is largely supported, we do not yet really know its impact. I hope that this will be considered most carefully.

I also ask the Government to bear in mind the following when formulating their proposals. First, there is the issue of jurisdiction. The Law Commission took the view that there should not be a presumption that the “failure to prevent” offence would extend to conduct carried out by employees or agents overseas, and that any decision to make the offence extraterritorial should be considered in the context of the specific offence. For example, do the Government have in their sights UK parent companies being responsible for problems arising in overseas subsidiaries?

Secondly, what offences would be within scope—that is, what comes within the ambit of “fraud” for these purposes?

Thirdly, assuming the provision follows the wording of Section 7, what will the definition of an “associated person” be? What conduct by an associated person vis-à-vis the company would trigger the offence? What would constitute adequate or reasonable procedures? This could be a field day for lawyers—something that many of my noble friends seem to reject greatly. I agree with them. We have to get the drafting right if this is to be put forward.

In addition to these issues, the Government will have to decide which body will have responsibility for investigation and prosecution. This would naturally fall within the domain of the Serious Fraud Office, but a number of issues must first be addressed. I should now refer to my entry in the register of interests and the advisory work that I undertake, which has given me some visibility of the SFO’s work.

Regrettably, over recent years there have been multiple examples of open investigations being mismanaged, and there are open issues relating to disclosure, funding and resourcing, and, perhaps most importantly, accountability. There is a proposal in the Bill that the Serious Fraud Office’s investigatory powers should be extended so that a person must answer questions or provide information to the SFO at a pre-investigation stage to enable it to determine whether to commence an investigation. Although in principle I would support such a proposal, the issues I just mentioned must first be tackled before the SFO’s powers are extended

I suspect that this falls outside the Minister’s remit, but will he support the proposal that, before a new director is appointed later this year, there should be a thorough investigation into how the SFO operates and the reforms needed to improve its performance and efficiency, so that it is fit to take on the burden of the extra work that a “failure to prevent” law would necessitate?

Finally, I turn to the proposal that the Solicitors Regulation Authority’s powers be extended. As we have heard, the SRA’s fining powers were increased from a maximum of £2,000 to £25,000 only recently, in May 2022. Concern was expressed at that time that the SRA did not have the structures or experience to make this change, unlike the Solicitors Disciplinary Tribunal, which is experienced in a judicial-type process and applying independent scrutiny. I am not aware that this concern has yet been addressed.

In a briefing paper issued in support of the proposed change in the Bill, the SRA states:

“Our ability to deter solicitors from involvement in economic crime has to date been constrained by our very limited fining powers for traditional firms and those who work in them”.


It provides no detail as to how it has been constrained, yet in the same briefing it states that enforcement action was taken against 51 firms or individuals in the year up to March 2022, and 163 firm inspections and 109 desk-based reviews were conducted, so it is not at all clear why this extension of its fining power is necessary. The Law Society has also expressed concerns, and queries how effective this provision will be in combating economic crime in any event.

The proposed unlimited powers could also include many more serious or significant cases that currently go before the Solicitors Disciplinary Tribunal. No case has been advanced as to why that should not remain the case. Unlike my noble friends Lady Stowell and Lady Altmann and the noble and learned Lord, Lord Brown of Eaton-under-Heywood, I am afraid I counsel against this present proposal, coming so soon after the May 2022 reform and before its effect has been properly tested.