Sanctions and Anti-Money Laundering Bill [Lords]

Debate between Baroness Hodge of Barking and Lloyd Russell-Moyle

2nd reading: House of Commons
Tuesday 20th February 2018 Commons Chamber

[Dame Margaret Hodge]

I strongly concur. Interestingly enough, David Cameron recognised that in 2013 when he told the overseas territories to rip aside the “cloak of secrecy” by establishing public registers of beneficial ownership. He wrote to them in 2014 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.”

He said that

“if we want to break the business model of stealing money and hiding it in places where it can’t be seen: transparency is the answer.”

When he launched the UK’s public register, he argued 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.”

I agree with all those sentiments and arguments. All that we are asking of the present Government is that they stand by the promises made by their colleagues, their right hon. and hon. Friends, in a Conservative-led Government nearly five years ago. I also agree with the current Prime Minister, who said:

“If you’re a tax-dodger, we’re coming after you. If you’re an accountant, a financial adviser or a middleman who helps people to avoid what they owe to society, we’re coming after you”.

However, our tax havens are “middlemen”. It is time that the Prime Minister and her Government turned their rhetoric into practical action, and put an end to the nefarious activities that take place in so many of our jurisdictions.

[Lloyd Russell-Moyle]

Many of our tax havens, and some of our Crown dependencies, were put on the EU watch list. They had to demonstrate that they were making improvements. I understand that one of the ways in which they could get on to the watch list was for the UK Government to underwrite that progress by indicating that they would support it, which would enable them to avoid being put on the blacklist. Is it not imperative for us to enforce the commitment that we made to the European Union in preventing them from being put on the blacklist by ensuring that they implement what they promised?

[Dame Margaret Hodge]

I entirely agree. Indeed, if we leave the EU without having implemented reforms that would have an impact on the overseas territories, the EU will blacklist them.

I know that there are many principled Conservative Members—including the right hon. Member for Sutton Coldfield (Mr Mitchell)—who care passionately about transparency, and have championed the cause from both the Back Benches and the Front Bench for many years. I urge them all to make clear to their Front-Bench colleagues that they will support a cross-party amendment setting a clear and reasonable timeframe within which the overseas territories would be required to prepare and launch public registers of beneficial ownership. I hope that the Government will listen to the advice of leading Back Benchers on their own side. Those of us who are involved in campaigning for transparency are not seeking short-term political advantage. What we want is an important, sustainable change that will have a lasting impact on the process of stamping out financial skulduggery, and a considerable impact not just on the United Kingdom’s public finances but on those of the poorest nations in the world.

We can never build a global Britain on dirty money. We will not create a strong economy on the back of being the jurisdiction of choice for every kleptocrat and crook in the world. Our British overseas territories will not prosper over time on the basis of being safe havens for illicit wealth. Transparency is an essential tool in the battle against all financial crimes. Exchanging information behind closed doors, which the Government claim is sufficient, particularly disadvantages the very same countries that suffer the most from financial crime and money laundering, because they have the weakest regulatory agencies in operation.

Relying on regulatory bodies is also very much second best. Even our under-resourced bodies such as Companies House are at best reactive in their work on uncovering financial crimes; there is very little evidence that they are undertaking proactive investigations. Indeed, the constant flow of scandals is strong evidence that the system based on the private automatic exchange of information is not working.

Let us consider the case highlighted recently by Global Witness of the $75 million paid by Glencore to Dan Gertler, a controversial businessman accused of bribing senior officials in the Democratic Republic of the Congo to advance mining interests. The money was originally due to be paid to Congo’s state mining company, but following a secret agreement was paid into one of Dan Gertler’s companies registered in the Cayman Islands. Or let us consider the case revealed in the Paradise papers of Jean-Claude Bastos, who managed Angola’s sovereign wealth fund and was paid more than $41 million from the fund via a secretive British Virgin Islands company. The BVI company was itself owned by a series of secretive offshore companies, but the ultimate beneficial owner was Mr Bastos.

Today’s Guardian contains disturbing revelations that North Korea broke international sanctions aimed at inhibiting the development of weapons by using a network of companies based in our tax havens to acquire millions of dollars-worth of fertiliser, coal and other commodities—our tax havens, undermining our national security and that of other western nations. Secrecy enables wrongdoing.

Ironically, the British Government have accepted that argument, because we are ourselves publishing our national register of beneficial ownership. The standard that we accept for ourselves should be the standard we expect for our overseas territories. To pretend, as the Government do, that the overseas territories are making good progress is nonsense. It was 2013 when David Cameron first demanded public registers; nearly five years later, we are still waiting for a number of the jurisdictions, including Anguilla and the Turks and Caicos Islands, to set up a central register.

Let me take this opportunity to debunk some of the myths that were prayed in aid when this matter was debated in the House of Lords. Raising the spectre of identity theft and personal security risks is wide of the mark. Public registers can have tightly defined case-by-case exemption policies to protect individuals who are genuinely at risk. Ministers claim that no other countries are adopting public registers. Again, that is not true: the EU is currently implementing the fifth anti-money laundering directive requiring all EU members to implement public registers by 2019, including Gibraltar, and we should be implementing that.

Arguing, as Ministers do, that we should not act until others have acted is a wretched excuse. We have been bold in leading the movement to stamp out corruption; we should pursue that course and be proud of it. As the number of tax havens decreases and the noose tightens around the remaining tax havens, our action will make action elsewhere in the world inevitable.

I welcome today’s statement from the Secretary of State for Exiting the European Union that the UK wants to lead a global race to the top in rights and standards. There is no better way of leading that race to the top than by insisting that our overseas territories adopt public registers of beneficial ownership.

Public registers will not undermine legitimate businesses or individuals who want to continue to take advantage of low-tax regimes. They will expose those who seek to hide their money because they have received it corruptly, or who unlawfully evade tax, all too often at the expense of poor people and poor countries.