Criminal Finances Bill

Lord Kennedy of Southwark Excerpts

2nd reading (Hansard): House of Lords
Thursday 9th March 2017 Lords Chamber

[Lord Kennedy of Southwark (Lab)]

My Lords, at the outset of my remarks I am pleased, like my noble friend Lord Rosser, to put on record that Her Majesty’s Official Opposition support the aims of this legislation. We will seek, as we always do, to probe, strengthen and improve the legislation that has come before us from the other place so that the Bill goes back there in better shape than when it arrived here.

Both serious organised crime and terrorism pose real and present dangers to the United Kingdom, and it is our job to ensure we pass laws that are fit for purpose and provide the law enforcement and other agencies with the tools they need to do their important job of keeping the United Kingdom, its citizens and all the people living here safe and protected from danger.

Noble Lords will have heard the figure of £24 billion, which is the estimate of what serious criminality costs the UK economy each year. I agree with what the noble Lord, Lord Faulks, said about the cost to the UK. It is a huge sum of money and with it go lives destroyed, communities ruined and real hurt to our economy. It is everything from the vulnerable person being ripped off on the phone by con artists—losing thousands of pounds, possibly every penny they have—to tax evasion, the evil trade in drugs, prostitution, slavery and firearms. It is our duty to do everything possible to disrupt the activities of criminals, to stop these activities and to bring the perpetrators to justice.

The things that criminals do to hide their ill-gotten gains include holding large cash sums and buying expensive cars, art, jewellery and expensive clothes in order to live a lifestyle that they have not earned through legal means, as the noble Lord, Lord Dear, said. An estimated $1.6 trillion is laundered throughout the world, and the National Crime Agency estimates that many billions of pounds of that money is laundered into or through the United Kingdom as a result of international corruption. Those are staggering figures, and they illustrate why action is needed.

The noble and learned Lord, Lord Brown of Eaton-under-Heywood, made an important point about the disparity between these criminal gains and the amounts recovered from those criminals, as did a number of other noble Lords during today’s debate. Action must be taken to make the UK the most hostile place in the world for those seeking to move, hide or use the proceeds of crime, and the criminals must get that message loud and clear.

I agree with what the noble Lord, Lord Flight, said about the importance of the various agencies, both public and private, working more closely together and sharing information, and the provisions there are very welcome.

That must also be the case for all the Crown dependencies, and this is one area where I think the Bill is deficient and improvements need to be made. My noble friend Lord Watson was right when he highlighted that the Government’s position on our overseas territories is weak: they have to do better than they are doing at present.

Transparency is one of the most effective ways of dealing with this type of corruption. The right reverend Prelate the Bishop of Oxford spoke about the scandal of the illicit flows of funds from the developing world and the need for firm action to be taken to deal with the issue of tax havens in British Crown dependencies and overseas territories. The lack of transparency is a real problem and prevents individuals from seeing who owns what. It enables criminals to hide behind a cloak of secrecy.

I agree with the noble Lord, Lord Hodgson of Astley Abbotts, that we have to get the issues right in respect of overseas territories. It would be appreciated if the Minister could explain to the House why the Government have not sought to introduce requirements to ensure that overseas territories and Crown dependencies which come under the jurisdiction of the United Kingdom publish publicly available registers of beneficial ownership. It is a requirement here in the UK, allowing us to see who owns which company, so why not in overseas territories and Crown dependencies?

The United Nations Conference on Trade and Development recently estimated that tax havens, including those in the United Kingdom’s overseas territories, are costing developing countries at least $100 billion per year. The noble Lord, Lord Thomas, referred to this. The Minister must be aware that the British Virgin Islands was by far the most widely used tax haven in the Panama papers, as referred to by my noble friend Lord Rosser. We have the ability to change that, and we should take the opportunity that the Bill provides to do so.

With the additional challenge of Brexit, it is important that we create an economy, a business centre, that is the best in the world in which to do business legally and is attractive to inward investment but protected from the risks of criminality. I do not agree with the noble Lord, Lord Hodgson of Astley Abbotts, if he is against proper regulation. It is not about box-ticking but about preventing criminality in a proportionate manner.

I have been reading Faulty Towers, a report from Transparency International UK which looks at the impact of overseas corruption on the London property market. It makes staggering reading. £4.2 billion of property has been bought in London with suspicious wealth, as the noble Baroness, Lady Kramer, referred to. In 14 landmark developments, almost 40% of future homes were bought by those from high-corruption jurisdictions. Again, I agree with the noble Lord, Lord Faulks, in this respect.

My noble friend Lord Rooker made important points about who owned what property in some of the most expensive parts of London. The shining of sunlight on bankers, estate agents and other middlemen must happen urgently. This situation leads to, among things, a distortion of housing supply, with ordinary law-abiding citizens unable to afford a home in the capital. The noble Lord, Lord Patten, speaking about the effects of criminal activity on the purchase of property in London, made similar points.

My noble friend Lord Anderson of Swansea made important points about properties bought in London with suspicious funds and asked who should ring the alarm bells—should it be the estate agents, lawyers, accountants and the bankers? I bought the home I live in 13 years ago. My wife and I could not afford to buy it at today’s prices, and we live in a very ordinary terraced house in Lewisham. That is a problem all over London, with people who work hard, pay their taxes and play by the rules unable to afford a home in the capital.

I agree with the noble Baroness, Lady Kramer, on the need for further protection for whistleblowers. I hope that the Minister will comment on that in her response.

There are many welcome measures in the Bill. Part 1 includes a number of measures, including the creation of unexplained wealth orders, which seek to tackle criminals who claim that they have no assets and are penniless but at the same time appear to control considerable funds. This measure will require an individual or organisation to explain the origin of assets that appear to be disproportionate to their known income. It is a welcome move, as is the extension of disclosure orders to money laundering, which will require someone who has relevant information to answer questions put to them as part of an investigation.

Chapter 2 of the Bill seeks to improve the procedures around money laundering and suspicious activity reports. Allowing the National Crime Agency further time to consider such reports, along with the power to request further information, is again a welcome move. The sharing of information to identify illegal activity is vital, and ensuring that companies can share information for the purposes of preventing and detecting serious crime, with clear legal certainty, will be another important tool in the box. The noble Lord, Lord James of Blackheath, gave a number of examples of shocking practices that have taken place in the past. Such behaviour has to be condemned and stamped out, with, where necessary, people brought to justice for behaving so irresponsibly, aiding criminality and putting lives at risk.

Tax evasion is a crime. I welcome provisions in the Bill that seek to disrupt this activity and in particular to deal with the issue of a company operating a business in the UK being able to escape criminal liability because a tax loss is suffered in another country rather than the UK. This will be of particular benefit to developing countries, which are at great risk of such activity.

Additionally, I welcome the introduction of new powers in respect of forfeiture and seizure of assets. I will want to probe in Committee whether we have got the list right and whether the process to amend it by the affirmative procedure is the correct way to proceed.

The Bill also seeks to extend the powers of various officials and agencies. We will again probe in Committee whether the new measures are both proportionate and fit for purpose.

The second part of the Bill extends powers provided for in Part 1 so that they can apply to investigations in relation to terrorist assets and terrorist financing. These measures are welcome. We must always be vigilant and ensure that we have in place measures to assist the appropriate authorities in carrying out investigations into terrorist offences. I am sure that the Minister will acknowledge the sometimes grey area between money laundering offences, criminality and terrorism offences, so having powers that work across the piece is important for those engaged in the work to keep us safe.

Part 3 introduces a welcome new corporate offence of failure to prevent tax evasion, but we will want to explore in Committee what further can be done. The noble Baroness, Lady Bowles of Berkhamsted, is right that people have the right to know who owns which companies and to be clear about the chain of responsibility. Economic crime must be policed with vigour. Good companies will have proper procedures in place and those that do not will be forced to take action. The Prime Minister has committed to getting tough on irresponsible behaviour in big businesses, and that is an aim I welcome very much.

Cracking down on corporate economic crime has the potential to deliver significant savings to taxpayers and ensures that the vast majority of businesses that act responsibly and play by the rules are not put at a competitive disadvantage. It would be useful if the Minister could comment on how she sees the present balance of the corporate liability regime and whether there is not a case for reform to make it easier to prosecute those companies that commit offences.

I again confirm that I welcome the Bill. We will seek constructively to probe and challenge the measures contained in it so that we send back to the other place an even better Bill that can tackle effectively and proportionately all the issues that Members around the House want dealt with, with people protected and kept safe, which is the first duty of government.