Economic Crime

Stephen Timms Excerpts

Thursday 2nd December 2021 Commons Chamber

[Dame Margaret Hodge]

Absolutely. That is another really important point; hiking up the prices at the top of the market obviously has an impact right through the housing market here in London. Some terrible instances have been uncovered in the various leaks. The Crown Estate, for example, sold 120 of its properties to companies registered in 14 different tax jurisdictions, demonstrating again the way in which the system is abused. Those are people such as Vladimir Chernukhin, who owns a residence in Regent’s Park through a company registered in the British Virgin Islands, or James Ibori, a Nigerian governor who was prosecuted here for fraud and money laundering, and who had property in Hampstead and Dorset. In the recent Pandora Papers, the Crown Estate bought a £67 million property from the Aliyev family, who are the well-documented abusers of their rule in Azerbaijan.

In 2015 we were promised a register of beneficial ownership for properties owned abroad. There was a consultation in 2016 and a draft Bill in 2018. It was mentioned in the Queen’s Speech in 2019, and again in the G7 meeting in Cornwall in 2021, but we still have not got a Bill, although it is my understanding that such a Bill has been written and is literally gathering dust on the shelf. The problem is enormous, and if we fail to act robustly it will overwhelm us. Economic crime is costing us our international reputation as a trusted and respected jurisdiction. If that trust goes, our ability to develop and grow our economy will be fatally curtailed.

[Stephen Timms (East Ham) (Lab)]

My right hon. Friend is talking about the amount of resource we commit to this, but has she seen the statistic that the National Economic Crime Centre put to the Work and Pensions Committee, which is that fraud now accounts for a third of crime in the UK, but for 1% of police resources?

[Dame Margaret Hodge]

Throughout this, when we talk to the enforcement agencies, they all minimise their expenditure on economic crime and have other priorities. That statistic is very frightening, and I am grateful to my right hon. Friend for bringing it to the attention of the House. I think it can be reflected in all four or five agencies that do a similar job.

We will never achieve sustainable prosperity on the back of dirty money. With the economic crime plan drawing to a close, this is the perfect opportunity for the Government to put the proposals in our motion before the House, so that we can debate and enact them, and embark on that long and difficult journey of ridding this country of the cancer that is growing in our economy and society. Across the House we will then all feel that we are not just debating, but that we are acting to expel economic crime from the Britain we all love and seek to serve.

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[Stephen Timms (East Ham) (Lab)]

I am very pleased to follow the hon. Member for Thirsk and Malton (Kevin Hollinrake), and I welcome his collaboration with my right hon. Friend the Member for Barking (Dame Margaret Hodge). They both advanced powerful arguments in opening the debate.

I want to focus briefly on one specific point. I mentioned, in an intervention on my right hon. Friend, the Work and Pensions Committee’s inquiry into pension scams, which reported a little while ago. This is an important area of economic crime, and our report highlighted in particular the menace of online scams, which the hon. Gentleman has just mentioned. As he said, the Online Safety Bill presents a unique opportunity to address this menace. The Prime Minister has said that tackling online fraud is one of the Bill’s main aims, but the current version, which is undergoing pre-legislative scrutiny, leaves out the major part of the problem. That must be changed.

The campaigner Mark Taber gave evidence to our inquiry. He found the compare-uk-bonds.co.uk fake comparison site on Google, and reported it to Google in May last year. An elderly woman who had recently been bereaved contacted him after losing more than £200,000 to that scam site on Google in September. Google finally took it down in December. People think that if they find something on Google, somebody must have vetted it, but of course they have not. Google gets paid by scammers, and then also gets paid by regulators to warn about the scammers people find on Google. It is a pretty good business. I have no idea why Google did not take that scam down in May. Was it because the company was disorganised? Was it because it wanted to keep the advertising income coming in? Google will not say, and I do not imagine that we will ever know. What this shows us is that the law must be changed. If it is not changed, crooks will continue to ruin the lives of thousands by advertising scams online. That would be an unforgivable failure of Government.

Last year, the Pension Scams Industry Group estimated that £10 billion had been lost to pension scams by 40,000 people since the pension freedoms were introduced by George Osborne in 2015. I welcome some of the recent changes that have been made to help. The new Pensions Schemes Act 2021 will restrict the statutory right to transfer, which was given in the pension freedoms, where there are signs of a scam. The High Court recently ruled that the fraud compensation fund could be used to compensate pension liberation scam victims. Those are both welcome steps, but we need to do more. In particular, we must tackle the menace of online scams. The insurer Aviva told the Work and Pensions Committee that in the six months before it gave us its evidence it had found 27 scam websites purporting to be Aviva. Having found them, it takes quite a lot of effort to get them taken down, and there are always victims before the sites are removed.

In the Online Safety Bill, the Government are tackling user-generated scams, but not paid-for scam adverts. That needs to be changed, because it is the scam adverts that are the heart of the problem. That is not just the view of my Committee and the Treasury Committee; it is the view of almost everyone outside Whitehall who has looked at this, except for the internet companies. The Governor of the Bank of England told the Treasury Committee that the risk to consumers from online fraud

“could be tackled through the Online Harms Legislation, but the experience so far...is that there is strong resistance in other parts of the official sector to extending the legislation to financial services. This is a serious problem.”

He is absolutely right.

The City of London police wrote to the Work and Pensions Committee in May that the exclusion of advertisements and cloned websites from the Online Safety Bill

“leaves a gap in the protection provided for the public”.

The City of London police went on to call for

“legislation requiring a duty to protect and/or corporate criminal liability for failure to prevent across all online and telecommunications enablers.”

The Financial Conduct Authority told us in evidence to the Committee that

“financial harms should be included in the Online Safety Bill to ensure that online platform operators take responsibility for the material which they disseminate which could cause consumers financial harm.”

That is absolutely right as well. The Prime Minister told the Liaison Committee in July that

“one of the key objectives of the Online Safety Bill is to tackle online fraud”.

I welcome and applaud that pledge, yet the Bill as it stands entirely misses the major problem of online fraud, which is paid-for advertising.

Martin Lewis of MoneySavingExpert.com, Sir Richard Branson and Dawn French have all had their name or image used in online scams. They all wrote to the Prime Minister last month calling for the Online Safety Bill to tackle scams, pointing out that the current Bill will penalise someone who posts a scam, but not someone who pays to post the same scam. They went on to say that the

“Government has said it wants to eventually tackle scam adverts through changing advertising regulation—but this will have to go through a lengthy process of legislating in the face of fierce opposition from a powerful advertising industry.”

We understand that work to address the problem of scam advertising is going on somewhere—the Department for Digital, Culture, Media and Sport, I think—but on a much longer timetable. If that is the track we go down, it will be years before anything changes, and thousands more people will lose their life savings in the meantime.

[Kevin Hollinrake]

That is a really interesting quote. Who is in the “powerful advertising industry”? The only people I can see benefiting from scams posted in the paid-ads section of Google are those at Google, not those in the advertising industry.

[Stephen Timms]

That hon. Gentleman raises an interesting point. I know that Ministers have been looking into this issue. As I understand it, there is now a very complex infrastructure around advertising. Google is at the end of the chain, but there are all sorts of agencies and intermediaries—a whole industry—in the middle. I imagine that letter is referring to the fact that all those people in the middle would say, “No, don’t touch this because it’s working very well.” It is working well for them, but I am afraid that for the public it definitely is not. If we wait in the way suggested in the letter, it will let crooks and scammers continue to ruin people’s lives for years to come. That would be a catastrophic Government failure. My plea is for Ministers to change course now, face up to the undoubted technical challenges, and legislate in the Online Safety Bill.

Finally, I agree with a point made by my right hon. Friend the Member for Barking in opening the debate: this is an existential threat to the UK economy. Financial services account for a big part of our economy, and we have a worldwide reputation and provide a great deal of expertise and high-quality services. If people conclude that they can no longer trust our financial services sector because fraud is being allowed to run rife, that is a massive threat not just to that industry but to our entire economy. We really do need to tackle economic crime, face it head on, and make the kind of changes that my right hon. Friend and the hon. Member for Thirsk and Malton have argued for, to protect not just the customers of these services but the entire economy.

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[Lee Rowley]

I am grateful to the right hon. Lady, who is an expert in this area. I hope we all agree that having such legislation in place is a step forward, and that the opportunity and ability to use it is a positive thing. As she has outlined, such measures have been used in some instances, but there have also been challenges. I hope that that use will continue to be made in appropriate areas, and I will certainly pass back her comments to the Ministers who are reviewing this issue.

In 2018, the UK’s anti-money laundering regime was reviewed by the Financial Action Task Force, and the UK received the best rating of any country assessed in that round of evaluations. None the less, there is an acceptance that more needs to be done, and as a number of Members have said, a number of months ago we published the economic crime plan. Progress was updated on top of that, with 52 actions to tackle economic crime, and the Government are on track to deliver 49 of those.



There have been achievements as well, including the commencement of reforms to the suspicious activity reporting regime, with £172 million frozen or removed from potential criminals in a recent reporting year, and the creation of the National Economic Crime Centre, which a number of Members referenced. Its work in the fusion cell in April 2020 highlighted potential criminality, potential challenges and potential investment fraudsters. We are also legislating in the current Finance Bill for the economic crime levy. I hope all hon. Members have seen the action to secure a unified position in the G7 on international anti-corruption efforts, including an agreement to implement and strengthen beneficial ownership registers.

[Stephen Timms]

The Financial Conduct Authority, which reports to the Minister’s Department, has made the case for the Online Safety Bill to be widened to include online fraud. Does he accept the strength of that argument?

[Lee Rowley]

I am just coming to that point, so the right hon. Gentleman pre-empts me, but I am grateful for the opportunity to do so.

We have heard some very good speeches in this afternoon’s debate. The right hon. Gentleman highlighted that point about the Online Safety Bill and the importance of tackling online fraud, which was also referenced by the hon. Member for Glasgow Central (Alison Thewliss), the hon. and learned Member for Edinburgh South West (Joanna Cherry) and—albeit, if he does not mind me saying so, once he got through the cheap shots—the right hon. Member for Wolverhampton South East (Mr McFadden). It is an important point to highlight.

Obviously, a specific Department is pursuing that legislation at the moment. The hon. Member for Glasgow Central, who sits on the Treasury Committee, heard on Monday that there is a variety of views about how best to deal with online fraud and which part of the legislation it should go in; I know that there was an active discussion about that in the Committee a few days ago. I will certainly pass back the comments made by the right hon. Member for East Ham (Stephen Timms). I understand the importance of the matter that he highlights. I think all of us in the House agree about the challenge; the question is what it is appropriate to do and where it is appropriate to do it, but I absolutely heard what he and other Members said about the importance of trying to make progress in that area.

My hon. Friend the Member for Barrow and Furness (Simon Fell) brings to the House a wealth of knowledge and experience in this area, which his very good speech highlighted. He highlighted the extensive work that has been under way for many years, notwithstanding the requirement for more to be done, and, again, the important point about the real impacts on real, ordinary people. This is not a theoretical crime; it is one that has real impacts in all our constituencies, which we will return to this evening and tomorrow.

I know hon. Members are keen to talk about where we are going. The spending review announced just a few weeks ago highlighted a significant amount of taxpayer spending specifically to reform Companies House, to improve the accuracy of the register, to clamp down on fraud and to strengthen the register in the long term. I hope that that announcement and the real money associated with it demonstrate the Government’s intention to make progress in this regard. On top of that, next year the Government will publish a fraud action plan and an updated economic crime plan, we will report on the review of UK money laundering regulations and the supervisory regime, and we expect to receive a corporate criminal liability options paper from the Law Commission. Officials continue to work on the three consultations from the start of 2021.

A constant theme throughout the work on reform has been a mantra from business and transparency organisations alike that the reforms are important and supported, but that they want to get them right. That does not mean we should delay unnecessarily, but we want to make sure that whatever we bring forward—I accept the challenge from hon. Members that they wish to see that happen quickly—we do it in the right way and as quickly as possible.

Let me spend a few minutes on the specific reforms and proposals that have been outlined today, particularly by the right hon. Member for Barking and my hon. Friend the Member for Thirsk and Malton, who secured the debate. The Government will legislate to expand the function of the registrar of companies to include a new function to maintain the integrity of the register of companies and the UK business environment. The registrar will be equipped with new powers to carry out that function, including powers to query suspicious appointments or firings, and in some cases to request further evidence or reject the filing. Companies House will have more extensive legal gateways for data sharing with law enforcement, other Government bodies and the private sector. That will result in more efficient sharing of information on suspicious activity with law enforcement, and the establishment of feedback loops with other Government bodies and the private sector. It will make anonymous filings harder and discourage those who wish to hide their company ownership through nominees or opaque structures.

Alongside the legislative changes I have outlined, Companies House will change. The combination of legislative reform and the transformation of Companies House will help to ensure that the UK is the best place to start and to grow a business, and that companies on the UK register are run responsibly, transparently and with accountability. Hon. Members have noted the draft Registration of Overseas Entities Bill, which has already received prelegislative scrutiny. That legislation will ensure the transparency of ownership and control of overseas entities that own property in the UK, about which concern was expressed.

The right hon. Member for Barking talked about proposed new corporate criminal liability offences. That is still under consideration. As hon. Members will be aware, the call for evidence a few months ago did not prove to be conclusive, so the Government have asked the Law Commission to undertake an in-depth review of the laws around that and to consider recommendations on proportionate opportunities for reform.

I recognise that hon. Members are keen for us to make progress—that desire was expressed very clearly today—but I hope they recognise that much work has been done. This debate has been a timely reminder of the view of this House on an important area and on the desire to make progress. I thank Members who have spoken today and the Backbench Business Committee for the opportunity to discuss this issue. I look forward to making further progress in the months and years ahead.