Economic Crime and Corporate Transparency Bill

Lord Johnson of Lainston Excerpts

2nd reading
Wednesday 8th February 2023 Lords Chamber

Moved by

[Lord Johnson of Lainston]

That the Bill be now read a second time.

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

My Lords, I draw noble Lords’ attention to my registered interests, including as the director of and person with significant control of AMP Ventures, and as a shareholder of and person with significant control of several other companies. I do not believe that any of those are relevant to today’s debate.

Economic crime threatens our national security, prosperity and global influence. It underpins serious and organised crime and undermines legitimate business, causing great harm to individuals, our society and our economy. That is why this Government are determined to tackle economic crime and drive out dirty money.

We have already taken unprecedented action to prevent kleptocrats and organised criminals abusing our open economy. We were the first G20 country to establish a public register of domestic company beneficial ownership in 2016. We introduced new powers in the Criminal Finances Act 2017, including account-freezing orders, which in 2021-22 alone enabled £132 million-worth of assets to be frozen or seized. We secured £400 million through the spending review and the new economic crime levy to support law enforcement over the next three years. We established both the National Economic Crime Centre to co-ordinate the law enforcement response to economic crime and, more recently, the combating kleptocracy cell in the National Crime Agency to target corrupt elites.

With the support of this House, following Russia’s invasion of Ukraine, we took immediate steps by passing the Economic Crime (Transparency and Enforcement) Act. It introduced reforms to improve transparency in land ownership and to provide greater powers and more information to identify, investigate and take action against illicit wealth. It also helped the UK to act swiftly to impose sanctions against over 1,200 individuals and 120 entities linked to the Russian state. I was very pleased, as I am sure we all were, to hear President Zelensky praising these moves today in his moving speech to both Houses.

However, we know that this is a constantly evolving challenge. We must not be in any way complacent about the threat. Building on the first Act, we are pleased to bring to the House the Economic Crime and Corporate Transparency Bill. It will bear down even further on kleptocrats, criminals and terrorists who abuse our open economy, and it will strengthen the UK’s reputation as a place where legitimate business can thrive, while ensuring that dirty money has no place to hide.

The Bill will ensure that law enforcement and the private sector have the tools needed to help tackle economic crime, including fraud and money laundering, and it will deliver greater protections for members of the public and businesses. It forms part of the wider government approach, sitting alongside the key provisions in the Online Safety Bill, which will tackle online fraud, as well as the forthcoming second economic crime plan and fraud strategy, the delivery of which are all supported by the spending review settlement.

The Bill covers several areas, and I will now speak to the measures set out within it, starting with the reform of Companies House. The UK operates one of the world’s largest and most open economies. It is important to note that the vast majority of companies are formed and run by legitimate business owners, benefiting the economy and contributing to society. We want to maintain that ease of doing business and continue to welcome investment and legitimate business. However, while that brings prosperity and opportunity, it also exposes the UK to harmful practices, such as money laundering, corruption and terrorist financing. Our welcoming business environment is open to misuse by those who seek to undermine the business framework. The use of anonymous or fraudulent shell companies and partnerships provides criminals with a veneer of legitimacy and undermines the UK’s reputation as a sound place to do business.

The Bill will deliver significant reforms to the role of Companies House, marking the biggest change to our system of registering companies in over 170 years. The changes will improve transparency and bear down on the use of thousands of UK companies and other corporate structures as vehicles for economic crime, including fraud, money laundering, illicit finance, corruption, terrorist financing and illegal arms movements. The reforms will provide Companies House with the appropriate information, tools and powers to take action and better respond to abuse, thereby strengthening our business environment.

Through clauses in Part 1 of the Bill, we will introduce identity verification for new and existing directors, beneficial owners and those who file information with Companies House, helping to ensure that we know the real people acting for, and benefiting from, companies. The Bill also broadens the registrar’s powers so that the registrar becomes a more active gatekeeper over company creation and a custodian of more reliable data. Improving the financial information on the register will make it more reliable, complete and accurate, thereby supporting better business decisions and creating wider economic benefits. Part 1 will also provide Companies House with more effective investigation and enforcement powers and will introduce better cross-checking of data with other public and private sector bodies. We will also enhance the protection of personal information and addresses, thus helping to protect individuals from fraud and harm.

On limited partnership reform, Part 2 tackles the misuse of limited partnerships, including Scottish limited partnerships, while modernising the law governing them. We will tighten registration requirements and require limited partnerships to have a lasting connection to the UK. The Bill will also increase transparency requirements and provide the registrar with powers to deregister limited partnerships which are dissolved or no longer carrying on business, or where a court orders the dissolution because it is in the public interest.

Part 3 of the Bill makes some technical changes to the register of overseas entities that was legislated for in the first Act. These changes will maintain consistency with changes to the Companies Act and are intended to enhance the effectiveness of the register.

On crypto asset measures, the measures in Part 4 and its associated Schedules 6, 7 and 8 will provide additional powers to law enforcement officials, so they are able to more quickly and easily seize, freeze and ultimately recover crypto assets. The creation of a civil forfeiture power for crypto assets will mitigate the risk posed by those who cannot be criminally prosecuted but use their funds to further criminality or for terrorist purposes. These measures will modernise our proceeds of crime and counterterrorism legislation to ensure that crypto assets cannot be a conduit for money laundering, fraud, ransomware attacks or terrorist financing.

Measures in Part 5 of the Bill will enable better information sharing between certain businesses and with law enforcement to prevent and detect economic crime. It also provides new intelligence-gathering powers for law enforcement to tackle money laundering and terrorist financing. These reforms will enable the better detection and prevention of crime taking place across multiple businesses and will prevent criminals exploiting information gaps between them. Clause 174 also stream- lines the process for updating the UK’s high-risk third-country list.

The Bill will provide legal service regulators with enhanced enforcement powers to support them in upholding the economic crime agenda within their regulated community. A regulatory objective will be added to the Legal Services Act 2007—the LSA. The Solicitors Regulation Authority’s—SRA’s—statutory cap on the financial penalty powers for disciplinary matters related to economic crime will be removed, and the SRA will be able to proactively request information from its regulated community for the purpose of monitoring compliance with the economic crime regime. These measures will make clear to regulated bodies and individuals the expectations that government has of the regulators on this issue and support their ability to uphold sanctions and the wider economic crime regime.

The Bill will also enable the Serious Fraud Office to use its powers under Section 2 of the Criminal Justice Act 1987 at the pre-investigation stage in any SFO case, including fraud cases. This will support the Serious Fraud Office in delivering its functions and assist with the Government’s efforts to tackle fraud.

I conclude my opening remarks by highlighting the opportunity that we have in front of us. This Bill will make a difference to businesses, law enforcement and our citizens. Businesses will receive a better service from Companies House; law enforcement will receive new powers and better information to help root out criminals; and citizens will be better protected. This Bill is significant, and addresses several technically and operationally complex areas. The measures within it have undergone extensive and constructive scrutiny through the other place, particularly through the work of the Public Bill Committee. Through that process, we have listened and made several refinements and improvements.

In that vein, I also want to thank noble Lords for the support which was received during the passage of what became the Economic Crime (Transparency and Enforcement) Act. I am mindful of the pace at which that Bill was passed and noble Lords’ request to ensure that this second Bill is subject to a timetable which enables full and proper scrutiny. I welcome that further scrutiny, including today’s debate, and I look forward to engaging with all noble Lords on the Bill as we seek to ensure that it achieves the crucial objective of making our country, our businesses and our citizens safer. I beg to move.

--- Later in debate ---

Moved by

[Lord Johnson of Lainston]

That the bill be committed to a Committee of the Whole House, and that it be an instruction to the Committee of the Whole House that they consider the bill in the following order: Clauses 1 to 50, Schedule 1, Clauses 51 and 52, Schedule 2, Clauses 53 to 92, Schedule 3, Clauses 93 to 108, Schedule 4, Clauses 109 to 147, Schedule 5, Clauses 148 to 167, Schedule 6, Clause 168, Schedule 7, Clause 169, Schedule 8, Clauses 170 to 180, Schedule 9, Clauses 181 to 192, Title.

Motion agreed.