Economic Crime and Corporate Transparency Bill (Eleventh sitting)

Baroness Hodge of Barking Excerpts

Committee stage
Tuesday 15th November 2022 Public Bill Committees

[Alison Thewliss (Glasgow Central) (SNP)]

New clause 25 is a probing amendment. I am minded to have a higher fee than £50, but what does the Minister think the baseline ought to be? Is it £100 or £50, or is he not prepared to put a number on the minimum price for registering a company? By way of contrast, a provisional driving licence fee application is £34, a passport is £75.50, and citizenship is £1,330 pounds. The Government are prepared to levy a whole range of fees for a whole range of privileges to do with living in this country; £12 to register a company seems miraculously low in comparison to all the other fees that the Government are willing to charge. In all those cases, I am sure that the Government would say that they are trying to recover costs, but they are not prepared to say how much it would cost to run Companies House in such a way that it can prevent economic crime, although that is pretty crucial to the whole endeavour.

I agree with everything the hon. Member for Aberavon has said, and I support the amendments from the right hon. Member for Barking, who is, I am sure, absolutely correct in everything she is about to say; I often agree with everything she says. I draw the Government’s attention again to the written evidence from UK Finance, which says:

“Clause 89 should be amended to ensure an initial increase in registration fees within six months of commencement, and to ensure annual reporting on planned investment, fee increases and scheduled implementation of new powers.”

If we set a minimum in legislation and do not update it, the problem is that often prices increase—mostly artificially, but also through factors such as the runaway inflation that we see in the UK at the moment. It is important to commit to an annual increase and annual reporting to ensure that fees keep pace with changes in a way that is considered reasonable.

Twelve pounds to register a company is really nothing in the grand scheme of things. I ask the Minister to consider how we can better ensure that the Companies House registration scheme forms part of the deterrent. Rather than allowing the bulk creation of lots of small companies at £12 a pop, we can ensure that people say, “This is a real company. There is a real financial commitment to it.” I do not think that any company will be deterred by a fee of £100 rather than £12.

[Dame Margaret Hodge (Barking) (Lab)]

On a point of order, Mr Robertson. Why is new clause 29 not included in this group?

[The Chair]

We are coming to it later.

[Dame Margaret Hodge]

Thank you. New clause 29 is on a similar area of debate, so there might be a bit of repetition when we come to it. The new clauses we are discussing speak for themselves. The Minister knows full well that it is really important that we get a grip on economic crime, and that means resourcing our enforcement agencies. He often says—and I completely agree—that it is pointless passing legislation if we do not enforce it, and that means funding agencies properly. If we look at the record on enforcement, it is pretty abysmal right across the piece.

That particularly goes for Companies House. The first conviction it achieved was against Kevin Brewer, a man in his mid-60s who formed a company and stated that Vince Cable, then Secretary of State for Business, Innovation and Skills, was a director and shareholder. He formed another company and put Baroness Neville-Rolfe and the right hon. Member for Braintree (James Cleverly), now Foreign Secretary, down as directors. He did it to demonstrate that Companies House never checks the data. When he put that information in the public domain, Companies House’s response was to sue him, and he had to pay a hefty fine. I am sure that the Minister will agree that this was a case of a genuine whistleblower trying to demonstrate that the system was not working and being wrongly pursued by the authorities. It should never have happened. That is the record of Companies House to date. We hope the reforms we are discussing and debating will improve the matter.

The current position is absurd. Everybody has used figures, but the figure that I like to use is the £12 it costs to form a company against the £1,220 it costs to get a visa for a skilled worker. Our perspective is just wrong. Everybody wants to make it easy to create new companies, but any business worth its salt would not find a greater sum an inhibiter to creating a new business. We just have this completely wrong, and that is what the Opposition are trying to put right in a way that does not burden the taxpayer.

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[Kevin Hollinrake]

It is £400 million over the spending period.

[Dame Margaret Hodge]

I know it is, but most of that comes from the economic crime levy. The £300 million comes from the economic crime levy; £100 million comes from the Government’s coffers. Correct me if I am wrong, but that is my understanding of it, so a third of that—£32 million or £33 million—is the Government’s annual contribution out of taxation. That is where I got the figure from. If I am wrong, I stand to be corrected, but that is my understanding.

Looking across the world, even the British Virgin Islands, our favourite secrecy jurisdiction, charges £1,000 to people who wish to create a company there; I cannot think that that has put anyone off using the BVI if they want a secrecy jurisdiction to support them. Australia charges £247; in the USA, in California, it is £150; in Delaware, another secrecy jurisdiction, it is £590; in New York, £570; Italy, £2,000; and Germany, £383. Even with our new clause, we would still be a cheap place in which to do business.

That is all I need to say at this point. We brought in new clause 40 because we think that should also be embedded. The Minister may tell me that it happens, but we think it should be embedded in legislation so that no future Government are ever tempted to take the money they earn from fees and put it towards other purposes. I hope that the Minister will accept that.

Again, correct me if I am wrong, but I have not seen anything in legislation that ensures that money raised in fees goes directly to enforcement. The Minister may want to do that, but his successors may not feel the same. The issue is never a high political priority so it is important that we get sustainability for the issue over time. That is the reason for the new clause.

[Liam Byrne (Birmingham, Hodge Hill) (Lab)]

It is a pleasure to speak with you in the Chair, Mr Robertson. It is fantastic for the Minister to be able to kick off today with this debate—surely there has never been a Minister as lucky as this one is in taking this Bill through Committee. Here we have an entire Opposition side of the Committee united in wanting to give the Minister the tools to do the job—the job for which he has argued for years and years in this House.

We want to send the Minister into the spending review, with his colleague the Chancellor of the Exchequer, with his hands bound. We want to ensure that he goes into those conversations with the law of the land changed, so that he is required to put up the fees for Companies House and actually has the money he needs to do the job. We know that that is not going to damage the business investment environment in this country. How? Because it could not get any worse than it is today.

The business investment level in this country over the last 12 years has now been the worst in the G7, so it is unlikely to get any worse if fees at Companies House are put up a little bit: it is already spectacularly bad. That underlines a simple point: that the level of economic crime in this country is now so infamous around the world that it could be damaging the level of business investment here. If we are known around the world—certainly, in Washington and in European capitals—as a global epicentre of dirty money, how does that help us become a great, global hub of business investment in years to come? Obviously, it does not. There is a competitive advantage to be had by becoming one of the great capitals of clean trade. Here we are, an Opposition united in wanting to help the Minister achieve that ambition and make sure that he has the resources to do the job.

In the public evidence sessions, we heard a clear set of arguments as to why these amendments need to be made. We heard that our country has now become the centre of the Russian laundromat, the Troika laundromat and the Azerbaijan laundromat. Indeed, the Security Minister and I were on the Foreign Affairs Committee together when we heard the most appalling evidence that some of the biggest money-laundering scandals have involved UK corporate structures more than anything else; I think I am right that about 40% of the billions laundered through Danske Bank came through UK corporate structures. That is truly a mark of shame, and why Bill Browder was absolutely right when said in evidence to this Committee that it is appalling—a matter of shame—that there has been only one prosecution for money-laundering around economic crime in this country. That truly is an appalling record of law enforcement.

Worse than that, we also heard from the Independent Reviewer of Terrorism Legislation that the situation is not simply bad news for economic crime, but a national security issue. When the Independent Reviewer of Terrorism Legislation tells the Committee that it is a matter of national security that we clean up the dark mass of economic crime in this country, we as Members of Parliament ought to listen and do something about it. Then we heard from a range of police specialists who said, first, that they thought the problem was getting much worse quite quickly, and secondly, that they did not have the resources they needed to enforce the law in this area.

All that evidence points in one direction: Companies House needs more money. When we took evidence from representatives of Companies House, we heard, startlingly, that they have not even discussed their budget with the Treasury for the next financial year, which is due to start in only a few months’ time. They mooted the idea of asking for cash for an extra 100 people, which the dogs in the street know is not going to be enough to enforce the measures in the Bill.

With all his native cunning and wit, the Minister needs to find a way to make the concessions the Opposition are asking for and to agree to the amendment, so that he can be the great, historic, legendary, reforming Minister who took the bull by the horns once and for all and helped make sure that this country is once more renowned around the world as a capital of clean trade—all because of the efforts, cunning and wisdom of the Minister in accepting the amendment before him today.

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[Dame Margaret Hodge]

Where is the parliamentary oversight of that?

[Kevin Hollinrake]

I am coming to that. The simple answer is that, when the fees are assessed, they are subject to regulations that are subject to parliamentary scrutiny. They are laid before the House before the fees are approved.

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[Dame Margaret Hodge]

Under negative or affirmative resolution?

[Kevin Hollinrake]

It is under the affirmative resolution. Different Members have suggested different figures, from £50 to £100. The right hon. Member for Barking said £1,000, as if to say, “We charge that in the BVI, therefore why not charge it in the UK?” That was the implication. What she said was that the people who look to use those jurisdictions to hide their money would be quite happy to pay £1,000, but that is exactly the point. On 99.9% of occasions, we are not just dealing with companies that indulge in nefarious activities; we are talking about not deterring bona fide businesses by setting the fee level at a fair level that does not deter business activity but does mean that Companies House has the right enforcement capability. That is what we want to get to, and we want to ensure that Companies House is able to do that.

I will touch on a couple of the points made about the SFO case last week, which I think we all welcome. It was not actually about resourcing; changing legislation made that possible. It was about corporate criminal liability and failure to prevent, which was successfully enforced in that case. That is a lesson for us all. The right hon. Member for Birmingham, Hodge Hill said that there has been only one case ever of a successful economic crime prosecution in the UK, and that Bill Browder had said that. Mr Browder did not say that; there have been many prosecutions of economic crime. To clarify, he was talking about it in connection to the money that came out of Russia.

Companies House is funded by the fees that it charges. If the Secretary of State considered changing those fees, there would of necessity be an appraisal of the resourcing needs of Companies House before that could take place. Fees can be charged only to cover the costs of the activities that they are intended to fund, including enforcement.

In order to arrive at an appropriate level of fee, my Department would have to work directly with Companies House to determine the funding requirements. Of course, there has to be Government oversight of that, because that is what we are elected to do. It is right that the Secretary of State would oversee that and then present it to Parliament for scrutiny. I agree that companies will justifiably want to understand how and why a particular level of fee has been arrived at, but the mechanism for that already exists. Fees will continue to be set by regulations, and the basis for any changes will be included in the accompanying analysis and explanatory memorandum that are published and presented to Parliament for scrutiny.

New clauses 25 and 33, introduced by the hon. Member for Glasgow Central and the right hon. Member for Barking, will shortly set out intentions on the level of fees to be charged. We do not intend to enshrine a level of fee in primary legislation, as doing so would restrict flexibility that may be required at a future date. We will commit to reviewing the fees on a regular basis to ensure that they provide the funding that Companies House needs.

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[Kevin Hollinrake]

I cannot imagine that in his many years as a Minister the right hon. Gentleman would have ever set out a date, but it will be shortly.

Finally, I turn to proposed new clause 45 and the points made by the right hon. Member for Barking. The Bill amends the fee-raising power within the Companies Act 2006, in order to enable costs associated with investigation and enforcement to be included when setting the level of fees. Companies House is able to retain incorporated fee income under current arrangements between the Treasury and Companies House, with the arrangement reviewed periodically. Legislation does not set the level of fees, but rather the level of fees is set by our regulations. I have to say to the right hon. Member for Barking that that is under the negative resolution procedure and therefore receives parliamentary scrutiny.

[Dame Margaret Hodge]

If it is under the negative resolution procedure, the Minister well knows that it will not receive the parliamentary scrutiny it deserves. The advantage of the way we framed our new clauses is that the fee would automatically rise with inflation rather than any other mechanism being needed. I would have thought the Minister would welcome that because it would ensure consistent resourcing.

[Kevin Hollinrake]

I do not accept that the two things—inflation and the resources needed by Companies House—necessarily correlate. Salaries do not rise automatically on that basis. As the right hon. Lady will know, Companies House reports annually and I am keen to ensure that there is the right level of scrutiny around this type of activity in terms of resourcing, as I have said to her before. Therefore I do not think an automatic inflationary increase is right, but I absolutely believe in parliamentary scrutiny and it is something that perhaps we can discuss.

[Dame Margaret Hodge]

Will the Minister therefore come back with an amendment that provides for affirmative resolution?

[Kevin Hollinrake]

That may be something that the right hon. Lady wants to table, but this is a significant commitment, both in terms of legislation and resourcing. I cannot imagine a situation where Companies House comes to the Secretary of State or to me, as I will have some oversight over it, and say, “We need this level of resourcing, which will impact on fees in this way,” and we respond by saying, “Actually, that is too much.” It depends what they say, of course, and it is right that we have scrutiny over that, but I am sure there will be many mechanisms the right hon. Lady can use to ensure we have that level right.

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[Dame Margaret Hodge]

I beg to move amendment 84, in clause 96, page 75, line 23, leave out “the Consolidated Fund” and insert

“a fund established by the Secretary of State for the purposes of tackling economic crime (see section 1132B)”.

This amendment requires penalties paid to the registrar to be paid into a fund for the purposes of tackling economic crime, rather than the consolidated fund.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 80, in clause 96, page 75, line 26, at end insert—

“1132B Fund for the purposes of tackling economic crime

(1) The Secretary of State must by regulations establish a fund for the purposes of tackling economic crime.

(2) Penalties received by the registrar under section 1132A must contribute to the fund.

(3) The regulations must specify the purposes for which the fund may be used including funding the activities of law enforcement agencies in tackling economic crime.

(a) funding the activities of law enforcement agencies in tackling economic crime;”

This amendment provides for a fund to be established for the purposes of tackling economic crime.

New clause 29—Report into the merits of a fund for tackling economic crime—

“(1) The Secretary of State must produce a report into the merits of a fund for tackling economic crime.

(2) The report must consider the case for penalties paid to the registrar to be ringfenced and used solely for the purposes of tackling economic crime.

(3) The report must be laid before Parliament within six months of this Act being passed.”

This new clause requires a report into the merits of a fund for tackling economic crime to be laid before Parliament.

[Dame Margaret Hodge]

Let us see where we get with this one—I will have another go. This is a vital amendment and I hope that the Government will listen carefully, because it would go a long way to ensuring that our enforcement capabilities, which we have been talking about all morning, really are fit for purpose and properly funded, without burdening the taxpayer—that is really important. If we tried to get competition between funding enforcement and funding other Government priorities, we would get nowhere in trying to ensure properly funded enforcement agencies.

The UK’s record is abysmal. I am going to put this on the record. The NCA has had five prosecutions each year for the last five years. That is hopeless. Money laundering prosecutions are down 35% over the last five years, at a time of exponential growth in money laundering. Less than 1% of the billions of pounds laundered annually is ever restored to us. And the number of criminal fraud cases by the SFO has halved in the last three years, although again I welcome the Glencore case, and I agree with the Minister that it shows the importance of introducing the offence of failure to prevent economic crime.

This is not a criticism of the agencies; it is a criticism of us and our failure to fund this work properly, which is what we are trying to do here. If we look at the totality of the UK’s expenditure on enforcement, we see that it is pathetic. It is 0.042% of GDP, whereas we know that the cost to the UK economy of economic crime is 14.5%, so there is an absurd relationship between our need to detect and prevent crime and our capability to do so. The FBI is 15 times larger than the NCA. We have already said that the police spend less than 1% on fraud, even though it represents 40% of crime—and that is just reported crime. And we have already said that the Americans have increased their budget, because they see this as a security threat, whereas we have reduced one.

I would welcome a comment from the Minister on this matter. My understanding is that the Government contribution to the fight against economic crime is £100 million. Out of the totality of £400 million in the budget, £300 million comes from the economic crime levy and only £100 million, over the comprehensive spending review period, comes from the taxpayer, so that is a mere £32 million or £33 million a year.

[Kevin Hollinrake]

If the right hon. Lady includes what we resource—the SFO, NCA and other enforcement agencies—it is not entirely clear, but we give about £825 million a year to our enforcement agencies.

[Dame Margaret Hodge]

The Minister knows that that is not necessarily to fight economic crime, but to fight other crimes. I was talking about the economic crime levy and those are the figures that I have.

It is irritating but understandable that the enforcement agencies prioritise other crimes in their day-to-day work; they do not prioritise economic crime. Despite the lack of funding, a lot of money is brought in by the enforcement agencies. Between 2018 and 2021, £3.9 billion was brought in in fines, confiscation and forfeiture. If all of that had been reinvested, all of the agencies would have had an extra £748 million to fight economic crime over that period. That would have had a fantastic impact on our ability to fight, detect and prevent economic crime.

It has been said in previous debates that money from fines cannot be hypothecated in that way, but I draw the Minister’s attention to three precedents that negate that claim. In June 2022, the Information Commissioner announced a new arrangement allowing the office to keep some of the proceeds of its civil penalties to fund its work with the big tech companies. In 2019, Ofwat kept the proceeds of penalties it had raised on Southern Water to pay out to and reimburse customers. The Gambling Commission can also require payments rather than penalties to compensate victims or make payments to charities. Those are three precedents on which the Minister could build the argument that it would be perfectly appropriate for the proceeds of fines to be kept in order to resource the fight against economic crime.

I also draw the Minister’s attention to a report on fraud published by the House of Lords last week, which states:

“To support the forthcoming fraud strategy”,

which is only a part of addressing economic crime,

“with adequate resources, the Government must commit to a long-term funding strategy with an increased offer for law enforcement agencies”—

and this is the important bit—

“focussed primarily on recycling revenue collected by law enforcement agencies back into law enforcement activity.”

The House of Lords has, therefore, come to the same conclusion as we have in tabling this amendment.

The UK’s asset recovery incentivisation scheme ensures that some assets are recycled. Most of them go to the Treasury. Of the £354 million recovered in 2021-22 from confiscation orders, forfeiture orders and civil recovery orders, only 40% went back into fighting crime. If we compare ourselves with the Americans, we will see that all of their forfeiture proceeds go back into enforcement.

Under our proposal, money would be ring-fenced and it would be a cross-Government fund to finance enforcement against fraud and dirty money. The Minister knows that if the UK is to tackle economic crime effectively, far greater ambition is needed on the scale of public investment, and establishing an economic crime fund is the radical response that we need.

[Stephen Kinnock]

I would like to add some comments to the eloquent remarks of my right hon. Friend the Member for Barking.

In clause 96, the Government provide a framework for the registrar, within parameters to be set out by the Secretary of State in regulations, to impose direct financial penalties for many offences without the need for lengthy and often costly court proceedings. That is surely a welcome development, at least in so far as it should enable the registrar to take swifter action to deal with any offences involving false representations made to Companies House.

Of course, we will need to look closely at the details of how that will work in practice. In that respect, it is right that the Bill provides for parliamentary scrutiny of the relevant regulations via the affirmative resolution procedure. If the Minister could give a rough indication of when we can expect those regulations to be published, I am sure that the Committee would be grateful.

One thing that clause 96 makes clear is that any civil penalties imposed by the registrar will not exceed £10,000. I would be grateful for an explanation from the Minister about how that figure was arrived at, and whether he is confident that the power to impose a fine at that level will act as a deterrent to would-be offenders. Given the profit margins involved in some of the most serious crimes, we must ensure that the threat of civil penalties is both real and sufficient in terms of its potential to take a meaningful chunk out of criminals’ assets. I am not entirely convinced that the threat of a £10,000 fine will be taken all that seriously by some of the intended targets, but if the Minister is aware of any convincing evidence to the contrary, I would be glad to hear it.

Even if we assume that the Government make rapid progress with the regulations enabling the registrar to impose civil penalties, we must then address—not for the first time in Committee—what happens to any funds raised from civil penalties. In amendments 84 and 80 and new clause 29, my right hon. Friend the Member for Barking has once again provided the Committee with an eminently reasonable and sensible answer to that question. Taken together, these amendments would require any fines paid to the registrar to be specifically designated and ring-fenced for the purposes of tackling economic crime.

The asset recovery incentivisation scheme, introduced by the previous Labour Government, provides a template of sorts, but given the scale of the threat that we now face from economic crime, we need to go further. It is surely a no-brainer that any fees paid to the registrar, together with penalties for those who break the rules, should be reinvested in broader cross-Government efforts to tackle economic crime. That would provide a stronger incentive for tougher enforcement and a more sustainable long-term funding model for Companies House and other enforcement bodies at no additional cost to the taxpayer. Opposition Front Benchers therefore fully support these amendments. We hope that Members on the Government Benches will do the same.

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[Dame Margaret Hodge]

I would like to press amendment 84 to a vote, but I do not intend to press amendment 80.

Question put, That the amendment be made.

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[Dame Margaret Hodge]

Will the Minister confirm whether the action of Companies House under this clause should be part of the annual report to Parliament?

[Kevin Hollinrake]

In terms of the financial penalties imposed?

[Dame Margaret Hodge]

Yes.

[Kevin Hollinrake]

I think that is a very sensible suggestion and I am happy to take that away. I would like to see a number of things in that report that are currently not there. If we look at the most recent report, we see a number of references to this particular legislation. It welcomes this legislation, and I think it is important that the body reports publicly and to Parliament, as would be the case with the measures that the right hon. Lady mentions.

Similarly, there may be reason to review the appropriate financial penalty amount, and interest or late payment amount, to deter misconduct against the register as effectively as possible. The regulations will be subject to the affirmative procedure, which will provide the appropriate amount of parliamentary scrutiny of any proposed further changes.

Clause 97 will strengthen the link between civil sanctions and director disqualification by amending section 3 of the Company Directors Disqualification Act 1986, which states that the court may make

“a disqualification order against a person where it appears to it that he has been persistently in default in relation to provisions of the companies legislation”,

and that

“the fact that a person has been persistently in default…may…be conclusively proved by showing that”,

in the previous five years,

“he has been adjudged guilty…of three or more defaults”.

Under proposed new section 1132A of the Companies Act 2006, the registrar will be able to impose a financial penalty on a person, if she is satisfied beyond reasonable doubt that the person has engaged in conduct amounting to an offence.

Section 3 of the CDDA will be amended so that the imposition of a financial penalty can count as a default. That will provide a greater deterrent to those who seek to circumvent legislative requirements. Not only will individuals face the risk of a financial penalty but the risk of being disqualified will become more likely when a financial penalty has been imposed. Clause 98 mirrors the provisions in clause 97 so that they apply in Northern Ireland, amending the current provision in article 6 of the Company Directors Disqualification (Northern Ireland) Order 2002.

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[Kevin Hollinrake]

Clause 100 and schedule 4 significantly increase the amount of information that must be provided about a new limited partnership and its prospective partners, and, subsequently, when they make their annual confirmation statements or deliver notifications that report changes. Schedule 4 sets out what information must be provided, including date of birth, nationality and the usual residential address when the partner is an individual.

Clause 101 is intended to ensure that existing limited partnerships registered prior to the commencement of the Bill are equally required to deliver the relevant information set out in schedule 4. The general partners of limited partnerships will be required to provide the registrar with the required information of each person who is a partner in the limited partnership, or who became a partner on registration within a six-month transitional period.

Failure to comply with those requirements may give the registrar reasonable cause to consider that the limited partnership is no longer operating and is dissolved. That will mean that the registrar may exercise her confirmation of dissolution power, which we will debate later on. If the registrar goes through the confirmation of dissolution process, she may deregister the dissolved firm.

Clause 102 provides that the Secretary of State may, by regulations, designate a standard system for classifying the business of a limited partnership. That will make it easier to collate and sort information about a limited partnership’s activities and it aligns with the position for companies. I thank the right hon. Member for Barking for her new clause 56. Perhaps she should speak about that now, and I will respond to her points.

[Dame Margaret Hodge]

I am grateful to the Minister and I agree with him that what we are all attempting to do here is trying to clean up the act in the UK. Some of our amendments are pragmatic, and I just hope that the Minister will listen and take them on board.

I want to go back to first principles, from when I started working in this area almost a decade ago. It was absolutely clear that transparency is a powerful tool in preventing and detecting economic crime. Sunshine is the best disinfectant. David Cameron used that phrase when he introduced the register of beneficial ownership, saying that we had a “gold standard”. It did not quite turn out that way, but that was what he wanted. To go back to the days of 2018, the Financial Action Task Force said that Britain was

“a global leader in promoting corporate transparency”.

We should hang on to that.

In 2014, the Cameron Government said it was “particularly important” that plans to force companies to name their ultimate owners should include English limited partnerships, in order to ensure that there were no loopholes or unintended consequences. That was completely right, yet two months later, in an inexplicable move, English limited partnerships were dropped. I do not know if the Minister has an explanation—I am happy to give way if he has—but that is what happened.

New clause 56 would introduce transparency into the system. I recognise that it is not a perfect answer, but it is a huge improvement on the status quo. We want to use the mechanism of the persons of significant control register. We propose that all limited partnerships, whether they are Northern Irish, English or Welsh, would have to register a person of significant control. All limited partnerships would therefore be treated in the same way.

As the Minister knows, limited partnerships have been used time and again by criminals to move and hide dirty money. I will give just one egregious example. In 2014, the US imposed sanctions on the Rotenberg brothers, Boris and Arkady, who are known as close friends of Putin, in response to the annexation of Crimea. A later investigation by the UK Senate found that the two brothers had used an English limited partnership, Sinara Company, to pay a front figure in the art industry, a man called Gregory Baltser, a huge amount of money to get around the sanctions, buying and selling paintings worth up to $18 million. Paintings by Magritte, Chagall and Braque were sold through this intermediary, Baltser. It was all done through an English limited partnership.

When the Government tightened up on Scottish limited partnerships, criminals moved to other forms, as the hon. Member for Glasgow Central said. I quote to the Minister a Russian-language newsletter that was circulated to clients by a formation agency called LAS, which said, after the UK tightened up on Scottish limited partnerships, that there is always a way out:

“As a substitute for Scottish partnerships, we offer the registration of English, Welsh and Irish LP partnerships, which have an identical legal form and similar benefits…At the moment, the privileges of this type of partnership are that they do not fall and will not fall under the laws on the disclosure of information about controlling persons.”

Transparency International’s report, which the Minister has quoted previously in our debates, shows how the structures are open to abuse by bad actors. It analysed 1,628 limited liability partnerships used in various corruption and money laundering schemes over a 12-year period between 2004 and 2016 for the nationality of the person of significant control. Russians were the most frequent nationality, at 17%; UK nationals were 16%; and Ukrainians, 15%. Nationals from the combined former Soviet states constituted half of those in the disclosures. That is a good red flag. The benefit of the persons of significant control register is that it would provide that red flag if it was extended elsewhere.

Limited partnerships are used by formation agencies, over whom there is also a red flag. Finance Uncovered and the BBC found that the five busiest formation agencies in 2017 created 28% of all English limited partnerships created that year.