Illegal Migration Update

Seema Malhotra Excerpts

Wednesday 29th March 2023 Commons Chamber

[Robert Jenrick]

My right hon. Friend has been vociferous in raising legitimate concerns about one particular location in her constituency. She is right to say that there should be appropriate engagement between the local authority and the Home Office before any decisions are made, and that the police and other stakeholders should be informed. Where there are serious concerns, of course we should not proceed with those properties.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

The Minister was right when he said that we need to stop people coming here by boat. Last night, Labour voted for the establishment of a cross-border police unit in the National Crime Agency to target the criminal gangs smuggling people across the channel. That measure would make a huge difference, in the short term and the long term, to the protection of our borders and to the welfare of migrants, so why on earth did the Government’s MPs vote against it?

[Robert Jenrick]

Because we have already done it.

Metropolitan Police: Casey Review

Seema Malhotra Excerpts

Tuesday 21st March 2023 Commons Chamber

[Suella Braverman]

I do not agree that we must abolish the Metropolitan Police Service. I think we need to institute a wide-ranging programme of profound reform, and that is why I think that Sir Mark is absolutely right in his turnaround plan, which deals specifically with the systemic problems—problems that, unfortunately, are not new but of which we are all aware—that need root-and-branch reform. That is why he is in the right position to effect that change.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

I want to put on record my thanks to Baroness Casey for her report, but it has reached the damning verdict that London’s women and children have been left even further behind. The report states:

“The de-prioritisation and de-specialisation of public protection has put women and children at greater risk than necessary. Despite some outstanding, experienced senior officers, an overworked, inexperienced workforce polices child protection, rape and serious sexual offences.”

Her report recommends specialist units to deal with violence against women and girls, and it is clear that this must happen across the country. Will the Home Secretary today back Labour’s plans to introduce 999 specialist call handlers for domestic abuse and specialist rape units in every police force, or bring forward her own urgent plans to do so?

[Suella Braverman]

I take violence against women and girls extremely seriously. That is why I added VAWG to the strategic policing requirement, meaning that it is set out as a national threat for forces to deal with specifically. We are funding the first full-time national policing lead for VAWG, DCC Maggie Blyth, who is driving improvements in the police responses. We are also providing up to £3.3 million for domestic abuse matters and consulting on increasing the powers that police have in responding to this heinous crime. There are many measures and initiatives that we have brought in over the years, and I am proud of this Government’s track record on supporting women and girls.

Economic Crime and Corporate Transparency Bill (Fifteenth sitting)

Seema Malhotra Excerpts

Committee stage
Tuesday 22nd November 2022 Public Bill Committees

[Tom Tugendhat]

I am glad to have support from further down the Treasury Bench.

To request information, a business must have reason to believe that the other business holds information that will, or may, assist in carrying out its relevant actions. Relevant actions include deciding whether further customer due diligence is needed, restricting access to products, or terminating a business relationship with the customer as a result of the additional information obtained.

Amendments 122 to 135 amend clause 148 to expand the provisions to offer protection from civil liability owed by the person sharing information to the person to whom the disclosure relates. As the Committee heard when UK Finance gave evidence, the banking sector maintains that without greater protection, information is unlikely to be shared, as doing so creates limited benefit in comparison with the risk of potential protracted and expensive litigation from customers. Greater use of the provisions will make it harder for criminals to exploit UK businesses. We have listened to the sector and tabled these amendments.

Clause 149 enables indirect information sharing by certain businesses via a third-party intermediary, on a similar basis to elements of clause 148. A business may share information about a current or former customer whom they have already decided to take action against due to an economic crime risk—or who would have been subject to that decision were they still a customer—either by terminating a business relationship or by refusing or restricting access to a product or service. The business must be satisfied that sharing the customer’s information will assist other businesses in carrying out their relevant actions. As with clause 148, the Government have tabled amendments 136 to 141 and 143 to 151 to disapply civil liability for a person who discloses such information.

Government amendments 142, 152 and 155 extend the scope of the indirect information-sharing provisions to cover large and very large accountancy and legal businesses. The benefit of bringing those businesses within the scope of the provision is that those firms have experience of dealing with high-risk clients. Criminals are known to exploit the information gaps that currently exist between businesses in these sectors, and encouraging further information sharing creates greater opportunities to prevent economic crime.

Clauses 148 and 149 do not disapply any liabilities arising under data protection legislation. The hon. Member for Feltham and Heston tabled amendment 167, which would expand clause 148 to include the accountancy sector. I hope that she is reassured that the Government amendments that I have just described achieve that objective.

Government amendments 153 and 154 make express provision for aiding, abetting, counselling and procuring in the definition of economic crime. Schedule 8 sets out the offences that are included in the definition of economic crime for the purposes of direct and indirect disclosures of information, the Law Society’s fining powers, and the objectives of regulators of legal services. The schedule is divided into common-law and statutory offences. No new offences are created by the Bill; the schedule has been included because there is no existing relevant definition of economic crime. The schedule is essential to provide clarity and certainty about the meaning of economic crime, in order for individuals, regulators and businesses to use the disclosure of information provisions effectively and to properly apply the new measures relating to legal services.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

It is a pleasure to serve under your chairship, Mr Paisley, and to speak to this rather large group. I thank the Minister for his comments, which I find reassuring. I will deliver my own remarks for the record, but his comments, particularly on our amendment 167, were helpful.

This important group of clauses and amendments relates to supporting disclosures to prevent, detect or investigate economic crime. The Minister is absolutely right about the concerns—raised by UK Finance specifically—that the clauses go a considerable way to addressing.

Clause 148 concerns direct disclosure of information and, as the Minister outlined, disapplies the duty of confidentiality owed by a business where the business making the disclosure knows the identity of the recipient and certain conditions—broadly outlined in subsection (1)—are met. The explanatory notes contain the example of a bank that identifies a transaction that it believes is irregular and wants further information from another party—perhaps more information on the identity of the payer or more clarity on the source of the funds. We understand why such information might be wanted and the importance of being able to get such clarity. In effect, clause 148, along with clause 149, about which I will say a few words separately, removes the civil liability for an institution in sharing that information with another entity for the purposes of detecting and preventing economic crime.

Given the concerns about the difficulties with information sharing, and the resistance that there has been to sharing information because of lack of clarity about the law or about where liability lies under data protection rules, these measures are welcome. They have perhaps taken longer to be introduced than we would have liked, but they are certainly welcome, and we hope that they will increase the detection of economic crime and reduce moves by those involved in it to seek to use our institutions to launder and hide money.

Although I welcome the removal of barriers to information sharing, I wonder whether the clauses give regulated sectors or actors so-called safe harbour as comprehensively as they might. Helena Wood of the Royal United Services Institute said in her evidence to the Committee:

“Although the provisions in the Bill will go some way towards increasing private-to-private information sharing and, in particular, the risk appetite in the banking sector, they really do not keep pace with the global standard. What we would like in the next economic crime plan”—

I think we are all hoping to see that soon; shortly is the word used in this Committee—

“is something much more ambitious. In many ways, I would say that while it is welcome, the Bill is a slight missed opportunity with regard to information sharing, given that it really does not push forward to this big data analytics model that others are moving towards.” ––[Official Report, Economic Crime and Corporate Transparency Public Bill Committee, 27 October 2022; c. 90, Q170.]

--- Later in debate ---

[Tom Tugendhat]

I am sorry to hear that the hon. Lady was considered a risk to public safety, a danger or a threat to the nation in any way. She is none of those things; she is a highly valued Member of this House and a friend to many of us. I can only imagine the unwisdom of whoever it was who decided to terminate a relationship with her. I hope that the decision is being reviewed and that the person is now enjoying a holiday on the Falkland Islands.

It is worth pointing out that the comparisons that this has with other jurisdictions should be looked at carefully. Not every jurisdiction has the same application of the ECHR, GDPR or various other constraints on sharing information and protecting privacy that the UK has. In the Netherlands, the transaction monitoring scheme has so far involved only the sharing of business data, so there are various different ways in which these applications are not exactly applicable. It is worth pointing out that, under the provisions, an individual’s right to a basic bank account, as established by the Payment Accounts Regulations 2015, is unaffected.

That means that affected individuals will be able to continue to access basic accounts, providing their account is not being used or has not been used for criminal activity, or that maintaining the account would breach any other legal obligations under the money laundering regulations. Moreover, the clause stipulates that before information is shared about a customer, the sharer must have taken action against the customer, or would have if they were still a customer. As a result, no one will have information shared unless the bank has already decided to take action against them or would have decided to do so.

We do not foresee a significant increase in the number of new individuals being denied access to services. Certainly, the hon. Lady’s comments about her constituent should be viewed in that context. However, if there are individual cases that she feels that I—or, indeed, my hon. Friend the Member for Thirsk and Malton—can help with, I would be very happy to look at them, as I am sure my hon. Friend would be as well.

The forms of redress that the hon. Lady raises are important. That is where going through the Information Commissioner’s Office or the Financial Ombudsman Service, depending on the nature of the complaint, is important. She raised many other questions, and although I will not be able to get to them right now, I will be happy to write to her on some of those individual items.

[Seema Malhotra]

I thank the Minister for his comments. If he is happy to write to me, I would be grateful for that. Can I clarify whether that will also cover some of the questions I raised about the expected timing of sharing information and the procedures for those who may have been caught up inadvertently? Procedurally, we need to understand how they can be dealt with. Rather than Ministers having to deal with individual cases, we want a mechanism that will make the system work fairly.

[Tom Tugendhat]

The hon. Member is making a perfectly reasonable point. I agree, and I will write to her about those timings so they are clearly on the record and we understand what is being asked and what the expected timeframes are.

It is also worth saying that the warning condition is more active because a business has already taken or would have taken a decision where a person is a customer. That is different from the request condition, where it is sharing in response to a specific request. The two are not quite identical, but I hope that answers the hon. Lady’s questions. I will write to her shortly.

Amendment 122 agreed to.

Amendments made: 123, in clause 148, page 136, line 24, leave out ‘to which’ and substitute ‘in circumstances where’.

This amendment and Amendments 124, 126, 127, 128 and 130 extend the power to expand the kinds of business in relation to which the provision can apply, so that it can describe attributes of the person as well as the business.

Amendment 124, in clause 148, page 136, line 25, leave out ‘to which’ and substitute ‘in circumstances where’.

See Member’s explanatory statement for Amendment 123.

Amendment 125, in clause 148, page 136, line 31, at end insert—

‘(1A) The protections are that, subject to subsection (9), the disclosure does not—

(a) give rise to a breach of any obligation of confidence owed by A, or

(b) give rise to any civil liability, on the part of A, to the person to whom the disclosed information relates.’

See Member’s explanatory statement for Amendment 122.

Amendment 126, in clause 148, page 136, line 32, leave out ‘to’.

See Member’s explanatory statement for Amendment 123.

Amendment 127, in clause 148, page 136, line 33, after ‘(a)’ insert ‘where the business carried on is’.

See Member’s explanatory statement for Amendment 123.

Amendment 128, in clause 148, page 136, line 34, leave out ‘business of a description prescribed’ and insert ‘in circumstances prescribed, in relation to the business or the person carrying it on,’.

See Member’s explanatory statement for Amendment 123.

Amendment 129, in clause 148, page 137, line 12, leave out ‘A’ and insert ‘The protections set out in subsection (7A) apply in relation to a’.

This amendment and Amendments 131, 133 and 135 provide that the disclosures mentioned in clause 148(7) do not give rise to any civil liability, on the part of the person making the disclosure, to the person to whom the information disclosed relates. There is an exception for liabilities under the data protection legislation.

Amendment 130, in clause 148, page 137, line 12, leave out ‘to which’ and substitute ‘in circumstances where’.

See Member’s explanatory statement for Amendment 123.

Amendment 131, in clause 148, page 137, line 14, leave out from ‘request’ to ‘R’ in line 15 and insert ‘if’.

See Member’s explanatory statement for Amendment 129.

Amendment 132, in clause 148, page 137, line 16, leave out ‘to which’ and substitute ‘in circumstances where’.

See Member’s explanatory statement for Amendment 123.

Amendment 133, in clause 148, page 137, line 19, at end insert—

‘(7A) The protections are that, subject to subsection (9), the disclosure does not—

(a) give rise to a breach of any obligation of confidence owed by R, or

(b) give rise to any civil liability, on the part of R, to the person to whom the disclosed information relates.’

See Member’s explanatory statement for Amendment 129.

Amendment 134, in clause 148, page 137, line 22, leave out from ‘applies,’ to the end of line 23 and insert ‘does not—

(a) give rise to a breach of any obligation of confidence owed by them, or

(b) give rise to any civil liability, on the part of R, to the person to whom the disclosed information relates.

This is subject to subsection (9).’

This amendment and Amendment 135 provide that use of information disclosed under clause 148(7) to enable a clause 148(1) disclosure to be made does not give rise to any a civil liability, on the part of the person making use of the information, to the person to whom the information relates. There is an exception for liabilities under the data protection legislation.

Amendment 135, in clause 148, page 137, line 25, after ‘contravene’ insert ‘, or prevents any civil liability arising under,’.—(Tom Tugendhat.)

See Member’s explanatory statement for Amendments 122, 129 and 134.

Clause 148, as amended, ordered to stand part of the Bill.

Clause 149

Indirect disclosure of information: no breach of obligation of confidence

Amendments made: 136, in clause 149, page 137, leave out lines 27 to 29 and insert—

‘(1) The protections set out in subsection (2A) apply in relation to a disclosure made by a person (“A”) to another person (“B”) if—’.

This amendment and Amendments 139 and 151 provide that the disclosures mentioned in clause 149(1) do not give rise to a civil liability on the part of the person making the disclosure, to the person to whom the information disclosed relates. There is an exception for liabilities under the data protection legislation.

Amendment 137, in clause 149, page 137, line 30, leave out ‘to which’ and substitute ‘in circumstances where’.

This amendment and Amendments 138, 140, 141, 142, 144 and 147 extend clause 149 disclosures so they apply in relation to persons with a large or very large UK revenue who carry on legal or accountancy services in the regulated sector.

Amendment 138, in clause 149, page 137, line 39, leave out ‘to which’ and substitute ‘in circumstances where’.

See Member’s explanatory statement for Amendment 137.

Amendment 139, in clause 149, page 138, line 1, at end insert—

‘(2A) The protections are that, subject to subsection (9), the disclosure does not—

(a) give rise to a breach of any obligation of confidence owed by A, or

(b) give rise to any civil liability, on the part of A, to the person to whom the disclosed information relates.’

See Member’s explanatory statement for Amendment 136.

Amendment 140, in clause 149, page 138, line 2, leave out ‘to’.

See Member’s explanatory statement for Amendment 137.

Amendment 141, in clause 149, page 138, line 3, after ‘(a)’ insert ‘where the business carried on is’.

See Member’s explanatory statement for Amendment 137.

Amendment 142, in clause 149, page 138, line 8, leave out from ‘provider,’ to ‘by regulations’ in line 9 and insert—

‘(aa) where—

(i) the business carried on is business in the regulated sector within paragraph 1(1)(l) or (n) of Schedule 9 to the Proceeds of Crime Act 2002 (accountancy or legal services), and

(ii) the UK revenue of the person carrying on the business is large or very large for the relevant financial year (see subsection (10)), and

(b) in circumstances prescribed, in relation to the business or the person carrying it on,’.

See Member’s explanatory statement for Amendment 137.

Amendment 143, in clause 149, page 138, line 11, leave out from ‘to B,’ to end of line 14 and insert

‘the protections set out in subsection (5A) apply in relation to a further disclosure of that information made by B to another person (“C”) if—’.

This amendment and Amendments 145 and 151 provide that the disclosures mentioned in clause 149(4) do not give rise to a civil liability, on the part of the person making the disclosure, to the person to whom the information disclosed relate. There is an exception for liabilities under the data protection legislation.

Amendment 144, in clause 149, page 138, line 15, leave out ‘to which’ and substitute ‘in circumstances where’.

See Member’s explanatory statement for Amendment 137.

Amendment 145, in clause 149, page 138, line 18, at end insert—

‘(5A) The protections are that, subject to subsection (9), the disclosure does not—

(a) give rise to a breach of any obligation of confidence owed by B, or

(b) give rise to any civil liability, on the part of B, to the person to whom the disclosed information relates.’

See Member’s explanatory statement for Amendment 143.

Amendment 146, in clause 149, page 138, line 22, leave out ‘A’ and insert

‘The protections set out in subsection (7A) apply in relation to a’.

This amendment and Amendments 148, 149 and 151 provide that the disclosures mentioned in clause 149(7) do not give rise to a civil liability, on the part of the person making the disclosure, to the person to whom the information disclosed relates. There is an exception for liabilities under the data protection legislation.

Amendment 147, in clause 149, page 138, line 22, leave out ‘to which’ and substitute ‘in circumstances where’.

See Member’s explanatory statement for Amendment 137.

Amendment 148, in clause 149, page 138, line 24, leave out from ‘person’ to ‘at’ in line 25 and insert ‘if’.

See Member’s explanatory statement for Amendment 146.

Amendment 149, in clause 149, page 138, line 28, at end insert—

‘(7A) The protections are that, subject to subsection (9), the disclosure does not—

(a) give rise to a breach of any obligation of confidence owed by R, or

(b) give rise to any civil liability, on the part of R, to the person to whom the disclosed information relates.’

See Member’s explanatory statement for Amendment 146.

Amendment 150, in clause 149, page 138, line 31, leave out from ‘applies,’ to end of line 32 and insert ‘does not—

(a) give rise to a breach of any obligation of confidence owed by them, or

(b) give rise to any civil liability, on their part, to the person to whom the disclosed information relates.

This is subject to subsection (9).’

This amendment and Amendment 151 provide that the use of information disclosure under clause 149(7) for the purposes of making a disclosure under clause 149(1) does not give rise to a civil liability, on the part of the person making use of the information, to the person to whom the information relates. There is an exception for liabilities under the data protection legislation.

Amendment 151, in clause 149, page 138, line 34, after ‘contravene’ insert ‘, or prevents any civil liability arising under,’.

See Member’s explanatory statements for Amendments 136, 143, 146 and 150.

Amendment 152, in clause 149, page 138, line 34, at end insert—

‘(10) In subsection (3)(aa) “relevant financial year”—

(a) for the purposes of subsection (1)(a), means the financial year immediately preceding that in which the disclosure by A is made;

(b) for the purposes of subsection (4)(a), means the financial year immediately preceding that in which the disclosure to C is made.

And, for the purposes of subsection (3)(aa), the question of whether a person’s UK revenue is large or very large for a particular financial year is to be determined in accordance with sections 55 to 57 of the Finance Act 2022 (calculation of UK revenue for the economic crime (anti-money laundering) levy).’—(Tom Tugendhat.)

This amendment include a definition of “relevant financial year” and explains how to determine if a person’s UK revenue is large or very large for the purposes of the new provision added by Amendment 142.

Clause 149, as amended, ordered to stand part of the Bill.

Clauses 150 to 152 ordered to stand part of the Bill.

Clause 153

Other defined terms in sections 148 to 151

Amendments made: 153, in clause 153, page 140, line 19, at end insert—

“(ba) constitutes aiding, abetting, counselling or procuring the commission of a listed offence, or”.

The amendment makes express provision about aiding, abetting, counselling and procuring in the definition of economic crime.

Amendment 154, in clause 153, page 140, line 21, after “(b)” insert “or (ba)”.

This amendment is consequential on Amendment 153.

Amendment 155, in clause 153, page 140, line 34, at end insert—

““financial year” means a period of 12 months ending with 31 March;”.—(Tom Tugendhat.)

This amendment adds a definition of “financial year” and is consequential on Amendment 152.

Clause 153, as amended, ordered to stand part of the Bill.

Schedule 8 agreed to.

Clause 154

Law Society: powers to fine in cases relating to economic crime

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Tom Tugendhat]

Indeed, and I am delighted to be called to speak to it.

The clause provides the Secretary of State with the power to make consequential amendments that arise from the Bill. The power is necessary to ensure that other provisions on the statute book properly reflect and refer to the provisions in the Bill once it is enacted and to ensure that there are no legislative inconsistencies. If regulations are made under the clause that do not amend primary legislation, they will be subject to the negative resolution procedure. If regulations are made under the clause that amend primary legislation, they will be subject to the affirmative resolution procedure. This, I hope, will provide the appropriate parliamentary scrutiny.

[Seema Malhotra]

I thank the Minister for his comments. May I clarify the process, Mr Paisley? In previous sittings, during each clause stand part debate the Minister has been called followed by the Opposition spokesperson. Perhaps that has had some variation, but it would be helpful to understand whether we need to do anything differently.

[The Chair]

No, nothing at all; it is just that the Minister did not indicate that he wished to speak. Members can speak at that point. Those clauses have been dealt with.

[Seema Malhotra]

I think that there was a slight misunderstanding, but we will move on.

Clause 158 confers on the Secretary of State a regulation-making power to make consequential amendments that arise from the Bill. I want to raise a general point: the Minister did speak to this, but perhaps he could say a little more about examples of where the Secretary of State might need to use the power. Perhaps it is written somewhere, but I am not fully clear whether any changes that come through secondary legislation to the Act itself—I think that is a Henry VIII power in this clause—would be taken through the affirmative procedure.

It has been a general theme of debate though our proceedings that we need to make sure that there is sufficient provision for the transparency, scrutiny and accountability of changes, as well as for accountability of the Secretary of State’s use of powers for the reporting that there should be on how well the provisions are working. The power to make consequential amendments comes at the end of the Bill in clause 158, but it is a Henry VIII power that means that amendments to primary legislation can be made. That is different from the power to make regulations under secondary legislation, which we have been debating.

The Government have said that the power is needed to ensure that other provisions on the statute book properly reflect and refer to provisions in the Bill once it is enacted. I want to be clear about what the scope of the use of this power would be, how it is intended and how it would be reported on. Would an affirmative or negative procedure be used to make any changes under this clause?

[Dame Margaret Hodge]

We have raised a number of amendments to the Bill during the course of consideration in Committee, many of which I consider to be technical and things that would improve the processes. All those amendments so far have been rejected. I wonder whether, rather than bringing us back at a later stage as the clause proposes, the Minister would undertake, together with his ministerial colleague, to look again at some of those amendments, which are really just practical, pragmatic amendments, with a view to bringing them back. Would he bring them back on Report?

[Tom Tugendhat]

I will answer the second question first, if I may. I am absolutely certain that my hon. Friend the Member for Thirsk and Malton and I will look with great interest at the suggestions that the right hon. Lady has made. As she knows, we share many similar ambitions. We will have a look at those suggestions with officials. Certainly, there are some that we think could improve the Bill—I do not think there is any great debate about that—and I will make sure that we keep her informed. Her contribution and help, not just today and on the Bill, have been enormous, and I pay enormous tribute to the work that she has done over many years in fighting money laundering and different forms of economic crime.

On this specific power, the hon. Member for Feltham and Heston raises a very important point, which is that the clause does give large consequential provision to the Government to change aspects of the Bill. I understand the concerns that she raises. The nature of the Bill, however, is that it has quite a consequential impact on other elements of legislation, as she herself has highlighted. Therefore there are knock-on elements that will no doubt require minor redrafting and changes at various different points as the Bill goes into law. I am afraid that is slightly the nature of these operations, as she understands extremely well. That is what this power is for.

It is worth saying that any significant or substantial changes that really do change the intent of the Bill should be brought back in primary legislation, because this is clearly a provision in order to enable the Bill to operate, not to change the intent that this House gives it.

[Seema Malhotra]

I thank the Minister for his comment, which puts that clarification on the record for successive generations of those who will sit in his seat—perhaps he will be promoted to higher office. It is important that that comment is on record, because we have to create legislation for not just today but tomorrow.

--- Later in debate ---

[Tom Tugendhat]

Clause 159 provides that regulations made under the Bill are to be made by statutory instrument. The clause also sets outs the parliamentary procedure for how regulations under the Bill should be made, including situations in which legislation must be subject to the affirmative resolution procedure or the negative resolution procedure. The clause is a standard provision to enable regulations to give the intended effect to the measures in the Bill. It is necessary to ensure appropriate parliamentary scrutiny of such regulations.

[Seema Malhotra]

Clause 159 provides that regulations under the Bill are to be made by statutory instrument. To a large extent, we have had clarification that any subsequent changes will be made through the affirmative procedure in Parliament, enabling greater scrutiny and transparency over the Bill’s implementation. I am not sure if there is a list anywhere of all the regulation-making powers that have been specified in the Bill. I feel like there is probably a summary somewhere of all of those powers, and whether any are subject to the negative procedure. I think that would be a helpful review for the Committee to have.

New clause 22 allows regulations to be made about the registration of certain Scottish partnerships, and to apply law related to companies or limited partnerships. It will allow the Scottish Partnerships (Register of People with Significant Control) Regulations 2017 to be amended or replaced in relation to those partnerships. We welcome the inclusion of amendment 43 alongside the new clause, which provides for regulations under new clause 22 to be subject to the affirmative procedure, unless they make provisions corresponding to provisions made by statutory instruments that are subject to the negative procedure. In light of my previous comments, I think it is healthy for us to clarify and have a clear summary of which are affirmative and which are negative, and the safeguards around them. That would ensure the transparency of regulation making subsequent to the passing of the Bill.

[Kevin Hollinrake]

It is a pleasure to speak with you in the Chair, Mr Paisley. I will speak briefly to amendment 43 and new clause 22, which are minor technical changes necessary due to the European Communities Act 1972 having been repealed. They give the Secretary of State the power to apply company or limited partnership law by regulations to Scottish qualifying partnerships, as well as to impose new requirements of Scottish qualifying partnerships not included in company or limited partnership law, such as identity verification. It allows the Government to retain the measures introduced by the Scottish Partnerships (Register of People with Significant Control) Regulations 2017 in relation to SQPs and to amend them in the future. Provisions about the registration of Scottish qualifying partnerships exist in the 2017 regulations, made using powers under now repealed section 2(2) of the European Communities Act 1972.

That has two consequences. First, there is no existing power to amend the regulations, other than by an Act of Parliament. Secondly, if not replaced under section 1 of the proposed retained EU law Bill, the 2017 regulations will be revoked at the end of 2023. This power will allow us to keep the existing requirements on Scottish qualifying partnerships and to add new ones. Without the amendment and new clause, it will not be possible to extend key measures introduced via the Bill, such as identity verification, to Scottish qualifying partnerships, thereby creating a dangerous loophole. I hope that my explanation has provided further clarity.

It is clear that regulations made under the Bill may make consequential, supplementary, incidental, transitional or saving provisions and regulations under specified clauses must be subject to the affirmative resolution procedure. I am sure we can write to the hon. Lady to set out exactly what those situations are.

Economic Crime and Corporate Transparency Bill (Third sitting)

Seema Malhotra Excerpts

Committee stage
Thursday 27th October 2022 Public Bill Committees

[The Minister for Security (Tom Tugendhat)]

Forgive me, Ms Wood; my hearing is not very good. Can you speak straight into a microphone?

Helena Wood: Yes.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

Q 170 Thank you very much for coming to give evidence today. I wanted to start by asking about the Bill’s reforms of information-sharing provisions—perhaps this is particularly to Ms Wood. In your view, do those provisions go far enough, and if not, do you have examples of where it is done better internationally? If information-sharing provisions are not improved, how much of a hindrance could it be to the effectiveness of the Bill?

Helena Wood: To place it in context, one of Britain’s great financial crime exports of recent years has been our joint money laundering information taskforce, which is one of the first public-private partnerships. That model has been replicated across the globe, with public-private partnerships now seen as a norm by the FATF, the international standard setter on tackling money laundering and terrorist financing. In one respect, we really have been a global leader in that regard. However, as with many British exports, we are now exporting that abroad and it is being copied and replicated at a speed and scale beyond what the UK is doing. Increasingly, we are seeing people moving from peer-to-peer information sharing towards a more collaborative data analytics model. I point to the models being set up in Holland and in Singapore as particularly groundbreaking in that regard.

Coming back to the provisions in the Bill, do they get us from where we are now on peer-to-peer information sharing, which is one thing, towards this world of collaborative data analytics, which we need to get to to really home in on financial crime? No, they do not. Although the provisions in the Bill will go some way towards increasing private-to-private information sharing and, in particular, the risk appetite in the banking sector, they really do not keep pace with the global standard.

What we would like in the next economic crime plan, which we hope to see this side of Christmas, is something that is much more ambitious. In many ways, I would say that while it is welcome, the Bill is a slight missed opportunity with regard to information sharing, given that it really does not push forward to this big data analytics model that others are moving towards.

[Seema Malhotra]

Q So your view is that we could be going further, and that we need to be going further.

Helena Wood: Absolutely. We have sat around for three years discussing information sharing in various working groups under the first economic crime plan, and it is a disappointment that all we have come up with is these one or two clauses of a Bill that merely take us towards quite analogue sharing between individual institutions. They do not take us as far as we should go.

I am not saying that at this stage, where that opportunity has been missed, we should push for something within the context of this Bill. These are really complex issues that require and deserve much further public consultation, particularly given the link with data privacy and individual rights of confidentiality, but we must see it in the next economic crime plan if we are not to get left behind. We invented public-private partnership, but we are really not driving that forward in the global context any more: we are being left behind. While this is a welcome step, and it is welcomed by the banking sector, it does not get us to where we need to be in 2025 and beyond.

[Seema Malhotra]

Q Could you be a little more specific about what you think would make a difference—what information is not being shared?

Helena Wood: Absolutely. On the information-sharing gateways that we have in place currently, I particularly point to section 7 of the Crime and Courts Act, which, although being used for JMLIT purposes—this public-private partnership—they were not designed for that purpose. There was an opportunity within the context of the Bill to push for something that really is fit for purpose and gives the regulated sector the confidence to share under a collaborative data analytics model.

We have seen others—I particularly point to the Dutch, who at the moment have some legislation going through, which really gives a lot more confidence to the regulated sector to share. The Transaction Monitoring Netherlands platform allows some of their biggest banks to share transaction monitoring data at scale to point to where the biggest risks are emerging. Would this legislation allow us to set up a similar shared utility? No. It would not give them the confidence. Although it takes us a step forward and should be welcomed, it is not taking us where we need to be. We need something much more ambitious that keeps pace with global best practices when we look at the next economic crime plan, which I believe the Home Office will be launching imminently.

[Seema Malhotra]

Q On the economic crime plan, you suggested that quite a number of commitments made in 2019 have not been implemented. Could you briefly say something about that? Then Duncan Hames might share, from Transparency International’s point of view, the top three changes that he would like to see in the legislation.

Helena Wood: I will start and then pass to Duncan. I would always say there is only so much that legislation can do. In many ways, as the Financial Action Task Force pointed to in the 2018 evaluation of the UK, we do have some of the best laws in place in the country. Although this law is absolutely essential in catching up with the threat, particularly around Companies House reform, we really do not have a problem with law; we have a problem of implementation in this country. We had an economic crime plan tracker, which is online and which you can scrutinise. It looked at all the 52 actions under the economic crime plan, and the most progress was made in areas of regulation and law—the bits that are quite easy and cheap to implement.

There was less progress in the areas of implementation, particularly around the enforcement of the existing laws in place. The big things that I would like to see prioritised outside the context of this particular Bill are things like policing reform, investment in the National Economic Crime Centre—I know you took evidence from them on Tuesday—and a real implementation of what we have got. That is not to say that this Bill is not necessary. It absolutely is, particularly around the huge gaps in Companies House capability and fundamental changes to its role, but none of this will come to anything if we do not invest in the enforcement response. I will pass over to Duncan, if I may.

Duncan Hames: We certainly welcome the Bill, and we welcomed the Government’s announcement that they intended to legislate for these reforms three and a half years ago. It is great that these are now before you, as Members of the House. The opportunity to address these issues dos not come along as often as it might feel that it has this year since Putin’s further invasion of Ukraine, so it is really important that we get reform of companies right this time rather than wait for things to be done later.

On what we would like addressed in the Bill, first, it is incredibly important that we do not allow a situation to develop where UK companies become the respectable front of otherwise secretive networks of corporates that provide the layering required to launder illicit funds. The use of corporate partners in offshore jurisdictions to control UK limited liability partnerships, for example, is a particular weakness that I can elaborate on.

Secondly, with these very welcome reforms, shareholder information will become the poor relation on the company register. That is a particular concern in instances where companies claim not to have a person of significant control, and shareholder information becomes our next best attempt to understand who is really behind those businesses.

[Seema Malhotra]

On the proposal in the Bill—

[The Chair]

May I say to the hon. Member that she has had quite a few questions and we are limited on time, so this will be her final question?

[Seema Malhotra]

Q This is just a quick follow-up for clarification. The Bill arguably makes shareholder information less transparent, because it takes away the opportunity to put information relating to shareholders on the central register.

Duncan Hames: A lot of information was collected on shareholders when this register was developed six years ago, and in many cases companies have been able to say, “There have been no changes.” That means there is a risk that information on shareholders has become quite dated, and finding what information there is involves tracking down PDF format documents that were uploaded a long time ago. There is an opportunity, whether in legislation or in practice at Companies House, to make sure that shareholder information does not become much less usable for investigation and due diligence.

On the third thing you asked me about, we think it is very important that Companies House has the powers and uses them to check the information, where it thinks necessary, that has been used to verify information by trust and company service providers, and not simply take that on trust where it has concerns or suspicions.

[Alison Thewliss (Glasgow Central) (SNP)]

Q I want to ask Duncan about Scottish limited partnerships and limited partnerships more generally. The Bill does not really crack down on the opaqueness of ownership. Could you explain a wee bit more to the Committee why that is a particular issue?

Duncan Hames: Limited liability partnerships have been a company entity available for the last 20 years or so, and 200,000 have been formed. We noticed that they kept appearing in revelations about major money laundering scandals. In the Danske Bank scandal, for example, the investigations found that UK limited liability partnerships were the vehicle of choice for the non-resident clients of its Estonian branch basically to hide their identity from those conducting compliance checks.

There are 1,600 LLPs that have appeared in these various scandals, but there are thousands upon thousands of UK limited liability partnerships that share the same offshore corporate partners. A pair of corporate partners registered in Belize are the controlling corporate partners of over 2,000 UK limited liability partnerships.

What is bizarre is that MPs have thankfully legislated to end secretive ownership of UK property, but we do not have the same requirements for overseas entities that control UK limited partnerships. As a result, we still have a veneer of UK respectability presented over what is essentially a secretive corporate network.

--- Later in debate ---

[The Chair]

We now hear from Chris Taggart from OpenCorporates and Elspeth Berry from Nottingham Law School. You are both very welcome; thank you very much for joining us this morning. Could you please introduce themselves for the record? We have until 12.35 pm.

Chris Taggart: My name is Chris Taggart and I co-founded OpenCorporates, the largest open database of companies in the world. Essentially, we take official company information, from Companies House and the equivalent of Companies House in about 140 jurisdictions, and we put it all in one place and make it freely available for everyone to use. About five million users a month use the data—everyone from journalists to law enforcement, regulators, banks, ordinary companies and so on. We are also a social enterprise: it is a company, but with public benefit at its heart.

Elspeth Berry: My name is Elspeth Berry. I am an Associate Professor of Law at Nottingham Law School. My teaching and research includes limited partnerships—well, all partnerships, including limited partnerships and limited liability partnerships, or LLPs—and my research in recent years has focused on limited partnerships and LLPs.

[Seema Malhotra]

Q First, thank you for coming to give evidence today; it is much appreciated. We have had some discussion on information-sharing; I think you overheard that. If there is anything that you wanted to add, rather than repeating what we may have heard, that would be useful.

I want to ask you a bit more about the lack of transparency when it comes to shareholders. How much do you see that as an issue? Can you suggest any specific measures to increase shareholder transparency?

Chris Taggart: I will maybe talk about the information sharing after. First, shareholding data is not even data. It is just a name; it is just some letters put together. We have opened the gates by allowing it to be just a transient historical record—you know, somebody owns shares in a company. They make a report. They put down a name; we assume that they put down their own name, but of course they can put down any name. But the shares are transferred the next day—maybe into a trust, maybe to somebody else—and there is no record.

At the moment, I think we have that with shareholding, particularly given the international context of cross-jurisdictional context networks and so on. Shareholding actually matters. If someone who runs a chip shop in south Wales or is a mechanic in Estonia, or wherever, owns the shares, they own the shares. That matters. We are not recognising this.

I absolutely welcome the Bill and think it is a huge improvement on where we are, but I think the shareholding is a particularly strong example of how there is essentially still the same problem, which is that Companies House is a historical record of information submitted by people, and the bad actors will always lie. We need to change things, so that it is much more difficult and risky for the bad actors to lie. I think that is the fundamental criticism of the Bill, which, by the way, I think is entirely welcome. It is an incredibly thoughtful and well-drafted Bill, but it is fundamentally coming from a different era. The Bill is a better horse and cart, and the criminals are driving around in fast cars.

Elspeth Berry: On the shareholder transparency point, I noticed that the identity verification is not being applied to shareholders and I think it could be, possibly subject to some de minimis requirements. If they come in as PSCs, which is possible, that also brings us to the problems with the PSC legislation, because the thresholds are, depending on which view you take, either woeful in terms of not catching enough people or should just not be there at all.

The third thing is that, for reasons I do not fully understand, I see that the central register of members is going. Some things now have to be central and some things cannot be central, and shareholders will not be central. I would also point out that the unique identifiers are not being applied to shareholders, although, in any event, they are apparently they not going to be made public. I am not a journalist, but I rely on the work of some fantastic investigative journalists and organisations to dig through that stuff and find out, “Well, that shareholder is appearing here as a partner, there as a director and there as another shareholder,” but that cannot be done.

[Alison Thewliss]

Q First, I want to follow up on that point about unique identifiers and how those would help. I have looked myself up in the Companies House register, and I appear as three separate people. Can you tell us what the benefits of having a unique identifier would be?

Elspeth Berry: The idea is that the John Smiths, the J. Smiths and the Mr Smiths can be linked. Where it is a common name—or an overseas name, where a person like me who was looking at this would not know it was a common name and might assume, “Well, that must be the same person,” when actually it is not, because it is such a common name—it is important to find links. I can see that it is important for Companies House as one of their red flags, and they are going to be able to operate this system, but only partly, because it will not apply to shareholders or partners. But outsiders—people who do fantastic work that Companies House can’t, doesn’t or won’t—are going to find it difficult, or at least as difficult as it is now, to do the work of trawling though everything.

--- Later in debate ---

[Dame Margaret Hodge]

Q Would you go down to zero—all shareholding data?

Chris Taggart: Yes. With shareholders, we ultimately need to get to a statement of fact—an authoritative record—so that what Companies House says is actually what the courts agree are the shareholders, and people cannot say, “We will move the shares, and then we will tell Companies House,” or, “We forgot to tell Companies House.” That will take work and time. We can extend the verification provisions for directors and PSCs to shareholders, at least over a de minimis amount, but ultimately we need to make Companies House the authoritative record of shareholding, so you are only a shareholder if you are on Companies House.

Elspeth Berry: On your question about dissolution, for limited partnerships it is a different issue because they are not an entity and you can still go after the partners, but of course that is why corporate partners are such a problem. Entities were a problem in Scotland some years ago. I am sure your Scottish colleagues can tell you more than I can about how that was dealt with after a fairly horrific criminal incident involving a lot of deaths. It was not possible to prosecute the partnership after it had dissolved. That is a problem with legal entity status, which is a whole big issue.

[Seema Malhotra]

Q I have a couple of specific questions. First, do you think there should be any sort of limit on the number of companies or partnerships registered at one address? Secondly, should there be any sort of limit—perhaps one beyond which there needs to be an application to increase, under specific criteria— on the number of directorships that any one director can hold?

Chris Taggart: On the latter question first, I have been a director for some 20 years. The first time, someone sat me down and said, “This is what’s involved in being a director.” You think, “Wow, that’s kind of scary.” You have a fiduciary duty and you have to understand the company. If you are a director of 200 companies, I fail to see how you can perform that fiduciary duty, or those companies are, in some ways, just legal entities for some conduits for something. They are not actually in business; they are just conduits. I struggle when someone is a director of 200 companies: either those are just legal entities for some purpose other than as a normal company or they are not doing their job. It seems to me obvious that there is a challenge there. Whether that is a limit or whether that is actually holding directors much more personally liable for the wrongdoing of the companies, I do not know, but I think that there is something. There seems to be a contradiction there, fundamentally.

Elspeth Berry: I agree. I would have supported a cap on the number of directorships for exactly those reasons, in that I do not think a director can fulfil their duties if they have a lot of companies. However, if you are not going to have that, that certainly has to be a red flag for Companies House. It has to be a thing they will investigate and that they have the resources to investigate, which comes back to the problems that we identified earlier.

On the addresses, if you have a company service provider giving their address, it is quite possible you will have multiples and that might be okay if that is their business, they are doing it properly, they are AML regulated and all the rest of it. The problem is that we have seen in recent years that they are not. Again, that ought to be a red flag. In the limited partnership proposals, where you are trying to establish some real connection, economic or otherwise, with a particular jurisdiction within the UK or, at least, with the UK, that is one of the problems. One of the options on the list—they are all problematic—I personally thought that the principal place of business might be quite a good one, showing an actual connection, but I have been corrected in my beliefs by my journalist colleagues who say that almost all the wrongdoers were able to tick that box. I think it is a problem if you are saying that as long as somebody will pick up the mail here, that is okay. Again, that needs to be a red flag.

[Tom Tugendhat]

Q I am very interested in some of the identification elements that are raised. How much of a difference will the verified identification make to the identification of individuals?

Chris Taggart: There are two issues. I watched some of the previous witnesses and the things that came across were issues to do with identification and resourcing and I back up both of those things. On identification, allowing the corporate service providers to essentially say they have done something seems both a huge vector for misuse and also unnecessary. The technology allows us to look like we are using one company when we are signing up online and so on, but it is all authenticated with another company. They could be using Companies House back ends or banks’ back ends—we could have that authority and those standardised processes—and still you would appear to be transacting with a corporate service provider.

Having corporate service providers doing the identity verification seems like we have walked away from doing it properly. Once you allow corporate service providers to play a significant role, particularly on identity, I think we have a bit of a problem. Assuming that loophole is closed, this is really good, but it is still state of the art two, three or four years ago, and I think we need to start using digital identities. We need to make sure that, with somebody’s identity, they are not saying one thing on this hand and not saying another thing on that hand. Again, the unique identifiers—

--- Later in debate ---

[The Chair]

We will now hear from Graham Barrow, a journalist and author appearing via Zoom. We have until five past 1 pm. Could you introduce yourself, Graham?

Graham Barrow: Thank you. I suspect I am probably unique among all the different people giving evidence because I am effectively a private citizen. I am not actually a journalist. I write, but not in a professional capacity. I am just somebody who became obsessed by what was happening at Companies House and have spent much of the last five years rooting away in the darker corners of it, to establish exactly how bad things are there.

[Seema Malhotra]

Q Thank you, Mr Barrow, for giving evidence today. To pick up on your point about becoming obsessed, I think that is an understatement of the contribution you are now making, which seems to be identifying so much more than Companies House is doing itself and documenting the flaws in the current system. Why do you think that is the case? You have played a very important role in documenting some of the most blatant abuses of the Companies House registration systems. How concerned should we be about the large number of companies you have identified that are incorporated in offshore jurisdictions with weaker money laundering laws than we have?

Graham Barrow: Thank you. Let me pick up on both of those questions. I think the reason why I have been successful is because I have a mandate to go wherever I want to and do whatever I want to. I also ought to congratulate Companies House because a lot of what I now know is through the release of its advanced search function, which has transformed our ability to understand networks of suspicious companies.

I really want to emphasise this idea of the network. No criminal ever set up one company. It is just not how it works. They work in networks of companies. At £12 a go, it is probably the cheapest way of organising a criminal network. Of necessity, they leave company DNA behind them. I guess I have a capacity for identifying that DNA and extracting it from the background noise at Companies House.

Your question about offshore entities is really interesting. I came into this five years ago very much thinking about what you have just been talking about—limited partnerships and limited liability partnerships. They feature prominently in a lot of the reporting. I think part of the reason for that is that they are, by and large, a very small subsection of the entirety of what is incorporated in Companies House. Therefore, the focus has been on some of that DNA that is exhibited by LLPs and LPs.

Before now, we have had very few tools that could establish the role of limited companies. To give that some context, since 1 January 2000, about 10 million companies have been incorporated at Companies House, of which about 5 million are still active. The loss rate is very high; it is consistently 50%. Nine and a half million of those companies are limited companies. That is an exceptionally difficult body of data to trawl through to establish suspicious activity.

I think one of the reasons why perhaps some of the stories I now re-tell on social media are novel is simply because we have never been able to extract those signals from the Companies House data before. For whatever reason, I appear to have a brain wired in a particular way that allows me to do that, and I have a very good relationship with Companies House. We share information quite regularly.

[Alison Thewliss]

Q Thank you, Graham, for coming to give evidence and for all the work you have been doing on the Companies House register. You have exposed quite a lot of companies that are essentially fake. They do not really exist—they are not real companies. Some of them are set up to imitate existing companies. Can you tell us a bit more about the extent of that and the scale of the work that the Companies House register will have to undergo to have a register that has integrity?

Graham Barrow: Where do I start? The scale is enormous. Even today, I have been looking—I have a company that tracks new company registrations. I can tell you that 20 or 30 companies have been set up in Leeds and in Birmingham today that have used real peoples’ names and addresses, some of them for the fifth, sixth or seventh time. One gentleman is 92 years old and has just had his name used for a second time. It is an absolute scandal what is going on. I would say that at least 1,000 people every week have their names used as directors on companies without their knowledge or permission. You are talking about potentially 50,000 people a year. It is on an unimaginable and wholly unreported scale.

Economic Crime and Corporate Transparency Bill (Fourth sitting)

Seema Malhotra Excerpts

Thursday 27th October 2022 Public Bill Committees

[The Chair]

Q Thank you very much. We have until 2.50 pm for Members to ask questions. Could the witness please introduce themselves for the record?

Peter Swabey: I am Peter Swabey, and I am the policy and research director at the Chartered Governance Institute UK & Ireland. The institute is the professional body for people who work in governance, which includes company secretaries and governance professionals in all sectors.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

Q Thank you very much, Mr Swabey, for coming to give evidence. Could you say a little about what you do in relation to issues around economic crime? What is the view of your members about what more needs to be done and whether there is enough going on in the Bill? Do you have two or three things that you think need to be improved?

Peter Swabey: The institute and its members look at governance. Effectively, they are the people who are responsible for filing documents at Companies House and for advising boards on good governance. In that sense, they are perhaps less directly involved in economic crime than some of the other bodies you are hearing from.

From our perspective, the Bill is a really good effort. While I was sitting at the back, somebody said that it was regarded as a starter for 10. I think the Bill is a really good start on a lot of things that a lot of people have been thinking that Companies House should have been doing all this time—indeed, many people thought Companies House was doing it all this time, but it has not had the powers to do so. From that perspective, giving Companies House some of those powers is a really big step forward. There are a few things that I would perhaps have done differently, but that is in the realm of detail.

[Seema Malhotra]

Q What about gaps?

Peter Swabey: The big gap, from my perspective, is around the role of the company secretary or governance professional in the Bill. We were just hearing a bit about the arrangements for who is allowed to deliver documents for the authorised corporate services professionals. In most companies, it would be the company secretary who takes responsibility and ownership for doing that. That is something that we would like to see more specifically included in the Bill. The Government’s intention may be to include that in the regulations that the Secretary of State has the power to make. That is fine—that is regulations—but I would much rather see it in the Bill and, ultimately, the Act.

[Seema Malhotra]

Q To be a bit more specific, what more do you suggest should be in the Bill?

Peter Swabey: For me, it should reference the role of the company secretary. I have a slightly wider issue than that. The Companies Act 2006 got rid of the requirement for a company secretary in all companies. That was deregulatory—that was fine—but we now rely much more on the reporting that companies do and the filings that companies make, so I believe there should be a requirement for a company secretary, not just in public companies, as there is now, but in larger private companies that also have to meet some of these requirements.

[Alison Thewliss]

Q We heard earlier about some of the deficiencies in the way that documents are delivered and uploaded to the Companies House website, and how they can be used thereafter. Are there practical improvements that could be made to improve that situation, both at your end of the process, in the filing, and for the use of those documents at the other end of the process?

Peter Swabey: Yes, I think there are. We have regular engagement with Companies House and that is one of the things that it is seeking to tackle already, but will also seek to tackle through the powers and resources that it will hopefully get as a result of the Bill. It would great if everything that has to be filed at Companies House can be filed electronically. There are still a number of things that cannot be. Again, that may be changed as a result of the changes that Companies House are making to their system but, as we stand at the moment, there are things that cannot be filed electronically.

In terms of use, there is a question that companies sometimes get feedback on from shareholders, which is on the availability of information, particularly about retail shareholders, and particularly for those companies that have large registers of members. Individuals on this Committee, or me, or whoever—their name and address might be at Companies House in respect of a holding of 100 shares in a company. If it is a big public company with millions and millions of shares, that is probably not that helpful. There are people who buy copies of the register for commercial purposes. It would be quite useful to tighten that up.

--- Later in debate ---

[The Chair]

I restart the sitting with our sixth panel . We will now hear oral evidence from Catherine Belton, journalist and author. Catherine is appearing via Zoom. We have until 3.10 pm. Catherine, could you please introduce yourself for the record?

Catherine Belton: Hi, I am Catherine Belton, author of “Putin’s People”. I am a reporter with The Washington Post.

[Seema Malhotra]

Q Thank you very much, Ms Belton, for joining us to give evidence today, and thank you for all you do as well. In terms of the scale of economic crime and how much needs to happen nationally and internationally, what gaps do you see in the legislation as it currently stands that stop the UK from being able to tackle economic crime on the scale that we need to?

Catherine Belton: There is a very simple answer to this, though I should basically preface all my answers by saying that I am not an expert on the Bill like some of my colleagues, such as Oliver Bullough. I have not studied it deeply, but what I can speak to is the urgency of these reforms, because of the threat posed to our national security. There is also a dire need to push through the anti-SLAPP legislation.

All these deep-pocketed oligarchs are essentially taking advantage of our system and are able to outspend not just journalists but financial watchdogs acting in the public interest. They are outspent and intimidated out of pursuing any real investigation into financial misconduct. They know from the outset that they may lose.

You only have to look at the example of the Serious Fraud Office and its battle against ENRC, which was once listed on the London stock exchange, then delisted and owned by a trio of Kazakh fraudsters essentially. The amount they spent annually on legal cases in the UK was £89 million, which is over the annual budget of the Serious Fraud Office. Though the Bill is of dire importance, without greater spending and funding for our public watchdogs—the National Crime Agency, Serious Fraud Office and other entities—we are going to be stymied from the get-go.

[Alison Thewliss]

Q Thank you very much, Catherine. Could you tell us a bit more about why the UK has become the destination of choice for people wishing to use corporate structures for money laundering and other purposes? Could you tell us about the impact that has internationally?

Catherine Belton: The UK, like many other countries, has welcomed capital from places such as Russia with open arms for the past 20 years. It is certainly a place that Russian oligarchs have flocked to, not only because they want to be part of the UK establishment but because they have clearly taken advantage of our lax legislation and regulation compared with the US, for instance. If you are listing a company in the US you face the Sarbanes-Oxley regulations, and you have committed a crime if you are found to have lied on your financial disclosures. Here, there seem to be so many loopholes; people can get away with everything.

We only have to look at our Companies House institution to see that there is very little scrutiny of filings that people are making. We have all heard the obvious examples of people not disclosing anything. I think you are a great expert in the use of limited liability partnerships by Russian money launderers. UK LLPs have seen tens of billions of dollars’ worth of illicit Russian cash move through them over the last decade or so.

Most of those money laundering schemes have been overseen by the Federal Security Service of the Russian Federation. It has a money laundering department called Department K, which has overseen all those schemes and has had an involvement in each and every one of them. I am told by security officials in Moldova—where one scheme used LLPs to move tens of billions of dollars of cash into the UK—that essentially the schemes are used not just by Russians seeking to move money to evade customs and tax, but by the Russian Federal Security Service itself, because it sees the greater flows of cash as cover for it to move its strategic cash into our jurisdiction.

I must again point to the need for SLAPP legislation and ask whether that could, or should, be attached to the economic crime Bill as it stands. If we do not enable journalists and financial watchdogs to look at those entities without fear of getting crushed by enormous lawsuits that will cost more than anyone’s budget allows, then we are going to be open to this type of abuse of our system forever. It was only July when Dominic Raab, the Justice Secretary, finally and wonderfully—it seemed like a miracle at the time—forwarded that anti-SLAPP legislation. It was going to allow for an early dismissal mechanism for cases that were clearly an abuse of the law, and aimed at intimidating journalists and financial watchdogs out of reporting matters of public interest—whether financial misconduct or something else. There has been a great deal of turmoil in Government since then, but we are seeing that SLAPP cases have very much not gone away.

The esteemed Chatham House think-tank recently had to remove the mere mention of a Tory donor, who had previously been convicted of money laundering, from a report on the abuses of the UK system by kleptocrats. The past of our Tory donors is something that we should know about, yet Chatham House had to erase its mention of that donor from its report. Staff looked into how much it was going to cost to defend, even though it was clearly public interest reporting. There was not really much to dispute about it, but they found it was going to cost them £500,000 before the case even got to trial, which means there is something so deeply wrong with our system, and we cannot even begin to combat any of these issues without having these anti-SLAPP measures in place. That is not just for journalists but for the Serious Fraud Office and for other public interest watchdogs.

--- Later in debate ---

[The Chair]

Catherine, I am really sorry, but I have two more people waiting to ask questions and there is only five minutes. I am so sorry to curtail you.

[Seema Malhotra]

Q I want to come back on how we can take practical steps to tackle this. I think you mentioned the Foreign Policy Centre. Are there more specific measures we could take in the Bill?

Catherine Belton: In July, the MOJ forwarded anti-SLAPP legislation. Unfortunately, because of the chaos of the last couple of months, that has not really gone anywhere. That legislation could be attached, as is, to the Economic Crime and Corporate Transparency Bill. The Bill as drafted slightly toughens the criteria for claimants; they have to prove that there is a significant likelihood that they have a real claim. You should speak to the FPC to weigh whether it is worth pursuing their draft laws as a better model, or whether it is enough to use the one already drafted by the MOJ. They had extensive consultations on that, but now it looks like all the momentum has gone. It is astonishing to me that this is not being pursued as a priority, given the situation we are in. It is absolutely vital that we shine light on individuals who may be operating on behalf of Putin to undermine western support for Ukraine, and to undermine our resolve this winter as we face enormous cost of living hikes. It is really important.

[Tom Tugendhat]

Q Catherine, thank you very much for giving evidence to what must be your 20th or 30th Committee in the last 12 months. I am very grateful for the work you do. Could you tell us how you think the reforms to Companies House will improve oversight of listed finance? As you say, it is a building block.

Catherine Belton: You say that this is my 20th or 30th time giving evidence, but unfortunately, it is not. I have only spoken on SLAPPs before. I will leave the realm of Companies House reforms to people who are more expert on it than me.

--- Later in debate ---

[The Chair]

Last but not least, we will hear oral evidence from Professor Jason Sharman, professor of politics at the University of Cambridge. We have until 3.30 pm. Professor Sharman, could you introduce yourself and give us your background for the record?

Professor Jason Sharman: My name is Jason Sharman and I am a professor of international relations at Cambridge University. I study international money laundering and corruption, often by impersonating would-be corrupt officials, money launderers and terrorist financiers.

[Seema Malhotra]

Q Thank you for coming to give evidence. Does the Bill go far enough in reducing the attractiveness of the UK as a destination for economic crime? You obviously have an international perspective, and I am keen to know whether you are seeing new behaviours that it would be useful for us to understand. Are the measures sufficient for tackling the challenge we face?

Professor Jason Sharman: I would not want to make the perfect the enemy of the good. The legislation is a positive step, but I watched the earlier testimony, and I agree with people who say that the proof of the pudding is in the enforcement. I study politics and international relations; I am less interested in the rules on the books and more interested in what difference they make, if any. If you are a criminal—a money launderer—you do not have to be very original. You do not have to try new things. Things that worked 10, 20 or 30 years ago still work today, so there is no need to change too much.

[Seema Malhotra]

Q On the attractiveness of the UK, you have mentioned enforcement, but from your research in this area, what would you highlight as being the weakest points in enforcement?

Professor Jason Sharman: The UK has a combination of a good reputation and lax enforcement. From the point of view of a launderer, that is a bonus: you get double. You get the appearance of probity—other people have mentioned the use of UK companies to open foreign bank accounts—with not much scrutiny and even less enforcement. Transparency is all good and well, but more information by itself does not lead to stronger action against money launderers or corrupt officials.

[Alison Thewliss]

Q There has been a lot of discussion about anti-money laundering supervision, and the effectiveness of the agencies that the Government expect to carry out those duties. Are they the weakest link in the chain, and could more be done to tighten up that anti-money laundering supervision, to shut the door, and to stop these companies from beginning their business here?

Professor Jason Sharman: There is certainly more that could be done. Some of it has been mentioned by other people; more money is the obvious one, but that may be necessary but not sufficient. In some ways, the career structure and career incentives for people who work in these agencies needs reviewing: if they start an investigation and it goes well, they get a small bonus to their career. If they start an investigation and it goes badly, they get a very big, indelible black mark, so in terms of career progression, it is safer for them not to investigate things.

One of the main sources of support has not been fully used: there are a lot of people outside the formal enforcement agencies who are very keen to help in this cause, including journalists and those in non-governmental organisations, as well as in the for-profit sector. That potential has not been tapped, so there are certainly things that the Government and the state could and should do, particularly in terms of regulatory agencies; but the area where I think it is possible to make most progress is probably beyond that.

Economic Crime and Corporate Transparency Bill

Seema Malhotra Excerpts

2nd reading
Thursday 13th October 2022 Commons Chamber

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

It is indeed a pleasure to speak on Second Reading of this important Bill. But before I begin my remarks, let me just mention that, in the Public Gallery today, there are two young dancers from Ukraine, Yeva and Zakhar, who, yesterday, came second in the International Ballroom Dancing Championships. I am sure that we all want to pass on our congratulations to them.

I welcome the Minister to his new role. I very much look forward to working with him in the same spirit as I did with his predecessors. Today, he will have heard Members across the House express their concerns about the time that it has taken to introduce this legislation. Urgency is required not just to bring forward a Bill, but to bring forward the Bill that we need to close the gap between what we are doing now and what needs to happen to tackle the scale of economic crime that exists.

As we heard today, action on economic crime was first promised in 2016 and then again in 2018 and 2019. Even in March, the Government blocked Labour’s amendments, which would have introduced reforms to Companies House and left Russian oligarchs with nowhere to hide. It matters that we have had these delays, because, in six years, we have seen a significant increase in economic crime, much of which could have been prevented had the Government acted earlier.

I thank all the Members who have contributed today from all parts of the House, many of whom have been ahead of the Government in calling for action. I also thank the Minister and his team for our meeting earlier this week. It is also good to have heard about the work going on with the devolved Administrations, because we do indeed need to hear voices from across the nations.

Let me pay tribute to some of the contributions that we have heard today. The right hon. Member for East Hampshire (Damian Hinds) made the important connection between fraud and cyber-crime. He also mentioned the local nature of crime and its links with economic crime nationally. This is not just a debate about a grand scale matter. There is a very deep connection with the lives that we lead in our everyday economies. There is also a need for global action, and it is up to the UK to take the opportunity to lead that action.

The hon. Member for Glasgow Central (Alison Thewliss), with whom it is always an honour to debate from the Front Bench, made some very powerful comments including around false registration, the methods of verification and the need for resources. I commend her work on tackling the issue of Scottish limited partnerships. I also commend the hon. Member for Cheadle (Mary Robinson) on her work on the APPG for whistleblowing; I hope that as we go through Committee we will see more action taken in this Bill to tackle the challenges faced by whistleblowers, who do us a service.

My right hon. Friend the Member for Barking (Dame Margaret Hodge) spoke eloquently, as always, but what stood out for me was her articulation of the scale of the challenge and the fact that there is still just not enough determination or ambition. She was absolutely right to say that warm words need to give way to action—I will come back to some of her other comments.

I will also come back to the speech by the hon. Member for Thirsk and Malton (Kevin Hollinrake), but his comments about legislation with implementation stuck with me. He is right, because we cannot afford to sit on our laurels after passing this Bill, saying we are proud of it, if it does not achieve the change that is necessary and vital. I will also come back to his campaigning on the failure to prevent; his arguments have been heard across the House.

My right hon. Friend the Member for Walsall South (Valerie Vaz) articulated the problem of homes being used fraudulently for the registration of companies when people are not living there, and the lack of redress—an issue also raised by other hon. Members across the House. I want to highlight what that means for the vulnerability of elderly people: we know they are more likely to be victims of scams, but the ability to identify them, often on the electoral register, as people who might be living alone is another source of vulnerability for them and may lead to their being targeted and becoming victims of economic crime.

The hon. Member for Weston-super-Mare (John Penrose), who I also come across in many debates on this and other related topics, is right that the Bill was due, and past due—I think those were his words. I am sure that we will come back in Committee to the arguments he has made about the urgency of proper beneficial ownership transparency and many other points he has raised. I look forward to working with him on those matters.

The hon. Member for Oxford West and Abingdon (Layla Moran), who is not in her place, was right to say that we should get this done in economic crime Bill 2, because we do not want to be back for economic crime Bill 3. This is our chance. She made the point that it is worth taking a little longer to get this Bill through both Houses of Parliament to make sure that it is fit for purpose, and I support that.

My hon. Friend the Member for Hammersmith (Andy Slaughter), speaking from his own deep experience on issues of policing and enforcement, made the point extremely well about the need to ensure that we have the resources, motivation and morale for both policing and enforcement. We cannot have a revolving door. We must have the resources within our public sector to tackle these issues effectively. The hon. Members for Glenrothes (Peter Grant) and for Rutherglen and Hamilton West (Margaret Ferrier) and my hon. Friend the Member for Stretford and Urmston (Kate Green) also made similar and very effective comments in the debate.

I would like to give one final set of thanks, because it is right to pay particular tribute to my right hon. Friend the Member for Barking and the hon. Member for Thirsk and Malton for their leadership in the work of the APPGs on anti-corruption and responsible tax and on fair business banking. Their work serves this House and our nation extremely well on these difficult and complex issues.

I also recognise and thank for their steadfast advocacy the civil society groups that work tirelessly for action on economic crime, including Transparency International, Spotlight on Corruption, the Royal United Services Institute, Open Ownership and the Fair Tax Foundation. That is not an exhaustive list, and many others are worthy of our thanks for bringing insight and clarity to a complex area, which demands that we act in the interests of our national and international security and prosperity.

This Bill is an historic opportunity to put a stop to the UK’s shameful role as a hub of illicit finance and a facilitator of economic crime. This debate is testament to the support of the House for the Government’s going further in tackling money laundering and the illicit use of cryptocurrencies to enable crime.

I am sure the Minister has heard the arguments put forward today, and the motivations for doing so are so clear. Dirty money is a national security threat. It is the lifeblood of corruption, crime and war. Organised crime gangs profiteer from drug smuggling, people trafficking, arms dealing, fraud and environmental destruction. Parliament’s Intelligence and Security Committee has criticised Russian influence in the UK and frankly, as long as Putin and his friends have a safe haven in London, we do a disservice to the brave people of Ukraine, who are fighting with their lives to defend their country and our shared values of democracy and freedom.

Dirty money also causes massive financial damage. In 2020, the National Crime Agency found that money laundering causes at least £100 billion of economic damage to the UK. We have heard other estimates today. Spotlight on Corruption estimates that fraud, now the most commonly experienced crime in the UK, costs us £190 billion annually, hitting businesses and tax receipts and damaging public services. As my right hon. Friend the Member for Barking said, we will never secure sustained growth on the back of dirty money. Every one of us is a victim of economic crime.

Dirty money is damaging the UK’s reputation. The prevalence of economic crime jeopardises our status as a business destination of choice. The United States has designated us as “high risk” for money laundering, alongside Cyprus. That is embarrassing, frankly. Britain must not lose its status as a trusted jurisdiction. The warning signs are there and we need to act urgently.

Finally, dirty money undermines the rule of law and democratic institutions. It corrupts political and legal systems. Oligarchs are clogging up Britain’s already overburdened legal system with vexatious lawsuits to muzzle legitimate critics and whistleblowers. My hon. Friend the Member for Hornsey and Wood Green (Catherine West) made that point extremely well. Democracy, free speech and the rule of law are under threat.

We welcome the Bill. Our argument is not about what is in it, but what is not in it. There are aspects of the Bill that we will want to strengthen and to work with the Government on doing so. Let me lay out some of the areas on which we want to see further action, some of which have also been touched on today. Money launderers use complex financial structures such as shell companies and offshore tax havens to provide the secrecy that allows them to move, hide and spend their money. We must lift the cloak of anonymity that protects criminals and the corrupt.

We are pleased that the Bill begins to tackle the abuse of limited partnerships, including Scottish limited partnerships, by strengthening transparency requirements and enabling them to be deregistered. New research by Transparency International has revealed that more than one in ten limited liability partnerships ever incorporated—over 21,000—have characteristics identical to those used in serious financial crimes, such as bribery, embezzlement of public funds and sanctions evasion. We will review the detail of changes in Committee. Given the mass use of LLPs and other UK legal structures in large-scale money laundering, those networks are ideal platforms for a variety of clients looking to move dirty money.

On Companies House, the Bill is a huge step forward in improving the integrity of our register. That is important as we move from Companies House being a register to being more of a regulator. For far too long, fraudsters have obscured their identities behind shell companies, relying on a lack of verification of the information they submit. It is right that the Bill will make failure to comply with new ID regulations a criminal offence. The identity verification introduced by the Bill can finally begin to close that door, but it needs to be strong and we need further details about how the new powers will be used to close down those fraudulent companies already registered with Companies House.

Experts such as Graham Barrow suggest that there have been a huge number of bogus incorporations over the past decade alone, which will take significant effort and time to retrospectively verify. The Government have yet to clarify the period in which registered companies will be required to meet their new commitments, which, similarly to the Economic Crime (Transparency and Enforcement) Act 2022, will create a window in which those who have engaged in fraudulent activities can dissolve their entities or transfer interests. We do not want to see that happen. Has the Minister considered whether such verification should also be required to strike off and dissolve a company? That would help to prevent entities from dissolving and restructuring to avoid scrutiny under the new regime.

I urge the Minister to consider a mechanism by which parties affected by fraudulent entries—we have heard examples today—can apply to Companies House to have an entity or director struck off. They should not have to wait for Companies House to use its querying power, given the time that it takes. Public accountability is vital, so what plans does the Minister have for reports to Parliament on Companies House activity, which will bring public confidence?

Trust and company service providers are defined as being “of the highest risk” for money laundering by the National Crime Agency. A recent Treasury review found that HMRC, which is responsible for supervising TCSPs, continues to suffer from

“a lack of appropriate AML policies, control and procedures”.

The AML supervisory regime, including of TCSPs, is under review, but the further consultation promised by the Treasury in June is yet to be published. Until this broken supervision is fixed, how can we rely on such third-party agents to effectively act as the gatekeepers of our financial system? Under the Bill as introduced, they can be authorised to carry out ID verification as an alternative to Companies House. Crooks and kleptocrats already rely on these enabling professionals to build and maintain whole systems of shell companies. New measures in the Bill requiring third-party agents who form companies on behalf of someone else to register with Companies House and be registered in the UK with an anti-money laundering supervisor are long overdue. However, unscrupulous TCSPs will simply add ID verification and, potentially, falsification to their menu of law-busting schemes. That must not become a loophole in the legislation.

Could the Minister outline how the legislation will have sufficient teeth to prevent rogue actors from setting up shell companies for money laundering? The detail of verification checks is yet to be defined, but as drafted, third-party agents will simply be able to state that they have verified information on behalf of clients. Will the registrar have sufficient powers to review the documentation of “know your customer” checks if there are concerns?

There are concerns from stakeholders, such as Transparency International, that the Bill does not commit to verifying shareholder data, which could reduce the level of trust in the accuracy of that data. Concerns have also been raised about information sharing. While the measures in the Bill are a step forward, information-sharing measures appear to be reactive, rather than to proactively spot problem areas. This is a complex issue, and I am sure that there will be detailed discussion of it in Committee.

Extending current asset recovery provisions into the realm of cryptoassets is a welcome step forward, with cryptoassets increasingly used to launder the profits of crime and to support terrorism. On seizing and recovering cryptoassets, we will want to work with the Government to ensure that powers in the Bill extend to introducing sanctions on crypto-marketplaces that enable criminal activity. However, we are concerned, as the UK Anti-Corruption Coalition is, that to be effective, any new provisions regarding crypto money laundering and asset seizure need to be executed by a fully trained workforce. What is the Government’s economic crime people and skills strategy, and how is it changing in the light of the new threats we face?

Finally, I want to come back to a point raised by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper) and others. We very much believe that there is a missed opportunity in this Bill, which is extending corporate criminal liability for economic crimes. The powers that exist under the Bribery Act 2010 and in relation to tax evasion could and should be extended to other economic crimes. The Secretary of State for Wales said this week that he considers a new failure to prevent offence for fraud “likely”. The Home Secretary said that the Government are looking at this, so why do they not just get on with it, and bring forward proposals or work with us on amendments to the legislation? I certainly believe, on the basis of the debate today, that there is support for such a move across the House, and we will continue to push for it.

There is much to welcome in this Bill, with long overdue powers for Companies House and law enforcement agencies, but those powers will make a real difference only if the Government provide the resources to use them—legislation with implementation, as the hon. Member for Thirsk and Malton said. We know that the Government committed £63 million in the 2021 spending review to Companies House, which was allocated for the transformation effort that, rightly, must take place. That is £63 million as against the billions that I have described economic crime as costing the UK each year.

The Government have included a new power to set Companies House incorporation fees. We know that the £12 cost of registration is the sixth lowest in the world, so what are the plans to resource those efforts? Does the Minister plan to increase the costs of incorporation to help pay for the effective operation of the new regime as part of the sustainable resourcing model, or to seek an increase in the economic crime levy, and what is the alternative? It would be helpful to understand that as the Bill goes on its passage through the House.

With the Bill’s complexity, it would not be possible to touch on all the issues involved, but I am grateful to have had the opportunity to wind up for the Opposition. We have the power in this country to lead change, and for the sake of our citizens, our children and the international community we must do so now.

[Madam Deputy Speaker (Dame Eleanor Laing)]

I call, to make his debut at the Dispatch Box, Minister Dean Russell.

--- Later in debate ---

[Dean Russell]

In that case, shall I start my new speech, Madam Deputy Speaker? I will not, because I am conscious that hon. Members have been incredibly gracious in their speeches and even more gracious in listening to mine. I will do my best to finish these last few points, so that the Adjournment debate can begin. [Interruption.] I can assure hon. Members that they will get weekends—I do not need to legislate for that.

Several Members, including the hon. Member for Hammersmith (Andy Slaughter), raised concerns about how the supervisory regime for professional enablers works and whether it is sufficiently robust. The UK’s anti-money laundering and counter-terrorist financing supervisory schemes are comprehensive in their regulation and supervision of firms most at risk from money laundering and terrorist financing. In December 2018 the global standard setter for those organisations, the Financial Action Task Force—there are lots of acronyms, so for anyone watching who is not as understanding of the details, I will use the words involved, rather than FATF, AML and all the rest—recognised that the UK’s regime is one of the strongest of more than 100 countries assessed by the Financial Action Task Force and its regional bodies to date.

In 2018 the Government established the Office for Professional Body Anti-Money Laundering Supervision to provide a greater degree of oversight and promote co-operation between the 22 professional body supervisors. That office has driven significant improvements in the supervision by professional body supervisors, and in 2019 only 9% of PBSs fully applied a risk-based approach. That rose to 86% by 2020. It has also developed platforms, such as the intelligence sharing expert working groups, to facilitate greater information and intelligence sharing. There is still work to be done to ensure consistency of approach and to improve information and intelligence sharing, as identified in the recent post-implementation review of the OPBAS regulations and the recent OPBAS report.

[Seema Malhotra]

I recognise that the Minister has made a huge set of comments on the issues that were raised, but I want to pick him up on one point relating to the Financial Action Task Force. He is right that we may be ahead in some areas, but the FATF and the IMF have highlighted that more needs to be done, including by the Financial Conduct Authority, to expand supervision. I hope that he can pick up some of that and make sure that we do not think that we have gone far enough—there is a lot further to go for confidence in the regime.

Oral Answers to Questions

Seema Malhotra Excerpts

Monday 5th September 2022 Commons Chamber

[Tom Pursglove]

I thank my right hon. Friend for the way she approaches this issue and her positive advocacy for that initiative, which we are committed to. It is about continuing to roll out the county lines programme, with £145 million over the next three years, to tackle what is the most violent and exploitative distribution model yet seen. It is about safeguarding vulnerable people from being exploited, arresting and charging those running the lines, and stopping them exploiting people.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

Local police have told me that they have seen a worrying rise in teenagers going missing, and there is inevitably an increase in county lines activity. Given the huge issues with county lines drugs gangs exploiting vulnerable children, will the Minister confirm whether the Government will be implementing the definition of child criminal exploitation in law and assessing whether police have the resources on the ground to deal with this terrible issue?

[Tom Pursglove]

It is fair to say that what is happening in London is a considerable increase in police officer numbers, running at nearly 3,000 already recruited through the uplift programme, as well as additional funding in the millions and millions of pounds. The Mayor of London has the resources he requires to tackle these issues and this criminality. It is important that the hon. Lady has strong dialogue with him on that and, of course, the Home Office will continue to monitor progress on the issue.

Nationality and Borders Bill

Seema Malhotra Excerpts

Consideration of Lords amendments
Tuesday 22nd March 2022 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

When people look back on this debate, I think it will be in the same way that we look back on debates around the Poor Law. They tried to solve poverty in those times by being cruel to the poor; I think that is what we are trying to do here. We are not addressing the real issues we face.

I fully concur with everything the right hon. Member for Haltemprice and Howden (Mr Davis) said. I find it bizarre that we are even considering offshoring at this point in time; I think we all know that, practically, it is never going to come off—it is never going to happen—and this is a wasted debate.

I want to concentrate on employment rights. In my constituency, I have two detention centres, which house nearly 1,000 people. Most of them will be detained, but will then come into the community, and will eventually be allowed to remain. There are 1,700 asylum seekers in hotels in my constituency as well. They are not a burden—I welcome them. They may be a financial burden on local authorities and others—central Government need to support them—but, socially and emotionally, I welcome them completely.

The problem that these people have is that, most of the time, they are trapped in the system. Hon. Members just need to look at the figures from their own casework. Cases take at least six months or a year; I have dealt with cases that have been waiting for four or five years before there is a result. In the meantime, people are denied the right to earn a living. They are told to live off £5.40 a day, and that means they live in poverty.

Someone mentioned Syrian asylum seekers; those I have met are some of the most qualified people I have ever met. They have gone through universities and training; they have skills that they could use to give the country so much, and yet they are trapped in the system, living in poverty. And, tragically, what does living in poverty do, in some instances? People try different angles. Sometimes, unfortunately, they end up in criminality. This system, which refuses to allow people to exercise their skills and devote their talents to our community, forces them into poverty and, in some instances, criminality. All Lords amendment 7 said was, “Just allow these people to work—allow them to support themselves and their families, and to give something back to this country.”

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

As my constituency neighbour, my right hon. Friend will be aware of the number of asylum seekers in Feltham and Heston who face the challenges that he has outlined. As well as being more humane, allowing people to work would also allow them to make a financial contribution. He will have heard stories similar to those I have—of young people with degrees, who have been tortured, who have fled for their lives, and want nothing more than to start their lives again in a country that they want to call home.

[John McDonnell]

More recently, a calculation was made of the sort of financial contribution that would be made to the country if we allowed people to work six months after they applied for asylum. At least £200 million would be put into our economy. We are denying ourselves these people’s ability to create wealth. I went through the same process when refugee Ugandan families turned up here in the time of Idi Amin; hon. Members may remember that. I have to tell the hon. Member for Ruislip, Northwood and Pinner (David Simmonds) that Hillingdon, then under the leadership of Terry Dicks, whom the hon. Gentleman will recall, was not kind to those refugees at the time. However, eventually those Ugandan Asians settled, and they made a huge contribution to this society, including a massive economic contribution, because we allowed them to use their talents and take up employment. Often, they created businesses. They made a great contribution, certainly in west London, as my hon. Friend the Member for Feltham and Heston (Seema Malhotra) can tell us.

I cannot understand the rationale for the Government’s approach. There is an argument that allowing employment will somehow add to the pull factor, but having to live off £5.40 a day is not the sort of pull factor that will attract millions to this country. We should look at the issue rationally, and recognise that the large number of people trapped in this poverty trap could contribute so much. That is why Lords amendment 7 needs to be looked at more rationally. Suffering cannot be part of our policy for dealing with the world refugee crisis—a crisis that will, as a result of climate change and other matters, become worse. We have to recognise that there will be movements of people. We have to accommodate that, and that is partly about making sure that those people are welcomed in a way that allows them to make an effective contribution to our society.

Nationality and Borders Bill

Seema Malhotra Excerpts

Report stage
Tuesday 7th December 2021 Commons Chamber

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

I want first to acknowledge my support for new clause 8, which my hon. Friend the Member for Streatham (Bell Ribeiro-Addy) tabled, and to congratulate her on a very powerful speech on ending the shame of profiteering from child citizenship fees. I also support the arguments made by my hon. Friend the Member for Enfield, Southgate (Bambos Charalambous).

I will make my short contribution mainly about amendment 12, which is in the name of the right hon. Member for Haltemprice and Howden (Mr Davis) and to which I have added my name. It seeks the removal of clause 9—tabled by the Home Secretary—which would deprive UK nationals of citizenship without notice. That is an extraordinary proposal, which has caused shockwaves across communities. In particular, in Feltham and Heston, it has really affected the south Asian community. I am grateful to all who have written in to me and signed the petition, which has almost 150,000 signatures. I also thank the immigration solicitor, Mr Harjap Bhangal, for his work and awareness raising of this issue.

I was born in Britain in Hammersmith in west London, and I grew up in Hounslow. It appears that, under the law, as drafted, I could theoretically be deprived of my citizenship with no notice, and potentially without appeal, because my parents were born in another country, even though they became British nationals and served their community with distinction. Perhaps the Minister will be able to say in his closing remarks whether that could ever happen to anyone. It appears that this proposal is the thin end of an appalling wedge. Members of my extended family were also among those who were expelled from Uganda in mass expulsions of the Indian community. I am sure that the Minister will understand why this has caused such concern.

The Home Secretary’s clause would amend the British Nationality Act 1981, which requires the Secretary of State to give a person written notice of their deprivation order, the reasons for the order and their right of appeal. In clause 9(2), proposed new section 40(5A) of that Act specifies circumstances in which the Secretary of State would be able to deprive a person of their citizenship without notice. That includes when

“the Secretary of State does not have the information needed to…give notice”

or

“it would…not be reasonably practicable to give notice”

for any other reason, or if giving notice would not be

“in the interests of national security”,

in the interests of relations with another country or “otherwise in the public interest”.

Perhaps someone can tell me what “relations with another country” means. If, in theory, a foreign Government with whom the Government are negotiating a trade deal say that they want British citizenship revoked from a group of people they would like to see returned back to their country of origin as a condition, possibly for political reasons, in theory, the Home Secretary could do so without saying why. This is a matter not of what this is likely to be about, but of what becomes possible. There is no practical reason for this change. The present rules governing notice allow for citizenship deprivation letters to be delivered to the individual’s last known address.

I cannot support the Home Secretary’s clause, which has breathed huge distrust and insecurity into the lives of millions of peaceful, law-abiding people. Having this power, without needing to give explanation, could affect not just those people but their children and grandchildren. I urge all hon. Members to support amendment 12 today.

[Richard Graham]

Today’s debate covers many different aspects. I certainly hope that the Government will consider new clause 4 carefully, but I want to focus on new clause 9 and the impact that the change in notification of revocation of nationality has had.

I say straightaway to the hon. Member for Streatham (Bell Ribeiro-Addy), who is not in her place at the moment, that when she describes the Bill as “hostile” and “horrible”, she should consider very carefully, as we all should, the impact on the lives of so many people of those who are killed by terrorists. Whether they are in Manchester, in London Bridge or anywhere else, the important thing about those ghastly incidents is that they affect those from every background, of every faith, of every race and of every colour. Clause 9 is not—

Prevention and Suppression of Terrorism

Seema Malhotra Excerpts

Wednesday 24th November 2021 Commons Chamber

[Damian Hinds]

We are of course greatly concerned with what happens in-country and in-region. We want to see progress. We want to see the Palestinian Authority extending its governance. But this measure is specifically about the entity of Hamas. It is a proscription of a body because of its involvement in terrorism, and this debate and vote must focus on that specific question.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

Will the Minister clarify what assessment has been made of important discussions that may need to go on in relation to humanitarian issues, education and healthcare, and how that will continue in the very important work that has to be done to support people in the Gaza strip?

[Damian Hinds]

The hon. Lady makes a very important point. If she will forgive me, I am coming to that a little later in my remarks, and I will cover it then.

Hamas formally established Hamas IDQ in 1992. IDQ was proscribed by the UK in March 2001. At the time, it was determined that there was a distinction between the political and military wings of Hamas, and that the only part of the organisation that was concerned in terrorism, and should therefore be proscribed, was the military wing. Over the past 20 years, as my hon. Friend the Member for Ipswich (Tom Hunt) said, Hamas’s so-called military and political wings have grown closer together, with any distinction between them now considered to be artificial. The Government’s assessment is that Hamas is a complex but single organisation made up of constituent parts, one of which includes Hamas IDQ. It is clear that these constituent parts are not wholly independent of Hamas’s so-called political wing and that they take strategic direction from it. There is also movement of key individuals across the organisation as well as, of course, a shared ideology. It is clear that the current proscription listing of Hamas does not reflect its true structure, and that is why this order has been laid. The Home Secretary has a reasonable belief that Hamas, in its entirety, is concerned in terrorism. It is our assessment that the group prepares for, commits and participates in acts of terrorism. There is also evidence that the group promotes and encourages terrorism.

Indiscriminate rocket or mortar attacks against Israeli targets are key examples of Hamas committing this terrorism. During the May 2021 conflict, over 4,000 rockets were fired indiscriminately into Israel. Civilians, including two children, were killed as a result. The rocket attacks also targeted airports and maritime interests. Hamas also frequently uses incendiary balloons to launch attacks from Gaza into southern Israel. There was a spate of incendiary balloon attacks from Gaza into southern Israel during June and July 2021, causing fires and resulting in serious damage to property. These attacks were likely carried out by both Hamas and by Palestinian Islamic Jihad, which is already proscribed. Only last summer, Hamas launched camps in Gaza that focused on training groups, including minors, to fight. In a press statement Hamas described the aim of these camps as to “ignite the embers of jihad in the liberation generation, cultivate Islamic values, and prepare the expected victory army to liberate Palestine”. This vile indoctrination of young people into the organisation’s violent ideology shows how diametrically opposed it is to our country’s core values.

The action we are taking is not a commentary on the ongoing tensions in Israel and the occupied Palestinian territories, nor is it a departure in any way from the Government’s long-standing position on the middle east peace process. We continue to support a negotiated settlement leading to a safe and secure Israel alongside a viable and sovereign Palestinian state. This decision is based on the Government’s assessment that Hamas, in its entirety, is concerned in terrorism and that proscription is a proportionate action to take, and nothing more. Having concluded that the distinction maintained in the list of proscribed organisations is artificial, it is right that this is addressed. Hamas, in its entirety, is a terrorist organisation. We must be clear on this to avoid conferring legitimacy on any element of the organisation.

It goes without saying that this Government do not provide any assistance to Hamas or the Government structure in Gaza that is made up of Hamas members. However, to answer the point made by the hon. Member for Feltham and Heston (Seema Malhotra), this proscription will not prevent aid from reaching civilians in need. In Gaza we have strong controls in place to monitor spending and ensure that aid sent into the region reaches its intended beneficiaries.

To conclude, the enduring and wide-ranging nature of the threat from terrorism demands an agile approach and a comprehensive strategy. That includes confronting groups that participate in and prepare for acts of terrorism or unlawfully glorify horrific terrorist acts. We must use every tool at our disposal to prevent them from stirring up hatred and division in our communities. We will never be cowed by those who hate the values we hold dear. The safety and security of the public is our No. 1 priority, and I commend the order to the House.

[Nick Thomas-Symonds (Torfaen) (Lab)]

I thank the Home Secretary for the letter she sent me on Friday, detailing her intention to bring forward this proscription motion and the reasons for its being considered at this time.

I start by outlining that the Opposition agree with the proscription motion and support the decision to proscribe Hamas in its entirety. As the Leader of the Opposition and I have repeatedly said, the first priority of any Government is the safety of its people and the protection of the public. I thank the members of the proscription review group for the vital work they do.

In the past month, this country has yet again faced the horror of two terror attacks. In Liverpool, a bomb was exploded outside the Liverpool Women’s Hospital, with the taxi driver, David Perry, fleeing from the car and fortunately surviving that horrific situation. We think of him and all the people of Liverpool. Only yesterday, I and hon. Members across the House attended Westminster Cathedral for Sir David Amess’s requiem mass, when he was laid to rest. That callous terrorist attack took the life of a much-loved Member of this House, leaving behind his family and friends. We think also of them today. Those incidents are the most sobering of reminders that any act of terrorism is designed to sow division and hatred. We always stand together against these attempts to drive us apart.

As the Minister set out, the proscription tool is a vital one in the fight against terrorism. We on the Opposition Benches appreciate the difficult balance that must be struck when considering the application of the test in section 3 of the Terrorism Act 2000. The previous Labour Government proscribed Hamas’s military wing in 2001 and made the assessment that there was at that time a meaningful distinction between the military and political wings.

Looking at this situation today, 20 years on, the Government have set out that there is now no distinction between the military and political wings. They have said there is an

“interconnectivity (including movement of individuals into different leadership roles across Hamas’ various structures) and cooperation between Hamas’ constituent parts; and that Hamas’ constituent parts are not wholly independent of the so called political wing of the organisation and take strategic direction from it.”

Hamas, the Government have said, is certainly a complex organisation, but it is a “single terrorist organisation”, and the Opposition accept that.

The Minister gave a number of reasons in his opening remarks for why this step has been taken, noting Hamas’s significant terrorist capability, including access to sophisticated weaponry and training facilities. The proscription also affects the ability to raise money and means significant restrictions on any activity here in the UK.

I turn, however, to a wider discussion on the use of proscription. I would be grateful if, when the Minister responds to the debate, he addressed these points in his further remarks. First, public confidence in the process is important. While of course matters must often remain confidential for reasons of national security, to the extent that it is possible, transparency is crucial. Can the Minister reassure hon. Members how often the cross-Government proscription review group considers these matters, and that the decisions are always under review?

Secondly, proscription is only one of the measures available in our armoury to tackle terrorism. At whatever level and wherever it comes from, it depends on the proper resourcing of our counter-terrorist and mainstream policing. When terrible major incidents happen, it is not only the counter-terror budget that is affected; resources are inevitably drawn in from mainstream policing. In addition, I commend neighbourhood policing that provides not only reassurance in our communities but vital local intelligence in the fight against terrorism. Appropriate funding for all those areas of our policing is crucial.

In relation to this proscription, Members on both sides of the House remain committed to a negotiated settlement to the Israeli-Palestinian conflict that delivers a safe and secure Israel alongside a viable and sovereign Palestinian state. We know that meaningful dialogue that brings together those from both sides of the conflict to find a resolution offers the only prospect of a meaningful and lasting peace in the middle east.

Earlier this year, the conflict between Israel and Palestine erupted once again, with lives lost on both sides. Given our country’s important role in supporting peace talks, I ask the Minister to give his assessment of and reassurance on the impact that today’s decision will have on the prospect of securing a peaceful resolution to the conflict, and what he understands the implications are for future engagement with bodies including the Palestinian Legislative Council and the Palestinian Authority.

Similarly, as my hon. Friend the Member for Feltham and Heston (Seema Malhotra) said, could the Minister outline the impact that he foresees on non-governmental organisations supporting Palestinian civilians in Gaza and on British people who are there at the moment and their safety? He gave a reassurance in his opening remarks about humanitarian aid still getting to where it is needed, but if he could expand on that and set out how he sees that happening in future, that would be helpful for Members on both sides of the House.

[Seema Malhotra]

My right hon. Friend is making an important speech. Does he agree that that must include giving guidance to the British consul general? Important visits happen that have an impact on many areas of policy and supporting NGOs on the ground. It is important to have that guidance to make sure that they can continue as they have been.

[Nick Thomas-Symonds]

I agree with my hon. Friend that guidance is vital and I hope that the Minister will address that point when he winds up.

As the Minister stated, the decision brings the United Kingdom into line with our allies the United States, Canada and the European Union, all of which have already proscribed Hamas in its entirety. I end by thanking our policing, especially counter-terror policing and our emergency services that, sadly and tragically, have been called into action many times in recent years. In the last few years, there have been several appalling attacks from the Manchester Arena bombing to the attacks on our democracy here in Parliament. Our world-leading security services have prevented 31 attacks since 2017; we thank them for their dangerous, careful and painstaking work.

Let us, too, mark the resolve and strength that our communities have shown in the face of such threats, which should give us cause for optimism. We continue to fight terrorism in all its forms and we support the motion.