Economic Crime

Pat McFadden Excerpts

Thursday 2nd December 2021 Commons Chamber

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

I am very grateful to the hon. Member for Thirsk and Malton (Kevin Hollinrake), my right hon. Friend the Member for Barking (Dame Margaret Hodge) and all the all-party parliamentary groups that are responsible for securing this debate today. What a great warrior my right hon. Friend has been on this issue over the years.

This issue matters particularly in the United Kingdom because we have one of the biggest financial sectors in the world. That is not only a great asset to the country in terms of wealth, employment, tax revenues and so on, but it gives us an opportunity and a responsibility. It is an opportunity, because how we regulate that can set an example around the world, but it is also a responsibility, because if our standards are too lax, and we allow the UK to be an easy home for illicit finance, that also sends a signal of a very different kind around the world.

As my right hon. Friend the Member for East Ham (Stephen Timms), the Chair of the Work and Pensions Committee, said, every day our constituents are assailed by fake texts, emails and scams trying to con them out of their own money. It is extremely difficult for our constituents to know what is genuine and what is not when receiving such communications. That is why it is essential that we act and use the opportunity of the online harms Bill to crack down properly on this kind of consumer fraud. At the moment, that is not the plan. There is a gaping hole in that Bill, and the first thing I want to put to the Minister is to accept the strength of feeling across the House that it has to be strengthened.

With the release of caches of documents, such as the Pandora papers and their predecessors, the UK and its overseas territories are far too often mentioned as a place where illicit funds can find a home.

We are about to go into a winter in which people will face not only rising prices but rising taxes, but time after time, we see reports that billions of pounds of illicit funding are washing through our country. The contrast between the obligations of those who struggle to make ends meet and those who see our property laws and institutions as vehicles for laundering money could not be more stark. It is an issue not just of financial probity and tax revenue—though it is certainly that—but of national security and should be treated as such.

If we are a welcome home for the proceeds of looting and kleptocracy, what does that say about the rule of law or our standing in the world? The Prime Minister’s recent performance on the issue of standards in this place suggests that he has scant regard for rules and responsibilities, but we already knew that. We know what he thought of the rules last Christmas when he told the rest of the country that they could not gather, as there are now reports of one Christmas party, maybe more, while the rest of the country was trying to obey the rules. The fight against money laundering and fraud is too important to be let down again by the belief that there is one rule for them and another for everyone else.

It is not an easy battle, because we are dealing with very rich people who will employ the most expensive lawyers in town to intimidate those who criticise them and try to silence them though financial exhaustion. We should pay tribute to the brave investigative journalists who have written about such things to expose what is happening, knowing that they will be aggressively pursued by legal actions designed, at best, to silence them and, at worst, to bankrupt them. But however rich the people involved are, we in this House can still act. We can decide not to sit back and let it happen. The measures advocated in this debate command strong cross-party support, so why are the Government not making more use of that support? Where is the urgency that hon. Members have called for?

Let us consider some of the individual measures that have been discussed. The Registration of Overseas Entities Bill has been on the stocks for years, but it sits in the sidings, not moving. We are approaching the fourth anniversary of when it was first promised, and it is more urgently needed now than then, yet when asked about the timescale, Ministers still wheel out the time-honoured bromide of “when parliamentary time allows”. They have had four years of parliamentary time, which is more or less a whole Parliament.

The legislation could play an important role in revealing the true nature of asset ownership, particularly the expensive London properties beloved of those who want to store their wealth here. Why will the Government not bring forward the Bill? Why does it keep being put on the back burner? Who in Government keeps saying no to it?

Shell companies are at the heart of mechanisms to hide the true nature of wealth—or perhaps more accurately, layer on layer of shell companies whose sole purpose is obfuscation. We have heard some figures about the registration of companies, including that there are 4,000 owners under two years old and that five beneficial owners control more than 6,000 companies. Companies House is a registrar that lacks the powers to do any serious policing or regulating of who registers companies. Plans for reform have been announced, which the Minister will no doubt go through in a few minutes, but they have not been implemented.

The aim should be clear: to ensure that Companies House is a guardian of propriety, rather than simply a library of data where there are no real checks on the quality of that data. No legitimate business owner has anything to fear from that kind of reform, but the people registering thousands of companies for the purpose of obscuring real ownership do. I urge the Minister not only to say what is planned for Companies House but to ensure that it is actually implemented. The sponsors of today’s debate rightly put Companies House reform at the heart of the fight against money laundering and fraud.

What of the Intelligence and Security Committee’s report on Russia? Where is the Government’s response to the measures advocated in that? Here there is not even a pretence of action. In fact, the report said, “If you’re determined to look in the opposite direction, then perhaps it’s not a surprise that you haven’t found anything.” The Government keep looking away in the hope that this issue will go away, but it will not.

Two weeks ago, the shadow Security Minister, my hon. Friend the Member for St Helens North (Conor McGinn), wrote to his opposite number asking what checks there had been on the almost £2 million of funds from Russian donors to the Conservative party. Does the Conservative party ask any questions at all when receiving this money? Why do Conservative Members think that their party has been such an attractive destination for this money, and what is it doing to Government policy? For example, who is there left in the Business Department who can still take a decision on the Aquind pipeline? How many Ministers have had to recuse themselves either because they have been funded or because they have already pronounced on the impending decision?

The third element called for today is greater corporate responsibility when it comes to money laundering and fraud. This already exists for tax evasion, for example. A company could not get away with saying, “Well, we were looking the other way—we didn’t know” when it comes to tax evasion. This was debated during the passage of the Financial Services Act 2021, which went through the House this time last year. Of course, any new corporate liability laws have to be carefully thought through, but the law should not act as an incentive for chief executives and senior executives in companies to claim ignorance about what is happening in their own organisations. We saw that time after time during the LIBOR scandal when these titans of the finance industry testified one by one that they had no idea what their traders were up to. The question facing the Government is: if corporate responsibility is right for tax, why should it not be right for fraud?

Underlying these specific points is a broader issue that should focus our attention. A number of times the Chancellor has said that he wants to put competitiveness at the heart of post-Brexit financial regulation. Having hung the financial sector out to dry when negotiating the Brexit deal, the Treasury now dangles the consolation prize of deregulation in front of it—the “Crackerjack” pencil for cutting off market access from the European Union—but at what price? Regulation was changed in the wake of the global financial crisis right across the world to protect the public in different countries, and the consequence of the Chancellor’s post-Brexit search for a consolation prize for deregulation should not be to put the public at greater risk. What kind of signal is it to send around the world to say, “Come to Britain because we want to make the referee weaker”? That is not even a signal the financial sector itself wants.

New fields are emerging. Cryptocurrencies have grown hugely in recent years. That has not been discussed much this afternoon, but it is hugely important. Their growth poses a genuine challenge to regulators and central banks right around the world. Where do the Government stand on the regulation of cryptocurrencies? Is it the case that crypto exchanges are being encouraged to base themselves outside the country so that we do not have to face up to these regulatory questions and responsibilities? Washing our hands of this issue is not good enough if the result is that those exchanges are based abroad and are beyond our reach in regulatory terms, without its making any difference to their ability to operate in the UK market. We have to be alive to the dangers of fraud and money laundering through new methods and innovations, and regulation has to keep pace with these market innovations. Can the Minister assure the House that the Government are telling the financial regulators that crypto exchanges that operate in the UK should be regulated in the UK? Is that the Government’s position?

This is an important debate, and it has shone a light on the inadequate efforts being made to protect the country from being seen as an easy place to store or to launder illicit finance. Despite the persistence of the problem and all the words said about how serious it is, the Government have dragged their feet on implementing measures that could command cross-party support. This is too serious an issue for that approach to continue because, as I have said, it is not just a matter of money; it is a matter of national security. It should be treated as such, and that is certainly the approach the Opposition take to the issue.