Corruption (International Business)

Tessa Munt Excerpts

Wednesday 11th December 2013 Westminster Hall

[Catherine McKinnell]

My hon. Friend makes the case very well and I thank him for his work in the all-party group promoting these issues. He succinctly highlights the key message that we want to convey to the Minister. He can work with other Departments, which will help us do what we can to bring an end to some of the corruption that is causing devastation in developing countries.

Our role is in part a consequence of the sheer scale of our financial services, which undoubtedly play a major role in the nation’s economy. The UK accounts for 18% of cross-border banking and houses 251 foreign banks—more than any other country. London has been voted the most attractive financial centre for asset management and is the largest currency trading centre in the world. However, we are also implicated through our links to British overseas territories and Crown dependencies, which, together with the UK mainland, account for one third of all shell companies. A number of thefts from the Democratic Republic of the Congo, for example, were routed through the British Virgin Islands.

Thirdly, and on a very positive note, we are also linked by our potential international leadership on this issue. Since 1997, the UK has proved itself at the forefront of international development work and has recently taken steps to lead the world in global transparency too. We very much support the steps that the Government have taken in relation to transparency, particularly the recent Lough Erne declaration, after the G8 summit there.

[Tessa Munt (Wells) (LD)]

I just wanted to comment on the benefits that the Government have introduced through the G8 open data charter and getting agreement to have more transparent company ownership and more transparency about those who control companies. I just wonder what the hon. Lady thinks about beneficial company ownership registry. We have agreed that it will be open, but there is an awful lot that we can do in the way that companies are formed in this country to ensure that this problem is sorted out and that Companies House helps to do so.

--- Later in debate ---

[Catherine McKinnell]

The hon. Gentleman makes an important point. The key is that this register of beneficial ownership cannot be used as a smokescreen to hide the identities of companies and the individuals who control them. It must be part of the solution to ensure that we have greater transparency, and it must have the effect that I know the Government want it to have.

It is important that beneficial owners are required to provide information such as a passport number or date of birth, so that the register provides a unique, verifiable identifier for every person listed. It is also important that the information goes through some means of verification by Companies House. For example, it could be cross-checked with other registers, such as those of the Driver and Vehicle Licensing Agency or the passport authority. Where company ownership is not direct, individuals should be asked to explain how they exercise control, and when control changes it should be noted within a reasonable time period. Lastly, it is important that the information is published in line with the principles outlined in the G8 open data charter, to which the UK is a signatory, and on a very practical note, it must be machine-readable and searchable, because the amount of information contained will be vast and it is of no use if it cannot be searched.

[Tessa Munt]

The UK Companies Registry already requires changes of names of directors to be made within a 14-day period, so it should not be difficult to require other changes, particularly as something like 98% of companies that are registered with the UK Companies Registry are actually private, small, family businesses, where the ownership is terribly clear already. It is only the very small percentage of companies that are trying to hide things that we need to get to.

[Catherine McKinnell]

The hon. Lady makes a very important point. This register of beneficial ownership should not be an onerous burden on business. It should not only make it as easy as possible for banks’ due diligence officers, civil society groups, investigative journalists and foreign law enforcement officials to use the information on it, but for companies themselves to register the relevant information with the necessary authorities. The more people who are able to access this information easily, the more we can guarantee its accuracy.

It is vital that the register is fit for purpose, so the eyes of parliamentarians from across the House will be on the Government as they implement their own pledge next year. I and other members of the all-party group on anti-corruption will make sure that the Government make every effort to introduce the legislation to make that happen.

Money laundering has been much discussed in recent days, during the passage of the Financial Services (Banking Reform) Bill. Noble members, including former members of the respected Parliamentary Commission on Banking Standards, not least the Archbishop of Canterbury, have been calling on fellow legislators to take this opportunity to tighten up our anti-money laundering regulations, because our current checks are inadequate. In 2011, the Financial Services Authority found that 75% of banks, including the major ones, had inadequate checks in place and a Treasury report published just last month described the common failures as

“fundamental Anti-Money Laundering/Counter-Terrorist financing obligations... that all firms should be aware of.”

The new banking standards created by the Bill present an ideal opportunity to embed anti-money laundering compliance, both at the very top and throughout the culture of British banking.

Finally on the subject of money laundering, it is worth noting that this week is the anniversary of the imposition of a $1.9 billion fine on HSBC for transacting with Mexican drug lords, terrorist financers and those in countries subject to sanctions, including Libya, Burma and Iran. As a result of the deferred prosecution agreement that HSBC signed in order to avoid more serious punishment, its compliance with anti-money laundering laws is being independently monitored for five years. HSBC will be monitored not just in the United States; the Financial Conduct Authority will also be monitoring HSBC’s compliance with UK laws during the next five years. I would be interested to hear the Minister’s views on whether those monitoring reports should be published.

There are some general anti-corruption steps that the Government should consider taking. I draw to the Minister’s attention a Transparency International report on asset recovery that was released this week. Clawing back the money stolen in the type of deals that I have talked about is vital, but at present it is extremely rare. Currently, 99% of illegally obtained money flows undetected through the financial system. The seizure rate could be as low as 0.2%. How many people would steal millions of pounds if they had a 99.8% chance of keeping it?

The report suggests that there should be a new law against corrupt enrichment, which would allow suspicious assets that vastly outweigh the declared wealth of a politician or public official to be seized until proven legitimate. That would shift the burden of proof to the individuals wishing to invest, and away from businesses, which are already under significant obligations. I would be interested to hear the Minister’s views on this proposal.

It is also important to stress the important work of law enforcement in this area. As legislators, we are often very quick to add to the statute book, but of course it is vital that existing laws are enforced. The all-party group on anti-corruption was recently briefed by the head of the Metropolitan police’s proceeds of corruption unit. The unit, which is funded by DFID, costs just 2% of the amount of money that it has recovered, and just 0.3% of the amount of money that it is currently investigating. A £50 return for every pound of investment seems to be a pretty good deal.

The overseas anti-corruption unit, which sits within the City of London police, is also funded by DFID and since its creation in 2006 it has investigated more than 155 cases where corruption or bribery were alleged, resulting in more than 115 suspects being investigated and in the arrest of 80 individuals involving a number of sectors, including energy and natural resources, security, humanitarian aid, construction and engineering, and publishing. For every pound invested in that unit, Her Majesty’s Revenue and Customs retrieves between £10 and £30 from the clutches of shell companies and returns it to the UK public purse. In times of austerity, the Government should clearly be prioritising areas of work that provide such good value for money.

I will conclude by turning once again to those who suffer the impact of these devastating crimes. I would like to relay the words of a Zambian nurse quoted by ActionAid in one of its reports about the alleged abuse of shell companies. She describes what her hospital would do if it received the money that was owed to it. She says that

“maybe that money would be used...to access hard to reach places.”

She goes on to say that at present the hospital staff can only reach

“surrounding areas which we are able to walk to.”

The President of Equatorial Guinea’s son purchased a Gulfstream jet with suspicious funds, so he could probably solve that problem for them. However, I doubt that he will do so on his own. Instead, let us take the opportunity that we have here in the UK Parliament to do it.