Criminal Finances Bill (Sixth sitting)

Debate between Tristram Hunt and Ben Wallace

Committee Debate: 6th sitting: House of Commons
Tuesday 22nd November 2016 Public Bill Committees

[Tristram Hunt (Stoke-on-Trent Central) (Lab)]

I beg to move, That the clause be read a Second time.

The purpose of new clause 14 is to require the Secretary of State to establish a publicly accessible register of the beneficial ownership of UK property by foreign companies within six months of the commencement of the Act. That is another helpful intervention to support the Minister in his work.

As I read in The Observer on Sunday, money launderers use anonymous offshore companies to acquire properties in the UK with the proceeds of crime. That became evident from the Panama papers. More than 2,800 secret companies set up by Mossack Fonseca held 6,000 Land Registry titles in the UK with combined historical costs in excess of £7 billion. In London alone more than 40,000 properties —one in every 10 in the borough of Westminster—are owned by offshore companies with unknown beneficiaries. There is not only an impact on housing costs in the capital, which can, indeed, spread to St Albans, Mrs Main, but a fear about money laundering and the hiding of finance through the use of London property essentially as a reserve currency.

Requiring offshore companies holding property titles in the UK to declare their beneficiaries would be fully in line with the legal obligations of UK companies to disclose persons with significant control, which came into effect in June. Requiring the Government to set up a public register of the persons with significant control of non-UK corporations holding properties and other assets, or PSCs willing to do business in the UK, will naturally tie the two purposes together: the commitment to lift offshore secrecy; and the passing of the Bill with the aim of the eradication of money laundering in the UK. It will build on exactly what the Minister suggested with reference to the former Prime Minister’s anti-corruption speech in Singapore, and the anti-corruption summit. I hope the Minister will agree to the new clause.

[Mr Wallace]

At the London corruption summit earlier this year, the Government announced that we plan to create a beneficial ownership register of overseas companies that own or wish to purchase property in the United Kingdom. The Government remain committed to delivering that policy and are developing the detail of how the register will work before we issue a call for evidence in the coming months. Our intention is to bring forward legislation to provide a statutory basis for the register in due course and as soon as possible.

The UK leads the world in corporate transparency. That is a position that the UK Government are rightly proud of: we are the first in the G20 to have started a public register of beneficial ownership. We should build on that position, and I am determined that we complete what we started at the summit.

The proposal is that the register will apply throughout the whole of the United Kingdom. That is important to ensure that control of companies owning land is transparent wherever in the UK the land is. However, Scotland and Northern Ireland have different land registration requirements from England and Wales, which makes the drafting of the legislation more complex. The Government therefore believe that it is important to spend time to get the policy and its implementation correct, and to consult on the policy before legislating.

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[Mr Wallace]

It is getting higher—we will be getting into double figures for The Observer’s readership if we are not careful.

The best time to examine the register is when we have had a full consultation. We have worked closely with the Scottish Government and the Northern Ireland Executive to ensure that we get it right. As the Scottish National party has pointed out, things such as Scottish limited partnerships were set up often for landowners to avoid ownership obligations way back in 1907, if I am not mistaken. Therefore, legislating is easier said than done, and we want to ensure that we get it right so that there are no loopholes or areas in which people can hide in the shadows, which might happen if we rushed it. We want to ensure that public means public. I therefore urge the hon. Gentleman to withdraw his new clause.

[Tristram Hunt]

I thank the Minister for his response. I understand that such a register throws up legal complexities and matters to do with the interrelationship between the English property market and legal system and the Scottish and Welsh ones. That is why it should be a UK-wide process. I am willing to admit that six months might seem a little aggressive in terms of the full publication of the register. The Minister said “in due course” and “as soon as possible”. On Report, perhaps he will give us slightly greater clarity about the commitment with which the Government are approaching the register. I very much welcome his enthusiasm. On that basis, I beg to ask leave to withdraw the motion.

Motion, by leave, withdrawn.

New Clause 15

Failure to prevent facilitation of tax evasion offences: exclusion from public procurement

‘(1) In section 57 of the Public Contract Regulations 2015 after paragraph 3(b) insert—

“(c) the contracting authority is aware that the economic operator is a body that has been convicted of an offence under section 37 or 38 of the Criminal Finances Act 2017.”’—(Tristram Hunt.)

This new clause would ensure that companies convicted of failure to prevent a tax evasion facilitation offence are excluded from public procurement.

Brought up, and read the First time.

[Tristram Hunt]

I beg to move, That the clause be read a Second time.

The new clause builds on new clause 6, which we looked at earlier. Exclusion is the key means of incentivising good corporate governance. The threat of exclusion from public procurement is known to be one that companies fear more than fines. Making the new offences subject to exclusion would ensure that companies take preventing such offences seriously. The UK’s anti-corruption summit committed to excluding corrupt bidders from public procurement contracts, so it is important that companies that facilitate tax evasion are similarly excluded.

Under the Public Contract Regulations 2015, public authorities must exclude companies found to be in breach of their obligations related to the payment of taxes. Unless the Bill specifies whether the new offences under clauses 37 and 38 will constitute such a breach, the Crown Commercial Service, which is often narrow in its approach, is unlikely to consider that they do. The purpose of the new clause therefore is to urge Ministers to ensure that the Crown Commercial Service understands there to be a breach in that context.

[Mr Wallace]

I am grateful to the hon. Gentleman for tabling his new clause because it allows us to cover another important element of the tax evasion offence we debated earlier. I also thank him for meeting me to discuss those proposals.

New clause 15 would create mandatory exclusion from public contracts of a relevant body convicted of an offence under part 3 of the Bill. I fully agree that, where an organisation has been convicted under the new offences and grave professional misconduct has taken place, it should be possible to exclude that organisation from public contracts.

I am pleased to say that existing law already allows for that by virtue of the Public Contracts Regulations 2015, which allow for the exclusion of a body from a public contract

“where the contracting authority can demonstrate by appropriate means that the economic operator is guilty of grave professional misconduct, which renders its integrity questionable”.

That is quite a low threshold if you ask me; nevertheless, it allows us to do it. I know the hon. Gentleman will be interested in this part, because it is a European angle to his proposal. I am advised that it is not possible lawfully to include a new mandatory exclusion under regulation 57, as proposed by the amendment. Regulation 57 contains a list of offences based on the six categories set out in the EU public contracts directive. The categories outlined in the directive are exhaustive. Case law indicates that member states are not free to add new additional grounds for exclusion to those set out in the directive.

[Mr Wallace]

I hope the Committee is satisfied that, where there has been grave professional misconduct by an organisation convicted under the new offences, contracting authorities will have the discretion to exclude them from public contracts.

[Tristram Hunt]

I thank the Minister for his answer. As my hon. Friend the Member for Bootle quietly alluded, this might be something we will have to look at again amid the welter of opportunities—count them!—thrown up by Brexit. [Hon. Members: “Hear, hear!”]

As a result of European regulations, I am willing to accept the Minister’s point. On Report, will he say whether we could have included in the statistical bulletins on unexplained wealth orders and other elements of the Bill an account of any corporations excluded from public procurement as a result? Is there a statistical account of whether any companies have fallen foul of the measure? Could we gain some account of that?

[Mr Wallace]

I am grateful for the hon. Gentleman’s idea, which I think is a good one. I will certainly try to ensure it is released in any statistical bulletins. When the Bill is up and running, I would like to know as much as he would how many people are precluded from public procurement practices.

[Tristram Hunt]

I thank the Minister. On that basis, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 16

Failure to prevent facilitation of tax evasion offences: reporting

‘The Secretary of State must make an annual report to Parliament containing the number of prosecutions brought and convictions made under section 37 and 38 of this Act.’ —(Tristram Hunt.)

This new clause would require that the Secretary of State reports annually on the number of prosecutions brought and convictions made for failure to prevent the facilitation of UK and foreign tax evasion offences.

Brought up, and read the First time.

[Tristram Hunt]

I beg to move, That the clause be read a Second time.

The new clause would

“require the Secretary of State reports annually on the number of prosecutions brought and convictions made for failure to prevent the facilitation of UK and foreign tax evasion offences.”

That is connected to an earlier new clause about culture change within Government to ensure the right degree of ministerial push and importance given to the implementation of the Bill, and to ensure that attention is given at the top of the Home Office and in ministerial offices, which is something a report to Parliament encourages. The fear that I and some of my colleagues have is that, if that detail is hidden away in obscure departmental documents, it does not necessarily have the drive and political push it deserves. The new clause is therefore another attempt to support the Minister in his job, and to encourage proper transparency about this interesting and in many ways useful Bill.

[Mr Wallace]

I do not want to look ungrateful to the hon. Member who is, as he says, trying to help me enhance the Bill and do my job. I am incredibly grateful for all the suggestions from hon. Members over the last few weeks.

[Mr Wallace]

I am not that grateful.

New clause 16 would require the Secretary of State to report annually to Parliament on the number of prosecutions brought and the number of convictions made under the new corporate offences. Under the domestic tax evasion offence, HMRC will be the investigating authority and the decision on whether to prosecute will rest with the Crown Prosecution Service. In relation to the overseas offence, the Serious Fraud Office and the National Crime Agency will be the investigating authorities and the decision to prosecute will rest with the SFO or the CPS.

It is important to emphasise that, as with the corresponding offence under the Bribery Act 2010, the number of prosecutions alone will not be a true metric of the level of success of the measure. The new corporate offences are not only about responding to wrongdoing but about changing corporate culture and behaviour. True success will lie in changing corporate culture and preventing wrongdoing from occurring in the first place.

In any case, all of the prosecuting authorities already undertake extensive public reporting on investigations and prosecutions. For example, HMRC publishes quarterly performance updates and the CPS publishes an annual report. Neither of those documents are obscure—they are weighty but not obscure. I can confirm that information relating to the new offences will be included in those existing formats. Accordingly, I invite the hon. Member for Stoke-on-Trent Central to withdraw his new clause.

[Tristram Hunt]

I will not detain the Committee with an inquiry into the difference between “weighty” and “obscure”; these things can often be lost in the mists of time. As we did not quite generate the success that we needed to on new clause 11, I will not put the measure to a Division. However, I urge the Minister to ensure that, having created this interesting Bill and having delivered these interesting reforms, if the reforms are going to be put to proper effect and have the political momentum—a terrifying word—behind them, then a degree of political transparency and support connected to Parliament is important. On that basis, I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 19

Whistleblowing in relation to failure to prevent the facilitation of tax evasion

‘The Chancellor of the Exchequer shall conduct a review of arrangements to facilitate whistleblowing in the banking and financial services sector, including the protection of anonymity, in relation to the disclosure of suspected corporate failure to prevent facilitation of tax evasion, and report to Parliament within six months of the passing of this Act.’—(Roger Mullin.)

This new clause would conduct a review into the facilitation and protection of whistleblowers with a focus on the protection of anonymity for those who suspect corporate failure to prevent the facilitation of tax evasion.

Brought up, and read the First time.

Criminal Finances Bill (Third sitting)

Debate between Tristram Hunt and Ben Wallace

Committee Debate: 3rd sitting: House of Commons
Thursday 17th November 2016 Public Bill Committees

[Tristram Hunt (Stoke-on-Trent Central) (Lab)]

New clause 12 seeks to add to amendment 2 and put a duty to prevent corruption in the Bill, to strengthen the hand of the Minister and the agencies involved. As we have heard, the UK is still considered a global haven for money laundering.

According to a Home Affairs Committee report on the proceeds of crime, it is estimated that more than £100 billion is laundered through London’s financial systems every year. Despite more than 380,000 suspicious activity reports being filed each year, the National Crime Agency currently has only 27 investigations open, with approximately £170 million frozen. By contrast, in Switzerland, some £5 billion-worth of Swiss francs are currently frozen.

The new clause seeks to ramp up the responsibilities on the National Crime Agency, public prosecutions and HMRC to make it a duty to prevent corruption, to ensure that we protect London’s reputation and that our financial, legal and accountancy services remain among the best in the world.

[Mr Wallace]

We are all in agreement that law enforcement agencies should do more to co-operate and talk to each other before embarking on action against a person or property, and that they should ensure that they are acting to combat corruption in all its forms. In that sense, the implication of the amendments is entirely sensible.

As the hon. Lady set out, amendment 2 would impose a duty on operational agencies to co-operate prior to applying an unexplained wealth order. Such co-operation would have several benefits. Most obviously, it would avoid duplication of the same effort against an individual and their property. It would avoid one agency trampling over another that had embarked on a similar line of inquiry. Indeed, another agency may well have an explanation of the wealth. An obvious example is that HMRC can be aware of complex legal tax arrangements that an individual may have.

I am entirely supportive of the spirit of the hon. Lady’s amendment. I would go further and say that liaison should not be limited to those bodies that can apply for unexplained wealth orders and take civil recovery action; it should happen between all law enforcement agencies and prosecution authorities. I am pleased to reassure her that that already happens. Law enforcement agencies, as a matter of course, check various law enforcement databases to see whether there is a flag against a particular person or property that is of interest to them. They can then liaise accordingly. In addition, unexplained wealth orders will be subject to the Proceeds of Crime Act investigation code of practice, which will be amended and subject to debate in both Houses before coming into force. I can assure the Committee that this issue will be addressed in that code.

The Proceeds of Crime Act is not the only legislation where a conflict between law enforcement agencies could occur relating to the same person or property. Several police forces may have an interest in the same criminal. Those conflicts can be resolved without the need for primary legislation. This is a matter for internal discussion on tasking and co-ordinating, which the code of practice will achieve.

New clause 12 would impose a duty on agencies to prevent corruption when considering the use of unexplained wealth orders. It is my hope that the mere existence of these orders in UK law will in itself create a deterrent to those who seek to place their corrupt wealth in the UK.

We continue our efforts to tackle corruption in all its forms. This year, we hosted the London anti-corruption summit, bringing together world leaders, business and civil society to agree a historic package of actions to expose, punish and drive out corruption in all walks of life. We will continue to implement UK commitments from the summit and encourage others to do likewise.

Indeed, the limb of unexplained wealth orders that allows their application to non-EEA foreign officials and politicians reflects the real concerns about those involved in corruption overseas who then launder the proceeds of their criminality in the UK. I hope the hon. Member for Stoke-on-Trent Central can see that the power will be used to tackle corruption, but unexplained wealth orders go further: they will also apply to cases in which there is a suspicion of involvement in serious crime, not necessarily corruption. The proposed duty could risk the deprioritisation of other crime types, which we agree that the NCA, the Crown Prosecution Service, HMRC and the Financial Conduct Authority could be tackling. They will of course pursue those guilty of corruption, but I hope we agree that our law enforcement agencies are best placed to prioritise their resources to pursue a whole range of criminals.

The Secretary of State and Attorney General already issue statutory guidance on the use of powers under POCA, including the use of civil recovery powers. That guidance will be extended to the new bodies granted civil recovery powers in the Bill. HMRC and the FCA intend to reissue the guidance next year, when we will be able to address both issues. I hope that the hon. Members for Ealing Central and Acton and for Stoke-on-Trent Central are reassured that the issues are already accounted for. I invite her to withdraw the amendment.

[Tristram Hunt]

I am happy for the amendment to be withdrawn, but it would be nice to hear something more on Report. I take the point about the precision of focusing on corruption when other serious criminal activities are involved, but some language on a duty to prevent corruption would be good. The important element is the duty; I hope that the wording on corruption and other serious criminal activity might be added to that.

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[Tristram Hunt]

The amendment is explained by the explanatory statement. You will know, Sir Alan, that in 2014 Slovenia’s former Prime Minister, Janez Janša, was found guilty of taking bribes during the course of a €278 million arms deal with a Finnish state-owned contractor. Politically exposed persons were also among the 12 people referred to a criminal court in Cyprus earlier this year to stand trial for corruption and bribery charges in connection with a waste overcharging scam that is thought to have involved more than €30 million.

Although it may be reasonable to expect that European economic area countries would be able to undertake criminal investigations against politically exposed persons in their countries if there were sufficient evidence to suggest that they had been involved in corruption, that might not necessarily be the case. For example, there is still blanket immunity from criminal prosecution for parliamentarians in Hungary, despite it being an EEA country. The amendment would extend the Government’s welcome reform of unexplained wealth orders for those outside EEA states to include those within EEA states. We know that what we are dealing with does not simply stop at the continent of Europe or the EEA states. The amendment seeks to apply some degree of equality of this legislation to the EEA states.

Amendment 60 would have the same effect as amendment 59, but would apply to unexplained wealth orders issued in Scotland as well.

[Mr Wallace]

I thank the hon. Gentleman for his comments. We had a useful meeting yesterday about some of these issues. He will know that we welcome these amendments as they give us the opportunity to discuss why we have effectively a different regime between politically exposed persons outside the EEA and ourselves. The amendment would cover us sitting in this room—all PEPs in the EEA. That is important because, if any of us were to face an unexplained wealth order, we would want to know that it had been issued on the basis of evidence linking us to serious crime; we would not want to give our authorities the ability just to slap one on without any evidential threshold.

We have confidence that, within the EEA—the hon. Gentleman used the example of a country prosecuting its own former Prime Minister—there are the tools to find the evidence and the ability to work with fellow law enforcement agencies around Europe to meet the evidential threshold. We cannot discriminate within the EEA; we cannot say, “This applies to Slovenia but it doesn’t apply to France”. Once we go into that area, we cannot discriminate between the different states. He picked out Hungary, where there is immunity for parliamentarians. I think there are other countries—even Italy; I do not know. If I remember my Berlusconi history, I think there were lots of issues about immunity in that country. That is the real issue. We have confidence in our neighbours and friends in Europe that they have the capacity to build the evidence and therefore to build a case for an unexplained wealth order.

[Mr Wallace]

I am grateful to my hon. Friend for his intervention. He makes the clear point that we want to be confident that, when we are held to account, it is based on evidence gathered by our resourced law enforcement agencies. The decision on PEPs outside the EEA reflects real operational challenges that we and organisations such as the National Crime Agency have had in gathering evidence against people in some countries where there may be no properly functioning Government or, indeed, where the Government are entirely corrupt and it is very difficult to gather that evidence.

That is the reason we have had to plug that gap in that way. I hope that the hon. Member for Stoke-on-Trent Central understands that that is why we have a different approach. I urge him not to push his amendment to a vote.

[Tristram Hunt]

I thank the Minister for his comprehensive response, including on the evidential threshold, and the hon. Member for Dover for his point concerning the energy with which some financial institutions in the UK have approached PEPs, even—dare I say it?—on car insurance.

On the basis of the Minister’s argument, I am willing to withdraw the amendment, but I fear that this may be returned to in the aftermath of our exiting the European Union.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

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[Mr Wallace]

The cumulative wealth would of course build up. I am happy to be persuaded by the Committee about the threshold. The reality is that, given the vast number of people involved with organised crime groups across the threat picture and the staggering wealth of some of them, we will be lucky to get to £100,000. We will be going for people worth £20 million, £30 million or £40 million and all the way down. It would chill people’s bones to realise how some of the people who live among us make their money out of crime and launder that money. The bottom line is the number of those individuals. That is why we chose £100,000, but hon. Members may want to make a persuasive argument otherwise. Cumulative wealth is certainly an issue. I was in the north-east of England the other day and met an individual who is unemployed but has well over £400,000 in their bank account. I am looking forward to knocking on that person’s door.

[Tristram Hunt]

I had a terrible fear about the rule of law for a minute there.

We tabled new clause 11 to help the Minister. It would require the Secretary of State to make an annual report to Parliament about the number of unexplained wealth orders made each year. It is really about helping to drive culture change through the Government, the Departments and the agencies involved in this excellent set of reforms, and ensuring that Parliament is kept up to date with how the agencies and Ministers are approaching it. There is nothing quite like a presentation to Parliament —a ministerial statement, written or oral—to concentrate attention in Departments on the importance and significance of a particular piece of legislation. The new clause would ensure that the Bill had the bureaucracy and political support behind it.

Similarly, new clause 13 would help to get the wheels in motion for unexplained wealth orders and investigatory powers under the Proceeds of Crime Act 2002. It seeks to prevent the courts from awarding costs against enforcement agencies if their applications for unexplained wealth orders or interim freezing orders are unsuccessful. It is about ensuring that a culture of risk-aversion does not develop in our agencies. They are often fearful, in these straitened budgetary circumstances and under the full glare of the press, about pursuing the kind of individuals the Minister spoke about, for fear of the financial implications if they are unsuccessful and taken to court. Colleagues will remember that the Serious Fraud Office’s botched case against the entrepreneur Vincent Tchenguiz will settle for £3 million plus costs, which is a fraction of what his lawyer originally demanded, so these can be quite costly enterprises.

We would not want to hand down these new powers in statute to those who direct our investigatory agencies, only for a culture of not pursuing those individuals to develop in those organisations. New clause 11 would ensure that Parliament had a voice and oversight over the process, and new clause 13 would ensure that a culture of risk-aversion does not develop in the agencies that are to be granted these new powers.

[Mr Wallace]

I will start with the good news: I support the spirit of new clause 11, which I discussed with the hon. Gentleman yesterday. It is important that we have a measure to ensure the transparency of the operation of unexplained wealth orders. In my recent responses to the reports of the Public Accounts Committee and the Home Affairs Committee on asset recovery—both reports were excellent, I have to say—I committed to publishing annual statistics on annual recovery performance. After our meeting, I instructed my officials to ensure that those statistics include unexplained wealth orders. I therefore hope there is no need for the hon. Gentleman’s new clause—which would create a statutory duty in primary legislation to report—as those figures will be contained in an annual bulletin.

New clause 13 relates to the risk that potential financial liability may make law enforcement agencies reluctant to apply for unexplained wealth orders. It seeks to ensure that the authorities are not liable following an unsuccessful unexplained wealth order application. I was pleased to be able to discuss that issue with the hon. Gentleman yesterday, and I am advised that the existing civil procedure rules, which would extend to cover unexplained wealth orders, mean that by default an application for such an order would take place in private. I am happy to share those civil procedure rules with the hon. Gentleman to see whether he thinks that is enough. That is also the case for any subsequent legal stages. On that basis, if an application is unsuccessful, or if the individual was latterly able to provide the court with an acceptable explanation of their wealth, it would not generally be public knowledge. There would therefore be no undue reputational damage to the individual concerned.

More generally, whatever the peculiarities relating to unexplained wealth orders, it remains our view that any awards of costs should follow the same rules that apply in other, similar matters. The general principle that the loser pays is a well established position. Changing it could lead to unfortunate unintended consequences in relation to other powers and procedures. In any case, the judge has a general discretion to award costs that are proportionate. It is not a matter of one side producing a figure and the judge awarding that without any consideration of the case; we should maintain a consistent approach.

On that basis, although I share the concern about impinging on our agencies’ ability to pursue crimes, it is not appropriate to indemnify them in this context. If they have made a mistake and applied for an unexplained wealth order against the wrong person, risking someone’s reputation, it is in my view appropriate for them to take responsibility. If we indemnify them, a mistake will be confused with normal investigative procedure. I do not think it is the best thing to indemnify them, given that hearings can be held in private, in court procedure. I hope that hon. Members will be satisfied with that.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Interim freezing orders

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

Oral Answers to Questions

Debate between Tristram Hunt and Ben Wallace

Wednesday 20th April 2016 Commons Chamber

[Tristram Hunt (Stoke-on-Trent Central) (Lab)]

7. What steps the Government are taking to support tourism in Northern Ireland.

[The Parliamentary Under-Secretary of State for Northern Ireland (Mr Ben Wallace)]

The promotion of tourism to Northern Ireland is primarily a devolved matter, but the Secretary of State and I take every opportunity to support it. The new British-Irish visa scheme in China and India will enable visits to both Ireland and the UK, including Northern Ireland, on a single visa of either country, thus encouraging tourism, business links and inward investment.

[Tristram Hunt]

According to Lord Lawson, the chair of the increasingly absurd Vote Leave campaign, a British vote to leave the European Union would result in the return of border posts and passport controls between the Republic of Ireland and Northern Ireland. What modelling has the Minister done on how that might affect the £750 million tourism industry in Ulster?

[Mr Wallace]

I do not think I need to do much modelling; we should let the businesses of Northern Ireland speak for themselves. They believe it would be wrong to leave the European Union. The free flow of tourists between the Republic of Ireland and Northern Ireland is good for Northern Ireland, good for the island of Ireland and good for the United Kingdom economy.