Criminal Finances Bill

Debate between Nigel Mills and Roger Mullin

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 21st February 2017 Commons Chamber

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

I start by thanking the Security Minister and the Government for responding to the campaign on Scottish limited partnerships in which I have been involved for about a year. We are all grateful that the Government recently announced that they will conduct a review, which means that the amendment that I have regularly been tabling to Bills over the past year is no longer necessary. However, I have found myself having to table a different new clause; I will explain why and why it troubles me greatly that I am forced to do so.

For Members who are unfamiliar with why my colleagues and I have been so concerned about these things called Scottish limited partnerships, let me point out that they do remarkable reputational damage to Scotland and probably to the UK’s financial sector. They are a front for some of the worst international crime, money laundering and hiding of criminal assets to be found. Without going into great detail of how they manage to do that, it might interest the House to know just a few of the types of crime for which they have been used.

SLPs have been at the centre of Ukrainian arms deals, kick-backs and a major Moldovan banking fraud. They have been at the heart of a major corruption scandal in Latvia involving the nephew of Uzbekistan’s President Islam Karimov. They have been used to run international mail frauds, including that of a French psychic who has been targeting vulnerable elderly people with offers of spiritual insights for significant amounts of cash. They are involved in a $1 billion copyright infringement case that is taking place in the United States. They have been involved in criminal activity such as setting up paedophile websites and raising money through such horrible activities. The list goes on and on. SLPs, and other limited partnerships to some extent, have been utilised as a way of hiding billions of pounds of criminal money. Often that money does not necessarily come here, as we find it in tax havens. The legitimation of a UK or Scottish limited partnership is used as a means of hiding the beneficiaries of such criminal activity.

For those reasons, I am particularly grateful that the Minister has been willing to speak seriously about this. He has done more than any other Minister to move the Government to respond to some of our concerns, so why did I table new clause 10? I did so because SLPs and limited partnerships are based on a 1907 Act, of which probably few people are aware, that amended the Partnership Act 1890, of which even fewer people are aware. By some chance, I sit on the Regulatory Reform Committee, which is so popular that in December it held its second meeting since I joined it in January 2016. Why did we have our second meeting in December? Because we were told that the Treasury was introducing a legislative reform order. And what was that legislative reform order for? At the same time as the Government announced a much-welcomed review of limited partnerships, the Treasury sought to create a new form of limited partnership—private fund limited partnerships —not on the Floor of the House, but through a device that is supposed to be used only for non-controversial matters of legislative reform. I can hardly think of anything more controversial than a mechanism that has been used for international criminal assets and money laundering, but I have even greater concerns.

I will have to leave the debate in about an hour to attend a meeting of the Regulatory Reform Committee to take evidence on the Treasury’s proposals—[Interruption.] I hear Members suggesting they are jealous, but I am sure that they are not. Under the proposals, there are four areas with which even SLPs have to comply that these new private fund limited partnerships will not. For example, the jurisdiction in which the general partners are registered no longer needs to be divulged. The registration numbers of the general partners no longer need to be divulged. The jurisdiction in which the limited partners are registered no longer needs to be divulged, and the registration numbers of the limited partners, if they are corporations, no longer need to be divulged.

Not only are we creating a new form of limited partnership, but we are doing so with considerably less regulation than is in place for existing limited partnerships that have been a front for international criminality. As I have such great faith in the Minister for Security, our new clause would require the Home Office to conduct a review before the Treasury introduces any legislation to create a new form of limited partnership so that we can ensure that those limited partnerships will not be subject to the type of criminal abuse and illegality that we have found with Scottish limited partnerships.

There is also a broader question to be answered. Why are this Government using a device such as a legislative reform order to try to quickly establish something in such a controversial area? Surely this is something that should be fully and properly debated on the Floor of the House. That is why, when I go to the Committee shortly, I will certainly not be agreeing that the proposal makes progress. I will do my best to require that this matter is brought back to the Floor of the House so that it can receive proper and urgent scrutiny. In the light of my arguments, I commend new clause 10 to the House.

[Nigel Mills]

It is a pleasure to speak in this debate. I rise to address the new clauses that my right hon. and learned Friend the Member for Harborough (Sir Edward Garnier) spoke about and new clause 6. I will begin by speaking to the new clauses tabled by my right hon. and learned Friend and the measures tabled by the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), who co-chairs the all-party group on anti-corruption, on the failure to prevent economic crime.

The hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin) knows far more about such things than I do, and he made his argument well, but I reinforce the point that there is a strong feeling among the public, because if large companies are seen to be part of some very serious criminal activity, people are confused about why those companies and the senior people within them have not been prosecuted for those serious offences. If people look across the Atlantic, they see that America does manage to prosecute senior bankers for such offences, so they think, “We see all our banks being fined in America for being guilty of rigging various markets, yet why are no senior directors of those companies being prosecuted here? Why are those banks not being prosecuted?” That exposes the fact that our law, as the hon. Gentleman explained, has become out of date. It seems horribly unfair that the Serious Fraud Office finds it comparatively easy to prosecute very small companies and their directors, when it is clear who the controlling minds are, but that when we see far more serious offences being committed by, on behalf of, or for the benefit of much larger companies, we cannot quite find enough evidence to prosecute those companies or their very senior directors.