Sanctions and Anti-Money Laundering Bill [HL]

Lord Hodgson of Astley Abbotts Excerpts

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

Moved by

[Lord Hodgson of Astley Abbotts]

69: 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.”

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I begin by giving two apologies to the Committee. The first is on behalf of my noble friend Lord Faulks, in whose name the amendment was tabled. He is unavoidably detained overseas. As I shall explain in a moment, he and I tabled a similar amendment during Committee on the Criminal Finances Act, and he asked if I would take up the cudgel on his behalf tonight. I went to put my name down to the amendment but found that several other noble Lords had beaten me to the punch. Secondly, I apologise to the Committee for not having taken part in proceedings on the Bill before, but I have taken the precaution of reading the relevant sections of Hansard with care. With that, and knowing that several noble Lords want to contribute to this debate, I will cut to the chase, if I may.

At the outset, I thank the Minister my noble friend Lord Ahmad for his offer of a meeting to discuss this matter. Although I am always delighted to meet him, it seemed to me that such a meeting might be more productive after this debate, when he has had a chance to reflect on the range of concerns that may be raised around the Committee and that that might be a better use of his time.

The purpose of Amendment 69 is simple: it inserts a new clause which increases the pressure on the Government to fulfil their long-stated commitment to introduce a public register of the beneficial ownership of UK properties owned by companies and other legal entities overseas. To those Members of your Lordships’ House who were present during proceedings on the Criminal Finances Act earlier this year, the arguments are familiar—some might say, depressingly familiar—but we have a new pilot at the helm tonight, although he has temporarily left the Chamber. I am delighted to be talking to my noble friend Lord Bates. I was offered a meeting with my noble friend Lord Ahmad, so I thought that he might reply to the debate, but never mind. We have a new pilot, anyway, in place of my noble friend Lady Williams of Trafford, who was the Minister on the previous Bill, so, for my noble friend who is coming fresh to this topic, let me summarise the position.

The reasons why UK property is an attractive asset class for someone from overseas can be simply stated. First, property rights in the United Kingdom have been sacrosanct for nearly 400 years. Mr John McDonnell, the shadow Chancellor of the Exchequer, flirted with the idea of seizing property in North Kensington to be handed over to former residents of Grenfell Tower, but I am not sure that that has become Labour Party policy. Secondly, the cities of the United Kingdom remain attractive, engaging and safe places to live. Finally, in recent years at least, UK property as an asset class has appreciated in value.

If you live in less secure and happy circumstances than prevail in this country, where better than in the United Kingdom to buy a bolthole—the value of which has in recent years most conveniently grown enormously? The result has been a veritable flood of overseas money into the property market of London and other major cities. How great a flood is unclear—indeed, one purpose behind the amendment is to try to shed greater light and transparency on the extent of the flood—but, to put it no higher, there is suspicion that not all the hands from which the money to purchase these properties comes are as clean as they might be.

Noble Lords will have received briefings from the pressure group Global Witness which are self-explanatory. They may also have caught the article in last Sunday’s Telegraph, headed, “Fears that ‘dirty money’ paid for Uzbek dictator’s daughter’s £17 million Mayfair and Belgravia homes”.

As I said a few minutes ago, my noble friend Lord Faulks and I tabled an amendment to the Criminal Finances Bill on Report with broadly similar purposes to this one which we are discussing tonight. In her reply, my noble friend Lady Williams of Trafford gave some encouraging and soothing words. She said:

“I am pleased to have the opportunity to return to this issue. The clear abuse of the London property market and high-value properties across the country … to launder money, including the proceeds of corruption, has to be stopped. We must not allow this city to be a haven for kleptocrats hiding their ill-gotten gains. That is why the Government share the ambition of creating such a register”.


She went to say:

“Subject to the outcome of the general election, it remains our intention to introduce legislation to create the register as soon as parliamentary time allows. I hope this provides my noble friends”—


that is, my noble friend Lord Faulks and myself—

“with the reassurances that they seek”—[ Official Report, 25/4/17; cols. 1333-34.]

The general election is now out of the way, but no progress seems to have been made as regards to the implementation of this important policy promise.

It should not be forgotten that as long ago as May 2016, at the international anti-corruption summit held in London, the Government committed to creating a new register showing the beneficial owners of overseas companies that own or want to buy property in the UK, and of overseas companies involved in central government contracts. So this amendment is well in line with government policy.

In her ministerial foreword to the relevant consultation establishing such a register, Margot James MP emphasised that it was important,

“to ensure the integrity and reputation of the UK property market … A higher level of transparency will boost investor confidence”.

Responses to that consultation have now been in for more than six months, so what now is happening?

Of course I understand the eternal pressure of a crowded legislative programme, which has been made significantly worse by the results of Brexit, but the Long Title of this Bill makes it clear that its purposes are,

“to make provision for the purposes of the detection, investigation and prevention of money laundering and terrorist financing and for the purposes of implementing Standards published by the Financial Action Task Force relating to combating threats to the integrity of the international financial system; and for connected purposes”.

So no one can suggest that this amendment is out of scope with this Bill. Rather, it seems absolutely within the scope of the Bill and, moreover, consistent with government policy and, frankly, a matter of some urgency.

Given that the setting up of the register does, as I understand it, require primary legislation, I now have to ask my noble friends on the Front Bench the question: if not now, when? It is simply not adequate once again to respond by saying, “When parliamentary time allows”. I suspect that parliamentary time will not allow it in the near future, and this really important step for stamping out corruption will drift further and further into the middle and long distance.

There has been a tendency to think that this is an issue confined to London, so before I finish, I draw my noble friend’s attention to the extent that, as London property prices have risen, overseas purchasers have begun to turn their attention to other UK cities. In preparation for our debate earlier this year, I took some time to trawl through the provincial press and I found examples, inter alia, in Birmingham, Bristol and Manchester. I used the Manchester example in the debate then because I thought it would be of particular interest to my noble friend Lady Williams, because she is Baroness Williams of Trafford, in the City of Manchester.

The example in Manchester was of a development of 282 flats over 29 storeys at One Cambridge Street in that city. Purchasers were drawn from 18 different nationalities, including Azerbaijan, China, Japan and Zimbabwe, and 125 flats were bought as a bloc for £25.7 million by OFY, a company based in the British Virgin Islands. Only two of the 282 flats are owned by Britons. The developer’s sales brochure includes the statement:

“The generously proportioned apartments have … appeal to owner-occupiers, investors and renters. In other words, the scheme is appealing to several sectors of the market, including those looking to make the step towards getting on to the housing ladder and more established owner-occupiers”.


Whether first-time buyers would really think that a 99.2% overseas ownership was a fair result I leave to others to judge.

--- Later in debate ---

[Lord Bates]

That is right. We are certainly not going to shrink from the commitment from the previous Prime Minister, with which the current Prime Minister is in agreement. We want to see that happen. We have also, of course, taken certain actions in relation to this area. For example, the annual tax on enveloped dwellings, known as ATED, was introduced in April 2013 to ensure that those who place UK residential property in a company pay a fair share of tax.

My noble friend Lord Hodgson asked whether the number of purchasers was increasing. The anecdotal evidence and the facts suggest that. The ATED receipts in 2015-16 were £178 million, a 53% increase on the previous year. It is at least an indicator of the scale of the undoubted challenge. We stand by the commitment made earlier this year. However, because we lead the world in seeking to be the first major economy to have such a register, there are legal consequences. The same lawyers who do the conveyancing will be reading through the fine print of any legislation that comes forward. We have to make sure that it is watertight to ensure that the right people are affected by it and, as the noble Lord, Lord Collins, said, that other people are dissuaded from making those investments here.

With those reassurances and the commitment to meet again, I hope that my noble friend will withdraw his amendment.

[Lord Hodgson of Astley Abbotts]

My Lords, I am very grateful to all noble Lords who have spoken in support of this amendment: the noble Baroness, Lady Bowles, the noble Lord, Lord Rooker—he has shown that his investigative nose is as sharp as ever—my noble friend Lord Freeman, the noble Baroness, Lady Kramer, and the noble Lord, Lord Collins of Highbury.

My noble friend Lord Bates defended his wicket a great deal better than the English test team has been doing in Australia. He quite fairly drew attention to the Government’s efforts in relation to additional tax for properties owned inside a company and so on. But we have been round the familiar arguments, and nine months after the consultation closed seems a very long time for careful consideration.

I think we will take the Minister up on the invitation offered by his friend for a meeting. I am concerned that there will be a response early in the new year, just as we wave goodbye to this piece of legislation. I am not clear whether this requires additional primary legislation. If so, how will it be fitted into our programme? It could be tacked on to this Bill but once it has gone I am not aware of much else coming down the track where this register and all the other stuff could be included

We have been round this a great many times. I am grateful for the Minister’s initial response. He understands the strength of feeling on all sides of the House that this situation should not be allowed to continue. We look forward to the meeting and, in the meantime, I beg leave to withdraw the amendment.

Amendment 69 withdrawn.

Sanctions and Anti-Money Laundering Bill [HL]

Lord Hodgson of Astley Abbotts Excerpts

3rd reading (Hansard): House of Lords
Wednesday 24th January 2018 Lords Chamber

[Lord Faulks (Con)]

My Lords, I was responsible for putting down the amendment which I think provoked this amendment to the Bill. As many noble Lords may remember, the background was anxiety expressed around the House about the fact that large parts of central London and outside London were being bought up by legal entities and companies, often with money laundered proceeds of crime and corruption—it is an increasing problem. Although the Government had committed to set up a register, they were taking some time about doing it and the attempt was to bring matters forward.

I am glad that my noble friend was able to give reassurance to the House that the register would be coming forward and that a Bill would be drafted, and indeed went further by promising that there would be regular reporting about progress. That, as I understand it, is the purport of proposed new subsection (3).

I am sorry that I have banged on about this issue for some time—throughout the passage of Criminal Finances Act, through Questions and through the course of this Bill—but I remain unrepentant. I was particularly reassured about this when I attended a lecture given by the distinguished author and journalist Misha Glenny on Monday. He has spent 10 years or so studying international crime and money laundering and is the author of the book McMafia, which is now the basis of a successful television series. He outlined for the audience the scale of money laundering throughout the world, principally following the collapse of communism, and how it has spread to all sorts of jurisdictions, the United Kingdom being one in principle. He showed the audience a map of central London showing the extent to which prime London property is now owned by kleptocrats: let us not beat about the bush—that is the position. He said, however, that worldwide there is a feeling that we should be fighting back against this appalling scourge of money laundering. He identified the most effective way this country could do this as being to set up a register to make sure that nobody could hide behind the cloak of anonymity and thus be able to launder the proceeds of crime through central London property. This is why this remains an important procedure.

I am very glad that the Government are committed to doing what they said they will do. I will be keeping the Government up to the mark, as I am sure other noble Lords will. My noble friend Lord Hodgson has one query about the amendment. Subject, of course, to the clarification that my noble friend Lord Naseby seeks, I join others in thanking the Minister and his Bill team for their co-operation on this issue and on all issues. My real sense in dealing with the Bill is that it is not a party political exercise at all; there is a real cross-party endeavour to make sure that this is as effective as possible.

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I have put my name to various amendments on this issue, going back to the Criminal Finances Act last April, and I add my thanks to my noble friend for having listened so intently and for having tabled Amendment 3, which we are debating this afternoon. As I prepared for this discussion in Committee, I raised a couple of points with his office. As ever, he and his office were punctilious in responding, but some clarification might be helpful for those of us who are not as accustomed and learned in the law as others are.

The first issue concerns commencement. Originally, reading this through, it appeared to fall under a clause where the commencement was set by the Secretary of State and that was the trigger for the 12-month clock. I was concerned that we might have a delay in the Secretary of State triggering this clause: it was not in Clause 54. The commencement of each clause is set down, but the commencement might be delayed. The Minister’s office pointed out that Amendment 5 triggers the clock on Royal Assent. It would be helpful if he could make that clear. It would also be helpful if he could say when he expects Royal Assent to take place, although I quite understand that he cannot give a commitment. If Royal Assent is delayed, let us say through the summer, it might be nearly two years before we get the first report: if commencement were to start in August or September, it would be September 2019 before we get news of any progress whatever. So it would be helpful to the House if my noble friend, either now or by writing to those of us who have been involved in the proceedings on this Bill, will say how and when he expects the clock to start ticking.

My second point concerns an omission in the words of Amendment 3, which we are debating. When my noble friend Lord Faulks and I tabled Amendment 75 —and earlier amendments—it did not cover just a register of companies and other legal entities registered outside the UK that own or buy UK property but also covered those which,

“bid for UK government contracts”.

Those words do not appear in the amendment before us today. My noble friend’s officials have drawn my attention to, and indeed he has mentioned, the Written Ministerial Statement, tabled today, that commits the Government to dealing with a public register of beneficial owners of non-UK entities that own or buy UK property or which participate in UK government procurement. So, that is covered in the statement, but it is disappointing that we do not have it in the Bill, which is where we started and what we hoped for when we set out on this long and rather stony road.