DRAFT MONEY LAUNDERING AND TERRORIST FINANCING (AMENDMENT) REGULATIONS 2022

Peter Grant Excerpts

Monday 7th February 2022 General Committees

[Peter Grant (Glenrothes) (SNP)]

It is a pleasure to see you in the Chair this afternoon, Mr Robertson. I commend the hon. Member for Hampstead and Kilburn on a powerful speech. I will not repeat many of her points, but I must pick up on the Minister’s use of the phrase “hostile environment”—it is still an untasteful phrase for many people on both sides of the House, given its connotations about being hostile to people rather than to crime.

In all good faith, the Minister says that that the Government are making the United Kingdom a hostile environment for dirty money and money laundering, but that is not what independent commentators, either in the UK or elsewhere, are saying. Will he explain the Government’s evidence that they are correct and that everyone else has got it wrong? It certainly seems to me that a lot of people are eyeing up London in particular, and other parts of the UK to some extent, as an attractive place to hide their money. Remember: money does not have to be hidden forever; it can just be kept for a limited time within the confines of a legitimate organisation. Where it goes after that can always be explained away.

I agree that any legislation around public disclosure must strike a balance between an individual’s right to privacy and the need for public authorities to protect all of us against serious and organised crime. Consider the seriousness of the crimes we are talking about here. We are not just talking about somebody pilfering a couple of hundred quid from the cash box; we are talking about people who are stealing literally billions of pounds and then using that to fund acts of mass murder either in the United Kingdom or elsewhere. This is a genuine, serious threat to us all, and that means, sadly, that the balance of rights may come down a bit further on an authoritarian “requirement to disclose” regime than we would all ideally like.

I regularly get stuck at the airport going through security checks; I have missed flights because I turned up with an hour to get through security and did not make it. I do not like it, but when we think about the alternatives, perhaps missing a flight sometimes is not such a bad idea. Perhaps not getting the right to the degree of privacy that we might like is something that needs to be considered sometimes, if it means that the real thugs cannot hide behind that right to privacy.

My biggest concern with the Government’s approach to money laundering and terrorist financing is that they are going far too slowly. They are not doing enough. A lot of what should be getting done just does not seem to be getting done at all. The hon. Member for Hampstead and Kilburn has already mentioned some of the compelling evidence that has been presented to the Government in the past that does not seem to have gone anywhere.

On a couple of occasions in the Chamber recently—once during a debate on the Finance Bill and once, I think, during an urgent question—the Government have attempted to explain why their economic crime Bill has not been seen yet. At one point, they claimed that there was not enough parliamentary time. Two hours after they said that, the business of the House collapsed more than half a day short of its allotted time; there was not enough business to keep Members talking for the full day. That was the second time that that had happened in the space of three weeks, and it suggests to me that there is not a lack of parliamentary time but a significant lack of political will.

I am going to get the Minister in trouble by keeping on saying this, but I think he is genuine; I think he genuinely and sincerely wants that legislation brought forward, but it is clear that there are powerful forces at work behind the scenes in this Government to prevent that. We can only speculate about why that might be, but when we look, for example, at the comments from the Centre for American Progress, which said that uprooting

“Kremlin-linked oligarchs will be a challenge given the close ties between Russian money and the United Kingdom’s ruling conservative party,”

we really have to wonder what kinds of forces are at work behind the scenes preventing these reforms from coming into place.

While the Minister correctly points out the registration process that is required for a lot of kinds of trusts, the registration requirements for companies are non-existent. There does not need to be a blind trust for someone to be able to set up a network of legitimate-looking companies in the United Kingdom and use them to launder money to their heart’s content. As my hon. Friend the Member for Glasgow Central (Alison Thewliss) pointed out recently, there are cases where people have been able to be registered as directors or as people with significant controlling interests in companies in the United Kingdom when they have not been born yet. That is the degree of examination that goes into checking who is setting up businesses in the United Kingdom.

We have to remember that although a lot of well-informed commentators understand that having a company registration number in the United Kingdom means nothing, a lot of innocent victims do not. They think that if a company is registered at Companies House, it means something—it is a guarantee of integrity—in exactly the same way as a lot of innocent victims thought that the Financial Conduct Authority logo on somebody’s literature meant that they could be trusted, when all too often it proved that they could not be trusted at all.

Finally, let me pick up on something else that the hon. Member for Hampstead and Kilburn said. I have a concern that if someone—especially one of the organisations with an excellent track record in identifying fraud and corruption in our financial services sector—has to prove that they have evidence of misconduct before they are allowed to look at anything, it is a bit like the police saying, “We’re not going to investigate that reported crime because there’s no evidence that a crime was ever committed.”

I have raised a number of individual cases directly with the Minister, and he has been very supportive of my attempts to get to the bottom of them. No offence to him, but I have had a lot more information, and often a lot more direct help, provided to me and my constituents by non-governmental organisations such as Transparency Task Force. That is not because the Minister does not want to do it; it is probably not his job. However, determined, well-informed private individuals —especially those who have worked in the industry before, and sometimes those who helped to bury the bodies and know where they are likely to be—can be very effective at weeding out the information that criminals have tried to keep hidden. We need to be very careful about preventing those people from being able to go about the work that they have been doing for so long.

Clearly, there must be protections for people’s right of privacy. The right of privacy in a trust is fair enough as long as people do the things that they do not bother to do when setting up a company—for example, proving that the child for whose benefit the trust has been set up actually exists. There are people who are registered as company directors at Companies House who do not exist. As long as that continues, regulations such as these, welcome though they might be, are a drop in the ocean of fraud that threatens to engulf the City of London.

--- Later in debate ---

[John Glen]

I will endeavour to cover the points raised by the hon. Members for Hampstead and Kilburn, for Glenrothes, and for Wallasey. I acknowledge that a number of those points refer to the broader canvas of economic crime and I shall try to deal succinctly with those, respecting the fact that the Treasury Committee published a report last week, on which the Government will reflect and respond in due course. There is an obligation and, indeed, a determination on my part to bring forward a broader money laundering SI later this year.

It is the Government’s view that this amendment will assist in ensuring that the money laundering regulations operate as effectively as possible and continue to protect the financial system from the threat posed by money laundering and terrorist financing, and that will allow the UK to continue to play its part in the fight against economic crime.

The hon. Member for Hampstead and Kilburn mentioned several points made by Transparency International and other organisations about access to trust information. The SI will extend the existing exclusion for insurance trusts to exclude all healthcare policies in trust and will clarify how the exclusion applies to certain retirement policies and life policies with temporary disablement cover. The SI also adds a new exclusion for trusts created in the course of opening child bank accounts. Indeed, the regulations set out 23 different exclusions: this is not an exhaustive list, but it includes pension trusts, insurance trusts, registrable charitable trusts and trusts meeting certain legislative requirements.

When the trust service was set up, the register of beneficial ownership of trusts—the trust registration service—was established five years ago. We have now seen 200,000 taxable trusts registered. It is the case that it is perfectly legitimate for some of those trusts to be excluded. There is a matter of the legitimate privacy for some of the trustees, but that does not prevent law enforcement or regulated entities from being able to access them.

I think that there is a question here about the IT service. The hon. Members for Wallasey and for Hampstead and Kilburn mentioned that. It is clear that HMRC has had an enormous task over the last two years to deliver some pretty complex interventions. The regulations simply give an extension on those registration deadlines. I am not convinced that there is an enduring IT problem in HMRC; there is an administrative necessity consequential to a particular failure.

The hon. Member for Glenrothes picked me up on the use of certain language. It was not my intention to be provocative, but it is my sincere wish to convey the absolute frustration that we feel and our desire to shut down loopholes that allow bad actors to enter our financial system.

[Peter Grant]

I do not have an issue with the Minister’s use of the phrase “hostile environment”. I was making the point that, as the phrase has been previously used in respect of people whom we should have made welcome, it loses a lot of its impact when used in its correct context.

[John Glen]

That is a reasonable observation. I think, however, that the hon. Gentleman’s frustration echoes mine; I have been in this job over four years, and I was before the Treasury Committee on 29 November referring to some of these imperatives, which had been thrown into focus by the FATF report in December 2018. We need to make further interventions. I cannot prejudge the outcome or the business managers, as I think the hon. Member for Wallasey knows, but the point is that this is an absolute imperative from where I stand in the Treasury. We do need this legislation to deal with the broader issues that are outstanding.