Economic Crime and Corporate Transparency Bill

Rushanara Ali Excerpts

Consideration of Lords message
Wednesday 25th October 2023 Commons Chamber

[Kevin Hollinrake]

The hon. Gentleman raises a very important issue relating to the concerns about de-banking that we have across the economy. The Economic Secretary to the Treasury, my hon. Friend the Member for Arundel and South Downs (Andrew Griffith) is looking at it, as is the Treasury. In future, it is our intention to ensure that when banks close accounts they give a valid reason why, rather than closing them summarily. He is absolutely right to raise the point and I am very happy to engage with him on it, because it affects businesses as well as community groups.

To conclude, I encourage everyone to agree with the Government’s position on these two areas. It is vital that we achieve Royal Assent without delay, so we can proceed to implement the important reforms in the Bill as quickly as possible.

[Rushanara Ali (Bethnal Green and Bow) (Lab)]

It is an honour to speak on the Bill again. I was hoping that we could conclude the proceedings on the Bill as soon as possible and it is disappointing that the Government are yet to make further compromises. The Bill is welcome in principle, but it should not have taken the war on Ukraine to prompt the Government into action. I am grateful to my right hon. Friends the Members for Barking (Dame Margaret Hodge) and for Birmingham, Hodge Hill (Liam Byrne), and to Members across the House for working together to improve the Bill.

Economic crime poses a threat to our country’s national security, our institutions, our economy, and causes serious harm to our citizens and wider society. Conservative estimates place the cost of economic crime at £290 million a year, according to the National Crime Agency, and the failure to stop criminals benefiting from the proceeds of their crime can fund further criminality. That can include offences such as funding organised crime groups, terrorist activity, drug dealing and people trafficking—this is a very serious issue.

Economic crime, as the Minister knows, has many victims. For too long, the Government have turned a blind eye to corrupt and dirty money, allowing Russian illicit finance to flood into Britain. That lets Putin’s cronies stash ill-gotten gains and even recycle the proceeds of crime into luxury properties. That is well documented and has been highlighted by many Members across the House, as well as in Select Committees. According to analysis by Transparency International, properties to the tune of £6.7 billion have been bought through suspicious wealth. Of those, almost a quarter in value were

“bought by Russians accused of corruption or links to the Kremlin.”

Most are held via secretive offshore companies. That drives up property prices for ordinary people in our country. More than two-thirds of English and Welsh properties held by foreign shell companies do not report their true owners. Research by the London School of Economics and Warwick University shows that the Register of Overseas Entities is not fully effective. For 71% of such properties, essential information about their beneficial owners remains missing or publicly inaccessible, despite the register. That means we still cannot know whether sanctioned individuals, money launderers or other corrupt individuals are benefiting from those properties.

We must not sustain economic growth off the back of dirty money. The Government have already delayed the Bill and these actions for too long. In that time, money has been lost, economic crime has become ingrained and the UK economy has once again lost out. Given that the nature and necessity of the Bill has already been discussed at length, I will focus on addressing the two amendments.

During the passage of the Bill, helpful alterations have been made to ensure that it is robust. The Lords amendments before us today seek to address two omissions. We are very disappointed that the Government are not willing to compromise and not willing to heed the wise and expert input of the Lords. That is deeply disappointing, because a great deal could be achieved if the Minister and his Government took note, including from hon. and learned Members on their own side.

[Kevin Hollinrake]

rose—

[Rushanara Ali]

If the Minister is brief, rather than talking the Bill out like he did last time, I will give way.

[Kevin Hollinrake]

I will be very brief. On the question of compromise, the hon. Lady will have noticed that there was no “failure to prevent” offence when the legislation was first tabled, nor was there an identification doctrine. There has been significant compromise on the Government side. Our preference, clearly, is to move forward in that spirit of compromise. We have achieved a great deal with the Bill, which has moved from under 300 pages to 400 pages. I do not think it is right to say that the Government have not compromised.

--- Later in debate ---

[Rushanara Ali]

When the Minister was a Back Bencher, he was a powerful advocate on the very issues we are discussing today. It is a shame he has been muzzled, but I appreciate that he is in a difficult position. I hope we can have some comprise, but clearly he has not managed to persuade senior members of his Government. I ask the Government to once again carefully consider these amendments, so that we can best tackle the problem of fraud and economic crime.

The Minister highlighted all the problems with the amendments, but I want to talk about their strengths. The noble Lord Garnier’s amendment on “failure to prevent” fraud, which exempts small and micro-enterprises, highlights that the criminal law should be uniform and apply to all in a similar way. This is not just a small insignificant amendment, but a change that would significantly alter law enforcement. For context, fraud is the most common crime in the UK, accounting for 41% of all crimes. Introducing a “failure to prevent” offence would help to deter companies from engaging in or facilitating fraud. To fully change corporate behaviour, we must ensure that the offence applies to all companies, regardless of size.

As has been stated on many occasions, since the “failure to prevent” bribery covers all companies, there is no reason why this measure should not also cover businesses of all sizes. It simply creates more discrepancies and confusion for businesses. The size of a business should not determine who is exempt. The Government have touted this exemption as a protection for small businesses against unnecessary red tape, but in reality this carve out deprives small and medium-size enterprises of the defence of having put in place reasonable anti-fraud procedures. Smaller companies will instead be covered only by the fraud offence itself, when large companies would be caught by the lighter “failure to prevent” fraud offence. The introduction of a new “failure to prevent” offence should apply to all, and the corresponding defence of putting in place reasonable defence procedures should be available to all. In effect, through this carve out, the Government are creating an uneven playing field that is biased against smaller companies. The Bill currently leaves large gaps for economic crime to not only persist but flourish, which I know is not the intention of the Minister. The amendment would have gone a long way to addressing those issues. I ask him once again to carefully consider the amendment, rather than reject it.

I want to turn to the amendment from the noble Lord Faulks, on cost protections in civil recovery cases. The amendment gives more discretion to court judges to alter the allocation of legal costs to ensure that extortionate legal fees are not a hindrance to justice. The spirit of the amendment is that it will help to prevent criminals benefiting from the proceeds of crimes, here or around the world. When it comes to cases where enforcement agencies are trying to prosecute high-level, large-scale economic crime, cost orders remain a serious barrier. I know that first-hand from evidence we received when I served on the Treasury Committee, where we conducted two inquiries on these issues. Our enforcement agencies need strong backing if they are to take on fraud, money laundering and other types of economic crime on the largest scale. Right now, the Government should be on the side of our agencies, rather than tying their hands behind their backs. The amendment would ensure that criminals, cronies and kleptocrats are not given cover by leaving the back door open for them to spend their way out of justice. That cannot be right. It would ensure that the size of their bank accounts and assets does not give them a guaranteed get out of jail free card just because they can afford to meet any expenses required to support their case. The Minister knows that this is a problem; he has heard evidence of it. He knows that it is a serious issue that needs to be addressed.

It has been disappointing to observe the Government’s lack of willingness to protect our law enforcement. It seems reasonable that a court could have discretion on how to allocate costs, especially when we know of previous cases, one of which resulted in a family’s seeking costs amounting to a staggering £1.5 million. That represents 40% of the National Crime Agency’s annual budget between 2015 and 2018.

The Bill is almost over the line, and I acknowledge that there have been some improvements, but we could do a great deal more. We have welcomed the Bill and we welcome the Lords amendments, so we are disappointed that the Government continue to fail to support them. We would be in a much better place if there were a compromise. The “failure to prevent” offence is a case in point. For years we have been calling for a replication of the successes of the Bribery Act 2010. Sadly, our capital city has been nicknamed “Londongrad”, and is now considered to be a capital where money laundering and fraud are rife. That means that we must do more to tackle these issues, but the Bill provides only part of the solution. The present circumstances require much more radical action than the timidity that we have witnessed both today and in the last Session.

It is saddening that the Government have missed such an important opportunity. We will continue to hold their feet to the fire, but given the lack of compromise, it will be for the next Government—the next Labour Government, I hope—to pick up the pieces and toughen up our response in order to end the corrosive impact of dirty money in our country.

[Several hon. Members rose—]