Beneficial Ownership Registers: Overseas Territories and Crown Dependencies

Baroness Hodge of Barking Excerpts

Thursday 7th December 2023 Commons Chamber

[Dame Margaret Hodge (Barking) (Lab)]

I beg to move,

That this House notes the implementation of public registers of beneficial ownership in the UK’s Overseas Territories and Crown Dependencies; believes that the Government needs to respect the will of Parliament and meet the implementation deadline at the end of 2023; encourages the Government to lay an Order in Council formally requiring the UK’s Overseas Territories to implement public registers of beneficial ownership if the deadline is not met; and considers public registers of beneficial ownership to be an essential transparency measure to combat tax evasion, money laundering and other economic crimes.

This debate should not be necessary. The House expressed its view when it agreed an amendment to the Sanctions and Anti-Money Laundering Act 2018 that required overseas territories to voluntarily introduce registers of beneficial ownership within two years or face an Order in Council mandating compliance. Five years have passed since the right hon. Member for Sutton Coldfield (Mr Mitchell) and I moved the amendment, and the only overseas territory to comply with the legislation is Gibraltar, which I salute. While I understand that the Minister is making progress with some of the other jurisdictions, they have yet to comply with our legislation.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

Journalists have revealed that the family of Asif Aziz, a landlord to my constituents in Britannia Point, Colliers Wood, manages a large property portfolio registered under dozens of companies on the Isle of Man. There is no beneficial owner listed, so complaints can never reach the landlord. We already have legislation that requires offshore companies that own properties to declare their owners on a register. Does my right hon. Friend agree that properly resourced enforcement is essential, and that having public registers of beneficial owners would make it much easier to identify and scrutinise the beneficial owners of offshore shell companies?

[Dame Margaret Hodge]

I am grateful to my hon. Friend for bringing that to our attention. Sadly, it is an issue not just of enforcement but of definition. I bet that the landlord in her constituency owns the properties through a trust, and there is no openness about beneficial ownership of trusts. She makes a very important point.

[Sir Peter Bottomley (Worthing West) (Con)]

I apologise for not being able to stay for the whole debate.

I strongly support this debate. I put it to the right hon. Lady that the reason why people hide things in trusts and offshore is either to avoid embarrassment or to avoid tax. People ought to do better, so that they will not be embarrassed, and they ought to pay tax properly.

[Dame Margaret Hodge]

I thank the hon. Member for his support. I agree that it is partly about reputation and partly about avoiding tax, but it is also about indulging in economic crime, from money laundering through to the worst crimes that stain our country and our economy.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

As the Father of the House has just intervened and I am the longest-serving Member on the Opposition side of the House, may I say that I am a long-term supporter of what my right hon. Friend has been trying to do? Owing to our time together as undergraduates at the London School of Economics, I know that she is a determined woman. Let us get on with it—let us hold these people to account and change the law.

[Dame Margaret Hodge]

I thank my hon. Friend for his support—he is probably my oldest friend in the House; we go back many years—and I hope that the Government heard his urging.

[Sir Julian Lewis (New Forest East) (Con)]

Could we add one more to the list of reasons why people conceal their identities in this way, which is to avoid sanctions, including sanctions placed by our own Government?

[Dame Margaret Hodge]

The right hon. Member makes a really important point, which I will come to later. He is right: this is a national security threat as well as a threat to our economy.

The Government have yet to comply with the legislation by making an Order in Council to mandate compliance by the overseas territories. After discussions between the Crown dependencies and the right hon. Member for Sutton Coldfield and myself, the three Crown dependencies —Jersey, Guernsey and the Isle of Man—announced in May 2019 that they were committed to introducing public registers and set out a plan to do so. Although I welcomed that in principle, I was concerned that their commitment was qualified and that their action plan contained a number of opt-out clauses. However, on the basis of their commitment, we chose not to legislate but to trust them. It now seems that our trust was misplaced. They are reneging on that commitment and using every excuse not to comply.

[Sir Robert Neill (Bromley and Chislehurst) (Con)]

I understand how strongly the right hon. Member feels. May I point out that, as a matter of constitutional fact, we have no right to legislate for any of the Crown dependencies? Constitutionally, they are not subject to the jurisdiction of this Parliament.

[Dame Margaret Hodge]

I have enormous respect and time for the hon. Member, but I have an opinion from a renowned KC that we sought at that time—I will come to it later—which contradicts entirely his point and says that we do have the constitutional right to legislate.

[Karen Bradley (Staffordshire Moorlands) (Con)]

I want to comment not on the substance of what the right hon. Lady is talking about but merely on the procedural aspects. She will know that the Procedure Committee is looking at the impact of legislation in this place on devolved legislatures, the overseas territories and the Crown dependencies, and I am interested in her comments and look forward to her speech, but does she agree that we should try to find a way for the voice of the overseas territories to be heard when we legislate in this place if there are implications for them?

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[Dame Margaret Hodge]

Indeed. I would love for us to be able to do this in a consensual way; that would obviously be the best way to proceed. Sadly, we have been waiting for 10 years, and my patience has worn a little thin. Given the implications both for national security and for the economy, the time has come to say, “Enough is enough.” We should use the powers that we have.

[Dr Matthew Offord (Hendon) (Con)]

The right hon. Member is being generous with her time. The 2022 ruling of the Court of Justice of the European Union stated that unrestricted public access to beneficial ownership information was incompatible with the right to life. Will she cover that?

[Dame Margaret Hodge]

I will. The hon. Member will know as well as I do that we are no longer a member of the European Union, so we are not bound by that finding.

Why does all this matter? The epidemic of tax avoidance, tax evasion and economic crime flourishes in an environment of secrecy, and our overseas territories and Crown dependencies facilitate that secrecy. We know from the ever-growing number of leaks of data on financial misdemeanours that their role is central to enabling economic crime. Half the shell companies exposed in the 2016 Panama papers were incorporated in the British Virgin Islands. In 2017, the Paradise papers—a massive tranche of documents leaked from the offshore law firm Appleby—showed that a frightening number of frontline politicians held secret accounts, with the overseas territories appearing prominently as destinations of choice for hiding money. Those included people such as Justin Trudeau’s chief fundraiser, Donald Trump’s Commerce Secretary, Brazil’s Finance Minister, Uganda’s Foreign Minister, and our own Lord Ashcroft, who had—and probably still has—a Bermuda-based trust where he hides some of his wealth.

Some 20% of the files in the FinCEN—Financial Crimes Enforcement Network—leak of 2020 contained clients that listed an address in the British Virgin Islands. The leak also revealed, because it was a leak of documents from an American agency, that the Americans viewed Britain as a higher-risk jurisdiction for its role in money laundering and financial crime. The Pandora papers leak of 2021 involved 12 million files, with data from 14 different law firms and company services providers. Over two thirds of the companies analysed in that batch of leaked documents were registered in the BVI. A World Bank review of 213 corruption cases that were investigated over the 30-year period to 2010 found that 70% involved anonymous shell companies. The UK, its overseas territories and Crown dependencies accounted for the second jurisdiction in terms of the number of corruption cases associated with it.

[Mr Sheerman]

What I am learning from my right hon. Friend’s excellent speech is that London is the centre of the world for hiding money, because so many professionals in this city know how to do it. Is that correct?

[Dame Margaret Hodge]

Yes. Sadly, London has become the jurisdiction of choice for too much of our dirty money. The all-party parliamentary group on anti-corruption and responsible tax has been successful—albeit not as much as I would have liked—in achieving changes to economic crime legislation to challenge and start tackling that.

[Andy Slaughter (Hammersmith) (Lab)]

I congratulate my right hon. Friend on leading the debate, and more particularly on the forensic and persistent way she has dealt with this issue over so many years. It is clear that London is the centre of much of the wrongdoing in this area. That is not a coincidence; it is because the Government have been permissive. Has she had an indication of whether they are now prepared to back her proposals?

[Dame Margaret Hodge]

My hon. Friend is right. I have often said that it is not just this Government who have done that; the Labour Government, in their time, also deregulated to such an extent that they allowed London to become the centre of this activity. I do not feel that the Government are doing all that they can to try to turn that around. I await a future Labour Government, and I will watch Labour Ministers with an eagle eye to ensure that they do that.

The debate is not just about the role of the overseas territories and Crown dependencies in facilitating economic crime; their activities as secrecy jurisdictions are a threat to our national security, as the right hon. Member for New Forest East (Sir Julian Lewis) said. The Foreign Affairs Committee said as much in a report on the matter, and as recently as November it called on the Government to ensure that the overseas territories fulfil their commitment, adding that

“there should be no further deadline extensions.”

We know, for example, that between 2008 and 2018, £68 billion flowed out of Russia and into our overseas territories. We are a favourite jurisdiction for receiving Russian-laundered money. We know that individuals who are sanctioned use the overseas territories and Crown dependencies to hide their assets just before sanctioning to prevent those assets from being frozen. Abramovich and Usmanov are two classic examples of that practice.

We know the role of the overseas territories in preventing us from knowing the actual beneficial owner of property in the UK. Over 70% of the properties in the list of those that we know about are owned by companies registered either in the Crown dependencies or the BVI. We still cannot identify the beneficial owners of two thirds of those 70%, because they use trusts to hide their identity, and 85%—more than eight out of 10—of those trust arrangements are based in the three Crown dependencies and the BVI.

Most recently, in the Cyprus papers, which have just been uncovered, we found a direct link between Vladimir Putin and Roman Abramovich, with money going from Abramovich to two men dubbed as “wallets” for Putin—a man whose salary is $100,000, but whose wealth is rumoured to be between $125 billion and $200 billion. The theft of money from the Russian people is facilitated by secrecy jurisdictions such as Cyprus, but also by our own tax havens.

The problem is massive, and the role of our overseas territories and Crown dependencies is central. Baron Cameron of Chipping Norton understood that when he went to Davos in January 2013—over 10 years ago—and warned multinationals to

“wake up and smell the coffee”.

I will give a few more quotes from him. In 2013, he pledged:

“Every one of the Crown Dependencies and Overseas Territories are going to have an action plan on beneficial ownership”.

He told the overseas territories to rip aside the “cloak of secrecy” by creating public registers of beneficial ownership. In 2014, he wrote to the overseas territories, saying that public registers were

“vital to meeting the urgent challenges of illicit finance and tax evasion.”

In September 2015, he accused them of

“frankly…not moving anywhere near fast enough…if we want to break the business model of people stealing money and hiding it in places where it can’t be seen: transparency is the answer.”

When Lord Cameron launched our UK register in 2016, he said that

“it’s better for us all to have an open system which everyone has access to, because the more eyes that look at this information the more accurate it will be.”

At the anti-corruption summit in May 2016, he said:

“We’ve talked about the need for every country to ultimately reach what I call the gold standard of having a public register of beneficial ownership. And I am clear that I include all the Overseas Territories and Crown Dependencies.”

Lord Cameron is now in a position to act, and I urge the Minister to tell his boss to do so. When even Nigeria, Ukraine, Albania and Morocco have introduced public registers, why can our tax havens not?

Using the European Court of Justice ruling to delay the implementation of public registers is a convenient but lame excuse. It actually has not deterred Gibraltar. While some countries have closed their registers, others have kept them open. Crown dependencies in particular are acting in a completely dishonourable way. Their role in facilitating economic crime and tax avoidance is indisputable, and their protestations to the contrary are simply untrue. Their behaviour in providing public assurances that they will move towards public registers but claiming that the European court ruling prevents them from doing so is, in my view, unforgivable.

[Mr Sheerman]

My right hon. Friend is being generous in giving way. I absolutely support everything that she is saying, but can we also have more publicity about what is happening with people who do not pay tax in this country? Jim Ratcliffe of INEOS has become very rich and now does not pay tax in this country. I understand that the Daily Mail does not pay any taxes. Could we not have an ad in The Sunday Times rich list about those who actually pay their taxes?

[Dame Margaret Hodge]

I am left wondering whether The Sunday Times would ever publish that—we shall see.

Let me address the point made by the hon. Member for Bromley and Chislehurst (Sir Robert Neill). In April 2019, the right hon. Member for Sutton Coldfield and I sought legal advice about whether it would be constitutionally lawful for the UK Parliament to legislate to compel all Crown dependencies to establish public registers of beneficial ownership. I have the advice here, which concluded:

“It is beyond doubt that the intrusion of criminal funds into the UK economy threatens the interests of the UK. It is also beyond doubt that extensive funds in this category emanate from the Crown dependencies.”

The last sentence states: “The proposed amendment”—we put an amendment to the King’s Counsel to consider whether it was lawful—

“is a constitutionally legitimate and lawful exercise of the UK’s powers to secure its domestic interests by protecting confidence in its financial institutions and the integrity of the commercial life of the nation”.

Finally—I recognise that we are running out of time— I want to touch on the compromise that I think the Minister is seeking to secure in his negotiations with our tax havens. The compromise is that in order to have access, a member of the public needs to have a legitimate interest, a term that was introduced in the European Union’s sixth anti-money laundering directive. We already have that proviso in relation to the register of overseas properties, and I draw to the Minister’s attention the fact that Transparency International has put in inquiries in six cases to get information, has waited for four to six months, and has then seen those requests for information turned down by His Majesty’s Revenue and Customs. All of those requests were in relation to trusts listed as the beneficial owners of overseas companies that hold property here in the UK, and we would have expected them to be on that register and for the information to be provided.

[Dame Angela Eagle (Wallasey) (Lab)]

Surely, every single citizen of this country has a legitimate interest in closing the kinds of loopholes that have allowed rotten, dirty money to come flooding into our jurisdiction. Does my right hon. Friend agree that it has had huge detrimental effects on ordinary people—who do not have trust funds and are unlikely to inherit anything—such as the huge increases in property prices that have forced many people out of the housing market?

[Dame Margaret Hodge]

My hon. Friend makes an important point: those who suffer the most are the poorest in our community. One must remember that no tax is levied on all this illicit finance, so it does not fund the public services that we require. I would also point out to the Minister that a legitimate interest proviso does not meet the requirements of the Sanctions and Anti-Money Laundering Act 2018: the terms of the draft Order in Council specifically said that we want

“a compliant publicly accessible register”.

I ask the Minister to think about that.

Sunlight is the best disinfectant—we all know that. If we are serious about our effects to clamp down on dirty money and eliminate it from Britain, and from our overseas territories and Crown dependencies, we must have public registers, so that we can at the very least start to follow the money.

[Sir Julian Lewis]

For the sake of people who might not be experts in this field, can the right hon. Lady explain the extent to which those Crown dependencies and overseas territories themselves know where the real ownership of the resources resides? Can we be sure that they themselves know what information is being concealed and ought to be made public, or that we will have got to the bottom of the matter if it is made public?

[Dame Margaret Hodge]

I am not sure I can answer that, because I do not know whether they know, but there have been one or two instances where whistleblowers have come to see me—about Jersey, for example. It has been very difficult to find out and identify how much the Jersey authorities knew, and why or whether they took action on the information that is available. It would be wonderful if the right hon. Gentleman’s Committee could look at this issue in greater detail to establish that.

Illicit finance is not just an evil in itself: it is the golden thread that runs through all serious crime, from drug smuggling to people smuggling. It threatens our national security, hits the poorest countries the hardest, and starves our public services of much-needed investment. It was in recognition of that importance that we established the strong cross-party consensus in the House that led to the 2018 law, which was agreed unanimously in this House. Ten years have passed since David Cameron first openly supported public registers, and five years have passed since we legislated, but we are still waiting. That is not good enough.

It is the job of the Executive to implement the will of Parliament. To that end, I ask the Minister to take two actions. First, will he now lay an Order in Council, requiring the overseas territories to introduce public registers of beneficial ownership forthwith? Secondly, will he legislate to require Crown dependencies to do the same? If the Government do not act, I can assure him that Parliament will, for we must—for the sake of our economy, for the sake of our security and for the sake of our reputation. I urge the Government to move forward on this issue.

[Mr Deputy Speaker (Mr Nigel Evans)]

Five people have indicated that they wish to speak, and the wind-ups will begin at 4.30. That means eight minutes for Richard Thomson, 10 minutes each for Stephen Doughty and Mr Rutley, and two minutes for Margaret Hodge to wind up. If people stick to five minutes, everybody will get equal time.

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[Dame Margaret Hodge]

What has been great about this debate is that we mostly agree across the House. That has been the basis on which we have taken action down the years, and I am grateful for that. I want to acknowledge the teamwork that has gone on. The right hon. Members for Sutton Coldfield (Mr Mitchell) and for Tonbridge and Malling (Tom Tugendhat) both played a key role in pursuing transparency in the run-up to 2018 and beyond, before they became Ministers. Transparency is just one tool in the fight against economic crime, corruption, and tax evasion and avoidance.

I thank all the Members who have taken part in the debate. My hon. Friends the Members for Wallasey (Dame Angela Eagle) and for St Helens South and Whiston (Ms Rimmer) both mentioned the eye-watering sums of money that are lost to the legitimate system through tax avoidance, tax evasion and other ways.

May I thank everybody and finally say—