Sanctions and Anti-Money Laundering Bill [Lords]

Baroness Hodge of Barking Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 1st May 2018 Commons Chamber

[Helen Goodman]

I shall make a little more progress, because many Members want to speak.

I have linked new clause 14 to the fifth anti-money laundering directive, so that we would see a number of jurisdictions moving together. I am pleased that the Government have accepted the secrecy jurisdictions and that we have a role with respect to the overseas territories, but we need an effective path to bring change according to a timetable, within the current Parliament, and new clause 6 tabled by my right hon. Friend the Member for Barking would provide that. I will not press new clause 14 to a vote—I was not going to press it in any case—because I think we can reach an agreement on how to proceed on these matters.

[Dame Margaret Hodge (Barking) (Lab)]

Let me start by saying how grateful I am to all right hon. and hon. Members from all parties who support new clause 6. I am particularly grateful to the right hon. Member for Sutton Coldfield (Mr Mitchell), who has worked with me on this important issue and shown his particular skills and experience as a former Government Chief Whip.

The fact that the new clause commands such wide support throughout the House speaks volumes for what it says. Our proposal is right in principle and will be effective in practice. When it is passed—I am grateful to the Minister for conceding that the Government will not oppose it—this simple measure to require British overseas territories, our tax havens, to publish public registers of beneficial ownership will transform the landscape that allows tax avoiders, tax evaders, kleptocrats, criminals, gangs involved in organised crime, money launderers or those wanting to fund terrorism to operate. It will stop them exploiting our secret regime, hiding their toxic wealth and laundering money into the legitimate system, often for nefarious purposes.

Transparency is a powerful tool. With open registers, we will know who owns what and where and will be able to see where the money flows. We will thereby be better equipped to root out dirty money and deal with the related issues, and we will be better able to prevent others from using secretive jurisdictions to hide their ill-gotten gains.

[Sammy Wilson (East Antrim) (DUP)]

Does the right hon. Lady accept that open registers are not the panacea that she is describing? Indeed, the UK currently has open registers, but the name and address of an 85-year-old was used fraudulently to register 25,800 companies, without anyone discovering that fraud.

[Dame Margaret Hodge]

Open registers are an essential tool. They are necessary, but they are not sufficient. We also need a strong regulatory framework for the establishment of companies and strong policing arrangements to ensure that the regulations are implemented.

[Toby Perkins]

My right hon. Friend is absolutely right to pay tribute to Members from all parties, including the Conservative Members who bravely supported her even when the Government attempted to buy them off. On behalf of many Members from different parties, may I say how grateful we are for the tenacity that she has shown and the excellence with which she has pursued this campaign? It shows Parliament in a good light, and the measures that the House is set to approve will do a great deal of good.

[Dame Margaret Hodge]

I thank my hon. Friend for his kind words, but it really has been a team effort, with people from throughout the House and across all the political tribes.

New clause 6 would simply put into legislation proposals that David Cameron first articulated in 2013, when he spoke about ripping aside the “cloak of secrecy” and repeated the well-known mantra, “sunlight is the best disinfectant”. It would do no more and no less than fulfil the commitment made by the then Prime Minister five years ago.

Britain sits at the hub of the world’s largest network of secretive jurisdictions, and British tax havens are central to the movement of illicit moneys around the world. The secrecy under which they currently operate facilitates wrongdoing on an industrial scale. We have a weak regulatory regime, some of which was enacted by the previous Labour Government and needs reform, and sadly we have lax policing of our system. Couple that with the secrecy that prevails, and Britain and our overseas territories have increasingly become the most attractive destination for crooks, kleptocrats and corrupt individuals who engage in financial skulduggery. If we do not accept new clause 6, we will be in danger of sacrificing our traditional reputation as a reliable jurisdiction by our failure to challenge the secrecy.

[Liam Byrne]

I very much echo the sentiments of my hon. Friend the Member for Chesterfield (Toby Perkins). Does my right hon. Friend agree that it is impossible for us to get unexplained wealth orders to work unless we put in place registers not only for our countries and the overseas dependencies, but for the Crown dependencies, too?

[Dame Margaret Hodge]

I entirely concur with my right hon. Friend’s important point.

Let me take Members through the argument, because it is important that we understand what we are dealing with. First, on the scale of the problem we are tackling, the National Crime Agency reckons that around £90 billion a year is laundered through the UK. We know that developing countries lose three times as much in tax avoidance as they get in all the international aid that is available to them. Half the entities cited in the Panama papers were corporations registered in just one of our overseas territories: the British Virgin Islands. We know that, in the past 10 years, £68 billion has flowed out of Russia into our overseas territories. That is seven times more going to the overseas territories than has come to Britain. We know that there are 85,000 properties here in the UK that are owned by companies registered in our tax havens, half of which are in just two constituencies in London, and a sample survey done by Transparency International suggests that two out of five of those properties have Russian owners.

--- Later in debate ---

[Chris Bryant]

So far, we have been talking about public registers of beneficial ownership of companies. Does my right hon. Friend accept that this should also apply to beneficial ownership of trusts? It seems incomprehensible to me that we in this country should keep the trusts quite separate and quite hidden.

[Dame Margaret Hodge]

I completely concur with the point made so forcefully by my hon. Friend. No doubt that will be subject to further campaigns for a change in legislation over the coming period.

[John Penrose]

May I just follow up on that last point? It is not just trusts that are an essential and major omission here. It is also other kinds of assets, including real estate, mineral rights, debt and bonds. Unless we have complete and comprehensive registers in due course, my worry, and the worry of others, is that we may be over-claiming the benefits of transparency. It may be a necessary step, but it certainly does not cover all those other areas, which, arguably, are more important.

[Dame Margaret Hodge]

I welcome the contribution from our anti-corruption champion—the hon. Gentleman was appointed by the Government to fulfil that role. Indeed, he is right, but I hope that he will work with me and others in ensuring that we get better coverage for the public registers. However, that should in no way limit what we are attempting to achieve today, which will be a remarkable, important and really world-changing measure in the fight against corruption.

Our overseas territories are an integral part of Britain and they should be guided by the same values as us. Clamping down on corruption and toxic wealth is morally right. We will never be a truly global Britain on the back of stolen principles. Other Members have mentioned the White Paper that was published by the Government in 2012 on our relationship with our overseas territories. I simply refer Members to one phrase in that document:

“As a matter of constitutional law, the UK Parliament has unlimited power to legislate for the territories.”

The Government put that phrase pretty high up in that White Paper, so they are jealously guarding their powers in relation to the overseas territories. These are powers that we should always be reluctant to use, but they are also powers that Governments of both parties have employed in the past.

[Mr Cox]

In 2009, we gave the people of the Cayman Islands a solemn pledge in this House. We said, “We will not legislate for you in these areas of public responsibility without your consent.” By this measure today, we are breaking that promise to them, and it is beneath the dignity of this Parliament to do away with that promise and that pledge of good faith.

[Dame Margaret Hodge]

I simply draw the attention of the hon. and learned Gentleman to what his Government stated in 2012 in the White Paper. In that White Paper, they set out the fact that they were jealously guarding their right to legislate as and when that became appropriate. That is what his Government said in 2012.

[Mr Bob Seely (Isle of Wight) (Con)]

On a point of record, I believe that that was in our previous two manifestos, so I am not quite sure why we, on the Government Benches, are arguing on this point.

[Dame Margaret Hodge]

I thank the hon. Gentleman for his intervention.

For the sake of clarity, let me just say that, in the past, Conservatives have used this power when they legislated to ensure that capital punishment was abolished in all our overseas territories. A Labour Government used the power to ensure that we brought to an end discrimination on the grounds of sexuality in our overseas territories. One of us—I never remember which—used the power to intervene in the Turks and Caicos when there were problems with the administration of governance.

[Mr Kenneth Clarke (Rushcliffe) (Con)]

The right hon. Lady has conceded that we use with reluctance our undoubted power to exercise our jurisdiction in these territories and she has given the very important areas in which this House has already done that. Does she accept that, when such vast sums of dishonest money are being channelled through the territories, and when such obviously little progress is being made in many of them to deal with the matter, that is a situation that justifies our jurisdiction? As the Cayman Islands have a rather better record than some of the other British overseas territories—they do co-operate very closely with our law authorities, as the dependent territories do—it is open to their Government to consider the matter and act on their own accord given the steer that this House is giving to them.

[Dame Margaret Hodge]

I completely concur with the right hon. and learned Gentleman’s succinct remarks. People have said to me that the areas in which we have intervened—we do intervene with huge reluctance—are moral issues. I cannot think of another issue that is more moral than trying to intervene to prevent the traffic in corrupt money and illicit finance across the world.

[Adam Holloway (Gravesham) (Con)]

Does the right hon. Lady agree that corruption also costs lives and violates people’s human rights?

[Dame Margaret Hodge]

Absolutely. That is why the Magnitsky amendment, which we have just passed, is absolutely central to our proceedings and legislation on anti-money laundering.

[Hannah Bardell (Livingston) (SNP)]

I thank the right hon. Lady for giving way and I congratulate her on this excellent cross-party consensus. Is she not concerned that the hon. and learned Member for Torridge and West Devon (Mr Cox) seems more concerned about a promise made to the Cayman Islands than about the people of his own constituency and of the UK who are suffering as a result of corruption and money laundering? Does that not seem odd?

[Dame Margaret Hodge]

The truth is that the traffic in illicit money has an impact not just on people here in the UK—for example, through the acquisition of properties here—but worldwide. We see that in the losses in tax revenues, particularly to the poorest developing countries.

[Mr Cox]

Will the right hon. Lady give way?

[Dame Margaret Hodge]

I do not think that the hon. and learned Gentleman and I are going to agree. I am going to make some progress because I know that other Members wish to say certain things.

Openness and transparency do not stop the overseas territories from choosing to try to compete on tax. Although I would not approve, they can all set a corporation tax rate of zero. If they believe that that is a way of attracting financial services into their countries, they are free do so. We are asking for openness and not much more. I do agree with their argument that our registers need to be improved, but that is not an either/or; it is a both/and. We need both to improve our registers and ensure transparency in our overseas territories. To those who argue that the money will transfer to other tax havens, I say this: there may well be some leakage, but our tax havens play a disproportionately large role in the secret world that makes tax havens. If we lance that boil, it will be far easier for us to secure transparency elsewhere and much harder for other tax havens to sustain their business models.

Our campaign on transparency is not and has never been partisan. My party believes passionately that transparency is vital in the battle against financial crime and money laundering, but all Members of this House—from all the political tribes—share our determination to eliminate the wrongdoing that inevitably springs from the secrecy that pervades our tax havens. We cannot sit here and ignore the practices that allow Britain and our British overseas territories to provide safe havens for dirty money. If we can act to root out the corruption, we must do so. Our proposal is simple but powerful. It is easy to implement but lethal in its effectiveness. It is not just legally possible; it is morally vital. Britain and our overseas territories will not get rich on dirty money. We must act now and new clause 6 is an important move in doing so. I ask the House to support it.

[Mr Andrew Mitchell (Sutton Coldfield) (Con)]

I draw the attention of the House to my declaration in the Register of Members’ Financial Interests.

Before I speak about new clause 6, I would like to thank my right hon. Friend the Minister for Europe and the Americas on two other issues, the first of which is the Magnitsky amendment, for which many of us made the case on Second Reading, especially with regard to a degree of independent input from the House into the visa banning and sanctions regime. No doubt aided by the dreadful events in Salisbury, we have all now got to the same place, and I am grateful to him and his colleagues for ensuring that that is the case today.

The second issue—I know from our time together at the Department for International Development that my right hon. Friend understands this well—is about trying to ensure that no unnecessary restrictions will stop money flows for humanitarian charities and non-governmental organisations that often operate with great bravery in extremely difficult and contested areas. I understand that very good progress has been made on that, and I hope that he will keep an open mind if there are future difficulties in that regard.

I turn to new clause 6. It has been a tremendous pleasure to work with so many colleagues from both sides of the House, and I am grateful to many of my own colleagues for standing firm in the face of considerable pressure. It has been a very pleasurable experience to work closely with the right hon. Member for Barking (Dame Margaret Hodge) over the past six months, and the House has clearly benefited hugely from her distinguished period as Chair of the Public Accounts Committee. I think that this is the fourth time that we have been around this track, so it is now time for the House to assert its authority and nudge the Government into the right place. I am therefore delighted that the Government have indicated that they will accept new clause 6. I cannot forbear to point out that this is evidence that, in a hung Parliament, power passes from the Cabinet room to the Floor of the House of Commons. I was going to urge the House to support new clause 6 and, with the deepest respect, reject the Government’s starred amendments, which were tabled at the last moment yesterday, but in fact you did not select them, Mr Speaker.