Criminal Finances Bill

Roger Mullin Excerpts

Wednesday 26th April 2017 Commons Chamber

[Richard Arkless (Dumfries and Galloway) (SNP)]

Unlike some other Members, Madam Deputy Speaker, I did not make my maiden speech with you in the Chair, but I seem to have made a number of speeches in front of you, although some have been made to an empty Chamber. Perhaps, if we are both lucky enough to be re-elected, we will not be drawing the short straw during the next parliamentary term.

As the Minister said, the Bill’s passage has been widely consensual and co-operative. We have managed to work together across all party boundaries in Committee, at various meetings, in discussions with the Minister and during debates on the Floor of the House. We have reached a point at which we think that the Bill is a very decent start towards the longer-term goal of tackling and eradicating financial criminality. I think that everyone agrees with those aims. Of course, we think that the Bill could be improved, and I am sure that the Minister will be minded to agree, in theory, with the principles of the improvements that we envisage. I trust that we will work on that as time goes on.

Touching now on some of the Lords amendments, I was delighted to hear the Minister say that the threshold for unexplained wealth orders will be reduced from £100,000 to £50,000 pursuant to the submissions we made in the Bill Committee. It was gracious of the Minister to give us that credit at the Dispatch Box, and it is taken graciously. There are very good reasons why the threshold should be £50,000, and the Minister acknowledged them in his speech. The last thing we want is something in the terms and conditions—the facets and facilities—of an UWO that could be used by the criminals to get one step ahead and subvert that process. Bringing the threshold down goes a long way towards closing off the gaps for the criminals; I thank the Minister for that and am glad that this change will be in the Bill in its final form.

The inclusion of betting slips as a form of cash in the Bill is also welcome. That was a Scottish National party election pledge, and we are proud that it has been delivered in the Bill.

My hon. Friend the Member for Kirkcaldy and Cowdenbeath (Roger Mullin) has made significant political waves on the issue of Scottish limited partnerships, and special mention must go to the journalists David Leask and Richard Smith from the Herald—as acknowledged by the Minister—who have done some great investigative journalism on this subject over the last couple of years.

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

I had not intended to participate in this debate, but just want to acknowledge the co-operative way in which the Minister has responded.

[Richard Arkless]

I corroborate that: the Minister has never given any indication at any point in the process that he does not agree with the thrust of what we have been saying. It is heartening to hear that he has corroborated our position in the consultation. My only request to him—and I will take him at face value—is that he and his Department show the same energy in tackling this issue beyond the consultation period, so that we can finally get rid of the scourge of the awful vehicle of the Scottish limited partnership, which brings this place and our economy into disrepute.

The question of compelling jurisdictions to publish registers of beneficial ownership has been a hot topic during the debates on the Bill. I would have preferred a situation where we could justify persuading or compelling overseas territories to publish registers of beneficial ownership, although we in the SNP would, rightly, always stop short of allowing this place to tell another jurisdiction what it can and cannot do; clearly, that is consistent with what we believe on constitutional issues. For that reason alone, I am pleased, although not overwhelmingly so, by the new provisions in the Bill. There is a commitment for discussions and an assessment to take place in relation to the information-sharing between the territories and the UK Government. We have had good and constructive discussions with all the territories and with the Government, and they all assure us that, on a 24-hour turnaround, information can be ascertained to aid the tackling of financial criminality in the UK. That is a good and reassuring assurance, but it must be documented and proved in this House.

Criminal Finances Bill

Roger Mullin Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 21st February 2017 Commons Chamber

The wheels of Whitehall move extremely slowly. Everyone has to be consulted nowadays and nobody is allowed to have an idea of their own without it being beaten up and pushed through the roller by every other Department that thinks it has an interest or half an interest in what somebody else wants to do. People should try to produce a piece of legislation as a Law Officer. Law Officers are not supposed to have any policies; they are simply supposed to sit in a cupboard, the door of which is occasionally opened to get an answer and then shut again with them inside. Fortunately, however, I was able to bring forward deferred prosecution agreements. I hope, as a very much ex-Law Officer, that I will encourage the Government to take a positive view of the principles behind the new clauses, not only because I want that but because they represent an efficient and effective way of assisting the SFO, which is one of the most valuable and effective prosecution agencies in the western world, to do its job of ensuring that both bad people and bad companies are brought to justice. I hope to hear positive things from my hon. Friend the Minister, from whom I have never heard anything else.

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

I start by thanking the Security Minister and the Government for responding to the campaign on Scottish limited partnerships in which I have been involved for about a year. We are all grateful that the Government recently announced that they will conduct a review, which means that the amendment that I have regularly been tabling to Bills over the past year is no longer necessary. However, I have found myself having to table a different new clause; I will explain why and why it troubles me greatly that I am forced to do so.

For Members who are unfamiliar with why my colleagues and I have been so concerned about these things called Scottish limited partnerships, let me point out that they do remarkable reputational damage to Scotland and probably to the UK’s financial sector. They are a front for some of the worst international crime, money laundering and hiding of criminal assets to be found. Without going into great detail of how they manage to do that, it might interest the House to know just a few of the types of crime for which they have been used.

SLPs have been at the centre of Ukrainian arms deals, kick-backs and a major Moldovan banking fraud. They have been at the heart of a major corruption scandal in Latvia involving the nephew of Uzbekistan’s President Islam Karimov. They have been used to run international mail frauds, including that of a French psychic who has been targeting vulnerable elderly people with offers of spiritual insights for significant amounts of cash. They are involved in a $1 billion copyright infringement case that is taking place in the United States. They have been involved in criminal activity such as setting up paedophile websites and raising money through such horrible activities. The list goes on and on. SLPs, and other limited partnerships to some extent, have been utilised as a way of hiding billions of pounds of criminal money. Often that money does not necessarily come here, as we find it in tax havens. The legitimation of a UK or Scottish limited partnership is used as a means of hiding the beneficiaries of such criminal activity.

For those reasons, I am particularly grateful that the Minister has been willing to speak seriously about this. He has done more than any other Minister to move the Government to respond to some of our concerns, so why did I table new clause 10? I did so because SLPs and limited partnerships are based on a 1907 Act, of which probably few people are aware, that amended the Partnership Act 1890, of which even fewer people are aware. By some chance, I sit on the Regulatory Reform Committee, which is so popular that in December it held its second meeting since I joined it in January 2016. Why did we have our second meeting in December? Because we were told that the Treasury was introducing a legislative reform order. And what was that legislative reform order for? At the same time as the Government announced a much-welcomed review of limited partnerships, the Treasury sought to create a new form of limited partnership—private fund limited partnerships —not on the Floor of the House, but through a device that is supposed to be used only for non-controversial matters of legislative reform. I can hardly think of anything more controversial than a mechanism that has been used for international criminal assets and money laundering, but I have even greater concerns.

I will have to leave the debate in about an hour to attend a meeting of the Regulatory Reform Committee to take evidence on the Treasury’s proposals—[Interruption.] I hear Members suggesting they are jealous, but I am sure that they are not. Under the proposals, there are four areas with which even SLPs have to comply that these new private fund limited partnerships will not. For example, the jurisdiction in which the general partners are registered no longer needs to be divulged. The registration numbers of the general partners no longer need to be divulged. The jurisdiction in which the limited partners are registered no longer needs to be divulged, and the registration numbers of the limited partners, if they are corporations, no longer need to be divulged.

Not only are we creating a new form of limited partnership, but we are doing so with considerably less regulation than is in place for existing limited partnerships that have been a front for international criminality. As I have such great faith in the Minister for Security, our new clause would require the Home Office to conduct a review before the Treasury introduces any legislation to create a new form of limited partnership so that we can ensure that those limited partnerships will not be subject to the type of criminal abuse and illegality that we have found with Scottish limited partnerships.

There is also a broader question to be answered. Why are this Government using a device such as a legislative reform order to try to quickly establish something in such a controversial area? Surely this is something that should be fully and properly debated on the Floor of the House. That is why, when I go to the Committee shortly, I will certainly not be agreeing that the proposal makes progress. I will do my best to require that this matter is brought back to the Floor of the House so that it can receive proper and urgent scrutiny. In the light of my arguments, I commend new clause 10 to the House.

[Nigel Mills]

It is a pleasure to speak in this debate. I rise to address the new clauses that my right hon. and learned Friend the Member for Harborough (Sir Edward Garnier) spoke about and new clause 6. I will begin by speaking to the new clauses tabled by my right hon. and learned Friend and the measures tabled by the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), who co-chairs the all-party group on anti-corruption, on the failure to prevent economic crime.

The hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin) knows far more about such things than I do, and he made his argument well, but I reinforce the point that there is a strong feeling among the public, because if large companies are seen to be part of some very serious criminal activity, people are confused about why those companies and the senior people within them have not been prosecuted for those serious offences. If people look across the Atlantic, they see that America does manage to prosecute senior bankers for such offences, so they think, “We see all our banks being fined in America for being guilty of rigging various markets, yet why are no senior directors of those companies being prosecuted here? Why are those banks not being prosecuted?” That exposes the fact that our law, as the hon. Gentleman explained, has become out of date. It seems horribly unfair that the Serious Fraud Office finds it comparatively easy to prosecute very small companies and their directors, when it is clear who the controlling minds are, but that when we see far more serious offences being committed by, on behalf of, or for the benefit of much larger companies, we cannot quite find enough evidence to prosecute those companies or their very senior directors.

Preventing and Combating Violence Against Women and Domestic Violence (Ratification of Convention) Bill

Roger Mullin Excerpts

2nd reading: House of Commons
Friday 16th December 2016 Commons Chamber

[Michelle Thomson (Edinburgh West) (Ind)]

I aim to be fairly brief today. I commend and thank my hon. Friend the Member for Banff and Buchan (Dr Whiteford) for bringing the Bill forward. She spoke most eloquently.

I want briefly to reference the speech I made last week and to give some thanks, first, to the Speaker’s Office and, you, Madam Deputy Speaker, for being very supportive of me, and to my friend and colleague, the hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin), who has been a great support to me.

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

I am undeserving of any praise, but I want to say that the hon. Lady inspired my wife, three days ago, to talk for the first time of her sexual abuse at the age of only six years. It is a great tribute to the hon. Lady that she has done so much for so many people. [Applause.]

[Michelle Thomson]

I thank the hon. Gentleman very much for that. But, of course, I made my position very clear: it was not about this individual here; it was about women more widely, and indeed men, who have also been affected by sexual or physical violence. I spent most of last weekend personally answering the literally hundreds of emails I got, and it was truly humbling, because people, for the first time, were writing their own stories and sharing their own stories. One phrase jumped out at me. Somebody said that they recognised that “black burden that shadows a survivor’s back.” We need to keep that at the forefront of our minds at all times.

That is why we have debates about this issue—about legislation and so on. It is about our driving need for change and leadership, and I commend the hon. Member for Salisbury (John Glen) for offering his perspective on that. It is leadership and the driving need for change that we must keep at the forefront of our minds all the time.

I again challenge the Minister that while warm words about a spirit of intent are incredibly welcome, we are looking for hard, specific dates by which something will be done, because we need to send a message that resonates with the wider world that these things are unacceptable. Our culture, in many areas of the UK, is completely unacceptable. If there is one thing I learned last weekend from reading all these emails, it was the extent to which these stories go unheard.

Again, I say thank you to everybody who has supported me—I wanted to put that officially on the record. Finally, I thank all those agencies that—day in, day out, week in, week out, month in, month out—give their support to people who are in the most difficult circumstances.

Oral Answers to Questions

Roger Mullin Excerpts

Monday 5th December 2016 Commons Chamber

[Mr Wallace]

First, that is why we established the joint fraud taskforce, which includes police and crime commissioners, police forces and victims groups, to make sure that we co-ordinate better our response. It is also why the Government have sponsored and supported the Cyber Aware campaign and Cyber Essentials, to help to make businesses aware of the fraud that awaits them, and banks have sponsored the Take Five campaign. In addition, the national cyber-security strategy sets out a programme in which the Government have invested billions of pounds to make sure that our law enforcement agencies have the capacity to tackle that crime when it is presented to them.

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

Police have described so-called binary options betting websites that masquerade as investment vehicles as the biggest scam and fraud being perpetrated in the UK. What do the Government intend doing about them?

[Mr Wallace]

When one of those websites is reported through Action Fraud, our law and order agencies set about trying to make sure we either dismantle it or signpost people away from such areas. In Scotland that is devolved, and it is up to Police Scotland. The broader picture is to make sure that the public and the consumer are aware of what awaits them online, and that they take some very basic steps to protect themselves when they are, for example, Christmas shopping to ensure that fraudsters do not take their money away.

Criminal Finances Bill (Fifth sitting)

Roger Mullin Excerpts

Committee Debate: 5th sitting: House of Commons
Tuesday 22nd November 2016 Public Bill Committees

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

I beg to move, That the clause be read a Second time.

It is a great pleasure to serve under your chairmanship, Mrs Main. Before I go into the substance of the new clause, I place on the record our thanks to the Minister for his willingness to discuss the issue with us both before and after Second Reading. Although I am a relatively new Member of Parliament, this is the fifth Bill Committee on which I have served in just over a year, and this is the most listening Minister I have come across. I would like to acknowledge that.

[Mr Wallace]

That’s my career over.

[Roger Mullin]

Yes, this is the gentle dagger.

I rehearsed on Second Reading many of the specific instances of abuse using Scottish limited partnerships. I do not intend at this moment to repeat all that, but for the Minister’s benefit, I would like to add to what has already been said.

First, we have had further discussions with the Law Society of Scotland and others. They indicate a willingness to assist us in moving forward to address what the solutions may be to Scottish limited partnerships. I have also had discussions with an individual who was named in evidence to us, Mr Richard Smith, who has undertaken a lot of research into this matter. He, too, has indicated a willingness to assist.

Why do we consider that a review is needed? A lot of research has been undertaken, including by Mr David Leask, who gave evidence to the Committee just last week. However, in our view, before the Government move towards precisely how they will take action to secure SLPs from abuse in the future, it would do us a lot of good if we conducted a detailed review, sponsored by the Government, to ensure that all forms of abuse are properly understood. It would be good to do that before we move towards saying what the precise solutions will be. Therefore, it would be valuable if the Minister, when he comments on the new clause, indicates whether he thinks there is still scope for the Government to consider a detailed review such as that which we have discussed.

I shall conclude now and allow the Minister to respond. Our hope is that the response will be such that there will be no need for us to push the new clause to a vote.

[Mr Wallace]

I thank the hon. Gentleman for his kind words. As the son of a Fifer, I know that one always does well to listen to a Fifer—or one faces the consequences.

I am also grateful to the Scottish National party and The Herald newspaper for raising this issue. It is a genuine issue of abuse, as they have rightly pointed out. We have taken important steps to prevent the misuse of corporations for money laundering, corruption and tax evasion. The UK’s public register of company beneficial ownership went live this year—we were the first G20 country to put such a register in place. At the London anti-corruption summit, we committed to going further and creating a register of the beneficial ownership of foreign companies that own real property or wish to be involved in public sector procurement contracts in the UK.

However, we must not be complacent. Hon. Members have rightly raised the issue of Scottish limited partnerships a number of times. I hope they are assured that I take it very seriously. The stories in The Herald and the intelligence assessments that I have received from our law enforcement agencies are very concerning.

As I committed to do on Second Reading, I have spoken on this subject to the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Stourbridge (Margot James), who is responsible for small business, consumers and corporate responsibility, and she shares my concerns about the abuse of SLPs. We agreed that we need to get the balance right between ensuring that the UK remains a good place to do business for the law abiding and cracking down on abuse. Her Department recently published a discussion paper that invites views on a number of questions about transposing corporate transparency requirements under the fourth anti-money laundering directive. The catchy name is “Implementation of the Fourth Money Laundering Directive—Discussion paper on the transposition of Article 30: beneficial ownership of corporate and other legal entities”.

[Mr Wallace]

I can repeat it for those who want to write it down. That was launched on 3 November. I think that it is a six-week consultation. As a starting point, I strongly urge the Scottish National party to make a submission.

[Roger Mullin]

We are aware of that consultation with a snappy title, and it is our understanding that, appropriately, submissions have to be in by St Andrew’s day— 30 November. We intend to make a submission.

[Mr Wallace]

One issue raised in the paper is whether SLPs should be brought within the scope of the directive by including them on the UK’s public company beneficial ownership register, which would go some way to revealing the people behind some of those arrangements. The Government propose that SLPs should be on the register, although we must wait to see the responses to the consultation before we make a final decision. Hopefully my office will be in touch with hon. Members to arrange a meeting to discuss both that and some of the other issues they have raised.

New clause 1 proposes a statutory review of SLPs. The existing discussion paper already provides for interested parties to submit their views on identifying the beneficial owners of SLPs, which is a good first step. I reassure hon. Members that officials and Ministers in multiple Departments are looking closely at the wider issues related to SLPs, and I hope we will have more to say about that on Report. For now, I hope the hon. Gentleman feels suitably encouraged to withdraw his new clause.

[Roger Mullin]

I thank the Minister for his encouraging response. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 2

National Crime Agency: Report on staff training

“Section 3 of the Proceeds of Crime Act 2002 is amended as follows, after subsection (7) insert—

‘(8) The National Crime Agency must make an annual report to Parliament on the provision of training to persons under this section.’”.—(Dr Huq.)

This new clause would require the National Crime Agency to make a report to Parliament about the training it provides to its staff in financial investigation and the operation of the Proceeds of Crime Act.

Brought up, and read the First time.

[Dr Huq]

I beg to move, That the clause be read a Second time.

Criminal Finances Bill (Sixth sitting)

Roger Mullin Excerpts

Committee Debate: 6th sitting: House of Commons
Tuesday 22nd November 2016 Public Bill Committees

[Tristram Hunt]

I will not detain the Committee with an inquiry into the difference between “weighty” and “obscure”; these things can often be lost in the mists of time. As we did not quite generate the success that we needed to on new clause 11, I will not put the measure to a Division. However, I urge the Minister to ensure that, having created this interesting Bill and having delivered these interesting reforms, if the reforms are going to be put to proper effect and have the political momentum—a terrifying word—behind them, then a degree of political transparency and support connected to Parliament is important. On that basis, I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 19

Whistleblowing in relation to failure to prevent the facilitation of tax evasion

‘The Chancellor of the Exchequer shall conduct a review of arrangements to facilitate whistleblowing in the banking and financial services sector, including the protection of anonymity, in relation to the disclosure of suspected corporate failure to prevent facilitation of tax evasion, and report to Parliament within six months of the passing of this Act.’—(Roger Mullin.)

This new clause would conduct a review into the facilitation and protection of whistleblowers with a focus on the protection of anonymity for those who suspect corporate failure to prevent the facilitation of tax evasion.

Brought up, and read the First time.

[Roger Mullin]

I beg to move, That the clause be read a Second time.

[The Chair]

With this it will be convenient to discuss new clause 22—The culture of the banking industry and prevention of the facilitation of tax evasion—

‘(1) The Secretary of State must undertake a review into the extent to which the banking culture contributes to the failure to prevent the facilitation of tax evasion in the financial sector, and lay a copy of the review before the House of Commons within six months of this Act receiving Royal Assent.

(2) The review must set out what steps the UK Government intends to take to ensure that banking culture is not facilitating tax evasion.’

[Roger Mullin]

I rise to speak to new clauses 19 and 22, which are on today’s amendment paper for the Committee to scrutinise thanks to the complacent and worrying attitudes of both the FCA and the BBA at last week’s evidence session, when I specifically raised the issues of banking culture and whistleblowing.

During the previous exchanges, the Minister indicated the importance of culture, for which I am grateful. I have been concerned with culture for a long time. In one of my previous lives, I undertook more than 30 cultural studies of large, complex organisations. As many Members will be aware because I have related this fact more than once, large-scale international studies have shown that around 70% of major corporate failures are primarily as a result of a failure of culture—they are not about detailed regulation or detailed law, but about culture. In that regard, this issue must be taken very seriously indeed.

A very important part of culture for the related new clause on whistleblowing is to assess internal trust within organisations. Unless there is sufficient cultural trust, whistleblowers will not feel secure or safe. Despite advances in recent years in the protection of whistleblowers, I am sure that I am not alone in having had people come to me, an MP for barely over a year, saying that they wish to raise issues in organisations but fear the consequences.

I will highlight that by picking just one example—the case of Paul Moore, with whom some Members will be familiar—from the financial sector to show the importance of culture and whistleblowing. He is best known as the HBOS whistleblower, following his dismissal from Halifax Bank of Scotland in 2004. He was appointed to the role of head of group regulatory risk at the end of 2003 and had formal responsibilities for the bank’s policy and oversight of executive management’s compliance with Financial Services Authority regulation. During 2004, while conducting reviews of the bank’s sales culture, Moore and his team uncovered mis-selling and unethical practice. He reported those findings to the HBOS board as his job demanded, and was fired on 8 November 2004 by the HBOS group chief executive officer, James Crosby. Since then, Mr Moore has been shunned by the financial community for doing his job and doing it well.

--- Later in debate ---

[Roger Mullin]

I thank the Minister for his remarks, particularly his conclusion, when he indicated an open mind, as is only to be expected from him. However, we remain concerned about culture. He mentioned the role of the FCA. After the comments made last week by the FCA representative, I would have thought that the FCA itself needs a bit of a culture review to see whether it is fit for purpose.

[Mr Wallace]

When the Bill was being rolled out, I specifically asked for a meeting with the FCA to demand that when it comes into force—hopefully it will do so—they will up their game. The overall intention of the Bill is not just the criminal prosecution of individuals, but to bring about cultural change. As a regulator, I would like steps to be taken. One of the things that I welcome in the English part of the Bill is that the perpetrators are faced with unlimited fines for some of the offences—there is no cap on fines. With large fines, we change not only employees’ habits, but shareholders’ behaviour, which is important.

[Roger Mullin]

I think the Minister for those remarks and I particularly welcome his remarks about his meeting with the FCA. He is to be commended for that, and we would fully support him. Given his remarks, we will not at this stage push either of the new clauses to a Division, but we will reserve our position and perhaps return to it on Report. I beg to ask leave to withdraw the new clause.

Clause, by leave, withdrawn.

New Clause 20

Recovery orders: repatriation

‘(1) The Proceeds of Crime Act 2002 is amended, after section 266, by inserting—

“266A Recovery orders: repatriation

(1) Where a court—

(a) issues a recovery order under section 266; and

(b) has reasonable grounds for suspecting that property subject to the recovery order was obtained through unlawful conduct in a foreign country,

the court must issue a repatriation order in relation to that property.

(2) A repatriation order shall provide that within a year of the property’s having been recovered the property must be repatriated back to its country of origin.

(3) When a repatriation order has been issued, the Secretary of State shall send a request for cooperation and assistance to a representative of the government of the country of origin, in consultation with relevant third parties, and must, upon a court having issued a recovery order, endeavour to agree with that representative—

(a) as to how such property or the value of such property will be used upon its being repatriated to ensure that wherever possible the property repatriated will be used in a manner that will contribute to the implementation of Sustainable Development Goal 16, that benefits victims of the unlawful conduct, or that ensures the repatriated property is used for the original purpose from which it was diverted;

(b) a mechanism for accounting for the disbursement of the property and for making public a report on the use to which the property has been put.

(4) For the purposes of this section—

“relevant third parties” will include civil society actors and non-governmental organisations; independent audit bodies; the Department for International Development and multilateral development banks; and

“victims” will include communities affected by the unlawful conduct as well as the State.

(5) A repatriation order shall not be issued where—

(a) the court is satisfied that on the balance of probabilities that successful repatriation would lead to the property or the value of the property being subject to conduct that, were it within its jurisdiction, would violate the Human Rights Act 1998;

(b) the court is satisfied that on, the balance of probabilities, that successful repatriation would most likely result in such property being subject to illicit financial activity by a Politically Exposed Person in its country of origin; or

(c) the court is satisfied that, on the balance of probabilities, the property would not reach and/or be used for the purposes as agreed to by the Secretary of State and the representative of the country of origin.

(6) The UK may retain the total value of the recovered property where the Secretary of State and the relevant enforcement agency take all appropriate steps as set out in section (3) subsections (a) and (b) to assist the State in question in repatriating such property and yet receive no cooperation from the other State within a year of having taken such appropriate steps.

(7) For the purposes of subsection (6) “cooperation” is defined as the foreign State’s conclusively demonstrating to the Secretary of State and enforcement agency of its having done or being in the process of implementing the necessary steps required to ensure that the property or value of such property will be used for the ends laid down in section (3) (a) and the court is satisfied on the balance of probabilities that the property or value of such property will be used in accordance with those activities and probabilities as laid down in subsection (5)(a), (b) and (c).

(8) The court may order that a repatriation order may grant that the property could be given, subject to an agreement between the Secretary of State and a representative of the government of the country of origin, to a non-state actor who may distribute the property in accordance with subsection (3)(a) and (b) above.

(9) Upon application by the relevant enforcement agency the court may increase the time period within which repatriation must happen up to a maximum of five years if the court is satisfied that operational circumstances preclude the possibility of repatriation within the period previously required.

(10) The relevant enforcement agency may apply to the court for further extensions to the time period, where there is less than a year before the date of repatriation.

(11) Where the court grants an extension the enforcement agency in conjunction with the Secretary of State must publish a public report detailing the reasons why it sought an extension to the deadline for repatriation.

(12) Where the Secretary of State in conjunction with the enforcement agency publishes such a report as set out the Secretary of State may omit sensitive operational information which would preclude the possibility of repatriation being successful should such details be published.

(13) Such a report without redacted information will be passed to the Secretary of State upon each application made to the court for an extension.

(14) No later than one year after such property is repatriated all such reports will be made public in an uncensored form.””—(Dr Huq.)

This new clause would require property that was subject to a recovery order to be repatriated to its country of origin where the money was options through unlawful conduct in that country.

Brought up, and read the First time.

[Dr Huq]

I beg to move, That the clause be read a Second time.

The new clause would place a duty on the Secretary of State—and the enforcement agencies vested with the power to do so—to receive recovered property under the Proceeds of Crime Act 2002, and to repatriate recovered property where a court is satisfied that the property or the value of the property was begotten by illicit means. I hinted at the issue this morning. The clause builds on former Prime Minister David Cameron’s global forum for asset recovery, which came about after the anti-corruption summit of May 2016. We Opposition Members commend him for that. How he is missed. We have seen the forum begin to bear fruit, with the Government having signed a memorandum of understanding with Nigeria last September. There has clearly been limited progress on repatriation, but the Crown Prosecution Service’s most recent asset recovery strategy laments the low take-up of mutual legal assistance requests:

“Since London is a global centre for finance, there are a large number of criminal proceeds deposited in its financial institutions. Despite this, historically the CPS has not received a high volume of incoming MLA requests for the restraint and recovery of assets.”

Many of the people from the charitable sector who gave evidence worry that, at the end of the process, little will go back to those communities and third-world economies.

The Minister said on Second Reading, in relation to repatriating illicit wealth, that

“It is important to note that we are already doing this. In November 2015, the UK returned £28 million to Macau, which were the proceeds of corruption laundered in the UK. That is a concrete example of our giving back money to those countries that have been robbed by crooks who have used Britain to launder the money or to make the money in its jurisdiction. I want to see more of that and to see it go further.”—[Official Report, 25 October 2016; Vol. 616, c. 198.]

Through this new clause, we seek to help him with that process. He has made a clear commitment to seeing repatriation go further, and to ensuring that there is more of it. The CPS has also stated that mutual legal assistance is seriously underused, and that massive sums of illicit wealth are simply not subject to such requests and are therefore not being repatriated.

The new clause would not obstruct the Minister or the Government in their desire to see greater repatriation of illicit wealth. In fact, it would aid the Government in realising their aims. The new clause seeks to provide a different avenue from mutual legal assistance for repatriating illicit wealth, and it has a number of in-built safeguards to ensure that the UK repatriates such wealth to deserving countries, as well as safeguarding against the UK’s time being wasted.

Although the new clause is substantial in scope and takes up a number of pages in the amendment paper, we are not trying to cause an argument for argument’s sake. A precedent for repatriating wealth has been set, and the Committee has heard an example. The new clause would streamline the process, and I hope that the Government will take that in good faith; the new clause is technical, rather than political.

This is how we envisage the new clause working: where a court is satisfied that property is recoverable and issues a recovery order, and where it is also satisfied that the property was acquired with wealth illicitly obtained abroad, it may instruct a receiving enforcement agency to take steps towards repatriating that wealth upon the property being initially recovered. We term that a “repatriation order”—that is snappy.

Once such an order has been made, the Secretary of State would request co-operation and assistance in the repatriation process from a representative of the Government of the country of origin. The Secretary of State would then be free to enter into consultation with any other relevant third party. After that initial contact, an agreement would be reached with the aforementioned actors on how the value of the property would be used on repatriation.

The purpose of the measure is international development. In the new clause, proposed new section 266A(3)(a) of the Proceeds of Crime Act 2002 states that

“wherever possible the property repatriated will be used in a manner that will contribute to the implementation of Sustainable Development Goal 16”,

or the repatriated property will benefit the victims of the crime, or it will be used for its original purpose. The Government have some flexibility and room for discretion in the phrase “wherever possible”. Proposed subsection (4) contains a list of definitions.

--- Later in debate ---

[Richard Arkless]

The SNP generally supports that proposition—we would prefer that Crown dependencies and overseas territories held publicly available registers of beneficial ownership—but to further a point that I made earlier, as the Scottish National party, we are obviously reluctant to compel this place in primary legislation to legislate for jurisdictions where it perhaps does not have locus. Proposed new section 2AA(5) in new clause 5 highlights the constitutional quagmire that that would put this place in. It states that this place would

“take all reasonable steps to support the Crown Dependencies to consent”.

Are we going to try to persuade them to consent? I do not quite understand what that subsection is getting at. If we have jurisdiction, we have jurisdiction; if we do not have jurisdiction, we simply do not have jurisdiction.

In conversations that I have had with the Jersey authorities—I have forthcoming conversations with the Isle of Man authorities, which sent me a similar letter, although I perhaps would not describe it in such terms—they have been at pains to stress that this place does not have competency to make such legislative provisions. I am minded to agree, even though I think it would be a good idea if they did, under their own steam, make those public registers available. Our position is that we support the proposition in principle, but we do not see that this new clause is competent, given the jurisdictional capabilities of this place over the Crown dependencies.

[Roger Mullin]

The SNP has been very supportive of everything today, but I have to say that for the past year and a half I have been having discussions with the Isle of Man authorities, including with the First Minister there, and I have found them genuinely willing to engage in discussions. I think that the language used about the Isle of Man was unfortunate.

[Mr Wallace]

As the hon. Lady rightly says, this subject has been raised significantly, both on Second Reading and elsewhere. New clause 21 would set a legislative timetable for the UK Government to ensure that overseas territories have a public register of beneficial ownership, and to work with Crown dependencies to achieve the same outcome. There is considerable interest in this specific issue and I am pleased that this amendment allows us to debate it. I understand where the Opposition are coming from and appreciate the desire for these jurisdictions to have publicly accessible registers of beneficial ownership information—David Cameron made this an ambition in 2015. I would be grateful if the hon. Lady clarified why she chooses to treat Crown dependencies differently from overseas territories when it comes to some of the measures; that would be helpful to all Members.

While the overseas territories and Crown dependencies are separate jurisdictions with their own democratically elected Governments, and are responsible for their own economic diversification and fiscal matters, we have been working with them on their role on company transparency. If public registers emerge as a new global standard, the UK Government would expect all relevant jurisdictions to meet that standard. However, it would be wrong to say that, in the absence of public registers, no efforts have been made to increase corporate transparency and tackle tax evasion and corruption. The Crown dependencies and those overseas territories with financial centres are already taking a number of important steps on beneficial ownership and tax transparency, which will put them well ahead of most jurisdictions. This includes some of our G20 partners and other major corporate and financial centres, including some states in the United States. These measures will prevent criminals from hiding behind anonymous shell companies and mark a significant increase in the ability of UK law enforcement authorities to investigate bribery and corruption, money laundering and tax evasion.

I asked officials whether there has ever been an example of our imposing legislation on the Crown dependencies. As far as we can find out, in recent history there has never been an example of our imposing legislation on Crown dependencies without their consent. That is important—we have not gone around imposing our will on Crown dependencies as we see fit. Where we have done so on overseas territories, it has been on very strong moral issues such as capital punishment. Both in Crown dependencies and overseas territories, people have moved quite significantly and, I have to say to the hon. Lady, far more significantly than in 13 years of a Labour Government. We cannot sit here and ignore the elephant in the room.

Under our Government, we now have a position where the debate in this room is about the word “public” and whether registers are going to be public. It is not about whether these islands and other places will have a central register of beneficial ownership. By next year, they will either have a direct central register or linked registers and that is 90% of the way. By the way, our law enforcement agencies will have automatic access to that information.

The best thing, in my view, would be to say, “Yes, we know what David Cameron’s intention was in 2015 when he made that statement; yes, the United Kingdom pretty much leads the world in making our register public for the whole of the United Kingdom”, but also to say, “Let us revisit this once we get the Bill through, once we see whether our law enforcement agencies can use that access to prosecute, deter, change culture and show the way forward.” If that is not happening, of course we can have these debates again, but we should recognise that a lot of those countries have moved without our imposing our will on them, and we are hopefully giving access to our National Crime Agency and HMRC—all the things that we struggled to get for very many years. Let us see where that journey takes us. Our intention is clear. We pretty much lead the world in this. I urge hon. Members to recognise that we are going a long way.

Immigration Rules (International Students)

Roger Mullin Excerpts

Wednesday 16th November 2016 Westminster Hall

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

I am delighted to serve under your chairmanship once again, Mr Gray. I am changing the speech that I was going to make, as there have been such fine contributions from everyone. I shall just highlight issues from my personal experience.

In the early days of Namibian independence, I went along to do an assignment on capacity building. I went, as I was asked, to the office of the Prime Minister, where I was met by his senior adviser, who said to me—I think I can do his accent just about perfectly—“Roger, delighted to meet you. How are Glasgow Rangers getting on?” That came as a great shock to me, as an Ayr United supporter. He had spent eight years studying in Glasgow and had two degrees, and after independence he returned to his country.

A short time later, I was at the new University of Namibia, where I was to give some help. There I met the wonderful Professor Peter Katjavivi, who was here recently. He is now the Speaker of the Namibian Parliament. Peter set up the first South West Africa People’s Organisation office in Europe—in London—and when he was here, for years, eventually completed his PhD at Oxford. Some time later, I met a man for whom eventually I would be the best man at his wedding. He is now the permanent secretary to the President of Namibia. His name is Samuel /Goagoseb—I pronounce the forward click for the benefit of Hansard. Samuel was partly educated at Heriot-Watt University in Scotland. My experience was just a small personal example of the way we have exported such talent, to great benefit, throughout the world, but I fear that those people might not be able to get access today in an equivalent way, under the types of regimes that we operate.

I also have the pleasure of continuing as an honorary professor at the University of Stirling. I used to teach there on MBA and MSc programmes. These masters programmes at Stirling University benefited hugely, particularly from the many students from India. There has been an utter collapse in the number of students from India coming to our universities. That has led in some cases to the cancellation of previously very well regarded programmes.

I used to sit as the chair of an interdepartmental ethics committee—it took a long time and a lot of practice to say that—and I came across many researchers at Stirling University. I cannot remember a single research proposal that did not involve someone from beyond the UK. International students were fundamentally important to our research capability and to assisting us in having the diverse education from which everyone in the UK benefits.

I appeal to the Minister to listen to the facts and figures he has heard today and to consider the qualitative benefit that encouraging international students brings to our country.

--- Later in debate ---

[Mr Goodwill]

It is very difficult to ensure that a person who gets a visa to work, potentially, in Scotland is stopped from travelling elsewhere in the UK. Certainly, the pull of the south-east and London is one we are all too well aware of.

In 2008, the tier 1 post-study work visa replaced the Fresh Talent scheme and was introduced country-wide. This route saw high levels of abuse, with evidence of large numbers of fraudulent applications and individuals deliberately using the student route solely as an avenue to work in the UK, with no intention to study and many in unskilled work. I am sure that hon. Members are not seriously suggesting that a return to a completely open post-study work route that does not lead to skilled work would be advantageous for any part of the United Kingdom.

The UK already has an attractive offer for international graduates of UK universities. Those who can find a skilled job are free to do so. There is no limit to the number of tier 4 students who can move to a tier 2 general skilled worker route, nor do they count against the annual tier 2 cap. Around 6,000 tier 4 international students move to tier 2 annually, and that number has been rising year on year. However, that does not mean that the Government do not remain open to keeping our offer for international students under constant review, to ensure that we help our renowned institutions to attract talent from around the world. One such recent development was the launch of the tier 4 visa pilot with the universities of Bath, Cambridge, Oxford and Imperial College in July.

[Roger Mullin]

Will the Minister give way?

[Mr Goodwill]

I suspect I am going to answer the hon. Gentleman’s question before he raises it. May I take this opportunity to reassure hon. Members that those institutions were chosen because of their consistently low visa refusal rates, lest anyone imagines we might have a conspiracy against Scotland?

[Roger Mullin]

On the conspiracy the Minister has against Scotland, would he clarify which Scottish universities he thinks did not operate appropriately and reasonably regarding students? Name them, or apologise.

[Mr Goodwill]

I am not aware of any Scottish universities that are not operating within the rules, but the four chosen for the pilot were those with the best performance in terms of their visa refusal rates. Indeed, the whole point of the pilot is to find out the benefits and advantages so that it can be rolled out more generally. I know that a number of Scottish universities, such as the University of Glasgow, which has increased its overseas non-EU student numbers by 32% between 2012 and 2015, are just the sorts of institutions that have shown how successful they can be in attracting overseas students.

As part of this pilot, certain visa eligibility checks have been delegated to the universities, and the documentary requirements for students taking part are reduced. The students also have additional leave at the end of their course to enable them to take advantage of the UK’s current post-study work offer. Monitoring of the pilot is ongoing, and the results of that will be evaluated to inform any decision to roll the pilot out more widely. But, if it is a success, I hope that other high-quality institutions throughout the UK will be able to benefit, including those—I am sure the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East will be glad to hear—in Scotland, and, I hope, also in Yorkshire.

Any change for the best-performing institutions will build upon the excellent offer that the United Kingdom already has for international students, with the intention of allowing the UK to remain the second most popular destination in the world for international higher education students, behind only the United States of America. Our approach to reform continues to strive towards two key goals: first, to ensure that our fantastic institutions can attract the very best and brightest students from around the world, and secondly, to protect the student migration route from abuse. I am sure that hon. Members here today can agree that this is a sound foundation on which to build.

Criminal Finances Bill (First sitting)

Roger Mullin Excerpts

Committee Debate: 1st sitting: House of Commons
Tuesday 15th November 2016 Public Bill Committees

[Mrs Flick Drummond (Portsmouth South) (Con)]

Q Are you confident that the enforcement agencies will have sufficient resources to make full use of the new powers in the Bill?

Detective Superintendent Harman: Yes I am. In fact, the Bill is very helpful for counter-terrorism in that one of its sections allows us to make more of the resources we have. To be brief, about 40% of our financial investigators are police staff, or “civilians”, as they used to be called. Under current legislation, you have to be a warranted police constable to conduct a lot of the financial inquiries that we need to do. The Bill offers those civilian investigators new powers similar to those of a constable, allowing us to make the most of the resources we have. We are very pleased to see that in the Bill and confident we will make good use of it.

Mick Beattie: Likewise, I gave an example of the attendance at court which can be reduced by the disclosure orders. Obviously the policing bill has been cut, as is well documented and, yes, that has been challenging, but there have been some positives. The Government have recently provided additional funding for ACE teams—asset confiscation enforcement teams—which allows us to go chasing confiscation. They have provided additional funding for section 22 where you can revisit outstanding orders—it is a little technical—and, only recently, they have announced additional funding for the regional asset recovery teams, all of which will benefit from the improvements identified in the Bill.

Donald Toon: You have already heard about the disclosure orders but I also think the power to require information for the Financial Intelligence Unit and the information sharing provisions are important in making us more efficient. The one thing I would bring out is that it is not just about resources in law enforcement. We are talking about the ability to harness resources and capability from across the regulated sector, in particular financial institutions. From that perspective, I think it is a huge strengthening of capability.

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

Q I would like to take a slightly different tack and ask about the existing powers that you have that this Bill seeks to build upon. I am concerned that the National Crime Agency has declined to deal with the Hermitage case, which has been discussed, and which involves about $30 million laundered in London. Although the evidence provided to the National Crime Agency has been sufficient in other jurisdictions to take action, there has been a refusal to take action here. Why is that the case? Is it a lack of resources or a lack of will?

Donald Toon: Frankly, it is neither. In the Hermitage case, the overwhelming majority of the actual criminality took place outside the UK. One of the key issues in terms of where we focus our attention has got to be the prospects of actually being able to bring the major criminality in front of a court, and hopefully achieve a conviction. The fact is that a number of overseas jurisdictions are investigating criminality that took place in their jurisdiction. The vast majority of the criminality did not take place in the UK, and those responsible are not in the UK. We have supported, we are supporting and we will continue to support inquiries in the UK that are designed to help to bring those people to justice in the jurisdictions where they can actually be targeted.

[Roger Mullin]

Q With all due respect, what I quoted was $30 million that was laundered in London. I am not talking about the other money laundered through Hermitage in other jurisdictions. My understanding is that they have been buying up different types of assets in London—they are not merely property assets—and that the individuals involved regularly visit London, which would seem to bring it entirely within the remit of the UK to do something about it.

Donald Toon: We have a remit in the UK to do something, as you say, but from our perspective, we have a remit to do something in support of those who are better placed to target the main criminals. My understanding of the position is that I am not at liberty at the moment to go into the detail to which you refer.

[Scott Mann (North Cornwall) (Con)]

Q I have three questions for you, Mr Toon, if I may. What have been the most significant challenges for the NCA in tackling economic crime? How will the measures in the Bill help the NCA to tackle economic crime? The third question is a small supplementary on the seizure orders and unexplained wealth orders. A small number of people make money from online gambling. Could you tell me how the Bill might affect them?

Donald Toon: I outlined earlier a couple of the biggest problems. Essentially, at the top end of money laundering, asset hiding and asset tracing, we are talking about something that is fundamentally international in scope and often involves us dealing with difficult jurisdictions. That has been an ongoing problem, notably around our ability to access sufficient information to track asset movements and identify ultimate beneficial owners. The fact that we have provision in the Bill for information sharing with the private sector is from our perspective hugely valuable. We have been working with the banks in a joint money laundering intelligence taskforce for about the past 16 or 17 months. This legislation essentially gives more cover for the banks to be able to share information effectively. Currently, they can do that only through us, through our gateway.

It is important to bring out that, with the capability that we have had so far, 58 arrests have flowed from the ability to share information with the banks. We have identified more than 2,100 suspicious accounts. Most importantly—there is something here about the shared intervention response—we have also had 730 bank-led internal investigations into customers and the use of particular accounts, which is hugely valuable to us. We are often dealing with large multinational financial institutions. They are in a very strong position to track the movement of money and see transfers between particular accounts, which enables us to identify the routes that we need to go down to track beneficial ownership. That information sharing provision, together with the work that has been done around improving transparency on beneficial ownership, is hugely valuable.

I have already mentioned the value of the unexplained wealth orders. Equally, there is the power to require provision of further information. We have an issue with suspicious activity reporting. Yes, we get a very large number of reports and that number continues to rise, but it is overwhelmingly from the banks. We have significant concerns about the quality and number of reports that we get from other parts of the regulated sector. Often, banks report suspicious transactions involving other parts of the regulated sector. It is very unusual for us to be able to see and track those transactions as they have gone through, say, the legal profession, accountants or company service providers. We should see better quality reporting in that space. The power in the Bill will give us the ability to seek additional information, either where we have a report and it lacks quality or where we have a report that leads us to want to start asking questions of other parts of the regulated sector that have been involved in the transaction. That is hugely valuable from our perspective.

The Bill as a package is really valuable, but not just because of that. I have mentioned the SARs moratorium period. That moratorium period has been so difficult, not just from our perspective, but from the perspective of law enforcement’s ability in the round to make effective use of SARs. With a seven-day turnaround and a 31-day limit, as soon as we go international, even with supportive jurisdictions, it is very hard to get information within that 31-day limit to be in a position to get a restraint order. That we can now see that go up to a maximum of just over six months—186 days—and that there is court oversight to give safety, is a hugely valuable step forward. Those are the major advantages of the Bill.

On the point about internet gambling, I confess I have not focused on that area. I would expect that, when we are in a position to be able to track those who are making particular profits, they could be targeted using the same provisions. The interesting thing is that while the information-sharing provision starts with the banks and the financial sector, the intention is to broaden that out and share information with the wider regulated sector. That would take us into things such as the gambling operators.

--- Later in debate ---

[Victoria Atkins]

Q On behalf of all the lawyers in the room, only one person may be convicted, but that conviction may mean that many hundreds of millions of pounds has been stolen from the Exchequer. With one conviction, you have solved that crime. Is that correct? In other words, one conviction does not necessarily reflect the extent of the damage that that particular defendant has inflicted on the UK economy.

Simon York: Not necessarily, no. We will use whichever approach we think is the most effective. Sometimes—for example, in relation to organised crime or groups of wealthy individuals—we will use a mixture of our civil tax powers and criminal investigation powers quite deliberately to get the biggest impact. My team recovers or protects about £5 billion a year through a combination of civil and criminal activity.

[Roger Mullin]

Q I have two short questions. First, what types of business formations are most susceptible to use by criminals?

Simon York: I think most sorts of business formations can be susceptible. Companies, partnerships, limited liability partnerships, Scottish limited partnerships and trusts are all used most widely for completely legitimate purposes but all, in the wrong hands, can be used to attempt to obscure ownership or value, or to launder profits of crime. They can all be used in different ways.

Nick Price: I am not sure that there is a specific type that lends itself to criminal activity any more than any other.

[Roger Mullin]

Q Perhaps this is for HMRC again then. How effective are we at supervising for anti-money laundering purposes all trust or company service providers that register UK companies?

Simon York: HMRC is the supervisor—TCSPs are not regulated in any other area. Our strategy is that we have teams that conduct anti-money laundering supervision, try to support that industry, particularly those that are susceptible or vulnerable to money laundering, and help them. My teams tend to get involved when we clearly suspect some of those organisations of facilitating crime, money laundering, tax fraud or whatever. Our strategy is to, again, use a combination of the money laundering supervisory regulatory powers and our tax powers. We have some really quite significant projects—I cannot go into too much detail—on the go at the moment in relation to TCSPs in particular.

[Antoinette Sandbach]

Q I want to come back, Mr York, to attributing criminal liability to corporates. You felt that that would prompt good behaviour. For example, there have been some well publicised cases of licence payments where profit will be taken out of the UK because of some form of licensing agreement or other device that removes profits from the UK. How do you see the new advisory part 3 capability in tackling that? That is tax avoidance, rather than tax evasion, is it not?

Simon York: It could only be used to tackle that sort of behaviour if that, in itself, was a criminal offence. I think what you are describing is typically the sort of tax planning or avoidance that multinationals might engage in. If that was fully presented to us and it was completely upfront, this would not be the appropriate response to that. If, however, anything was misrepresented to us and it effectively became a fraud and a criminal offence, and that was being facilitated by someone else, it could. But this is not really aimed at that at all.

--- Later in debate ---

[Tristram Hunt (Stoke-on-Trent Central) (Lab)]

Q One of the attempts to deliver that kind of behavioural change is among the new clauses I am submitting. Will they garner your support for asking the Secretary of State, for example, to make an annual report to Parliament about unexplained wealth orders, to make it a duty to prevent corruption, and to establish quite swiftly a publicly accessible register of beneficial ownership of UK properties? Do you think the good intentions of the Bill could do with a boost to make sure the foot is on the accelerator on some of this?

Professor Murphy: I would entirely agree with a number of points you make. In fact, I would support all those measures. I do not need to comment further; they would all help.

It is clear that transparency is of enormous benefit. The biggest problem with regard to transparency in this country is that 400,000 companies a year in the UK do not file an annual return with the Registrar Of Companies and do not file accounts as required by law. We have no idea what those companies do. They are struck off. It is assumed they have no tax liability, so it is just assumed they have not traded. That is a completely unreasonable assumption for the registrar to make. HMRC does not pursue these companies. I did some research in 2014 on the recovery of penalties imposed on these companies for non-compliance. More than 99% of the penalties imposed were not paid.

In other words, we have an enormous hole in our economy, so we cannot rely upon these systems of registrars and beneficial ownership. The proposed register of beneficial ownership in the UK is simply a voluntary honesty box arrangement, because there are only four extra people being tasked to monitor it. When 400,000 companies do not even file a return, which is where they would disclose their beneficial ownership data, the chance that we will have reliable information is incredibly low indeed. We have to get down to very basic levels to get this right.

I am not saying that the Bill is wrong, but in terms of direction of effort, parliamentary time and resources, there are many more important tasks that would bring about the behavioural changes that Alex has talked about that would encourage compliance.

[Roger Mullin]

Q I have been concerned for some time about the Scottish limited partnerships and similar vehicles. To what extent do you think that there are particular types of business formations that are most susceptible to criminal activity and tax evasion?

Alex Cobham: This is one of the interesting features of the Bill. If the Government were a relevant body, I think the continuing provision of Scottish limited partnerships would make it very easy to prosecute the Government for facilitating evasion. The work of Richard Smith and David Leask, who I think will be giving evidence later, is very clear on this point. Something like one in four limited partnerships in the UK, but about two in three of Scottish limited partnerships, are structured in such a way that one of their partners is an anonymous company registered in a secrecy jurisdiction.

That is the perfect model for unaccountable business, unaccountable ownership of assets and income streams that may be criminal. The effective facilitation that the UK provides in that way is simply unacceptable. What is good about this Bill is a very clear recognition that that facilitation is unacceptable; what is missing is application to the Government themselves. I think the only consistent action would be to make impossible the use of anonymous partners for limited partnerships.

Professor Murphy: I agree with all that. I extend the concern to the limited liability partnership. I have been a partner in limited liability partnerships and they potentially have a very useful commercial role—they are tax transparent in a way that is very important, which is why I used one. The truth is that they are also used extensively by offshore agents, again using anonymous companies, to create structures that look as though they are present in the UK and give them an air of credibility. In fact, they are entirely controlled offshore and can be used for abuse. Both need a significant review. I can see no legal or commercial justification at all for limited partnerships in terms of their current use. Limited liability partnership legislation needs explicit change to make sure that it cannot be abused.

[Roger Mullin]

Q You mentioned a review, so I take it that you would support the new clause we have tabled calling on the Government to have a specific review of Scottish limited partnerships?

Professor Murphy: Yes.

[Roger Mullin]

Q You have mentioned the issue of money laundering and have given us an estimate of the tax gap. Do you have any estimates of the extent of money laundering in the UK?

Professor Murphy: The money laundering estimates that are available—for example, peer-reviewed work undertaken for the World Bank—would suggest that the UK has a shadow economy of about 10% of GDP. Curiously, that is very consistent with the data reported by HMRC with regard to VAT abuse, where the figure consistently runs at around 10%. It is absolutely impossible that you can lose 10% of VAT and end up with an overall tax gap of 6.4%, by the way. You cannot lose 10% of the top line and yet end up collecting the tax elsewhere. There is no accounting mechanism for that income to reappear in the national profit and loss account to be taxed further down the system—I say that as a chartered accountant. Therefore, absolutely on a basic methodological and logical level, HMRC’s estimates have to be wrong, but around 10% is likely. We are relatively low in that figure, by the way; as a contrast, in Germany the figure is 16%.

Alex Cobham: On the money laundering point, an informal or shadow economy of 10% is not out of line with a number of other high-income countries, but at least anecdotally, the number of times that UK vehicles crop up in foreign criminal cases seems disproportionately high. It is true that because the UK has been a leader to an extent in transparency it is easier to do some of this analysis involving UK companies, but that would also be a reason why they should not be used by people committing crimes and yet, they still seem to be. I think you would probably conclude that at the moment, although the evidence is not consistent, it is likely that the UK is disproportionately important in national money laundering. How disproportionately so is completely uncertain and, again, that makes the case for a review.

Professor Murphy: We do have a disproportionate number of companies per head in the UK compared with any other European country.

[The Chair]

Can I point out that four Members are still asking to get the floor and you have 10 minutes left?

Criminal Finances Bill (Second sitting)

Roger Mullin Excerpts

Committee Debate: 2nd sitting: House of Commons
Tuesday 15th November 2016 Public Bill Committees

[Dr Huq]

Q There is also evidence that since 2009, a lot of specialist trained investigators of financial crime who were trained on the public purse have jumped ship and gone over to the commercial sector, some of them even to gambling. An amendment that we are tabling would keep people within—I cannot remember the exact wording, but they would have to repay the cost of training. Do the three of you have any thoughts on that and potential poaching?

Nausicaa Delfas: I do not have a view on poaching, but we have accredited investigators at the FCA.

Anthony Browne: I do not have any views on this, but I can ask my members about it. There is clearly circulation between law enforcement authorities generally and banks on a two-way basis, in the sense that people at banks go to work for law enforcement authorities and vice versa. If you ask the law enforcement authorities and certainly the banks, it is actually very valuable to get that exchange of information, insight and expertise across the two. This is partly a development of the fact that the battle against financial crime, to which the banks are very committed, is a lot more of a partnership now.

Law enforcement authorities see that the banks are fully committed to this and working to the same ends. We have the same goal in mind: banks do not want to handle illicit money. Bringing the expertise of law enforcement experts within the banks helps the battle against financial crime. I do not have a view on the costs of training.

Amy Bell: We do not have a view on that either. It is not something that we see very often, people coming from law enforcement into solicitors’ firms. It happens occasionally but not on a widespread basis. We prefer investigators.

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

Q A lot of research indicates that about 70% of major organisational crises are caused by culture. Why has the FCA scrapped the proposed review of the culture of banks? How is that going to assist in an attack on criminality?

Nausicaa Delfas: You are aware that the FCA is looking at culture with each individual institution. Although we would not be conducting that particular piece of work, we are doing other work. In terms of the Bill, I do not have anything further to add.

Anthony Browne: It was an investigation into the culture of retail banking and it was a decision for the FCA what it did with it. We did not ask for them not to do it at any time and would have been very happy for them to do it. As Nausicaa said, the FCA does a lot of work on culture already. The banks are doing a lot of work on culture through a lot of different means. We completely agree with your assessment of the importance of culture and of getting a better culture in banking. That is why from the chairmen and chief executives down they are spending so much time, effort and money trying to improve the culture in banks.

[Roger Mullin]

Q I will try another familiar area. There has also been removal of a proposal regarding the reverse burden of proof. How is the removal of that proposal going to assist in an attack on holding people responsible for criminal behaviour?

Nausicaa Delfas: That was a matter for the Government and legislation. There are still protections within the regulations to address senior management responsibility.

[Roger Mullin]

Q Are you content with what exists?

Nausicaa Delfas: Yes.

[Richard Arkless (Dumfries and Galloway) (SNP)]

Q I would like to push Ms Delfas on the point about banking culture. Do you see a link between banking culture and criminality? Do you think that a bad banking culture—to put it in layman’s terms—could be a conduit for criminality, or could exacerbate the potential for criminality in the financial sector?

Nausicaa Delfas: Obviously, we regard banking culture as incredibly important. We believe that it should be driven from the top down. We have not seen connections with criminality. We actually see that a lot of the sector operates well. Where there would be any issues around crime, they would obviously need to be detected and rooted out.

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[Mr Wallace]

We have not had any representations from the United States objecting to this.

[Roger Mullin]

Q I would like the panel’s views on whether there is a case for strengthening protection for whistleblowers in the financial sector.

Anthony Browne: The protection for whistleblowers has just been strengthened in the financial sector. Ms Delfas might know more about it. We have been working with the regulators to ensure that each bank has a proper independent whistleblowing regime that does exactly that: protect whistleblowers. There is a senior manager or a board director who is a champion of the whole whistleblowing regime within the bank. That is a process that we have been going through over the past 18 months or so, to strengthen it.

[Roger Mullin]

Q Are you satisfied it is working satisfactorily?

Anthony Browne: I know that, as the banking sector, we think that it is a lot stronger. It is very important to have a strong whistleblowing regime. It is an important part of improving the culture of banks and preventing wrongdoing. We have been working with the regulator on this, so you should ask the regulator.

Nausicaa Delfas: I agree that the regime has been strengthened. We regard it as very important. It feeds into work on culture in banks as well. I would be interested if you thought it should be further improved.

Amy Bell: I cannot comment, unfortunately, in relation to the financial sector. In relation to the solicitors’ profession, we do have in our regulations the obligation for people to report serious misconduct. We do not have any specific whistleblowing provisions but that is not something we have encountered an issue with.

[Nic Dakin (Scunthorpe) (Lab)]

Q From the evidence we had this morning I formed the opinion that there is a view that banks are pretty good at spotting irregularities and bringing them forward to the authorities but other parts of the regulated sector are less proactive in that way. That seemed to be what was coming through the evidence this morning. Does that ring true to you? Are the measures in this legislation likely to improve the performance of other parts of the regulated sector?

Anthony Browne: We think it is important that the Government and law enforcement authorities use all the tools that they can to combat financial crime and not just rely on banks. I would agree with the assessment that banks do an awful lot; we certainly do an awful lot. It is important that you do not underplay or pay too little attention to other sectors—not just lawyers but accountants and estate agents. There are lots of different groups that get involved with this. They can all play their part against financial crime. We should all play our full part in that way.

Nausicaa Delfas: I agree with that. I obviously cannot speak for the other professions but we are aware that there are about 400,000 suspicious activity reports filed with the NCA each year. The vast majority of those, I understand, come from the financial sector. Obviously, perhaps more could be done. I go back to the point that that is a huge number. It is a quantity issue and we would urge any changes that could be made to improve the quality of those so that there are better leads for law enforcement.

Amy Bell: We have to be careful in judging the numbers of suspicious activity reports. The Financial Action Task Force and the NCA’s predecessor, SOCA, were both clear that there is no right number of reports. It is fair to say that the vast majority of reports do come from the financial sector. They see patterns of financial activity that we do not see. I do understand that there is criticism levelled at the professions in relation to reports about clients that banks report but maybe the professions are not reporting, but that is because we see different parts of the transaction. That should not be underestimated.

Although I think we should continue to be vigilant, we need to be very careful about drawing any conclusions from the disparity in the numbers. I think the information sharing will help because that means that the bank can communicate with the regulated sector where they see things that will give data to the professions to be able identify suspicious activity.

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[Roger Mullin]

Q I will direct my questions to Mr Leask, but I would be very happy if Toby decided to join in as well. If it had not been for Mr Leask’s groundbreaking research over the past year or more, I would not have been aware of the seriousness of the situation, so I would like to put that on the record. Could you give us a sense of your perception of the scale and type of criminality that is associated with Scottish limited partnerships?

David Leask: There are some 25,000 of these firms on the register at Companies House. A colleague of mine, Richard Smith, has scraped data from these and we think some 17,000 of them have entirely opaque ownership, meaning that they are owned by members—partners in partnerships—who are in some of the places that Toby has talked about, such as the British Virgin Islands, Panama and Belize. There is no way of knowing who stands behind those companies.

How do we know what they are doing? We cannot gauge the scale of criminality, tax evasion or anything else because we do not know who these companies belong to or who controls them, but some of them have started cropping up in criminal matters elsewhere. For example, we have seen a company called Fuerteventura Inter, which is registered on the high street in a small mining village in Lanarkshire, named in a prosecution in Ukraine for corruption involving the export of shells from Ukraine to the middle east. We have seen minor cases as well: for example, in what you might think are tuppenny-ha’penny corruption cases—they involve tens of thousands of pounds—officials have used them as fake intermediaries for exports of alcohol. They then take a cut, allegedly.

We have also started seeing these companies being used substantially in the world of e-commerce, both for what you might think of as being criminal, unregulated and unethical behaviours. Only yesterday, we reported that Scottish limited partnerships were being used as fronts for the kind of unregulated cash-transfer firms—sort of PayPals, only not regulated by anyone—where an anonymous sender can send an anonymous amount of money to an anonymous recipient by email. They actually guarantee that they can provide identity-masking. That may not be an illegal activity but it is unregulated, and again, we do not know who stands behind those companies.

[Roger Mullin]

Q To follow up on that, I read the article yesterday and I was taken aback, to say the least, when it alleged that there could be contacts with what used to be known as the KGB.

David Leask: There have been stories in Ukraine that have accused some of these companies of having connections—albeit tenuous ones, to some extent—with people who are connected to the security service in Russia. However, the companies concerned deny that.

[Roger Mullin]

Q You have already started to give us a sense of the type of criminality that is involved. To confirm, we are talking about financial criminality, but not just financial criminality—I think one of your investigations was into things that involved, for example, paedophile websites. Is that correct? Could you say a bit more about that?

David Leask: One of the types of companies that Scottish limited partnerships have become quite popular as fronts for are businesses that you might call cyber-lockers. They are essentially subscription services where you can access material and peer-to-peer sharing. That might include, for example, bootlegged Hollywood blockbusters. It can also be things that are quite unpleasant. People post such things to those sites and you pay a subscription to access that material. There is a lot of concern about the use of those peer-to-peer file sharing systems. Sometimes it is quite innocent—people sharing pictures of their families—and sometimes it is not. That is subject to an investigation by police in Scotland.

There is a similar issue involving the alleged theft of copyrighted material by a well-known torrent site. That is another site where people can access copyrighted material such as TV programmes and films in the United States, where the estimated value of the copyrighted material stolen is $1 billion. That involves a Scottish company as part of the payment mechanism for those services.

[Roger Mullin]

Q I will allow other Members to speak, but I want to ask one more follow-up question. I can understand why you are reticent to suggest what legislators should do but, as far as I am aware, you have been one of the leading researchers in the field. However talented you may be, Mr Leask, you are limited in your resources to research further. Would you welcome the UK Government putting their shoulder to the wheel, as it were, and conducting a detailed review of the use of SLPs for criminal purposes?

David Leask: That is a reasonable ask. As I said earlier, we are talking about companies that are trading on the brand of Scotland and the brand of Britain. When they are offering these services, they are stressing that the addresses that they are using are British. The United Kingdom’s status is part of the reason that these companies are popular. That is part of the reason that you may want to look at the matter.

One of the reasons that people in countries such as Ukraine or Russia may wish to use a Scottish or British company as a shell company is that it lends the enterprises respectability. I am not sure that our authorities will want to lend the respectability of countries such as Scotland, which have an image in the world of being stand-up places where there is the rule of law, to some of the enterprises we are talking about.

One thing I urge you to do if you are remotely interested in the issue is simply to go online and google “Scotland” and “offshore”. If you can do so in Russian, all the better. You will see the most extraordinarily explicit explanations of how these companies do not need to pay tax, report any financial findings or reveal who their owners are, because those owners will be in entirely opaque jurisdictions.

Q Toby Quantrill: So much of what Mr Leask has talked about in terms of how anonymous companies are used applies equally to our overseas territories, including the issue of respectability by connection to the UK.

I want to say a couple of things on volume, especially with respect to developing countries and the impact there. A high-level panel was put together by the United Nations economic and financial committee. It was run by Thabo Mbeki, so it is known as the Mbeki panel. That panel estimated that illicit financial flows out of Africa run at somewhere in the region of at least $15 billion a year. That is money being lost from Africa at a far greater rate than aid is going in. That money is either illegally obtained, illegally transferred or illegally utilised, so it covers a range of activities including transfer pricing—the illegal movement and transfer of finances—and criminal activities and many of the kind of things that have been described. It is worth noting that the sort of picture being painted there would apply equally and, in many respects, more so.

One little pertinent fact that I have written down is that 11% of foreign-owned companies operating in Russia are apparently registered in the British Virgin Islands, but we do not know who sits behind them.

[Mrs Flick Drummond (Portsmouth South) (Con)]

Q This question is really a supplementary to some of Dr Huq’s comments on the overseas territories. I asked a previous panel including the Serious Fraud Office, HMRC and the Crown Prosecution Service whether they thought they had the resources to go in there. They have automatic access to all the records, although I know that it is not public document. I want to know a bit more about that, Mr Quantrill, because obviously you are a great expert on it. To add to that, are you confident that the enforcement agencies have enough resources and the capability to do what is in the Bill and prosecute people in the overseas territories and Crown dependencies?

Toby Quantrill: It would be an awful lot easier if we had transparency in regard to beneficial ownership. It is true that all of the overseas territories have now agreed to share information with the UK Government and a number of other Governments on a Government-to-Government basis. However, from the perspective of a citizen in a developing country who may well not trust their Government and wants to know what is going on, they will not be happy. First, they cannot hold their Government to account to use that data even if they get it—most developing country Governments will not. As long as it is shared only between Governments, there is a limit to who will see it and who can act on the information. That is critical.

We cannot put this an awful lot better than David Cameron did when he was talking about the UK’s beneficial ownership register. He was asked, “Is it not enough for it to be available to Government officials?” and he said:

“we in government will use this data to pursue those who break the rules, and we’re going to do that relentlessly, but there are also many wider benefits to making this information available to everyone. It’s better for businesses here, who’ll be better able to identify who really owns the companies they’re trading with. It’s better for developing countries, who’ll have easy access to all this data without having to submit endless requests for each line of inquiry. And it’s better for us all to have an open system which everyone has access to, because the more eyes that look at this information the more accurate it will be.”

Yes, there is a question of resources and availability to use the information once it is provided, but the more people who have access to it, the more likely it is first to be accurate and secondly to be utilised.

I was talking to a colleague from Global Witness just before last weekend. They spent the whole weekend with a group of data analysts sitting and looking at the information now available through the UK’s beneficial ownership register, making connections and linking that with other databases they have. This information does get utilised, and the more people utilising it, the more likely it is to be helpful. Our sense is that it is not enough just for the authorities to have access.

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[The Chair]

I think we will have a written reply.

Dame Margaret Hodge: Okay. I am going to think about that one. Thank you. That will save me, Sir Alan.

[Roger Mullin]

Q Is there a case for extending public registers to cover trusts?

Dame Margaret Hodge: Yes.

[The Chair]

Order. I am afraid that brings us to the end, Dame Margaret. Our allotted time has run out again. Thank you very much for coming. It was a delight to see you.

Examination of witnesses

Tom Keatinge, Dr Susan Hawley, Chido Dunn and Duncan Hames gave evidence.

Criminal Finances Bill

Roger Mullin Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons
Tuesday 25th October 2016 Commons Chamber

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

Many people in the Chamber consider much of the Bill to be praiseworthy. It struck me that all the critical speeches this afternoon—spanning all parties represented by the Members who have spoken—have been about what is not in the Bill, rather than what is in it. I wondered who would put the Bill in the context of the challenge that we face, and I think the Minister did that best in his opening remarks. He said of the extent of the criminality that he discovered on becoming a Minister that

“it…takes my breath away.”

The extent to which the Bill will deal with such criminality does not quite take the breath away.

I would like to comment on three areas that have been mentioned, the first of which is the permissive culture of banks. The best critique of that culture has come not from me or from anybody who is currently in the Chamber, but from the right hon. and learned Member for Rushcliffe (Mr Clarke) on 24 May this year. When talking about this forthcoming Bill, he commented:

“we in this country are very bad at dealing with white-collar crime, and there is growing awareness of that. If someone wishes to rob a bank, they go to the LIBOR market; they do not put on a balaclava and pick up a shotgun—that is much less profitable.”

He very succinctly drew out the problem of how the culture in banks has created a context in which it is easier to commit grand crimes in them than it is for the old-fashioned external robber to do so. He went on:

“London is still the money-laundering capital of the world. For an African despot or a serious international criminal, London is the best place to put their money, because they can trust the bankers to look after it and not to steal it from them.”

He concluded:

“I hope we will also impose a duty on those at the head of the institutions involved to ensure that they take positive steps to stop those working for them encouraging such activities.”—[Official Report, 24 May 2016; Vol. 611, c. 450.]

I doubt whether anybody in this debate would disagree with the right hon. and learned Gentleman’s words in May, but I do not think that his optimism about the Bill is reflected by the reality of what we now face.

On banking, I suggest that the Minister look at two things. The right hon. Member for Barking, who is no longer in her place, gave the example of what happened in HSBC, where someone was willing to speak up but was then pilloried by senior management. One thing I would suggest to the Minister that needs doing is to strengthen protection for whistleblowing in the banking and financial sector. If we could find a mechanism to encourage people to speak up about criminality or bad practice, that in itself would be a useful measure. Many people have commented that the crisis in the banking sector in 2008 was not predominantly because of the details of regulation, but predominantly because of the culture at the top level. It was caused by group-think on the boards of banks, and by the over-confidence of individual chief executives who were immune to considering anything other than a dash for cash. The other thing I would suggest to the Minister is that it would be useful for a requirement for proper cultural analysis to be built into the banking sector.

The second area on which I want to comment has already been hinted at by my hon. Friends the Members for Dumfries and Galloway and for Aberdeen North (Kirsty Blackman), but no one else has talked about it in this debate thus far. It is the topic of Scottish limited partnerships. This may be new to some hon. Members, so I hope they will allow me to give a few examples. Scottish limited partnerships are not a new phenomenon. They are not a devolved matter; they are a matter for this House. Although they were created by Asquith in the Budget of 1907—even I do not remember it—from 2008 they began to be used much more extensively for criminal behaviour. Since 2008, the use of SLPs has risen by approximately 40% year on year.

Scottish limited partnerships have been at the heart of some of the major corruption scandals in the world. For example, they have been named in major corruption scandals involving the former Soviet Union, particularly Ukraine, where they are still openly marketed as off-the-peg zero-tax offshore companies. Elsewhere, one Scottish limited partnership is at the moment at the heart of a $1 billion digital bootlegging case in the United States. The International Monetary Fund has warned that the risk posed by SLPs to the fight against money laundering and organised crime is something to which attention needs to be given. Other Scottish limited partnerships are involved in pornographic and even in paedophilia websites. Indeed, the span of criminal activity through these financial vehicles seems to know absolutely no bounds.

Closer to home, The Herald newspaper, which has done extraordinary work in this area, revealed barely six days ago that the tax haven bank owned by Lord Ashcroft is being used, without his permission, as a base to set up dozens of firms utilising SLP loopholes linked to a known fraudster. Indeed, two Belize companies have been falsely using the address of the HQ of Lord Ashcroft’s bank for at least six years. Those secret Belizean businesses, Sherbrook Assets and Whitmoore Solutions, have formed at least 70 other Scottish entities, most of them registered, I am sorry to say, to a convicted fraudster who lives in Fife in Scotland, Anzelika Young. The Bill should be ensuring that every SLP, along with any similar financial vehicle elsewhere in the UK, is exposed to rigorous due diligence at the very least.

During proceedings on the recent Finance Bill, I attempted to add a very simple new clause calling on the Government to investigate SLPs. They chose to vote that new clause down. When, subsequently, yet more criminal activity came to light, on 26 September I wrote to the Chancellor—I have a copy of the letter with me—seeking a meeting about this major international criminal activity. As of last week, when I was yet again chasing this up, the only response I have had—this is after a month, showing the Government’s lack of concern about international criminal activity—is that they are still considering how to respond to my request for a meeting. It is quite inappropriate for a Member of this House seeking a meeting about a major criminal activity to have to wait a month for any response.

[Mr Wallace]

I reassure the hon. Gentleman, given our meeting yesterday, that I have listened to what he said. I will meet my ministerial colleagues to discuss the problem he raised with me and see what we can do about it.

[Roger Mullin]

I am particularly grateful to the Minister for that clarity. Indeed, in coming to the Dispatch Box at that moment he confirmed what I was about to say in my closing line on the issue of SLPs. Given how he has discussed this matter with those of us on the Opposition Benches who are interested in it, and his understandable and quite appropriate concern about the matters raised, I was going to suggest that the Prime Minister could appoint him the formal tutor for all Treasury Ministers, in addition to his role as Minister for Security; I am sure they would learn a great deal from the appropriate way he deals with matters. I commend that new appointment to the House. I speak in jest, but surely there is an issue here, as some of the Treasury Ministers who have been turning a blind eye for months need to learn that these are matters of great concern and importance, and deserve to be treated as such.

The third area I will briefly mention—and it will be very brief, as many Members have already commented on it—is what has been happening post Panama papers on Crown dependencies and the like. The clear view expressed in this debate is that the Bill does not yet go far enough, particularly on the much needed transparency and openness on beneficial ownership. If the Minister would be willing to think about how we might, in a collegiate way across the House, begin to address that issue and some of the others raised today, he will win himself many friends indeed.