Criminal Finances Bill

Lord Rooker Excerpts

Committee: 1st sitting (Hansard): House of Lords
Tuesday 28th March 2017 Lords Chamber

[Lord Faulks]

My Lords, a walk around the centre of London after dark reveals that large parts of the city are wholly unilluminated. Why are the lights off? Is it that most Londoners are getting an early night? I think not. The fact is that many high-end properties are unoccupied and are used as investment vehicles by those who regard London as a safe haven for their money, often unlawfully acquired. In September 2016 the Mayor of London, Sadiq Khan, launched an inquiry into the impact of foreign investment flooding into London’s housing market. Lest my submission be considered too London-centric—I declare an interest as a resident of central London—such investment has also been going on in Manchester, Liverpool and Birmingham, among other cities. Mayor Khan said on launching the inquiry that we all need to be reassured that dirty money is not flooding into the property market.

Property that is the subject of a UWO does not have to be real property, but real property has the advantage of being less easy to dispose of informally and quickly. Your Lordships have already heard me and others discuss the importance of tightening up the provisions in relation to compliance with UWOs to deal with the potential for evading the orders. In this context, I am particularly concerned about property owned by overseas companies. On 17 March 2016, the Land Registry published the fact that it had registered 100,000 freehold and leasehold properties in the name of overseas companies. I should make it clear that the list excludes private individuals, UK companies, UK companies with an overseas address and charities. Noble Lords may be aware that unlike in most countries, there are absolutely no restrictions on foreign ownership of residential property in the United Kingdom.

Do we really think that all this property is being acquired with clean money? Are solicitors and agents complying with anti-money laundering provisions? I know that tightening up those provisions is the subject of later amendments. I read last week in the Times that only five people have been convicted of money laundering in the 10 years since the legislation was apparently tightened. The Law Society is on record as saying:

“Compliance with money laundering obligations is one of the greatest challenges for solicitors in the UK today”.


What about the obligations of estate agents? Of these properties owned by overseas companies, how many are polluted by dirty money? I mentioned at Second Reading the envelope tax. This was a reference to the super-rich being prepared to pay something like £218,000 a year in tax rather than identify who owns property. I asked the Minister whether the Government were happy with this state of affairs. Her answer was that UWOs will,

“make it easier for our law enforcement agencies to investigate money laundering in the London property market and recover the proceeds of crime”.—[Official Report, 9/3/17; col. 1519.]

She also mentioned the importance of ensuring that lawyers, estate agents and other professionals comply with their money laundering obligations. Apparently the Treasury will in due course publish its findings in relation to the supervisory regime.

The noble Lord, Lord Rooker, referred to his kleptocracy tour in his speech at Second Reading, while the noble Baroness, Lady Kramer, cited the report of the All-Party Parliamentary Group on Anti-Corruption, which takes the view that more than £4 billion-worth of properties have been bought with suspicious wealth. My noble friend Lord Patten endorsed all the comments that were made at Second Reading about the devastating effect of dirty money on the occupancy of London properties. The Minister said that,

“the Government intend to publish a call for evidence, seeking views on a new register of overseas companies that own property in the UK”.

She said that the Government,

“hope to do so shortly and will then introduce the relevant legislation when parliamentary time allows”.—[Official Report, 9/3/17; col. 1519.]

As I have explained in relation to other amendments, I do not think that parliamentary time is likely to be available in the foreseeable future, so we must seize the legislative opportunity as it now presents itself.

London is in danger of becoming a safe haven for dirty money. This is partly because of our reputation for maintaining the rule of law and because we are generally regarded as a good home for foreign investment. I certainly would not want to deter investment, particularly in the uncertain economic times that lie ahead, but I deprecate this assault on the London property market, the effect it is having on Londoners and how it is adding to the pressure that exists in the London property market, which falls particularly harshly on those seeking to acquire their first properties. We should do everything we can to make these provisions effective.

The legislation currently provides that the court must be satisfied that a respondent is a PEP, has been involved in serious crime, or that there is at least a reasonable suspicion of involvement. The amendment in my name and that of the noble Lord, Lord Anderson of Swansea, who unfortunately is unwell, would add to that,

“the respondent has a financial interest in land or property in England and Wales … registered in the name of an overseas company”.

This would make it easier for the agencies to obtain a UWO in circumstances where they do not have much evidence of involvement in serious crime or the respondent is not a PEP, but they have suspicions about the source of money used in the acquisition of property. My noble friend Lord Leigh referred to his familiarity with questions being posed by the Revenue. The High Court would still have to be satisfied that there are reasonable grounds for suspecting that the respondent’s lawfully obtained income would have been insufficient, but this should not be too high a bar to surmount.

Would this create any unfairness? I do not see why. If the property has been acquired with honest money, an explanation could be provided that would comply with the order. I ask the Minister: how, if at all, will UWOs be used to get at the problem that has been identified by me and a number of other noble Lords? Will she explain why she objects, if she does, to this amendment, or at the very least explain what improvements will be made to deal with this very real problem? Her answer may be partially to rely on the very recently proposed government Amendment 21. I am not sure that that does the trick. This a very important point and a real opportunity. I beg to move.

[Lord Rooker (Lab)]

My Lords, I had not intended to speak on this amendment, but it gives me the opportunity to raise the point that I wanted to raise today anyway following Second Reading. I agree with everything that the noble Lord just said. From memory, I think the figure is that 9.3% of the properties in Westminster are owned by overseas companies from jurisdictions that maintain secrecy. That is a huge percentage of the properties in one local authority area.

The issue I want to raise is that the money comes into this country from somewhere. Basically, it must come through the banks. At Second Reading I made the point:

“As far as I know, no bank has ever been prosecuted in the UK for laundering corrupt wealth from another country”.—[Official Report, 9/3/17; col. 1487.]


The Minister responded by saying:

“The noble Lord, Lord Rooker, talked about fines on banks in the UK. He raised the issue of banks in the UK not being penalised for laundering funds from overseas. I have a huge list of fines, which I will not read out today, because it would take up valuable time in responding … I will send it to him … and place a copy in the Library”.—[Official Report, 9/3/17; cols. 1520-21.]


When the noble Baroness wrote to Members who had participated at Second Reading, she neglected to mention anything about that exchange, so I contacted her office just to remind them. I was sent a letter, which I presume others would have had, dated 21 March. Attached to it were details of some of the most significant fines imposed in recent years on financial institutions with a presence in the UK. They related to tax fraud, money laundering and financial crimes. The vast pile of papers that the Minister said she had at Second Reading amounts to four sheets, but only three banks in the UK are mentioned: Barclays, Deutsche Bank and Sonali. Not one of them has been prosecuted for money laundering. They have had fines levied on them by the Financial Conduct Authority, but not one has been found guilty of money laundering.

--- Later in debate ---

[Lord Rooker]

The Minister is missing the point, although I am sure she is not doing so deliberately. No bank has been prosecuted. That is the background to the question I asked. I did not ask about cosy deals with the Financial Conduct Authority—like those reported today with Tesco and the one with Rolls-Royce, which I referred to at Second Reading—to have deferred prosecutions, so that they pay but do not get prosecuted. I asked about banks being prosecuted. The one way to stop or curtail this, as the noble Lord, Lord Deben, said, is to get them where it hurts, not with cosy deals. These fines are not the result of prosecutions. If she is implying that, she is wrong, and is close to misleading the Committee. I am not asking about deals; I am asking about prosecutions which take place in court, not through cosy deals and a fine from the Financial Conduct Authority.

[Baroness Williams of Trafford]

I hope the noble Lord does not think that I have ever tried to mislead the House. I talked about fines, but where a bank was found to have committed a criminal offence, a prosecution could be undertaken. Investigations and prosecutions are a matter for law enforcement agencies and prosecutors. I take the point that he is making, but this is open to law enforcement. Last month, a £163 million fine was issued to Deutsche Bank, and I would suggest that hitting them where it hurts probably involves hitting them in their pockets. It is open to law enforcement to prosecute banks, but I take the noble Lord’s point in that, today, I know of no prosecutions of banks. But the fines regime is in place.

I am very grateful for the amendment but hope that my noble friend has been assured that there is not a gap in existing powers that would justify extending UWOs in the way proposed. I hope he will feel content to withdraw his amendment.

[Lord Faulks]

My Lords, I am grateful to all noble Lords who took part in the debate and for the general support for what lay behind this amendment, which is a widespread concern about the London property market in particular and the degree to which it is clear that corrupt money has entered it. The noble and learned Lord, Lord Brown, made a number of important points—particularly that I am not learned. He was also correct to say that the word “or” was missing from the amendment, and made some other drafting suggestions. He was also right to suggest that this is not a panacea, but it was not designed to be. The amendment was intended to provoke the sort of debate we have had and to ask the Government whether they are truly satisfied that the evil we have identified is being answered, and in particular whether anything in the Bill can be used to deal with the problem.

My noble friend the Minister has said that the provision covers those who are PEPs within the definition of the Bill or those suspected of serious criminality. But what, I ask, about those who may not easily be defined as being “suspected of serious criminality” but are in fact gangsters? What of those who have high office but do not come within the definition of PEPs? With many of the properties, it will be difficult to determine precisely who owns them. All that we ask for is an unexplained wealth order—it is not a criminal offence; it is a civil procedure which results, if there is no adequate explanation, in civil recovery. That, I suggest, will help deter the incursion of corrupt money. The provisions contain safeguards on self-incrimination and compensation. Let us not be too pusillanimous about this. My noble friend said that she had received my request for information about the envelope tax at Second Reading and she has again, but she has not yet replied. On the face of it, that is in stark contradiction to the policy that underlies the UWOs.

We will miss a legislative opportunity if we do not do something through the Bill to sort out the problem we have identified. I hope that my noble friend will speak to her officials and be satisfied that there is no gap, no lacuna, in this approach.

[Lord Rooker]

Perhaps through the noble Lord, as the Minister talks to her officials, I can invite her to watch two films: “From Russia with Cash” and “From Ukraine with Cash”. They are on the same CD. If she does not have access to them, I will provide her with a copy. They spell out that there is a serious problem.

[Lord Faulks]

I am very grateful for that intervention, which supports the point that these effective owners may not be PEPs within the definition and it may be difficult to pinpoint serious criminality. We must do something about this. I look to the Minister to provide a better solution than exists at the moment. If not, we will be letting the country down and letting Londoners down, particularly young, aspirant Londoners. However, at this stage, I beg leave to withdraw the amendment.