Failure to Prevent an Economic Criminal Offence

Criminal Finances Bill – in the House of Commons at 2:45 pm on 21st February 2017.

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“(1) A relevant body (B) is guilty of an offence if a person commits an economic criminal offence when acting in the capacity of a person associated with (B).

(2) For the criminal purposes of this clause—

“economic criminal offence” means any of the offences listed in Part 2 of Schedule 17 to the Crime and Courts Act 2013.

“relevant body” and “acting in the capacity of a person associated with B” has the same meaning as in section 39.

(3) It is a defence for B to prove that, when the economic criminal offence was committed—

(a) B had in place such prevention procedures as it was reasonable in all the circumstances to expect B to have in place, or

(b) it was not reasonable in all the circumstances to expect B to have any prevention procedures in place.

(4) In subsection (2) “prevention procedures” means procedures designed to prevent persons acting in the capacity of a person associated with B from committing an economic criminal offence.

(5) A relevant body guilty of an offence under this section is liable—

(a) on conviction on indictment, to a fine,

(b) on summary conviction in England and Wales, to a fine,

(c) on summary conviction in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum.

(6) It is immaterial for the purposes of this section whether—

(a) any relevant conduct of a relevant body, or

(b) any conduct which constitutes part of a relevant criminal financial offence takes place in the United Kingdom or elsewhere.

(7) The Chancellor of the Exchequer and the Secretary of State must prepare and publish guidance about procedures that relevant bodies can put in place to prevent persons acting in the capacity of an associated person from committing an economic criminal offence.”—(Sir Edward Garnier.)

This new clause would create a corporate offence of failing to prevent economic crime, defined by reference to the offences listed in Part 2 of Schedule 17 to the Crime and Courts Act 2013.

Brought up, and read the First time.

Photo of Natascha Engel Natascha Engel Second Deputy Chairman of Ways and Means

With this it will be convenient to discuss the following:

New clause 3—Failure to Prevent an Economic Criminal Offence (No. 2)—

“(1) A relevant body (B) is guilty of an offence if a person commits a economic criminal offence when acting in the capacity of a person associated with (B).

(2) For the purposes of this clause—

“economic criminal offence” means one of the following—

(a) a common law offence of conspiracy to defraud;

(b) an offence under section 1, 5 or 7 of Fraud Act 2006;

(c) an offence under section 1, 17 or 20 of the Theft Act 1968 (theft, false accounting and destruction of documents);

(d) an offence under section 993 of the Companies Act 2006 (fraudulent trading);

(e) an offence under sections 346, 397 and 398 of the Financial Services and Markets Act 2000 (providing false statements to auditors, misleading statements, and misleading the FCA);

(f) an offence under section 327, 328 and 329 of the Proceeds of Crime Act 2002 (concealing criminal property, facilitating acquisition, acquisition and use of criminal property).

“relevant body” and “acting in the capacity of a person associated with B” has the same meaning as in section 39.

(3) It is a defence for B to prove that, when the economic criminal offence was committed—

(a) B had in place such prevention procedures as it was reasonable in all the circumstances to expect B to have in place, or

(b) it was not reasonable in all the circumstances to expect B to have any prevention procedures in place.

(4) In subsection (2) “prevention procedures” means procedures designed to prevent persons acting in the capacity of a person associated with B from committing an economic criminal offence.

(5) A relevant body guilty of an offence under this section is liable—

(a) on conviction on indictment, to a fine,

(b) on summary conviction in England and Wales, to a fine,

(c) on summary conviction in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum.

(6) It is immaterial for the purposes of this section whether—

(a) any relevant conduct of a relevant body, or

(b) any conduct which constitutes part of a relevant criminal financial offence takes place in the United Kingdom or elsewhere.

(7) The Chancellor of the Exchequer and the Secretary of State must prepare and publish guidance about procedures that relevant bodies can put in place to prevent persons acting in the capacity of an associated person from committing an economic criminal offence.”

This new clause would create a corporate offence of failing to prevent economic crime, defined by reference to certain offences listed in subsection (2).

New clause 4—Failure to prevent criminal financial offences in the UK—

“(1) A relevant body (B) is guilty of an offence if a person commits a criminal financial offence when acting in the capacity of a person associated with B.

(2) It is a defence for B to prove that, when the criminal financial offence was committed—

(a) B had in place such prevention procedures as it was reasonable in all the circumstances to expect B to have in place, or

(b) it was not reasonable in all the circumstances to expect B to have any prevention procedures in place.

(3) In subsection (2) “prevention procedures” means procedures designed to prevent persons acting in the capacity of a person associated with B from committing criminal financial offences.

(4) For the purposes of this clause—

“criminal financial offence” means an offence listed in Part 2 of Schedule 17 to the Crime and Courts Act 2013 [that could not be prosecuted under the offences created by sections 7 and 38 of this Act], or, one of the offences listed below—

(a) an offence under section 1, 6 or 7 of the Fraud Act 2006;

(b) an offence under section 1, 17 or 20 of the Theft Act 1968;

(c) an offence under section 993 of the Companies Act 2006;

(d) an offence under section 327, 328 and 329 of the Proceeds of Crime Act 2002;

(e) the common law offence of conspiracy to defraud;

“relevant body” has the same meaning as in section 36.

(5) A relevant body guilty of an offence under this section is liable—

(a) on conviction on indictment, to a fine,

(b) on summary conviction in England, to a fine,

(c) on summary conviction in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum.

(6) It is immaterial for the purposes of this section whether—

(a) any relevant conduct of a relevant body, or

(b) any conduct which constitutes part of a relevant criminal financial offence takes place in the United Kingdom or elsewhere.”

This New Clause would create an offence of failing to prevent any financial offence listed in Part 2 of Schedule 17 of the Crime and Courts Act 2013.

New clause 6—Public registers of beneficial ownership of companies registered in the Overseas Territories—

“(1) In Part 1 of the Proceeds of Crime Act 2002 (introductory), after section 2A, insert—

“2AA Duty of Secretary of State: Public registers of beneficial ownership of companies registered in Overseas Territories

(1) It shall be the duty of the Secretary of State, in furtherance of the purposes of—

(a) this Act; and

(b) Part 3 of the Criminal Finances Act 2017 to take the steps set out in this section.

(2) The first step is, no later than 31 December 2018, to provide all reasonable assistance to the Governments of the UK’s Overseas Territories to enable each of those Governments to establish a publicly accessible register of the beneficial ownership of companies registered in that Government’s jurisdiction.

(3) The second step is, no later than 31 December 2019, to prepare an Order in Council and take all reasonable steps to ensure its implementation, in respect of any Overseas Territory that has not yet introduced a publicly accessible register of the beneficial ownership of companies within their jurisdiction. This Order would require the Overseas Territory to adopt such a register.

(4) In this section “a publicly accessible register of the beneficial ownership of companies” means a register which, in the opinion of the Secretary of State, provides information broadly equivalent to that available in accordance with the provisions of Part 21A of the Companies Act 2006.””

This new clause would require the Secretary of State to take steps to provide that Overseas Territories establish publicly accessible registers of the beneficial ownership of companies, for the purposes of the Proceeds of Crime Act 2002 and Part 3 of the Bill (corporate offences of failure to prevent facilitation of tax evasion).

New clause 10—Duty to prevent use of new Limited Partnerships for financial criminal activity—

“(1) The Treasury may not lay regulations before Parliament on new Limited Partnerships before the Secretary of State has completed and published a review of the proposed regulations.

(2) It shall be the duty of the Secretary of State to review draft regulations which would allow the creations of new Limited Partnerships, in order to prevent the use of new Limited Partnerships for financial criminal activity.

(3) In performing that duty the Secretary of State must, in particular, have regard to the contribution transparency may make in tackling tax evasion, money laundering, national and cross border criminality, and terrorist financing.

(4) Following any review under subsection (2) the Secretary of State must lay a report before Parliament on what steps the Government will take to prevent new Limited Partnerships being used for criminal purposes.

(5) In conducting the review the Secretary of State must consult—

(a) the Scottish Government,

(b) the National Crime Agency,

(c) the Serious Fraud Office,

(d) the Financial Conduct Authority,

(e) HMRC,

(f) interested third sector organisations, and

(g) any other persons the Secretary of State deems relevant.”

This new clause sets a duty on the Secretary of State to review Treasury proposals for new Limited Partnerships to prevent their use for financial criminal activity, including tax evasion, money laundering and terrorist financing. In carrying out the review the Secretary of State will be required to consult those groups listed in subsection (5) and lay a report before Parliament.

New clause 11—Failure to prevent facilitation of tax evasion offences: consultation on other jurisdictions—

“(1) Within 12 months of this Act receiving Royal Assent, the Secretary of State must conduct a public consultation on the issues listed in subsection (2).

(2) The issues are—

(a) the desirability of the Crown Dependencies and Overseas Territories introducing equivalent offences to those introduced by sections 40 and 41 of this Act; and

(b) the steps that would need to be taken for the Crown Dependencies and Overseas Territories to introduce equivalent offences to those introduced by sections 40 and 41 of this Act.

(3) As part of this consultation the Secretary of State must seek views from—

(a) the governments of the Crown Dependencies and Overseas Territories,

(b) such bodies as the Secretary of State or the governments specified in subsection (3)(a) consider appropriate,

(c) any other person or body who the Secretary of State deems relevant, with particular regard to non-governmental bodies and private sector entities.

(4) The Secretary of State must lay before both Houses of Parliament a report setting out the outcome of this consultation within 24 months of this Act receiving Royal Assent.”

New clause 12—Failure to prevent facilitation of tax evasion offences: publication of convictions—

“(1) The Secretary of State must publish an annual report listing all bodies and organisations that have been found guilty of a failure to prevent facilitation of a UK foreign tax evasion offence within the previous five years.”

New clause 13—Failure to prevent tax evasion offences: sentencing guideline—

“(1) The Secretary of State must produce sentencing guidelines for the level of fine to be imposed on bodies found guilty of failure to prevent facilitation of a UK foreign tax evasion offence.

(2) Such guidance must stipulate that the maximum level of the fine cannot be greater than the total value of the tax whose evasion was facilitated.”

New clause 14—Failure to Prevent an Economic Criminal Offence (No. 3)—

“(1) A relevant body (B) is guilty of an offence if a person commits an economic criminal offence when acting in the capacity of a person associated with (B).

(2) For the criminal purposes of this clause—

“economic criminal offence” means any of the offences listed in Part 2 of Schedule 17 to the Crime and Courts Act 2013.

“relevant body” and “acting in the capacity of a person associated with B” have the same meaning as in section 39.

(3) B is guilty of an offence under this section if a person associated with B commits an economic criminal offence intending—

(a) to obtain or retain business for B; or

(b) to obtain or retain an advantage in the conduct of business for B or otherwise for the financial benefit of B.

(4) It is a defence for B to prove that, when the economic criminal offence was committed—

(a) B had in place such prevention procedures as it was reasonable in all the circumstances to expect B to have in place, or

(b) it was not reasonable in all the circumstances to expect B to have any prevention procedures in place.

(5) In subsection (2) “prevention procedures” means procedures designed to prevent persons acting in the capacity of a person associated with B from committing an economic criminal offence.

(6) A relevant body guilty of an offence under this section is liable—

(a) on conviction on indictment, to a fine,

(b) on summary conviction in England and Wales, to a fine,

(c) on summary conviction in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum.

(7) It is immaterial for the purposes of this section whether—

(a) any relevant conduct of a relevant body, or

(b) any conduct which constitutes part of a relevant criminal financial offence takes place in the United Kingdom or elsewhere.

(8) The Chancellor of the Exchequer and the Secretary of State must prepare and publish guidance about procedures that relevant bodies can put in place to prevent persons acting in the capacity of an associated person from committing an economic criminal offence.”

This new clause would create a corporate offence of failing to prevent economic crime, defined by reference to the offences listed in Part 2 of Schedule 17 to the Crime and Courts Act 2013.

New clause 15—Failure to Prevent an Economic Criminal Offence (No. 4)—

“(1) A relevant body (B) is guilty of an offence if a person commits an economic criminal offence when acting in the capacity of a person associated with (B).

(2) For the criminal purposes of this clause—

“economic criminal offence” means one of the following—

(a) a common law offence of conspiracy to defraud;

(b) an offence under section 1, 5 or 7 of Fraud Act 2006;

(c) an offence under section 1, 17 or 20 of the Theft Act 1968 (theft, false accounting and destruction of documents);

(d) an offence under section 993 of the Companies Act 2006 (fraudulent trading);

(e) an offence under sections 346, 397 and 398 of the Financial Services and Markets Act 2000 (providing false statements to auditors, misleading statements, and misleading the FCA);

(f) an offence under section 327, 328 and 329 of the Proceeds of Crime Act 2002 (concealing criminal property, facilitating acquisition, acquisition and use of criminal property).

“relevant body” and “acting in the capacity of a person associated with B” have the same meaning as in section 39.

(3) B is guilty of an offence under this section if a person associated with B commits an economic criminal offence intending—

(a) to obtain or retain business for B; or

(b) to obtain or retain an advantage in the conduct of business for B or otherwise for the financial benefit of B.

(4) It is a defence for B to prove that, when the economic criminal offence was committed—

(a) B had in place such prevention procedures as it was reasonable in all the circumstances to expect B to have in place, or

(b) it was not reasonable in all the circumstances to expect B to have any prevention procedures in place.

(5) In subsection (2) “prevention procedures” means procedures designed to prevent persons acting in the capacity of a person associated with B from committing an economic criminal offence.

(6) A relevant body guilty of an offence under this section is liable—

(a) on conviction on indictment, to a fine,

(b) on summary conviction in England and Wales, to a fine,

(c) on summary conviction in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum.

(7) It is immaterial for the purposes of this section whether—

(a) any relevant conduct of a relevant body, or

(b) any conduct which constitutes part of a relevant criminal financial offence takes place in the United Kingdom or elsewhere.

(8) The Chancellor of the Exchequer and the Secretary of State must prepare and publish guidance about procedures that relevant bodies can put in place to prevent persons acting in the capacity of an associated person from committing an economic criminal offence.”

This new clause would create a corporate offence of failing to prevent economic crime, defined by reference to the offences listed in Part 2 of Schedule 17 to the Crime and Courts Act 2013.

New clause 16—Conversion of platforms to centralised registers: review—

“(1) Within one year of this Act receiving Royal Assent the Secretary of State must establish a review of the operational efficacy of closed beneficial ownership platforms created by Crown Dependencies or British Overseas Territories that are subject to the automatic exchange of beneficial ownership information with Her Majesty’s Government for the purpose of combating illicit financial activity.

(2) The aim of the review will be to gather information to equip Her Majesty’s Government to take all steps necessary to provide financial, administrative or any other support to assist Crown Dependencies and British Overseas Territories in converting all such beneficial ownership platforms into closed centralised registers of beneficial ownership.

(3) In the course of the review the Secretary of State must consult—

(a) the governments of any Crown Dependencies and Overseas Territories which have created closed beneficial ownership platforms and which are subject to the automatic exchange of information with Her Majesty’s Government for the purpose of combating illicit financial activity; and

(b) such bodies as the Secretary of State or governments under subsection (3)(a) deem appropriate.

(4) The review shall be completed and laid before Parliament within one year of its establishment.

(5) No later than one year after the review has been laid before Parliament, Her Majesty’s Government must have taken all steps necessary to assist relevant Crown Dependencies and British Overseas Territories in the establishment of closed centralised registers of beneficial ownership.

(6) Her Majesty’s Government shall supply quarterly reports to Parliament of the progress of steps taken under subsection (5), and such reports shall set out—

(a) concerns expressed by relevant Crown Dependencies and British Overseas Territories about conversion of beneficial ownership platforms to centralised registers, and

(b) an assessment by Her Majesty’s Government of the extent to which objections to the creation of centralised registers can be justified on a constitutional, economic, administrative or any other operational basis.”

New clause 17—Public registers of beneficial ownership of companies registered in Crown dependencies—

“(1) In Part 1 of the Proceeds of Crime Act 2002 (introductory), after section 2A, insert—

“2AA Duty of Secretary of State: Public registers of beneficial ownership of companies registered in Crown dependencies

(1) It shall be the duty of the Secretary of State, in furtherance of the purposes of—

(a) this Act; and

(b) Part 3 of the Criminal Finances Act 2017 to take the actions set out in this section.

(2) The first action is, no later than 31 December 2017, to provide all reasonable assistance to the Governments of Crown Dependencies to enable each of those Governments to establish a publicly accessible register of the beneficial ownership of companies registered in that Government’s jurisdiction.

(3) The second action is, no later than 31 December 2019, to publish legislative proposals to require the Government of any Crown dependency that has not already established a publicly accessible register of the beneficial ownership of companies registered in that Government’s jurisdiction to do so.

(4) In this section—

“a publicly accessible register of the beneficial ownership of companies” means a register which, in the opinion of the Secretary of State, provides information broadly equivalent to that available in accordance with the provisions of Part 21A of the Companies Act 2006.

“legislative proposals” means either—

(a) a draft Order in Council; or

(b) a Bill presented to either House of Parliament.”

New clause 18—Whistleblowing in relation to failure to prevent facilitation of tax evasion and money laundering—

“(1) The Secretary of State shall conduct a review of arrangements to facilitate whistleblowing in the banking and financial services sector in relation to the disclosure of suspected corporate failure to prevent facilitation of tax evasion and money laundering.

(2) The review must consider, but shall not be limited to—

(a) arrangements to protect the anonymity of persons disclosing suspected corporate failure to prevent facilitation of tax evasion and money laundering;

(b) the efficacy of current penalties for institutions that treat whistleblowers unfairly, and proposals for future criminal penalties.

(3) In conducting the review the Secretary of State must consult—

(a) whistleblowers in the banking and financial services sector,

(b) devolved administrations,

(c) interested charities,

(d) the relevant regulators, and

(e) any other persons the Secretary of State deems relevant.

(4) The Secretary of State must lay the report to Parliament within six months of the passing of this Act.”

This new clause requires the Secretary of State to conduct a review of arrangements to facilitate whistleblowing in the banking and financial services sector, in consultation with those groups listed in subsection (3), and then lay a report before Parliament on steps the Government will take to bring forward penalties for institutions that fail to protect whistleblowers.

New clause 19—The culture of the banking industry and failure to prevent the facilitation of tax evasion—

“(1) The Secretary of State must undertake a review into the extent to which banking culture contributed to the failure to prevent the facilitation of tax evasion in the banking sector.

(2) The review must consider, but shall not be limited to, the following issues—

(a) the impact of culture change on decision making senior executive and board level;

(b) the pressure on staff to meet performance targets;

(c) how allegations of tax evasion are reported and acted on.

(3) The review must set out what steps the UK Government intends to take to ensure that banking culture is not facilitating tax evasion.

(4) In carrying out this review, the Secretary of State must consult—

(a) devolved administrations;

(b) HMRC;

(c) the Serious Fraud Office;

(d) the Financial Conduct Authority;

(e) interested charities, and

(f) anyone else the Secretary of State deems appropriate.

(5) The Secretary of State shall lay a copy of the review before the House of Commons within six months of this Act receiving Royal Assent.”

New clause 20—Report on the impact of the criminal offences relating to offshore income, assets and activities—

“(1) The Chancellor of the Exchequer shall, within one year of the coming into force of the provisions in Tax Management Act 1970 relating to criminal offences relating to offshore income, assets and activities introduced by section 165 of the Finance Act 2016 publish a report on the impact of the introduction of these offences.

(2) The report must include, but need not be limited to, information about—

(a) the number of persons who have been charged with offences under each of sections 106B, 106C and 106D of the Tax Management Act 1970;

(b) the number of persons who have been convicted of any such offence;

(c) the average fine imposed; and

(d) the number of people upon whom a custodial sentence has been imposed for any such offence.”

New clause 21—Report on income lost to tax evasion—

“(1) The Chancellor of the Exchequer shall, within one year of the passing of this Act, prepare and publish a report, in consultation with stakeholders, on the value of income lost to the Exchequer from tax evasion offences.

(2) The report must include the following—

(a) the value of the income lost to the Exchequer from tax evasion offences in the financial years—

(i) 2015-16;

(ii) 2014-15;

(iii) 2013-14;

(iv) 2012-13; and

(v) 2011-12;

(b) a detailed summary of the model used by HMRC for estimating income lost to the Exchequer from tax evasion offences.

(c) an assessment of the efficacy of HMRC’s performance in relation to dealing with tax evasion, including—

(i) a breakdown of specific HMRC departments or units dealing with investigation and enforcement of tax evasion matters;

(ii) details of the numbers of staff in each of the years listed in paragraph (a) who are located within departments or units dealing with investigation and enforcement matters in relation to tax evasion;

(iii) details of the budgets allocated to departments or units dealing with investigation above; and

(iv) details of the numbers of prosecutions or the amount of tax recovered in each financial year listed in paragraph (a) as a result of the work of HMRC departments or units dealing with investigation and enforcement matters in relation to tax evasion in those financial years.”

Photo of Edward Garnier Edward Garnier Conservative, Harborough

I shall be relatively brief in introducing this group of new clauses. In moving new clause 2, which stands in my name and those of a number of hon. Members on both sides of the House and which mirrors new clauses 3, 4, 14 and 15, I want to introduce a debate about the future of corporate criminal liability in this jurisdiction. I must declare an interest, as over the past few years I have been instructed by the Serious Fraud Office in a number of cases involving the prosecution of large international companies. One of the problems that prosecutors and, no doubt, investigators have found in this jurisdiction when dealing with the modern corporate landscape—to use that hideous jargon—involves trying to fix liability on a company suspected of criminal activity, as a matter of criminal law. It is not difficult to fix criminal liability on an individual if the evidence is there: the person either did or did not do it, and they either did or did not have the necessary criminal intent.

Under current English law, however, fixing criminal liability on a corporation involves resorting to what is called the identification principle. This involves finding someone of sufficient seniority within a corporation who can act as or be described as the directing mind of the company. Through that identified person, we can then move on to fix criminal liability on the corporation. That was fine in the Victorian era, when most companies had one or two directors. An example would be a small business in a market town in the 1860s or 1870s, which would have been owned and directed by two or three men—it was always men in those days. If a fraud was committed on behalf of the company, it would have been perfectly easy to find the directing mind of that company among the small group of directors.

As the industrial revolution and corporate legal development proceeded during the late 19th century and early 20th century, however, it became clear that companies were getting bigger. An increase in international trade meant that companies based in this country had offices, and directing minds, in other parts of the world. In 1912, the United States dealt with this by doing away with the identification principle involving the directing mind and, through case law, by developing a principle in criminal law that a company could be vicariously liable for the criminal acts of its employees on the basis that they were conducting criminal activities for the benefit and on behalf of the company.

We in this country reached the stage long ago at which we needed to reform the way in which we look at corporate criminal liability. Richard Arkless, with his Scottish legal experience, will no doubt inform us whether the situation is the same in Scotland as it is in England, but I believe that it is uncontroversial to say that the Victorian identification principle is no longer apt to deal with international corporations. I am not picking on the company that I am about to mention because I think it has committed a criminal offence; quite the contrary—I just want to use it as an example of a large international company. British Telecommunications is a huge company that employs hundreds of thousands of people all around the globe doing various things in the telecoms world, all of them entirely legitimate and beneficial to the company, its shareholders and our national economy. Surely, however, it is a matter of common sense to say that it would be extremely difficult nowadays to fix upon an individual or small group of individuals as representing the directing mind of that company if it was suspected that an offence had been committed many miles away from the main board and the headquarters of the company in London. I repeat that I have used British Telecommunications simply as an example of a large international company with operations right around the world.

Of course it would be perfectly possible to fix upon an individual, a human being, who had committed an offence. It might well be that that individual had committed an offence for the benefit of the international corporation, but unless that person was of sufficient seniority within the hierarchy of that great big international company, it would be very difficult to fix criminal liability for that person’s offence on the corporation as well. As I have said, the United States has been getting round that problem for more than 100 years by using the principle of vicarious liability, which we are used to dealing with in this country in civil law but not in criminal law.

I believe that there are two ways in which we can approach this question, and this is the whole point of the new clauses that I and others have tabled. First, we could use the American system of vicarious liability, and there are plenty of good arguments for doing so. Secondly, we could approach the problem—as we have done in the new clauses—by using the failure to prevent regime, in which, when a company fails to prevent someone or another body associated with it from committing a specified offence, it thereby becomes liable for the criminal offence itself. We already have that provision on the statute book in section 7 of the Bribery Act 2010, and it is about to be added to the statute book through the existing provisions in this Bill relating to tax offences. That follows David Cameron’s speech to the corruption summit at Lancaster House last summer.

In pushing forward these new clauses, I want to invite Parliament, in this House and the other place, and the Government—by which I mean not only the political Government but the non-political Government: the officials who run the Government day by day and advise on matters of policy—to consider whether extending the failure to prevent regime would be an easier and better way to deal with this than turning the whole thing on its head by adopting the vicarious liability principle wholesale.

There are plenty of arguments for and against the extension of the section 7 failure to prevent bribery model. I have attended a number of meetings with criminal lawyers who are far more experienced than I am. Indeed, I see one sitting just two Benches in front of me, behind the Minister. My hon. Friend Victoria Atkins will know, as I have come to learn over the past few years since I have taken an interest in corporate crime, that a number of difficulties are created by the failure to prevent model. I will not rehearse them all now, but some of those difficulties were set out on Friday 13 January 2017 in the Ministry of Justice’s “Call for evidence” paper, which sets out five options for a failure to prevent regime.

I favour the failure to prevent model over the vicarious liability model because it is already set within our system. The new clauses would not extend the principle but merely extend the ambit of the criminal offences that could come within a failure to prevent system. The provisions will not be brought into this Bill because it is highly unlikely that the Government would accept any of them—albeit they may nod politely at them—when the Ministry of Justice’s call for evidence process is still open. However, I hope that the Government will look carefully at the shape and design of the new clauses with a view to considering vigorously whether what we have proposed as a matter of principle is worthy of greater thought.

The intention of new clause 2 is to create a corporate offence of failing to prevent economic crime, as defined by reference to the offences listed in part 2 of schedule 17 to the Crime and Courts Act 2013. Again, I will do my best to be brief. That schedule brought in the deferred prosecution agreement system for dealing with errant companies. I declare an interest, with both capital and small letters, in that not only have I been instructed by the SFO in two of the three deferred prosecution agreements that have so far taken place, but I brought the system into law when I was Solicitor General—at least I began it before I got the sack. There is a cloud in every silver lining, is there not?

Photo of Edward Garnier Edward Garnier Conservative, Harborough

Very few. I am diverting myself, because I deliberately said “a cloud in every silver lining” not “a silver lining in every cloud.”

The short point is that schedule 17 to the 2013 Act contains about 50 economic and financial criminal offences that can be dealt with through deferred prosecution agreements between either the Crown Prosecution Service or the SFO on the one hand and corporations—that is to say respondents and defendants that are not human beings—on the other. Those offences are perfectly capable of being moved across into the failure to prevent regime. As I said, section 7 of the Bribery Act 2010 makes it an offence to fail to prevent bribery, and we are about to have an offence of failing to prevent a tax offence, so why not—I ask rhetorically on this occasion—extend the failure to prevent regime across to these other offences? New clause 3 does exactly the same, save that it limits the offences to those set out in its subsection (2).

New clauses 4, 14 and 15 contain provisions suggested by Catherine McKinnell that broadly address the same issue that I am discussing. I will not press new clause 2 to a Division, because these are probing amendments designed to create a public discussion, and I hope that they will inform the Ministry of Justice’s discussion paper. I also hope that they will encourage the Home Office and the Minister, with whom I have had some useful discussions about this and other matters to do with the Bill, to consider carefully and positively the extension of the failure to prevent regime.

The wheels of Whitehall move extremely slowly. Everyone has to be consulted nowadays and nobody is allowed to have an idea of their own without it being beaten up and pushed through the roller by every other Department that thinks it has an interest or half an interest in what somebody else wants to do. People should try to produce a piece of legislation as a Law Officer. Law Officers are not supposed to have any policies; they are simply supposed to sit in a cupboard, the door of which is occasionally opened to get an answer and then shut again with them inside. Fortunately, however, I was able to bring forward deferred prosecution agreements. I hope, as a very much ex-Law Officer, that I will encourage the Government to take a positive view of the principles behind the new clauses, not only because I want that but because they represent an efficient and effective way of assisting the SFO, which is one of the most valuable and effective prosecution agencies in the western world, to do its job of ensuring that both bad people and bad companies are brought to justice. I hope to hear positive things from my hon. Friend the Minister, from whom I have never heard anything else.

Photo of Roger Mullin Roger Mullin Shadow SNP Spokesperson (Treasury) 3:15 pm, 21st February 2017

I start by thanking the Security Minister and the Government for responding to the campaign on Scottish limited partnerships in which I have been involved for about a year. We are all grateful that the Government recently announced that they will conduct a review, which means that the amendment that I have regularly been tabling to Bills over the past year is no longer necessary. However, I have found myself having to table a different new clause; I will explain why and why it troubles me greatly that I am forced to do so.

For Members who are unfamiliar with why my colleagues and I have been so concerned about these things called Scottish limited partnerships, let me point out that they do remarkable reputational damage to Scotland and probably to the UK’s financial sector. They are a front for some of the worst international crime, money laundering and hiding of criminal assets to be found. Without going into great detail of how they manage to do that, it might interest the House to know just a few of the types of crime for which they have been used.

SLPs have been at the centre of Ukrainian arms deals, kick-backs and a major Moldovan banking fraud. They have been at the heart of a major corruption scandal in Latvia involving the nephew of Uzbekistan’s President Islam Karimov. They have been used to run international mail frauds, including that of a French psychic who has been targeting vulnerable elderly people with offers of spiritual insights for significant amounts of cash. They are involved in a $1 billion copyright infringement case that is taking place in the United States. They have been involved in criminal activity such as setting up paedophile websites and raising money through such horrible activities. The list goes on and on. SLPs, and other limited partnerships to some extent, have been utilised as a way of hiding billions of pounds of criminal money. Often that money does not necessarily come here, as we find it in tax havens. The legitimation of a UK or Scottish limited partnership is used as a means of hiding the beneficiaries of such criminal activity.

For those reasons, I am particularly grateful that the Minister has been willing to speak seriously about this. He has done more than any other Minister to move the Government to respond to some of our concerns, so why did I table new clause 10? I did so because SLPs and limited partnerships are based on a 1907 Act, of which probably few people are aware, that amended the Partnership Act 1890, of which even fewer people are aware. By some chance, I sit on the Regulatory Reform Committee, which is so popular that in December it held its second meeting since I joined it in January 2016. Why did we have our second meeting in December? Because we were told that the Treasury was introducing a legislative reform order. And what was that legislative reform order for? At the same time as the Government announced a much-welcomed review of limited partnerships, the Treasury sought to create a new form of limited partnership—private fund limited partnerships —not on the Floor of the House, but through a device that is supposed to be used only for non-controversial matters of legislative reform. I can hardly think of anything more controversial than a mechanism that has been used for international criminal assets and money laundering, but I have even greater concerns.

I will have to leave the debate in about an hour to attend a meeting of the Regulatory Reform Committee to take evidence on the Treasury’s proposals—[Interruption.] I hear Members suggesting they are jealous, but I am sure that they are not. Under the proposals, there are four areas with which even SLPs have to comply that these new private fund limited partnerships will not. For example, the jurisdiction in which the general partners are registered no longer needs to be divulged. The registration numbers of the general partners no longer need to be divulged. The jurisdiction in which the limited partners are registered no longer needs to be divulged, and the registration numbers of the limited partners, if they are corporations, no longer need to be divulged.

Not only are we creating a new form of limited partnership, but we are doing so with considerably less regulation than is in place for existing limited partnerships that have been a front for international criminality. As I have such great faith in the Minister for Security, our new clause would require the Home Office to conduct a review before the Treasury introduces any legislation to create a new form of limited partnership so that we can ensure that those limited partnerships will not be subject to the type of criminal abuse and illegality that we have found with Scottish limited partnerships.

There is also a broader question to be answered. Why are this Government using a device such as a legislative reform order to try to quickly establish something in such a controversial area? Surely this is something that should be fully and properly debated on the Floor of the House. That is why, when I go to the Committee shortly, I will certainly not be agreeing that the proposal makes progress. I will do my best to require that this matter is brought back to the Floor of the House so that it can receive proper and urgent scrutiny. In the light of my arguments, I commend new clause 10 to the House.

Photo of Nigel Mills Nigel Mills Conservative, Amber Valley

It is a pleasure to speak in this debate. I rise to address the new clauses that my right hon. and learned Friend Sir Edward Garnier spoke about and new clause 6. I will begin by speaking to the new clauses tabled by my right hon. and learned Friend and the measures tabled by Catherine McKinnell, who co-chairs the all-party group on anti-corruption, on the failure to prevent economic crime.

Roger Mullin knows far more about such things than I do, and he made his argument well, but I reinforce the point that there is a strong feeling among the public, because if large companies are seen to be part of some very serious criminal activity, people are confused about why those companies and the senior people within them have not been prosecuted for those serious offences. If people look across the Atlantic, they see that America does manage to prosecute senior bankers for such offences, so they think, “We see all our banks being fined in America for being guilty of rigging various markets, yet why are no senior directors of those companies being prosecuted here? Why are those banks not being prosecuted?” That exposes the fact that our law, as the hon. Gentleman explained, has become out of date. It seems horribly unfair that the Serious Fraud Office finds it comparatively easy to prosecute very small companies and their directors, when it is clear who the controlling minds are, but that when we see far more serious offences being committed by, on behalf of, or for the benefit of much larger companies, we cannot quite find enough evidence to prosecute those companies or their very senior directors.

Photo of Mark Field Mark Field Vice-Chair, Conservative Party

In the US context, does my hon. Friend accept that there is often a political element there, despite the division of power? The prosecutor is often looking to make a name for himself by taking on a big bank—often, it has to be said, a big non-US bank. It is a particular concern—not just in the banking world but beyond—that overseas companies tend to be fair game as far as prosecutions are concerned. There is actually a rather different regime there, and it might not necessarily point to a desire and a need for a change in UK law.

Photo of Nigel Mills Nigel Mills Conservative, Amber Valley

I agree with my right hon. Friend’s point. It is interesting that the United States seems to favour prosecuting large banks and large companies that are internationally owned rather than US-owned. I am sure that the Foreign Office is trying to work out whether that is an unfair, anti-competitive move by the US. He is right that we should not try to read too much across from the US system into ours, but I was trying to make the point that people are confused about why people are prosecuted in the US but not over here.

That takes me back to the point that it seems unfair that while we can prosecute directors of small businesses, we cannot prosecute when we see much more serious offences in large businesses. That is why I support extending the model of the failure to prevent that we already have in place for bribery and that we are adding for tax evasion. We are talking about other very serious economic crimes, and it is hard to make a distinction as to why we would rank some of these offences as less important or serious such that we do not take the power to prosecute so that we prevent serious fraud, for instance.

I welcome the Government’s consultation on those issues, and it is right that it would be somewhat premature to legislate before we get the outcome of the consultation, as that might make a mockery of the idea of consulting. It is a real pity that although this Bill is the ideal vehicle in which to act, we cannot, because of the timing, make the change that want. We will be relying on another relevant Bill being introduced later in this Parliament so that we can finally make the change. As my right hon. and learned Friend the Member for Harborough said, it would be helpful if the Minister would make some encouraging noises about how seriously the Government take such matters and when we might expect to see some progress following the consultation, if the Government were minded to proceed with legislation.

I will take a bit of a leap from that topic to the subject of new clause 6—our grouping is interesting. For quite a long while, I thought that I was supporting Government policy by encouraging our overseas territories and Crown dependencies to adopt the same transparency regarding beneficial ownership that we are putting in place for the UK through the Bill. The previous Prime Minister was absolutely right to make efforts to get those territories and dependencies to agree to having transparent registers. I think that we all welcome the fact that the territories have moved a fair way in agreeing to have registers and reliable information on the beneficial owners of companies operating there. We all congratulate them on that, and look forward to that being in place; we all recognise that it will be a great step forward for various law enforcement authorities to be able to get that information relatively speedily to help prosecutions here. However, that does not go far enough, and we recognise that by saying in new clause 6 that we want a transparent register.

In our debate on the first group of amendments, the Minister strongly made the case that what attracted businesses to the UK was the rule of law and our favourable tax regime. I suspect that those are the main advantages that all our overseas territories have—people go there and establish various companies, trusts and so on because they recognise that they have a strong rule of law, which is based on our rule of law, and can get the favourable tax treatment that they want. What we are trying to say in new clause 6 is that those territories can rightly market themselves as advantageous places from which to do business, because they have a stable rule of law and the right tax treatment, but that we do not want them to market themselves as, or to be used as, ways of hiding dirty money and being a way around the rules that we are putting in place, and that other countries around the world have.

We want those territories to have the same transparency as us. When they lobby us and say, “We don’t need to do that, and if we did it before Delaware, Panama or wherever, it would move all these people elsewhere and that would make our business model inviable,” they always seem to add, “We don’t want dirty, corrupt or criminal money in our territory. We take action if we spot that.” I can never quite get the reason why they are so opposed to having a transparent register. If people are not operating in those territories but using entities in them, why are the territories so concerned about having a transparent register that would show that and allow us all to see it? It just leaves a suspicion that they might be getting a bit of money coming through that perhaps ought not to be going there. It would be greatly to the advantage of the reputation of those territories, and that of the UK as a whole, if this transparency were in place. That is why I support the efforts of Dame Margaret Hodge to draft the new clause and get it in order.

It clearly would not be right for this House to legislate for all those territories—those days passed a few decades ago—but it is clearly right for us to send out a strong message that although there are many advantages to being one of our Crown dependencies or overseas territories, those advantages come with obligations, one of which is that we want those places to be beacons of the right way of doing business and investing, and of attracting the right kind of money. We are saying, “Over the next couple of years, we want you to get these transparent registers. We don’t want to destroy your business model or national income, but we want it to be clear that you are taking clean, legitimate money. There is no reason for those who are operating like that to want to hide.” If any of the territories are acting as a conduit to get money into the UK, we will know who the beneficial owner is, because that will be published here, so one of the main advantages that they have is probably no argument against the new clause.

I feel strongly about this because we are affected when there are stories about money being hidden in these territories. I was in Tajikistan on a parliamentary visit, where a very effective toll road has been built between the two main cities. The only problem is that the revenue from the tolls end up in a British Virgin Islands company. Nobody quite knows who owns it, but let us just say that it is owned in such a way that it is unlikely that the Tajik authorities will be scrutinising it too hard. People say, “It’s you; the UK is allowing our toll money, which we pay, to be stolen and siphoned off to one of these strange territories.” That may or may not be true.

Photo of Mark Field Mark Field Vice-Chair, Conservative Party 3:30 pm, 21st February 2017

My hon. Friend makes a strong and powerful case, but does he not recognise the distinction between privacy and secrecy? No one wants an entirely secret element, but most people who indulge in banking, whether in an overseas territory or anywhere else, expect a certain amount of privacy. There is no question but that we would expect law enforcement, the police and the tax authorities to have access to these registers. My hon. Friend has been fair in making the point that ultimately a lot of these issues should be constitutional questions for the territories; these measures should not be imposed on them by the UK. On the notion that anyone should have access to that information beyond the authorities I mentioned, as they would in his Tajikistan example, surely he can understand the reluctance for that to happen, particularly in the globalised financial world in which we live, and particularly if the same does not apply elsewhere.

Photo of Nigel Mills Nigel Mills Conservative, Amber Valley

I accept that we hear the privacy argument a lot—I am sure that it is made in the UK context as well—but we have taken the decision to have transparent registers so that we know who the ultimate beneficial owners of these entities are. If I think through the scenarios in which people would have a right to privacy, I can perhaps see that there might be a good reason not to publish if there is a real issue of individual safety, but I struggle to find many other situations for which there is a good argument for people being able to establish entities or other bodies in the overseas territories without being clear about who the ultimate owner is. If someone owns a company here or is a shareholder, that has to be public. That transparency exists for any kind of entity here, so I am not sure why a different argument ought to apply for our dependencies. In weighing the right to privacy against the right to ensure that we are not letting dirty, corrupt, criminal money into the system, we have to err on the latter side of the equation.

Photo of Ben Wallace Ben Wallace Minister of State (Home Office) (Security)

My hon. Friend gave the example of a toll road in Tajikistan. Because of where we are now, with a commitment to central registers and automatic access for our law enforcement agencies to those registers in countries such as the BVI, we could investigate his example and those responsible could be tracked down. Because it is an offence under the Bill to encourage tax evasion, even in another country—I guess the people who siphon off the toll money are not paying taxes in Tajikistan—we could take action if the BVI bank had a British nexus. We have now gone a long way towards tackling that type of crime because of this Bill and where we have got to since David Cameron’s summit.

Photo of Nigel Mills Nigel Mills Conservative, Amber Valley

I am grateful to the Minister for making those points, but we should be careful that we do not focus only on one example. There might be good commercial reasons in that case and it might just be a rumour from that country. I was highlighting the question of whether there are sufficient resources in the various law enforcement bodies, either here or elsewhere, to pursue inquiries through the labyrinth of corporate structures that tend to be involved when it comes to the most complex money-laundering or corruption situations.

The advantage of transparency, and one reason why we have chosen to have it here, is that it puts the information into the public domain so that various NGOs or other bodies can do some of the initial investigation, piece together the corporate chains and links, break the corporate veils, and thereby work out where this money is coming from and where it has got to. I am a little sceptical that our law enforcement bodies will ever have the resources to start that process in the vast majority of cases. If we can get the information into the public domain and give people the chance to trace it all the way through and find the answers, that new information can be used by the law enforcement bodies. That is what we are trying to achieve, because enabling transparency will make it much harder to hide the money through a complex structure going through multiple territories and however many different trusts and entities.

It is entirely right and welcome that law enforcement bodies will have timely access to information, but that will not be enough to enable the full tackling of this scourge that we would like to see. That is why I support the effort that has been made with new clause 6 to find a way to send a very strong signal to our territories that we want transparent registers. That is the right thing to do and it is the right direction of travel for the regimes in question. We want our territories to take the lead, rather than waiting for everybody else to do something first. Let us set an example and move first, and not wait for the herd.

Photo of Caroline Flint Caroline Flint Labour, Don Valley

It is a pleasure to follow Nigel Mills. I almost feel like not making a speech and sitting down now—but I will not—because he made such excellent points about why public registers of beneficial ownership in our overseas territories are so important. I look forward to working with him on this issue and on public country-by-country reporting, as well as with the many other colleagues from both sides of the House and from eight political parties who support new clause 6. Despite some Government pressure, several Conservative MPs support the new clause, including the former International Development Secretary, Mr Mitchell, who I understand hopes to catch your eye, Madam Deputy Speaker. I also pay tribute to my right hon. Friend Dame Margaret Hodge for her hard work on this important amendment. I am really sorry—and she is too—that she cannot be here today to speak in this debate. I hope that, on this occasion, Members will not mind me dubbing new clause 6 “the Hodge amendment”.

I welcome the Government’s Criminal Finances Bill. Its aims of tackling corruption, tax evasion and terrorist financing are really important and should be commended. However, the absence of any mention of the overseas territories is remarkable. As Christian Aid has said, the No. 1 thing that the Government can do to tackle corruption, money laundering, and tax evasion is to ensure transparency in their overseas territories. Unfortunately, the secrecy that those territories trade in facilitates the corruption and the aggressive tax avoidance and tax evasion that we are all trying to stamp out.

The amendment is supported by the all-party groups on responsible tax and on anti-corruption, Christian Aid, Global Witness, Transparency International, Action Aid, Publish What You Pay, Save the Children, Oxfam and many others. We all know from numerous polls that this matter is something that the British public really care about. Two thirds of them want the Government to insist on public registers of beneficial ownership in the overseas territories.

As the hon. Member for Amber Valley mentioned, we have, with this amendment, responded to concerns raised earlier at different points of debate on this Bill. We are focusing purely on the overseas territories where the constitutional issues are more clear cut. We recognise that the overseas territories are taking steps towards private registers of beneficial ownership, so we have allowed a generous timeline for them to move from that to make these registers publicly accessible.

The overseas territories need to have these private registers in place by June of this year. This amendment would give them another two and a half years after that, which is within the lifetime of this Parliament, simply to make those private registers public. Such a move would be a major step forward.

New clause 6 is important not only for us in the UK, but for developing countries, which is why so many NGOs are supporting it. According to the UN Conference on Trade and Development, developing countries lose at least $100 billion every year as a result of tax havens. Around 8% to 15% of the world’s wealth is being held offshore in low tax jurisdictions, many of which come under our jurisdiction. A World Bank review of 213 big corruption cases found that more than 70% of them relied on secret company ownership. Company service providers registered in UK territories were second on the list in providing these companies. Oxfam has said recently that around one third of rich Africans’ wealth is currently sitting in offshore tax havens. If all that wealth was held in Africa and taxed properly, we would be able to pay for enough teachers to educate every child in Africa.

It damages our reputation, as the hon. Member for Amber Valley said, that the British Virgin Islands was the most mentioned tax haven in the Panama papers. We know that future leaks are coming, so why cannot we get ahead of the game and ensure transparency now?

In a recent debate on the Commonwealth Development Corporation Bill, the Minister of State, Department for International Development, Rory Stewart, said that the CDC would never invest through Anguilla or the British Virgin Islands. If a DFID Minister and the CDC can say that, what does it say about our responsibility today to change that reputation—British Ministers are clearly considering this—and do something to help those territories become more transparent?

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

My right hon. Friend is making an incredibly strong point. I, too, was pleased to add my name to new clause 6—I am sorry that I have not been able to join her for much of this debate. Does she agree that this is all about the consistency of approach? We talk about trying to reduce the need for aid in certain countries, and a key way in which to do that is to ensure that countries can generate their own revenues by having tax paid properly in their own jurisdictions?

Photo of Caroline Flint Caroline Flint Labour, Don Valley

I absolutely agree with my hon. Friend and I thank him for his support and for putting his name to new clause 6. Aid is important, but more important is the question of how to create self-sufficiency so that more countries that are recipients of aid can stand on their own two feet. Transparency regarding overseas territories and our own system is an important part of that, as is good governance in the countries in question. Unfortunately, some countries to which we supply aid could do a hell of a lot more to help their own citizens. This is an area where we can have a direct impact and start making significant changes right now.

Sadly, we have seen a somewhat disappointing climb-down from Ministers in recent weeks. The Government’s new line is that as public registers emerge as the global standard, they would expect the overseas territories to follow suit. I applaud the fact that the UK Government have made considerable progress on this agenda but although the UK is 15th on the financial secrecy index, when combined with our overseas territories and Crown dependencies, we are at the top of the list. We cannot hide from that. Other countries probably use that fact as an excuse for not adopting public registers. We should be aware that we are bound to the overseas territories and Crown dependencies in such a way that other countries in which we want to see progress can use it as an excuse not to take steps forward on this important matter.

David Cameron deserves praise—I do not often say that—for his leadership at the 2013 G8 summit, yet we cannot claim global leadership in this area until we get our own house in order. Why is it so important that the registers are publicly available? First, that is the only way in which people in developing countries can access the information properly. Secondly, beyond the law enforcement agencies, which will have access as a result of progress that has been made, public registers will allow NGOs and civil society to interrogate the data as they have with the Panama papers. Transparency is far more efficient than endless systems of information exchange between Governments.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth 3:45 pm, 21st February 2017

Does my right hon. Friend agree that there is a conflict here? On the one hand, different Labour and Conservative Governments have been very sensible in supporting tax systems and tax authorities in many developing countries. However, if transparency of information—on companies, how they are incorporated and so on—is not available, even if we are giving them support, they cannot get to the bottom of where their taxes are actually going.

Photo of Caroline Flint Caroline Flint Labour, Don Valley

If we do not have the tools to make the difference, we are not going to see the change that I think everyone across the House wants to see. Without full access to transparent information, investigators will not know what information to request through these agreements, and that is fundamental. That is why public access to the data is important and why David Cameron was exactly right to demand it.

When the Minister responds, I expect him to say that the overseas territories are making real progress on this agenda and that including them in the legislation is not necessary. Let us be clear about the progress that has been made since the former Prime Minister first asked the overseas territories to consider public registers of beneficial ownership back in October 2013. More than three years on, just one overseas territory, Montserrat, has committed to a public register. Hooray for Montserrat! The rest have delayed at every step. Is the Minister satisfied with that outcome, and how does he account for why progress has been so slow?

In April 2014, the then Prime Minister wrote to overseas territory leaders, asking them to consult on public registers. Not all of them even did that. In July 2015, the current Chief Secretary to the Treasury, Mr Gauke asked those overseas territories with financial centres to develop plans for central registers by November 2015. That deadline was not hit. Press reports last year said that the overseas territories were ignoring Foreign Office Ministers’ letters and meeting requests. At the most recent meeting with overseas territories’ leaders in November 2016, public registers of beneficial ownership were not even mentioned in the final communiqué. That raises the question whether we would have made as much progress as we have if the Panama papers had not been released.

Photo of Ben Wallace Ben Wallace Minister of State (Home Office) (Security)

The right hon. Lady is not being very charitable. Actually, we have achieved an awful lot since David Cameron’s summit. While the registers are not public, we will this year achieve a central register of beneficial ownership in all the overseas territories and Crown dependencies, and where they have needed help in getting there, we have given them help. The hon. Lady said that the issue of the public register had not even been raised. I can tell her that I had a meeting with the overseas territories and Crown dependencies two weeks ago, and I raised it then.

Photo of Caroline Flint Caroline Flint Labour, Don Valley

I thank the Minister for that information, because I did go and read the final communiqué from the meeting in 2016, and while there was some mention of beneficial ownership and private registers, nothing in the communiqué mentioned any journey from private to public registers—the point I made a little earlier. I do welcome the progress that has been made, but, as I will go on to suggest, unless we link the efforts being made on private registers to the endgame of public registers, I fear that we will still have some of the problems that so many people on both sides of the House and outside it have been worried about for some years.

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party, Foyle

The Minister has just told us that he did raise the issue of making the register of ownership public. If he was prepared to raise that issue two weeks ago, and if he is prepared to adopt that role of encouragement, would it not be better for him if he was supported in future by this Parliament through the very new clause we are debating?

Photo of Caroline Flint Caroline Flint Labour, Don Valley

I thank the hon. Gentleman for his intervention. Part of having this debate, and part of looking at ways to rephrase the original amendment, is about strengthening the arm of Ministers to say, “Look, we welcome the efforts on central registers, private registers and the automatic exchange of information, but we are on a journey. This is not the endgame; this is part of a journey to where we want to get to.” It would be helpful to hear from the Minister what the reaction was to the discussion of public registers at the meeting he mentioned.

The issue of central registers is important because, while there may be private registers, information may be held in different places. Private central registers are important because it helps to make things clearer, even in the private situation, if those who ask for information are able to get it. Also, if we do not have central registers, it will be even harder to make that journey to public registers if we want to do that in the future.

So how many of our overseas territories will provide central registers? Will the British Virgin Islands register be central? Not all of the overseas territories have indicated that this is the route they want to go down. That is why Ministers should be talking to them now about the journey to public registers. This is about the journey we are on. The way the private registers are put together, how they are held and how easy it is to access them for those who are going to have to ask for access are all pertinent to a future where public registers are available.

When the Minister responds to the new clause, I expect him to say how complicated this all is constitutionally. None of us who has signed the new clause wants the Orders in Council to be used. They are there as a backstop if the Government are unsuccessful in persuading the overseas territories to publish their registers. As I have said before, the new clause gives the overseas territories until the end of 2019 to act on their own.

However, the fact is that we cannot remove the possibility of using Orders in Council if we want to see more progress on the transparency agenda. The constitutional position on the overseas territories is very clear. A 2012 Government White Paper said:

“As a matter of constitutional law the UK Parliament has unlimited power to legislate for the Territories.”

There are multiple examples of the UK legislating for its overseas territories. In 2009, the UK imposed direct rule in the Turks and Caicos Islands, following allegations of corruption. In 2000, the UK Government decriminalised homosexual acts in the overseas territories using Orders in Council. In 1991, the UK Government, by Order in Council, abolished capital punishment for the crime of murder in Anguilla, the British Virgin Islands, the Cayman Islands, Montserrat, and the Turks and Caicos Islands. The exception was Bermuda, which is generally considered the most autonomous overseas territory, but the UK Government threatened to impose change, which had the desired effect of ensuring changes in domestic legislation.

On Second Reading and in Committee, the Minister was very clear that he wanted to see public registers in the overseas territories and was working to get them, so why has he scaled back on his ambitions in recent weeks? Undoubtedly, the UK Government need to work closely with our overseas territories to help them to diversify their economies away from a unique selling point of secrecy, and that will require a great deal of support.

As we look ahead to a global, post-Brexit Britain, let us seek to lead the world rather than just follow. Let us ensure that transparency is increased. Let us ensure a fair playing field for businesses and individuals across the world. Let us ensure that tax cheats, corrupt individuals, terrorists and organised criminals have nowhere to hide. For the benefit of UK taxpayers, for people in the developing world, and for the UK’s reputation and that of our overseas territories, let us not miss this opportunity. For all these reasons, I urge the House to support new clause 6.

Photo of Andrew Mitchell Andrew Mitchell Conservative, Sutton Coldfield

New clause 6 is an important probing amendment. I very much look forward to hearing what the Minister says before I decide whether to vote for it. One of the most important aspects of the Bill is tackling corruption and standing up for openness and transparency. The Government deserve enormous praise for the work that they have done—landmark work, really—not only here but in the G20, in trying to tackle corruption. That is what this new clause is about.

Conservative Members join Caroline Flint, who spoke to the new clause very eloquently, in saying how much we regret that Dame Margaret Hodge cannot be here today. Given the reason for that, I hope that she will send the right hon. Lady the House’s best wishes. I should correct her on one point. She said that Back Benchers signing this new clause might have been leant on by the Government or were signing it in spite of being leant on. I am happy to confirm to the House that no one has tried to lean on me in this respect.

I think that the Minister will have to do a little better than in his response to my hon. Friend Nigel Mills on his Tajikistan bridge example, because my hon. Friend was absolutely correct. The Administration of Tajikistan may well be colluding with the owners of the bridge, but that is not the point—the point is to enable civic society to hold the powerful to account. That is why we support transparency. That is why, when I had the privilege of being Secretary of State for International Development, we introduced the transparency initiative. We put everything we possibly could into the public domain. It is why we should all support a free press. Although it may be rumbustious and unruly from time to time, a free press is nevertheless a bastion of our liberties. Sunlight is the best disinfectant. A lot of the stuff that is the subject of this new clause leaks out anyway in the back pages of Private Eye or whatever. It is much better to put the whole thing on a formal setting and have it made public. The Government, particularly the former Prime Minister and the former Chancellor, my right hon. Friend Mr Osborne, and my right hon. Friend Sir Eric Pickles in his capacity as the anti-corruption tsar, have made huge progress on this.

Will the Minister give us the flavour of the Government’s thinking on the slightly differing treatment of the overseas territories and the Crown dependencies? It would be helpful for the House to understand that. During the run-up to the tabling of this new clause, I was visited by officials of no fewer than five of the dependent territories, supported by the Falkland Islands, although I think that that was a matter of solidarity rather than direct interest. They made some very important points, which no doubt we will hear about from my hon. Friend Sir Henry Bellingham, who chairs the all-party British Virgin Islands group. First, they say that if they have an open public register, they will suffer a competitive disadvantage—and that is true. Their answer is that if they are going to do it—they do not have an objection in principle to doing so—they think that everyone else should do it as well. They point out that the potential effect on their income, which could reduce quite substantially, might well push them back into dependency. That is a fair point. The Government’s answer should be to try at all times to narrow the footprint of the areas that can hide behind secrecy.

Certainly, it is a step forward to have a register, albeit not a public one, but we need to hear from the Government how long they intend to allow the register to remain private and whether they expect the dependent territories and the Crown dependencies to make the register public in due course. If the register remains private, although it may be accessible to law enforcement agencies—that is, obviously, right—crime fighters will be confronting corruption with one hand behind their back. Under British law, we completely accept the argument that allowing law enforcement agencies to see all the entries makes the fight against crime and corruption much easier. That is why in the UK we have a public register. I hope that the Minister will explain to the House how he thinks progress will be made towards a public register, and whether he is saying that the Crown dependencies want more time—a point that their representatives made when they came to see me—or whether he takes a different view.

Finally, the Africa Progress Panel looked recently at the extent of the siphoning off of revenue from the Democratic Republic of the Congo. It is a rich irony that in the DRC some of the poorest people in the world live on top of some of the richest real estate. The Africa Progress Panel identified nearly £1.5 billion of lost revenue—more than the country’s total health and education budgets during the period in question—in the area at which it looked. According to credible studies by the World Bank, the extent of the money stolen or concealed as unpaid tax in Africa each year dwarfs the totality of the flows of international aid and development money. The House today has the opportunity to go with the grain of the Bill, and with the grain of British leadership internationally, on transparency and openness. Unless the Minister has a very strong argument —he is the sort of Minister who may well have—the effect of our saying that we will not impose the same standards on dependent territories, with all the advantages that they gain from that status, will be to damage our credibility on these matters not only here in Britain but internationally.

Photo of Bob Neill Bob Neill Chair, Justice Committee 4:00 pm, 21st February 2017

It is a pleasure to follow my right hon. Friend Mr Mitchell, who speaks with great authority and commitment on these matters. I will come on to a practical matter on which I disagree with him, although I do not disagree with the objective that he seeks to achieve.

I endorse the thrust of the Bill, as my right hon. Friend has just done, and the observation—it is worth repeating, and it is all the more important as we look towards the world as it will be after we have left the European Union—that Britain is a world leader in transparency and effectiveness at dealing with financial crime. My right hon. and learned Friend Sir Edward Garnier was right to stress the value of the Serious Fraud Office’s work. It is extremely successful and highly regarded the world over, not least because it is operationally independent of any investigating authority. Many of us believe that it would be quite wrong to do anything to change that arrangement. The SFO works well as currently constituted, and it has an international reputation as a leader precisely because of that important independence.

I turn to new clause 6. I have much sympathy with what Caroline Flint has said, but I do not think that new clause 6 is an appropriate or proportionate way to achieve the desired objective. Let me set out why. Before I do so, I should declare an interest as the secretary of the all-party group on Gibraltar, one of the British overseas territories, and I am also a member of the all-party group on the Channel Islands, which are Crown dependencies. Crown dependencies are not covered by new clause 6, but they are covered by other new clauses.

My concern is that the way the argument is put assumes that all the overseas territories should be lumped in together, which I do not think is fair. I particularly want to address the position of Gibraltar. Its position is different, first, because of the nature of its constitution and, secondly, because unlike other overseas territories—I do not criticise or make any comment about them—it is, in effect, part of the European Union. As part of the European Union, it has had to comply, and has done so willingly, with international and EU standards in the same way as the UK.

It is important not to lump Gibraltar in with other jurisdictions where there has been controversy. I say that specifically—it is important for the House to have this on the record—because I am afraid that some politicians on the other side of the land border in Spain unscrupulously seek regularly to slander Gibraltar and its constitutional and legal arrangements, doing so wholly unfairly to advance an unjustified claim against Gibraltar. I would not want anything said in this House in any way to give comfort to people seeking to do down a loyal and effective British territory, so we need to draw such a distinction.

There is a twofold point to be made about Gibraltar. Although I accept the 2010 White Paper’s observations about what can be done, I argue that it is undesirable to contemplate legislating, certainly in Gibraltar’s case, because to do so, even by Orders in Council, would have the effect of abrogating the 2006 Gibraltar constitution. The constitution gives Gibraltar, and the democratic and elected Gibraltar Parliament, entire home rule in matters relating to its economy and domestic legislation, save only those matters reserved to be exercised by the Governor on behalf of the British Crown.

Photo of Caroline Flint Caroline Flint Labour, Don Valley

I thank the right hon. Gentleman—

Photo of Caroline Flint Caroline Flint Labour, Don Valley

I apologise to the hon. Gentleman, who should be “right honourable”. I absolutely agree that it is very welcome that Gibraltar has complied not only with the EU initiative, but with the OECD as well. I would gently ask him, however, why Gibraltar is not in favour of following the UK route of having a public register of beneficial ownership?

Photo of Bob Neill Bob Neill Chair, Justice Committee

The reason was very properly and sensibly set out by my right hon. Friend the Member for Sutton Coldfield. There is a risk of a competitive disadvantage, and as I have said, we must bear in mind the situation in which Gibraltar finds itself. I suggest it would be inappropriate for it to be at a competitive disadvantage compared with other Mediterranean jurisdictions, some of which are not well disposed towards it.

Gibraltar has done a great deal, and continuing dialogue is a sensible way forward. It would not be appropriate to legislate, particularly as undermining Gibraltar’s constitution, even if it was legally possible theoretically—I suspect it would be challenged in the courts—would be most undesirable politically, because our commitment to Gibraltar must be made particularly clear as we leave the European Union.

It is worth adding that Gibraltar has taken very considerable practical steps and has been recognised internationally for doing so. It is worth simply saying that it has transposed all the necessary EU directives into its law—perfectly willingly, without any difficulty and of its own volition—and it has also complied with all OECD initiatives in this regard. It has gone beyond that establish a central register, under the terms of the fourth anti-money laundering directive, for which the deadline is this June. It has entered into an exchange of notes to accelerate access to all UK authorities for investigative purposes. It has agreed to the EU5 proposal for the automatic exchange of beneficial ownership with participating countries, covering all EU countries, including Spain. Gibraltar has therefore been extremely willing to co-operate, even with countries that do not always behave well towards it, and that needs to be recognised. The Gibraltar Government are actively looking at the 5 July 2016 EU proposal to amend the fourth anti-money laundering directive by introducing a register, and that ought to be their decision. As I think the Minister would confirm, Her Majesty’s Government have worked very closely with Her Majesty’s Government of Gibraltar on this issue. A constructive dialogue is taking place, which is the right way to deal with it.

Finally, before I move on to Crown dependencies, it is worth saying that Gibraltar’s record of effectiveness in the exchange of information was recognised by the 2014 OECD “Phase 2” review, when it was ranked as largely compliant. That is actually a very high ranking, which ranks Gibraltar as being as good in terms of compliance as the United Kingdom, the United States and Germany. Gibraltar, therefore, is doing the job. That really needs to be stressed, so that others do not misuse the linkage, which, in Gibraltar’s case, is not borne out by the evidence: it has some 135 tax information exchange mechanisms with some 80 countries; it has already implemented the Financial Action Task Force recommendations with the United States and the United Kingdom; and it is implementing common reporting standards, the global standard, along with the UK and other countries. I therefore suggest it would be heavy-handed and inappropriate to involve Gibraltar in this approach when it is already doing so much.

I would like to touch on the Crown dependencies, as did my right hon. Friend the Member for Sutton Coldfield. Frankly, I think the constitutional position is more difficult because they are not, and never have been, subject to the United Kingdom. Their allegiance is purely to the British Crown, not the United Kingdom. The difficulty of attempting to legislate for them would be real and profound in constitutional terms. That is why the relationship falls under the Ministry of Justice and their legislation is signed off by the Privy Council. The new clauses that seek to bring them into the position here are not well-conceived legally in that regard. That is the key issue.

It is also worth observing, since the Justice Committee recently visited all three Crown dependencies as part of an inquiry, that they, too, are up to the highest standards of reporting and ensuring information is readily available to the authorities. It is worth saying in relation to Jersey, but it applies to them all, that a report by Moneyval, an established body of international repute, stated:

“Jersey’s combination of a central register of the UBO with a high level of vetting/evaluation not found elsewhere and regulation of TCSPs of a standard found in few other jurisdictions has been widely recognised by international organisations and individual jurisdictions as placing Jersey in a leading position in meeting standards of beneficial ownership transparency.”

Similar provisions, in different legislative forms, have also been made in the two other Crown dependencies. Again, it would be unfair, inappropriate and disproportionate to lump the Crown dependencies in with this issue.

We all share the same objective. We want to make sure there is maximum transparency and honest money in our system. For the reasons I have set out, however, I hope those who support the new clause, and other new clauses that have not yet been moved, will reflect and conclude that this is not the appropriate legislative vehicle to achieve that objective.

Photo of Henry Bellingham Henry Bellingham Conservative, North West Norfolk

I, too, would like to say a few brief words on new clause 6. I declare an interest: I chaired the all-party British Virgin Islands group and I am a former Minister with responsibility for the overseas territories.

I am well aware of the challenges in Africa. My right hon. Friend Mr Mitchell mentioned the Democratic Republic of the Congo. He and I will remember when Tullow Oil had its licences expropriated by the Kabila Government. It transpired that the interface company was a BVI-registered shell company in which Kabila, and part of Zuma’s family, had shares. It would have been very useful if we had been able to confirm that at the time.

I entirely accept that looking to the future and envisaging public registers across the world makes a lot of sense. What I am very worried about—this is the only point I am going to make—is that if new clause 6 is passed and territories like the BVI lose their business model, there would be a massive exodus by legal services, accountancy firms, banks and so on. They would have to then rely on tourism, and it could well be that they move back to being dependencies.

The other issue is this: would it solve the problem? No. The companies registered in the BVI, the Cayman Islands or the Turks and Caicos Islands would simply register elsewhere in countries that do not have public registers. They would go to Panama or Colombia. Indeed, I saw recently that the United States, Hong Kong and Singapore have said specifically that they will not bring in public registers until the rest of the world moves on. New clause 6 is well intentioned, but we should be very mindful of the unintended consequences.

Apart from the BVI losing its business model, those unintended consequences would include, above all else, the loss of some excellent intelligence and exchange of information arrangements. For example, the BVI has in place a beneficial ownership secured search system that enables our crime and fraud agencies to co-operate immediately and confidentially to get the information required. If these companies were registered elsewhere in the world, we would lose that crime-busting capability.

For those reasons, I hope that the Minister will reject new clause 6, well intentioned though it is, and instead work with right hon. and hon. Members concerned about this whole issue and make sure that in due course we persuade more and more countries around the world to work together and ensure a uniform approach in the future.

Photo of Nick Herbert Nick Herbert Conservative, Arundel and South Downs 4:15 pm, 21st February 2017

I rise to support new clause 6, to which I added my name in the full confidence that I was merely endorsing what I understood to be Government policy on ensuring transparency on these matters in the overseas territories, that policy having been announced by the previous Prime Minister. I find myself genuinely puzzled, therefore, about why that is apparently no longer Government policy, and I wish to raise some issues and put some questions that I hope the Minister can answer so as to reassure me and other hon. Members who have supported the new clause in good faith that there are good reasons why it should not go forward.

First, I thought that the argument about transparency had been established. My right hon. Friend Mark Field suggested that transparency would, in itself, be an undesirable thing for the overseas territories to have to undertake, but it seems to me that we might well have applied that argument to the position in the UK. Had we accepted that argument, we would not have taken action here in the UK to require transparency.

Photo of Mark Field Mark Field Vice-Chair, Conservative Party

It is fair enough that I be allowed to defend myself. I was making the point that while I favoured full transparency towards law enforcement agencies and the tax authorities, I did not support there being a full, open and public register at this stage, because I supported the idea of banking privacy.

Photo of Nick Herbert Nick Herbert Conservative, Arundel and South Downs

I am grateful to my right hon. Friend for clarifying what he said, but my point still stands, which is that we have taken action in the UK to require such publication. Why is it right in the UK but wrong in the overseas territories? That was the point I was seeking to make. Perhaps the Minister can explain.

Secondly, I understand that constitutional objections have been raised to the new clause. The argument is that it would be wrong to insist that the overseas territories take action. If so, why did we propose it in the first place? As a result, hon. Members like me now find themselves on the wrong side of the Government’s opinion, when we thought we were supporting a policy in our manifesto. If there is a constitutional objection, was it not surprising that the previous Prime Minister announced the policy of transparency for the overseas territories?

Is it even right that the British Government never impose policies on our overseas territories? In 2000, the Government, by Order in Council, decriminalised homosexuality in the overseas territories. I doubt that many Members would oppose that policy, although I suspect it was opposed in many of the overseas territories. Do hon. Members say that the British Government were wrong to do that? Murder might still be a capital offence in some of the overseas territories had the Government not insisted on the abolition of such capital crimes in 1991. The principle is established that the Government are constitutionally entitled and have in practice, where there is an overriding public policy justification, legislated in relation to the overseas territories.

The third argument advanced against this measure is that the overseas territories are doing it anyway. We are told that it is not necessary to back new clause 6 because the overseas territories are well on their way to doing the right thing, but that takes us back to the question of what it is that they are doing. If they are producing registers, that is welcome, but my question still stands: why did we think transparency was a good thing, but now no longer believe that it is a good thing? We have reset that bar. We are now saying that the overseas territories are on their way to doing the right thing, but the right thing is now defined merely as the register, and it is no longer transparency.

I think the reason this has happened has been revealed by some of my hon. Friends for entirely honourable reasons, and it is that some of these overseas territories and therefore some of my hon. Friends fear that there will be a competitive disadvantage for the overseas territories if they are required to produce a public register as the new clause suggests, in the way they will eventually be required to do, and as the Government suggested at one point that they should.

However, let me say simply that if we accept the argument that being at a competitive disadvantage is an obstacle to taking measures against tax evasion or corruption, this House would do very little on those issues. It can always be argued that we could be putting our own banking arrangements or those of other countries at risk by taking steps deemed to be in the public interest on the grounds that they could produce corruption. To turn that around, if we accept the argument on competitive disadvantage, there would be no reason why the House should not reverse all the measures taken on banking transparency and establish some sort of regime that used to pertain in countries like as Switzerland where there would be wholesale banking secrecy, because that would be good for business and it would place us at a competitive advantage by comparison with other countries. It could be argued that such a thing would be entirely acceptable.

Clearly, that would not be acceptable. We have taken the opposite view: there is a reason to demand transparency and that transparency is essential in order to tackle corruption. We are talking about measures that are necessary to protect not just the UK taxpayer but the poorest countries in the world, which are disadvantaged and penalised because people are able to siphon off funds unlawfully and immorally and shelter them in various regimes. We are apparently saying that we are willing to accept that, because if we take action against it, some other regime will perform that immoral task. That seems to me to be a wrong position for the House of Commons to take, and if it were accepted, we would not have a Bill such as this one or any transparency measures at all.

I therefore hope that the Government will reconsider their position. New clause 6 is entirely reasonable, providing a period of time for the overseas territories to comply with the transparency requirement. I, for one, will take a great deal of convincing that something that was held by the Government to be desirable and that we hold to be desirable and right in our own country is wrong for the overseas territories.

Photo of Mark Field Mark Field Vice-Chair, Conservative Party

I have spent the last 16 years as the Member for Cities of London and Westminster, and six of those years as an adviser to an international law firm with a substantial Isle of Man presence—Cains. Over the last two years, I have been the vice-chairman for international affairs for my party and have therefore had many dealings with and much knowledge of these sorts of issues.

I fervently agree with Caroline Flint and my right hon. Friend Mr Mitchell that there has been a significant journey—indeed, a massive change—with respect to the mentality around beneficial ownership, getting registers together and having a certain openness about those registers. It is a journey that is ongoing.

I think it realistic to believe—my hon. Friends the Members for Bromley and Chislehurst (Robert Neill) and for North West Norfolk (Sir Henry Bellingham) presented some powerful arguments in this regard—that there is a real risk of competitive disadvantage applying to a number of the overseas territories. As my hon. Friend the Member for Bromley and Chislehurst pointed out, and as was recognised by the right hon. Member for Don Valley, the Crown dependencies are in a different legal and constitutional position. They are not part of the United Kingdom. They have their own legitimate and democratic Governments, and I think it would be entirely wrong for the Government to railroad them, whether by means of Orders in Council or through the Bill.

My instinct is that we shall return to these issues. I support the Government: I do not think that the time is ripe for a provision such as new clause 6. It would, however, be wrong to assume that a huge amount of work has not been done quietly behind the scenes. I know from my own experience, and the experience of many other people, that in recent years there has been a sea change in the attitudes of a number of the overseas territories, and certainly in those of the Crown dependencies, many of which are ahead of the game when it comes to elements of the transparency agenda. I think there is a real risk—which was very well described by my hon. Friend the Member for North West Norfolk—that if we were to impose this provision on the overseas territories in such short order, a huge amount of business would leave those shores. Some would say, perhaps with some legitimacy, “We do not want to have this business here.”

I believe that we should continue the work of recent years, and consider global protocols that would prevent competitive disadvantage from coming into play. Surely that would be a better regime. I think it entirely wrong to perceive all our overseas territories as terrible tax havens where illicit work goes on. They have an astonishing amount of technology, which I have seen at first hand in, among others, the British Virgin Islands and the Cayman Islands, to enable them to co-operate instantaneously with law enforcement and tax authorities in the event of any suspicious transactions.

I hope that new clause 6 will not be pressed to a vote, or that the Government will win if it is. However, I also hope that the Minister will give us some idea of how he sees the future, given the ongoing conversations about a global protocol that we could all support.

Photo of Richard Arkless Richard Arkless Scottish National Party, Dumfries and Galloway

It is an honour to follow Mark Field. His homeward commutes on Thursday evenings fill me with the utmost envy. Perhaps he would enjoy my regular seven-hour journeys up and down. However, he made a very interesting speech. Indeed, the contributions from Members on both sides of the House have been very informed and enlightening.

I do not want to take up too much time, but I want to touch briefly on some of the new clauses before I hand over to the other Front Benchers. New clauses 2, 3, 14, 15 and 4 extend the principle of corporate economic crime, which has been discussed at length today. The Bill incorporates a failure to prevent such crime, but only in relation to tax evasion. As others have said, it would appear sensible, given the current climate and the public mood, to extend that provision so that the liability reaches the tops of organisations.

I have mentioned this in the House before, but, as a lawyer who had some in-house experience working for a large retail bank, I can say with the utmost certainty that sticking one’s head above the parapet and telling the bank that it is wrong is not the course of action that is most conducive to one’s career. I did not fall foul of that myself—I avoided that particular pitfall—but I think that I probably would have done so at some future time.

I think the public would demand that the concept of corporate economic crime be extended beyond tax evasion. I think they would be surprised to learn that the bank would not be held liable for LIBOR-rigging, for instance. Of course, the individuals concerned were prosecuted under different laws, but there was no corporate criminal liability for the boards of directors or for the banks themselves. I do not think the public would thank us for a corporate economic offence that extended only to tax evasion. It is tax evasion, for goodness’ sake. I think the public would expect companies such as banks and other large organisations to be held criminally liable for something as obvious as tax evasion. It is a great shame that the Bill has not grasped the nettle. The Minister may, of course, have something miraculous to say. I suspect, however, that we are not going to have an extension of corporate economic crime, which is a real shame.

Even if it were to come to pass, I would still have issues about some of the provisions in the failure to prevent model. If a bank can show that it had reasonable processes and protocols, that is an absolute defence. There is also a defence if, in the circumstances, it is deemed that the bank ought not to have any reasonable processes in place. I know from bitter first-hand experience of commencing litigation against banks that in the eleventh hour they will miraculously pull together volumes and volumes of training manuals, protocols and processes that seemed completely absent when the alleged offence was being committed to convince the judge that they have all the processes necessary. Call me a cynic, but even if the failure to prevent was extended along the lines of the incorporated new clauses, I still think there is an opportunity for a bank to—to put it in colloquial terms—wriggle out of that potential responsibility.

I do not have a great deal to add to what has been said on new clause 6, which we will support. We are pleased that the Crown dependencies are not part of new clause 6. Given that I am a Scottish National party MP, it is part of my political definition that I do not want this place to legislate on places or jurisdictions where it does not have authority. We understand that there is more of a case for the overseas territories, and we will support the amendment on that basis, but the Chair of the Select Committee on Justice, Robert Neill, was absolutely right to make the distinction between, for example, Gibraltar and the overseas territories. Throughout this process I have been puzzled about why Gibraltar is considered an overseas territory and not a Crown dependency; that is probably not within the Minister’s remit, but it has occurred to me over the last few months.

Transparency is key. If this Government’s policy is transparency and we all agree that transparency would facilitate a fairer banking and financial system, there ought to be no good reasons why those jurisdictions should not have public registers the same as we have. But I corroborate other Members’ views that that is the clear direction of travel. Whether or not it is right to legislate to compel jurisdictions over which we perhaps do not have authority is another question, but on the basis of transparency and the fact that I think it reflects the public mood, we will support new clause 6.

New clause 11 asks the Government to go through a consultation process to persuade and cajole the Crown dependencies to adopt legislation that, frankly, ought to be determined by their own Parliaments in their own jurisdictions. New clause 6 is easier to deal with as it deals with transparency and things we really want to get done, but new clause 11 seems to be a wish-wash of “Let’s have a chat with them,” and “Let’s see if we can persuade them to do anything,” when that really ought to be up to them, as it ought to be up to the Scottish Parliament, and up to the Welsh Parliament or whatever jurisdiction holds those powers. I therefore would have constitutional jurisdictional problems with new clause 11, but, again, I accept the basis behind it. However, I think we will find that as time goes on the overseas territories and Crown dependencies will be willing to have that conversation about the effectiveness of their registers.

We have tabled three new clauses in this group. The first is on Scottish limited partnerships, and I have nothing to add to what was said by my hon. Friend Roger Mullin, who is no longer in his place as he had to go to the second meeting of the rather popular Committee he mentioned. He articulated the case very well. It would be our intention to press new clause 10 to a vote this evening, but that will turn completely on what the Minister has to say when summing up—so, no pressure, and we look forward to hearing what the Minister has to say, or we will, without question, press new clause 10 to a vote.

New clause 19 gets to the heart of the issue surrounding criminal finances: what I would describe as the responsibility-shedding, banking sales-driven culture that we have in the UK. The banks are the facilitators of criminal finance; they facilitate all the wrongdoing in the financial system. The reason we had the crash in 2007-08 was that the pendulum had swung from banks being professional organisations looking after their clients’ interests to being completely sales-driven, profit-seeking organisations. I think the pendulum has swung too far, and it was the swinging of that pendulum that created the mess almost 10 years ago. Unless we deal with that culture, we will not be able to deal properly with the facilitating that big companies and banks can give to criminal finances. It is a shame that that opportunity has not been taken in the Bill.

Not long after I was elected to this place, I was dismayed to learn that the Financial Conduct Authority had withdrawn its promise to look into the banking culture. Why? That was the most obvious thing to do if we were to clean up the financial system. The public were demanding it, and I think that business ethics were demanding it, and I simply cannot understand why neither the FCA nor the Government would carry out a review into the very thing that had facilitated the crash and that could indeed facilitate another crash if we are not careful.

Our new clause 18 deals with protection for whistleblowers. Given what I understand about the culture of banks, I know that it is very difficult for a bank employee to put their head above the parapet. People who work in those organisations and who have information that law enforcement agencies could use to address and pursue criminality should have protection. Quite simply, if anyone in a bank raises their head above the parapet and tells all and sundry that the bank is committing or facilitating criminal finance acts, their career is over, not only in that bank but more generally in the financial services sector. The consequence of honesty and transparency should not be that such people lose their jobs and their livelihoods. There should be some form of protection, which is why we have tabled that new clause.

That concludes my submissions on the new clauses that we have tabled, other than to say again—ad nauseam —that we support the principles of the Bill but we do not believe that it goes far enough in certain areas. We applaud the direction of travel in which it will take the UK economy, and we hope that we will be able to go further. We hope that its provisions will not be caught up in red tape and bureaucracy, and that they will actually work so that we can get at the bad guys’ money and the rest of us who play by the rules can have a fair crack of the whip.

Photo of Rupa Huq Rupa Huq Shadow Minister (Home Office) (Crime and Prevention) 4:30 pm, 21st February 2017

This group of new clauses contains a fair few of ours, so I shall take a bit longer than I did last time. I want to speak to new clauses 6, 16 and 17 and I want to press new clause 17 to a vote.

Tax evasion was big news in 2016 following the publication of the Panama papers, which threw light on certain opaque offshore companies. Following the leaking of those papers, the overwhelming sentiment was that something needed to be done, and this Bill is that something—or rather, it introduces a set of somethings to deal with the problem. It introduces new corporate offences that will no longer be reliant on the defunct guiding mind principle, it creates unexplained wealth orders and it contains some other eye-catching stuff including the failure to prevent offences under the category of a politically exposed person. It also makes necessary amendments to our pre-existing anti-terrorist legislation. The Minister has pointed out that the Bill builds on a raft of Labour-initiated legislation, including the Proceeds of Crime Act 2002, the Bribery Act 2010 and the Terrorism Acts of 2000 and 2006. On the whole, we support the Bill, and all this stuff is not to be sniffed at.

I also want to mention the new additional monitoring, which the Minister announced on the spot a little earlier, relating to the human rights abuses mentioned in our debate on the first group of new clauses.

As the Bill has progressed, however, it has become apparent that there are chinks in the armoury for fighting money laundering. We welcome what is in it, but concerns are being expressed not only in my party but by a range of charities and non-governmental organisations such as Amnesty International, Christian Aid, Traidcraft, Transparency International, CAFOD and the ONE Campaign. They are concerned about what the Bill does not contain, and the elephant in the room is the issue of beneficial ownership and the UK’s inaction in tackling the financially secretive companies and practices that lie at the heart of the economies of many of our overseas territories and Crown dependencies. Beneficial ownership is entirely not present in the Bill. It is conspicuous by its absence. In other words, I am referring to our “tax havens.” The silence seems bizarre given that we are talking about money laundering, tax evasion and terrorist financing. Whether the Government like it or not, the matter must be addressed. The issue falls within the Bill’s remit because overseas territories are facilitating, aiding and abetting financial crime. The last time I was at the Dispatch Box I said that the UK, along with its overseas territories and Crown dependencies, is the biggest secretive financial jurisdiction in the world, so we have a special responsibility to act and to lead on this agenda, not to be slightly less bad than everyone else. The UK is facilitating some of the largest and most well-known tax havens, so we should be leading not following.

When the Government have been told that they need to “get real” not just by me in Committee but by the court of public opinion after the scandalous events of last year, they need to toughen up and get a grip on overseas territories and Crown dependencies because they facilitate illicit financial activity on a global scale, but the same excuses follow and have been trotted out today: the UK does not have the constitutional legitimacy for the overseas territories and Crown dependencies; and the territories are supposedly adhering to international standards anyway, so making them adopt public registers of beneficial ownership is not necessary. We are also told that the Government do want the territories and dependencies to adopt such registers, that they are working towards that, and that in the light of the progress made the threat of an Order in Council is unnecessary.

The Government say that the time will be right when the rest of world follows the UK’s lead and that they will set a global benchmark for financial territories. At the sixth sitting of the Bill Committee, the Minister told us that only when the time is right and only when there is an international standard for public registers of beneficial ownership will it be imperative for our overseas territories and Crown dependencies to follow suit. He actually claimed that the Crown dependencies and overseas territories with financial centres are already way ahead of “most jurisdictions”, including most G20 nations, on tax transparency. We were told that they are doing enough and that now was not the time to upset the applecart with public registers, particularly when they have agreed to adopt centralised registers. The Minister may recognise his own words from Committee in response to an amendment of mine that was pretty much identical to new clause 6:

“I certainly think that these places”— the overseas territories and Crown dependencies—

“have come 90% of the way, and we should see whether that works for us. We all have the intention”— to adopt public registers—

“and the United Kingdom is leading by example.”

In response to our threat of an Order in Council, he said:

“The new clause is a very strong measure. We should not impose our will on the overseas territories and Crown dependencies when they have come so far.”

This is the interesting bit:

“It is important to recognise that we have got where we have through cajoling, working together and peer group pressure, which…makes a real difference.”––[Official Report, Criminal Finance Public Bill Committee, 22 November 2016;
c. 199-200.]

That already seems slightly contradictory.

On the one hand, we hear that we cannot legislate for the dependencies. In fact, I remember the Minister calling me—someone whose parents suffered the worst excesses of the British empire—a neo-imperialist. It was certainly the first time that anyone has called me a neo-colonialist or whatever it was. At the same time, however, we clearly are able to do something and have the option to stop turning a blind eye and to turn inactivity into activity. The Minister himself insisted that the proposal was a “strong measure” that is less preferable to his own formula of cajoling and behind-the-scenes pressure.

Photo of Ben Wallace Ben Wallace Minister of State (Home Office) (Security)

Will the hon. Lady recognise for once that through cajoling and peer group pressure all Crown dependencies and overseas territories will by this year have central registers of beneficial ownership or similar? That is ahead of many G20 countries that do not even have central registers. We have actually come a long way and a lot further than when Labour was in government.

Photo of Rupa Huq Rupa Huq Shadow Minister (Home Office) (Crime and Prevention)

I listened carefully to what the Minister said, and he said something similar in response to my right hon. Friend Caroline Flint. I will literally eat my hat—not that I am wearing one—if that happens. The registers must be in a format that is easily convertible to public registers.

We are not there yet. As someone who conducted empirical social science research, I wonder where the 90% figure came from. I know such things are often said across the Dispatch Box—in this case, it was in a Public Bill Committee—on the hoof, in the heat of the moment, and I would not want to label the Minister as a purveyor of fake news, but does he really think that we are 90% of the way there? Even if Government Members say that we do not normally do this, there is always a time when, if needed, we can step in, and the Labour party would argue that that time is now.

Rather worryingly, the Government recently replied to the report of the International Development Committee, “Tackling corruption overseas”, by emphatically rejecting the claim that they need to do more to ensure that the overseas territories and Crown dependencies adopt centralised public registers. That is rather different from the rhetoric we are hearing today. There is evidence that, behind the scenes—I am sorry to say this—the Government have not, to use the Minister’s words, really “cajoled” the Governments of the Crown dependencies. Alternatively, perhaps they have not been cajoling those Governments hard enough, because if this Government really had, I would not have to cite the following statement by the Chief Minister of Jersey from Jersey’s Hansard. When asked by a Deputy—they are not called MPs—when the public registers of beneficial interest would become a reality, he answered:

“The U.K. Government accepts, and has accepted in conversations with us, that our approach meets the policy aims that they are trying to meet and international bodies, standard setters and reviewers, have acknowledged that our approach is a leading approach and is superior to some other approaches taken.”

It is hard to see how the Government can cajole someone to do something while simultaneously telling them that they do not need to do it—that speaks for itself.

The Government seem a bit confused about whether they do or do not want to play their part in creating a fair, ethical and transparent finance system. As for the suggestion that the UK lacks the constitutional power to legislate for the Crown dependencies, we have heard examples from both sides of the House of when such powers have been used.

Photo of Mark Field Mark Field Vice-Chair, Conservative Party 4:45 pm, 21st February 2017

The specific problem is about legislating for the overseas territories rather than the Crown dependencies. I think it is understood across the board that this does not apply to the Crown dependencies. We all recognise that significant progress has been made in recent years, so will the hon. Lady pledge at this juncture not to press new clause 6 to a Division? Let us see further progress in the months and years to come that will hopefully ensure that we move towards a global protocol that keeps everyone happy.

Photo of Rupa Huq Rupa Huq Shadow Minister (Home Office) (Crime and Prevention)

First, I would like to finish what I was trying to say. I was coming to the Crown dependencies and overseas territories, which I realise are two different things. I would also like to hear what the Minister has to say, because at earlier stages of the Bill he was conciliatory and we backed down on some things.

We are dealing with not just new clause 6 but new clause 17. We are looking at both overseas territories and Crown dependencies because, internationally, the UK will be able to lecture and persuade others to adopt transparent finance practices only if its overseas territories and Crown dependencies stop engaging in—

Photo of Rupa Huq Rupa Huq Shadow Minister (Home Office) (Crime and Prevention)

I will carry on for the moment because I want to make some progress—I am not able to get a sentence out at the moment. The hon. Gentleman will be referenced later in my speech. We worked well together under his excellent stewardship of the Justice Committee.

The previous coalition Government’s White Paper on the overseas territories has already been quoted by my right hon. Friend the Member for Don Valley. It referred to how, as a matter of constitutional law, the UK Parliament has unlimited power to legislate for the overseas territories. The phrase “unlimited power” is pretty clear. On the Crown dependencies, which Mark Field mentioned, it appears that not only the Government but the SNP, given the remarks of Richard Arkless, who was a member of the Justice Committee with me, have accepted, or been cowed into believing, that the Crown dependencies are somehow untouchable.

I want to quote from a report by Robert Neill. The Justice Committee’s 2010 report on the Crown dependencies stated:

“the restrictive formulation of the power of the UK Government to intervene in insular affairs on the ground of good government is accepted by both the UK and the Crown Dependency governments”.

A list of examples was given, but the hon. Gentleman probably knows it better than I did, because he wrote it.

Photo of Bob Neill Bob Neill Chair, Justice Committee

It would not be unreasonable for the hon. Lady to note that I was not Chair of the Justice Committee at that time. Can she give me any example of a time when the United Kingdom has specifically legislated for a Crown dependency, as opposed to acting under the prerogative power through the lieutenant governors, which indeed itself has not been done in many years? The overseas territories are not the same as the Crown dependencies legally. I honestly urge her to reflect on that, because she is genuinely on shaky legal ground.

Photo of Rupa Huq Rupa Huq Shadow Minister (Home Office) (Crime and Prevention)

As I have said, there seems to be a lack of will. The hon. Gentleman talked at length about Gibraltar—[Interruption.] If he will listen to what I say back to him, that might be useful. There is a lack of will to act. People have been lobbying all of us, probably including him. The fact that we have the power to make a change is more significant than examples—if this is needed, it can be done. New clause 16 does not coerce anyone to do anything, but it sets out steps that would facilitate matters.

Photo of Richard Arkless Richard Arkless Scottish National Party, Dumfries and Galloway

Given the principle of parliamentary sovereignty, it is of course open to this place to legislate on Scotland. Is the hon. Lady suggesting that she would legislate on matters that are devolved to the Scottish Parliament?

Photo of Rupa Huq Rupa Huq Shadow Minister (Home Office) (Crime and Prevention)

No, I did not say that. If the hon. Gentleman had listened, he would know that I did not mention Scotland at all.

Several hon. Members:

rose—

Photo of Rupa Huq Rupa Huq Shadow Minister (Home Office) (Crime and Prevention)

I would like to make progress. I will not take any more interventions, because I am still at the very beginning of my speech and the Whips are telling me that they want me to conclude.

The question is not, “Can we do this?” but, “Is it right to do this?” It will come as no surprise that I think that the answer is yes. The Government’s White Paper made it clear that when the law is not working, or there has been a breakdown in order—corruption was mentioned —the UK has the power to act.

Photo of Rupa Huq Rupa Huq Shadow Minister (Home Office) (Crime and Prevention)

I have said that I am not giving way any more.

Photo of Rupa Huq Rupa Huq Shadow Minister (Home Office) (Crime and Prevention)

It would help if Members were listening to me. How many times have I given way? Numerous times—more than anyone else in our proceedings, which have been going on for many hours—so I would like to make some progress.

Even if, as has been mentioned, it is the British Virgin Islands and the Cayman Islands that are prolific offenders—I think that the British Virgin Islands come up the greatest number of times in the Panama papers—it does not completely absolve the Crown dependencies. Several Members have tried to untangle the difference between Crown dependencies and overseas territories. The Isle of Man managed to rack up 8,000 entries in the Panama papers and is being singled out by the Canadian revenue authorities for investigation. Let us not forget that in October 2015, HMRC defeated the Isle of Man on a tax avoidance scheme that took place from 2001 to 2008 and left a hole in our finances of £200 million. That is a not insignificant sum, and it is money going from our Exchequer. How many hospitals and schools could we have built for that? I do not know the precise answer; it is a rhetorical question. In 2007, the tax havens of Guernsey and Jersey were investigated by our Serious Fraud Office in one of the biggest corruption investigations in African history. These things often join up; the money moves around.

The point is clear: the very structure of the laws pertaining to finance in these places, coupled with their deliberate adoption of complex and opaque institutional structures, is crying out for reform. Globally, these dependencies are at the heart of undermining the rule of law—something that we hold dear—in other countries due to the corruption that they facilitate. Their laws therefore clearly need to be changed, and there is undeniable scope for us to change them. As my right hon. Friend Dame Margaret Hodge, who is sadly absent, has said, there is a moral case for us to act, even if there might not be an identical incident in which we have so acted. My right hon. Friend the Member for Don Valley referred to polling that shows enormous public support for such an approach—some 80% of people in a recent poll.

The Bill Committee was told that public registers are not an international norm and that our Crown dependencies and overseas territories are somehow exemplars because they have adopted closed registers of beneficial ownership. Lamentably, that might look like a bit of an alternative fact—dare I say that. I have here a piece of paper—in fact, it is three sheets stapled together—with a list of 46 jurisdictions. Those countries are all dependencies of G20 nation states, so they are in a similar constitutional position to our overseas territories and Crown dependencies, and they all have centralised registers of beneficial ownership. Shall I read out all 46, or does the House want just a smattering? They are: the Ashmore and Cartier Islands, Christmas Island, the Cocos Keeling Islands, the Coral Sea Islands

Photo of Eleanor Laing Eleanor Laing First Deputy Chairman of Ways and Means

Order. The hon. Lady is not going to read out all 46, is she? She has made her point most eloquently, so there is no need to list all 46. We do not read long lists in this Chamber, and the House has got the point she is making.

Photo of Rupa Huq Rupa Huq Shadow Minister (Home Office) (Crime and Prevention)

I am most grateful for that clarification, Madam Deputy Speaker. Some of those on the list are the DOM-TOMs—the départements d’outre-mer and the territoires d’outre-mer—so there is a long list, including Guadeloupe and Martinique, but I shall move on.

It is a bit of a nonsense for the Conservative party to claim that the overseas territories and Crown dependencies are leading the world in financial transparency because of the creation of central registers if 46 other dependencies are doing that already. Not only have some been incredibly slow to catch up with the aforementioned countries, but some of our Crown dependencies and overseas territories are among the worst offenders and have not adopted centralised registers, let alone made them public. More accurately, they have adopted platforms.

The Government ask us to believe that the British Virgin Islands or the Cayman Islands will be able to police their own financial businesses by relying on those businesses, which facilitate crime. It is asking them to mark their own homework and to be judge and jury. Call me a cynic, but I doubt that that is a workable solution. Do we really believe that anonymous companies in the British Virgin Islands—which, for example, allowed the former wife of a Taiwanese President to illicitly purchase $1.6 million of property in Manhattan—would be capable of policing themselves?

There are several other examples. Would Alcoa, the world’s third largest producer of aluminium, be capable of policing itself when it has used an anonymous company in the British Virgin Islands to transfer millions of dollars in bribes to Bahraini officials? Would the anonymous British Virgin Islands-based company used by Teodorin Obiang, the son of the President of Equatorial Guinea, really be capable of policing itself when it allowed him to squirrel away $38 million of state money to buy a private jet? It was thanks to the US Justice Department that he was caught. The Government’s protestation that we are working with the territories and dependencies, and that we are 90% of the way there, is at best highly questionable.

Photo of Rupa Huq Rupa Huq Shadow Minister (Home Office) (Crime and Prevention)

No, there is more.

The main point I want to make is that our Government should be at the forefront of the push to cast off the cloak of secrecy under which terrorists have previously been able to fund their attacks and gangsters have stored their ill-gotten gains. We should not be dragging our feet on this. Some of these jurisdictions, including the British Virgin Islands and the Cayman Islands, have hidden behind the fig leaf of the consultation.

I shall dispense with the rest of what I was going to say, but we wish to press new clause 17 to a Division—[Interruption.] If anyone had listened to me, they would know that I was largely talking about the Crown dependencies.

In conclusion, we could have gone all the way and become the gold standard for other Governments to follow. We could also have dealt with the public disquiet over perceived levels of tax evasion, which the former Prime Minister, to his credit, wanted to tackle. This massive oversight undermines not only the claims made by the former Member for Witney, but citizens in some of the poorest developing countries of the world, which are at the end of these complex supply chains of criminality. Those citizens are the main losers in all of this.

The Home Office’s press release that accompanied the publication of the Bill said that the new offences were aimed at

“sending out a clear message that anyone doing business in and with the UK must have the highest possible compliance standards.”

Although we agree with large parts of the Bill, it does, none the less, fall short. New clause 17, which Her Majesty’s Loyal Opposition wish to press to a Division, would go some way towards addressing a number of these issues.

Photo of Ben Wallace Ben Wallace Minister of State (Home Office) (Security) 5:00 pm, 21st February 2017

It is a pleasure to follow Dr Huq. I will take this opportunity to respond to the many points that have been raised in this debate. It is a regret that Dame Margaret Hodge is not in her place, but it is for fully understandable reasons. I pay tribute to her for the work she has done in campaigning for tax transparency, and I send her my best wishes at this time.

Let me now turn to the main thrust of this debate. What has dominated our proceedings is this question of whether our British overseas territories and Crown dependencies should have public registers of beneficial ownership. I am a supporter of transparency. I was the first Member of this House to publish my expenses—long before that was required. It was not a popular thing to do at the time, but I am a great believer in transparency. I learned that from my time in the Scottish Parliament, because I am also a great believer in respecting devolution and respecting constitutional arrangements.

Let me say to my right hon. Friend Nick Herbert that we have not changed our ambition. Our ambition is still to have public registers of beneficial ownership in the overseas territories and Crown dependencies. I repeated that to the leaders of those territories and dependencies just two weeks ago, but how we get there is where there are differences. We must recognise that, ever since David Cameron held that anti-corruption summit, we have come a long way—I am not sure whether it is 90%, 89%, or 85%. I do not know the percentage—I did not do the same course as the hon. Member for Ealing Central and Acton. None the less, we now have a commitment to keep either central registers or linked registers. My hon. Friend Nigel Mills needs to recognise that it is perfectly possible to link registers and to interrogate them centrally. We aim to fulfil that commitment by June 2017.

We are also committed to allowing our law enforcement agencies to have automatic access to those registers. We already do that in some of those territories, with requests coming back within hours. As a Home Office Minister, I am charged with ensuring that we see off organised crime, tackle corruption, and deal with money laundering. I believe that our arrangements do allow us to deal with potential crime and tax evasion. If I did not think that, I would not be here making the point that now is not the time to impose that on our overseas territories and Crown dependencies. I have faith that, at the moment, the capabilities of our law enforcement agencies enable us to interrogate those systems and to follow up and prosecute those people who encourage tax evasion not only in this country, but in other countries. This Bill gives us that extra territorial reach that many other countries do not have.

Photo of Ian Paisley Jnr Ian Paisley Jnr Shadow DUP Spokesperson (Energy and Climate Change), Shadow DUP Spokesperson (Communities and Local Government), Shadow DUP Spokesperson (Culture, Media and Sport)

Can the Minister give the House a categorical assurance that none of the money made from ill-gotten gains of criminal activity, through fuel fraud in Northern Ireland and the Republic of Ireland, is illicitly put into those countries?

Photo of Ben Wallace Ben Wallace Minister of State (Home Office) (Security)

We find criminals using banking systems all over the world to hide their money, whether that is in Northern Ireland, London, the Republic of Ireland, Crown dependencies or elsewhere. Such places have agreed to work with our law enforcement agencies, and we will allow their law enforcement agencies access to our databases in order to follow up such activity.

The hon. Member for Ealing Central and Acton underplays the success of the United Kingdom’s leadership role. Without imposing on democratically elected Governments in those countries and without imposing our will in some sort of post-colonial way, we have achieved linked registers and access to registers for our law enforcement agencies across many Crown dependencies and overseas territories. We might compare ourselves with our nearest neighbours, the major economies—with all due respect, I do not mean Christmas Island—such as Germany and other European neighbours such as Spain. We are the ones with a public register and we, not them, are the ones ready to have a unified central register. Perhaps we should start by looking at the major economies, rather than sailing out on a gunboat to impose our will on overseas territories that have done an awful lot so far in getting to a position in which I am confident that our law enforcement agencies can bring people to justice. That is the fundamental point of this principle. We have not abandoned our ambition. We have decided that the way to do it is not to impose our will on overseas territories.

The Labour party’s new clause 17 is probably constitutionally bankrupt, if I may use that phrase. It would certainly cause all sorts of problems, although I am not sure that we can actually impose our will on a Crown dependency like that. All the good words of the hon. Member for Ealing Central and Acton seem to have disappeared because the new clause leaves out overseas territories and would apply only to Crown dependencies. If Labour Members think that such a provision is right for Crown dependencies, why is it not right for overseas territories? I do not understand why they have left that out, although I suspect it is because, when it really comes to it, Labour Members do not know what they are talking about. If the Labour party wanted to be successful with this, it might have done it in its 13 years in Government.

I respect devolution and constitutional arrangements, and it is important to do that at this stage. Crucially, if we do this in partnership, we will get there. When we see people being prosecuted and the system of information exchange between law enforcement agencies working, we will have arrived at a successful point. I am confident that we will get there. I do not shy away from telling the overseas territories and Crown dependencies that our ambition is for transparency but, first and foremost, our ambition is for a central register that is easily interrogated by our law enforcement agencies.

Photo of Nick Herbert Nick Herbert Conservative, Arundel and South Downs

I welcome my hon. Friend’s restatement that the Government remain committed to transparency. Will he give some kind of indication of a timetable, once his policy of registers is fully in place, by which he expects the overseas territories to be able to move to full transparency?

Photo of Ben Wallace Ben Wallace Minister of State (Home Office) (Security)

The first commitment is for the central register to be in place by June this year. Where overseas territories have trouble fulfilling that—for example, they just do not have the capacity to do it—we have offered help to allow them to do so. Hopefully that means that we will keep on target. As for setting a date for the public register, we first have to complete our own, and get it up and running. Once we know what challenges are involved in doing that and seeing how it works, we can have a grown-up discussion with our G20 partners about when they will do that. We should not just focus on the overseas territories and Crown dependencies. Major economies, including our own, are guilty of allowing people to hide illicit funds, which is why we introduced this Bill. I suspect we will find many funds laundered not in those small overseas territories, but in some major economies in the G20. That is important.

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party, Foyle

A number of the Minister’s hon. Friends used the argument of competitive disadvantage when speaking against new clause 6. That is not an argument that the Minister has addressed at the Dispatch Box. Will he assure us that he is not saying that, when the time might be right in the future, and as long as any of the territories cite concerns about competitive disadvantage, the British Government would just back off?

Photo of Ben Wallace Ben Wallace Minister of State (Home Office) (Security)

We do have to recognise that there is a difference between secrecy and privacy; we have to respect that and to understand when privacy is an advantage and when it is being used secretly, to create a disadvantage or to avoid detection. So the difference between secrecy and privacy is not as straightforward as it would seem. In our lives, we all deserve some element of privacy. Shareholdings in some very major private companies, for example, are not listed—they have to be declared—and that has been established for many years.

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party, Foyle

Just to clarify the point, some of the Minister’s hon. Friends said that their grounds for not supporting new clause 6 were that these territories would be put at a competitive disadvantage if they had to move to public registers. Is that the Government’s case, or is that argument being made by his hon. Friends, but not from the Dispatch Box?

Photo of Ben Wallace Ben Wallace Minister of State (Home Office) (Security)

The United Kingdom Government do not think they are at a competitive disadvantage, and that is why we are progressing with a public register ourselves. However, we will lead by example and by peer-group pressure; we will not lead by imposition. That is fundamentally the difference between the Government and some Members of the House. That is how we are going to get there.

Photo of Ben Wallace Ben Wallace Minister of State (Home Office) (Security)

No, I have to press on. I am sorry.

The damage caused by economic crime perpetrated on behalf, or in the name, of companies to individuals, businesses, the wider economy and the reputation of the United Kingdom as a place to do business is a very serious matter, and it comes within the area of corporate failure to prevent economic crime.

The Government have already taken action in respect of bribery committed in pursuit of corporate business objectives, and the Bill will introduce similar offences in relation to tax evasion. Both sets of offences followed lengthy public consultations, as is appropriate for such matters, which involve complex legal and policy issues.

That is why I confirmed in Committee that the Government would be launching a public call for evidence on corporate criminal liability for economic crime. That call for evidence was published on 13 January and is open until 24 March. It will form part of a potentially two-part consultation process. It openly examines evidence for and against the case for reform, and seeks views on a number of possible options, such as the “failure to prevent” model. Should the responses we receive justify changes to the law, the Government would then consult on a firm proposal. It would be wrong to rush into legislation in this area, but I hope hon. Members will recognise that the Government are looking closely at this issue, and I encourage them to contribute to the consultation process.

Let me move on to the issue of limited partnerships, which was raised by Roger Mullin and more generally by members of the Scottish National party. I am grateful for the work they have done alongside the Glasgow Herald in highlighting the abuse of the Scottish limited partnership by criminals internationally and domestically, and it is important that we address that issue. We take these allegations very seriously—only recently, the hon. Gentleman highlighted another offence to me—and that is why a call for evidence was issued on 16 January by the Department for Business, Energy and Industrial Strategy on the need for further action.

The “Review of limited partnership law” is an exciting document—I am afraid the graphics man was clearly not in on the day it was created—but I urge members of the Scottish National party to respond to it, and I know they have already done so. They will be interested in one of the questions, which asks:

“What could the UK government do to reduce the potential of Limited Partnerships registered in Scotland being used as an enabler of criminal activity, whilst retaining some or all of the aspects of those Scottish Limited Partnership structures which are beneficial?”

I know the Scottish National party will respond to that.

Photo of Richard Arkless Richard Arkless Scottish National Party, Dumfries and Galloway

What can the Minister tell us about the mystery Committee that is sitting for one hour today and proposing a new type of limited partnership that will, in theory, step into the place of SLPs? That is the sticking issue for me. Is there anything he can say on that point?

Photo of Ben Wallace Ben Wallace Minister of State (Home Office) (Security)

Well, apart from asking the hon. Member for Kirkcaldy and Cowdenbeath how he has enjoyed his hour on the Committee, which he has gone off to attend, I think we should look at this in chronological order. The review is taking place now. Whatever it produces will, of course, be responded to. If it is responded to in legislation, that will succeed whatever is being discussed in that Committee now.

I come now to the issue of tax evasion and the Opposition’s new clause 11, which returns us to the question of corporate transparency in overseas territories. I should stress that the new offences in part 3 of the Bill already apply in those jurisdictions. First, the domestic tax evasion offence applies to any entity based anywhere in the world that fails to prevent a person acting for it, or on its behalf, from criminally facilitating the evasion of UK taxes. The overseas offence applies to any entity that carries out at least part of their business in the United Kingdom. The only circumstances in which a company is outside of the scope of these offences is where there is no connection to the UK: no UK tax loss, no criminal facilitation from within the UK, and no corporation carrying out any business. In those situations, it is for the country suffering the tax loss, and not for the UK, to respond. The corporate offences are by no means a one-size-fits-all solution for every country. However, I am pleased to report that Government officials have spoken to revenue authorities, regulators and businesses from across the world about the new corporate offences, and there has been significant interest in them.

New clause 13 would require the Secretary of State to produce sentencing guidelines that would stipulate a maximum financial penalty no greater than the tax evaded. As hon. Members may be aware, it is the role of Sentencing Council, under the presidency of the Lord Chief Justice, to produce sentencing guidelines. The council has already published a definitive guide of fraud, bribery, and money laundering offences, including a section on corporate offenders. Therefore, while I agree that there is merit in a sentencing guideline for the new corporate offences, it would not be for the Government to produce it. This could undermine the independence of the judiciary.

I have sought to cover as many of the concerns that have been raised as possible. I am grateful to the House for its patience and for enabling discussion of so many significant topics. I trust that right hon. and hon. Members are suitably reassured that we have reflected on all the amendments in this group and will agree that legislation is not necessary or appropriate for the reasons I have set out. I remain open to discussing these matters or any others with colleagues, and I am sure that we will return to some of them in the House of Lords. At this stage, I hope that I have addressed hon. Members’ concerns and invite them not to press their amendments.

Photo of Caroline Flint Caroline Flint Labour, Don Valley

I will not press new clause 6 to a vote. I do not believe that the Minister has really answered the points that have been made by hon. Members across the House. I am sure that this matter will be picked up in the other place, and I reserve the right to pick it up once again with my right hon. Friend Dame Margaret Hodge when it returns to this place.

Photo of Edward Garnier Edward Garnier Conservative, Harborough

My new clause 2 was drafted and tabled before Christmas. Since then, I have had a number of meetings with my hon. Friend the Minister and we have also seen the Ministry of Justice’s call for evidence in relation to corporate criminal liability. In the light of what he has said this afternoon, I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 17