Beneficial Ownership Registers: Overseas Territories and Crown Dependencies

Nigel Evans Excerpts

Thursday 7th December 2023 Commons Chamber

[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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[Mr Deputy Speaker (Mr Nigel Evans)]

I will call Marie Rimmer and then Meg Hillier. You must sit down by half-past 4, so perhaps you can divide the time between you.

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[Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

It is a pleasure to follow the passion of my hon. Friend the Member for St Helens South and Whiston (Ms Rimmer). I have been on this journey with my right hon. Friend the Member for Barking (Dame Margaret Hodge) since I served on the Public Accounts Committee when she was chairing it—shockingly, it is now 10 years on from that. We began to deal with some of the domestic issues with companies that had international footprints—the large companies such as Starbucks, which we had before the Committee. I remember that rollercoaster ride and my right hon. Friend should be congratulated on that work.

Let us be clear what the impact of the lack of beneficial ownership registers is. Others have touched on security, but I wish to talk about the tax that is lost. We are in a cost of living crisis, there is a huge pressure on the Exchequer and we have an election looming, with each party that is likely to be in government wanting to make promises to the electorate. This money is being hidden away without people knowing where it is and that is definitely having an impact on the tax take; it is an absolute opportunity for tax avoidance and tax evasion, in particular, and it is key that we have this register. In my constituency, a lot of properties are owned by offshore companies, some of them in the overseas territories, and it is impossible for the residents of those buildings to know who their landlord truly is; they face an address with no name attached, and no responses come from those landlords. It is against natural justice for people who have their homes owned by others as finance vehicles not to be able to have access to them.

We need to make sure that this issue is dealt with, because if we do not deal with the issues of money laundering and economic crime across the piece, and we deal with them only domestically, without a strategy for the overseas territories and Crown dependencies, there is a risk that the problem will simply move, rather than be resolved. People with money and advice about where to hide it, if they are minded to hide it, will find ways to do that where those ways exist. This loophole needs to be closed and we have a prime opportunity, with the Foreign Secretary, the very person who, as Prime Minister, was backing that a decade ago, now sitting in the House of Lords and at the Cabinet table. He could be driving this, so I urge the Minister to speak up for his new boss. I hope that the Minister has been given the go-ahead to give us some comfort today that this issue will finally be revolved. There are only a few weeks until the end of the year, and I hope he can give us some comfort on the timeline.

[Mr Deputy Speaker (Mr Nigel Evans)]

Thank you for your co-operation. For the first wind-up, I call Richard Thomson.

[Richard Thomson (Gordon) (SNP)]

Let me begin by sharing the disappointment of the right hon. Member for Barking (Dame Margaret Hodge) that this debate is necessary at all. It is incredibly disappointing that the target the UK Government had of ensuring that by December 2023—the month we are in—public registers were set up for the overseas territories and Crown dependencies looks set to be missed. This debate ought to start, as in fairness it has, from a fundamental premise: public registers of beneficial ownership are a vital tool in helping to identify and therefore reduce financial crime, and to increase financial transparency.

The simple fact of knowing who owns what, who benefits from it, and where the moneys have flowed from and are flowing to all helps to identify and tackle crime of all sorts, including corruption, drug trafficking and people trafficking, as well as domestic and international tax evasion and tax avoidance. Being able to get this under control would be massively to our collective benefit, and not just from a reputational point of view, because the revenues, moneys and assets that are concealed in this way can be used to fund activities that are detrimental to national security. It would also be massively to the benefit of the rest of the world to close down options for kleptocratic “businesspeople” or politicians to strip assets from their countries and squirrel them away in untransparent jurisdictions to enrich their lifestyles. That is clearly not a good thing, and the people of those countries suffer as a consequence of that permissive environment.

Registers are a necessary but insufficient step, and there is a lot of work to be done, not just on this issue. We have heard about London’s unenviable reputation as the laundromat—I think that term was used—for some of the world’s dirty money. I remember participating in a debate earlier in my parliamentary career about similar issues that were caused by London being the laundromat for reputational issues, through the prevalence of libel tourism, the ability to use SLAPPs—strategic lawsuits against public participation—and the prevalence of public affairs and public relations agencies that are willing to accept money to do such things. There is much work to be done to clean up the United Kingdom’s act in that sense.

Although the UK Government introduced a register of beneficial ownership in 2016 and have encouraged the Crown dependencies and overseas territories to follow suit, they have not done that, so far at least, despite voluntarily agreeing to do so. That is despite the UK Government using the sweet persuasion of publishing a draft Order in Council as long ago as in 2020 to require them to do so and giving them a deadline of this month, which now seems almost certain to be missed.

This is the fundamental point: if the UK wishes to seek leadership on this issue, it cannot be taken seriously as a world leader on financial transparency if it does not do more, and is not seen to do more, to stop overseas territories being used as havens for individuals to evade their obligations.

It matters very much that that should happen. More than half of the shell companies exposed in the Panama papers were incorporated in UK tax havens. More than two thirds of the companies analysed by the International Consortium of Investigative Journalists from the Panama papers leaks were found to be registered in the British Virgin Islands. The UK and its overseas jurisdictions are collectively responsible, through that permissiveness, for costing the rest of the world nearly $90 billion in lost tax each year by enabling non-residents to hide their finances and avoid tax. As the hon. Member for Wallasey (Dame Angela Eagle) highlighted, Tax Justice UK estimates that the UK and its network of overseas territories and Crown dependencies are responsible for some 35% of global tax losses suffered by countries around the world.

The impact that clamping down on this problem could have, not just on the public good for the UK but in many other countries around the world, is highly significant. We are often invited to believe that the biggest threat to our quality of life—[Interruption.] Excuse me. [Interruption.] Thank you very much.

[Mr Deputy Speaker (Mr Nigel Evans)]

I thank Mr Doughty for providing a cup of water, in the spirit of the Lib-Lab pact.

[Richard Thomson]

Lib? Well, it shows that there is perhaps a future for progressive alliances of one kind or another, Mr Deputy Speaker.

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[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

This has been a hugely useful debate on the implementation of public registers of beneficial ownership in the UK’s overseas territories and Crown dependencies. I thank my right hon. Friend the Member for Barking (Dame Margaret Hodge) for securing this crucial debate and for her tireless and unrelenting work on combating illicit finance, fighting for transparency and opposing corruption. As shadow Minister for the overseas territories, I draw attention to my declaration of interest.

We have heard some important, passionate speeches, not least from my right hon. Friend. The campaigning motivations behind her speech have been clear and transparent in what she has attempted to achieve over many years, as many hon. and right hon. colleagues have reflected on.

Important points have been made, including by my hon. Friends the Members for Mitcham and Morden (Siobhain McDonagh) and for Hackney South and Shoreditch (Dame Meg Hillier), on one of the key reasons for transparency, which is understanding who owns buildings, for example, and in what way they own them. I have had the same experience in my Cardiff South and Penarth constituency, with many residents affected by fire and building safety issues having difficulty establishing who is the freeholder and how the ownership is structured.

In an equally passionate speech, my hon. Friend the Member for Wallasey (Dame Angela Eagle) clearly exposed why this matters in so many different regards. My hon. Friend the Member for Hackney South and Shoreditch also explained the importance to the public purse of dealing with these matters. My hon. Friend the Member for St Helens South and Whiston (Ms Rimmer) made an equally passionate speech about why this matters to our efforts against Russia and its illegal and barbarous war in Ukraine, and in relation to our responsibilities elsewhere in the world, including in Africa and many other locations.

We heard strong comments from the Father of the House, as well as from my hon. Friend the Member for Huddersfield (Mr Sheerman), the right hon. Member for New Forest East (Sir Julian Lewis), my hon. Friend the Member for Hammersmith (Andy Slaughter) and the hon. Member for Hendon (Dr Offord). The Chair of the Justice Committee, the hon. Member for Bromley and Chislehurst (Sir Robert Neill), also made important points on the constitutional position of the Crown dependencies. I am no expert on the different legal opinions that have been expressed on that matter, but I have certainly had it put to me clearly by representatives of the Crown dependencies.

As Labour’s shadow Minister for the UK overseas territories, I want to begin by reiterating our unwavering commitment to each member of our global British family, their sovereignty and their right to self-determination. We are committed to a respectful but candid, productive but principled partnership between the UK and each territory, and the same is true in many respects of the Crown dependencies. It was a pleasure to meet the premiers, Chief Ministers and representatives of each overseas territory earlier this month during the week of the joint ministerial council and to hear their insights, concerns and perspectives on issues from security to sovereignty, climate change to infrastructure, and constitutional relationships to this very issue of financial services and beneficial ownership.

As I have said in previous debates, we need to be careful that we do not pursue misconceptions about the overseas territories and Crown dependencies. Each territory and dependency is distinctive and unique. Many of the overseas territories do not engage in financial services, and this debate applies less to them. We must also recognise that steps have been taken and that there has been progress in some areas. Indeed, reference was made to the public register of beneficial ownership in Gibraltar, to the exchange of notes agreement, which has existed since 2017, and to a number of other steps that have been taken. I also want to acknowledge— I have discussed this with them over the last two years—that a number of the overseas territories, and indeed Crown dependencies, have been integral to efforts on freezing Russian state and other assets since the onset of Putin’s illegal and barbarous war in Ukraine.

However, Labour believes that being part of the British family comes with clear responsibilities. We share common values, obligations and principles, including a robust commitment to democracy, the rule of law and liberty, and the protection of human rights. We also believe in the advancement of good governance and in ensuring proper democratic accountability and regulation, which of course includes transparency in financial services.

The 2018 Foreign Affairs Committee report was referred to, and I note the comments in it and comments made today about the interdependence between proper regulation and transparency and our wider national security and foreign policy objectives. That is why we must respond to the calls made by my right hon. Friend the Member for Barking and many others today for us to tackle these issues by urgently bringing about the full implementation of public registers of beneficial ownership in the UK’s overseas territories and, I hope, Crown dependencies.

Sadly, action on economic crime has been held back by years of Conservative delay and dithering. As has been referenced, we were first promised a register of overseas ownership by Lord Cameron in 2016, and it beggars belief that we are still debating how it should be implemented.

Section 51 of the Sanctions and Anti-Money Laundering Act 2018 required the Secretary of State

“no later than 31 December 2020”

to

“prepare a draft Order in Council requiring the government of any British Overseas Territory that has not introduced a publicly accessible register of the beneficial ownership of companies within its jurisdiction to do so.”

Yet here we are in 2023.

We should also remember the Economic Crime (Transparency and Enforcement) Act 2022, which was passed as emergency legislation in the light of the situation in Ukraine and the need to sanction Russian state entities and others involved in the invasion. Its primary purpose included setting up a register of overseas entities and their beneficial owners and requiring overseas entities that own land in the UK to register in certain circumstances.

We have repeatedly been clear that overseas entities should not be able to hide behind trusts, and it is important to explain why that matters. A recent article by Advani, Poux and Summers from the London School of Economics tells us that

“63 per cent of cases where beneficial ownership is not publicly reported”

involve “the use of trusts”. It also states:

“The Crown Dependencies and Overseas Territories are…heavily implicated here. Over 85 per cent of all trust arrangements come from…Jersey (32 per cent), Guernsey (25 per cent), British Virgin Islands (17 per cent) and Isle of Man (11 per cent).”

Russia’s invasion of Ukraine only highlighted why we need to see who owns what and in a way that is transparent and publicly available.

We have made clear time and again the need to bring forward much-needed reforms to Companies House, alongside a review of the register of overseas entities, to ensure that the right balance is struck between privacy and the public interest, including our ability, for example, to apply sanctions effectively. Here in the UK I am afraid we have been playing a game of catch-up. We need to move forward in that respect, working co-operatively with the overseas territories and the Crown dependencies, but taking action if it has not yet been forthcoming.

The views of the British public are clear. The results of a poll for the UK Anti-Corruption Coalition show that 72% of the British public believe that the Government should take more responsibility, working with offshore financial centres to tackle money laundering and tax evasion. That will require the opening up of corporate registries to public scrutiny, and for the end-of-year deadline to be met as a matter of priority. We are seeing, as never before, a confluence of the need to ensure good governance across financial centres and our own national security.

Let me ask the Minister some questions. First, will the deadline be met—yes or no? If not, what do the FCDO and the wider Government consider to be a reasonable deadline, and what will be done to meet it? Can he clarify the position in relation to the Crown dependencies in particular, given the comments that have been made today? Obviously I have seen the statement that they have made about coming forward with a public commitment—I think that was the phrase—in relation to their approach to access to information on registers of beneficial ownership by the end of December 2023, to replace the 2019 commitment.

I was pleased to read the Joint Ministerial Council’s communiqué, which said that

“the Overseas Territories and the UK…will be establishing a technical working group on beneficial ownership…and…the implementation of publicly accessible registers”.

What is happening about that, and what support is being given to smaller territories, in particular, to enable them to make progress? What is the group doing, and how will it move forward and actually deliver results? After the November JMC, the Minister pledged that he would report to Parliament before the recess on the progress toward the deadline. Is today that day, and can he provide a precise timeline? Could he also provide an update on the status of the draft Order in Council and the circumstances in which it would be invoked? Will he tell us what percentage of business covered by the 2017 exchange of notes agreement is being covered now? I understand that in 2019 it was 87%; is it now 100%, as promised? At what speed is the information being exchanged? The Cayman Islands has told us that it does it within 24 hours; is that timeline the same in every single territory?

I hope that the Minister can answer those questions today. We want to see progress as a matter of urgency, as part of a respectful, constructive but principled relationship with our overseas territories and Crown dependencies.

[Mr Deputy Speaker (Mr Nigel Evans)]

If the Minister can sit down by about two minutes to 5, that will allow Dame Margaret Hodge to sum up the debate.