Sanctions and Anti-Money Laundering Bill [Lords]

Paul Sweeney Excerpts

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

[Helen Goodman]

My hon. Friend has brought precisely the point to the House in highlighting that unfortunate episode.

Registers have been introduced in some of the British overseas territories, but they can be accessed by the authorities in London only when the authorities have a reason to be suspicious. The inadequacy of that approach was demonstrated by the publication of the Panama papers and the Paradise papers. According to the Guardian investigators, the law firm Mossack Fonseca, operating out of Panama, acted for 113,000 companies incorporated in the British Virgin Islands, which hosts 950,000 offshore companies. That is a country with a population of 30,000. This is public interest journalism at its best—fearless, determined and forensic. Had it not been for the excellent investigatory journalism, we would not have known that Britain’s high street banks processed $740 million from a vast money-laundering operation run by Russian criminals through anonymously owned firms, nor that Mukhtar Ablyazov, who fled Kazakhstan in 2009 after $10 billion went missing from the bank he chaired, had a Cayman Islands trust set up by law firm Appleby.

Significantly, HMRC has been able to use the information revealed in Panama and Paradise to open civil and criminal investigations into 66 people and pursue arrests for a £125 million fraud, tackle insider trading and place dozens of high net worth individuals under review. Imagine how much more effective it could be if transparency were the rule and not the exception.

[Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)]

My hon. Friend makes a good series of points about the nature of the British overseas territories and Crown dependencies. Given that the Bill considers the whole nature of our governance structures after Brexit, does she agree that we should look in a broader sense at the curious structure of British overseas territories and Crown dependencies? We should perhaps follow the example of France, which has incorporated its overseas territories into its metropolitan country and given them a democratic place in its legislature. We could consider the same thing.

[Helen Goodman]

My hon. Friend is right that the situation is complex—we have one legal regime for the overseas territories and another for the Crown dependencies—but I think that that would be beyond the scope of the Bill.

The all-party parliamentary group on responsible tax, led by my right hon. Friend the Member for Barking (Dame Margaret Hodge), has been pursuing this agenda energetically for several years now, and across the House, Members want effective action.

Another scandal is the use of London property by oligarchs, corrupt officials and gangsters from across the globe. I am talking about people like Karime Macías, the Mexican wife of the former Veracruz Governor Duarte. He has been imprisoned and charged with corruption, money laundering and involvement in organised crime. His years in office saw a spike in disappearances and murders, while she claims to be a fugitive in London.

When I was young, if you drove through Chelsea at night, it was full of light because people actually lived there. Now, swathes of London are pitch black, as properties are bought simply as money safes. Meanwhile, in the outer boroughs, which the Foreign Secretary never visits—

--- Later in debate ---

[Alison Thewliss]

I agree. That is the point I was trying to make, fairly badly I suppose: how long do we leave it? Has it been five years with no sign of anything, or five years with some sign of something? We need more conversations to see exactly where things are, but I am keen to support the right hon. Lady’s amendment.

There is slightly more concern about overseas territories such as the British Virgin Islands and Bermuda. When we look at the extent of the Panama papers and the Paradise papers, we cannot fail to be deeply concerned by the extent of nefarious transactions, out-and-out theft and money laundering, particularly when it involves, as other Members have said, the siphoning—the guzzling —of funds from countries whose populations can least afford it. We should be deeply concerned about that, and there seems to be little indication that they will comply at all. Perhaps there is a different approach from the Crown dependencies and the overseas territories on how willing they are to comply with what has to be done to make things transparent and open.

Moving on to part 2 and clauses 43 and 44, on the progress towards beneficial owners of overseas entities. This is very encouraging, but again the thing with the Bill is that action is required. Action is required to check up on all these companies and registrations. Action is required on enforcement and prosecution, and enforcement action requires agencies, intelligence, people and boots on the ground to make sure that it is done. It is fine to have law, but if we do not have anybody to enforce it, there is absolutely no point at all.

Scottish limited partnerships are a particular example of where things are not being enforced. This was bequeathed to me by Roger Mullin, and I am very grateful. It is estimated by Richard Smith and David Leask, who have been working hard on this issue—hon. Members will have seen some of David’s reports in The Herald—that an estimated 20,000 to 28,000 SLPs are of concern. The Herald recently reported that a former president of Peru has been accused of taking £4 million of bribes that have been funnelled through a shell firm based in Scotland. These things should be checked up on and enforcement action should have been taken, but SLPs have become a cover for all manner of murky and dubious behaviour.

As Transparency International and others have said, the missing link in all this is Companies House, because it does not have the duty to refuse a company’s registration; it has to register the company. It does not check up on whether it is legitimate, or whether the people who are registering it actually exist, and it is less compliant than the agents who use it, so there is no benefit to someone going through an agent if they can go through Companies House and avoid all the scrutiny. We have an opportunity in the Bill to close that loophole, because for me, Companies House is ignoring its money laundering duty.

There are wider concerns about shell companies. I invite the Minister to look at New Zealand, which was in a similar situation. However, its regulations have seen a near eradication of its 5,000 shell companies, which were registered to only about a dozen addresses in New Zealand. Part of the solution was a requirement for a New Zealand-based director, which made a huge difference almost overnight.

[Mr Sweeney]

Another interesting example from the recent Labour Government in New Zealand is the idea that they could ban the overseas ownership of property. Given the huge inflationary pressure in the UK housing market, usually from the opaque overseas ownership of UK property, perhaps we ought to consider that measure in this country as well.

[Alison Thewliss]

Yes, that would be a very useful addition. The Secretary of State did not answer the questions on the fifth money laundering directive: how it will be transposed; how it will be scrutinised; if there is a transitional phase; what that transition will look like; how we will prevent any loopholes; and how we will make sure that criminals do not exploit that transition.

Sanctions and Anti-Money Laundering Bill [Lords]

Paul Sweeney Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 1st May 2018 Commons Chamber

[Sir Alan Duncan]

I am grateful to the hon. Lady. I am hoping for a similar response on other parts of the Bill as I proceed gingerly through the new clauses and amendments that we are discussing today. I hope that, when I proceed gingerly, no one can see that I am here at all.

Opposition amendments 31 and 32 would insert a purpose into the Bill to allow sanctions regulations to be made for the purpose of preventing, or ensuring accountability for, a gross human rights abuse or violation. As the hon. Lady has already suggested, however, our amendment 10 would add a similar purpose, so I sense that we have found common ground here. Also, just to make the record clear, Opposition amendment 33 would define what constitutes a gross human rights abuse or violation on the face of the Bill. Government amendment 13 provides a similar function through reference to a definition already existing in other legislation, as I have just explained, which is preferable for maintaining a tidy statute book. I therefore hope that our amendments meet the goals of the hon. Lady’s amendments. I sense that they do.

Setting aside a technical assessment of the Bill, I think that, on Magnitsky, we have got there. This is a very important moment for the House, and for the defence of human rights that the United Kingdom is always proud to show. All parties have come together to find consensus on ensuring that the proper legislative powers are in place to address gross violations of human rights. That is a matter of deep concern to Members on both sides of the House, to many people outside and internationally. If the amendments are agreed to today, as I am sure they will be, we can truly say that we have spoken together, united in favour of human rights, and that the voice of the United Kingdom sits alongside other countries that have adopted such legislation, and we can score it as a great achievement of which we can all be proud. Once again, I pay tribute to those who have so relentlessly and persistently campaigned for it. It is not just a triumph for the House; it is a personal triumph for them. In saying that, I look once again to my right hon. Friend the Member for Newbury in particular.

Turning to Scottish limited partnerships, we recognise the concerns that have been raised, and I assure the House that the Government are committed to making further progress. SLPs and other forms of limited partnership play a vital role in the asset management sector for the funding of asset-based contribution pension schemes and for oil and gas exploration, which matters enormously to Scotland. That makes it all the more important not just that their legitimate use is supported, but that legitimate action is taken to prevent their misuse. As hon. Members will be aware, the past decade has seen a vast increase in the number of SLPs, with the growth rate far outstripping that of the number of limited partnerships established in the rest of the UK, and we recognise the concern that SLPs are being used inappropriately. Following clear evidence of certain SLPs being misused, the Government brought them within the scope of our register of beneficial ownership. Since then, the rate of new SLP registration has declined by approximately 80%, but we recognise that more needs to be done.

Yesterday, the Department for Business, Energy and Industrial Strategy published a consultation document on limited partnership reform following its call for evidence last year. The document sets out clear options for reform. The Government propose that all those registering a limited partnership would need to be registered with an anti-money laundering supervisor. They would need to carry out due diligence before establishment, with the possibility of supervisory action. That due diligence will necessarily include identifying the beneficial owners of the SLP, including its general and limited partners when they exercise control over the SLP. That addresses the substantial purpose behind new clause 19, which would require at least one of both the general and limited partners in an SLP to have an active UK bank account, and so require that they will have been subject to due diligence for anti-money laundering purposes.

Such measures would address the substantial purpose behind the new clauses on the subject. We are further consulting on how best to require limited partnerships to retain a physical presence in the UK to ensure that there is a UK link against which any necessary enforcement proceedings can be taken. Additionally, the Department for Business, Energy and Industrial Strategy is seeking views on whether all limited partnerships should be required to file an annual confirmation statement with Companies House. Taken together, the proposals would tighten the checks on SLPs, ensure that they retain a UK presence and expose more details about their workings to public scrutiny. They would not disproportionately burden limited partnerships that operate entirely lawfully, but they would go further in reducing their potential for illicit misuse.

New clause 1 would require that, where a Scottish limited partnership has general and limited partners, at least one of each must be a British citizen. That would have the unintended side effect of disrupting the legitimate uses of corporate partners within sectors, including the venture capital sector. The Government consider that the measures on which the Department for Business, Energy and Industrial Strategy is consulting will do more to bring transparency to limited partnerships and to prevent them from being misused, without damaging their legitimate usage. The Department’s consultation will be open until 23 July, and I encourage all interested Members to continue engaging with the process of reforming limited partnership structures. Given the work that the Department is leading, and the Government’s clear plan to continue reforming limited partnerships, I respectfully ask that hon. Members do not move their respective amendments in this area and that they work hard with us to ensure that we can produce an outcome with which they are fully satisfied.

[Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)]

The Minister mentioned increasing the regulation of SLPs, but a regulation from last year meant that SLPs had to register their beneficial ownership within 28 days or face a £500 daily fine. Only 43% of them have provided that information, meaning that £2.2 billion in backdated fines has accrued. When does the Minister intend to collect that money and enforce the regulations that already exist for SLPs?

[Sir Alan Duncan]

It sounds as though the hon. Gentleman is going to make a robust submission to the consultation, and I urge him to do so, because I fully take the point that if something can be required but it does not work operationally, then obviously it will not be delivered. I urge him to record what he believes are the facts and submit them to the consultation.

I express my gratitude to Members who have tirelessly continued to raise their concerns on the issue of SLPs—I can spot one from where I am standing—and I hope that what I have said today, and the content of the consultation published yesterday, provides reassurance that the Government are genuinely committed to reform in this area.

Turning to beneficial ownership in the overseas territories, as the House will now appreciate, the Government’s plan for tackling the issue had been to table a new clause, which we did, that sought unity in the House, which I believe we had a good chance of securing. The new clause sought to enhance the measures on beneficial ownership in the overseas territories but stopped short of legislating for them, thus avoiding constitutional conflict. As Members will be aware, however, some amendments were not selected today, and we of course fully respect the procedural basis on which Mr Speaker chose not to select them.

New clause 6, tabled by my right hon. Friend the Member for Sutton Coldfield and the right hon. Member for Barking (Dame Margaret Hodge), would put a duty on the Government to work with the overseas territories to set up public registers of company beneficial ownership by 31 December 2020. If they do not do so, the new clause would require the Secretary of State to prepare a draft Order in Council, aiming to legislate directly. Opposition new clause 14 would require the Secretary of State to provide all reasonable assistance to the Governments of the Crown dependencies to enable them to establish a public register of company beneficial ownership, and if, by the implementation of the European Union’s fifth anti-money laundering directive, they have not, the new clause would require the Secretary of State to take all reasonable steps to ensure that the Privy Council legislates to require each Crown dependency to do so.

The UK has strongly supported co-ordinated international action to promote beneficial ownership transparency. The UK was the first G20 country to establish a public register of company beneficial ownership and has committed to creating a new beneficial ownership register for overseas companies. At EU level, the UK went beyond the requirements of the fourth anti-money laundering directive in establishing a public register and supported the inclusion in the fifth anti-money laundering directive of a provision that will require all EU member states to have legislation in place to support publicly accessible registers by the end of 2019.

We are also committed to seeing the overseas territories and Crown dependencies take further action, and they have already made significant progress through consensual joint action. We are grateful, and we respect all the work they have done in this area. All Crown dependencies have central registers in place. Of the seven overseas territories with significant financial centres, four already have central registers or similarly effective arrangements. They are able to provide UK law enforcement authorities, on request, with access to such information, even at very short notice—it can be within 24 hours, or even within one hour in urgent cases.