Criminal Finances Bill

Lord Rosser Excerpts

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

[Lord Rosser (Lab)]

My Lords, I thank the Minister for setting out the purpose and provisions of the Bill and for her earlier letter which covered the same ground. The Government’s Explanatory Notes on the Bill state that it makes,

“the legislative changes necessary to give law enforcement agencies, and partners, capabilities and powers to recover the proceeds of crime, tackle money laundering and corruption, and counter terrorist financing”.

The notes go on to say:

“The measures in the Bill aim to: improve cooperation between public and private sectors; enhance the UK law enforcement response; improve our capability to recover the proceeds of crime, including international corruption; and combat the financing of terrorism”.


This Bill has already been through the House of Commons, where we supported its aims and objectives but pursued points which reflected our feeling that the Bill did not go as far as it could have done in providing statutory and other backing for investigating and combating money laundering, tax evasion, corruption and the financing of terrorism in this country and overseas. Our approach in this House will be very similar.

As the Minister has said, the Bill provides for new orders and powers and enhancements to existing orders and powers: in particular, a new unexplained wealth order; increasing the scope of disclosure orders to cover money laundering investigations; an extension of existing seizure and forfeiture powers; a strengthening of suspicious activity reporting; a widening of investigatory powers into the funding of terrorism; and an extension of facilitating tax evasion offences to companies involved in such activities.

In her letter to which I referred, the Minister said that this Bill had been described by Transparency International UK as,

“one of the most significant pieces of anti-corruption legislation in the past few decades”.

However, unless I am mistaken, Transparency International, in expressing its concerns about the UK’s role as a safe haven for corrupt assets, has also said that,

“The UK’s Overseas Territories should require company beneficial ownership information to be made public, in a format that is free and searchable”—

an issue that this Bill does not address. The United Kingdom publishes a central register of beneficial ownership—why not our overseas territories as well? Surely we have a responsibility to ensure transparency in our tax havens.

The British Virgin Islands was by far the most widely used tax haven in the Panama papers, with over half of the 214,000 corporate entities that came to light in the Panama papers being registered in the British Virgin Islands. More than 75% of corruption cases involving property investigated by the Metropolitan Police’s proceeds of corruption unit involved anonymous companies registered in secrecy jurisdictions, 78% of which were registered in the UK’s overseas territories or Crown dependencies.

Three years on from the first request from then Prime Minister to our overseas territories to consider public registers, only Montserrat has so far committed to introducing such a register. The only agreement so far has been to create central registers of beneficial ownership and provide UK law enforcement agencies with access within 24 hours. Yet, in 2014, the then Prime Minister wrote to the overseas territories stating that,

“beneficial ownership and public access to a central register is key to improving the transparency of company ownership and vital to meeting the urgent challenges of illicit finance and tax evasion”.

What do the Government intend to do about this situation?

Unfortunately, the Government have confirmed in the letter of 6 March sent to Members of this House that they have significantly changed and weakened their previous stance to which I have just referred. Their stance now, as the letter says, is simply:

“It remains our ambition that public registers become a global standard. If and when they do, we would expect the Overseas Territories and Crown Dependencies to follow suit”.


The United Kingdom, along with its overseas territories and Crown dependencies, is the biggest secrecy jurisdiction in the world, and yet there is no question now, as far as the Government are concerned, of expecting our overseas territories and Crown dependencies to follow us and establish public registers of ownership. Instead, the Government’s approach is that if public registers become a global standard, they would expect our overseas territories and Crown dependencies to follow suit. If public registers do not become a global standard, then that presumably is the end of the matter as far as the Government are concerned.

As long ago as 2011, a World Bank study found that 70% of over 200 corruption cases involved the use of anonymous shelf companies to launder funds and conceal the identity of corrupt politicians. Anonymous companies are also used to launder corrupt and illicit funds into the UK, and transparency about the beneficial owners of these companies—companies which can be created in a matter of hours—has been identified as an important part of the solution to tackling the laundering of such funds.

The OECD has estimated that tax havens may be costing developing countries a sum of up to three times the global aid budget. Corruption hits developing countries very hard: around $1 trillion flows out of developing countries via illicit financial flows every year. Africa is a net creditor to the world. Private registers of beneficial ownership will not be accessible to people in developing countries, which is where people suffer the most from the financial secrecy that tax havens offer. The reality, surely, is that, as more registers of beneficial ownership become public—as has happened in this country—the quicker that will become the norm and universally accepted. The EU Parliament has now voted for public registers of beneficial ownership to be in place across the EU.

Maybe there is some overwhelming reason why action cannot be taken in regard to our overseas territories. If so, no doubt the Government will set that out in responding at the end of Second Reading. It certainly does not appear that there is a bar in legislating, because, as I understand it—perhaps incorrectly—as a matter of constitutional law the UK Parliament has power to legislate for the overseas territories.

While this Bill addresses the issue of corporate liability, amendments were nevertheless tabled in the Commons to extend the application of a “failure to prevent” approach in the Bribery Act 2010 to other forms of economic crime, such as fraud and money laundering. The Government have called for evidence on this issue, but there needs to be sufficient deterrence to corporate misconduct, and arguments have been put forward that there should be a strict, direct corporate liability offence, along the lines of, I believe, Section 7 of the Bribery Act 2010. Perhaps the Minister can respond to that point when she replies to the debate.

A case can also be made for saying that the ability to prosecute companies should be extended not only to economic crimes but also to cases of severe harms caused to individuals, including those overseas. The Business & Human Rights Resources Centre recorded over 300 allegations of human rights abuses made against 127 UK-linked companies between 2004 and 2014. Despite evidence that some companies were potentially repeat offenders, there have been no corporate criminal prosecutions. Nearly half of the allegations were made against extractive companies. Are the Government looking to extend the terms of this Bill to enable prosecutions to be made more feasible against companies, as opposed to individuals, for crimes of this kind?

Billions of pounds in corrupt money comes into this country every year. The National Crime Agency has indicated that the amount of money laundered in this country each year could be as high as £90 billion. It is not clear, though, what provisions in this Bill are intended to address the effectiveness, or otherwise, of our anti-money laundering system. There are a large number of supervisory bodies in the relevant sectors, which leads to a fragmented approach over identification of risks and their mitigation and the approach to enforcement. It also raises the question of whether some of the 27 supervisory bodies have conflicts of interest when 15 are also lobby groups for the sectors they supervise, for example. Once again, it would be helpful if the Minister could address this point about the need to overhaul our anti-money laundering system if we are to stop billions of pounds of corrupt money coming into this country each year, and indicate how this issue is addressed in the Bill.

On the enhancements to the suspicious activity reporting regime, will there also be, for example, a system for prioritising suspicious activity reports in order to help ensure that the resources of the law enforcement agencies are deployed to maximum effect and benefit? There were over 380,000 suspicious activity reports in 2015, ranging from the theft of small amounts of petty cash to suggestions of serious organised crime. What are, and will be, the procedures for ensuring that scarce resources are not spent processing minor crime reports coming via the suspicious activity regime at the expense of investigating more serious activity reports?

If the measures provided for in the Bill—which we support, albeit that they could have gone further—are to be effective and made to bite, the necessary resources will need to be provided. Whether we are talking about the new offences and powers in the Bill or the extension of existing powers, further resources, not least financial and staff resources, will surely be required. What are the Government’s intentions in this regard, and which agencies will be responsible for implementing and enforcing the new powers set out in the Bill, apart from the National Crime Agency? For example, will Border Force be involved, or the many individual police forces in this country, and if so, in what way? What is the Government’s assessment of the impact of this Bill on the forces and agencies, including our security and intelligence agencies, which will be responsible for implementing its provisions?

I have indicated our support for the aims and objectives of the Bill, but as I have also stated, there are areas where we think that more could be done than appears to have been provided for. There is also the issue of resources and the effectiveness of our systems and processes, not least in relation to combating money laundering. As the Minister has said, the Bill is not seeking to address victimless crimes. We want it to prove to be about more than just good intentions. Instead, it should play a key part in the process of ending the situation where this country appears to be a money-laundering hub so that we show what can be achieved, in particular on coming down hard on money laundering and the purposes for which it is used, as well as on tax evasion through schemes and arrangements that have not been cleared by revenue and customs. We want to ensure that we can show the wider world what can be achieved in this regard.

Criminal Finances Bill

Lord Rosser Excerpts

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

[The Deputy Chairman of Committees (Viscount Ullswater) (Con)]

I must advise the Committee that if this amendment is agreed to, I shall not be able to call Amendment 59.

[Lord Rosser]

My Lords, I have Amendment 72 in this group. The Bill provides for extensions to the suspicious activity reports regime under which private sector companies report suspected money laundering—or, at least, they are meant to. The extensions or enhancements enable the moratorium period during which the relevant law enforcement agencies can gather evidence to be extended and provide a power enabling the UK Financial Intelligence Unit in the National Crime Agency to obtain further information from suspicious activity reporters. The enhancements also create a legal basis for sharing information between companies in order that they can build up a clearer picture of suspected money laundering.

Amendment 72 would provide for a procedure, through the National Crime Agency, for prioritising the most serious suspicious activity reports to target effectively the use of scarce law enforcement resources. Private sector companies and professionals, such as accountants, are required by law to make a suspicious activity report every time they become aware that a person might be in possession of the proceeds of crime, and that applies equally even if the amounts involved are small or if the information is far from conclusive or far from being considered fully reliable. The same duty to report applies whether the suspicion relates to a theft of a few pounds from petty cash or to what could be serious organised crime.

At present there appears to be no means by which information may be quickly screened or sifted to determine which are likely to prove the most significant or important reports requiring full investigation. There were just over 380,000 individual suspicious activity reports in 2015, and considerable time must be spent processing essentially very minor crime reports, which can only be at the expense, resource-wise, of the investigation and detection of crimes at the serious end of the scale. This amendment seeks to address that situation by providing for priority levels based on the intelligence value of each report, or a similar kind of categorisation, which would give an appropriate risk-based approach to determining which economic crimes should be tackled as a matter of urgency.

At Second Reading, the Government said that the issue raised in this amendment on suspicious activity report reform was lacking in the Bill, even though reform of the SARs regime was a crucial part of the Government’s own action plan for anti-money laundering and counterterrorist finance. The Government went on to say that they had established a programme to reform the SARs regime, and were seeking improvements in the short, medium and long term. They then went on to say that, during the review of the SARs regime that the Home Office ran in 2015, a number of regulated-sector companies suggested that suspicious activity reports should be prioritised, which is what this amendment is about. Despite this, they went on to say at Second Reading:

“We will consider this as part of the SARs reform programme”.—[Official Report, 9/3/17; col. 1518.]


However, the review was two years ago, in 2015, and a number of companies affected raised the issue addressed in this amendment in response to the review. Why, two years after the review, cannot the Government make a decision to do something to address this matter of prioritising reports rather than continue to put off making a decision? Surely, in all the discussions that would have taken place on this Bill before it was brought to Parliament and during the debates on the Bill so far in Parliament, prioritising SARs reports, which had after all been raised in the 2015 review, could and should have been considered, since it is directly relevant to the content of the Bill?

I hope that the Government will recognise this reality, and give a positive response to this amendment and, if that is not possible—and I would like to know why, if that is the case—accept that Report is now likely to be another four weeks away, with Third Reading being five weeks away, and agree to bring back a government amendment on Report or at Third Reading to address the issue raised in the amendment.

[Lord Brown of Eaton-under-Heywood]

I want to address only Amendments 58 and 59, both of which I oppose, to new Section 336B on page 28 of the Bill. That section deals with an application under the previous section to extend the moratorium period, which has to be dealt with as soon as is practicable. New subsection (3) says that the court,

“may exclude from any part of the hearing … an interested person”,

or “anyone representing that person”. We see that formulation again in new subsections (4) and (6). They are the people whose presence or otherwise at the hearing is in question.

New subsection (4) allows for a particular application, that certain specified information may be withheld from the interested person or representative, but that order can be made only under new subsection (5), if the court is,

“satisfied that there are reasonable grounds to believe that if the specified information were disclosed”,

something bad would happen—that either,

“evidence of an offence would be interfered with or … the gathering of information …would be interfered with”,

or somebody would be injured, or,

“the recovery of property … would be hindered, or … national security would be put at risk”.

In that situation, new subsection (6) comes into play. Unlike new subsection (3), which we looked at earlier, where the court “may exclude”, in this instance—because it relates to an application under new subsection (4)—the court inevitably “must” direct that the interested person or his representative be excluded. With the best will in the world, I cannot see how we could sensibly leave out new subsection (6), which puts a requirement on the court which is not to be found in new subsection (3), which deals with the general position. Nor would it make any sense whatever to substitute “may” for “must”. You have already got “may” in new subsection (3), but for this situation, “must” is the appropriate direction to the court for the order to be made. I respectfully oppose those amendments.

--- Later in debate ---

Finally, Amendment 72, tabled by the noble Lord, Lord Rosser, proposes that the National Crime Agency should be required to designate a qualifying report as a high-priority investigation. This was, of course, an issue that the noble Lord raised at Second Reading. A suspicious activity report, or SAR, is not in itself an investigation, but can help to inform a decision on whether to initiate such an investigation, when taken with other sources of intelligence. In 2015, the Home Office reviewed the SARs regime. One of the issues raised in that review, and mentioned by the noble Lord, was whether the regime could be focused more effectively, including through the prioritisation of SARs. A number of regulated sector entities made this suggestion, and we have been considering it carefully, as part of the ongoing SARs reform programme. This programme has been set up to improve the regime as a whole, and it will actively consider this issue. As the noble Lord knows, the SARs regime is complex and changes to it would affect a significant number of sectors. It is therefore right that we consider the changes very carefully.

[Lord Rosser]

Is the noble Baroness satisfied that this matter has been dealt with as expeditiously as possible bearing in mind that the review was in 2015 and we now have a Bill in front of us to which the SARs regime is directly relevant? However, when we put forward proposals to try to make the regime more effective by prioritising matters, we were told that the Government were still considering the situation. The difficulties in finding space for legislation over the next couple of years have already been raised, so could the noble Baroness address that point and reflect further that we are four weeks away from Report? If the Government really put their mind to it, surely they could come forward with an amendment of their own on this issue.

[Baroness Williams of Trafford]

My Lords, I recognise that the issue was considered in 2015. It is now 2017. I totally take on board what the noble Lord says. This issue is complex but I will go back to the department to see what is in the art of the possible before Report. I cannot promise anything at this stage other than that I will try to expedite it if possible.

Prioritisation and the allocation of resources are operational matters. The NCA already has processes in place to take tasking decisions and allocate its resources. It is very unlikely that a SAR would be the only factor taken into account when deciding whether to open an investigation. Putting this matter into legislation could, if anything, impose additional restrictions on law enforcement agencies, which already have the type of flexibility to prioritise cases that the noble Lord’s amendment seeks to achieve.

I hope that he is at least partly satisfied with my explanation. I invite the noble Baroness, Lady Hamwee, to withdraw her amendment.

--- Later in debate ---

[Baroness Hamwee]

My Lords, this amendment would provide a new clause on anti-money laundering supervision, requiring supervisory authorities to publish certain information. When the Bill started its passage through this House, briefings to noble Lords from a number of organisations made similar points about supervision, including that there are too many supervisors, there is inconsistency, and there are conflicts of interest since enforcement does not lie very comfortably with promotional activity. The term “a dysfunctional system” also was used. There was also quite a lot of comment about lack of transparency and accountability in the supervisory system, a matter which formed part of Transparency International UK’s analysis of the weakness in the rules. Its report was entitled Don’t Look, Won’t Find.

I am aware of the Treasury’s work and the current call for information but it seemed to me that it was worth pausing particularly on transparency and accountability. As Transparency International explains, these are,

“fundamental components to an effective supervisory regime”.

TI also quotes the Macrory report:

“Transparency is something that the regulator must provide to external stakeholders, including both industry and the public, so they have an opportunity to be informed of their rights and responsibilities and of enforcement activity. However, it is also important for the regulator itself, to help ensure they use their sanctioning powers in a proportionate and risk based way”.


My Amendment 70 is based directly on Transparency International’s report in the light of the recent government announcements.

The supervisors do not necessarily seem comfortable with the system. The Solicitors Regulation Authority comments that the draft regulations—the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017—fall short of requiring the supervisors of anti-money laundering to be fully independent of any representative body. The authority is keen to see where the weaknesses in the system can be addressed ahead of the Financial Action Task Force review next year. It asks us to raise in the context of the Bill the issue that the underlying legal position is in need of clarification to ensure explicit recognition that supervisory bodies should be fully independent from representative ones. I dare say that the Minister, or at any rate her officials, will have seen that briefing. Having focused on transparency and accountability, I beg to move.

[Lord Rosser]

We have Amendment 73 in this group, which is on not dissimilar lines to the amendment moved by the noble Baroness, Lady Hamwee. Amendment 73 would require the Secretary of State to,

“lay before each House of Parliament an annual statement on the money laundering supervision regime and any plans the Government has to amend it”.

At Second Reading, we raised questions about the effectiveness or otherwise of our anti-money laundering system in the light of the billions of pounds in corrupt money that comes into this country each year. Reference has already been made to that point in our earlier debate on the London property market. According to the National Crime Agency, the figure could be as high as £90 billion. The Government’s impact assessment says that this country is unusually exposed to the risks of international money laundering, which is made even more serious by the reality that money laundering is also a key enabler of serious and organised crime, including terrorist financing. The social and economic costs of this are estimated in the Government’s impact assessment at some £24 billion per year. However, despite this far from satisfactory state of affairs, there are, as I understand it, some 27 supervisory bodies in the relevant sectors, which must surely lead to a fragmented approach in the identification and mitigation of risks, and in the approach to enforcement.

--- Later in debate ---

[Baroness Williams of Trafford]

That is correct.

I now turn to Amendment 70, moved by the noble Baroness, Lady Hamwee, and Amendment 73 in the name of the noble Lord, Lord Rosser. I can update the Committee on the significant action that the Government are taking to improve the effectiveness of anti-money laundering regulation by strengthening the obligations on all supervisors through the new Money Laundering Regulations 2017. The Treasury published a consultation on these regulations shortly after Second Reading and it is open until 12 April.

The Government set out in a Treasury publication earlier this month their proposals for the new office for professional body anti-money laundering supervision. However, it would not be right for the Government simply to legislate without proper public consultation on the detail of this proposal, and I hope the noble Lord will recognise that that is the appropriate way forward.

We have also recognised the need for more co-ordination between regulators and supervisors of the regulated sector in relation to tackling money laundering. The new office for professional body anti-money laundering supervision will therefore work with professional bodies to help, and ensure, compliance with the regulations. The office will be hosted by the FCA and will liaise with other bodies across the regime to discuss and share best practice to help ensure consistent high standards across supervisors—especially where statutory and professional body anti-money laundering supervisors monitor the same sectors—and to strengthen collaboration between professional body anti-money laundering supervisors, statutory supervisors and law enforcement agencies.

The Government will consult on the draft regulations that will underpin the office over the summer, and they will be finalised and laid before Parliament in the autumn. The Government expect the office to be fully operational by the start of 2018.

The new arrangements will also support the enforcement capability of the supervisors. The supervisors can take a range of actions in relation to failings identified in the areas they supervise. Professional bodies have sanctions specific to their supervisory population—for example, the ability to expel firms from membership. The removal of professional accreditation in this way can incentivise compliance.

HMRC and the FCA have powers under the regulations to require information, enter and inspect premises, and administer monetary civil penalties to their supervised population. The UK is leading the way in improving transparency and accountability in anti-money laundering supervision by publishing an annual report on money laundering supervision on GOV.UK.

The Treasury’s annual report, which is now in its fifth year, sets out how the UK’s supervisors are contributing to the fight against money laundering and terrorist financing. The most recent report shows that supervisors are increasingly focusing on educating businesses on how to meet their anti-money laundering obligations, and ensuring that systems and controls are effective and proportionate to the risks. The actions that supervisors are reporting help to ensure that the UK’s financial system is a hostile environment for illicit finance.

The report shows the positive collaboration between the Treasury and the supervisory authorities, which include the FCA, HMRC, the Gambling Commission and the professional bodies. As set out in the Government’s response to the review of the supervisory regime, the annual report will be strengthened with a new requirement for supervisors to provide relevant information to inform the annual report. This will be expanded to include two new questions on enforcement activity.

I hope that noble Lords will recognise and commend the considerable government activity in relation to the anti-money laundering regime. On that basis, I hope that the noble Baroness will withdraw her amendment.

[Lord Rosser]

For clarification, the Minister referred to the Government’s intention to create a new office for professional body AML supervision, hosted by the FCA. If my memory serves me right, she said that it would be in existence in early 2018. That of course is still out for consultation, is it not? That is the document where responses were called for by 26 April. It may be that all the responses about the proposed body were negative, in which case presumably the Government may wish to think again. Does that mean that setting up this new office will not require any legislation and that there will not be a need for legislation, for example, to define its powers and responsibilities?

[Baroness Williams of Trafford]

It may be helpful to the noble Lord if I reiterate the point that I made. The Treasury published the outcome of the review on 22 March and is now conducting further consultation on the creation of the new body, which will be overseen by the FCA and will be up and running by the start of 2018.

On his question of whether legislation—secondary or otherwise—will be required, perhaps I may write to him. I think that it will be secondary legislation but I cannot be certain.

[Lord Rosser]

Is the Minister saying that setting up a new body that will have powers over other bodies can be done through secondary legislation—by a statutory instrument?

[Baroness Williams of Trafford]

I do not know, which is why I will write to the noble Lord, if he is happy with that.

Criminal Finances Bill

Lord Rosser Excerpts

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

Moved by

[Lord Rosser]

109: After Clause 20, insert the following new Clause—
“Report to Parliament on impact on enforcement authorities
(1) The Secretary of State must, within 18 months of the day on which this Act is passed, lay before both Houses of Parliament a report on the implementation of this Act and the impact on enforcement authorities.(2) The report must include an assessment of—(a) what, if any, additional resources are required by enforcement authorities in order to carry out their functions and powers under this Act;(b) what, if any, additional resources have been provided to enforcement authorities to support them in carrying out their functions and powers under this Act;(c) what additional training has been provided by enforcement authorities to staff members in order to allow them to effectively carry out their functions and powers under this Act;(d) to what extent enforcement authorities have used the powers provided under this Act.(3) In this section “enforcement authorities’’ means—(a) the National Crime Agency;(b) Her Majesty’s Revenue and Customs;(c) the Financial Conduct Authority;(d) the Serious Fraud Office; and(e) the Director of Public Prosecutions (in relation to England and Wales) or the Director of Public Prosecutions for Northern Ireland (in relation to Northern Ireland).”

--- Later in debate ---

[Lord Rosser (Lab)]

This amendment requires the Secretary of State, within 18 months of the day on which this Bill is passed, to lay before both Houses of Parliament a report on the implementation of the Act and its impact on enforcement authorities.

At Second Reading, it was pointed out that, if the measures provided for in the Bill are to be made to bite, the necessary resources will need to be provided. New offences and powers are created in the Bill, together with extensions of existing powers, which will require further resources, both financial and staff.

In response at Second Reading, the Government referred to the sums of money that have been invested in law enforcement agencies since 2006 and under the asset recovery incentivisation scheme over the past three years. I am not sure that that response really addressed the potential concern that had been expressed about the future and the implications for resources if the changes in the Bill in respect of new offences, powers and enhanced powers were to be effectively introduced and applied.

One’s concerns were not helped by the response from the Government to the question asked at Second Reading about the few unexplained wealth orders that were predicted—20 per year. The response was to the effect that it was a conservative estimate—presumably in more senses than one—as opposed to being a definitive indication of how often the unexplained wealth orders would be used. Has that been the basis on which other new and enhanced powers in the Bill have been assessed by the Government, and has it been done in this way to try to dampen down calls for additional resources in the quest to save money?

The Government said at Second Reading that they were already engaging with law enforcement authorities and prosecutors to encourage the use of all the new powers being introduced by the Bill. However, they went on to say that ultimately it would be for the enforcement authorities, which are operationally independent, to decide when and how often to use the new powers in the Bill. That may be true but the extent to, and thoroughness with which, enforcement authorities use the new and enhanced powers in the Bill must ultimately be determined by the level of resources they are given to carry out their new and enhanced role and responsibilities. The issue of the resources that are going to be made available to implement the provisions in the Bill, and about which we have heard very little, is a matter for government.

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[Baroness Williams of Trafford]

My Lords, I thank the noble Lord, Lord Rosser, and my noble friend Lord Hodgson of Astley Abbotts for speaking to the amendment. As with all powers introduced in legislation, it is crucial that the necessary resources are available to law enforcement and prosecution agencies so that they are used effectively. As he mentioned, ARIS is essential to this work. Under this scheme, half of all assets recovered go back to the law enforcement and prosecution agencies involved. Put simply, the more they recover, the more they get back. I am pleased to say that £764 million has been raised since 2006, and over £257 million in the last three years has been invested in law enforcement agencies under this scheme. The new powers will ensure that there are even more efficient ways of recovering assets and that they will be cheaper. Indeed, senior law enforcement officers gave evidence to the Commons Public Bill Committee that the powers will help agencies achieve more with the resources that they have. We have not downplayed the estimates in the impact assessment. These are provided subject to all the standard guidance based on input from law enforcement, the banks and others.

In addition, the Home Office share of ARIS is invested in front-line capabilities, including the regional organised crime units, which have received over £100 million in direct funding from the Home Office since 2013-14. Further to this, £5 million has been set aside from ARIS every year until the end of this Parliament to fund key national asset recovery capabilities, and we are fulfilling a manifesto commitment to return a greater percentage of recovered assets back to policing by investing all the Home Office share of the scheme’s money—above a certain baseline—in the multiagency regional asset recovery teams.

All the agencies listed in this amendment already report on their resources and results through departmental annual accounts and reports. As my noble friend said, this is about what they have achieved. They are subject to examination by the National Audit Office and Public Accounts Committee. The Criminal Finances Board, which is co-chaired by the Security Minister and the Economic Secretary to the Treasury, closely monitors resourcing, performance and support mechanisms such as training, to ensure that agencies are achieving results with the powers that Parliament imparts to them.

Finally, the Government have protected the NCA’s budget. In addition, new capital investment of over £200 million will be available over the period 2016 to 2020, to transform the NCA into a world-leading law enforcement agency, with new digital and investigative capabilities to tackle cybercrime, child exploitation and the distribution of criminal finances. The noble Lord, Lord Rosser, asked how many UWOs would be used and why so few were predicted. I said before—and the noble Lord said—that it was a conservative estimate, but we will encourage their use from day one. We are already actively engaging with law enforcement and prosecutors to encourage the use of all the new powers being introduced by the Bill. I hope with those words that the noble Lord is satisfied with my response. I know that we will keep an eye on this in the future but, for now, I hope that he will feel happy to withdraw his amendment.

[Lord Rosser]

I thank the Minister for her response and the noble Lord, Lord Hodgson of Astley Abbotts, for his contribution. The noble Lord’s main criticism of the amendment—not the only one—was that it did not provide for the authorities mentioned to say what they had achieved. I would have thought it was for the Government to say what they expected the authorities concerned to achieve in the light of the provisions of the Bill and the new offences and enhanced powers that they were giving the agencies. As yet, however, I have not heard anything from the Government about what they expect the agencies to achieve as a result of the Bill. There is some difficulty in requiring the agencies to report when the Government have not set them any targets that they are meant to attain. I do not know whether it is the Government’s intention to tell noble Lords at some stage what they think the agencies should be able to achieve in respect, for example, of a reduction in money laundering or the number of people who are arrested as a result of carrying it out. What do they expect the agencies to achieve in relation to the additional powers in the Bill? I do not know if this is something on which the Minister is prepared to write and tell me. What are the goals that the Government think these additional powers, and the resources that they say they are going to put in, will be achieved by the agencies? That is what is missing.

We have been having debates about the new powers and the noble Baroness has reminded us of the amount of money that has been provided so far, but what we are not getting is what the Government think the Bill will achieve to improve the situation. Is the Minister, either now or at some stage in the future, able to give me any idea of what the Government are expecting as a result of the new and enhanced powers in the Bill?

[Baroness Williams of Trafford]

My Lords, as the noble Lord will know, the Government have not been fixated on targets, but we most certainly will have expectations of what can be achieved and they will be laid out in due course.

[Lord Rosser]

How will they be laid out? Are they to be set out in regulations or will the Government be making a Statement?

[Baroness Williams of Trafford]

I would guess that they will be laid out in regulations and they will be revealed in due course.

[Lord Rosser]

We await the regulations with interest.

[Baroness Williams of Trafford]

Perhaps I may intervene once more. I will confirm in writing to the noble Lord that they will be laid out in regulations. I do not want to make misleading statements at the Dispatch Box, but I can let him know in due course.

[Lord Rosser]

I would be happy for the noble Baroness to write to me, but whether the letter will set out what she has just said remains to be seen. However, I am happy for her to write to me on this issue; it would be very helpful. With that, I beg leave to withdraw the amendment.

Amendment 109 withdrawn.

Criminal Finances Bill

Lord Rosser Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Monday 3rd April 2017 Lords Chamber

Fraud and money laundering cost billions, fund terror and misery and make us a low-justice country for big business—and could even be used against us in seeking trade agreements. There is urgency. I beg to move.

[Lord Rosser (Lab)]

My Lords, I will speak to my Amendment 166, which is also in this group. It would require the Secretary of State to issue a public consultation on new criminal offences for corporate criminal liability and for economic crime within six months of the day on which the Bill becomes an Act, and for the Secretary of State then to bring forward legislative proposals in response to the consultation within 12 months of the day on which the Bill becomes an Act.

The Bill makes it a corporate offence to fail to prevent tax evasion and adopts a similar approach to prosecution of bribery offences. However, as the noble Baroness, Lady Bowles of Berkhamsted, said, gaps remain in the law as regards the practical possibility of prosecuting companies for important economic crimes such as fraud, false accounting and money laundering, let alone the severe harms caused to individuals, including those overseas.

As the noble Baroness, Lady Bowles of Berkhamsted, again indicated, the issue was raised at Second Reading, when the Government said that,

“it would be wrong to rush into legislation in this area”,

of corporate liability for economic crime, and that there was,

“a need to establish whether changes to the law are justified”.

The Government said that they launched a public call for evidence—the closing date for which has now passed—and that if the responses,

“justify changes to the law, a consultation on a firm proposal would follow”.

Accordingly, the Government declined to comment on a timetable for reform,

“should that be the way forward”.—[Official Report, 9/3/17; col. 1518.]

The Business & Human Rights Resource Centre recorded just over 300 allegations of human rights abuses made against 127 UK-linked companies between 2004 and 2014. Although there is clear evidence that some companies were potentially serial offenders, it seems that there have been no corporate criminal prosecutions. Nearly half the allegations were made against extractive companies.

If there is a consultation following the call for evidence—and that may well be a big if—will the Government also consult on the need, or otherwise, to change the law on corporate criminal liability on human rights violations as well as economic crime? When an individual injures or kills another person, a criminal prosecution is initiated, but when a company is involved in causing similar harm—not least overseas—the ability to prosecute companies successfully is much reduced to the point of it being almost a deterrent to proceeding at all.

Overall, the corporate criminal law needs to provide that companies can be held liable for committing offences and not just for omitting to prevent them. No UK financial institution has faced criminal charges as a result of the 2008 financial crisis, and there appear to have been some recent serious issues which have resulted in no prosecution against companies as opposed to an ability to resolve the matter through financial payment.

There is also the issue that it appears from a relatively recent case that, under corporate liability laws, it is not illegal for companies to mislead their auditors. As has been said, current laws seriously disadvantage small and medium-sized businesses compared with larger businesses. SMEs, where directors are more involved, are much more easily prosecuted under the existing corporate liability regime, since current UK corporate liability laws rely on a “directing mind” test that requires prosecutors to prove that senior board-level executives intended the misconduct to occur. The Crown Prosecution Service, for example, stated that because of corporate liability laws it could not mount a successful prosecution against the companies involved in the phone-hacking scandal.

When do the Government intend to commit themselves to address this issue of the deficiencies within the current corporate criminal liability laws? They could do so today by accepting one of the amendments in this group. They could do so today by accepting my amendment, with its timetable for a public consultation and then legislation. If that is more than the Government are prepared to do, they could today at least announce that there will definitely be a public consultation on a firm proposal on the issue, following the call for evidence, and say when that public consultation is likely to commence.

[Lord Leigh of Hurley (Con)]

My Lords, I declare my interests, principally as a member of the Chartered Institute of Taxation. I wish to speak particularly on Amendment 161. The noble Baroness, Lady Bowles of Berkhamsted, is right that the mood of the public has changed dramatically and significantly against those who practise tax evasion—and to some extent tax avoidance, which I think she mentioned, although we are focusing here on tax evasion—so having such a clause in the Bill is very welcome.

Turning my mind back to 20 or 30 years ago when I was a tax practitioner, in many respects it would have been remarkable to think that this clause might appear in a Bill. Indeed, many of your Lordships may have noticed in Sunday’s and today’s national papers a two-page advertisement by a large Swiss bank protesting that it does not in any way condone tax evasion. It is quite extraordinary to see that—and most welcome—and it has no doubt come about in part because of the pressure to change public opinion brought to bear by the Government and Members of this House.

However, in respect of Amendment 161, I agree that the damage caused by economic crime is very serious. I welcome the Government’s consultation on corporate criminal liability for economic crime, but this is an extremely complex legal area that could significantly impact on the UK’s financial sector, in which I work, and in particular on the UK’s SME financial sector, which has a lot on its plate at the moment. Therefore, I hope that the Government will bring forward a consultation on possible options for reform following the conclusion of the call for evidence, which I think has just ended or will close shortly. We should wait until that is completed before a decision is made on introducing new legislation.

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[The Minister of State, Home Office (Baroness Williams of Trafford) (Con)]

My Lords, I am very pleased to be able to return today to our debate in Committee, beginning with the very important issue of corporate criminal liability. Through this Bill the Government are building on the efforts of the last Labour Government, when they created the Bribery Act, by creating new corporate offences of failure to prevent the facilitation of tax evasion. These are significant proposals and I look forward to debating them further shortly. The amendments in this group relate to corporate criminal liability for other types of economic crime—that is, other than bribery and the facilitation of tax evasion. This issue has, of course, arisen a number of times in both Houses during the passage of the Bill, and these amendments have allowed us to have an insightful and constructive debate.

As noble Lords have said, the damage caused by economic crime perpetrated on behalf of or in the name of companies—to individuals, businesses, the wider economy and the reputation of the United Kingdom as a place to do business—is a very serious matter. As this House will be aware, the Bribery Act is widely respected as both a sound enforcement tool and a measure that incentivises bribery prevention as part of good corporate governance. As I have said, this Bill makes similar provision in regard to the facilitation of tax evasion. That provision has followed a process of full and lengthy public consultation, as did the implementation of the Bribery Act. As my noble friend Lord Leigh alluded to, these are very complex legal and policy issues with the potential for significant impact on companies operating in the UK.

I hope noble Lords will agree that this level of detailed consideration of both the existing legal framework and any proposals to extend it was crucial. That is why the Government announced, at the time of last year’s London Anti-Corruption Summit, that we would consult on the creation of new forms of criminal liability. The Government’s public call for evidence on corporate criminal liability for economic crime was published on 13 January. It openly requested evidence for and against the case for reform, and sought views on a number of possible options, such as the Bribery Act’s “failure to prevent” model, as an alternative to the current common law rules. The consultation closed only last week, on Friday 31 March. The Ministry of Justice is now assessing the responses received, but, as noble Lords will appreciate, it is too early to confirm the outcome. Should the responses received justify changes to the law, the Government would then consult on a firm proposal, as the noble Lord, Lord Rosser, articulated. I hope that reassures him that we are continuing to explore this issue as his amendment proposes. I trust noble Lords will agree that it would be wrong to rush into legislation, or to commit to doing so in the future, prior to giving the matter the appropriate consideration, as my noble friend Lord Hodgson said.

Amendment 161 provides for the novel approach that we could add additional offences to the legislation by regulations. I commend the noble Baroness on her ingenuity—I was promised she would show it—but, as I have said, these are complex issues with potentially significant implications for companies across the country. The Government do not, therefore, believe that it would be appropriate to extend the failure to prevent offences via secondary legislation, which would not allow for the appropriate level of parliamentary scrutiny of proposals such as this.

The noble Baroness, Lady Kramer, asked about the timing of the failure to prevent measures and why the Government do not act now. She said we cannot afford to delay and made a point about the upcoming Brexit legislation. I remind noble Lords that the Bribery Act offence has been on the statute book for a number of years, allowing us to assess its effectiveness. We are now legislating on tax evasion and already looking closely and openly at the question of extending it to wider economic crimes. The Government are not delaying, we are acting—and we are doing so in a sensible and considered way.

The noble Baroness, Lady Bowles of Berkhamsted, asked about the standard of proof for the failure to prevent economic crime. Her Amendment 163 allows for the defence of reasonable procedures to be satisfied by the civil standard—that is, the balance of probabilities. I can confirm, as she wanted, that it mirrors the approach in the Government’s proposed offence of corporate failure to prevent the facilitation of tax evasion.

The noble Lord, Lord Rosser, asked whether HMG will legislate to create corporate liability for failure to prevent serious harm or human rights abuse. I wrote to the noble Lord about this—it is obviously seared in his brain or, probably, was passed straight to his outbox. All businesses are expected to comply with the legislation that comes under the jurisdiction of the UK, including that which relates to human rights. While the Government have no ability to regulate UK businesses operating in overseas jurisdictions, we encourage them to honour the principles of internationally recognised human rights wherever they operate. More broadly, in 2013, we were the first country in the world to produce a national action plan in response to the United Nations guiding principles on business and human rights.

Large UK-domiciled businesses must also comply with laws that require them to report certain human rights issues, including the Companies Act and our world-leading Modern Slavery Act, which requires them to produce annual statements on what they have done to ensure that such issues do not occur in their business and supply chains.

I hope I have fully answered noble Lords’ questions and that the noble Baroness, Lady Bowles, will feel free to withdraw the amendment.

[Lord Rosser]

My Lords, I suspect I am on a mission that is not going to succeed, but it is unfortunate that a number of key decisions are likely not to be taken by the Government until this Bill becomes an Act. The Minister said that the closing date of the public call for evidence in relation to corporate criminal liability has just gone, but do the Government expect to give any indication before Report as to whether or not they will be moving to consultation on a firm proposal or, alternatively, are they likely to indicate before Third Reading whether they will be moving to consultation on a further proposal?

[Baroness Williams of Trafford]

Perhaps I may look into that and let the noble Lord know because I am reluctant to make sweeping promises at the Dispatch Box without knowing exactly what the timescales will be. I will let him know, certainly before Report, what the expected timescales are.

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[Lord Kirkhope of Harrogate (Con)]

My Lords, I rise as a signatory to Amendment 167, which I fully support.

As the noble Baroness, Lady Stern, highlighted, the recent “global laundromat” revelations make the need for our amendment rather pressing. As she said, it is exactly a year since the Panama papers were published and we have yet another leak. Must we wait for the next one before we follow through on the commitment made by our former Prime Minister David Cameron?

In general, of course, I add my support to the overall measures in the Bill. I know that they will go a long way to addressing corruption. I think that almost all Members of Parliament and Peers who have spoken have supported its measures, which should give the Government comfort. I also agree that the Government deserve enormous praise for the work they have done both here in the UK and internationally to tackle corruption, tax evasion and avoidance. Since David Cameron put the issue at the centre of his 2013 G8 summit, the Government have shown global leadership on an issue that blights so many countries. I very much support the progress made on this agenda, particularly at the anti-corruption summit in May last year, and the work taken forward by the OECD to tackle corporate tax avoidance. It is also worth noting that the former Prime Minister committed himself to seek to persuade the overseas territories to introduce transparency. That is the element I want to take forward today.

We all welcome the progress that has been made by the overseas territories. I am pleased that they have now agreed on the importance of having registers of beneficial ownership and I look forward to them being in place very soon. However, we must also recognise that the UK’s Crown dependencies have made real progress on this in recent years. My understanding is that they will all have central registers of beneficial ownership. While these will not be publicly accessible yet, central registers are much easier to interrogate, and crucially they will be much easier to make public in due course. This contrasts with some of the overseas territories that have not yet put in place central registers. The British Virgin Islands and Cayman Islands are, as I understand it, instead implementing—or wishing to implement—a complex system of linked registers. Is my noble friend the Minister content with this? Exactly how would linked registers work in such places? If, for instance, the UK Government made a request, would the Government in the jurisdiction concerned then make a separate request to whoever administers that bit of the register? Is the Minister satisfied that these linked registers will give the UK Government the ability to request information quickly, and does she have any concerns about how they will work, and whether they will make making requests for information easier or harder for the UK Government?

Also, to what extent and with what vigour are the UK Government making representations to the overseas territories about introducing central registers, so that they will be easier to make public when public registers become the new global standard? Naturally, such registers are a good first step for law enforcement agencies to be able to access information quickly. But the Government have already accepted that in order to properly tackle corruption, this information must be open to public scrutiny. Journalists, NGOs and the public must be able to examine the information, not just for us in the UK but also for those developing countries which suffer most from corruption and need access to the information the most. People in developing countries cannot currently benefit from the huge plethora of information-sharing agreements that we have around the world.

I admit that I am a bit confused by the Government’s recent comments on this issue. I was of the impression that it was our strong desire to see public registers of beneficial ownership. I need hardly remind noble Lords again of David Cameron calling them the “gold standard” at last year’s very welcome anti-corruption summit in London. Yet, I noted the Minister’s comments in the other place that we do not expect our overseas territories to have public registers until and unless they become a global standard. My concern is that if we wait for this to happen, it could be an excuse for no progress to be made for many years. Can the Minister assure me that this will not be the case and say how we can guarantee faster movement? I understand that in some cases, there has even been a failure to respond positively to UK inquiries on the subject.

We should remember that the historic relationship with the overseas territories has benefits for all of us. It is fair to ask those jurisdictions that while their economy and defence depend on the stability and integrity of the UK, they should also be expected to follow the same rules of business and investment that we follow here. This is not about destroying a country’s economic business model or anything like that. That is why this amendment has given an extra two years to make registers public. It is about working with them and making sure that they are following the rules in taking clean money and not gaining from illicit finance. The UK’s global reputation is also very much at stake.

I know that there are concerns in this House about interfering in the affairs of overseas territories, but I remind noble Lords that we have done this before, as the noble Baroness, Lady Stern, said, on issues of equivalent moral importance. I confess that if the Government now think that we should not insist on these registers being made public, why on earth did they suggest it in the first place, and why did Ministers expend so much energy over such a period of time on it? Surely we should not give up at this point. David Cameron was right. We should keep trying as hard as we can and should give all the assistance we possibly can to the overseas territory Governments to achieve this.

Finally, can the Minister give an assurance that all overseas territories will at least have central registers of beneficial ownership by that June deadline? If not, when will all of them have them? The complex arrangements for linked registers seem overly problematic and will make publishing registers more difficult in future. What specific progress has been made in persuading the overseas territories to adopt those public registers? Simply saying that they will adopt them if other countries do it is not enough, and neither is not mentioning transparency while the private registers are being put in place.

As we look towards the UK’s role in a post-Brexit world, we must continue to lead in this important area of anti-corruption and transparency.

[Lord Rosser]

My Lords, my name is attached to Amendment 167, and I will also bring my Amendments 168 and 169 into play, not least because, unless I have misunderstood the situation, my noble friend Lord Eatwell will certainly wish to speak about one of my amendments in this group, if not all three of them.

I fully support Amendment 167 and will touch on some of the arguments in support of it when referring to Amendments 168 and 169. Amendment 169 would provide a duty on the Secretary of State to hold a consultation on the establishment of a publicly accessible register of the beneficial ownership of UK property by companies registered outside the United Kingdom within six months of the commencement of Section 1 of this legislation. It would also require the Secretary of State to bring forward legislative proposals to set up such a register within 12 months of the commencement of the section.

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I am sorry that I have taken so long. I hope that I have given as fulsome an explanation as noble Lords expected.

[Lord Rosser]

Perhaps I may ask the Minister to clarify a couple of points. First, in the light of what she has said and what has been said in this debate about competitive disadvantage, are the Government arguing that accepting Amendment 167 would place the overseas territories at a competitive disadvantage and that that is a key reason for the Government opposing the amendment? Secondly, in view of what the Government have said about wanting to work with the overseas territories in particular, is the reality that if either the overseas territories or the Crown dependencies do not agree to public registers of beneficial ownership, then that will not happen in relation to the overseas territories and Crown dependencies?

[Baroness Williams of Trafford]

Can the noble Lord repeat his last point?

[Lord Rosser]

Certainly. My question relates to what the Government have said about working with the overseas territories. Does that mean that if either the overseas territories or the Crown dependencies decline to agree to public registers of beneficial ownership, then that will not happen in relation to the overseas territories and Crown dependencies? Is that the Government’s position?

[Baroness Williams of Trafford]

My Lords, they are all committed to working towards the same end. It would be perverse if, having signed up to this arrangement, they then decided that they were not going to work with the Government. If they suddenly stalled on working with the Government, the Government would encourage them to do so in strong terms.

[Lord Rosser]

I did not realise they had signed up to public registers. Since the Government say they want to work with the overseas territories in particular, I am simply asking what would happen if either the overseas territories or Crown dependencies declined to agree to have public registers of beneficial ownership. Is the Government’s position that it would therefore not happen as far as the overseas territories and Crown dependencies are concerned?

[Baroness Williams of Trafford]

My Lords, the Government are fully committed to working with the Crown dependencies and overseas territories to achieve the ultimate end of public registers. I have now forgotten what the noble Lord asked me on Amendment 167.

[Lord Rosser]

I was simply saying that, in the light of what has been said in this debate by a number of noble Lords about the overseas territories being placed at a competitive disadvantage if the amendment was accepted, are the Government arguing that to accept Amendment 167 would place the overseas territories at a competitive disadvantage and that that is a key reason for them opposing the amendment? Or is the reason for the Government’s opposition to the amendment a dislike of what they would describe as imposing something on the overseas territories rather than working with them?

[Baroness Williams of Trafford]

The noble Lord’s latter suggestion is correct: we do not want to impose on the overseas territories but want to work consensually with them to achieve the aims that we seek. The overseas territories may face competitive disadvantage in the short term, but in the long term, the transparent and open way in which the territories intend to work, and we with them, will be to their advantage.

Criminal Finances Bill

Lord Rosser Excerpts

3rd reading (Hansard): House of Lords & Report stage (Hansard): House of Lords
Tuesday 25th April 2017 Lords Chamber

[Lord Rosser (Lab)]

First, I start by making a reference to the amendment in the name of the noble Lords, Lord Faulks and Lord Hodgson of Astley Abbotts. We certainly support the objectives of the amendment; it is a matter that we, as well as the two noble Lords, have raised in Committee, Unless I have misunderstood its intention, the amendment says that action should be taken within a certain period of time, which I think is described as within six months of the day on which the Bill is passed.

When the matter was discussed in Committee, the Minister referred to the fact that the Government had announced at the London anti-corruption summit last year that the Government’s intention was to create a register of overseas company beneficial ownership information where the company owned UK property. On behalf of the Government, the Minister also said that the Government intended to publish a call for evidence that would set out the policy proposals in full in the coming weeks, and would also introduce legislation to implement the register as soon as parliamentary time allowed.

As the noble Lord, Lord Faulks, said, the call for evidence on a register showing who owns and controls overseas legal entities that own UK property or participate in UK Government procurement has now been issued; it has come from the Department for Business, Energy and Industrial Strategy. But I imagine that the key concern, from what the noble Lord said, is about how long it may take for anything to happen with regard to setting up the register. I assume that the Minister will probably not be in a position to say very much about that. She could, of course, tell us what the intentions would have been of this Government—but they will not be around for very much longer. There will be a new Government after the election, and it will be an issue for that Government to decide what priority they are going to give to it.

Certainly, the omens do not necessarily seem very good, since there seems to be a general view that much of the legislative time that any Government have after the next election will be taken up with the issue of the implications of our withdrawal from Europe. I hope that the Minister will at least be able to say what the intentions would have been of this Government when she comes to respond to the specific point raised in the amendment spoken to by the noble Lord, Lord Faulks, about putting a time limit on when something is actually going to happen and not leaving it as something that may well drift well into the future.

I thank the Minister for moving government Amendment 8, which is clearly—at least in part—a response to Amendment 14, spoken to by the noble Baroness, Lady Stern, and to which my name is attached. I do not intend to reiterate the arguments and points made by the noble Baroness, with which I fully concur. I will concentrate my comments on government Amendment 8. As the noble Baroness, Lady Stern, has already said, this does not go as far as Amendment 14, since it contains no reference to the Government having to bring forward an Order in Council by the end of 2019—or, indeed, by any other time—and then taking all reasonable steps to ensure its implementation, requiring any overseas territories listed in Amendment 14 that have not introduced a publicly accessible register by the end of 2019 to do so. The government amendment provides for a report to be prepared before 1 July 2019 with an assessment of the effectiveness of the arrangements in place between the UK Government and the Government of any of the Channel Islands, the Isle of Man or any relevant overseas territory for the sharing of beneficial ownership information, having regard to such international standards as appear to the relevant Minister to be relevant.

Will the Minister give more information on the criteria against which the Government will assess the effectiveness of the current arrangements? I ask that in the context of what the view would have been of this Government on that issue. We are presumably all seeking to reduce the incidence of money laundering and corruption in particular, as well as the avoidance of paying tax, either by illegal means or through elaborate schemes that have not been cleared by the tax authorities. Will the level of such reduction achieved, or not achieved, in these areas be a key part of the assessment of the effectiveness of the arrangements in place, and will that be reported on in specific terms in the report to be placed before Parliament, to which reference is made in the government amendment?

Further, is it this Government’s intention that there should be a debate on the report in both Houses of Parliament in government time? What does the reference to,

“having regard to such international standards as appear to the relevant Minister to be relevant”,

actually mean? What do the Government consider the relevant international standards are at present, and how would those standards at the end of 2018 be determined? Are international standards internationally binding agreements, and is an international standard what is being achieved by the country with the best record of effectiveness and transparency in this area or by the one with the worst? I believe that the Minister said that the regard to international standards would be to the highest standards, but I would be grateful if she would confirm that when she responds.

A concern that has been expressed during the course of our discussions on this issue has been the potential or actual use of overseas territories and Crown dependencies by corrupt individuals, organisations or people in positions of real power in other countries to cream off money for themselves that was intended to be used for the benefit of a nation as a whole, or a significant part of a nation. An advantage of a publicly accessible register of beneficial ownership is that people and organisations in such countries would have access to such a register, which would help them identify where, and by whom, corruption and money laundering may be taking place and thus be better able to expose what is going on—the prospect of which would, in itself, also act as a potentially significant deterrent.

The Government’s amendment refers to an exchange of information between the Government of the UK and the Government of each relevant territory. How will this government amendment address the issue of the use of overseas territories and Crown dependencies for corruption and money laundering purposes by individuals, organisations or people in positions of real power in countries outside the United Kingdom? Does the amendment mean that the UK Government would seek information on beneficial ownership from a relevant Crown dependency or overseas territory in respect of individuals, organisations or people in positions of power in countries other than the United Kingdom? Where a credible request for such information comes from individuals, organisations or Governments within those other countries, is it the intention of this Government that the information on beneficial ownership obtained would be passed on unless there were overriding reasons why to do so would jeopardise life or security?

There is a basic difference between ourselves and the Government. The Government believe that a process of persuasion will lead to publicly accessible registers of beneficial ownership in line with what is to be UK practice—albeit I note the trenchant comments of the noble Lord, Lord Eatwell, about the lack of verification of the register in the UK. However, the Government do not want to set any time limit for when the voluntary approach has to have delivered, following which legislative action would be taken. We are not convinced that this approach will deliver the required outcome, particularly in light of the Government’s change of stance from the days of the previous Prime Minister, so the commitment now appears to be to expect overseas territories and Crown dependencies to follow suit only if publicly accessible registers of beneficial ownership become the international standard.

In other words, it appears as though the United Kingdom will not be taking the lead as far as the overseas territories and Crown dependencies are concerned. This Government expect them only to “follow suit”. Can the Minister at least indicate that, while there are no time limits in the government amendment within which the voluntary approach to the introduction of publicly accessible registers of beneficial ownership should be implemented, the Government will nevertheless not resile from taking legislative action to achieve that objective at some undefined point in the future if that were shown to be necessary?

We are now in a situation where this Parliament is about to end, pending the general election in June. As has been said, the Bill has received widespread support, in both this House and the Commons, where the areas of difference of view have been over what the Bill does not include rather than over what it does. In this situation, a judgment has to be made. The Government have been persuaded to move further with Amendment 8, providing for a report to Parliament to be prepared by the middle of 2019. This will enable the issue to be kept alive, and for the case for, and objective of, publicly accessible registers of beneficial ownership in both overseas territories and Crown dependencies to continue to be pursued. This is assuming that the Government of the day do not come to the conclusion themselves that firm action needs to be taken to deliver that objective in the light of the progress—or lack of it—being made by the voluntary approach and the effectiveness—or lack of it—of the arrangements in place for the sharing of beneficial ownership information. The amendment does represent progress, albeit not as much as we would have liked.

Nobody wants to see this Bill, or even significant parts of it, actually bite the dust. We do not believe that, an election having now been called, government MPs are going to do anything other than support their own Government’s Amendment 8 at the expense of Amendment 14—assuming that that amendment could still have been carried in this House in the light of the Government’s amendment. For the reasons I have given, we will support Amendment 8. It does not go as far as we would wish—that position is reflected in Amendment 14—but it does represent progress and we thank the Minister for her work in that regard.

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[Baroness Hamwee]

My Lords, when the noble Lord responds to the debate, will he tell the House whether he thinks “I haven’t a clue” is purported compliance.

[Lord Rosser]

In light of the last comment from the noble Lord, Lord Hodgson of Astley Abbotts, one can only hope that the points he made will not leave the Minister stumped. I hope it gets better.

I thank the noble Lord and the noble Lord, Lord Faulks, for tabling these amendments, since they enable me to raise a concern that I expressed in Committee about the Government’s intention to create a new office for professional body anti-money laundering supervision through a statutory instrument, without any apparent reference to such a body in the Bill that we are currently discussing—which is why the noble and learned Baroness, Lady Butler-Sloss, had to raise her question. Nobody has a clue what the Government intend because they have not chosen to put anything in the Bill to enable us to have a discussion about it. It was only in a government document issued around the time of the Bill that the Government declared their intention to set up this body.

A briefing that no doubt we have all received from the Solicitors Regulation Authority refers to the amendment from the noble Lord, Lord Hodgson of Astley Abbotts, as “proposing” the creation of an office for professional body anti-money laundering supervision—which could, perhaps wrongly, be interpreted as meaning that the Solicitors Regulation Authority was unaware that that is what the Government were already proposing, albeit keeping rather quiet about it as far as proper parliamentary scrutiny is concerned.

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[Lord Rosser]

I support what the noble Baroness, Lady Kramer, has said in setting out the case for her amendment. She has already made reference to recent further examples of serious concern over the approach to whistleblowing and whistleblowers—she referred specifically to the situation at Barclays Bank in the light of apparent actions by its chief executive in seeking to unmask a whistleblower. There are meant to be strict regulations in the financial services industry for encouraging and protecting whistleblowers, but it does not look as though they are very effective.

It is difficult to believe that the apparent attitude at the top of Barclays Bank is an exceptional one-off, as opposed to being indicative of a rather more widespread culture, to which the noble Baroness referred, in the financial services sector. The reality is that whistleblowers will not come forward if they think that the reaction of the people at the top will be to try to find out who they are rather than investigate the issue to which they have drawn attention. Neither will people come forward if they think that being identified as a whistleblower will jeopardise their future employment prospects in the financial services sector, which is alleged to be the reality in that sector in particular. I hope that the Government in response will be able to offer something more than claims that existing arrangements and procedures address the concerns raised by this amendment, when it is clear that it is not the case.

[Baroness Williams of Trafford]

My Lords, I thank the noble Baroness for bringing forward this amendment, which would introduce new regulations so that the FCA could undertake the administration of arrangements to facilitate whistleblowing in the financial sector.

The FCA is already a prescribed person in relation to the financial sector. It actively promotes the whistleblowing framework to employees and employers in the sector so that prospective whistleblowers know where to turn and firms have appropriate internal whistleblowing policies in place. Other prescribed persons related to financial services include the Bank of England, the Serious Fraud Office, the Financial Reporting Council and the Prudential Regulation Authority. To each of them, whistleblowers will be one of several sources of information and intelligence about potential malpractice in support of their regulatory activities.

The Government believe that the right body to investigate the concerns of a whistleblower is the body that regulates the issue about which concerns are raised—I know I have said that before. That body is in the best position to see the disclosure in context; for example, to judge the seriousness of the allegations, to make connections with any related investigations under way and to consider whether some regulatory action is appropriate to prevent occurrence.

The amendment that the noble Baroness proposes would introduce a power to award compensation to any worker voluntarily providing information on wrongdoing to organisations in the financial sector. As I set out in Committee, we do not think that money is the main motivator for genuine whistleblowers. I do not think the noble Baroness thinks so either, but she expressed views on how a financial incentive system to encourage whistleblowing works well in the US. I can advise noble Lords that the FCA and Prudential Regulation Authority whistleblowing management teams visited the US in late 2013. At the time, there was limited empirical evidence of incentives leading to an increase in the number or quality of disclosures received by regulators. Introducing incentives would require a complex and costly governance structure.

Incentives could also undermine effective internal whistleblowing mechanisms, a requirement the FCA introduced in September 2016 for banks, insurers and deposit takers. If the FCA were to incentivise whistleblowers to report to the regulator, it could discourage them from reporting internally within their firms. It would risk delivering mixed messages by encouraging firms to set up costly systems which it then undermines by incentivising whistleblowers to disclose directly to the FCA. However, the FCA is considering reviewing the case for incentivisation again in financial year 2017-18. I would be happy to provide an update following that review.

The amendment also contains a provision with regard to retaliatory action against whistleblowers. I reiterate and reassure noble Lords that such a provision is unnecessary. Workers who have evidence that their employer has provided a negative reference, have been unfairly dismissed or have otherwise suffered detriment for making a public interest disclosure already have a route to seek compensation against their employer through an employment tribunal.

Some concerns were raised that we have seen a decline in the number of whistleblowing cases for the second year in a row, from 1,340 in 2014-15, to 1,014 in 2015-16 and 900 in 2016-17. The FCA does not have a target for the numbers of whistleblowing reports. Its aim is simply to ensure that those who prefer to report to an independent body know about its role and that, if they need to take the often difficult step of reporting on an employer, they and their information will be treated sensitively and professionally. New rules came into force in September 2016 that require banks, building societies and insurers to have internal whistleblowing arrangements in place and to appoint an internal champion. We understand many firms began to implement these measures earlier than the commencement date, so we believe that this has affected the numbers going directly to the FCA. This is a positive message as many complaints are resolved earlier and without regulatory intervention, or lead to self-reports by firms themselves.

I want to address one point made by the noble Baroness: how we became aware of the issue regarding the investigation of the whistleblower’s identity by the CEO of Barclays and what action the FCA is taking. I recognise the concern that the noble Baroness raised about the Barclays example and I agree that behaviour of the kind she described does not serve the reputation of the industry nor the interests of the country. We must do all we can to prevent this type of behaviour. As the noble Baroness said, I realise that time is short but this issue is not going away. I ask whether she would be amenable to withdrawing her amendment, fully aware that I will hear more about the subject after the general election, should the outcome return a Conservative Government.

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[Baroness Williams of Trafford]

That the Bill be now read a third time.

[Lord Rosser]

I am not sure whether I should come in now but I just take this opportunity to thank the Minister and her ministerial colleagues in the Bill team for their willingness to meet and engage in what have been constructive and helpful discussions on not only provisions that are in the Bill but also provisions that are not, since it is with the latter that most differences of view or approach have centred. I also thank my Front-Bench colleagues for their hard work, not least—although he is not in his place—my noble friend Lord Kennedy of Southwark, who has not been exactly short of commitments in respect of other Bills as well. Finally, I thank the staff in our own office, not least Grace Wright, for their help and advice in navigating our way through this Bill.

[Baroness Hamwee]

My Lords, I echo those thanks to the Minister and the Bill team. As several people have said—most frequently the noble Lord, Lord Rosser —it is what is not in the Bill that has exercised us most. I can see an enormous amount of material for Private Members’ Bill in the next Session if we do not have government Bills that we can tack our—“demands” would be the wrong word—concerns on to. But the Minister has done an absolutely sterling job and I hope she gets five minutes to have a bit of a rest before she sets out campaigning. We have the luxury of knowing that we will be back to pursue these interests.