Oral Answers to Questions

Debate between Tom Tugendhat and Seema Malhotra

Monday 22nd May 2023 Commons Chamber

[Tom Tugendhat]

I can absolutely give that commitment. These scams, which to some people appear victimless, are sadly anything but. The connection to serious mental health issues that follow is sadly all too clear, and many of us in our constituency work have come across individuals for whom these events have resulted in extreme suffering and sometimes even worse.

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

It is staggering that fraud now accounts for almost half of crime, yet barely any of those crimes are investigated, and less than 0.1% of them make it to court. Hardly anything seems to be being done to upgrade police technology and practice to help deal with that. Seriously, what are the Government doing that will make any sort of difference?

[Tom Tugendhat]

The hon. Lady will have heard only a few weeks ago that we launched our new fraud strategy, which includes 400 officers in the national fraud squad and increased resources of some £400 million to help police forces across the country. A lot of that work has already started, and a lot of it still has to be done. We are making sure that that focus is there because, as she correctly says, 40% of crime is fraud. The UK, sadly, has received too many attempts to defraud our people, for several reasons. One reason is the way our banking system works and the speed of banking in the UK, and another is the English language, which I am afraid makes it significantly easier for fraudsters overseas to act against our people. It is true that a significant amount of that crime is not here in the UK but abroad, so working with partners around the world is important.

Economic Crime and Corporate Transparency Bill (Nineteenth sitting)

Debate between Tom Tugendhat and Seema Malhotra

Committee stage
Tuesday 29th November 2022 Public Bill Committees

[Seema Malhotra]

It is a pleasure to speak briefly in support of the new clause tabled by my right hon. Friend the Member for Barking. It would amend the Proceeds of Crime Act 2002 such that any disclosure made as part of the suspicious activity reporting regime must include a risk rating. My right hon. Friend outlined very effectively the reasons why the new clause is important. Much of the evidence in our meetings at the outset of the Bill, which set out the context and stakeholder views, it was clear that the SARs regime was failing. The databases of referrals were going unreviewed and unlooked at, because the resources were not there. There was no effective means that we could see of prioritising SARs fed into the NCA.

SARs is an essential tool in our defence against money laundering, but if the system is not working, something needs to happen. Having an extra step in the process to help with prioritisation, look at risks and deal with those identified as higher risk would help, as my right hon. Friend outlined, to bring in quality, at a time when we know that quantity is the new battle. She said that the current estimate is three quarters of a million referrals, which is extraordinary. Given the scale and types of economic crime, the number of referrals is likely to get worse, not better. That is a good thing if we are starting to highlight and refer more cases as we start to clean up our systems. However, we then need to deliver on that; otherwise, the downside is that we will reduce confidence among those doing the referrals that anything will actually happen.

Nigel Kirby of Lloyds Bank said in his evidence to the Committee:

“I think the SARs regime and the Proceeds of Crime Act 2002 itself actually need—well, not necessarily to be turned upside down, but to be looked at as a whole.”––[Official Report, Economic Crime and Corporate Transparency Public Bill Committee, 25 October 2022; c. 19, Q26.]

I think we have some agreement that the system itself is important, essential and necessary but that it needs wholesale reform to make it more efficient and effective and to ensure that it does what we ask of it.

[The Minister for Security (Tom Tugendhat)]

I thank the right hon. Member for Barking for the new clause. I will slightly gloss over one element and focus on something she mentioned several times—I always listen carefully to what she says—about the comparison between the FBI and the NCA. I take the comparison, but the NCA is not a direct comparator for the FBI. After all, the FBI includes the equivalent to MI5. It also includes counter-terrorism police and a lot of what we call regional organised crime units. It includes a lot of other areas of policing that simply do not come under the NCA’s budget, so the comparison of budgets is not apples and oranges; it is more like apples and cider—the bulk of one and the punch of the other are not quite the same. I hope the right hon. Lady will forgive me for saying that that is not entirely a fair comparison.

That said, the NCA does an enormous amount of good work and uses SARs in many different ways. I have the figure here: the UKFIU received and processed nearly 600,000 SARs in 2019-20. That has increased significantly every year. The action taken has resulted in about £192 million being denied to criminals in 2019-20, up 46% on the previous year. So this is something that we are already using heavily.

Economic Crime and Corporate Transparency Bill (Seventeenth sitting)

Debate between Tom Tugendhat and Seema Malhotra

Committee stage
Thursday 24th November 2022 Public Bill Committees

[Tom Tugendhat]

As I say, this is really a matter for the Treasury, and it has committed to publishing a consultation before the decision is made. It would be wrong of me to preclude the ongoing policy analysis and public consultation by making—

[Seema Malhotra]

May I clarify whether the Minister has had any discussions with Treasury colleagues about the matter and raised his concerns? Have they acknowledged the need to act much faster?

[Tom Tugendhat]

I have had many conversations with Treasury colleagues in recent weeks and months on various aspects of the challenges that economic crime poses to the UK. Many of us are committed—in fact, the Treasury is very committed—to ensuring that economic crime is reduced in this country. The support that the Treasury has given in various different ways has resulted in many things, including a very successful operation conducted this morning by the Metropolitan police that resulted in the arrest of many people connected to economic crime. That may sound tangential on the grounds that it is about fraud, but the reality is that all of it is connected. We see a very strong overlap between money laundering, fraud and various other different forms of economic crime. The Treasury, unsurprisingly, is extremely committed to making sure that economic crime in this country reduces. The Home Office and the Department for Business, Energy and Industrial Strategy are absolutely committed to making sure that we considerably reduce the level of fraud in this country.

What is important now is to ensure that we make OPBAS as effective as possible, and that we look for some of the reforms that we have started to highlight, because that means that the changes required by the amendment will be unnecessary. I hope that we can focus on that aim.

I have just been given a statistic that records that in October 2022, HMRC named 68 estate agents that had breached anti-money laundering regulations, and fined them a collective total of £519,000. We can see that the supervision of estate agents is not just conducted by my hon. Friend the Under-Secretary but by many others around the country and is taken extremely seriously.

Economic Crime and Corporate Transparency Bill (Eighteenth sitting)

Debate between Tom Tugendhat and Seema Malhotra

Committee stage
Thursday 24th November 2022 Public Bill Committees

[Tom Tugendhat]

I am surprised to hear the right hon. Lady speak so negatively about her other amendments and new clauses. New clause 64 is not the only one that is well drafted; others have been as well. New clause 64 focuses, quite rightly, on getting anti-SLAPP provisions into the Bill, but it would extend the reach a bit further than we could take. I am happy to look further at the issue. I am happy to listen carefully to the opinions not only of the right hon. Lady, but of the people who advised the right hon. Member for Birmingham, Hodge Hill, on different approaches to the question. I am extremely happy to listen, but I am afraid we will not accept the new clause.

[Seema Malhotra]

When the Minister talks about looking more closely at this new clause, does he mean in the proceedings on the Bill?

[Tom Tugendhat]

I will be looking closer at the new clause in the proceedings on the Bill, but whether it makes it through will not necessarily be my final decision, as she knows very well. I would be interested to hear the arguments of the people to whom the hon. Lady has spoken.

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[Seema Malhotra]

It is a pleasure to speak briefly in support of new clause 66, tabled by my right hon. Friend the Member for Birmingham, Hodge Hill. He laid out clearly his reasons for doing so, and I think we all share his concern.

The new clause concerns the introduction of a default supervisory authority for independent legal professionals, and includes provisions such that when an independent legal professional is not a member of any of the professional bodies listed in schedule 1 to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, but undertakes regulated business within the scope of regulation 12 of them, the Solicitors Regulation Authority should be the default body for that independent legal professional.

As my right hon. Friend outlined, it is concerning that legal professionals who are not members of any professional legal bodies are still undertaking activities and taking cases. It is effectively a loophole that can enable rogue actors to act as legal professionals without the supervision or membership of a professional body, thereby avoiding scrutiny of their actions, which could facilitate economic crime and money laundering. Clearly, we need a solution. My right hon. Friend suggested that it is a problem that the Government need to fix; we would be keen to work with them on how that will happen. I think we all want to find a solution, and to do so before the Bill goes much further through the House.

[Tom Tugendhat]

I thank the right hon. Member for Birmingham, Hodge Hill for tabling the new clause and the hon. Member for Feltham and Heston for her comments on how it is designed to elucidate answers for procedure rather than to push for a change in the law. There is a lot that really does need further investigation, but the reality is that although we should all seek to prevent legal professionals from undertaking activity connected to money laundering, the new clause would not quite do that.

As the hon. Member for Feltham and Heston will know, there are currently nine UK professional body supervisors—known as PBSs—that supervise legal professionals for anti-money laundering purposes. Of course, the SRA is one of them. They cover different professions and the different jurisdictions: England and Wales, Scotland, and Northern Ireland. Supervisors already work closely with the Office for Professional Body Anti-Money Laundering Supervision—OPBAS—which we spoke about earlier, to ensure full compliance.

The vast majority of legal professionals are already carefully conducting strong anti-money laundering work. However, the Government’s review of the UK’s AML regime, published in June, identified concerns in the legal sector that a small number of professionals may be unsupervised. The examples are limited to some specific and small subsectors, such as specialist wills and estate planners and one or two unregistered barristers.

The review concluded that further reform of the supervisory regime is necessary to improve its effectiveness and proposed four options for reform, which could include giving the SRA, or other legal sector supervisors, a greater role. The review committed to taking forward a public consultation to develop the options further, which is necessary given the potential scale of the reform and the need to ensure that we fully understand the risks and impact of our final decision. I reassure Members that the Government are focused on ensuring that the reform addresses the problems identified in the review, including that of supervisory gaps.

The new clause would require the SRA to supervise independent legal professionals in Scotland and Northern Ireland who are not regulated by any of the professional bodies listed in the money laundering regulations. Additionally, each AML supervisor currently represents different legal professions with diverging practices and processes. In the absence of broader AML reforms and appropriate resourcing, it would be difficult for the SRA to supervise those who are not currently members of its own regulated community, as the new clause would require.

I share the desire of the right hon. Member for Birmingham, Hodge Hill to strengthen our supervision regime; however, given the ongoing reforms to AML supervision that would be interrupted by the new clause, and its likely impact on the SRA, it would not be appropriate to accept it at this moment. I therefore urge the right hon. Gentleman to withdraw the motion.

Economic Crime and Corporate Transparency Bill (Fifteenth sitting)

Debate between Tom Tugendhat and Seema Malhotra

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.]

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[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.

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[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.

--- Later in debate ---

[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.

Economic Crime and Corporate Transparency Bill (Sixteenth sitting)

Debate between Tom Tugendhat and Seema Malhotra

Committee stage
Tuesday 22nd November 2022 Public Bill Committees

[The Minister for Security (Tom Tugendhat)]

It is nice to see you this afternoon, Ms Elliott. I look forward to proceeding in order for some parts of this afternoon sitting.

Clause 160 details the Bill’s territorial extent. In preparing the Bill, both Ministers and officials have engaged extensively with their counterparts in the devolved Administrations to ensure that we tackle economic crime and strengthen corporate transparency across all of the United Kingdom. The measures in the Bill extend to England and Wales, Scotland, and Northern Ireland. Some of its provisions have a lesser extent, where they amend existing legislation that extends only to one or two different parts of the UK. In the opinion of the UK Government, the Bill makes some provision for areas within the devolved competence of Wales, Scotland and Northern Ireland. However, the Bill respects the devolution settlements and, where relevant, legislative consent motions are being sought from the devolved Administrations.

Clause 161 sets out procedural detail for the commencement of the Bill’s provisions. It stipulates the various dates when, and conditions under which, the various sections and subsections will come into force. The Secretary of State can make regulations that set the date for certain provisions to come into force. Different days may be appointed for different purposes. The Secretary of State can also make transitional or savings provisions for regulations made under certain clauses, as set out in the Bill. Any regulations made under the clause are to be made by statutory instrument.

Clause 162 establishes that the title of the Bill once it becomes an Act will be the Economic Crime and Corporate Transparency Act. The short title is a standard clause in any Bill.

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

It is a pleasure to serve under your chairship, Ms Elliott.

I have a few limited remarks to make as we approach the end of clause-by-clause consideration and before we move on to new clauses. As the Minister said, clause 160 extends the Bill to England and Wales, Scotland, and Northern Ireland. I was grateful for his comments about liaison with the Scottish Parliament and the Welsh Senedd. There are obviously current challenges in respect of the Northern Ireland Executive. I would be grateful for some clarity about how the engagement with the devolved Administrations is going, because it has been a theme, certainly during the earlier debates. It is important that we can have confidence that all the issues that are being raised in our deliberations are coming into the Bill.

Clause 161 sets out when the Bill’s provisions will come into force. I am sure the Minister will want to give assurances that that will be no later than is absolutely necessary, bearing in mind the urgency of the measures. Clause 162 establishes the short title and we welcome it.

[Tom Tugendhat]

Different devolved Administrations have been contacted in different ways. Some of them have been written to, and I have sought conversations with some, although that has not always been achieved because of other people’s diaries as well as my own. The conversation is ongoing and, although I hope the Bill will be passed soon, it will have to continue because many things are going to change over the coming years.

Question put and agreed to.

Clause 160 accordingly ordered to stand part of the Bill.

Clauses 161 and 162 ordered to stand part of the Bill.

New Clause 1

Change of addresses of officers of overseas companies by registrar

“In section 1046 of the Companies Act 2006 (overseas companies: registration of particulars), after subsection (6) insert—

‘(6A) Where regulations under this section require an overseas company to deliver to the registrar for registration—

(a) a service address for an officer of the company, or

(b) the address of the principal office of an officer of the company,

the regulations may make provision corresponding or similar to any provision made by section 1097B or 1097C (rectification of register relating to service addresses or principal office addresses) or to provision that may be made by regulations made under that section.’”.—(Kevin Hollinrake.)

Where an overseas company is required to provide a service address or principal office address for a director or secretary, this new clause enables regulations to be made conferring power on the registrar to change the address if it does not meet the statutory requirements or is inaccurate.

Brought up, and read the First time.

Economic Crime and Corporate Transparency Bill (Third sitting)

Debate between Tom Tugendhat and Seema Malhotra

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.

--- Later in debate ---

[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—

Economic Crime and Corporate Transparency Bill (Fourth sitting)

Debate between Tom Tugendhat and Seema Malhotra

Thursday 27th October 2022 Public Bill Committees

[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.

Economic Crime and Corporate Transparency Bill (Fourth sitting)

Debate between Tom Tugendhat and Seema Malhotra

Committee stage
Thursday 27th October 2022 Public Bill Committees

[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.