I beg to move,
That this House
recognises the devastating impact economic crime has on individuals, businesses, families and society;
considers it unacceptable that the cost of money laundering alone exceeds £100 billion a year according to the National Crime Agency;
is concerned that in the wake of the Pandora Papers leak there is inadequate transparency, regulation and resources in place to effectively tackle this severe problem;
and calls on the Government to bring forward legislative proposals to tackle economic crime as a matter of priority, integral to which are provisions to introduce a criminal offence for failure to prevent economic crime, reform Companies House and introduce a beneficial ownership register for the overseas owners of UK property.
I am grateful to the Backbench Business Committee for selecting the motion for debate. I am also grateful to all those who supported the application, and I particularly thank Kevin Hollinrake for working with me on it. The reason why we have secured such wide support for our debate is the growing recognition, concern and understanding of the enormous problems we are facing as a result of economic crime.
The Government produced an economic crime plan in 2019, but as the period it covers comes to an end next year, I think we should all reflect that that plan has not resulted in a successful crackdown on economic crime, but instead we have witnessed frightening and real growth in such crime. Far from bearing down on such wrongdoing, we have seen it mushroom across our economy, infecting our society, our security and our public sphere.
I put on record my tribute to my right hon. Friend for her work yesterday on the Finance (No. 2) Bill, dealing not just with the bigger subject, but with the detail of the Bill’s clauses. Does she agree with that, although it is our economy, in a globalised environment we should worry about economies abroad, including the Russian influence? I refer specifically to the recommendations of the Russia report, which deal with a number of financial instruments.
One of my growing concerns is that economic crime and the laundering of money into the country—particularly, one suspects, of a lot of Russian money that has probably been stolen from the Russian people—is having an influence right through society, and I will reflect on that later in my contribution.
First, I congratulate the right hon. Lady. I just want to say that this money is not all from Russia; it is closer to home. I make this point because it is important to do so. I am sure that the right hon. Lady is aware that Northern Ireland has paramilitary groups that have become experts in money laundering. Does she not agree that information sharing UK-wide—it is no different here or in Scotland, Northern Ireland and Wales—is imperative if we are to stop those terrorist, criminal, evil thugs living the high life, which they do while the communities that they live in live in fear?
I completely concur with the sentiments expressed so powerfully by the hon. Member.
We are now, sadly, one of the jurisdictions of choice for money launderers, criminals and kleptocrats. We do not just tolerate, but—unwittingly, perhaps—facilitate economic crime. Our Moody’s credit rating has fallen a notch, specifically because of the
“weakening in the UK’s institutions and governance”.
Fraud, an important element in economic crime, now affects one in 15 adults, and it too often destroys the lives of innocent victims who are just normal, trusting citizens.
I have a constituent who had a dormant company that was taken over by criminals and used to defraud others, but Companies House says that it cannot do anything about it. LinkedIn is colluding, with a whole lot of false company information, which helps to undermine the situation. Does my right hon. Friend agree that Companies House should be able to do more, and that it is damaging its own reputation?
One of the specific areas on which we make a recommendation in our motion before the House is the reform of Companies House. The situation of my hon. Friend’s constituent is just the sort of situation in which Companies House ought to be able at least to verify and possibly to pursue the wrongdoers.
Economic crime is often the facilitator of other crimes—from people trafficking to drug smuggling, and from terrorism to corruption. It does not just enable other crimes; it impacts on our national security. Dirty Russian money laundered into the UK is spreading like a spider’s web through our society. It is used to buy influence and to control our football clubs, our vital infrastructure and, more recently, our politicians and our politics. Today, we want not just to lay out the problem, but to put forward three pragmatic reforms that the Government could adopt—not tomorrow, but today. These are three oven-ready policies that together could have a significant impact in both preventing economic crime and punishing its wicked perpetrators.
We have become the destination of choice for a number of reasons. First, we have a very weak regulatory regime after decades of deregulation. Introducing reforms to our corporate liability regime would start to address the inadequacies in the regulations we have inherited. Even where we do have clear laws—this is my second point—our enforcement agencies are both inadequately resourced and risk averse in their policing of our system. Lack of money and fear of failure drive their decisions, and unlike America, we let criminals get away with it. Reform of Companies House would constitute the start of creating a tougher enforcement regime. Thirdly, we still allow a lack of transparency to flourish, giving wonderful cover to ne’er-do-wells and making it difficult to follow the money. If we cannot follow the money, dirty money triumphs.
I congratulate the right hon. Lady and my hon. Friend Kevin Hollinrake on arranging this very important and very timely debate. I am only sorry that I cannot stay for the whole thing because I am due to speak elsewhere.
I want to pick up on the point the right hon. Lady was just making, and ask whether she would agree that it is not enough to improve the three things she is talking about to come up to some sort of international standard. Because of the existence of the City of London—a huge economic asset in Britain’s economy—we actually have to be better than almost anybody else, given not just the benefits but the risks that that creates.
I completely agree with the important contribution that our anti-corruption tsar has made in the House today. I think it is a really short-term view to believe that our British economy can flourish on the back of dirty money. We will flourish if we clean up the act in the City of London and it again becomes a trusted institution.
I just wonder how many Panama papers, Paradise papers, Pandora papers, FinCEN—Financial Crimes Enforcement Network—leaks, laundromat leaks, Falciani leaks and Luxembourg leaks we need for our Government to wake up, stop mouthing warm words, which they do a lot, and start acting with tough measures to bear down on this dangerous crime and this terrible trend.
A proposal to toughen up the regulatory framework was included in the 2015 Conservative party manifesto. The party pledged—I hope I am quoting accurately—to create a criminal offence where companies
“fail to put in place measures” to prevent economic crime. The Government launched a consultation that lasted four years, and then parked the issue in the long grass by referring it to the Law Commission. I understand that the Law Commission is about to report, but we need and want corporate liability reform, and we want it now.
It is a delight to work with the right hon. Lady on this particular issue. As part of the Law Commission consultation, there is talk that, instead of there being a criminal liability for failing to prevent economic crime within a corporation, it may be downgraded to a regulatory offence. Does she agree that that would not create the deterrent we need for these corporations, such as NatWest, which is facing a fine of £340 million for not properly monitoring money laundering in this country in a Bradford jewellery company? Does she agree that there must be a serious sanction, such as a criminal offence, where individuals could be locked up for not doing the right thing in these areas?
Again, I am pleased to see such unity across the Chamber today. I completely agree that if it is not made a criminal offence and there is no direct liability on the individuals concerned, it simply becomes a business cost and will not change the behaviour or conduct of those big corporations. I concur with the hon. Gentleman.
I was going to use the example, although I probably do not need to, of the Serious Fraud Office’s failure to successfully prosecute the Barclays bank case. As many observed at the time, that case showed that under our existing law the bank could not be held accountable for the actions of its employees, and the chief executive could not be held to account for the actions of the bank. Nobody could be held to account. These reforms would change that by introducing a vicarious liability condition and bringing in a “failure to prevent” clause. The Americans do it; they have much tougher laws that hit the corporations with criminal, civil and regulatory penalties, and they secure many more resources.
Our second ask is about starting the work to strengthen our enforcement by reforming Companies House. Creating a public register of beneficial ownership was an important move when David Cameron was our Prime Minister, and a huge step forward. In one year, the register was accessed more than 2 billion times, but the data, as we all know, is often inaccurate or incomplete. Global Witness did an analysis in 2018 that showed that 10,000 companies declare a foreign company—mostly linked to a secrecy jurisdiction—as the owner of the company, 335,000 companies had no beneficial owner and 9,000 companies were controlled by beneficial owners who each controlled more than 100 companies, so they were nominee beneficial owners.
It takes £12 to set up a company—it is ridiculous. That is why so many UK companies keep appearing in all the leaks we get of wrongdoing. Our lax enforcement leads to tragedies worldwide, and we need to do something about that. That is why these reforms could be funded by raising the fee. If we quadrupled the fee and charged 50 quid to start a company, we would raise a huge amount of money that we could put into reforming Companies House and ensuring that it had unique identifiers for the beneficial owners, and powers to investigate and interrogate.
My third proposal, which I will deal with very quickly, concerns the introduction of a property register. Buying a property through a shell company registered in the British Virgin Islands is the easiest way to launder money into the UK. There are very few good reasons for maintaining anonymity, but plenty of bad ones: not just money laundering, but avoiding stamp duty, inheritance tax and other taxes.
It is difficult to put a number on that, although many people have tried, but I will share one fact with the House. All London boroughs have had an increase in their electoral register over recent times; the only borough that has not is the Royal Borough of Kensington and Chelsea, the reason being that such a large number of properties there are bought through shell companies by foreign owners that there are fewer residents there today than there were 10 years ago.
Does my right hon. Friend agree that that distortion of the London housing market is to the detriment of all our constituents? I note there are other hon. Members present who represent London seats. Across the UK, but particularly in London, where we see such extreme homelessness and overcrowding of children, that really needs to be addressed.
Absolutely. That is another really important point; hiking up the prices at the top of the market obviously has an impact right through the housing market here in London. Some terrible instances have been uncovered in the various leaks. The Crown Estate, for example, sold 120 of its properties to companies registered in 14 different tax jurisdictions, demonstrating again the way in which the system is abused. Those are people such as Vladimir Chernukhin, who owns a residence in Regent’s Park through a company registered in the British Virgin Islands, or James Ibori, a Nigerian governor who was prosecuted here for fraud and money laundering, and who had property in Hampstead and Dorset. In the recent Pandora Papers, the Crown Estate bought a £67 million property from the Aliyev family, who are the well-documented abusers of their rule in Azerbaijan.
In 2015 we were promised a register of beneficial ownership for properties owned abroad. There was a consultation in 2016 and a draft Bill in 2018. It was mentioned in the Queen’s Speech in 2019, and again in the G7 meeting in Cornwall in 2021, but we still have not got a Bill, although it is my understanding that such a Bill has been written and is literally gathering dust on the shelf. The problem is enormous, and if we fail to act robustly it will overwhelm us. Economic crime is costing us our international reputation as a trusted and respected jurisdiction. If that trust goes, our ability to develop and grow our economy will be fatally curtailed.
Throughout this, when we talk to the enforcement agencies, they all minimise their expenditure on economic crime and have other priorities. That statistic is very frightening, and I am grateful to my right hon. Friend for bringing it to the attention of the House. I think it can be reflected in all four or five agencies that do a similar job.
We will never achieve sustainable prosperity on the back of dirty money. With the economic crime plan drawing to a close, this is the perfect opportunity for the Government to put the proposals in our motion before the House, so that we can debate and enact them, and embark on that long and difficult journey of ridding this country of the cancer that is growing in our economy and society. Across the House we will then all feel that we are not just debating, but that we are acting to expel economic crime from the Britain we all love and seek to serve.
It is a pleasure to speak in this important debate, and to follow Dame Margaret Hodge, who is such a champion in this area. I add my thanks to the Backbench Business Committee for granting this important and timely debate. This debate is urgent, particularly since, as the right hon. Lady said, the Government promised and intend to bring forward legislation in the form of an economic crime Bill. All we are asking for are things the Government have promised to do in the past, so we are pretty much on the same page. We must ensure that the Bill is brought forward quickly, because it is so important, and that it is brought forward in the same form. I am disappointed that there are not as many speakers as I might wish on the Government Benches, but it is wrong to think that this is not a political priority for many of my colleagues, and for Members across the House. It is good that 40 parliamentarians signed a recent letter on the issue to the Prime Minister, urging action in this area.
Perhaps some parliamentarians, and perhaps the public at large, do not feel that economic crime affects them. Perhaps in many people’s eyes it is a victimless crime, but nothing could be further from the truth. For evidence of that, we should look at the 27 victims—men, women and children—who drowned in the channel only a few days ago. They were victims of economic crime. Of course, the reasons people want to come to this country are manifold, including fear of persecution, or for a better life—whatever those reasons may be—but those journeys are enabled because they are facilitated by economic criminals, and people who benefit from economic crime. These are organised criminals.
If someone steals a little bit of money—£200 in cash, say—they can go down the pub and spend it or do something else with it. If someone benefits from a huge amount of money—these organised criminals are benefiting by millions of pounds from the business of people trafficking—how do they use that money? They cannot simply buy a house, which the right hon. Lady referred to, or a yacht; people cannot spend their ill-gotten gains in any way these days because there are checks and balances—some checks and balances. If a person goes to buy a house, somebody will say, “What’s the source of your moneys?” However, they do not check too far, and we cannot follow the money as far as we need to follow it.
If we want evidence of the importance of this, we should listen to the people who really understand economic crime. Paul Stanfield, the head of organised crime at Interpol, said recently:
“It’s all about the money. If you want to tackle organized crime, you have to go after the money.”
The small boats crisis is probably the No. 1 domestic political priority in the UK. It is a humanitarian crisis and it is an economic crime. In fact, there are two levels of economic crime in this area. One is the fact that organised criminals are taking huge amounts of money—thousands, or tens of thousands of pounds—from desperate people to cross a continent. That is an economic crime in itself, but that money is then laundered, and much of it is laundered through this country.
For evidence of that, we should listen to the Prime Minister’s corruption tsar, my hon. Friend John Penrose, who said exactly this in an intervention a few moments ago. This country is used because of some of our lax regulations, as the right hon. Member for Barking mentioned, but also because of the concentration of advisers in this country, be they lawyers, accountants, consultants—these other people who facilitate the rabbit holes that this money goes down so that it can then be used for legitimate purposes. That is what happens with this money, but the starting point is these terrible crimes.
Of course, we are talking not just about huge international organised criminals, but about domestic organised criminals. Recently, a Yorkshire “businessman” called Manni Hussain had an unexplained wealth order made against him by the National Crime Agency for £10 million. He presented himself as a bona fide businessperson, but he has connections with some of the worst organised criminals in this country. Murderers, drug dealers—all these people are facilitating crime in this country, and we are leaving open loopholes that we could close and clean up our economy.
Of course, there are lots of vested interests in this whole argument. Some would say, “Oh my God, all this dirty money will stop coming into the UK. It’ll damage our economy.” In my view as a businessperson, nothing could be further from the truth. What businesspeople need is a clean economy. That is the foundation of our economy—a clean framework that investors have confidence in. The more our law upholds that framework, the more successful our economy will be. But even if that money was good for this country, we are not interested in it; it can go somewhere else. We must show leadership in this context on the world stage.
And this is about the world stage. If anyone wants to look at how these rabbit holes work and how pernicious this activity is for billions of people on our planet, they should read the wonderful book “Moneyland” by Oliver Bullough. It is a fantastic book. He starts off with a very interesting story about former Ukrainian President Viktor Yanukovych and talks about this huge house he has—one of many palaces that he built around Ukraine, all from the expropriation of moneys from the Ukrainian people. He diverted money that was supposed to be there for health services and many other public services into his own coffers, and he eventually ended up in exile in Russia. He is a very brave man, Oliver Bullough, and he explains how this all happens. He explains very clearly how it could not happen without the rabbit holes that are enabled in this very country. It is not just the UK, to be fair. Some are enabled by our overseas territories and Crown dependencies—the Government are bringing forward, after a lot of pressure from people such as the right hon. Member for Barking, open registers of shell companies in those jurisdictions—and by many other countries, too. The US is very guilty, with places such as Dakota allowing similarly lax regimes. We want other countries to do the same. Such opportunities are facilitating some of the worst crimes known to humanity: people trafficking; drug dealing; organised crime; terrorism, which Jim Shannon mentioned; the expropriation of public money; and the impoverishment of nations.
A report from Oxfam in 2000 talked about how money was being stolen by kleptocrats in developing nations around the world to the tune of £50 billion a year. We have big debates in this House about our international aid budget and whether it is used wisely. Significant amounts of money—our taxpayers’ money—are put into developing nations. In that year, internationally £50 billion went into developing nations. Can we guess how much money was moved out of those very countries by kleptocrats, officials and politicians? It was £50 billion—so, in one door and out the other. We are facilitating that and we can close it down.
Whether it is £10 million for the smaller scale organised criminal or billions of pounds for international kleptocrats, we have the opportunity to close those things down. The money is no use to anybody unless they can spend it. To spend it, they need to be able to salt it away and legitimise it. That is what our shell companies do under the lax regime of Companies House, where £12 sets up a company with no checks and balances, no identity checks and no requirement to check who is the beneficial owner. Trusts are not included, so money can go into trusts. There is no oversight of trusts in the UK or UK property. The Government, rightly, say they will bring forward a register of overseas entities. The City of London—its knowledge, its power, our legal firms and our accountancy firms—facilitates this stuff to the tune of £100 billion a year in the UK. As the motion sets out, £100 billion a year is money laundered in the UK. That figure is directly from the National Crime Agency and that is not even the full extent of economic crime—it is that big.
Paul Stanfield says that we have to follow the money. The point, ironically, is that our system stops us from following the money. That is what we need to address. The key to all of this is transparency. Everything needs to be more transparent. That is the point about Companies House. Companies House should become not just a register but a regulator, with checks and balances to make sure that the people setting up companies are the beneficial owners of those companies. It is quite straightforward: as the right hon. Lady the Member for Barking said, a simple levy on top of the £12 would provide the resources to do that. We need a register of overseas entities, so we can see who is buying UK properties—again, the Government have committed to doing that.
I want to come on to transparency in other contexts. I draw the attention of the House to my entry in the Register of Members’ Financial Interests. I was involved in a business until March this year when it was sold. Last year, when things looked pretty tough, we took on quite a significant coronavirus business interruption loan. We never drew it down. We repaid it without touching it when we realised that the recession was not going to be as hard as we thought on our business, but it was a significant amount of money.
Whether we are talking about CBILS or the bounce back loan scheme, the Government decided that it would not make these loans subject to public scrutiny—loans which were providing Government support, effectively enabled by taxpayers’ money. If I, as a businessperson, had taken taxpayers’ money, I would have no problem with that being open to public scrutiny. It is good if it is subject to it—what is wrong with that level of transparency? The Government decided not to make that transparent, but we had to provide some level of transparency because of our association with the European Union.
Bloomberg got hold of this issue and scraped the data on 45,000 companies—hon. Members can read its report, which was in the paper last week—and there were some very startling cases. One included a £4.7 million loan that was drawn down by a company that existed only two days prior. There are lots of different concerns about those programmes. Some of that loan may be legitimate, although it seems unlikely that it was bona fide, because the company would have had to be a viable trading company before that time. However, if all this stuff is open to public scrutiny, it could be looked at by people such as us and those who have more time to do it, such as journalists, who do a fantastic job in this area by highlighting these issues—where would be without the investigative journalists who look at this kind of stuff? That would deter people in the first place from drawing down a loan in such circumstances and, because people would know that they would be pursued, it would reduce the level of fraud. This is a key issue for the Government in relation to the furlough scheme, the bounce back loan scheme and other areas. I cannot see how it would be detrimental to our economy to have more transparency in these areas. I am thinking particularly of Companies House reform and the register of British overseas entities.
My final point on the motion is about the offence of a failure to prevent economic crime. That is so important. This is an extension of the “failure to prevent” offence that exists, for example, for bribery—so if an organisation does not put checks and balances in place to make sure that its staff are not bribing other people or customers to try to get work, for example, it is breaking the law. That is a criminal offence, and it relates to tax evasion as well.
We want to extend that offence to cover economic crime. That means—I spoke about the NatWest example—that if a company does not put measures in place to prevent money laundering, so there are not checks and balance throughout an organisation to prevent that, it has corporate criminal liability. As I said, I would like to see that as individual criminal liability, because that would provide the biggest deterrent for senior executives and mean that they clamp down on the wrong kind of behaviour in their organisation. We can look at the construction sector for an example. This is a bit tangential, but the number of accidents and deaths on building sites dropped markedly only when directors suddenly had personal criminal liability over health and safety on their construction sites. Personal liability makes a big difference. Otherwise, this is seen as just a cost of doing business.
The “failure to prevent” offence does not just cover money laundering, and that is key. If we spoke to the banks about this, they would say, “We have that covered already under money-laundering rules”, but this is not just about money laundering. The corporate criminal offence is a tougher penalty and is available to the Serious Fraud Office rather than just the regulator, the Financial Conduct Authority, and it covers other crimes.
As many people know, in the all-party group on fair business banking we have dealt with the fall-out of the financial crisis in relation to RBS, the Global Restructuring Group, Lloyds, and HBOS Reading in particular. Let us look at the HBOS Reading scandal. For 10 years, Lloyds and HBOS denied any wrongdoing and that a fraud was happening in their organisations before it was proven in court in 2017, and four people went to jail for 47 years. It is the only case in the history of fraud ever proven against a bank in this country, and we know there has been more than that. Nevertheless, there was denial for 10 years.
Over that 10-year period, going back as early as 2007, victims were saying to Halifax Bank of Scotland and then to Lloyds bank, “There is fraud going on in your bank.” They were ignored; it was denial after denial. When an individual within Lloyds, its senior risk manager Sally Masterton, wrote a report on it and gave it to the bank, it sacked her. It shut her down for five years, saying that she was not a cogent witness and that she was acting for her own reasons rather than on a company instruction. That turned out not to be the case, and the bank had to retract the claim and compensate her in 2018. If we had the “failure to prevent” offence, that could not happen. People in those organisations would be accountable at a senior level, and that would clamp down on such behaviour. It would be a tremendous deterrent. It would also work with lawyers and accountants, because they too have responsibility to prevent economic crime. Instead of being facilitators, they would be required to stop this stuff happening.
We are currently having plenty of conversations in debates about how we can prevent scams such as push payment fraud, particularly on platforms including social media. The “Online Harms” White Paper refers to user-generated content rather than corporate-level scams. The Government are talking about expanding the Online Safety Bill to include those, but a requirement to prevent economic crime could work for Facebook, Google and the rest of them as well.
At present, platforms such as Google can simply take money from the highest bidder. They accept “pay per click” for companies to advertise investment opportunities, without checking whether they are bona fide companies. They do not check whether a company is Standard Chartered or someone posing as Standard Chartered; they simply take the money and let the company advertise on their sites, with no checks and balances and no requirement for them. If there were a “failure to prevent economic crime” provision, they would not be able to do that. They would have to put in place those checks and balances to ensure that the companies concerned were the companies that they were purporting to be, which, as we all know, is not beyond the wit of those platforms. This would tackle many different hugely important issues at the same time.
I have spoken for far too long, Madam Deputy Speaker, but all these matters are so important. The Government could introduce the necessary measures very quickly, and I urge them to do so. I believe that they will, and when we see that legislation, Members on both sides of the House will be championing them from the rooftops.
I want to focus briefly on one specific point. I mentioned, in an intervention on my right hon. Friend, the Work and Pensions Committee’s inquiry into pension scams, which reported a little while ago. This is an important area of economic crime, and our report highlighted in particular the menace of online scams, which the hon. Gentleman has just mentioned. As he said, the Online Safety Bill presents a unique opportunity to address this menace. The Prime Minister has said that tackling online fraud is one of the Bill’s main aims, but the current version, which is undergoing pre-legislative scrutiny, leaves out the major part of the problem. That must be changed.
The campaigner Mark Taber gave evidence to our inquiry. He found the compare-uk-bonds.co.uk fake comparison site on Google, and reported it to Google in May last year. An elderly woman who had recently been bereaved contacted him after losing more than £200,000 to that scam site on Google in September. Google finally took it down in December. People think that if they find something on Google, somebody must have vetted it, but of course they have not. Google gets paid by scammers, and then also gets paid by regulators to warn about the scammers people find on Google. It is a pretty good business. I have no idea why Google did not take that scam down in May. Was it because the company was disorganised? Was it because it wanted to keep the advertising income coming in? Google will not say, and I do not imagine that we will ever know. What this shows us is that the law must be changed. If it is not changed, crooks will continue to ruin the lives of thousands by advertising scams online. That would be an unforgivable failure of Government.
Last year, the Pension Scams Industry Group estimated that £10 billion had been lost to pension scams by 40,000 people since the pension freedoms were introduced by George Osborne in 2015. I welcome some of the recent changes that have been made to help. The new Pensions Schemes Act 2021 will restrict the statutory right to transfer, which was given in the pension freedoms, where there are signs of a scam. The High Court recently ruled that the fraud compensation fund could be used to compensate pension liberation scam victims. Those are both welcome steps, but we need to do more. In particular, we must tackle the menace of online scams. The insurer Aviva told the Work and Pensions Committee that in the six months before it gave us its evidence it had found 27 scam websites purporting to be Aviva. Having found them, it takes quite a lot of effort to get them taken down, and there are always victims before the sites are removed.
In the Online Safety Bill, the Government are tackling user-generated scams, but not paid-for scam adverts. That needs to be changed, because it is the scam adverts that are the heart of the problem. That is not just the view of my Committee and the Treasury Committee; it is the view of almost everyone outside Whitehall who has looked at this, except for the internet companies. The Governor of the Bank of England told the Treasury Committee that the risk to consumers from online fraud
“could be tackled through the Online Harms Legislation, but the experience so far...is that there is strong resistance in other parts of the official sector to extending the legislation to financial services. This is a serious problem.”
He is absolutely right.
The City of London police wrote to the Work and Pensions Committee in May that the exclusion of advertisements and cloned websites from the Online Safety Bill
“leaves a gap in the protection provided for the public”.
The City of London police went on to call for
“legislation requiring a duty to protect and/or corporate criminal liability for failure to prevent across all online and telecommunications enablers.”
The Financial Conduct Authority told us in evidence to the Committee that
“financial harms should be included in the Online Safety Bill to ensure that online platform operators take responsibility for the material which they disseminate which could cause consumers financial harm.”
“one of the key objectives of the Online Safety Bill is to tackle online fraud”.
I welcome and applaud that pledge, yet the Bill as it stands entirely misses the major problem of online fraud, which is paid-for advertising.
Martin Lewis of MoneySavingExpert.com, Sir Richard Branson and Dawn French have all had their name or image used in online scams. They all wrote to the Prime Minister last month calling for the Online Safety Bill to tackle scams, pointing out that the current Bill will penalise someone who posts a scam, but not someone who pays to post the same scam. They went on to say that the
“Government has said it wants to eventually tackle scam adverts through changing advertising regulation—but this will have to go through a lengthy process of legislating in the face of fierce opposition from a powerful advertising industry.”
We understand that work to address the problem of scam advertising is going on somewhere—the Department for Digital, Culture, Media and Sport, I think—but on a much longer timetable. If that is the track we go down, it will be years before anything changes, and thousands more people will lose their life savings in the meantime.
That is a really interesting quote. Who is in the “powerful advertising industry”? The only people I can see benefiting from scams posted in the paid-ads section of Google are those at Google, not those in the advertising industry.
That hon. Gentleman raises an interesting point. I know that Ministers have been looking into this issue. As I understand it, there is now a very complex infrastructure around advertising. Google is at the end of the chain, but there are all sorts of agencies and intermediaries—a whole industry—in the middle. I imagine that letter is referring to the fact that all those people in the middle would say, “No, don’t touch this because it’s working very well.” It is working well for them, but I am afraid that for the public it definitely is not. If we wait in the way suggested in the letter, it will let crooks and scammers continue to ruin people’s lives for years to come. That would be a catastrophic Government failure. My plea is for Ministers to change course now, face up to the undoubted technical challenges, and legislate in the Online Safety Bill.
Finally, I agree with a point made by my right hon. Friend the Member for Barking in opening the debate: this is an existential threat to the UK economy. Financial services account for a big part of our economy, and we have a worldwide reputation and provide a great deal of expertise and high-quality services. If people conclude that they can no longer trust our financial services sector because fraud is being allowed to run rife, that is a massive threat not just to that industry but to our entire economy. We really do need to tackle economic crime, face it head on, and make the kind of changes that my right hon. Friend and the hon. Member for Thirsk and Malton have argued for, to protect not just the customers of these services but the entire economy.
I shall try to hobble on one leg, Madam Deputy Speaker. I thank Dame Margaret Hodge and my hon. Friend Kevin Hollinrake for securing this important and timely debate. Frankly, it is time that we addressed some of these issues for once and for all.
Before I begin, I refer the House to my entry in the Register of Members’ Financial Interests. For 10 years before I was elected, I worked in fraud and financial crime with some of the largest institutions—banks, insurers, telecoms companies, charities and, in fact, the Government—trying to bear down on fraud and financial crime. I seconded members of my team to the national economic crime command and the joint money laundering and intelligence taskforce, and the organisation that I worked for chaired the joint fraud taskforce.
During that period working in fraud and financial crime, I learned that there is huge willing on the part of the industry, the Government and law enforcement to work together to tackle some of the issues at the heart of this debate. I think those in the industry are willing to go a lot further in putting time, resource, money and energy into tackling some of these issues, but in return they want their investment to be backed by action from the Government and law enforcement. They want to feel heat and to see people’s collars being felt.
Let us be absolutely clear: without peril, this is just a game of whack-a-mole in which one rogue actor—one criminal—can simply shut down their activity and start again. They collect their money, move on and make liquid their funds until that route closes, and then they just open another. That is the game they are currently playing—and it is a game to them. We should be dismayed that it is happening and being allowed to happen. As Members have already said, funds are being raised through serious and organised crime. They are the result of scams and low-level frauds, of insider information leaks, of hacks, of the exploitation of breach data, of corporate espionage, and of people deliberately exploiting the state. As my hon. Friend the Member for Thirsk and Malton pointed out, stopping the money flows is essential to stopping this activity full stop.
I recall a meeting about three years ago with the NCA, which had mapped an organised crime group and how it enabled and then laundered the proceeds of economic crime and of very human crimes. The OCG was linked to people traffickers. As my hon. Friend mentioned, those same groups are now exploiting vulnerable people and transporting them across the channel in dinghies. It was linked to low-level scams in which a vulnerable grandmother might get a phone call and suddenly have her life savings emptied out of her bank account. It was tied to complex financial marketing activity on the dark web, where credit card breach data is sold for criminals to exploit. It was also linked to drug imports and county lines drug running. The chain ran from grandmothers’ houses, across the channel, across the dark web, into the property market and all the way to the poppy fields of Afghanistan.
I make it clear that this is one group, and there are many of them. It is not a ragtag bunch of criminals trying their hand but a deeply successful, multimillion-pound business—a tax-avoiding business, too—and there are many of them out there. These people sought and exploited every single opportunity to enrich themselves, with no care for the misery or economic cost they left behind.
These criminal gangs result in real challenges for people. Insurance premiums are higher, delivery costs are inflated, public funds do not reach those who need them the most, small businesses are cratering and life savings are stolen. They also overinflate the property market, which is important. I recall sitting in the office of the NCA’s director of economic crime in Vauxhall. He pointed out of the window to the shiny new skyscrapers opposite and said, “Not a single one of them has curtains or a kettle in the kitchen, yet they change hands on an almost weekly basis for millions of pounds.” This is forcing people out of the property market. If we hope to ensure that some of our cities are ever again affordable for families to live in, we need to bear down on this activity.
These organised crime businesses are hugely complex. They run as cells, and they are intelligent. If part of the business is shut down, they know how to get up and run again. As reprehensible as they may be, I am slightly in awe of how clever they are and how they operate. But the reality of these businesses is wrought in the ruined and damaged lives they leave behind. I come back to my first point: without peril, we will simply not be able to act against them. The current whack-a-mole approach means that, for every snake’s head we chop off, another one appears.
As Stephen Timms said, fraud is the No. 1 volume crime in the UK. It is epidemic and completely out of control. We simply do not have a grip on it. It is all well and good for the City of London police to run a day of action and pick up the 10 most-wanted fraudsters in the UK, but there are 4.6 million cases of fraud each year. Where is the peril that will stop the behaviour? When the industry, the biggest banks, insurers, charities and the Government pull together to share information to bear down on those fraudsters, why are collars not being felt more regularly?
The Department for Work and Pensions ran 11 raids this morning to shut down an OCG’s £4 million benefit scam. I am glad to see there is some work happening in this area, but there is plenty more to do. We should be considering the economic equivalent of antisocial behaviour orders—economic crime prevention orders—to put those who commit fraud on notice by putting a mark against their name and saying there will be serious consequences if they do it again.
We should be looking again at how we can better empower information sharing and action against those responsible for these crimes. Taking away the ability to launder their funds would remove a good part of the incentive of people who run small boats, and taking away a county lines drug operator’s ability to trade out their earnings will do exactly the same. We need to look more closely at enablers. Thankfully, Companies House now restricts the amount of personal data available to the public on its website, which was a key enabler of fraud, but I join other colleagues in saying that we have to tread a fine line between encouraging entrepreneurship by making it easy to set up a business and making the UK a dynamic place in which to operate, and creating an easy entryway for criminality and allowing criminality to disguise itself with a veneer of acceptability.
The other key point on enablers relates to online safety and education, which will be key. Young people are sharing information right, left and centre on social media without a care for how it is going to be picked up and used against them. The point about advertising that was mentioned earlier was also spot on. The online harms Bill is absolutely where we need to be addressing this issue; to add to the layer cake of voices calling for the change that colleagues have mentioned, the director of the national economic crime command has also suggested that fraud should be included in that Bill.
In drawing to a close, I wish to thank the right hon. Member for Barking and my hon. Friend the Member for Thirsk and Malton for calling this incredibly important debate. The measures they are calling for in an economic crime Bill are proportionate and fair. We need to inject not only as much transparency as we possibly can into the system, but peril, too; we need to be making sure that criminals feel that heat. I believe the reforms they have suggested will get us there, and I very much look forward to hearing the Minister’s views.
I thank Simon Fell for speaking and giving his expertise on this. I, too, have a bit of a gammy ankle, so I will try not to fall over. He will find that if he sits on the Front Bench and leans against it, he will get a wee bit more support and will not have to wobble so much. That is a top tip from my hon. Friend Dr Whitford, who has had a similar affliction recently.
This debate is incredibly important and timely, and I am very grateful to Dame Margaret Hodge and Kevin Hollinrake for securing it. I feel as though this has almost been economic crime week for me in this place, because our Treasury Committee took its final evidence from Ministers on this issue on Monday. The Economic Secretary to the Treasury and the Minister for Security and Borders were very clear that not enough is being done. That is probably the biggest understatement in this House this week. It is very evident that not enough is being done, because these crimes are going unprosecuted, victims are increasing in number and it feels as though nothing very much is happening to address it. It is incredibly worrying, as we see when we look at the figures, which indicate the scale of this. It can only indicate the scale of it because, by its very nature, economic crime can be very difficult to count; that money is gone—it is disappeared and it vanishes, never to be seen again.
I very much support the suggestion that all Members who have spoken so far have made of an offence of a failure to prevent economic crime. That is crucial, and I would tie it in to the online safety Bill that is coming, because that is a golden opportunity. The evidence we have had from almost every person who has come before the Treasury Committee to talk about this has been, “You have to get this in the online safety Bill.” They do not believe another good enough opportunity will come along quickly enough to deal with this issue. The Government are very good at saying, “Oh yes, when parliamentary time allows—we will look at this soon. We will do this in good time.” But we need to see it now, as this has been drifting long enough and action needs to be taken on it.
Stephen Timms mentioned that the Governor of the Bank of England, every other financial institution that has come before us and sent in evidence, independent experts, journalists and organisations such as the Royal United Services Institute—all kinds of people from all kinds of backgrounds—have said that more needs to be done, that there is an opportunity here and that it would be huge neglect on the part of the Government if they failed to take the opportunity that is in front of them right now. It is an opportunity that they have presented to this House in the form of this Bill. If they miss this chance, it will be a matter of significant detriment to all our constituents.
The biggest barrier is the lack of enforcement. The Government will point to very good laws that they have on money laundering, and things that they feel are useful to tackle financial and economic crime more broadly, but enforcement levels are woeful. The figure of only 1% of police resource going to something that is an increasing problem in our society is part of that. The enforcement agencies are doing their best, but they are a hotchpotch; they are a patchwork of different agencies all working away in their own wee world and not managing to connect all of these different things. People are drowning under suspicious activity reports, while those who ought to be filing them are not even bothering. There is a huge gap in enforcement.
As I have said ad nauseam in this place, in Bill Committees and everywhere else, Companies House is the front door to this. Graeme Biggar, the director general at the National Economic Crime Centre, spoke to the Treasury Committee on
“It can be too easy to set up companies here, as we have seen repeatedly over the years. We have done some analysis recently on some of the laundromats that have come out of Russia and the former Soviet Union, and a disturbing proportion of the money that comes out of those laundromats—not much shy of 50% in one case—were laundered through UK corporate structures.”
He pointed out that not all of that money will have been in the UK or will have touched the UK, but it is the corporate structures themselves that have been facilitating this economic crime.
The Royal United Services Institute has said:
“The ease with which a company can be formed in the UK—within 24 hours, without showing any ID and for a mere £12—has contributed strongly to the UK corporate structures emerging as the money-launderers’ vehicle of choice over the past decade.”
It says the “vehicle of choice” for “money launderers”. This Government have proposed Companies House reform, but, while welcome, it does not go nearly far enough. It makes no sense to me that, if I want to apply for a driving licence or a passport to do my self-assessment tax return, I have to go through a whole gamut of Government verifying schemes. That is not the case, as I understand it, for setting up a company. All it will cost me is £12. The information that I put into the Companies House register may be complete and utter guff, because it has no one checking that information; it is just a repository of that information.
Some statistics were given in the reading material that has been pulled together. Four thousand beneficial owners are listed in the persons of significant control register who are under the age of two. I am sure that there are many prodigious under two-year-olds out there, but I do not think that they really should be beneficial owners of companies. There are five beneficial owners who control more than 6,000 companies. Again, there should be some kind of limit to the number of directorships that beneficial owners can hold, because it is very clear that these people can have no real role in the running of those companies, because there are far too many of them.
Even more worryingly, some of this has been facilitated through Facebook. A recent “File on 4” programme showed how people were being recruited as company directors via Facebook. Again, they had no role or responsibility in the company, but were being brought in as a means of making money. I ask the Government what they intend to do about this kind of fraudulent behaviour.
That is before I get to Scottish limited partnerships, which, again, I have talked about at length in this place. I pay tribute to Richard Smith, David Leask and Roger Mullin—my colleague who was in this place until 2017—for their constant plugging away on the subject of Scottish limited partnerships. The Government will say, and they would be correct to say, that since they brought in the reforms, the number of Scottish limited partnerships has reduced. However, as the hon. Member for Barrow and Furness pointed out, what has happened is a bit of a whack-a-mole strategy. As my good friend, colleague and employee Councillor Alexander Belic has said, the point of whack-a-mole is the increasing frequency of moles rather than an effective mole eradication effort. That is very true of financial crime and SLPs.
Many of those involved have moved to Northern Irish limited partnerships, English limited partnerships, trusts, other obscure company formations, or, as Colm Keena of The Irish Times has pointed out, Irish limited partnerships. There is therefore a wider consequence of this Government’s actions. I doubt very much that they informed the Irish Government that this was going to happen, only to leave them saying, “Oh, gosh, this is now on our doorstep. Now we have to deal with this international financial crime”. Some of those Irish limited partnerships had Scottish limited partnerships as their people of significant control, so it becomes a nesting doll of different companies, and we can never get to the centre of it and find out who really is in charge.
At the very heart of all that is this: if we reform Companies House, it will slam the door in the face of all of this. If we give Companies House an anti-money laundering supervisory role, if we tighten up the registration process, if we make it that a person has to prove that they are a real person before they can register a company, and if we put up the fees, we will take away a lot of this crime. The Government really should be looking at that very urgently, and the lack of urgency remains a significant concern to me.
I sat on the Bill Committee when the Sanctions and Anti-Money Laundering Bill came through this House. The Government had a lack of interest in a great number of things, but it was funny how quickly they got interested in dirty Russian money when the Salisbury attack happened during the course of that Committee. All of a sudden they were very interested in doing something about that.
I also sat on the Joint Committee on the Draft Registration of Overseas Entities Bill. We made very good recommendations and the Government replied, but they did not accept all of them—and now, tumbleweed. Nothing has happened; there is no urgency. When I questioned the Economic Secretary to the Treasury on Monday, I asked, “Are you actually going to bring it forward urgently?”. It does not feel urgent in the slightest, because there is nothing happening and nothing is changing.
The longer it goes on, the more I wonder who benefits from this delay. Is it the oligarchs and those to whom they donate? There are wider political implications of this delay—not just here, although there is an implication here for transparent structures such as unincorporated associations, which are set up in Scotland and fund parts of the Conservative party and the no campaign in Scotland.
My hon. Friend clearly shares my concerns and those of the Electoral Commission about unincorporated associations. Among a number of other troublesome characteristics, those that meet the threshold for registration with the Electoral Commission are not required to conduct permissibility checks on a relevant donation—a donation meant for political activity. Presumably, she would like to see those very much tightened up.
I would; we should have strong registration requirements for donations to political parties, and there should be no ways of circumventing them.
Whether the money turns up as millions of pounds in Conservative party coffers, leads to the House of Lords in the end, or is just laundered from Russia, Uzbekistan, Ukraine or any number of other countries involved in SLPs and money laundering, we should be worried, because this issue goes to the very heart and fundament of our democracy. If we cannot guarantee where the money goes, who it influences, where it ends up and who it benefits, we are in real trouble as a democracy, as well as an economy.
It is really important that the online safety Bill deals more with frauds, scams and misleading info. As the right hon. Member for East Ham pointed out, if people take out paid advertising that costs a penny, they will get away with a lot more than if they generated it themselves and did not pay for it. That seems fundamentally wrong.
There is a lot of information being put about out there. Google, Facebook and some other companies have all appeared before us in the Treasury Committee, and they really did not do much by way of accounting for the behaviour of people using their platform for activity such as allowing others to register as company directors, trying to sell goods online and defrauding our constituents, or offering financial advice—that is a regulated sector, which makes that very serious behaviour. No one should be giving financial advice unless qualified to do so, but if hon. Members were to look at Instagram, they would find all number of accounts offering this advice or that advice, saying “Take these shares out” or “Do this and put your money here”. All this activity puts people at risk, whether it is user-generated or advertised, and it should be regulated properly so that people cannot use such platforms to defraud others and profit for themselves.
The nature of this world is changing. Lots of people are conducting their business on Instagram now, including lots of entirely legitimate people and businesses, many of which suffered when Instagram went down because they could no longer sell their pizzas or whatever they were selling online. We need to be mindful that the platforms have a responsibility to the people who use them to ensure that they cannot easily part with their money and be defrauded. Although faster payments are great in a number of ways in facilitating financial transactions, once that money is gone, it is very hard to get it back.
At the moment, the banks often get the money back for people, but there is no consequence for the platforms that facilitate the fraud. They do not have to pay anybody their money back. They allow this to happen and they get to just hold their hands up and say, “It’s not our fault. People should know better”. That is not good enough. The platforms are facilitating a good deal of this fraud. The Government will be failing in their duty to all our constituents if the online safety Bill does not address those levels of transactions where people are doing lots of business that way nowadays—if it does not hold to account those big, wealthy providers and platforms, both the ones that exist just now and those that will emerge in future, and make sure that they take responsibility for their actions.
I urge the Government to listen to everybody who has given evidence on this matter to the Treasury Committee, to the Work and Pensions Committee, and to our APPGs—to listen to those experts and not miss this opportunity to take action to protect our constituents, our economy and our democracy.
I pay tribute to Dame Margaret Hodge and Kevin Hollinrake for securing this very important debate. I thank them for all the work they have done over the years on these issues, and indeed on wider issues of fairness in the economic industry. I have had great cause to be grateful to the hon. Member for Thirsk and Malton for the assistance he has afforded some of my constituents through his expert advice from his experience on the all-party parliamentary group on fair banking.
The right hon. Member for Barking spoke very powerfully about the problem of money stolen from the Russian people being laundered in this country, saying that it impacts on our national security in a number of ways because it is spreading its tentacles through our society. She was intervened on by Jim Shannon, who drew attention to the problem of money laundering through paramilitary, which unfortunately we still have as a result of the legacy of the troubles in Northern Ireland. The right hon. Lady made the very important point that that enables other crime, and that, in her words, if you cannot follow the money then dirty money triumphs.
There was an important intervention on the right hon. Lady from Stephen Timms, who told us that one third of crime in the United Kingdom is now economic crime but only 1% of police enforcement time is spent on that. I certainly know from my time as an advocate depute in the Crown Office in Scotland that there were often not really adequate resources for us to prosecute economic crime properly. It is decades since I was a prosecutor, but I know that a huge amount of work has been done in Scotland to give the Crown Office more powers to do that. Prosecuting economic crime is very challenging, and Government need to put a lot more investment into making sure that it is done effectively.
Importantly, the hon. Member for Thirsk and Malton explained why economic crime is not a victimless crime. He cited the tragic death of the 27 people who drowned in the channel trying to reach our shores last week as a good example of organised crime and economic crime taking a terrible toll on its victims.
The right hon. Member for East Ham outlined the need to tackle online fraud. He was absolutely right in identifying the online safety Bill as a missed opportunity do that. He rightly took aim at Google for its failure to take down a scam when it was well aware that it was there. As he said, that shows that the law must be changed. We are all well aware of the problem of the huge power of organisations such as Google, Facebook and Twitter, and it is really important that the Government put real teeth into legislation to make sure that they do not facilitate crime—particularly, in this case, economic crime. I was interested to hear that the Financial Conduct Authority has said that financial harms should be included in the online safety Bill.
It was also interesting to hear from Simon Fell, who speaks from a career of some length in the regulation industry and therefore with some authority about what needs to be done and the challenges of doing it. He made a powerful point about the damage that has been done to our great cities as a result of the overinflation of the property market. In my own home city of Edinburgh at the moment, most people can no longer afford to be a first-time buyer. I know that is a huge problem in the great city of London as well. Tackling economic crime is one way that we can bring house prices down.
Finally, my hon. Friend Alison Thewliss spoke knowledgably from her lengthy experience in relation to these matters and drew our attention to the fact that, ultimately, Companies House is the front door to this problem, and existing corporate structures facilitate economic crime. She gave very good examples of the hoops we have to go through to do things such as getting a driving licence, but how easy it is for people to tell a pack of lies and misrepresent themselves in setting up a company. She raised again the issue of Scottish limited partnerships, which have been raised over the years by a number of Members of this House, most notably my friend and former colleague, Roger Mullin.
My hon. Friend the Member for Glasgow Central put the question succinctly for the Minister to answer this evening: where is the urgency in dealing with these matters? We have had many debates about these issues in the six and a half years I have been in this House, and I know they have been going on for much longer than that. The Government have made a number of commitments, but why are they not honouring them? Where is the urgency?
Then there is the troubling question of who benefits from the delay to the Government tackling these issues. We know that some pretty dodgy Russian money has found its way into the coffers of the Conservative and Unionist party. As my hon. Friend said, there are wider political implications here. My hon. Friend Deidre Brock continued in this debate to raise the matters of concern that she has raised previously about the failure to properly regulate political donations.
Although we have had a short debate, it has been very knowledgeable, and the Members who have contributed have done so from a position of strength and of knowledge of this matter. The helpful briefing prepared for this debate basically tells us what needs to be done. It has three big asks for an economic crime Bill: creating a register of overseas companies that own UK property; reforming Companies House to ensure it can monitor, verify and investigate suspicious companies; and reforming corporate criminal liability laws to ensure that enablers are held to account. The question for the Minister is: when will that economic crime Bill be brought forward?
I am very grateful to Kevin Hollinrake, my right hon. Friend Dame Margaret Hodge and all the all-party parliamentary groups that are responsible for securing this debate today. What a great warrior my right hon. Friend has been on this issue over the years.
This issue matters particularly in the United Kingdom because we have one of the biggest financial sectors in the world. That is not only a great asset to the country in terms of wealth, employment, tax revenues and so on, but it gives us an opportunity and a responsibility. It is an opportunity, because how we regulate that can set an example around the world, but it is also a responsibility, because if our standards are too lax, and we allow the UK to be an easy home for illicit finance, that also sends a signal of a very different kind around the world.
As my right hon. Friend Stephen Timms, the Chair of the Work and Pensions Committee, said, every day our constituents are assailed by fake texts, emails and scams trying to con them out of their own money. It is extremely difficult for our constituents to know what is genuine and what is not when receiving such communications. That is why it is essential that we act and use the opportunity of the online harms Bill to crack down properly on this kind of consumer fraud. At the moment, that is not the plan. There is a gaping hole in that Bill, and the first thing I want to put to the Minister is to accept the strength of feeling across the House that it has to be strengthened.
With the release of caches of documents, such as the Pandora papers and their predecessors, the UK and its overseas territories are far too often mentioned as a place where illicit funds can find a home.
We are about to go into a winter in which people will face not only rising prices but rising taxes, but time after time, we see reports that billions of pounds of illicit funding are washing through our country. The contrast between the obligations of those who struggle to make ends meet and those who see our property laws and institutions as vehicles for laundering money could not be more stark. It is an issue not just of financial probity and tax revenue—though it is certainly that—but of national security and should be treated as such.
If we are a welcome home for the proceeds of looting and kleptocracy, what does that say about the rule of law or our standing in the world? The Prime Minister’s recent performance on the issue of standards in this place suggests that he has scant regard for rules and responsibilities, but we already knew that. We know what he thought of the rules last Christmas when he told the rest of the country that they could not gather, as there are now reports of one Christmas party, maybe more, while the rest of the country was trying to obey the rules. The fight against money laundering and fraud is too important to be let down again by the belief that there is one rule for them and another for everyone else.
It is not an easy battle, because we are dealing with very rich people who will employ the most expensive lawyers in town to intimidate those who criticise them and try to silence them though financial exhaustion. We should pay tribute to the brave investigative journalists who have written about such things to expose what is happening, knowing that they will be aggressively pursued by legal actions designed, at best, to silence them and, at worst, to bankrupt them. But however rich the people involved are, we in this House can still act. We can decide not to sit back and let it happen. The measures advocated in this debate command strong cross-party support, so why are the Government not making more use of that support? Where is the urgency that hon. Members have called for?
Let us consider some of the individual measures that have been discussed. The Registration of Overseas Entities Bill has been on the stocks for years, but it sits in the sidings, not moving. We are approaching the fourth anniversary of when it was first promised, and it is more urgently needed now than then, yet when asked about the timescale, Ministers still wheel out the time-honoured bromide of “when parliamentary time allows”. They have had four years of parliamentary time, which is more or less a whole Parliament.
The legislation could play an important role in revealing the true nature of asset ownership, particularly the expensive London properties beloved of those who want to store their wealth here. Why will the Government not bring forward the Bill? Why does it keep being put on the back burner? Who in Government keeps saying no to it?
Shell companies are at the heart of mechanisms to hide the true nature of wealth—or perhaps more accurately, layer on layer of shell companies whose sole purpose is obfuscation. We have heard some figures about the registration of companies, including that there are 4,000 owners under two years old and that five beneficial owners control more than 6,000 companies. Companies House is a registrar that lacks the powers to do any serious policing or regulating of who registers companies. Plans for reform have been announced, which the Minister will no doubt go through in a few minutes, but they have not been implemented.
The aim should be clear: to ensure that Companies House is a guardian of propriety, rather than simply a library of data where there are no real checks on the quality of that data. No legitimate business owner has anything to fear from that kind of reform, but the people registering thousands of companies for the purpose of obscuring real ownership do. I urge the Minister not only to say what is planned for Companies House but to ensure that it is actually implemented. The sponsors of today’s debate rightly put Companies House reform at the heart of the fight against money laundering and fraud.
What of the Intelligence and Security Committee’s report on Russia? Where is the Government’s response to the measures advocated in that? Here there is not even a pretence of action. In fact, the report said, “If you’re determined to look in the opposite direction, then perhaps it’s not a surprise that you haven’t found anything.” The Government keep looking away in the hope that this issue will go away, but it will not.
Two weeks ago, the shadow Security Minister, my hon. Friend Conor McGinn, wrote to his opposite number asking what checks there had been on the almost £2 million of funds from Russian donors to the Conservative party. Does the Conservative party ask any questions at all when receiving this money? Why do Conservative Members think that their party has been such an attractive destination for this money, and what is it doing to Government policy? For example, who is there left in the Business Department who can still take a decision on the Aquind pipeline? How many Ministers have had to recuse themselves either because they have been funded or because they have already pronounced on the impending decision?
The third element called for today is greater corporate responsibility when it comes to money laundering and fraud. This already exists for tax evasion, for example. A company could not get away with saying, “Well, we were looking the other way—we didn’t know” when it comes to tax evasion. This was debated during the passage of the Financial Services Act 2021, which went through the House this time last year. Of course, any new corporate liability laws have to be carefully thought through, but the law should not act as an incentive for chief executives and senior executives in companies to claim ignorance about what is happening in their own organisations. We saw that time after time during the LIBOR scandal when these titans of the finance industry testified one by one that they had no idea what their traders were up to. The question facing the Government is: if corporate responsibility is right for tax, why should it not be right for fraud?
Underlying these specific points is a broader issue that should focus our attention. A number of times the Chancellor has said that he wants to put competitiveness at the heart of post-Brexit financial regulation. Having hung the financial sector out to dry when negotiating the Brexit deal, the Treasury now dangles the consolation prize of deregulation in front of it—the “Crackerjack” pencil for cutting off market access from the European Union—but at what price? Regulation was changed in the wake of the global financial crisis right across the world to protect the public in different countries, and the consequence of the Chancellor’s post-Brexit search for a consolation prize for deregulation should not be to put the public at greater risk. What kind of signal is it to send around the world to say, “Come to Britain because we want to make the referee weaker”? That is not even a signal the financial sector itself wants.
New fields are emerging. Cryptocurrencies have grown hugely in recent years. That has not been discussed much this afternoon, but it is hugely important. Their growth poses a genuine challenge to regulators and central banks right around the world. Where do the Government stand on the regulation of cryptocurrencies? Is it the case that crypto exchanges are being encouraged to base themselves outside the country so that we do not have to face up to these regulatory questions and responsibilities? Washing our hands of this issue is not good enough if the result is that those exchanges are based abroad and are beyond our reach in regulatory terms, without its making any difference to their ability to operate in the UK market. We have to be alive to the dangers of fraud and money laundering through new methods and innovations, and regulation has to keep pace with these market innovations. Can the Minister assure the House that the Government are telling the financial regulators that crypto exchanges that operate in the UK should be regulated in the UK? Is that the Government’s position?
This is an important debate, and it has shone a light on the inadequate efforts being made to protect the country from being seen as an easy place to store or to launder illicit finance. Despite the persistence of the problem and all the words said about how serious it is, the Government have dragged their feet on implementing measures that could command cross-party support. This is too serious an issue for that approach to continue because, as I have said, it is not just a matter of money; it is a matter of national security. It should be treated as such, and that is certainly the approach the Opposition take to the issue.
Thank you, Madam Deputy Speaker, for the opportunity to contribute to this debate; it has been a good and constructive one and I am grateful to all those who have contributed. In particular, I congratulate Dame Margaret Hodge, who has done extraordinary work in this area for so many years, first on the Public Accounts Committee—I had the privilege of sitting on it a few years after the right hon. Lady, but her reputation went beyond her time there—and now in the all-party parliamentary group on anti-corruption and responsible tax that she is pursuing. I also pay tribute to my hon. Friend Kevin Hollinrake for the extraordinary work he continues to do for so many people, referred to by other hon. Members today, through his all-party parliamentary group on fair business banking. I thank them both for securing this important debate.
I have heard many important points today underlining the evils and dangers of all forms of economic crime—fraud, corruption, tax evasion, laundering, terrorism, potential people-trafficking, organised crime, drugs and the expropriation of public money. I agree with them. Economic crime is every bit as insidious as hon. Members have so cogently argued today. I reiterate that the Government are committed to continuing to build a framework that will deter such crimes and provide the genuine accountability that hon. Members have so accurately outlined through this short debate.
Several hon. Members have outlined some of their own personal experiences from their constituencies, and I know and accept that economic crimes not only represent a significant cost to the economy, but have real-life implications for individuals out there. That is something we must not forget about. I have seen it in my own constituency; just a few months ago I dealt with a gentleman from one of my towns, Killamarsh, who had had £20,000 taken from him in a telephone-based scam. We had to struggle to get that money back from the bank in the first place, but it should not be the responsibility of the individual, and the individual should not have to engage with their Member of Parliament, to get that money back through those processes. The money should never be taken in the first place, and we should prevent such problems before they happen.
On that basis, I accept the challenge here but, without taking anything away from the valuable and important points made today by all hon. Members, I highlight that it is important that the Government pursue a targeted and proportionate level of enforcement, focusing on achieving compliance from companies. I do not think anyone here today would disagree with that in principle. We must seek to counter financial crime, but we must also seek to protect the dynamism of the UK’s business environment.
The overwhelming majority of the UK’s 4.5 million companies contribute productively to the UK company, abide by the law and make a valuable contribution to society, and our responsibility to them is as important as the absolute requirement to crack down on the small minority who misuse the system. We must not undermine the strengths of our current systems nor overburden the law-abiding majority.
Notwithstanding that, the Government are committed to increasing the transparency of business so that those behind the abuse of companies can be identified and our law enforcement bodies can access the information to support their investigations. I know the main question today is one of timing; it is a question of how quickly we get there, and I appreciate the exhortations from hon. Members across the House. I assure them that both the Department I represent and the Government as a whole are working hard to bring forward appropriate measures as soon as we are able. We are taking it seriously, and further information will come forward on that as soon as possible.
I highlight that because it should be clear, based on things we have already done, that the intention is moving in the direction hon. Members want. Consultations were published a couple of months ago, and the Department has published responses on limited partnership reform, increasing transparency, and reforming the powers and role of Companies House—something the right hon. Member for Barking has highlighted throughout the debate. Members have seen a draft Bill to increase the transparency of overseas companies that own property in the UK, as referenced throughout the debate. As Members will know—many Members in the Chamber have been here longer than I have—by convention, the Queen’s Speech outlines the point at which the legislative programme comes forward, and we will do that in due course. I assure the House of the Government’s commitment in that regard.
The Minister is making a good and important speech. His Department is looking at a review of whistleblowing regulations and legislation. We have heard evidence from across the House that fraud now accounts for something like a third or even 40% of all crimes, and around 40% of those crimes are identified only because of the work of whistleblowers. It is widely acknowledged that whistleblower legislation is falling behind that in other countries. Does the Minister agree that we must focus on that issue in the context of this debate? Whistleblowers are key to finding the information, so that we can crack down on crimes that are facilitated within these organisations.
I am grateful to my hon. Friend for highlighting that important point. Whistleblowing is a vital part of an ecosystem that works and has appropriate checks and balances. He correctly highlights the need to ensure that our frameworks are appropriate for that, and I know that Ministers responsible for that area of policy are listening to this debate and will take his points on board.
Let me take a moment or two to talk about context. Context is important because, even in a good-natured and constructive debate such as this, it is important to acknowledge some of the work that has been done, while also recognising that Members are keen for us to move further and quicker. In 2015, the Government legislated to ban bearer shares and create a public register of beneficial owners of UK companies, and that register has been a template for countries across the world. Indeed, a number of years on, we still get requests from other parts of the world about it. Since 2016 the Government have made significant changes to the way they tackle money laundering, particularly through new powers in the Criminal Finances Act 2017, which include unexplained wealth orders, new seizure and forfeiture powers for bank accounts, and new protections for the sharing of information.
We welcomed moves such as the introduction of unexplained wealth orders, but that is the point we are making: they came in with a great bang, we had one successful one, there was then a failure, and since then there has been almost silence and the power has not been used. There is also a fear of failure, which is related to the fear of having to carry the costs of that failure. The Government could legislate on that, as the Americans have done, so that people cannot claim those massive £2 million or £3 million costs if they succeed in the courts. There is also a lack of resources within the enforcement agencies properly to prepare for such cases. After the case that we lost, investigative journalists showed clearly that falsehoods were told in the courts that led to the failure of that provision. Unexplained wealth orders are a great idea, but they are not being used.
I am grateful to the right hon. Lady, who is an expert in this area. I hope we all agree that having such legislation in place is a step forward, and that the opportunity and ability to use it is a positive thing. As she has outlined, such measures have been used in some instances, but there have also been challenges. I hope that that use will continue to be made in appropriate areas, and I will certainly pass back her comments to the Ministers who are reviewing this issue.
In 2018, the UK’s anti-money laundering regime was reviewed by the Financial Action Task Force, and the UK received the best rating of any country assessed in that round of evaluations. None the less, there is an acceptance that more needs to be done, and as a number of Members have said, a number of months ago we published the economic crime plan. Progress was updated on top of that, with 52 actions to tackle economic crime, and the Government are on track to deliver 49 of those.
There have been achievements as well, including the commencement of reforms to the suspicious activity reporting regime, with £172 million frozen or removed from potential criminals in a recent reporting year, and the creation of the National Economic Crime Centre, which a number of Members referenced. Its work in the fusion cell in April 2020 highlighted potential criminality, potential challenges and potential investment fraudsters. We are also legislating in the current Finance Bill for the economic crime levy. I hope all hon. Members have seen the action to secure a unified position in the G7 on international anti-corruption efforts, including an agreement to implement and strengthen beneficial ownership registers.
I am just coming to that point, so the right hon. Gentleman pre-empts me, but I am grateful for the opportunity to do so.
We have heard some very good speeches in this afternoon’s debate. The right hon. Gentleman highlighted that point about the Online Safety Bill and the importance of tackling online fraud, which was also referenced by Alison Thewliss, Joanna Cherry and—albeit, if he does not mind me saying so, once he got through the cheap shots—Mr McFadden. It is an important point to highlight.
Obviously, a specific Department is pursuing that legislation at the moment. The hon. Member for Glasgow Central, who sits on the Treasury Committee, heard on Monday that there is a variety of views about how best to deal with online fraud and which part of the legislation it should go in; I know that there was an active discussion about that in the Committee a few days ago. I will certainly pass back the comments made by Stephen Timms. I understand the importance of the matter that he highlights. I think all of us in the House agree about the challenge; the question is what it is appropriate to do and where it is appropriate to do it, but I absolutely heard what he and other Members said about the importance of trying to make progress in that area.
My hon. Friend Simon Fell brings to the House a wealth of knowledge and experience in this area, which his very good speech highlighted. He highlighted the extensive work that has been under way for many years, notwithstanding the requirement for more to be done, and, again, the important point about the real impacts on real, ordinary people. This is not a theoretical crime; it is one that has real impacts in all our constituencies, which we will return to this evening and tomorrow.
I know hon. Members are keen to talk about where we are going. The spending review announced just a few weeks ago highlighted a significant amount of taxpayer spending specifically to reform Companies House, to improve the accuracy of the register, to clamp down on fraud and to strengthen the register in the long term. I hope that that announcement and the real money associated with it demonstrate the Government’s intention to make progress in this regard. On top of that, next year the Government will publish a fraud action plan and an updated economic crime plan, we will report on the review of UK money laundering regulations and the supervisory regime, and we expect to receive a corporate criminal liability options paper from the Law Commission. Officials continue to work on the three consultations from the start of 2021.
A constant theme throughout the work on reform has been a mantra from business and transparency organisations alike that the reforms are important and supported, but that they want to get them right. That does not mean we should delay unnecessarily, but we want to make sure that whatever we bring forward—I accept the challenge from hon. Members that they wish to see that happen quickly—we do it in the right way and as quickly as possible.
Let me spend a few minutes on the specific reforms and proposals that have been outlined today, particularly by the right hon. Member for Barking and my hon. Friend the Member for Thirsk and Malton, who secured the debate. The Government will legislate to expand the function of the registrar of companies to include a new function to maintain the integrity of the register of companies and the UK business environment. The registrar will be equipped with new powers to carry out that function, including powers to query suspicious appointments or firings, and in some cases to request further evidence or reject the filing. Companies House will have more extensive legal gateways for data sharing with law enforcement, other Government bodies and the private sector. That will result in more efficient sharing of information on suspicious activity with law enforcement, and the establishment of feedback loops with other Government bodies and the private sector. It will make anonymous filings harder and discourage those who wish to hide their company ownership through nominees or opaque structures.
Alongside the legislative changes I have outlined, Companies House will change. The combination of legislative reform and the transformation of Companies House will help to ensure that the UK is the best place to start and to grow a business, and that companies on the UK register are run responsibly, transparently and with accountability. Hon. Members have noted the draft Registration of Overseas Entities Bill, which has already received prelegislative scrutiny. That legislation will ensure the transparency of ownership and control of overseas entities that own property in the UK, about which concern was expressed.
The right hon. Member for Barking talked about proposed new corporate criminal liability offences. That is still under consideration. As hon. Members will be aware, the call for evidence a few months ago did not prove to be conclusive, so the Government have asked the Law Commission to undertake an in-depth review of the laws around that and to consider recommendations on proportionate opportunities for reform.
I recognise that hon. Members are keen for us to make progress—that desire was expressed very clearly today—but I hope they recognise that much work has been done. This debate has been a timely reminder of the view of this House on an important area and on the desire to make progress. I thank Members who have spoken today and the Backbench Business Committee for the opportunity to discuss this issue. I look forward to making further progress in the months and years ahead.
Very briefly, I want to start by thanking saying a big “Thank you” to all who participated in today’s debate for the issues they raised.
I am particularly grateful to Kevin Hollinrake. It is a joy to work with him. He raised important points on developing countries, which we did not come back to. It is true, however, that developing countries lose three times as much through tax avoidance and corruption as they gain from international aid, so if the Government want to cut the international aid budget, they could take action there that would be hugely beneficial.
All Members talked about the importance of transparency. We are all at one with my right hon. Friend Stephen Timms in wanting to include paid-for advertising in the online harms Bill. We are working across the House and I think there is huge agreement, certainly on the Back Benches, on that matter.
The contribution from Simon Fell was excellent. He has some great ideas and I do hope he will join our all-party parliamentary group. We are always looking for new ideas that will help to strengthen the fight against tax avoidance, tax evasion and economic crime, so that would be terrific.
I am hugely grateful to Alison Thewliss for her constant support. She is dogged in pursuing the issues that are of importance to her. I am also very grateful to my right hon. Friend Mr McFadden, who gave such an eloquent speech.
I just want to say three things in response to the Minister. First, of course most businesses and individuals behave well, but if we do not work to rid ourselves of criminals, kleptocrats and money launderers who infect our economy, we do a disservice to those who want to work legitimately. That was a point made by John Penrose, our anti-corruption tsar. The point is not, therefore, that this is the exception. If we do not deal with the exception, we break the rule. I hope the Minister will take that away. Secondly, while we welcome the Government’s general support, we will keep pushing. The proposed legislation is there and we want it on the statute book. Those are choices that the Government can make, and I hope they will make them. Thirdly, such things as paid-for fraudulent ads affect millions of people across the country in every constituency, and we have all had such cases. That is about individuals, but there is also the behaviour, for example, of the Aliyev family from Azerbaijan and the way they launder their money here and buy their privileges in our communities. That has to be stopped. That is not the sort of Britain that any of us wants to live in.
Weak regulation, poor enforcement and lack of transparency have an impact not just here in Britain, but elsewhere in the world. I will finish with this story. We all remember too well the terrible explosion in Lebanon, when ammonium nitrate killed a lot of people and destroyed that country. I was amazed to get a call a few weeks after it occurred from someone who told me that the company that owned the ammonium nitrate in the warehouse at the port in Lebanon was UK-registered. I gave a usual quote to demonstrate the lack of proper regulatory controls here. I was then inundated with phone calls in which I was told that not only was the company owned here, but it had a nominee beneficial owner based in Portugal or Spain—somewhere like that. The company said that it was dormant and had therefore not filled in HMRC returns. Further investigation by the Lebanese Bar Council and journalists in Lebanon demonstrated that, actually, the ammonium nitrate was not destined to be used as fertiliser in Mozambique; it had been brought by Russian Syrians to be given to Assad in Syria for barrel bombs to be used on the population in Syria. That is outrageous. We are facilitating that, and the tragedy it created is what makes it so important—so imperative—that the Government take action.
Question put and agreed to.
That this House
recognises the devastating impact economic crime has on individuals, businesses, families and society;
considers it unacceptable that the cost of money laundering alone exceeds £100 billion a year according to the National Crime Agency;
is concerned that in the wake of the Pandora Papers leak there is inadequate transparency, regulation and resources in place to effectively tackle this severe problem;
and calls on the Government to bring forward legislative proposals to tackle economic crime as a matter of priority, integral to which are provisions to introduce a criminal offence for failure to prevent economic crime, reform Companies House and introduce a beneficial ownership register for the overseas owners of UK property.