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.