Economic Crime and Corporate Transparency Bill

Lord Ponsonby of Shulbrede Excerpts

2nd reading
Wednesday 8th February 2023 Lords Chamber

[Lord Ponsonby of Shulbrede (Lab)]

My Lords, I open by welcoming the Minister to his new position in his new department; we wish him well. I agree with all the sentiments that he has expressed when introducing this Bill, particularly that we are dealing with a “constantly evolving” threat and what he said about the mechanisms that are being addressed in this Bill. It went through a very lengthy process in the House of Commons, and I hope that we will have an equally thorough process in this House.

Although the Bill introduces many necessary changes, we must make sure that those changes are strong enough to stand up to the significant problem that economic crime has come to be in this country. The Government first promised action against fraud, money laundering and other forms of economic crime in 2016. It is regrettable that change has taken so long to reach us and that action has come only after the war in Ukraine exposed the deep connection that economic crime and dirty money have to war and the threat that not plugging the gaps in our financial system poses to the rule of law and democracy across the world.

In the Bill’s absence, the problem of dirty money within our system has not only been allowed to continue, but has grown significantly. Estimates of the total annual cost to the UK from economic crime are between £290 billion and £350 billion per year. These are huge sums, and around twice what we spend on our NHS in England every year. Over the past two years, 64% of businesses have experienced fraud, corruption or other financial crime—a figure that has increased by 50% over the past four years. In 2020, 4.5 million incidents of fraud were recorded, and many more remain unreported. This makes it the single most common crime perpetuated against people in the UK, and only 0.01% of cases are brought to court where somebody is charged with an offence. Only three convictions for serious fraud were secured last year, which is a decrease of seven since 2015. Reform is vital to ensuring protection and justice for individuals and businesses across Britain, but the scale of financial crime across the country also threatens our economic fortune, national security and international status. If we are to continue to welcome and encourage good business and clean money, we must firmly expel the bad.

On the day on which we welcomed President Zelensky to speak to us in Parliament, we must also reflect on the part that economic crime here in the UK has played in supporting crime and war worldwide. Crime within our financial system supports international organised crime, such as people trafficking, drug smuggling and illegal arms dealing. Through the corruption of political systems, it threatens peace, democracy and the rule of law across the world. President Zelensky spoke earlier of the bravery that Ukrainians have shown in the face of invasion and thanked the British people for standing with them, in his words, “from day one”. We must all work together in this House to make sure that this Bill is strong enough to play its role in helping Ukraine. Ending the flow of illegal Russian money through the UK, which is being used to fund the war in Ukraine, will be one important measure of this Bill’s success.

The Government must explore strengthening measures in the Bill in several areas. The overhaul of Companies House is welcome and long overdue. Verifying the details of nearly 5 million existing company directors and others with significant control is a large but achievable task. The Government have allocated £63 million to Companies House for this reform and stated their intent to raise registration fees. We do not wish to see fees raised to the point of discouraging enterprise, but they must cover the costs of preventing not only serious instances of large-scale fraud, but the day-to-day frauds perpetuated against ordinary individuals. I said that fraud worth up to £350 billion takes place every year. How does the Minister think that £63 million stands up against that figure? Given the large number of existing directors, as well as new directors, who will need to be verified, I am interested to hear from the Minister how long he thinks that it will take to complete the process and whether the balance between encouraging business creation through low fees and covering costs can be met.

The Bill as written also fails to mention all the loopholes connected with the use of trusts and with companies registered in British Overseas Territories. In fact, it remains completely silent on this point. The Bill will be marked down as a missed opportunity, and we will return to this issue as it progresses through this House.

The Bill also needs strengthening in its enforcement measures. The Government have not yet set out a clear strategy to recoup assets seized through economic crime enforcement and to compensate victims. It is welcome that the Government have indicated their intent to introduce further measures on corporate criminal liability after significant concerns were raised in the other place. The lack of measures to hold directors to account for fraud and money-laundering conducted by their businesses is a clear omission in the Bill in its current form, and we look forward to seeing what measures the Government will bring forward, as was promised in the other place.

We must ensure that this Bill allows us to get ahead of those wishing to abuse our financial system through economic crime. The delay in bringing forward these reforms, and the gaps that remain in the Bill, risk us being condemned instead to playing catch-up with the criminals. We are pleased to support its Second Reading, and I look forward to working with the Government and colleagues from across the House to address the issues and make this a better Bill.

--- Later in debate ---

[Baroness Stowell of Beeston (Con)]

My Lords, may I just take this opportunity briefly to ask the noble Lord, Lord Ponsonby, to relay to his noble friend Lord Sikka the House’s displeasure at his discourtesy, particularly if, as my noble friend Lord Leigh said, this is not the first time that he has not stayed until the end of a debate, and since his was the longest of the Back-Bench speeches in this debate? He took advantage of a full 15 minutes.

[Lord Ponsonby of Shulbrede (Lab)]

I assure the noble Baroness that I will refer the matter to our Chief Whip.

[Lord Sharpe of Epsom (Con)]

My Lords, I beg to move.