Economic Crime (Transparency and Enforcement) Bill

Robert Neill Excerpts

2nd reading
Monday 7th March 2022 Commons Chamber

[Sir Robert Neill (Bromley and Chislehurst) (Con)]

Thank you very much, Madam Deputy Speaker. This is an important Bill, and it is an exceptional Bill because this is not normally the way in which we go about dealing with such matters, but it is necessary. My right hon. Friend the Member for Haltemprice and Howden (Mr Davis) spoke of it as an economic warfare Bill. Sadly, there is an element of that, because a vicious and genocidal war is being waged in our own continent and, as a law-abiding country that believes in the rule of law, we have necessarily to take actions perhaps not in the way we normally would.

Some aspects of the Bill involve, for example, the removal of a proportionality test in the seizing of assets. In the case of the acolytes, fellow travellers and hangers-on of the Putin regime that is murdering people, it is perfectly proportionate to move swiftly and immediately, but that might not be true in all the other cases in which entities are held in this form. Although none of us is going to delay this Bill today, I hope that the Minister will reflect on whether the second Bill that will come along, which I welcome, may give us a better chance to look at whether that approach is appropriate as a global provision, as opposed to one that is specifically targeted in this instance. There are legitimate business grounds for why assets may be held in various forms of entities that will be caught by the Bill. We do not want to destroy our ability to do that in this country, but at the same time, we want to prevent abuse.

I also welcome what has been said about strengthening the enforcement provisions. We need to do much more on economic crime. The Justice Committee is conducting an inquiry on fraud at the moment, but we need to look at crime internationally as well. Our reputation both as a financial centre and a legal centre depends on that, but that involves our committing the money in a way in which, for example, the United States does to a far greater degree for economic and extraterritorial matters.

The fact that, unlike us, Russia is not a country that abides by the rule of law could not have been more amply demonstrated by its non-attendance at the International Court of Justice in The Hague today. It is a measure of the regime’s arrogance that despite being party to the genocide convention and having signed up to the ICJ’s jurisdiction, it does not even bother to turn up and has the brass neck to suggest, wholly falsely, of course, that it is defending Russian speakers against genocide. It is a measure of the perversion that has taken over the Russian state. Regrettably for those of us who love Russia’s culture and history as a European nation, under Putin it has become almost as much of a rogue state as the mullahs have made Iran. We therefore have to act with exactly the same rigour to destroy it economically. That will bring awful pain to the people of Russia, which is terrible, and it will bring a considerable amount of pain to many people in this country and beyond. Sadly, however, that is the price that we will have to pay to ensure that a genocidal, homicidal dictator, who has clearly never changed from being the KGB torturer that he once was, will not be able to blackmail us going forward.

On the Bill’s specifics, I hope that the Minister will look at some of the amendments, including a number of important technical amendments that have been suggested by the Law Society and which merit being looked at in Committee. We must not forget, for example, that those who have significant control are not necessarily the same as those who have beneficial ownership. There is a risk of a loophole that needs to be tightened up. It is really important, therefore, that we ensure that the various registers that are now being created align sufficiently so that we actually get to the economic beneficiaries of the trusts, rather than the intermediaries who might be dealing with it. That is where the oligarchs, in this case, and the criminals are likely to be.

It is also particularly important to look at the timeframe. Six months for registration seems needlessly generous. Equally, 28 days is too short, because we must bear it in mind that legitimate businesses will hold their assets through these entities and formulas, and we need to give them time to register. I say to the Minister that if, in the other place, there was an amendment that brought that time limit down to three months, many of us think that that would strike the balance very sensibly. That would enable legitimate businesses to register properly, but it would still put the pressure on the villains who we would really get to. I hope that the Minister will think about that.

Subject to that, I commend the Bill to the House. This is actually a fight not just for democracy and decency, but for the rule of law, and that is why we must get the Bill through.

--- Later in debate ---

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to speak in this debate and to follow the right hon. Member for Barking (Dame Margaret Hodge), whom I join in welcoming this long-delayed Bill. I think I have co-chaired the all-party parliamentary group on anti-corruption and responsible tax for nearly seven years; as she says, we were promised this measure six years ago. The irony is that at the time the Government were ahead of the curve, and probably ahead of the world, in coming up with such measures. If we had only had these rules in place and these disclosures available to us now, we could have moved so much faster in this crisis. I wholeheartedly welcome them today and support them all.

I just want to take a few moments to disagree slightly with some comments that have been made. The transparent register of overseas entities is not about economic warfare; it is a perfectly normal and necessary measure to ensure that we have a clean economy free of dirty, criminal and corrupt money. It should not be seen just as a measure for this crisis, but as a measure for life. It is needed for our economy, and it is not intended to be an attack on investors who are perfectly normal and acting properly. It will catch Americans, Australians, Canadians and Europeans; anyone who has property in this country owned by a company will be caught. They are still welcome to come here. We want them to come here, invest here and create jobs.

What we do not want is dirty, corrupt money. People involved in that can sling their hook—they can go. That is what these sanctions are aimed at correcting. People who are coming here to invest have nothing to fear if they are doing nothing illegal—that is what we want. Please, let us not pretend that this measure, which has been planned as an anti-corruption measure for all these years, is solely one for this crisis. I hope it helps in this crisis and that somehow we find some property owned by an oligarch or two that we would not otherwise have found, and we can freeze or sanction it. I suspect that this measure will not make much difference on that. If we do not know what assets they have got already, through our intelligence services, and we cannot get those sanctions and freezes in places quickly, I suspect that having a register in place in a few months’ time, which these people may or may not comply with, is not going to make a lot of difference.

[Sir Robert Neill]

My hon. Friend makes a good point: this is not just for this crisis. He will have seen the excellent article in The Spectator by Professor Richard Ekins, where he and Sir Stephen Laws, the former Junior Treasury Counsel, suggest that the best route for this crisis would have been a stand-alone Bill naming all those to be sanctioned in a schedule and with power for that to be added to. That is not what we have, so the reality is that we are going to have to get this Bill through and perhaps think about that better approach, should such eventualities arise again in the future.

[Nigel Mills]

I agree with my hon. Friend, but that matter is beyond my expertise or interest; my interest is in anti-corruption measures here. I welcome the fact that we have this Bill, but I am nervous that the speed of its drafting and some of the technical provisions may lead these provisions not to work as they should. The people we are most after are not the innocent businessmen who have chosen to arrange property or a company here; we are after the really dodgy rich ones who will use every bit of machinery they have got and may well be able to find some loopholes and ways of exploiting this.

The Bill requires the registration of the beneficial owner of the company that owns the property, not the actual property itself. That may sound like a distinction without a difference, but I suspect that ways can be found, through nominees and careful shareholdings, where those two things can be distinguished. So we need to watch carefully as we bring these provisions in to ensure that they are hitting the people we think they should hit and getting the disclosures we want. If we are not getting them, we need to come back quickly and tighten the rules, changing the provisions and tweaking them. We must not just think, “We have done this today; that’s it. It doesn’t matter. We have got a few thousand registrations.” All the innocent ones may be there, but we may not have got the important ones. That is where we need a huge culture change in the City, in the government and in the law enforcement agencies, where people know that Parliament is now serious in saying, “We mean these provisions to have effect. We want you to enforce them, and we want them to work and to be resourced.” We do not want them on the statute book only then to be ignored, with their being a bit of a deterrent and it not mattering whether they are used or not. We want this stuff to make a huge culture change to our economy and we want it to happen quickly. I commend the Bill and I look forward to the rest of its stages.

Economic Crime (Transparency and Enforcement) Bill

Robert Neill Excerpts

Committee stage
Monday 7th March 2022 Commons Chamber

With that, I am grateful for the Committee’s attention, but really we need to do all these things in a timely fashion and some of us are just phenomenally frustrated that it has taken us so long to get here.

[Sir Robert Neill (Bromley and Chislehurst) (Con)]

I am afraid that I am now going to reduce the level of excitement by returning to some rather technical and boring but I think important legal details of the Bill, because we all want to make sure that this works in practice. I am concerned that, despite what is in the Bill itself and in a number of the amendments, there still seem to be two important areas of potential loophole.

Can I start with the definition of registrable beneficial owner, largely in schedule 2? The concern that I have, and I am fortified by the briefing I have received from the Law Society of England and Wales—it mirrors the briefing that I suspect the hon. Member for Glasgow Central (Alison Thewliss) had from the Law Society of Scotland—is that there is a gap here, as the impact assessment of the Bill sets out. What has been done here is to take the existing domestic registry of persons of significant control and seek to build on that, which is fair enough, but it does not go far enough.

The problem that we have is this. There is a common misconception that analysing who the person of significant control of an entity is, is the same as analysing who the beneficial owner is. They are not the same and the objective we need to get to is: who is the economic beneficiary?

The position is this. The PSC regime seeks to establish ownership certainly, but only ownership in the context of leading to the control of the relevant entity. It does not seek to establish who the ultimate economic beneficiary of that entity is. So we could have a situation where the register disclosed the ownership of, let us say, a corporate group, but it would not then disclose who in fact are the people behind the corporate group. It might disclose individual named nominees, but it would not then disclose the people on whose behalf the nominees hold the property. There might in fact be no registrable person—no legal entity that holds significant control—so nobody would be shown up in that.

I urge the Minister to pay attention to what the Law Society suggests to get around that and to ensure the economic beneficiaries of the property are captured—the oligarchs and their families; they are the economic beneficiaries we want to get to. The trust and its beneficiaries—this will invariably be in the form of trusts of one kind or another—should also be registrable under regulation 45 or 45ZA of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. That is a mouthful, but it would do the job. The whole point is that then we would be able to capture the beneficiaries. That is missing from the Bill as it stands and I do not think any of the current amendments deal with that point. I hope the Minister, as he is taking things away, will take that away urgently in order to plug the loophole.

That relates to the relationship between the scheme under this Bill and the scheme of the trust registration service because that same set of 2017 money laundering regulations works in conjunction with the trust registration service: that is the body through which entities meet their legal obligation to register under those money laundering regulations. Express trusts are covered by that if they are UK trusts. Non-UK express trusts are obliged to register under the 2017 regulations if they hold UK property, or derive income from a UK asset—again, that is the sort of situation of the oligarchs that we are looking at.

We must be very clear in setting out which overseas trusts are going to be caught by the legislation. Are they under the regulations or under the Bill? If we extend the definition across, we might well cover that. It is also suggested—I think there is merit in this—that guidance should be issued to honest practitioners in this field setting out which entities are in scope of the scheme and which are out of scope. That has happened in other forms of tax legislation and will be a sensible idea to take away.

The final point I make in relation to that guidance is that that would enable the Secretary of State to give better indication as to interpreting the meaning of “significant influence or control” within legislation. We have got who the beneficial owner is, capturing the economic beneficiaries, and who the person of “significant influence or control” is. We ought to make tally with the PSC regime as far as we possibly can. The logical way to do that is by introducing an amendment to introduce the same provisions we are introducing here into section 790C(7) —I am sorry, again, about the length—of the Companies Act 2006. That would enable us to bring in the equivalent PSC regimes for limited liability partnerships —again there is a gap here, as I read it—unregistered companies, and also Scottish partnerships, which have been referred to by Opposition Members.

Those are gaps that the Law Society has flagged up that could be plugged. There is plenty of time between now and next week to get that worked out. I just say this: the Government have many able lawyers—I worked with some of them when I was a Minister. Specialism in detailed trust law is not necessarily a core Government legal business. The Law Society, both north and south of the border, has access to real expertise in this field, objectively. It has written to say that it would be very happy to work with the Government in helping to fine-tune the legislation. I hope the Government will think about that. Not all wisdom purely comes from within Whitehall and we ought to look to experience in the sector to take that on board.

I hope those suggestions will improve a Bill that is well intended, but we want to nail everything down as much as we can. In that spirit, I hope the Minister will consider them.

[Layla Moran]

I rise to speak to the amendments in my name: new clause 5 and, in particular, amendment 4, which is supported by the cross-party group that has been trying to get our ducks in a row. The Bill is welcome and timely. It is long overdue and we are all trying to pull in the same direction, but it is a bit of a Swiss cheese Bill. Much in the Bill is good, but there are a lot of loopholes, which we are seeking to close.

I will single out new clause 29 in the name of the right hon. Member for Haltemprice and Howden (Mr Davis) and the amendments relating to clause 31 that were tabled by the hon. Member for Rhondda (Chris Bryant). I heard what the Minister said about “Economic Crime Bill 2”. It sounds like the promise of the good sequel after the film—it is coming and it will be even bigger and better, with bigger stars than the first one—but we all know how sometimes part 2 can be a flop. I sincerely hope that part 2 will come sooner. I remember when the Minister was on his feet claiming that this Bill would wait until the next Session, and here we are debating it now. I welcome that. I wonder whether we might want to try to do that with part 2 and part 3 and get the sequels out as quickly as possible because each one will be pretty meaty and need time.

New clause 5 asks the Government to release the names of those who in the last year have been lobbying the Government against these measures. That is important because it helps on the SLAPPs amendments, which I wholly support. These people need to now be named and shamed. It is not enough to name the oligarchs; we need to name the PR companies and the lawyers—those who seek to water down or create loopholes in this legislation. I tabled a parliamentary question to the Foreign, Commonwealth and Development Office—it was passed to the Home Office—asking it to provide and publish the names of those who had been doing that. The answer was:

“The information requested could not be obtained without disproportionate cost.”

Forget about the cost—do the Government have the list? If they do, those people deserve to be named and shamed, like in the speech by the hon. Member for Isle of Wight (Bob Seely) the other day. I hope that “Economic Crime Bill 2” will have all the necessary powers to clamp down on that activity.

Amendment 4, like amendment 26, looks small. It is very small; it just deletes a line in clause 18. It relates to the bit of the Bill that talks about exemptions. There are three ways in which an individual can become exempt if the Secretary of State wants them to be. Two of them are reasonable. They are

“in the interests of national security”

and

“for the purposes of preventing or detecting serious crime.”

Absolutely fine. Some people think we should just get rid of them all, but I can live with those. However, the third, in clause 18(1)(b), says that the Government can exempt an individual if satisfied that it is necessary to do so

“in the interests of the economic wellbeing of the United Kingdom”.

These are high net worth individuals. Many of them own companies that potentially employ thousands of people in this country. I do not understand why the Government want to give themselves that headache. Why do they want these enabling lawyers to look at clause 18(1)(b) and say, “I’m going to lobby Government to exempt me under 18(1)(b)”?

It is not just a loophole. People keep talking about horses bolting after the gates have been closed. This is hitching a coach to the horse, putting the oligarchs in it with their lawyers and allowing them to drive their way through the Bill. It makes no sense at sall.