Elections Bill

Lord Rooker Excerpts

Lords Hansard - Part 2 & Committee stage
Monday 28th March 2022 Lords Chamber

As I said, I do not suggest that these amendments in their present form cover all aspects of the issue, but when my noble friend comes to reply I would be grateful if he could tell the Committee whether this is an area of policy that could usefully be explored further with a view to stopping the sort of impropriety that I think we all agree disfigures our national scene.

[Lord Rooker (Lab)]

My Lords, I will say a few words about Amendment 212G, which is in my name and that of the noble Lord, Lord Butler of Brockwell. It concerns risk assessment and due diligence policies, controls and procedures by political parties. This would be a major change for political parties, and is very strongly suggested by the Committee on Standards in Public Life, particularly in chapter 4 of its report published in July last year. This contains several recommendations and is a very powerful case for anti-money laundering style checks. Like others, it specifically cites the Intelligence and Security Committee’s Russia report at paragraph 4.24. I shall give some examples later.

Dirty money in UK political finance leaves parties exposed to malign influence, fosters dependence on the proceeds of crime and other dubious sources as a source of party finance, and, as my noble friend said, risks undermining the integrity of the electoral system. Under PPERA 2000, political parties are not required to run anti-money laundering checks on donors. There is no indication that UK political parties do robust checks on the source of donations, nor that parties ever reject donations after such checks have been made. I would very much welcome being contradicted on this.

As the UK’s anti-money laundering framework has progressively tightened over the last decade—I applaud the Government for the changes they have made—the checks that political parties should undertake have stayed largely unchanged since 2001. Examples from the media suggest that if parties check the source of donations at all they are woefully inadequate and fail to prevent the flow of tainted money into UK politics, with damaging effects on the health of our democracy.

The Electoral Commission, which the Government clearly do not like, has argued since 2018 that risk management principles from anti-money laundering checks by business could apply to election finance. This would greatly increase transparency for voters. The Committee on Standards in Public Life has also recommended that.

As I was listening to a CD in the car the other week, the present system reminded me of the song “Money, Money, Money”. I will misquote Tim Rice’s lyrics from “Evita”; I have changed only one word, and I will not try to sing it: “When the money keeps rolling in, you don’t keep books. You can tell you’ve done well by the happy, grateful looks. Accountants only slow things down, figures get in the way”. That is the reality of our political parties at present: they do not do the checks.

So how does this amendment address the problem? It would update PPERA to require political parties to develop and publish a reasonable and proportionate risk-based policy for identifying the true source of donations above the figure of £7,500. Parties would need to have reasonable and proportionate risk assessment and due diligence controls and procedures in respect of those policies; the framework of the policies could be set out in statutory instruments.

For any donation or aggregated amount within a year exceeding that figure, parties would need to

“undertake enhanced risk assessment and due diligence checks”

to identify

“the donor’s principal place of business if different from its registered office … the nature of the donor’s business … the people with significant control of the donor’s business, and … the names of the donor’s directors or senior persons responsible for its operations.”

Donors giving more than £7,500 would need to give a written declaration as to whether their business is in a high-risk sector—these are listed in proposed new Section 54C(13) of PPERA—and whether they have been

“under formal investigation by a regulator or law enforcement body for, or convicted of,”

a range of offences; these offences broadly reflect the mandatory grounds of exclusion in the Public Contracts Regulations. Further, a political party would need to

“include a statement of risk management in its annual accounts that identifies how risks relating to the true source of funds have been managed.”

All major UK political parties have accepted potentially suspect donations, including from individuals and companies that have later been found to be involved in economic crimes.

I want be fair and clear on this; I will give one example from the Labour Party. However, as the party in government since 2010—although it constantly forgets this—the Conservative Party has accepted the majority of such donations in recent years. Russia’s brutal invasion of Ukraine has increased scrutiny on the large sums that the Conservative Party has received from donors with links to the Russian state. I will deal not just with links to the Russian state but with those who have been involved in criminal activity and economic crime, and I will use media and official sources to do so.

My noble friend referred to the £1.9 million from Lubov Chernukhin so I will not go into detail on that, but my source for the following example is the Guardian. Between May 2018 and May 2021, the Conservative Party accepted £366,765 from Aquind. It was first reported in January 2021 that Aquind’s major shareholder, Viktor Fedotov—a Russian-born oil tycoon—was alleged to have been involved in a major fraud in Russia during the 2000s involving the siphoning of funds from the Russian state pipeline monopoly Transneft.

My source for this example is the Financial Times. Between September 2018 and January 2021, the Conservative Party accepted £484,570 from Mohammed Amersi; he figures in a lot of examples but this one is worth going over, even though my noble friend alluded to it. In 2006—well before that time—a Swiss tribunal found that Amersi was closely involved in a business deal involving one of Russia’s largest telecommunications companies, which was later revealed to have been controlled via Cyprus by Leonid Reiman, then Vladimir Putin’s telecoms Minister. Reports in the press claim that Amersi acted as an adviser for a Swedish telecoms company on a transaction that was later accepted by the company as a bribe to the first daughter of Uzbekistan’s ruler, Islam Karimov. Despite the existence of an internal Conservative Party memo circulating in late 2020 warning of Amersi’s business dealings circulating, the party accepted an additional £50,000 in January 2021. Naturally, Mr Amersi has denied any wrongdoing.

My sources for this example are the Daily Mail, the Financial Times, the Independent and the Guardian. The Conservative Party accepted £202,540 from New Century Media Ltd, which represents

“an extensive list of state-connected Russian clients.”

Whichever way you check, it is basically a Russian front organisation. These clients include the Firtash Foundation, which is run by Dmitri Firtash,

“a Ukrainian gas and chemicals oligarch wanted by the US for bribery”.

He still is wanted; I think he is locked away in Austria. Of course, as I said in a recent speech, Ministers at the Ministry of Defence did business with him regarding the selling of a property to him while he hides from the United States.

New Century Media’s £900,000 a year contract with Firtash includes reputational management, personal introductions to individuals within politics, and support for his passport application. The firm has other notable—or should we say, in its terms, successful—dealings, introducing figures close to the Putin regime to Conservative politicians via donations. This included the introduction of Russian MP Vasily Shestakov and billionaire oligarch Andrei Klyamko, both close friends of Putin, to then Prime Minister David Cameron at a donors’ ball in 2014. New Century’s owner had already arranged for Shestakov to meet Prime Minister Cameron at the previous year’s ball in 2013. New Century also arranged for Sergey Nalobin, a senior diplomat at the Russian embassy, to meet Prime Minister Cameron at a Tory donor dinner in 2012. Nalobin, the son of a senior FSB spy, was expelled from the UK by the Home Office in 2015.

These Russian meetings with Cameron when he was Prime Minister take on a really new shape after the astonishing letter in the Financial Times last Wednesday, 23 March, from Carl Scott, a retired air commodore. He was the UK defence attaché in Moscow between 2011 and 2016, sending back regular reports, pointing out Putin’s long march to war in report after report to the Government. At exactly the same time, Cameron was Prime Minister and being nobbled and cossetted by these Russian interests.

The Independent noted in 2014 that:

“Unlike the vast majority of lobbying firms, New Century fails to provide details of its clients to the industry’s voluntary register of interests.”


While New Century Media did subsequently register with the Registrar of Consultant Lobbyists in November 2019, it has still never declared a single client.

As I was preparing to speak when I thought this might come up last Thursday, I was casting around with respect to my own party. All I had to do was open the Times last Wednesday, 23 March, to see pages 20 and 21 devoted to the “king of bling”, one Peter Virdee. The opening paragraph stated that:

“One of Europe’s most wanted men was welcomed as a donor by the Conservatives and Labour despite being under investigation for bribery and fraud.”


Even after his arrest by the NCA, both parties continued to take his money. It does appear from the figures given in the Times that he favoured Labour somewhat less than the Conservatives, but we still took the money. He lied about his membership of charity trusts, the ENO and NSPCC. It is not a good story for Labour, and even less so for the Conservatives.

There are other dubious donations from sources not connected necessarily to the Russian state. I will just give one, because of time: £726,300 from Javad Marandi, an Iranian businessman with close links to the kleptocratic Azeri regime. Marandi’s business relationship with individuals reportedly connected to the Azerbaijani laundromat was first identified in 2017, after which the Conservative Party accepted the majority of his total donations of £520,000. The source there was the Guardian and the OCCRP, the Organized Crime and Corruption Reporting Project.

These are just a few examples. There are more I am not going to use, and other Members of the Committee will have their own. It is a simple process: political parties and other voluntary organisations—I fully accept that they are voluntary, but they are not charities—are more regulated now than they used to be, and it is just as well. Given the importance of the money, I cannot see any reason why the approach of anti-money laundering regulations that the Government have used over the last decade for other companies cannot be used for political parties. I would be interested in due course to know the views of the Government.

--- Later in debate ---

[Earl Howe (Con)]

I will come to the subject of caps on donations in a moment.

On Amendment 212E, the noble Lord, Lord Rennard, recently tabled a Question for Written Answer about the uncommenced provision in the 2009 Act. This provision, Section 10, refers to residence and domicile for income tax purposes as a criterion for permissible political donations. Although a response was issued to him by my noble friend Lord Greenhalgh on 14 March, I hope that it will be helpful if I repeat it briefly for the benefit of the Committee.

The Government have no current plans to bring into force the uncommenced provision, Section 10 of the Political Parties and Elections Act 2009, regarding donations from non-resident donors. There is a very good reason for this: the provision is not workable given that an individual’s tax status is subject to confidentiality. It may therefore be difficult or even impossible for the Electoral Commission, political parties and other campaigners to accurately determine whether a donor meets the test set out in Section 10.

Furthermore, as a matter of principle, taxation is not connected to enfranchisement in the UK. If a British citizen is able to vote in an election for a political party, they should be able to donate to that political party subject to the requirements for transparency on donations. There is clear precedent here. Full-time students are legally exempt from paying council tax but still have the right to vote. Likewise, those who do not pay income tax rightly remain entitled to vote. For these reasons, the Government cannot support these amendments.

The other key theme that this debate has focused on is that of donations made by companies or other entities such as unincorporated associations. I will address Amendments 197, 198, 200, 210, 212 and 212G in the remarks that follow. As I have said before, only those with a legitimate interest in UK elections can make political donations, such as UK-registered companies which are carrying out business in the UK, trade unions and other UK-based entities. There is only a very limited exception to this, whereby, as I indicated earlier, for political parties registered in Northern Ireland permissible donors are a wider category.

The law is already clear that, if a company wants to donate to a party or fund a campaign, it must be a permissible donor. The recipient of a donation is responsible for checking that the donor is eligible; that is to say that it is registered in the UK and carrying out business in the UK. The recipient must also report the relevant donations to the Electoral Commission quarterly, and weekly during election periods. To ensure transparency about party funding, donation reports are published by the Electoral Commission on its online database.

Unincorporated associations are permissible donors only where they carry on business or other activities wholly or mainly in the United Kingdom and where their main office is in the UK. Further to this, any unincorporated associations making political contributions of more than £25,000 in a calendar year must notify the Electoral Commission and are subsequently subject to various reporting requirements relating to their own funding. Members’ associations, many of which are unincorporated associations, are separately regulated as regulated donees and must report on donations and loans that they receive.

Amendment 197 would introduce a new obligation on unincorporated associations to take all reasonable steps to check whether donations they receive intended for political purposes come from a permissible donor. At first glance, “all reasonable steps” appears perfectly reasonable. However, this would represent a significant change for unincorporated associations which, as I outlined previously, are already subject to significant reporting requirements. It singles them out from other types of donors and puts them instead closer to the level of political parties in their due diligence obligations. This could mean many voluntary groups and local sports clubs and societies all facing a significant extra due diligence cost simply because they fall into an unlucky category. That does not strike me as fair, and I would be concerned about the possible chilling effect on democratic participation of those groups.

Amendment 198 is an attempt to restrict donations from organisations. As drafted, it would exclude UK-based companies with fewer than five employees from making donations. Furthermore, it is unclear how one would determine who has “significant control” of an unincorporated association, as their governance structures are not regulated in the same way as other legal entities. Although I am sure this was not the intention, it demonstrates quite well the risk of serious unintended consequences if amendments which place restrictions on who can participate in our democracy are made with haste and without consultation. Furthermore, Amendment 198 would make it an offence for an ineligible company to even offer a donation, regardless of whether it is accepted and regardless of whether it was aware the donation it was offering is impermissible. This is unnecessary.

Donations from impermissible donors are already illegal, and it is the political parties and campaign groups receiving the money, the ones which better know and understand this area of law, which are accountable and responsible for checking, returning and reporting impermissible donations. In addition—this point has been highlighted previously—it is an offence for a donor knowingly to facilitate the making of an impermissible donation.

I am grateful to my noble friend Lord Hodgson for his Amendment 210, which would prohibit donations from individuals or companies that hold public contracts with a value equal to or exceeding £100,000. The complexities of procurement frameworks are slightly beyond the scope of this debate, but let me say that, while well-intentioned, it is not clear how this amendment would operate in practice. Seemingly, there is no limitation on a person making a donation to a party prior to entering into a contract with a public body, and it is unclear whether the prohibition extends beyond the lifetime of the contract and, if so, for how long. It is important to note that the existing legislation already provides for publication of donations to political parties, regulated donees and recognised third-party campaigners, therefore enabling any discerning citizen and our free press to scrutinise any large donations.

I also thank the noble Lord, Lord Sikka, for his Amendment 212. As he explained, the intention of this amendment is to prevent shell companies being used to make large donations. Similar concerns on source of donations underpin Amendment 200 and the substantial Amendment 212G from the noble Lords, Lord Rooker and Lord Butler, which would introduce requirements for registered parties to carry out risk assessments and due diligence checks on donations.

However, as I have already outlined, there are strict rules requiring companies making donations to be incorporated and carrying out business in the UK. Existing rules also prohibit circumventing the rules through proxy donors. That is on top of a legal requirement for political parties and other recipients to conduct permissibility checks and report to the Electoral Commission.

The principle of strengthening the system to provide greater levels of assurance on the sources of donations to ensure they are permissible and legitimate is important. We take seriously the risk of donors seeking to evade the rules. Indeed, the Government recently set out their final position on the reforms to the corporate registration framework, ahead of introducing legislation, in the Corporate Transparency and Register Reform White Paper.

The introduction of mandatory identity verification for those incorporating and filing with Companies House will be essential for making information on the companies register more reliable. It will mean that those with the intention of fraudulently misusing the UK corporate registration framework will have their activities traced and challenged. For example, all directors of UK limited companies will be required to verify their identity in order to be registered, and overseas companies will be required to verify the identity of all their directors. This, in combination with a new power for the Companies House registrar to proactively pass on relevant information to law enforcement and other public and regulatory bodies, including the Electoral Commission, will help ensure that any company making political donations is properly trading in the United Kingdom.

However, we do not want to impose disproportionate legal obligations that hinder the ability of parties and other campaigners to generate funds against the cost of carrying out checks on donations to ensure that they come from permissible sources. To do so would risk it not being cost effective for parties to accept smaller donations and therefore exclude some people from being able to participate in our democracy in this way. The current rules are proportionate and achieve this balance.

[Lord Rooker (Lab)]

I am listening carefully to the Minister. Going back, say, a decade before the Government started to tighten up the anti-money laundering rules, companies, accountants, company secretaries and company lawyers all said, “Our professional obligations and institutions require us to do all these checks.” But they were not doing them, hence the Government had to bring in some anti-money laundering rules. Why are political parties any different?

[Earl Howe (Con)]

My Lords, I hope I have already explained how the Government intend to legislate in the future to create greater transparency of companies. As I said at the beginning, all we can do is keep the rules under review. I am suggesting that in this particular area, the balance is about right.