Clause 1 - Overview

Economic Crime (Transparency and Enforcement) Bill – in the House of Commons at 6:29 pm on 7th March 2022.

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

Photo of Rosie Winterton Rosie Winterton Deputy Speaker (First Deputy Chairman of Ways and Means)

With this it will be convenient to discuss the following:

Clauses 2 and 3 stand part.

Amendment 24, in clause 4, page 2, line 18, at end insert—

“(aa) a statement either—

(i) of the names of any persons who are registered beneficial owners of the entity and are designated persons listed on the UK Sanctions List, or

(ii) that no registered beneficial owners of the entity are so listed;”

This amendment would require the identity of any sanctioned registered beneficial owners of the entity, or a statement that there are no such persons, to be included in an application for registration.

Clauses 4 to 6 stand part.

Amendment 5, in clause 7, page 4, line 11, after “update period” insert “or trigger event”.

This amendment would extend the duty to update the registrar to certain trigger events.

Amendment 25, page 4, line 11, at end insert—

“(aa) an updated statement in accordance with section 4(1)(aa)”.

This amendment requires statements made under amendment 24 to be updated annually.

Amendment 6,  page 5, line 18, at end insert—

“(8A) For the purposes of this section, trigger event means the date on which an overseas entity has reasonable cause to believe that anyone has become or ceased to become a registrable beneficial owner.”

This amendment defines a trigger event.

Clause 7 stand part.

Amendment 42, in clause 8, page 5, leave out lines 30 to 35 and insert—

“(a) on the first day of contravention, a fine,

(b) on the second continued day of contravention, an additional fine of £500, and

(c) on each subsequent day of continued contravention, an additional daily default fine of the value of the previous day’s fine plus £50.

(2A) If the contravention continues for a period of six months beginning with the first day of contravention, the Court must order the seizure of assets from the person guilty of the offence of the value of the cumulative fines to which that person is liable.”

The purpose of this amendment is to provide progressively higher fines for a registered overseas entity, and every officer of the entity, for an initial default in complying with its duty to update the register, leading to a seizure of assets if non-compliance continues for 6 months.

Government amendment 45.

Amendment 7, page 5, line 31, leave out “£500 and one-tenth of level 4 on the standard scale” and insert

“£2,500 and half of level 4 on the standard scale.”

This amendment would increase the daily default fine for an offence committed under section 8 in England or Wales.

Government amendment 46.

Amendment 8,  page 5, line 35, leave out “one-tenth” and insert “half”.

This amendment would increase the daily default fine for an offence committed under section 8 in Scotland or Northern Ireland.

Amendment 43,  page 6, leave out lines 1 to 6 and insert—

“(a) on the first day of continued contravention, a fine of £500, and

(b) on each subsequent day of continued contravention, an additional daily default fine of the value of the previous day’s fine plus £50.

(6) If the contravention continues for a period of six months beginning with the first day of contravention, the Court must order the seizure of assets from the person guilty of the offence of the value of the cumulative fines to which that person is liable.”

The purpose of this amendment is to provide progressively higher fines for every officer of the entity for a continuing contravention of its duty to update the register, leading to a seizure of assets if non-compliance continues for 6 months.

Government amendments 47 and 48.

Clause 8 stand part.

Amendment 9, in clause 9, page 7, line 14, leave out subsection (8).

This amendment would extend the definition of an overseas entity registered as the proprietor of a relevant interest in land for the purposes of sections 9 and 10 to include such entities irrespective of date of registration of the entity.

Clauses 9 to 11 stand part.

Amendment 41, in clause 12, page 8, line 32, at end insert—

“(3A) If an entity declares that there is no person whom it knows, or has reason to believe, is a registrable beneficial owner in relation to that entity, the registrar of companies in England and Wales must give an information notice under this section to that entity requiring full details of how the entity is controlled.”

This amendment requires an explanation to be given where an entity claims there is no registrable beneficial owner. Making a false statement in purported compliance, or failing to comply, with a notice under this section is an offence under section 15.

Clause 12 stand part.

Clauses 13 to 15 stand part.

Amendment 10, in clause 16, page 10, line 29, at end insert—

“and (d) prior to the registrar taking action under section 5(1).”

This amendment establishes that such verification processes made under regulations should take place prior to the registrar recording the date of registration in the register, allocating an overseas entity ID to the entity and record the overseas entity ID in the register.

Amendment 11, page 10, line 30, leave out “may” and insert “must”.

This amendment requires the Secretary of State to include the specified information in regulations.

Government amendment 49.

Amendment 12, page 10, line 35, at end insert—

“(4) The Secretary of State must make regulations under this section no later than 28 days following the commencement of Part 1 of this Act”.

This amendment would require the Secretary of State to make regulations under this section within 28 days of the commencement date.

Clauses 16 and 17 stand part.

Amendment 4, in clause 18, page 11, line 16, leave out subsection (1)(b).

This amendment removes the ability of the Secretary of State to exempt an individual from the requirements to register their overseas entities on the grounds of the economic wellbeing of the United Kingdom.

Clauses 18 to 20 stand part.

Amendment 37, in clause 21, page 13, line 1, leave out from beginning to end of line 2 and insert—

“(3) No cause of action in civil proceedings shall lie against a person in respect of the making of a protected disclosure as defined in section 1 of the Public Interest Disclosure Act 1998 in relation to information from the register.

(3A) In a prosecution of a person for any offence prohibiting or restricting the disclosure of information it is a defence for that person to show that, at the time of the alleged offence, the disclosure was, or was reasonably believed by the person to be, a protected disclosure.”

Clause 21 stand part.

Clauses 22 to 25 stand part.

Amendment 44, in clause 26, page 16, leave out lines 10 to 15 and insert—

“(a) on the first day of contravention, a fine,

(b) on the second continued day of contravention, an additional fine of £500, and

(c) on each subsequent day of continued contravention, an additional daily default fine of the value of the previous day’s fine plus £50.

(2A) If the contravention continues for a period of six months beginning with the first day of contravention, the Court must order the seizure of assets from the person guilty of the offence of the value of the cumulative fines to which that person is liable.”

The purpose of this amendment is to provide progressively higher fines for a registered overseas entity, and every officer of the entity, for providing inconsistent information for the register, leading to a seizure of assets if non-compliance continues for 6 months.

Government amendments 50 and 51.

Clause 26 stand part.

Clauses 27 to 30 stand part.

Amendment 26, in clause 31, page 18, line 13, leave out “knowingly or recklessly”.

This amendment removes the requirement that a false statement to the registrar needs to be proven to have been given knowingly or recklessly for that statement to constitute an offence.

Amendment 27, page 18, line 18, at end insert—

“(1A) If the registrar has reason to believe that a person may have committed an offence under section 31 the registrar may require—

(a) any person connected with the entity, including in any professional or advisory capacity,

(b) any public body, or

(c) any other person to provide information in connection with that potential offence.

(1B) A requirement under subsection (1A) applies notwithstanding the data protection legislation (within the meaning in section 25).

(1C) A person who fails to comply with a requirement under subsection (1A) commits an offence.”

This amendment gives the registrar powers to demand information in connection with suspected false statement offences.

Clause 31 stand part.

Clauses 32 and 33 stand part.

Amendment 34, in clause 34, page 20, line 20, at end insert—

“, provided that the person can show that he or she was not acting knowingly, recklessly or carefully.”

This amendment would require those giving advice in a professional capacity to show that they were not acting knowingly, recklessly or carelessly if they are not to be caught by the provisions of subsection (2).

Clause 34 stand part.

Clauses 35 to 37 stand part.

Amendment 29, in clause 38, page 21, line 4, leave out from “if” to “the” in line 5 and insert

“it is reasonable to assume that, on the balance of probabilities,”.

This amendment reflects the civil law standard of proof.

Amendment 30, page 21, line 6, at end insert—

“, or conduct which would have been an offence if the word ‘recklessly’ in clause 15(2)(b) were replaced with ‘carelessly’”.

This amendment expands the test to behaviour which may reflect a lack of due diligence as well as deliberate intent.

Amendment 31, page 21, line 6, at end insert—

“(1A) Where the failure relates to the ownership of a qualifying estate (as defined in Schedule 4A to the Land Registration Act 2002), any penalty imposed by the registrar shall be calculated by reference to the market value of that qualifying estate.”

This amendment makes provision for the calculation of penalties by reference to the market value of the qualifying estate.

Amendment 32, page 21, line 9, at end insert—

“(ba) for penalties to be reduced in cases where a person was acting carelessly, and not recklessly or knowingly;”.

Manuscript amendment 63, page 21, line 12, insert—

“(f) disqualifying the person from the electoral roll.”

Amendment 33, page 21, line 20, leave out subsection (4) and insert—

“(4) The regulations must provide that—

(a) if a person is convicted of an offence and is liable to a fine, and is subsequently the subject of a financial penalty under this clause relating to that same conduct, the penalty shall be reduced by the amount of the fine (but not below zero), and

(b) if a person is subject to a financial penalty under this clause, and is subsequently convicted of an offence relating to that same conduct, any fine for which they are found liable shall be reduced by the amount of the financial penalty (but not below zero).”

Clause 38 stand part.

Clauses 39 to 49 stand part.

Amendment 38, in clause 50, page 32, line 9, at end add—

‘(2) The Secretary of State shall establish an inquiry into the use of legal intimidation and strategic lawsuits against public participation (SLAPPs) to prevent such actions from being used to prevent economic crime from being uncovered.”

Clause 50 stand part.

Government amendment 59.

Clauses 51 to 52 stand part.

Government amendments 52 to 54.

Clause 53 stand part.

Amendment 1, in clause 54, page 33, line 7, after “force”, leave out “on such day as” and insert

“at the end of six months from the day on which this Act is passed or on any earlier day that”.

The intention of this amendment is for the Parts 1 and 2 of the Act to come into force no later than 6 months from being passed.

Government amendments 60 to 62.

Amendment 36, page 33, line 20, at end insert—

“(8) The provisions of this Act shall have retrospective effect from the date that the Bill received first reading in the House of Commons.”

This amendment seeks to move forward the provisions of this Bill, backdating them to the day upon which it received first reading.

Clause 54 stand part.

Amendment 2, in clause 55, page 33, line 22, leave out “Economic Crime (Transparency and Enforcement)” and insert “Registration of Overseas Entities, etc”.

The intention of this amendment is for the short title to reflect more accurately the contents of the bill.

Clause 55 stand part.

Government new clauses 31 to 40.

Government manuscript new clause 41.

New clause 2—Report on funding of enforcement agencies—

‘Within 28 days of this Act being passed, the Secretary of State must publish and lay before Parliament a report on the funding of enforcement agencies in connection with the provisions of Part 2 of this Act.’

This new clause would require the Secretary of State to publish and lay before Parliament a report on the funding of enforcement agencies in connection with the reforms to unexplained wealth orders, as provided for in Part 2 of the Bill.

New clause 3—Requirement on entity to register if it owns certain assets—

‘(1) An overseas entity must apply for registration in the register of overseas entities if the entity is registered as the owner of—

(a) a professional football club,

(b) a jet, or

(c) a yacht.

(2) In this section—

“professional football club” means any association football club playing in the English Premier League, the English Football League or the Scottish Professional Football League.

“jet” means any jet aircraft with a value over £500,000.

“yacht” means any medium sized sailing boat with a value over £500,000.’

This new clause would require an overseas entity that owns a football club, jet or yacht to apply for registration in the register of overseas entities.

New clause 4—Registrar of companies for England and Wales: additional duties—

‘(1) The Secretary of State must amend the Money Laundering, Terrorist Financing and Transfer of Funds Regulations (2017/692) to specify that the registrar of companies for England and Wales is a supervisory body in relation to overseas entities as defined in section 2 of this Act.

(2) The Secretary of State must direct the registrar of companies for England and Wales to participate in a government identity assurance scheme.’

The purpose of this new clause is for Companies House to be made an anti-money laundering supervisor and to register as part of the UK Government’s Verify scheme.

New clause 5—Duty to report on representations received by the Government relating to economic crimes—

‘(1) Within 1 month of this Act being passed, the Secretary of State must lay before Parliament a disclosure report detailing all representations received by the Government in the last twelve months regarding the register of overseas entities, as provided for by Part 1 of this Act.

(2) The disclosure report under subsection (1) must include—

(a) the minutes from or any notes of meetings in which such representations were made; and

(b) all correspondence, including submissions and electronic communications, addressed or copied to any Minister or former Minister of the Crown.

(3) Information provided under subsection (2)(b) must include—

(a) the names of entities making representations;

(b) the dates on which representations were made; and

(c) a summary of what the representation was.’

This new clause requires the Government to lay before Parliament a report containing details of all representations made by entities including businesses, regarding the register of overseas entities, provided for by Part 1 of the Bill. The report must be laid within 1 month of the Bill attaining Royal Assent.

New clause 6—Transitional Period for Certain Qualifying Estates—

‘(1) A transitional period of 18 months shall apply to—

(a) an entity that—

(i) is registered in the register of title kept under the Land Registration Act 2002 as the proprietor of a qualifying estate within the meaning of Schedule 4A to that Act, and

(ii) became so registered in pursuance of an application made on or after 1 January 1999,

(b) an entity that—

(i) in relation to a plot of land that is registered in the Land Register of Scotland, is (or is to be) entered as proprietor in the proprietorship section of the title sheet for the plot of land by virtue of an application for registration made on or after 8 December 2014,

(ii) in relation to a lease that was recorded in the General Register of Sasines or registered in the Land Register of Scotland before that date is, by virtue of an assignation of the lease registered in the Land Register of Scotland on or after that date, the tenant under the lease, or

(iii) in relation to a lease that was registered in the Land Register of Scotland on or after that date, is the tenant under the lease, or

(c) an entity that—

(i) is registered in the register kept under the Land Registration Act (Northern Ireland) 1970 (c. 18 (N.I.)) as the owner of a qualifying estate within the meaning of Schedule 8A to that Act, and

(ii) became so registered on or after the day on which that Schedule came into force.

(2) Overseas entities registered as the proprietor of relevant interests in land falling within the scope of subsection (1) must comply fully with all obligations under the Act at the end of the period of 18 months beginning with the commencement date.’

This new clause creates a transition period for certain overseas entities registered as the proprietor of relevant interests in land in order to provide the Government with a time frame to resolve issues with the Land Registry that currently make registration impracticable.

New clause 7—38A Further reforms to Companies House—

‘(1) Not later than 28 days from when Part 1 of this Act comes into force, the Secretary of State must publish draft legislation for the purpose of making further reforms to Companies House, including to support the effective functioning of the register of overseas entities.

(2) The draft legislation must include—

(a) new powers for the registrar to aid the verification of foreign entities applying for registration as set out in section 4 of this Act;

(b) new powers for the registrar to better share data with enforcement agencies; and

(c) reforms that will improve the quality and veracity of the information on the register.’

This new clause would compel the Secretary of State to publish draft legislation on reforms to Companies House, including reforms that would support the operation of the Act.

New clause 8—47A Annual reports on unexplained wealth orders—

‘(1) The Secretary of State must prepare annual reports on unexplained wealth orders made by the High Court on application by an enforcement authority under the Proceeds of Crime Act 2002.

(2) An annual report must —

(a) specify the number of unexplained wealth orders made during the relevant period; and

(b) specify the number of applications by each enforcement authorities during the relevant period.

(3) An annual report must be published and laid before Parliament before the end of the 4 month period beginning immediately after the last day of the period to which the report relates.’

This new clause requires the Secretary of State to make an annual report on the use of unexplained wealth orders.

New clause 9—Review of Act 2022 and adequacy of resources

‘(1) The Secretary of State must publish a review of the operation of this Act by 31 December 2022.

(2) The registrar of companies in England and Wales must publish a report on the operation of this Act by 31 December 2022.

(3) The report by the Secretary of State under subsection (1) must include an assessment of the adequacy of resources allocated for the operations of the registrar of companies in England and Wales, as augmented under this Act.

(4) The report by the Secretary of State under registrar of companies in England and Wales must include an assessment of what the effect on performance of the over the following 12-month period if the real-terms resources after inflation allocated by the Secretary State were increased by—

(a) 10%,

(b) 25% and

(c) 50%.

(5) The Secretary of State must publish a further review of the operation of this Act by 31 December 2023, and at least once in each subsequent calendar year.

(6) The registrar of companies in England and Wales must publish a further report of the operation of this Act by 31 December 2023, and at least once in each subsequent calendar year.’

This new clause would require annual reports from the Government and Companies House on the effectiveness of this Act, and the adequacy of resources allocated to Companies House.

New clause 10—Review of sanctions regulations: requirement for a debate in House of Commons—

‘In section 30 of the Sanctions and Anti-Money Laundering Act 2018 (Review by appropriate minister of regulations under section 1), after subsection (5), insert—

“(5A) An appropriate Minister of the Crown must, not later than ten sitting days after a report under this section has been laid before Parliament, make a motion in the House of Commons providing for a debate in relation to the report.”’

This new clause would require the Government to schedule a debate on reports laid before the House in relation to the continued appropriateness of regulations made under section 1 of the Anti-Money Laundering Act 2018.

New clause 13—Power to require overseas entity to register if it owns property within a freeport—

‘(1) The Secretary of State may by notice require an overseas entity to apply for registration in the register of overseas entities within the period of 6 months beginning with the date of the notice if at the time the notice is given—

(a) the entity is registered as the proprietor of a relevant interest in property within a UK freeport, and

(b) the entity is not registered as an overseas entity, has not made an application for registration that is pending and is not an exempt overseas entity.

(2) A notice under subsection (1) lapses if, before the end of the period mentioned there, the overseas entity—

(a) ceases to be registered as the proprietor of a relevant interest in property within a freeport, or

(b) becomes an exempt overseas entity.

(3) If an overseas entity fails to comply with a notice under subsection (1), an offence is committed by—

(a) the entity, and

(b) every officer of the entity who is in default.

(4) A person guilty of an offence under subsection (3) is liable—

(a) on summary conviction in England and Wales, to imprisonment for the maximum summary term for either-way offences or a fine (or both);

(b) on summary conviction in Scotland, to imprisonment for a term not exceeding 12 months or a fine not exceeding the statutory maximum (or both);

(c) on summary conviction in Northern Ireland, to imprisonment for a term not exceeding 6 months or a fine not exceeding the statutory maximum (or both);

(d) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both).

(5) In subsection (4)(a) “the maximum summary term for either-way offences” means—

(a) in relation to an offence committed before the time when paragraph 24(2) of Schedule 22 to the Sentencing Act 2020 comes into force, 6 months;

(b) in relation to an offence committed after that time, 12 months.

(6) In this section “exempt overseas entity” means an overseas entity of such description as may be specified in regulations made by the Secretary of State for the purposes of this section.

(7) Regulations under subsection (6) are subject to the affirmative resolution procedure.’

This new clause requires an overseas entity to apply for registration in the register of overseas entities if they have a property within a freeport.

New clause 14—Commission for the Protection of Whistleblowers—

‘The Secretary of State shall establish a Commission for the Protection of Whistleblowers for the purpose of enhancing the transparency and enforcement of economic crime covered by this Act.’

New clause 18—Publication of information during transitional period—

‘(1) The Secretary of State must record the activities of overseas entities that fall within the scope of this Bill which take place during the transitional period, provided for by part 2 of schedule 3 and part 2 of schedule 4.

(2) The Secretary of State must publish on a weekly basis the information gathered under paragraph (1).

(3) “Information” under subsection (2) means details on overseas entities as provided for by Part 1 of this Act.’

This new clause would require the Secretary of State to record and publish the details of companies benefitting from the 18-month transitional period, to facilitate scrutiny as to whether they may be linked with the Russian regime.

New clause 19—Power to require registration of donations to registered political party, etc.—

‘(1) The Secretary of State must by notice require a company or Limited Liability Partnership (LLP) to apply for registration in the register of overseas entities within the period of 6 months beginning with the date of the notice if at the time the notice is given—

(a) the company or LLP has made a donation to—the entity is not registered as an overseas entity, has not made an application for registration that is pending and is not an exempt overseas entity.

(i) a registered political party,

(ii) a candidate at an election,

(iii) a third party (non-party campaigner under Schedule 11 of the Political Parties, Elections and Referendums Act 2000 (PPERA)),

(iv) a permitted participant at a referendum under Schedule 15 of PPERA, or

(v) any other regulated entity under Schedule 7 of PPERA, including holders of elective office, members of political parties, and members’ associations, and the entity has not made in written form to the recipient the declaration specified in subsection (2) of this section; and

(b) the entity is not registered as an overseas entity, has not made an application for registration that is pending and is not an exempt overseas entity.

(2) The declaration required by (1)(a) is that the company or LLP’s profits generated and taxable within the UK over the previous 12 months are greater than the value of the donation given.

(3) A declaration under this section must also state the company or LLP’s full name, address and registration number.

(4) A person who knowingly or recklessly makes a false declaration under this section commits an offence attracting the following penalties—

(a) on summary conviction in England and Wales or Scotland: to imprisonment for a term not exceeding 12 months or a fine not exceeding the statutory maximum (or both);

(b) on summary conviction in Northern Ireland: to imprisonment for a term not exceeding 6 months or a fine not exceeding the statutory maximum (or both);

(c) on conviction on indictment: to imprisonment for a term not exceeding 12 months or a fine (or both).

(5) The Secretary of State may by regulations make provision requiring a declaration under this section to be retained for a specified period.

(6) The requirement in subsection (1) does not apply where, by reason of section 71B(1)(b) of PPERA, the entity by whom the donation would be made is a permissible donor in relation to the donation at the time of its receipt by the party.’

This new clause is intended to require that any donations made by UK companies or limited liability partnerships come from sources generating profits made by genuine commercial activity carried out within the UK, and prevent donations of foreign or unknown provenance from being channelled through UK companies or LLPs into regulated political entities (political parties, third parties, campaigners at referendums, candidates etc.)

New clause 21—Report on co-ordination and co-operation—

‘The Secretary of State must lay a report before both Houses of Parliament no later than 31 December 2022, and at least once in each subsequent calendar year, setting out progress in co-ordination and co-operation in relation to this Act and (in particular) an assessment of the effectiveness of information-sharing in relation to entities registered or operating in—

(a) the Crown Dependencies (the Bailiwicks of Jersey and Guernsey, and the Isle of Man), and

(b) the British Overseas Territories (Anguilla, Bermuda, British Antarctic Territory, British Indian Ocean Territory, British Virgin Islands, Cayman Islands, Falkland Islands, Gibraltar, Montserrat and Pitcairn Islands.’

This new clause requires annual reports on transparency and enforcement in the Crown Dependencies and the British Overseas Territories.

New clause 22—Report on resources for implementing this Act—

‘(1) The Secretary of State must lay a report before both Houses of Parliament no later than 31 December 2022, and at least once in each subsequent calendar year, setting out the funding and achievements in relation to this Act of—

(a) National Crime Agency and

(b) the Office of Financial Sanctions Implementation, in the most recent year ending 31 March, with an assessment by the Comptroller and Auditor-General of value for money of each of those organisations.

(2) Each report under subsection (1) must be accompanied by—

(a) an assessment from the organisation concerned of the adequacy of the long-term financing provided by the Secretary of State, and

(b) an assessment by that organisation of the expected outcomes in terms of performance and value for money, if funding for the next financial year was increased by 20%

(3) Before laying a report under subsection (1), the Secretary of State must consult the Scottish Ministers.’

The intention of this new clause is to ensure parliamentary oversight of the funding of the National Crime Agency and Office of Financial Sanctions in relation to the implementation of this Act.

New clause 23—Scottish Limited Partnerships—

‘(1) The Secretary of State must consult the Scottish Ministers on the application of this Act to Scottish limited partnerships.

(2) The Secretary of State may make regulations, including supplementary, incidental and consequential provision, to apply any provision in this Act to Scottish limited partnerships.

(3) Regulations made under subsection (2) with the consent of the Scottish Ministers are subject to the negative procedure.

(4) Regulations made under subsection (2) which do not have the consent of the Scottish Ministers are subject to the affirmative procedure.’

The intention of this new clause is to ensure that Scottish limited partnerships are covered by the provisions in the Bill.

New clause 24—Review of funding arrangements for enforcement agencies—

‘(1) The Secretary of State must conduct a review of the suitability of the funding arrangements for enforcement agencies in light of the provisions of this Act and in connection with the wider context of economic crime.

(2) The report of the findings of the review under subsection (1) must be published and laid before Parliament within 3 months of this Act being passed.’

This new clause would require the Secretary of State to conduct a review of the funding arrangements for enforcement agencies in light of the provisions of the Bill and in relation to economic crime more broadly.

New clause 25—Reports on operation of Act—

‘(1) The Secretary of State must lay before both Houses of Parliament no later than 31 December 2022, and at least once in each subsequent calendar year, a report on the operation of this Act.

(2) The Secretary of State must also lay before both Houses of Parliament no later than 31 December 2022, and at least once in each subsequent calendar year, a report from the register of companies in England and Wales on the operation of this Act.’

The purpose of this new clause is to ensure that Parliament is regularly informed about the operation of this Act.

New clause 26—Designation of persons under sanctions regulations: reform—

‘(1) The Sanctions and Anti-Money Laundering Act 2018 is amended as follows.

(2) In section 11 (designation of a person by name under a designation power), leave out subsection (2)(b)(ii).

(3) In section 12 (designation of persons by description under a designation power), leave out subsection (5)(b)(ii).’

This new clause would amend the Sanctions and Anti-Money Laundering Act 2018. It would remove the requirement that a Minister, when designating a person by name or persons of a specified description in regulations made under that Act, to have regard to the likely significant effects of the designation on those persons.

New clause 27—Commission for the Protection of Whistleblowers (No.2)—

‘(1) The Secretary of State shall establish a Commission for the Protection of Whistleblowers for the purpose of promoting transparency in relation to breaches of the provisions of this Act.

(2) The Commission for the Protection of Whistleblowers must work with relevant authorities to ensure that any concerns raised by whistleblowers in relation to breaches of the provisions of this Act are dealt with responsibly and effectively by the relevant authorities.’

New clause 28—Emergency asset-freezing orders—

‘(1) The Secretary of State may make an unexplained wealth order in respect of any property or cash in whatever form, including sums held in blockchain accounts, that is held (or that the Secretary of State has reason to believe that is held) by or on behalf of a designated person.

(2) The Secretary of State may make an interim freezing order in respect of the property or cash in whatever form, including blockchain, if the Prime Minister considers it necessary to do so for the purposes of avoiding the risk of any recovery order that might subsequently be obtained being frustrated, and that it is in the interests of national security that the order be made.

(3) An interim freezing order has the same meaning as in section 362J of the Proceeds of Crime Act 2002.

(4) The Secretary of State may designate under subsection (1) any person whom Secretary of State considers meets, or is likely to meet, the criteria for sanctions to be imposed under the Sanctions and Anti-Money Laundering Act 2018.

(5) The power in this section lapses 6 months after the date on which this Act is passed, unless the Secretary of State makes an order to continue this section in force for a further period of up to six months.

(6) An order under subsection (4) may be made more than once, but every such order may be made only after a draft of the order has been approved by resolution of each House of Parliament.’

The intention of this new clause is to provide a temporary emergency power to freeze the assets of individuals, companies or other entities in order to prevent asset flight before sanctions are in place.

New clause 29—Asset freezing in respect of individuals considered for sanctions—

‘(1) The Secretary of State may by notice publish the name of a person being considered as a subject for sanctions.

(2) A person in respect of whom a notice has been published under subsection (1) is immediately subject to the provisions of this section.

(3) A person in respect of whom a notice has been published under subsection (1) is prohibited from—

(a) selling any assets they own or have an interest in,

(b) moving any assets they own or have an interest in out of the United Kingdom, or

(c) moving any of their funds out of the United Kingdom.

(4) ‘Assets’ in subsection (3)(a) or (b) includes (but is not limited to)—

(a) land;

(b) houses, flats or other private accommodation;

(c) commercial, industrial, agricultural and other buildings, premises or property;

(d) businesses;

(e) personal possessions, works of art, jewellery or collectibles with an individual value of more than £500;

(f) motor vehicles;

(g) yachts or boats; and

(h) aircraft.

(5) ‘Funds’ in subsection (3)(c) means financial assets and economic benefits of any kind, including (but not limited to)—

(a) gold, cash, cheques, claims on money, drafts, money orders and other payment instruments;

(b) deposits with relevant institutions or other persons, balances on accounts, debts and debt obligations;

(c) publicly and privately traded securities and debt instruments, including stocks and shares, certificates representing securities, bonds, notes, warrants, debentures and derivative products;

(d) interest, dividends or other income on or value accruing from or generated by assets;

(e) credit, rights of set-off, guarantees, performance bonds or other financial commitments;

(f) (letters of credit, bills of lading, bills of sale; and

(g) documents providing evidence of an interest in funds or financial resources.

(6) A person who breaches any prohibition under this section commits an offence.

(7) A person who engages in an activity knowing or intending that it will enable or facilitate the commission by another person of an offence under paragraph (6) commits an offence.

(8) A person guilty of an offence under subsection (6) is liable—

(a) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both;

(b) on summary conviction—

(i) to imprisonment for a term not exceeding six months; or

(ii) to a fine which in Scotland or Northern Ireland may not exceed the statutory maximum,

(None) or to both.

(9) A person guilty of an offence under subsection (7) is liable on summary conviction—

(a) to imprisonment for a term not exceeding six months; or

(b) to a fine which in Scotland or Northern Ireland may not exceed level 5 on the standard scale, or to both.’

This new clause would prevent individuals whom the Secretary of State has named as being considered as a subject for sanctions from selling their assets or moving funds or assets out of the UK.

New clause 30—Proposals for enforcement agencies to retained recovered wealth—

‘Within 28 days of this Act being passed, the Secretary of State must publish and lay before Parliament a report setting out proposals to allow for the wealth recovered in connection with the use of unexplained wealth orders and other anti-corruption powers under the Proceeds of Crime Act 2002 and the Criminal Finances Act 2017 to be retained by the agencies involved in countering economic crime.’

This new clause would require the Secretary of State, within 28 days of the Bill being passed, to publish and lay before Parliament a report setting out proposals to allow for the wealth recovered in connection with the use of unexplained wealth orders and other anti-corruption powers to be retained by the relevant enforcement agencies.

Amendment 28, page 35, line 3, schedule 1, at end insert—

“(1A) The required information about an individual owner who is not a British citizen must include information about whether that individual has ever held a Tier 1 (investor) visa issued in accordance with paragraphs 245E to 245EF of the Immigration Rules.”

This amendment would ensure transparency over the use of overseas entities by individuals who have held so-called golden visas.

Amendment 40, in schedule 1, page 35, line 38, at end insert—

“6 In a case where Condition 5 in paragraph 6 of Schedule 2 is met in relation to the registrable beneficial owner, the required information includes details of the role of the beneficial owner in relation to the trust.”

This amendment would ensure that the required information includes details of the role of the beneficial owner in relation to a trust, where a person controls a trust which owns shares, has voting rights, can appoint or remove directors or exercise significant influence or control over an entity.

That schedule 1 be the First schedule to the Bill.

Amendment 3, in schedule 2,  page 37, line 30, at end insert—

“4A Any individual trust, company, government or public authority wherever resident shall be treated as a registrable beneficial owner in relation to an overseas entity for the purposes of this Act if a beneficial owner of a qualifying estate as defined in Schedule 4A that is held by the overseas entity whether or not the individual trust, company, government or public authority holds itself any interest in that overseas entity.

4B In relation to a trust which is to be treated as a registrable beneficial owner, full details shall be given in the registration of the senior trustees and principal beneficiaries.”

The intention of this amendment is to facilitate the identification of the beneficial owners of registered trusts.

Amendment 18, page 38, line 5, leave out “25%” and insert “10%”.

The intention of this amendment is to define as a beneficial owner a person who holds more than 10% of the shares in an entity.

Amendment 19, page 38, line 8, leave out “25%” and insert “10%”.

The intention of this amendment is to define as a beneficial owner a person who holds more than 10% of the voting rights in an entity.

Amendment 39, page 38, line 23, at end insert—

‘6A (1) A person (“A”) is a beneficial owner of an overseas entity or other legal entity (“B”) if—

(a) A is closely connected to a person (“C”) to whom one or more of the conditions in paragraph 6 applies; and

(b) A—

(i) benefits directly from C’s role in respect of B, or

(ii) previously exercised the role in relation to B that is now exercised by C.

(2) For the purposes of this Schedule two persons are “closely connected” if—

(a) they are married to one another;

(b) they are in a civil partnership with one another;

(c) one person is the parent of the other.

(d) one person is the brother or sister of the other.

(3) Where this paragraph applies, the required information under Schedule 1 must be provided in a single statement in relation to both A and C.’

Amendment 20, page 40, line 34, leave out “25%” and insert “10%”.

This amendment is consequential on Amendment 18.

Amendment 21, page 40, line 36, leave out “25%” and insert “10%”.

This amendment is consequential on Amendment 18.

Amendment 22, page 41, line 1, leave out “25%” and insert “10%”.

This amendment is consequential on Amendment 19.

Amendment 23, page 41, line 2, leave out “25%” and insert “10%”.

This amendment is consequential on Amendment 19.

That schedule 2 be the Second schedule to the Bill.

Amendment 13, in schedule 3, page 45, line 10, leave out paragraph (b).

This amendment would require the registrar to enter a restriction in the register in relation to a qualifying estate in which an overseas entity is registered as the proprietor regardless of the date of the registration.

Government amendment 55.

Amendment 15, page 48, line 20, leave out “18 months” and insert

“save as provided for by section (Transitional period for qualifying estates) 28 days save as provided for by section (Transitional period for qualifying estates)”.

This amendment would reduce the period for registration as an overseas entity within from 18 months to 28 days save as provided for by NC6.

Amendment 14, page 48, line 26, leave out paragraph (b)

This amendment would extend the offence to all overseas entities, and every officer of the entity in default regardless of the date of the registration.

Manuscript amendment 64, page 49, line 9, leave out from “estate” to the end of line 12 and insert “from the commencement date”.

Government amendment 56.

Amendment 16, page 49, line 11, leave out “18 months” and insert

“28 days save as provided for by section (Transitional period for qualifying estates)”.

This amendment would reduce the period from 18 months to 28 days for entering the restriction relating to a qualifying estate save as provided for by NC6.

That schedule 3 be the Third schedule to the Bill.

Government amendment 57.

Amendment 17, in schedule 4,  page 57, line 24, leave out “18 months” and insert “6 months”.

This amendment would reduce the transitional period from 18 months to 28 days save as provided for by NC6.

Government amendment 58.

That schedules 4 and 5 be the Third and Fourth schedules to the Bill.

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London) 6:45 pm, 7th March 2022

Over the last 10 days, the world has watched the actions of Vladimir Putin in shock and horror. The ability to tackle dirty money and impose economic sanctions has never been so important. We are putting the Bill through in an expedited way. It is important that I put on the record what the Bill will do and set out the intention behind the Government amendments. I will seek to be brief because a number of right hon. and hon. Members are keen to speak to their amendments.

As my right hon. Friend the Home Secretary set out earlier, the Bill has four main objectives. First, it will prevent and combat the use of land in the UK for money laundering purposes through the establishment of the public register of beneficial owners of overseas entities owning land in the UK, which will be held by Companies House. Secondly, it will reform the UK’s unexplained wealth order regime to enable law enforcement to investigate the origin of properties and recover the proceeds of crime. Those measures remove key barriers to the effective use of UWO powers and will increase and reinforce operational confidence in relation to their use. Thirdly, it will amend financial sanctions legislation, including the test for imposing monetary penalties and powers, to publicly name those breaching financial sanctions. That will make it easier for the Government to act against those who fail to comply with sanctions. Fourthly, it will amend the Sanctions and Anti-Money Laundering Act 2018 to streamline the current legislation so the Government can respond even more swiftly and effectively to sanction oligarchs and other businesses associated with Putin’s regime.

Part 1 establishes the new register of overseas entities, which will require overseas companies owning or buying property in the UK to provide the information about their true owners. Clauses 1 to 6 provide an overview of the register, define an overseas entity and establish the register and registration process. Clauses 7 to 11 set out the duties for updating and removing entities from the register. Clauses 12 to 19 set out mechanisms for obtaining, updating and verifying information, penalties for non-compliance and exemptions to various requirements.

Photo of Chris Bryant Chris Bryant Chair, Committee on Standards, Chair, Committee on Standards, Chair, Committee of Privileges, Chair, Committee of Privileges

Amendments 24 and 25 would require that, when someone is registering or updating, they also have to notify the fact that one of the people to whom they are referring as an overseas person is a sanctioned individual. Will the Government accept those amendments tonight?

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

I thank the hon. Gentleman for his intervention. I have spoken to colleagues across the House. We will certainly look at how to draft the measure correctly to ensure that it serves its purpose. We will certainly look in the other place to debate that further.

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

I will not give way for a second, because I want to ensure that we can cover the ground. I will deal with some of the opposing amendments at the right time: at the end of the Committee.

Clauses 20 to 30 cover the annotation and inspection of the register, and the disclosure, protection, correction and removal of information. Clauses 31 to 39 cover measures including the false statement offence and amendments to land registration as well as provisions about offences and penalties. The schedules define key terms such as “registrable beneficial owner” and cover amendments to land registration laws, for example, regarding land ownership and transactions for England and Wales, Scotland and Northern Ireland respectively.

Photo of Stewart Hosie Stewart Hosie Shadow SNP Spokesperson (Cabinet Office), Shadow SNP Spokesperson (Constitution)

Schedule 2, paragraph 6 describes a beneficial owner as meaning someone, for example, who

“has the right to exercise, or actually exercises, significant…control over” an “entity”. However, part 4 of schedule 2—on beneficial owners exempt from registration—goes on to describe such a person as someone who has

“the right to exercise, or actually exercises, significant influence or control over” an “entity”. It may be that that apparent confusion is dealt with in part 3 of schedule 2, which deals with an entity

“subject to its own disclosure requirements”, but it is not at all clear whether someone has to be a registrable beneficial owner, or whether they are exempt for precisely the same criteria.

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

I thank the right hon. Gentleman for that point; it comes back to something that was said in the previous debate about persons of significant control, which I did not address at the time. However, I will take that point away and discuss it with Dame Margaret Hodge and others to make sure that we can get any drafting on that exactly right.

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

I will not just because I want to make sure that we can cover all the areas, and we will be short of time.

Important changes in part 2 include changing the unexplained wealth order regime, increasing the scope of the existing powers to ensure that an enforcement authority can obtain the information that they need even when the assets in question are held in trusts or other complex ownership structures. That is to ensure that the true owners cannot hide their claim over assets to avoid the force of the law. The introduction of an alternative test to the existing income requirement also provides flexibility for agencies to tailor the UWO applications to the facts of a case.

Clauses 44 to 47 will mitigate the significant operational risks to an enforcement authority and provide a more encouraging basis for them to use their powers to seek a UWO: first, by extending the period for which an interim freezing order has effect, enabling agencies to review material provided in response to a UWO without significant time pressures; and secondly, by reforming the cost rules to protect law enforcement against incurring substantial legal costs following an adverse ruling.

Part 3—clauses 48 to 51—strengthens the financial sanctions legislation to change the monetary penalty test and internal review process. Those changes will allow the Office of Financial Sanctions Implementation to publicly name sanctions breaches even when no monetary penalty has been imposed and allow for greater information sharing across Government.

We are really grateful for the support of all parties in passing this legislation as quickly as possible, but in the light of the deteriorating situation and the Government’s desire to work together to strengthen and accelerate this package, I want to outline further measures that we have tabled as Government amendments.

New clauses 32 to 40 will amend the Sanctions and Anti-Money Laundering Act 2018 to streamline the current legislation so that we can respond even more swiftly and effectively to sanction oligarchs, individuals and businesses associated with Putin’s regime and others like them in the future. New clause 32 will simplify the procedural requirements that can delay the implementation of sanctions. New clauses 33 and 34 are designed to streamline the designation of individuals and entities, allowing us better to respond to fast-moving events. New clause 36 will ensure that the proposed changes in new clauses 33 to 35 will apply to sanctions regulations that are already in place. New clause 37 will remove the requirement for Ministers to review each sanctions regime every year and to review each designation every three years. That will free up vital resource to focus on developing new designations.

Photo of Angela Eagle Angela Eagle Labour, Wallasey

I thank the Minister for giving way finally, but it all counts. He seemed to be saying to colleagues earlier that his attitude to our amendments is that he is willing to discuss them after the Commons stages of the Bill and to do something in the Lords. Is that what he is saying? Is he telling us today that the Government will not accept any more Opposition or Back-Bench amendments and that he will leave it to the House of Lords to change these things? Clearly, if that is going to be his attitude, we need to know.

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

I will cover the amendments more fully in my closing remarks, once they have been spoken to. None the less, I want to ensure that the amendments with which I have sympathy do exactly what they are intended to do and that the drafting is right. I am happy to work with colleagues who have tabled them to make sure that we can get that right and to see what more we can do in the other place.

Photo of Sammy Wilson Sammy Wilson Shadow DUP Spokesperson (Treasury), Shadow DUP Spokesperson (Work and Pensions), Shadow DUP Spokesperson (Brexit)

Does the Minister accept that many of the amendments have been tabled today because people genuinely want to make the Bill better? There would be no better signal to send from this House tonight than the Government accepting the reasonable amendments, regardless of where they come from, if it is believed that they strengthen the Bill. If we find that they do not do what they are meant to, the opportunity is available to make them do that in the other House. At least that would send a great message from this House tonight that there is widespread support for the Bill and that the Government are listening.

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

There are a number of amendments and they do not all do what is intended. On amendments 24 to 26, I respectfully ask the Members concerned not to push them to a vote, but I will happily work with them to see what more we can do in the other place.

Photo of Iain Duncan Smith Iain Duncan Smith Conservative, Chingford and Woodford Green

My understanding is that the Government accept amendments 24 to 26 in principle and will work in the Lords to put something in the Bill that delivers what they suggest. Am I correct in that?

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

Essentially, yes. We want to make sure that we can work with hon. Members on that. I do not want to accept all those amendments here and now, but I want to make sure that we can get it right in the other place, working with them at that stage.

Photo of David Davis David Davis Conservative, Haltemprice and Howden

I would like this to be rendered in English for the world at large to understand. If the Minister puts into law in the Lords all the amendments that we proposed, will it not still be the case that nothing can be done to stop a Russian oligarch from moving, selling or transferring his assets, even if we know all about it, until the moment when he is actually sanctioned?

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

First, I thought that when I said, “Essentially, yes,” it was a clear, two-word answer to a simple question. I will cover my right hon. Friend’s amendments in my closing remarks, but I wanted to speak to the Government amendments at this point. However, his new clause 29 would give a huge amount of powers not just to the Foreign Secretary in relation to Putin’s regime, but to future Foreign Secretaries. We need to tread carefully and look at that carefully before the House acts in that way.

Photo of Liam Byrne Liam Byrne Labour, Birmingham, Hodge Hill

We can see that the sanctions regulations will become much stronger, but our sanctions regime is still a long way short of the kind of sanctions that have been imposed on, for example, Iran, whereby we are able to sanction secondary entities trading with sanctioned companies. Does this legislation allow us to enforce Iran-like sanctions on Russia, because ultimately, that is what will be needed?

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

I think the right hon. Gentleman comes from a place of supporting the proposal from my right hon. Friend Mr Davis. I do not want delay the Committee in debating the amendments in full before I respond towards the end of the debate.

On the provisions on the register of overseas entities, we will increase the ceiling of criminal penalties for non-compliance from £500 a day to up to £2,500. Again, we have listened to representations from Members across the House. We are increasing the limit to allow for stronger enforcement mechanisms, but, by making it “up to” that amount, we are also making sure that we do not criminalise people who do not have their house in order but who are using these entities for perfectly legitimate reasons.

We are reducing the transition period for existing overseas entities to register their beneficial owners from 18 months to six months. We want to ensure that there is no place for corrupt elites and kleptocrats to hide, but there are many legitimate individuals and businesses that are likely to be holding property through overseas entities for understandable reasons, such as personal security. As I said, we want to make sure that we can work with people from across the House, including my hon. Friend Kevin Hollinrake, to make that more secure and to see what more we can do to tackle the issues that we face here and now. It is important to remember that once the register is in place, new transactions will be caught on day one.

I am grateful for the engagement of the Scottish Government on part 3 of schedule 4. We are committed to consulting Scottish Ministers on regulations made under that part that contain provisions within the legislative competence of the Scottish Parliament. Similarly, we are committed to consulting Northern Ireland Ministers on regulations made under the similar mechanism for Northern Ireland in clause 32(4), (5) and (6).

Photo of Sammy Wilson Sammy Wilson Shadow DUP Spokesperson (Treasury), Shadow DUP Spokesperson (Work and Pensions), Shadow DUP Spokesperson (Brexit) 7:00 pm, 7th March 2022

There should not be any part of the United Kingdom where money can be hidden or moved to be hidden. Will the Minister clarify a point that I was not quite clear about from his response to my hon. Friend Gavin Robinson on Second Reading? Does the relevant schedule require a legislative consent motion from the Northern Ireland Assembly, or does its inclusion in the Bill mean that all the registration requirements and so on will apply to Northern Ireland regardless?

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

As I say, the Bill touches on devolved matters in Scotland and Northern Ireland in particular. Ideally we would have an LCM, but I do not think that we can achieve one, given the current status and the timescale in which we are trying to formulate these measures. However, we are working with representatives in the Northern Ireland Assembly and the Scottish Government to ensure that we can carry on our positive approach.

Photo of Sammy Wilson Sammy Wilson Shadow DUP Spokesperson (Treasury), Shadow DUP Spokesperson (Work and Pensions), Shadow DUP Spokesperson (Brexit)

Given what has happened in Northern Ireland as a result of the Northern Ireland protocol and so on, will the Minister confirm just for clarity that if a legislative consent motion is not available, that will not mean that this legislation cannot apply in Northern Ireland?

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

We will be moving on it so that it does apply in Northern Ireland. It is really important that we get this running so that there is no hiding place in any part of the UK for dirty money. It is important that we all work together on this, and I am really pleased about the positive nature of that work.

In that spirit of working together to strengthen and accelerate this package, I urge all parties to accept our Government amendments. I commend them to the Committee.

Photo of Seema Malhotra Seema Malhotra Shadow Minister (Business, Energy and Industrial Strategy)

On my own behalf and on behalf of my hon. Friend Holly Lynch, it is a pleasure to speak in support of the amendments tabled in our names and the name of the Leader of the Opposition. I echo the sentiments that the Minister expressed about the horror of what is happening in Ukraine and about the importance of today’s debate. We stand in solidarity with the people of Ukraine.

We need the Bill to succeed and to achieve its goals. The Government have dragged their feet on stopping dirty money flowing through our economy. These measures were first promised six years ago, and even now the Bill will be implemented too slowly and with serious loopholes. I thank the Minister for our conversation last week and for tabling amendments that recognise Labour’s concerns about the Bill, but key problems remain.

Time is tight, so I will keep my remarks brief on our amendments and our concerns about the Bill. Part 1, “Registration of overseas entities”, establishes a public register of beneficial owners of foreign entities that own or buy land in the UK. Far too many corrupt individuals are currently hiding their identity behind a foreign company. Under the Bill, a foreign entity need only annually update its entry on the register. We are concerned that that gives the opportunity to register an entity in a non-controversial individual’s name, change the beneficial owner the following day and have 12 months before having to declare the change, by which time property can be sold and money laundered without a record.

The integrity and quality of the data on the register will matter. From the start, the register needs a framework of rules that commands confidence and ensures the completeness and accuracy of information, so our amendments 5 and 6 to clause 7 would require that entries on the register be updated within 14 days of any trigger event, namely the change or removal of a beneficial owner. UK companies have clear obligations to notify Companies House in the days after an ownership change, so why do overseas entities have a year to do the same? Have the Government considered that issue? What measures will they take to address it?

Our amendments 7 and 8 to clause 8 relate to the £500 fine that the Bill would impose on entities that fail to update the register. The idea that such a fine would deter those who fail to comply is frankly ridiculous, so we support Government amendments 45 and 46, which directly replace ours and will raise the fine to at least £2,500 a day.

Our amendments 10 to 12 focus on verification. The Government have accepted Labour’s argument that a verification process needs to be established before the register is operational, so they have tabled amendment 49, which we support. It was unacceptable that the register would have become operational without verification regulations. Will the Minister therefore confirm when the secondary legislation that is needed to design that verification process will be published?

Labour has a wider concern that the Government have not yet addressed. The Bill does not stipulate that verification must take place between an application being made and the registrar entering the overseas entity on the register and allocating an overseas entity ID. We are clear that the regulations that the Government introduce must specify that the registrar must take action to verify the registrable beneficial owners before an entity is put on the register; it is not good enough to rely on the compliance of the entity itself. I would be grateful if the Minister confirmed that point.

Our amendments 15 to 17 would shorten the transitional period. We urgently need to close in on Putin’s cronies who have illicit money in our economy. This is about not just oligarchs, but money launderers and tax evaders. We need to know where the money is and who owns what in Britain. Transparency is vital and the register is essential.

The Government have seen some sense and have reduced the transitional period from 18 months to six months, but we are not being unreasonable in saying that it should be 28 days. As my hon. Friend Jonathan Reynolds said, this legislation was promised by David Cameron in 2016 and began its passage in 2018, so when we say 28 days, we really mean 28 days plus the preceding six years. Six months still provides ample time for criminals to sell properties and find other assets in which to invest—a concern that has rightly been raised by hon. Members, including in today’s manuscript amendments. Labour’s amendments 15, 16 and 17 to schedules 3 and 4 would reduce the transitional period to 28 days, which in our view would provide enough time for overseas entities to get documents in order, while recognising the need to act urgently.

But that is not enough. It is unacceptable to say that the Bill applies not to all properties owned by overseas entities, but only to those bought after 1999 in England and Wales and after 2014—just eight years ago—in Scotland. It does not matter whether corrupt oligarchs bought property four weeks or four decades ago; the point is that UK property should not be used as a vehicle for money laundering. Under Labour’s amendments 9, 13 and 14, all foreign-bought properties would fall within the Bill’s scope, regardless of when they were purchased. We recognise that registering properties bought before 1999 in England and Wales or 2014 in Scotland may take more time, for reasons that the Minister has discussed, so our new clause 6 would allow an 18-month transitional period for such properties, but it is important that we make sure that they are included in the scope of the Bill.

I turn to reform of Companies House. Changes to Companies House’s regulation are long overdue. It beggars belief that despite how long the issue has been on the agenda, all we have had from the Government in the past week is a White Paper. I know that the Minister knows this is urgent. The legal framework in which Companies House operates needs an overhaul. It has been called for by business, by law enforcement agencies and by civil society. Companies House is a key tool in our fight against economic crime. That is why Labour has tabled new clause 7, which would require that the Secretary of State lay draft legislation on Companies House reform within 28 days of this Act coming into force. I acknowledge the arguments being made by Alison Thewliss in new clause 4 on some of the areas associated with Companies House reform and verification.

Let me turn briefly to parts 2 and 3 of the Bill, which relate to unexplained wealth orders and the Sanctions and Anti-Money Laundering Act 2018. Since their introduction in January 2018, UWOs have failed to live up to expectations. The Government expected them to be used 20 times a year, but the National Crime Agency has so far obtained only nine, with none in the past two years. We welcome measures to make these orders more effective. Clause 40 grants enforcement agencies the ability to apply for more time to consider the information related to UWOs. The Government have accepted the principle of Labour’s new clause 8, which would require an annual update to be made to the House on the use of UWOs, in their new clause 31. However, these changes on their own will not lead to more effective use of UWOs.

The Prime Minister announced the creation of a combating kleptocracy cell in the NCA, which is welcome. However, money laundering prosecutions have dropped by 38% in the past five years and the NCA’s budget has dropped by 4.2% in real terms since 2016. As the Treasury Committee made clear in January, on financial crime there is a “mismatch” between the scale of the problem and the Government’s response. We all recall as well the Business Secretary’s suggestion that fraud is not a crime affecting most people—he could not be more wrong. Economic crime affects us all, and the Government must match the reforms with adequate resources. So our new clause 30 calls on the Government to create a funding plan that sees enforcement and investigative agencies benefit from the assets seized. The Government have so far failed to adequately resource this vital work, but this new clause would allow for a rebalancing of the risk appetite, which the Government are seeking to address with their cost capping proposal in clauses 46 and 47.

The Government have also accepted, with their amendments 59 to 62 and new clauses 32 and 40, Labour’s argument that the designation process under the 2018 Act was not fit for purpose. It cannot be right that the UK is slower at targeting oligarchs who prop up Putin than the EU, where unanimity is required across 27 member states. It is also worth noting that in all four of the NCA’s high-profile dirty money cases brought in the past two years, all of those under investigation had entered the UK with a golden visa. We have not tolerated dirty money but courted it. We must amend the Act to remove the barriers that stop the UK keeping pace with allies on Russian sanctions. We are pleased that the Government have agreed with us on that, and we expect to see the raft of promised designations soon.

Finally, important amendments have also been tabled by my hon. Friends the Members for Rhondda (Chris Bryant) and for Walthamstow (Stella Creasy), my right hon. Friend Dame Margaret Hodge and Mr Davis. I thank colleagues, including my right hon. Friend Liam Byrne, for their commitment and work on tackling economic crime. We support amendments 26, 27, 37 and 38, new clauses 2 and 9, and new clause 29, among others. They would tighten up the register requirements and enforcement; address the issue of a lack of resources; and strengthen the effectiveness and powers of the registrar.

This Bill is long overdue and we support its passage. We acknowledge that the Government have taken on board a number of our amendments in the past few days, but we know that a lot more needs to be done. I cannot stress enough how important it is that the UK acts now and acts effectively to start to put right our embarrassing reputation as an international soft touch on fraud and money laundering. Putin and those who prop him up should have nowhere to hide, least of all in the UK. I hope that Members from across the House will support us in the proposals we have put forward to improve the Bill.

Photo of Iain Duncan Smith Iain Duncan Smith Conservative, Chingford and Woodford Green 7:15 pm, 7th March 2022

I am grateful to be called so early in the debate, and I rise to speak to the amendments standing in my name and those of colleagues on both sides of the House. I refer to amendments 24 to 27, and new clause 10. First, let me deal with new clause 10 and then come back to the main issues associated with the other amendments.

New clause 10 is really about the issue of debate in this House and being able to scrutinise properly the nature of what is being done or not being done to those whose ill-gotten gains are being used for purposes they should not be. It would place an obligation on the Government to schedule a debate on the annual sanctions regulations report. I know that the Government argue that that is the responsibility of the House, and of course it is, but it is also important that this provision would be specifically tied to this particular issue. There is a reason for that: it is too easy for Governments to find lots of reasons why they do not end up doing that debate or they schedule it somewhere else and it gets pushed away—I say that having served in Governments myself. The new clause would mean that within 10 days of the report there would have to be a debate. That is important as it opens this up to a proper debate and proper scrutiny. Therefore, I wish that the Government will give it further thought, but I will come to that later on, if necessary.

I return to the key area where I and others have tabled amendments. Amendments 24 to 27 are linked and consequential, but, crucially, they are linked to clause 31. Like others, I had concerns about that clause because it seemed to leave a back door open to any enabler to avoid any requirements for reporting by appealing to the excuse that they did not know that the assets or money they were dealing with had any link to any individual or entity. I draw the Minister’s attention to what clause 31 actually says. Subsection (1) uses the words:

“It is an offence for a person knowingly or recklessly”.

So the excuse is, “I didn’t know” or, “I’m not acting recklessly, because I didn’t know”. It is peculiar that we would want in a Bill a defence that someone may wish to use subsequently if they were in court. This will mean that they will never get to court if they challenge the Government.

Photo of Stella Creasy Stella Creasy Labour/Co-operative, Walthamstow

I thank my neighbour for giving way. Does he agree that many of our constituents will be looking at this and will be bemused, because when it comes to their own tax affairs they do not get the same leeway? They can be penalised for acting both recklessly and carelessly. So if we want to make sure that this legislation is watertight, we should take a lesson from Her Majesty’s Revenue and Customs and make sure that we are not giving people a loophole in that way, especially if they are oligarchs.

Photo of Iain Duncan Smith Iain Duncan Smith Conservative, Chingford and Woodford Green

Yes. I take the hon. Lady’s point. The point I am making is that we should rightly assume that this is their responsibility—there is no let-out. If they misrepresent their position, they should face the full rigours of the law. It should not be a case that they can defend themselves before—

Photo of Iain Duncan Smith Iain Duncan Smith Conservative, Chingford and Woodford Green

First, I will give way to the hon. Member for Oxford West and Abingdon.

Photo of Layla Moran Layla Moran Liberal Democrat Spokesperson (International Development), Liberal Democrat Spokesperson (Foreign and Commonwealth Affairs)

I was going to make the point that was just made: we should expect oligarchs to abide by the same rules that all the rest of us do.

Photo of Iain Duncan Smith Iain Duncan Smith Conservative, Chingford and Woodford Green

We all have to stop agreeing like this, as it will give the House a bad reputation.

Photo of Robert Buckland Robert Buckland Conservative, South Swindon

My right hon. Friend is making an important point. I have looked at these amendments. Is not the best way to achieve his aim to make this offence a strict liability one, which does not require a state of mind and simply involves a set of facts having been established? There could be a reverse burden, whereby the subject demonstrates that they have not acted unlawfully. Strict liability might be the best way to achieve his aim.

Photo of Iain Duncan Smith Iain Duncan Smith Conservative, Chingford and Woodford Green

I am grateful to my right hon. and learned Friend. I always bow to him in the knowledge of the law, as of course I would. I thought he was an excellent Justice Secretary—I will just slip that one in, gratis, and I am sure he can dine out on it. I agree with him wholeheartedly, because what he says is right. I will come back to the flexibility that is required, but I come to the principle of what we are saying. We are seeking to strike out that little lacuna that results from the words “knowingly or recklessly”. That would make this about the responsibility of the person concerned and that would be it—there would be no let-outs, no issues and no quibbling. This is the key. Everything in the other amendments is relevant to it; they merely backfill various areas, and it is important that they should refer to clause 31. They make it clear that responsibility rests with the individual—the entity, should I say—in this particular case.

Photo of Nusrat Ghani Nusrat Ghani Conservative, Wealden

It is important to note that these amendments in my right hon. Friend’s name, my name and those of others do not set us apart from is happening in the rest of Europe and in America. America is applying the same principles. Although the Bill closes the front door on much of Putin’s dirty money, we must ensure that no back door is open. We should therefore be working in line with our NATO allies, and with many other European colleagues as well.

Photo of Iain Duncan Smith Iain Duncan Smith Conservative, Chingford and Woodford Green

That is exactly correct. All we are doing is asking for the UK to be at the same level as the United States, and I do not think that that is asking too much. I am co-chair of the all-party parliamentary group on Magnitsky sanctions, and this is very much what we are driving at. In fact, I love the idea that an individual who is sanctioned in the United States should be sanctioned here, and that if we sanction individuals the United States should sanction them as well, and that the same should happen in Europe. We would have this common purpose: there is nowhere for those people to go. They are sanctioned, full stop, and they cannot use their ill-gotten money anywhere.

Photo of Anthony Mangnall Anthony Mangnall Conservative, Totnes

Can my right hon. Friend tell me whether his amendment, and the Bill, will address the issue of nominees? That seems to be a way in which someone could get away with it: “I can hand my property to a nominee.” Do the enforcement mechanism and the reference to named individuals enable us to stop them doing that?

Photo of Iain Duncan Smith Iain Duncan Smith Conservative, Chingford and Woodford Green

They should, because the individual has to declare the whole chain. “Not knowing” would be no excuse. It would be the responsibility of individuals to know who those nominees were and to declare them They could not defend themselves. What my right hon. and learned Friend Sir Robert Buckland suggested might be a better way of doing this, but my point is that my amendment would nevertheless address it.

Photo of Kevin Hollinrake Kevin Hollinrake Conservative, Thirsk and Malton

I am not sure that my right hon. Friend is correct. The Bill defines a legal entity as

“a body corporate, partnership or other entity”. rather than an individual. I am not sure that, in those circumstances, the amendment would cover the individual.

Photo of Iain Duncan Smith Iain Duncan Smith Conservative, Chingford and Woodford Green

It might not, but I think it would, because it covers the information that individuals are asked to declare. It may not cover the sanction on the individual, but it covers the knowledge of who that individual is. If there is a better way to do it, however, I am up for it. That is feasible, and it may be that my right hon. and learned Friend’s way of doing it is a better way.

Photo of Margaret Hodge Margaret Hodge Labour, Barking

I think we are all wandering around the same point. May I clarify it? The Minister agreed to look at our amendment 3, which addresses the question of whether this is an entity or an individual, and whether, if it is an entity, that entity can put forward a company provider and thus hide the identity of the owner of the property. The Minister has agreed to look into what could be a loophole in the legislation, and then consult with us on it. I think the point is valid, and I hope that the Minister will look at it and that, between us, we can all close that loophole.

Photo of Iain Duncan Smith Iain Duncan Smith Conservative, Chingford and Woodford Green

I agree that clarity is everything in this instance. The Bill will be going to the other place, and by the time it comes back, we will be looking for those loopholes to be shut down and sorted out.

Photo of Robert Jenrick Robert Jenrick Conservative, Newark

I do not want to sow further confusion, but I think that the point made by our hon. Friend Anthony Mangnall is critical. Before the Bill passes into law, we need to understand whether a nominee can be the name at the end of the trail. If that is the case, I am afraid that this register will be largely pointless. If I wanted to conceal the ownership of a property, I would simply set up a shell company in the British Virgin Islands through a nominee, in which case, I am sorry to say, all our efforts today would be for naught. We must resolve that before the Bill completes its passage through both Houses.

Photo of Iain Duncan Smith Iain Duncan Smith Conservative, Chingford and Woodford Green

Let me simply say that the purpose of this debate is to tease out exactly that. I wish that we had less debate on Second Reading and more on the details, but that is water under the bridge, and this is an important factor. In a second—although not quite yet so he need not worry—I will ask my hon. Friend the Minister to explain what he actually plans to do, so that we are clear about that. However, I agree that we need to understand what that relationship is. My assumption was that they come together, but it may not be right, and if it is not right, we will end up back in the courts with delay upon delay and we will never get these people sanctioned.

I know that we must make progress, so I will not go into the details of each amendment, but, as I said earlier, amendments 24 to 27 are connected. We will, I hope, be able to vote on all those amendments, but I am prepared to give some leeway, for the reasons given by Dame Margaret Hodge. Will my hon. Friend the Minister tell me now what his attitude is to amendments 24, 26 and 27?

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

I will cover this at the end of the debate, but I should like to work with my right hon. Friend on amendments 24, 25 and 26 to ensure that we can make changes in the other place. However, we want to go further than amendment 27 in the second economic crime Bill.

Photo of Iain Duncan Smith Iain Duncan Smith Conservative, Chingford and Woodford Green

I am grateful to my hon. Friend. I take it from what he has said that he accepts amendments 24, 25 and 26 in principle, and that he will seek in the other place to deliver their meaning through other amendments, so that by the time they return here, this point has been established. May I draw to his attention the debate that we have just had on the definition of whom this provision encompasses? That will be a vital issue, as my hon. Friends have said, but it is not clear. I hope he agrees with me. I will take a nod from him at this point. Hansard can register his nod, because that is how it works.

Photo of Iain Duncan Smith Iain Duncan Smith Conservative, Chingford and Woodford Green

I am grateful.

Let me end by saying to my hon. Friend that this legislation is probably one of those great critical junctures at which we finally decide and agree in this place, as a result of an emergency that is going on elsewhere, that our procedures and our laws are wrong, and that we have to make change. When we have to make change, we should not baulk at it; we should make wholesale change, and ensure that what we deliver leaves the next generation clear about where they will be, and clear about the fact that we did not fail them. I therefore ask my hon. Friend to stick to his agreement with us, and when the Bill comes back, we will look to it. Otherwise we will have to amend the Bill, but I take my hon. Friend at his word.

Photo of Alison Thewliss Alison Thewliss Shadow SNP Spokesperson (Treasury)

I want to speak about the amendments and new clauses in my name and those of my colleagues. I refer to amendment 41, new clauses 4 and 21 to 23, and amendments 18 to 23 and 40. I have indicated my support for a number of other new clauses and amendments. I dare say that given the cross-party nature of the amendments that were tabled over the weekend, if we had had more time we would have had more names attached to all of them. The Minister would do well to listen to the cross-party calls from Members of both Houses. I have little in common with Sir Iain Duncan Smith, and I disagree with him vehemently on many issues, but I have signed some of his amendments.

I share the horror felt by my colleagues and my constituents at the news that is coming through from Ukraine. We condemn the flagrant and repeated breaches of the Geneva conventions by Putin and his troops. I thank the people of Glasgow Central who have been raising funds and gathering goods across the constituency, but particularly those at the Hindu mandir, dropping off those goods to help the people fleeing Ukraine. Their sense of humanity has been undoubted, and I hope that it will be met by Ministers—not least the Home Secretary, who disappeared before we could raise further issues with her—because the people of Ukraine deserve our support.

This Bill is patently not enough. The volume of worthy and sensible amendments, and indeed the Government’s own amendments, testify to that. Action is long overdue. Stephen Gethins, Professor of International Relations at St Andrews and our former colleague in the House, has said:

“For years we have turned a blind eye to Putin's dirty money, propaganda and influence in our democracy. Those who called out the corruption were badged as anti-Russian when it was the Russians who were Putin’s first victims. It is a shame that many are only paying attention to his crimes after such grave events. I hope that real action will be taken. After years of inaction we owe the people of Ukraine and Putin’s other victims at least that.”

I agree very much with Stephen Gethins.

The situation we find ourselves in today, legislating in great haste, did not need to happen. This is not new. Putin and his cronies have been shifting their ill-gotten gains through the UK for many years now, unimpeded—and indeed facilitated—by UK Governments of various stripes, while journalists, civil society campaigners and, to their credit, many Members across this House, such as the right hon. Members for Barking (Dame Margaret Hodge) and for Sutton Coldfield (Mr Mitchell), have repeated their calls for action throughout many Bills.

In recent years, we have had the Sanctions and Anti-Money Laundering Bill, and many of the same calls that are being made today were made at that time. Had the UK Government listened, we might not have needed to be here today in this complete and utter midden. It took the Salisbury attack to happen during the course of that legislation for the UK Government to take action on Magnitsky sanctions. They had the opportunity to do more at that stage to stem the tide of dirty money, but they did not. We had the Registration of Overseas Entity Bill published in draft and sent for scrutiny, but no action has been taken until today. And we are still short of comprehensive measures to close the loopholes and shut the door on the kleptocrats once and for all.

We had the creation of the Office for Professional Body Anti-Money Laundering Supervision, supposedly to tighten up on the facilitators and enablers, but while some, including the banks, flooded the system with suspicious activity reports, others appear to have taken very little responsibility for their actions. That was reflected in the Treasury Committee’s report. Under Gordon Brown, we had the creation of the golden visa scheme, which attracted these oligarchs in, gave them a veneer of respectability, treated them with the deference that very few of my hard-working, honest constituents receive from the Home Office and allowed them to buy their seat not only at party fundraisers but at the very heart of British democracy—[Interruption.]

Photo of Nigel Evans Nigel Evans Deputy Speaker (Second Deputy Chairman of Ways and Means) 7:30 pm, 7th March 2022

Order. There are far too many private conversations taking place, and I am finding it difficult to hear the hon. Lady.

Photo of Alison Thewliss Alison Thewliss Shadow SNP Spokesperson (Treasury)

Thank you, Mr Deputy Speaker. I was talking about people buying their seats at party fundraisers and at the heart of British democracy. That is something that this House should reflect on. This place needs to take a long hard look at itself and at what it has facilitated, allowed and ignored over the course of many years.

We in the SNP welcome this Bill—how could we not?—but we would argue that it is long overdue and does not go nearly far enough. The UK Government’s inaction and prevarication have given the oligarchs a head start to shift their assets, to lawyer up, to step down from companies and boards and to saunter unimpeded to their getaway yachts and go to places that will still have them. Co-ordinated and quick global action, including in the overseas territories, could have made this more difficult, as would action on crypto-assets. The recent Treasury Committee report highlighted the growing role of crypto-assets in economic crime.

We support Labour’s calls to cut the registration of overseas entities to four weeks. We all agree that 18 months was ludicrous, but six months still gives people far too long to shift their ill-gotten gains. I would be grateful if Ministers confirmed what they are doing to monitor asset flight, and if they could provide an estimate of how much money has already left. Our amendments 18 to 23 would lower the threshold for beneficial ownership from 25% to 10%. Evidence already points to the threshold being gamed and to people appointing family members and those they can easily control, and the Government need to be aware of that and do more to prevent it.

Photo of Anthony Mangnall Anthony Mangnall Conservative, Totnes

I apologise for interrupting the hon. Lady, who is making a brilliant speech. On her point about assets being handed over, where they are being hidden and the chain involved in these activities, does she agree that insurance companies need to be brought into these measures? Insurance companies have a list of every single asset and item in the name of these individuals, yet over the weekend there were reports that insurance companies were seeing people coming off their lists because they were already moving their assets out.

Photo of Alison Thewliss Alison Thewliss Shadow SNP Spokesperson (Treasury)

The hon. Gentleman makes an excellent point, and I hope the Minister was listening carefully. We need to use all the levers at our disposal to trace where these assets are going, who is moving them and who is helping them to do that.

Photo of Lloyd Russell-Moyle Lloyd Russell-Moyle Labour/Co-operative, Brighton, Kemptown

I am pleased to see the amendments that would lower the threshold to 10%. In the prelegislative scrutiny of the Registration of Overseas Entities Bill, the Government indicated that they were willing to lower that threshold through secondary legislation. Has the hon. Lady received word from the Government that they will now honour that promise that they made to us only a few years ago?

Photo of Alison Thewliss Alison Thewliss Shadow SNP Spokesperson (Treasury)

I have not received that assurance from the Minister, but I would be glad to do so. Lloyd Russell-Moyle and I served on that Bill Committee together, and a lot of the evidence that was given at the time still stands today. Many of the things we were warned about, such as shifting things into trusts, have happened, and the Government need to act on the warnings that they were given.

Turning to schedule 4, the register proposed in the Bill is not as transparent as the Scottish register, which will come into force on 1 April. Transparency International and the Chartered Institute of Taxation have said that the UK Government could learn from Scotland on this. As I say, Scotland’s register of persons holding a controlled interest in land in Scotland goes live on 1 April, and I would like to thank Jennifer Henderson, the Keeper of the Registers of Scotland, and her team of experts for taking the time to meet me last week to discuss this.

Transparency International has warned that this Government’s proposed register could not be as transparent as Scotland’s because the legislation as drafted does not require the disclosure of the ultimate beneficial owner of the property, but rather the disclosure of the beneficial owner of the overseas entity that in turn owns the property. Scotland’s register notes, per piece of land, who the beneficial owner of the land is. For example, it notes which companies have land registered to them, and who has significant control of those companies. I am sure that I could draw a diagram that would explain this better than my description, but my understanding is that if a holding company has five or six different pieces of land for three oligarchs, the Scottish register would show which oligarch each piece of land belonged to, but that the register as laid out in this Bill would not. I ask the UK Government to consider taking a lesson from Scotland, to speak to Registers of Scotland and to review changes such as this, so that we can properly understand who owns what.

The Chartered Institute of Taxation said that

“if the government’s aim is a public register of ownership of land it does not achieve this”.

It also said:

“The UK Government may also want to look at the Scottish approach which is to reveal the person who has ‘significant influence or control’ over the owner or long-lease tenant of land and property in Scotland.”

According to the Scottish Government, this means that

“it will be possible to look behind every category of entity in Scotland, including overseas entities and trusts, to see who controls land.”

Further to this, I would be grateful if the Minister could provide the clarification that the Law Society of Scotland has asked for on the way in which the two registers will interact, on how any disputes will be resolved—including on what is registered and what takes precedence—and on whether any additional resource will be provided directly from the UK Government to Registers of Scotland so that it can continue this work.

It is vital that Companies House reform does not slip off the agenda. We would have pressed new clause 4 to a vote, had it not been so similar in intention to the official Opposition’s new clause 7. It is unfortunate that all we are getting on Companies House will be a White Paper. We have already had extensive consultation on this, and we know the problems. They are obvious, and the Government have no excuse for not acting on them today.

Photo of Angela Eagle Angela Eagle Labour, Wallasey

Does the hon. Lady share my frustration, which was widely voiced in the Treasury Committee when we were doing our report on economic crime, that although the Government have known what is wrong with Companies House for a very long time, we have had virtually no movement to reform it except for an announcement that there might be enough money to do so in 2024?

Photo of Alison Thewliss Alison Thewliss Shadow SNP Spokesperson (Treasury)

The hon. Lady is right. This is entirely inadequate. With every day that passes, more and more guff gets put on to the Companies House register and the less valuable it becomes as a register.

We need finally to introduce verification. It is beyond belief that there is no Government verification scheme. Filing a tax return or applying for a passport or driving licence all require the use of a Government verification scheme. Graham Barrow, a Companies House expert, has pointed out that people need more ID to take out a library book than to set up a company in this country. That is absolutely ridiculous. Verification, when it is brought in, must also apply retrospectively. Companies House must go back through the register and look at all issues that existed in the past, because there is already so much nonsense in the register that needs to be weeded out, not just for reasons of accuracy but because it is being used to defraud people and by companies that are phoenixing. It is being used for all kinds of things that are resulting in people losing out.

Graham Barrow has also suggested that Companies House verification could reduce incorporations by close to 50% while making practically zero difference to corporate commercial activity in the UK. That shows the level of guff in the Companies House register. The examples of failures of accuracy at Companies House are legion. A Global Witness report in 2019 found an address in London where at least two company service providers appeared to host a number of companies apparently controlled by children under the age of two, who not only had access to the profits of the company but also the right to appoint directors and voting rights. That is quite extraordinary. There are some quite prodigious two-year-olds on that register.

It is long past time to act. The SNP’s new clause 4 would make Companies House an anti-money laundering supervisor, as it is strange that Companies House is not. That would go some way towards closing the door on those who seek to abuse the system. I wrote to the Government consultation three years ago to say that Companies House must have better and more robust mechanisms to ensure the information it holds relating to beneficial ownership is adequate, accurate and current. That still stands today.

There has also been a lack of action on Scottish limited partnerships. When I made my submission to the consultation, no fines had been handed out for non-compliance. Three years and four months later, I am pleased to report that is no longer true. Of the thousands of Scottish limited partnerships that have registered no person of significant control, there has now been a single fine of £210. We can all agree it is not the best deterrent if there is no consequence for not following the rules.

The Under-Secretary of State for Business, Energy and Industrial Strategy, Paul Scully spoke earlier of action, but action is not impressive if those who have continually not complied with the rules do not even face a fine. That goes for all the mechanisms in the Bill that levy a fine. If the Government will not actually levy a fine and collect the money, there is little point putting it in the Bill.

SNP new clause 23 would ensure that beneficial owners of Scottish limited partnerships must, at last, be published, which would ensure transparency. Scottish limited partnerships are being used, again and again, in nefarious ways to move money and goods around the world. They have been involved in war crimes, child pornography and arms deals. The loopholes in Scottish limited partnerships and at Companies House have to be closed, as they harm not only individuals who suffer the effects of these crimes but Scotland’s reputation. Although they are called Scottish limited partnerships, Scotland plays no part in them. They are an historical arrangement legislated for in this place.

The Scottish Government’s crime campus at Gartcosh is doing great co-ordination work on tackling economic crime in Scotland, but much of the legislation and company registration responsibility that holds us back is still held here at Westminster. Our good name must not be tarnished any longer by continued inaction on these reserved matters.

SNP amendment 41 would ensure that reasons are given for any company claiming to have no beneficial owner or person with significant control. At the moment, companies do not have to account for that. They can just say, “We don’t have an owner, and we do not know who has significant control.” That is not acceptable, particularly when we consider that Scottish limited partnerships possess a separate legal personality allowing them to own assets, to enter into contracts, to sue or be sued, to own property, to borrow money and to issue certain kinds of security. Typically, limited partnerships are not treated as separate legal personalities and are not able to do those things, but Scottish limited partnerships are uniquely different in that way.

Scottish limited partnerships are taxed as though they do not have a separate legal personality, and no tax is payable by the partnership itself. Instead, the tax authorities look through the partnership structure and tax the partners on their share of partnership income and gains, in line with their profit-sharing ratios. Provided that the partnership is not trading in the UK, however, no UK tax will be payable by non-UK-resident partners.

We have known for years that Scottish limited partnerships are a dodge, and that money has gone in and out without taxation. We know they have been used to launder millions of pounds in dirty money created by illicit business activities. We need to see action finally to put a stop to this.

Unexplained wealth orders have been lauded by the Government in recent weeks as a powerful tool to tackle dirty money, but only nine have been used in four cases since their introduction in 2018. We support improvements to unexplained wealth orders, and we support bringing property held in trust into scope. We hope this will finally allow the National Crime Agency to do more with unexplained wealth orders and make them work.

Tom Keatinge of RUSI explained to the Treasury Committee today that unexplained wealth orders have not survived contact with reality. We can only hope that the reforms will make them more effective and more anchored in reality.

Susan Hawley, the executive director of Spotlight on Corruption, cautioned:

“The focus needs to be on confiscating and seizing assets not just investigating them… Without addressing the serious issues that law enforcement faces from shrinking budgets, decrepit IT systems, to…losing staff to the private sector, the new legislation will not make any difference at all.”

I support the cross-party new clauses 14 and 27 on whistleblowers, tabled by Kevin Hollinrake. They are worthy, because a lot of the information we have on economic crime comes from whistleblowers. It does not come from the registers or anything else; it comes from people who are brave enough to blow the whistle, for which we thank them. And we should protect them. I welcome amendments 37 and 38 on SLAPPs, as those seeking to shine a light on corruption should not be silenced by lawyers with deep pockets.

I support all action to improve enforcement. Helena Wood, a senior research fellow at RUSI, said the Government have “vastly underfunded” enforcement agencies, saying that new powers would be pointless without beefing up the NCA and other agencies. I agree with her when she says:

“Law is completely ineffective if no one is around to enforce it.”

Hopefully there will be more budget for enforcement.

Finally, I support manuscript amendment 63 tabled by my hon. Friend David Linden to remove from the electoral register those who are found in breach. There ought to be consequences for being sanctioned, and removal from the electoral register could be one of them.

The Government continue to say that donors to the Conservative party are legit, that they are fine, because they are all registered to vote here and they all have the right to donate money, but some of them are able to do so only because they have been given privileged golden visas. They have been fast-tracked to citizenship, ennobled and fêted by the party of Government, which bears some responsibility.

I suggest to the Conservative party that they should return the £2.3 million in donations not to the Putin cronies who gave it to them but to those who have been harmed by Putin and his regime. They should donate it to the Disasters Emergency Committee appeal and use it to support the refugees of Putin’s bloody war, because these people deserve nothing less.

Photo of David Davis David Davis Conservative, Haltemprice and Howden 7:45 pm, 7th March 2022

I will speak solely to cross-party new clause 29. It is a very simple clause with a simple purpose: to make sure that the sanctions we intend against the oligarchs in Putin’s regime are actually effective.

I remind the House of a previous occasion when we had great fanfare for action against economic crime. Since we introduced unexplained wealth orders some years ago, we have tried to operate the orders only nine times against four individuals, and they have worked only twice. They failed seven out of nine times. The Government are doing something in this Bill to try to improve the equality of arms between Government lawyers and the multimillion-pounds-a-year lawyers on the other side. The Government have done good work that will help, but it does not address, because it cannot address, the most fundamental problem with unexplained wealth orders because, since 1990, it has been almost impossible to get any trustworthy evidential information out of Russia. The very least that does is slow the process leading to sanctions. The process leading to sanctions will be incredibly difficult and incredibly slow even with this better balance.

The Prime Minister and the Foreign Secretary have confirmed that the Government have—this is a tabloid quote, I am afraid—a “hitlist” of more than 100 oligarchs. So far, 11 days into this conflict, we have sanctioned just 17 individuals, with some very obvious and notable exceptions who we can see and hear redisposing their assets even as we sit here. Press reports have quoted Government sources suggesting that it will take six months to work through the rest of the hitlist. And the rest, as I suspect it will take longer.

Photo of Angela Eagle Angela Eagle Labour, Wallasey

I am a big supporter of the right hon. Gentleman’s new clause. President Zelensky is to address us tomorrow; would it not be good for us to be able to tell him that that new clause was accepted tonight? We would then be able to say that we can crack down much faster.

Photo of David Davis David Davis Conservative, Haltemprice and Howden

It would be good. It would allow us to crack down more effectively; not so much more quickly but more effectively.

What will we see during the months it takes to get people to the legal point at which they are sanctioned? We will see Russians scrambling to sell off their houses, dispose of their businesses and offload their football clubs. In respect of many of the measures, we will know a lot more about it and be much better informed, if none the wiser, with respect to what they are doing. Multimillion-pound car collections will be loaded into jets; anchors will be weighed on superyachts; priceless artworks will be squirrelled away—all to wend their way back to Russia or some other safe haven for these people. By the time our sanctions have taken effect on not all but many of the oligarchs, the horse will have well and truly bolted. Indeed, the background noise is currently the sound of a stampede of horses bolting as the door on the stables creaks shut. That is what we have to put right.

My new clause will help to prevent all that. It will not do everything, because it is only one piece of the repertoire of things we need to do, but it will allow the Government to publish a hitlist—forgive the tabloid term—or a list of individuals who are being considered for sanctions. In the same way as someone may wait on bail before they face trial, the freedoms of those on the list will be restricted for the period so that they do not flee. Once a person’s name appears on the list, their ability to sell, liquidate or transfer out of our jurisdiction their assets—cars, homes, businesses, jets, investments, cash and so on—will be frozen. They will then be unable to sell those assets or move them out of the UK. They will still be able to use them—there will be beneficial advantage to them—but their ability to thwart what we are trying to do today will be restricted.

Given my history in this House, some may be rather surprised that I am willing to see a restriction of a specific human property right—that is what my new clause amounts to and that is quite unusual for me—but we need to take action now; otherwise, any sanctions that the Government seek to impose will be entirely meaningless for a large number of these people. We see Chelsea being sold today and all sorts of actions going on that cannot be helpful to what we are trying to achieve. My new clause would give the Government breathing space—time to go through the legalities of formally sanctioning the oligarchs and pals of Putin who rightly deserve to be the target of sanctions.

Although the Government have identified 100 oligarchs to sanction, other countries have identified more. This is going to be a long war. The sanctions are going to be in place for years, not months. They will have effect only if we move more quickly than the targets.

Photo of David Davis David Davis Conservative, Haltemprice and Howden

Not for the moment; I am just about to finish the point. To move rapidly is the only way to ensure that our sanctions actually hit Putin where it hurts. I will now give way—I have never not given way in my life.

Photo of Kevin Hollinrake Kevin Hollinrake Conservative, Thirsk and Malton

I am most grateful. My right hon. Friend’s new clause is very important but, as he would probably concede, a difficulty with it is that we need alongside it transparency in respect of beneficial ownership; otherwise, we will not know who owns the assets. The problem is that the ownership of a lot of the assets is hidden. Does he agree that for his new clause to be truly effective we need a day-one capability to see who owns the assets?

Photo of David Davis David Davis Conservative, Haltemprice and Howden

Yes, I do, but my hon. Friend must bear in mind that the burden in the new clause—the responsibility and requirements—falls on the person who is sanctioned.

Photo of Iain Duncan Smith Iain Duncan Smith Conservative, Chingford and Woodford Green

I was not going to intervene on my right hon. Friend but I have been looking back over the list in his new clause. Does he think there is a slight problem, in that the new clause talks of

“selling any assets they own or…moving any assets they own or have an interest in out of the United Kingdom, or…moving any of their funds out of the United Kingdom” but it does not cover anything about gifting assets out to an individual who may then transfer them immediately? Does he think that ought to be included in the measure?

Photo of David Davis David Davis Conservative, Haltemprice and Howden

Yes, my right hon. Friend makes a good point. The reason why gifting and transferring to relatives, which is another category, is not in there is because I took—I almost ripped it out of the legislation—the legislation that we put in place for Skripal, which also omitted those things. My right hon. Friend is quite right, though, and had my new clause been accepted today, I would have looked to make two changes when the Bill went to the Lords, the first of which would be to do that—to tighten it. The other would be to include a right of appeal if it went on too long the other way round, to balance the human rights issue.

We should bear in mind the fact that the National Crime Agency, for example, has people on police bail. I know of a case in which people have been on police bail for five years and we know nothing about it, so the restriction in my new clause on somebody who faces possible sanction is much less than the restriction the NCA imposes on some people. It is vital that we prevent ultra-wealthy individuals, with their teams of highly paid lawyers, advisers and accountants, from exiting the UK with their ill-gotten gains or hiding them where we cannot find them or get them.

By the way, I am a great believer in the presumption of innocence, but if somebody came out of the old Soviet Union—Russia—in the years between 1990 and 2010 with £1 billion, £2 billion, £3 billion or £4 billion to their name, and they were previously an officer of the Russian state, I do not quite start with the presumption of innocence that I would normally start with. I would start with a requirement on them to explain where that came from. That seems to me to be a reasonable, common-sense modification of my normal “mad-libertarian” interests.

Photo of Anthony Mangnall Anthony Mangnall Conservative, Totnes

The presumption of innocence must surely be broad and not subjective in respect of any one individual. My right hon. Friend made the point about people on bail; the whole point is that if someone is on bail, a case has already been presented and built up. I of course understand that my right hon. Friend is trying to get to the point at which the case has been built up. On his new clause, how is the process reversed if someone should not be on the list? How would the Foreign Secretary say they are no longer on the list? There is nothing in my right hon. Friend’s new clause that specifies how that would work.

Photo of David Davis David Davis Conservative, Haltemprice and Howden

My hon. Friend is right. If we put the measure in place, there would be a decision at some point as to whether someone was on the list or no longer on the list—“We’ve decided that you’re not subject to sanction.” That clearly has to be part of the operation. By the way, I am afraid police bail does not quite work the way my hon. Friend thinks it does: in the case that I had in mind, there is no case but they have been on police bail. That is just an example to demonstrate that the idea in my new clause is not an unheard of option.

I see Dame Eleanor is looking at me, so let me finish by saying that if we back new clause 29, we will ensure that our sanctions regime will often have real effect. It is proportionate and simple and it would be effective.

Photo of Margaret Hodge Margaret Hodge Labour, Barking

I rise to speak specifically to new clause 2, on the funding of enforcement agencies, but I wish to say a couple of things about the amendments in general. First, I am grateful to the Minister for the Government’s spirit and approach in respect of the amendments. We all want the same thing and are attempting to find the most effective wording and mechanism to achieve our shared objectives. I hope the Minister sees the amendments on which there are votes tonight as utterly constructive. I assure him that they really do have cross-party support among Back Benchers in the widest possible sense. A lot of people are behind them and I hope that reassures him that we want to help and are not here to cause him problems.

I am grateful for the concessions that the Government have already made on penalties, on the implementation period, on speeding up sanctions—I very much welcome those new clauses—and on the reporting of unexplained wealth orders, which I have been after for a long time. As I have said to the Minister privately, our amendments include drafting amendments. I am glad he is going to talk to us about amendment 3. He will have heard the general concern throughout the House about whether the wording targets the individuals we wish to target. The other amendments are about strengthening the Bill.

To talk generally, some of the amendments point to the fact that this is not an economic crime Bill. A range of vital issues have to be addressed in a substantial and substantive economic crime Bill. A lot of people have talked about Companies House and tougher regulation; I would include company formation agents in that. We have talked about other enablers and effective enforcement, which is covered in our amendment. My right hon. Friend Liam Byrne raised SLAPPs, and issues in respect of whistleblowers and Scottish limited partnership are also important. That all shows that we do need a comprehensive Bill, but I accept that this is a very important first stage.

New clause 2 is very narrowly defined, because we had to get it in scope, but what we are talking about is the resourcing of all the enforcement agencies to enable them to meet the objectives of the legislation that we are passing tonight, and of other legislation on the statute book. We are trying to challenge and punish those responsible for economic crime, but if the enforcement is weak, we simply do not achieve our objectives. There is an issue of our having too many enforcement agencies, but that is for another debate at another time and in another place. I genuinely say to the Minister that, under the austerity of the past decade or so, we have hollowed out the resources that are available to our enforcement agencies, and those agencies are now no longer fit for purpose.

In new clause 2, we ask that within 28 days of the Act being passed, the Government publish a report on the funding of enforcement agencies for the purpose of unexplained wealth orders. I would have loved the new clause to go further, but we have kept it within the terms of the Bill.

I could go on about this forever, but if we look at the facts, we see that money laundering prosecutions have dropped by 35% over the past five years, just as money laundering has increased and intensified in the UK economy. Fraud is now the most common crime committed in the UK, with more than 5 million offences, but hardly any are prosecuted. The National Crime Agency has obtained fewer than five prosecutions a year for economic crime offences over the past five years. The number of individuals convicted by the Serious Fraud Office every year is also on a downward trajectory, from 13 in 2016-17 to four in 2020-21. The agency’s overall conviction rate has fallen from 86.7% in 2016-17 to 67% in 2020-21, so we are pursuing fewer criminals and we are being less successful in getting convictions.

As a Conservative Member mentioned on Second Reading, the UK spends about £852 million on enforcing economic crime laws. Just to be absolutely clear, that is equivalent to 0.042% of GDP, and that is a generous estimate that I have put together. Even though the most recent estimate that I have seen of the cost of economic crime is around £290 billion, which is well over 10% of GDP, the National Crime Agency has suffered a 4.2% cut in its core budget over the past five years. In contrast, I met a group of anti-financial crime executives working for the banks and they told me that the regulated financial services sector spends—hold your breath—£49.5 billion every year on financial crime compliance. Our £852 million is just too small in comparison.

Others have made a comparison between the UK and the USA. There is a massive difference in the effectiveness of enforcement between what happens here in the UK and what happens in the USA. We see that through all the actions that have been taken on the leaks—for example the FinCEN leaks and others. The Americans are just more aggressive and better resourced. They have a system whereby the agencies can hold back some of the money that they get in fines to fund their work. I think I heard someone ask how we could fund these changes. Well, that is one of the ways. The fines do not all have to go to the Treasury. Some could be held by the enforcement agencies themselves for them to do the work.

Photo of John Baron John Baron Conservative, Basildon and Billericay 8:00 pm, 7th March 2022

The right hon. Member knows that I am supporting her amendment tonight, but may I suggest that we need to look innovatively at how we fund these agencies? Perhaps they should be taking a share of successful prosecutions. Initially, we need a big increase in funding for these enforcement agencies to get them off the ground and make them fit for purpose, then we can explore longer-term funding solutions.

Photo of Margaret Hodge Margaret Hodge Labour, Barking

It always seems to me absurd that it costs £12 to establish a new company in Companies House. Obviously we want to make it easy for new businesses to enter the market, but £12 is absurd. We know that that gets exploited in relation to shell companies, but does it also facilitate economic crime? If we quadrupled that figure to £50, it would still not be a fortune, but we would then have a massive investment that we could put into our enforcement agencies without raising any further money through taxation. There are a whole range of mechanisms that would not have a direct impact on public spending. They may mean that the Treasury gets a little bit less than it thought it would, but they would not have a direct impact on public expenditure and we could employ them to make these enforcement agencies fit for purpose.

Photo of Iain Duncan Smith Iain Duncan Smith Conservative, Chingford and Woodford Green

I wonder whether the right hon. Lady can see some way forward on a point that I made earlier. Europe, the UK and the USA all have separate sanctioning bodies, with the USA way ahead of the pack. If the USA is sanctioning somebody, it surely should be for this Government, or for that matter for European Governments, to argue why they will not be sanctioning the individual against the evidence that is shared by the USA, rather than why they are looking to sanction the individual here. It seems that, if we are all in this together, it would be far better if we had a much closer set-up, so that we sanctioned people if somebody else had found the evidence and we thought that it was okay.

Photo of Margaret Hodge Margaret Hodge Labour, Barking

There are already arrangements for the sharing of information and data, but it is not enough. It is absurd. When I talk to the enforcement agencies and the anti-money laundering people working in the banks, they tell me that they cannot share information. If one bank has information that makes it suspicious about a particular client, it ought to be able to share it around the banking system so that they can all take action. There are pragmatic steps that we could take to share information and knowledge across jurisdictions, from America through to Europe to us, which would massively improve things and actually bring in money.

Let me take one example that came out of the FinCEN files. Standard Chartered Bank is a British bank. In 2019, it was fined by both America and ourselves for poor money laundering controls and other offences, including breaching sanctions in Iran. The British bank was fined £842 million in America, but only £102 million here by the Financial Conduct Authority in the UK. The Americans have got it right. There are lessons that we can learn from them. There are also ways in which we could properly resource all the enforcement agencies. We could perhaps reduce them as well—we do not need all these people. Every time I refer a matter, whether it is for a corrupt or an illegal activity, to one enforcement agency, I am either told that it is the responsibility of another agency or it goes into a big black hole and I never see anything arising out of it again. That situation is completely and totally unacceptable.

Photo of Damian Collins Damian Collins Chair, Draft Online Safety Bill (Joint Committee), Chair, Draft Online Safety Bill (Joint Committee)

On this point about information sharing, which is so important, we have an established financial system to do that. Does the right hon. Lady share my concern that many people who are affected by these sanctions may use cryptocurrency both to hide money and to move money, and that many of the cryptocurrency exchanges are saying that they will not take enforcement action against, say, Russian nationals, only against named individuals on the sanctions list?

Photo of Margaret Hodge Margaret Hodge Labour, Barking

Cryptocurrency has become the new way in which money is laundered. Corrupt and stolen money ends up in the pockets of one individual, and then gets back into the system for them to spend it elsewhere. I completely agree with the hon. Gentleman: it is important that we get our heads around cryptocurrency and that we legislate appropriately to tackle it.

The other way of looking at this issue, and the reason why we have tabled the new clause, is that our law enforcement bodies, while they are not as good as the Americans’, bring resources back to the UK through fines. Between 2016 and 2021, the law enforcement bodies brought £3.9 billion back into the UK coffers. If that money had been reinvested, which is one of the ideas for funding the enforcement agencies, it could have brought an extra three quarters of a billion pounds to be spent on enforcement by all those agencies. That is a lot of money, and it would have been effective; it would have had a snowball effect of increasing our budget.

New clause 2 is there to ensure that we get the enforcement right—that we have not only the powers but the resources we need to make sense of and put into effect the important legislation we are passing today. I hope it will have support right across the Committee; it certainly has support among Back Benchers, and I would love it if the Government accepted it and it became part of the Bill.

Photo of Eleanor Laing Eleanor Laing Deputy Speaker and Chairman of Ways and Means, Chair, Standing Orders (Private Bills) Committee (Commons), Chair, Standing Orders (Private Bills) Committee (Commons)

We have a great many amendments to consider this evening, and it would not be right if the people who tabled those amendments did not have the chance to speak to them so that the Committee can be helped to make its decisions on them, so I must appeal for shorter speeches now. I am not complaining, because so far we have had substantial speeches about substantial amendments, but will Members who are supporting amendments rather than speaking to their own amendments please consider making shorter speeches?

Photo of Kevin Hollinrake Kevin Hollinrake Conservative, Thirsk and Malton

It is a real pleasure to speak after Dame Margaret Hodge. We have worked together on so much, and we have worked on this legislation for a long time.

I will talk about new clause 2 when I come to my comments on whistleblowers, but the main thing I want to talk about is amendment 64. Many hon. Members have spoken about the danger of asset flight. In reality, we know it is happening already; people are not going to wait for this legislation to come into effect to try to hide their money. Whether the transition period is 18 months, six months or 28 days does not really matter, because the individuals in question can move their money around so quickly that much of it will have happened already.

I have supported amendment 16 in the name of the official Opposition, but I would like to think that my manuscript amendment 64, which I am very grateful to Mr Speaker and the Deputy Speakers for selecting, might be more effective. There are some other important amendments that have been tabled, such as new clauses 28 and 29, on freezing orders, but the difficulty with those new clause, as I said in my earlier intervention, is that we cannot freeze something that we do not know exists. That is very difficult to do. We need to look behind the curtain at who owns the assets. That is obviously what this Bill does; it is primarily about transparency and being able to see who owns what.

I am grateful for the support of many people on manuscript amendment 64, including my hon. Friend—he should be right honourableJohn Penrose, the Government’s anti-corruption champion. We have worked closely on this, and as soon as we looked at the Bill we thought, “There’s something missing here. Clearly, these people are going to move this money around very quickly to make sure it’s not touched.”

I think this amendment probably does something, although I am not a lawyer—I looked at this over the weekend and I did not have any legal input, so I cannot say it is totally fit for purpose and I am interested to hear what the Minister has to say about it. He has engaged on this issue all the way through and been willing to discuss with me, as we did yesterday, what we can do to close this potential loophole. The amendment would simply require beneficial ownership to be registered with Companies House, which links into the Land Registry’s requirement to ensure that something is properly registered with Companies House before it allows a transfer or a sale to happen. Without the Land Registry doing that, of course, people cannot sell or transfer a piece of land or property.

Photo of Lloyd Russell-Moyle Lloyd Russell-Moyle Labour/Co-operative, Brighton, Kemptown

The hon. Gentleman is making a very good speech on the importance of that relationship between the Land Registry and Companies House. Does he agree that the requirement still to pay to access the Land Registry dims the light that is shone, rather than enhancing it, and that making it an open registry, with Companies House as an open registry as well, would aid the process of light-shining?

Photo of Kevin Hollinrake Kevin Hollinrake Conservative, Thirsk and Malton 8:15 pm, 7th March 2022

That is what it will do. It is a public register, of course, so the beneficial owner will be revealed and, if that person is on the sanctioned list, that asset can be frozen. That is how it would work. In the legislation, schedule 3 paragraph 6 requires the Land Registry to do that, and it can prohibit or restrict a transfer or a sale. That is the key to this. The only respect in which the legislation is not currently fit for purpose, in my view, is that that does not take effect for 18 months. If we took those clauses out or changed the timescales so that it came into immediate effect on the commencement date of the legislation—that is, from day one—it would potentially prevent that sale or transfer of assets from one person or entity to another and the moving of those assets around, and thus prevent what we are all concerned about—asset flight.

I know the Minister has responded to this question a couple of times from the Dispatch Box, but I think there is a good chance this particular amendment would pass if pushed to a vote. I would appreciate confirmation from the Minister at the Dispatch Box whether the Government will, as he has indicated they would, table an amendment in the Lords that has a similar effect, so that we have a day one restriction or prohibition on the sale or transfer of assets from one to another. If he is willing to do that—[Hon. Members: “Do it now!”]

Photo of Eleanor Laing Eleanor Laing Deputy Speaker and Chairman of Ways and Means, Chair, Standing Orders (Private Bills) Committee (Commons), Chair, Standing Orders (Private Bills) Committee (Commons)

Order. We are not having this—we are getting on with things. Otherwise, people who have something to say will not get a chance to say it. Mr Hollinrake, come on!

Photo of Kevin Hollinrake Kevin Hollinrake Conservative, Thirsk and Malton

I was just trying to establish whether this would be done in the Lords if it was not done here tonight, Dame Eleanor. Perhaps the Minister will say it later in his summing-up.

Photo of Kevin Hollinrake Kevin Hollinrake Conservative, Thirsk and Malton

He is nodding—thank you very much. Hansard have got it on record that he is nodding. That is very important.

I want to mention one other important thing that is often missed. Many hon. Members in all parts of the House have talked about resources, and they are absolutely right. New clauses 2 and 9 deal with that. There are nowhere near enough resources applied to economic crime: it represents 40% of all crime, but 1% of the resources. For example, last year I think the Office of Financial Sanctions Implementation, one of the bodies charged with enforcement, sanctioned two individuals or companies with collective fines of £85,000. In the US, a similar body levied 87 fines totalling £1.5 billion, because it is properly resourced. That is hugely important.

New clauses 14 and 27 seek to approach the problem in a different way, because they would provide protection for whistleblowers. It is pointless having lots of law enforcement people charging around not knowing where to look. Whistleblowers tell us where to look. Some 43% of all financial crimes are identified through whistleblowers, yet it is something we do not talk about. We do not just need more regulators; we need somebody to point us in the right direction. Regulators will always be watchdogs, never bloodhounds. We need the bloodhounds in the organisations who are willing to speak up if things are going wrong.

Every single economic crime I have dealt with in my work on the banking side of things has come to light as the result of information provided by whistleblowers. On GPT Special Project Management, it was my own constituent Ian Foxley. Airbus paid $3 billion in fines internationally and £900 million to the UK Treasury, and all that money came as a result of a disclosure from whistleblowers. In every single case you can think of, whether HBOS or the PPI scandal, they were all about whistleblowers. Yet the protection and compensation that we offer whistleblowers in the UK is pretty much non-existent. In the case of Lloyds/HBOS, the FCA itself was guilty of not protecting the whistleblower. Barclays tried to identify the whistleblower in a case within Barclays. Yet very little or nothing is done. So if you are thinking of blowing the whistle, will you do it? My constituent, Ian Foxley, who was involved in the GPT Special Projects case that resulted in £28 million of financial sanctions at Southwark court last year, has been 11 years without a single penny. That man was earning £200,000 a year. Do you think he would step forward next time, or somebody else would do the same? We have to make sure that we protect whistleblowers.

Photo of Philip Dunne Philip Dunne Chair, Environmental Audit Committee, Chair, Environmental Audit Committee

My hon. Friend—by the way, I support enormously what he has been saying about the banking frauds—is making a very important point in relation to whistleblowers in a domestic context. In this context, we are talking about sanctions against people who potentially undermine the law of this country, as we saw in Salisbury, by taking action into their own hands against whistleblowers—trying to take them out. It is entirely appropriate to defend the personal safety of people who undertake whistleblowing.

Photo of Kevin Hollinrake Kevin Hollinrake Conservative, Thirsk and Malton

I am grateful for my right hon. Friend’s support.

I will press new clauses 14 and 27 to a vote. It is very important that this is included in part 2 of the Bill. We need modernised legislation, an office for the whistleblower, to provide protection, and a compensation regime so that these people are fairly compensated for bringing forward information that leads to prosecution of these crimes. That will lead to resources for the National Crime Agency, the Serious Fraud Office and others. One thing will lead to another. The US Securities and Exchange Commission, which is hugely successful in imposing fines on financial organisations, was a relatively small organisation before the US’s whistleblower legislation came into effect. That is one for later, but now, in this Bill, the change has to be made through amendment 64 or something similar. I would really appreciate the Minister’s confirmation that we will do that in the Lords as the Bill progresses.

Photo of Stella Creasy Stella Creasy Labour/Co-operative, Walthamstow

We are all acutely aware of just how important this Bill is. In less than 24 hours, this House will be addressed by President Zelensky, and we all want to be able to look him in the eye knowing that we have done everything we possibly can to help him and his people, and knowing how urgent the situation is—that we are days if not hours away from further atrocities in Kyiv, let alone across the country.

It is in that spirit of the urgency of getting this legislation right and making it as powerful as it can be that many of us have tabled amendments, many of which are cross-party. Sadly, my next-door neighbour, Sir Iain Duncan Smith, is not in his place. I want to follow up on the conversation about “carelessly or recklessly” by talking about the amendments I have tabled that try to learn from tax legislation. I hope the Minister will take that spirit forward, as he has made the commitment that he is going to bring forward further amendments on this in the other place to look at what we can learn from tax legislation. The difficult truth for all of us, as all these speeches are highlighting, is that if these amendments do not go into the Bill, many of us feel that the legislation will be toothless, and that brings the shame that means that we cannot look President Zelensky in the eye.

I particularly want to draw the Minister’s attention to amendments 29, 30, 34 and 31, which are about what we might do instead of having the omission of “carelessly or recklessly”. However, I support the new clause tabled to remove those three words. The amendments recognise what all of us recognise in our day jobs: the difference between tax avoidance and tax evasion; between people acting deliberately and people acting carelessly. Our constituents understand all too well—I am sure we see many cases of this in our casework—that if they have acted carelessly they still face penalties under the law just as if they have acted recklessly. But right now this Bill does not apply the same test to the oligarchs that we are trying to challenge. It does not recognise where somebody may have acted carelessly—although many of us might think that carelessness does not come into it when you are paying that amount of money to the enablers that we are talking about—and might be able to say it was a mistake that they had not declared who the person of significant control would be and who the beneficiaries are. It is clearly a breach of the rules when that happens, but as the Bill currently stands, many, when they are challenged, would no doubt say that it was just an unfortunate accident, what a pity it was and they would put it right. If our constituents cannot get away with that excuse with regard to their tax returns, then certainly an oligarch should not be able to get away with it. We should make sure that we show that we are not just focused on those excuses but that we care about those excuses.

Since 2016, the Government have made it compulsory for anyone setting up a company to name the individual who actually controls it—the PSC, or person with significant control—but nobody checks the accuracy of the information. As we have said, we could pretty much register companies in everybody else’s names in the Chamber and nobody could claim that that was impossible to do. Someone might claim that it was a mistake, but if they are an oligarch, how do we make sure that that person does not do that? The amendments I have tabled also address the nature of the penalty. We have not really talked about that. It is welcome that the Government have increased the penalties, but I still fear that we are talking about people for whom billions of pounds are the standard currency that they are dealing with. Amendment 31 refers to the market value of the properties at stake and the market value of the properties that are not registered. Subsequent amendments recognise the difference between carelessness and recklessness so that if somebody has accidently not registered a company, the penalty they might face would be lower than if they had deliberately not done it.

All this only works if we also bring in the other part of civil law, which is the balance of probabilities, because, again, our constituents do not get the benefit of the doubt but right now, under the Bill, oligarchs would. The amendments bring in the balance of probabilities to give the law enforcement agencies—I completely support those who are calling for additional resources for them—the ability to go after people on the balance of probabilities: not to have to hope that they have the evidence but to recognise the same test and threshold that we set in civil law with regard to our tax returns. For minor errors such as submitting a late return, there is usually a fixed penalty of a few hundred pounds, but if a tax return is intentionally wrong, or there has been a lack of reasonable care, HMRC levies penalties as a percentage of the tax due—up to 30% for carelessness and up to 70% for deliberate inaccuracy. The Government warn:

“Penalties can apply if your client does not tell HMRC if an assessment is too low. This type of penalty is known as an ‘inaccuracy penalty’ and applies to…taxes and duties”.

I hope the Minister can understand that point and why, with regard to deleting “carelessly or recklessly” we might also want to be clear about where people act with intent and where they act as though they do not care because frankly they have so much money that this is just an occupational surcharge that they may take on. Other amendments that I have tabled reflect that differential. I have also tabled amendment 34 to recognise where an adviser is part of that, because many of us are concerned about those who enable oligarchs to get away with this but would perhaps live in the land of the accidental omission rather than deliberate, reckless omission.

The other amendments I want to flag up to the Minister are about some of the other loopholes. Many of us have spoken about our fear that assets will be taken abroad, taken away or hidden, and particularly the idea that people will hide them among their family members. If we were in a proper Committee, I would say that amendment 39 was a probing amendment to see where the Government are going on this. It talks about connected parties. It is about recognising that there is a history among these people of registering and hiding assets not just in shell companies but in the names of their family members. Two years ago, the anti-corruption campaign group Global Witness looked at this and found that 4,000 of the people registered as a person of significant control were under the age of two, while one had not even been born yet. At the opposite end of the spectrum, its researchers found that five individuals each controlled more than 6,000 companies. There are more than 4 million companies registered at Companies House. That is a very large haystack in which to hide needles. If those needles happen to be connected to an individual, we should be able to track that fact and acknowledge it through this legislation. According to The New York Post, the former owner of Chelsea football club transferred £92 million of New York City property to his ex-wife, Dasha Zhukova, just before the 2018 round of sanctions was announced. Those sanctions were designed to affect people close to Putin and

“to counter and deter malign Russian activities” that were harming democracy around the globe.

Our counterparts in America have already sanctioned family members alongside oligarchs. The American Treasury announced that Nikolay Petrovich Tokarev, the president of Transneft, has been sanctioned, but so too has his daughter Maiya and his wife Galina. Maiya’s real estate empire covers more than £50 million-worth of property in Moscow alone and includes at least three companies, including Katina, which owns prime oceanfront real estate in Croatia. The EU and Canada have also sanctioned this family, and Canada has also designated Galina and Maiya, but as far as I can see, we have not yet sanctioned a single family member. Amendment 39 would make sure we have information about those connected parties. It is not perfect, but I hope that in his response, the Minister will explain how the Government intend to ensure we can avoid oligarchs hiding money not just in shell companies, but with shell relatives.

As part of that effort, I put on record my support for new clauses 29 and 2, which deal with resources and asset freezing. This is not just about bolting the stable door; it is about the people who are now running for their lives. We in this place have ruled out military intervention, as has NATO, because we have rested our hopes on economic sanctions as the way to bring Putin to a halt and stop what he is doing. We have to get this right, because there are people sat in Calais tonight, looking to this Government who have failed to give them a visa. There are people sat in Kyiv tonight, waiting for the air raid sirens to go off, who are asking what we are doing. This legislation is what we are doing, so if we do not make sure it is watertight, we are giving a green light to Putin to carry on. Nobody in this House wants to do that.

Photo of Kieran Mullan Kieran Mullan Conservative, Crewe and Nantwich 8:30 pm, 7th March 2022

I rise to speak in support of amendment 64. Economic crime is an issue that should always have the attention and concern of this House. It is theft on a grand scale, and often supports criminal networks and enterprises that are guilty of a much wider range of crimes, including violence, trafficking, drug dealing and all manner of actions that leave a trail of human suffering. These crimes may be committed in far-away places or have been committed in the distant past, which may go some way to explain why, to date, tackling this problem globally has not had the support it needs. However, we are considering this Bill in a changed world, where the human consequences of one major source of this kind of activity are plain for everyone to see.

Putin’s corrupt, criminal regime is waging war on the innocent population of Ukraine with absolute barbarity, almost certainly committing numerous war crimes. We have all seen the horrendous images of families lying dead on the street, shelled as they tried to flee during what was supposed to be a ceasefire. We have all seen the reckless assault on nuclear facilities and the apparent use of cluster bombs and indiscriminate weaponry in civilian areas, but we have also all seen the incredible bravery and patriotism of the Ukrainian people, with hundreds of thousands of volunteers from all walks of life picking up arms and fighting and dying for their country.

We can be proud of what we have done to help these people. We were the first country to supply lethal arms to them; we have trained more than 20,000 of their soldiers; and we joined the United States in doing our absolute best to warn the world about what was going to happen, often in the face of strong criticism. While these people are fighting for themselves and their country, they are also fighting for us. They are on the frontline of a battle that will decide whether the world order that has kept us safe for decades is upended. I understand why getting directly involved in this conflict could lead to much wider suffering and conflict, but because we are letting others fight and die on our behalf, it is incumbent on us to do everything else we possibly can to help them.

I want to challenge the impression that people who have heard today’s debates in the House and listened to the media may have received: that somehow, London and the UK have been uniquely susceptible to the finance that has been flowing from the Putin regime. This issue predates Putin. The transfer of the wealth of the Russian people to private individuals took place in the 1990s. That was the source of all this money, and every company, Government and individual that has had dealings with Russia since then has been tainted by it.

I am afraid there is plenty of blame to go around. It was the Labour party that introduced the tier 1 visa, which seems to have been one of the ways in which this country has been exploited. I remind Members that the Prime Minister at the time, Tony Blair, said at an EU-Russia investment conference he chaired that increasing reliance on Russian oil and gas was not something to be concerned about. A number of former Labour Prime Ministers and Members of the Lords have received handsome fees for speaking at Russian investment summits. Furthermore, Labour and Liberal Democrat Members argued against some parts of the original legislation in 2018 as too enabling of Ministers, with the shadow spokesperson saying that it contained excessive powers and was

“not justified by the need for speed”.—[Official Report, 1 May 2018; Vol. 640, c. 239.]

These oligarchs’ property empires are spread around the world, in Paris, New York, the French riviera and Berlin. If Members look at the media, they will see politicians from most of those capital cities identifying that they have been too lax on this issue for many years. Representatives of America’s justice system suggest that billions of pounds-worth of properties are hidden in New York limited liability companies.

As a financial centre of global importance and a high-value property market, it is not surprising that London seems to be a focal point for these oligarchs and their stolen wealth. While I accept things should have happened sooner, I question whether the world would have acted in the same way with us. There would be little point in cracking down on shell property ownership in London if all of it just fled to New York, Berlin and other capitals, so I caution against some of the self-righteousness we have heard from the Opposition.

The whole of the west has been too slow to act, and we can see we are all paying a price for that now. Every time we dealt with this regime’s puppets, we strengthened Putin. Every time Europe allowed its energy dependency to grow, we strengthened Putin. Whether it was behind closed doors, or in plain sight when they proceeded with the plans for Nord Stream 2, we know that ultimately that money and those projects date back to a corrupt, criminal regime that stole its funding from the Russian people.

In the end, authoritarian regimes get worse and worse—they always do. They are especially likely to do so in modern times, now that we have a modern surveillance state that makes it very difficult for the people to challenge or dislodge the regime. I welcome this Bill, and I welcome the spirit of the House generally in getting this legislation pushed through, even if at times I feel that people have been using it to make party political points.

I welcome the explanations we had from the Minister on Second Reading about a further Bill being drafted to tackle some of the wider issues, such as false declarations. It is right that we are focusing on the priority we have now, but that is a wider and bigger bit of work. I also draw Ministers’ attention to the challenge our enforcement agencies will have, and we must do more to help them. They can expect challenge in the courts. As others have said, the National Crime Agency and the Serious Fraud Office often face an onslaught of uneven legal competition whenever they proceed with any cases, and we can expect agencies such as Companies House to face the same. They can expect those supplying them with information to face legal attacks through the misuse of data protection laws.

We had a debate in this place on lawfare a few weeks ago that discussed strategic lawsuits against public participation, known as SLAPP. Those lawsuits go after not just journalists, but the kind of investigative companies that might help us tackle the huge task of proving who owns what. If we were already considering anti-SLAPP legislation, surely we need to put a rocket under that exercise to see whether there is more we can do. I know that Liam Byrne has tabled some amendments in that regard.

Capital flight is a key issue, as my hon. Friend Kevin Hollinrake has described, and I welcome the commitments that have been given at the Dispatch Box to ensure that the action we take is not too late, but there have been suggestions that we either shorten the time for registration or, as amendment 64 would do, put in place day one restrictions when it comes to the sale or transfer of assets during this transition period. The latter suggestion seems more proportionate and achievable, and I welcome the commitment from the Minister on delivering that.

I accept there may be challenges for Companies House and the Treasury in delivering on ambitious and wide-ranging changes to our approach. I understand that, and I do not say this lightly, but when it comes to making the commitments we should make to deliver on this, the resources we put into this task as a Government should reflect the seriousness of what is happening in Ukraine, with Putin determined to upend the global order. As the Prime Minister has said, we must do everything we can to ensure he fails. If we are asking the Ukrainians to fight and die for their democracy, and if the west has to answer for its role in failing to take action against the Putin regime for many, many years, it is the least we can do.

Photo of Chris Bryant Chris Bryant Chair, Committee on Standards, Chair, Committee on Standards, Chair, Committee of Privileges, Chair, Committee of Privileges

The hon. Member has only just spoken, so no, I am not going to give way. I think that speech was shabby, because it was partisan and completely inaccurate. Actually, many of us across the House were arguing for a very long time—all the way from 2010—for a proper sanctioning regime in this country. I think I personally asked different Prime Ministers 32 times for Magnitsky sanctions, and I was delighted when the Government introduced that legislation in 2018. I worked closely with Dominic Raab to try to secure that, and I was delighted when he became the Justice Secretary, because I know he cares about this issue, and I have worked with him on it for many, many years.

Some of us argued for many, many years that it was wrong to have tier 1 visas doled out to people from authoritarian regimes around the world, including China and Russia, without asking any proper questions about where the money had come from that they supposedly had to invest in the UK. The levels were £2 million and £10 million. If someone had £10 million, they could get their permanent right to remain in the UK fast-tracked, and they could end up with UK citizenship. I think that has led to greater corruption of the British state, so it is absolutely disgraceful that an hon. Member should come to the House today and try to blame the Opposition for not introducing legislation when we were not in Government.

Photo of Chris Bryant Chris Bryant Chair, Committee on Standards, Chair, Committee on Standards, Chair, Committee of Privileges, Chair, Committee of Privileges

No, I will not give way to the hon. Gentleman. I remind him what happened on 1 May 2018 when we debated the remaining stages of the Sanctions and Anti-Money Laundering Act 2018. We voted on whether to introduce—guess what?—an economic crime Bill to bring forward a public register of the ownership of properties. Conservative Members all voted against that and the Opposition voted in favour, so I will not take any lectures from him on that.

I care passionately about the issue because we are facing an absolutely critical moment. None of us elected as MPs in this generation thought that we would see the elected Mayor of a town gunned down by Russian mercenaries when giving out aid in a democratic society, as Yuri Prylypko, Mayor of Hostomel, was today; none of us thought that we would see the Russian Government bombing refugees when there was meant to be a ceasefire; and none of us thought that we would see ceasefires repeatedly ignored day after day, so timeliness is all today. This is not really emergency legislation—it is just long overdue—but it is timely and important. In fact, I suggest that the amendments that the Government have tabled are more important than the material in the original Bill.

What depresses me is how many Putin-related Russian oligarchs and people with large assets in the UK have still yet to condemn the invasion of Ukraine. It is an absolutely deafening silence. It shames all of us that we have sanctioned only 11 oligarchs so far, or perhaps 17 individuals—there are different ways of counting it; it depends who we count as an oligarch—whereas the United States of America and the European Union have done far more.

In the Foreign Affairs Committee this afternoon, the Foreign Secretary tried to blame me for not having done enough. It was all my fault because apparently I had said something that she had to subsequently retract because it turned out that that was not true and I had not said it at all. She has apologised. The point is that everything that we are doing today should have been done in 2018, so we are genuinely frustrated.

We are seeking transparency about who owns what. The Bill does a substantial amount of that, of course, but we also want that to be enforced. There is a major problem that Companies House cannot even question whether the information that it has been provided with is accurate. If someone looks up a director on the Companies House website, it says that it cannot verify whether the information is correct. We want to go that step further and it seems bizarre not to include that in the Bill, which is why there are amendments about that.

We want individuals to be sanctioned. The measure that the Minister has introduced has gone some considerable way to making that easier, but I still do not understand why we made it so difficult in the first place. We also want the seizure of assets. There is not much point in sanctioning people if it will not have any effect. That is also extremely timely and must happen rapidly because of all the things that we have said about asset flight.

My anxiety is that without new clause 29 we are not doing that last part at all. My guess is that if we have to wait for the Government to introduce further legislation, that will not happen until after the Queen’s Speech sometime in May, so it will not go through both Houses for another six months. If we leave things that long, we will do exactly what we did in 2014 over Crimea: the moment will have passed and we will forget. Our memories will be short, another issue will come along and Putin will have won.

That is why I have tabled four simple amendments. Amendments 24 and 25 say that when someone registers or updates the register of beneficial ownership, they simply have to say whether any of the individuals that they are referring to are sanctioned individuals. That is important because it means that the people who are doing the registering have to check whether they are sanctioned individuals. We might think that they would want to do that anyway, but forcing them to do it means that, when they then register incorrectly, they are committing the offence, rather than the sanctioned individual. That is why that is important.

On amendment 26, of course it is absolutely delightful that the Minister is saying that the Government are going to do all this in the Lords. I have never understood why Ministers do this. Why do Ministers always say, “It’s absolutely fascinating. It’s an absolutely brilliant amendment—I wish I’d thought of it myself—but we’re not going to let it go through today because this is just the elected House. No, we’ve got to go and take it down the corridor to somewhere else, where there are much more intelligent members, who can obviously decide on a much better and more informed basis, and where the Minister can get the credit for having tabled the amendment in the first place”?

All amendment 26 does is remove three words—“knowingly or recklessly”. In the Government’s version, it is an offence knowingly or recklessly to provide false information. Why on earth would we set such a high bar? It is almost impossible, I would have thought, to take that to court and to win. My amendment just takes those three words out. The Minister says he is going to take it to the Lords and he is going to redraft it. What is he going to redraft after taking those three words out? He could just agree it today, and I would wander over and kiss him on the forehead and congratulate him—[Interruption.] Oh no, maybe not. Sorry. It would not be in order and it would not be appropriate. I am merely trying to say this: the Minister knows that I am fond of him and I think he is a good man, and I just want him to do the right thing tonight. So if he could just stand up later—we need not tell anybody else: we do not have to tell Downing Street, the Whips Office or anybody else—and say, “We’re going to accept it tonight”, that would be great.

Amendment 27 is important because, as I said earlier, it is daft to have a rule that it is an offence to provide false information if nobody can check whether it is false information. All my amendment 27 does is say that the registrar—Companies House—is able to ask other people, including the people who provided the information, whether it is true information. For that matter, it could go to other Departments of Government and ask whether it is, including the security services. I do not think that that is too much to ask. I am guessing that the Government will end up doing something very similar at some point and, if they do not, frankly, the whole of the rest of the Bill is a waste of space.

With that, I am grateful for the Committee’s attention, but really we need to do all these things in a timely fashion and some of us are just phenomenally frustrated that it has taken us so long to get here.

Photo of Bob Neill Bob Neill Chair, Justice Committee, Chair, Justice Committee 8:45 pm, 7th March 2022

I am afraid that I am now going to reduce the level of excitement by returning to some rather technical and boring but I think important legal details of the Bill, because we all want to make sure that this works in practice. I am concerned that, despite what is in the Bill itself and in a number of the amendments, there still seem to be two important areas of potential loophole.

Can I start with the definition of registrable beneficial owner, largely in schedule 2? The concern that I have, and I am fortified by the briefing I have received from the Law Society of England and Wales—it mirrors the briefing that I suspect Alison Thewliss had from the Law Society of Scotland—is that there is a gap here, as the impact assessment of the Bill sets out. What has been done here is to take the existing domestic registry of persons of significant control and seek to build on that, which is fair enough, but it does not go far enough.

The problem that we have is this. There is a common misconception that analysing who the person of significant control of an entity is, is the same as analysing who the beneficial owner is. They are not the same and the objective we need to get to is: who is the economic beneficiary?

The position is this. The PSC regime seeks to establish ownership certainly, but only ownership in the context of leading to the control of the relevant entity. It does not seek to establish who the ultimate economic beneficiary of that entity is. So we could have a situation where the register disclosed the ownership of, let us say, a corporate group, but it would not then disclose who in fact are the people behind the corporate group. It might disclose individual named nominees, but it would not then disclose the people on whose behalf the nominees hold the property. There might in fact be no registrable person—no legal entity that holds significant control—so nobody would be shown up in that.

I urge the Minister to pay attention to what the Law Society suggests to get around that and to ensure the economic beneficiaries of the property are captured—the oligarchs and their families; they are the economic beneficiaries we want to get to. The trust and its beneficiaries—this will invariably be in the form of trusts of one kind or another—should also be registrable under regulation 45 or 45ZA of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. That is a mouthful, but it would do the job. The whole point is that then we would be able to capture the beneficiaries. That is missing from the Bill as it stands and I do not think any of the current amendments deal with that point. I hope the Minister, as he is taking things away, will take that away urgently in order to plug the loophole.

That relates to the relationship between the scheme under this Bill and the scheme of the trust registration service because that same set of 2017 money laundering regulations works in conjunction with the trust registration service: that is the body through which entities meet their legal obligation to register under those money laundering regulations. Express trusts are covered by that if they are UK trusts. Non-UK express trusts are obliged to register under the 2017 regulations if they hold UK property, or derive income from a UK asset—again, that is the sort of situation of the oligarchs that we are looking at.

We must be very clear in setting out which overseas trusts are going to be caught by the legislation. Are they under the regulations or under the Bill? If we extend the definition across, we might well cover that. It is also suggested—I think there is merit in this—that guidance should be issued to honest practitioners in this field setting out which entities are in scope of the scheme and which are out of scope. That has happened in other forms of tax legislation and will be a sensible idea to take away.

The final point I make in relation to that guidance is that that would enable the Secretary of State to give better indication as to interpreting the meaning of “significant influence or control” within legislation. We have got who the beneficial owner is, capturing the economic beneficiaries, and who the person of “significant influence or control” is. We ought to make tally with the PSC regime as far as we possibly can. The logical way to do that is by introducing an amendment to introduce the same provisions we are introducing here into section 790C(7) —I am sorry, again, about the length—of the Companies Act 2006. That would enable us to bring in the equivalent PSC regimes for limited liability partnerships —again there is a gap here, as I read it—unregistered companies, and also Scottish partnerships, which have been referred to by Opposition Members.

Those are gaps that the Law Society has flagged up that could be plugged. There is plenty of time between now and next week to get that worked out. I just say this: the Government have many able lawyers—I worked with some of them when I was a Minister. Specialism in detailed trust law is not necessarily a core Government legal business. The Law Society, both north and south of the border, has access to real expertise in this field, objectively. It has written to say that it would be very happy to work with the Government in helping to fine-tune the legislation. I hope the Government will think about that. Not all wisdom purely comes from within Whitehall and we ought to look to experience in the sector to take that on board.

I hope those suggestions will improve a Bill that is well intended, but we want to nail everything down as much as we can. In that spirit, I hope the Minister will consider them.

Photo of Layla Moran Layla Moran Liberal Democrat Spokesperson (International Development), Liberal Democrat Spokesperson (Foreign and Commonwealth Affairs)

I rise to speak to the amendments in my name: new clause 5 and, in particular, amendment 4, which is supported by the cross-party group that has been trying to get our ducks in a row. The Bill is welcome and timely. It is long overdue and we are all trying to pull in the same direction, but it is a bit of a Swiss cheese Bill. Much in the Bill is good, but there are a lot of loopholes, which we are seeking to close.

I will single out new clause 29 in the name of Mr Davis and the amendments relating to clause 31 that were tabled by Chris Bryant. I heard what the Minister said about “Economic Crime Bill 2”. It sounds like the promise of the good sequel after the film—it is coming and it will be even bigger and better, with bigger stars than the first one—but we all know how sometimes part 2 can be a flop. I sincerely hope that part 2 will come sooner. I remember when the Minister was on his feet claiming that this Bill would wait until the next Session, and here we are debating it now. I welcome that. I wonder whether we might want to try to do that with part 2 and part 3 and get the sequels out as quickly as possible because each one will be pretty meaty and need time.

New clause 5 asks the Government to release the names of those who in the last year have been lobbying the Government against these measures. That is important because it helps on the SLAPPs amendments, which I wholly support. These people need to now be named and shamed. It is not enough to name the oligarchs; we need to name the PR companies and the lawyers—those who seek to water down or create loopholes in this legislation. I tabled a parliamentary question to the Foreign, Commonwealth and Development Office—it was passed to the Home Office—asking it to provide and publish the names of those who had been doing that. The answer was:

“The information requested could not be obtained without disproportionate cost.”

Forget about the cost—do the Government have the list? If they do, those people deserve to be named and shamed, like in the speech by Bob Seely the other day. I hope that “Economic Crime Bill 2” will have all the necessary powers to clamp down on that activity.

Amendment 4, like amendment 26, looks small. It is very small; it just deletes a line in clause 18. It relates to the bit of the Bill that talks about exemptions. There are three ways in which an individual can become exempt if the Secretary of State wants them to be. Two of them are reasonable. They are

“in the interests of national security” and

“for the purposes of preventing or detecting serious crime.”

Absolutely fine. Some people think we should just get rid of them all, but I can live with those. However, the third, in clause 18(1)(b), says that the Government can exempt an individual if satisfied that it is necessary to do so

“in the interests of the economic wellbeing of the United Kingdom”.

These are high net worth individuals. Many of them own companies that potentially employ thousands of people in this country. I do not understand why the Government want to give themselves that headache. Why do they want these enabling lawyers to look at clause 18(1)(b) and say, “I’m going to lobby Government to exempt me under 18(1)(b)”?

It is not just a loophole. People keep talking about horses bolting after the gates have been closed. This is hitching a coach to the horse, putting the oligarchs in it with their lawyers and allowing them to drive their way through the Bill. It makes no sense at sall.

Photo of Sarah Olney Sarah Olney Liberal Democrat Spokesperson (Business, Energy and Industrial Strategy), Liberal Democrat Spokesperson (Transport)

My hon. Friend is making an excellent speech. On the point about horses bolting, I want to mention my new clause 13 on freeports. That issue has come up a number of times in the past few weeks. We have been talking about the National Insurance Contributions Bill, which is the enabling Bill for freeports. It is really important that we include the list of companies that are in freeports; I made that point in the debate on that Bill last week. Currently, someone can hide the fact that they are using a freeport, and there is so much concern that this is an open invitation for money laundering in the UK. While we are still discussing this Bill, before it is passed and before this particular horse has bolted, will the Minister reconsider supporting the amendment that the Lib Dems tabled in the Lords to that particular piece of legislation—

Photo of Sarah Olney Sarah Olney Liberal Democrat Spokesperson (Business, Energy and Industrial Strategy), Liberal Democrat Spokesperson (Transport)

I beg your pardon, Dame Eleanor. The new clause is in my name, but I apologise for taking too long on my intervention.

Photo of Layla Moran Layla Moran Liberal Democrat Spokesperson (International Development), Liberal Democrat Spokesperson (Foreign and Commonwealth Affairs)

Thank you, Madam Deputy Speaker. I thank my hon. Friend for her intervention. When the Secretary of State for Business, Energy and Industrial Strategy was at the Dispatch Box, he said that he would look closely at that amendment—it was the day before the vote on the National Insurance Contributions Bill—and I urge the Minister to look at that again.

Photo of Robert Buckland Robert Buckland Conservative, South Swindon

I have been listening carefully to the hon. Lady’s speech, and she is making an understandable point. My recollection about the phrase “economic wellbeing” is that it appears, for example, as an exemption to the right to privacy in article 8(2) in the European convention on human rights. What we should be looking for is provisions that match the rights acquired under article 1 of the first protocol—namely, rights to property—and clearly, there need to be qualifications on that in circumstances such as these. She is right to probe the Government so that we get language that mirrors, at the very least, convention rights. Does she not agree with that reasonable proposition?

Photo of Layla Moran Layla Moran Liberal Democrat Spokesperson (International Development), Liberal Democrat Spokesperson (Foreign and Commonwealth Affairs)

I thank the right hon. and learned Gentleman for his helpful intervention. I would rather that we deleted these lines now—they cause a lot of problems—and then, when the Bill goes to the Lords, he should by all means have a conversation with the Minister and perhaps it can be tidied up there. My concern is that if this stays in the Bill now, we then end up with too much to do in the Lords. So much is being put off and is waiting for the Lords to have a look at it that we may never get to these things. It is such a small thing, but its impact is huge.

We all want the same thing. Let us not get the enablers to start betting on clause 18(1)(b). Amendment 4 is very simple—it would delete this now. We might have to tidy a few things up in the Lords, but I would be really grateful if the Minister specifically addressed how he will ensure that clause 18(1)(b) does not end up ruining what is otherwise a good Bill that has been made much better by all the amendments that have been tabled, including by the Government.

Photo of Liam Byrne Liam Byrne Labour, Birmingham, Hodge Hill

Thank you for calling me to speak, Dame Eleanor. I thank the Minister for his presentation to the House and for the spirit that I thought he brought to his remarks at the outset. He slightly walked back from some of that consensus, but I make the point to him that many of us across the House think that the Government’s approach to tackling economic crime is all holes and no net. We have tried, in 27 pages of amendments, to turn what should be a net into some snares. That is why we cannot understand why the Government are not taking on board some of the smaller, technical drafting amendments that we proposed tonight—and frankly, some of the bigger moves. The Minister has it in his power to drive those through tonight so that by the time the sun rises tomorrow, we would have in our country a much stronger framework for tackling economic crime to take to the other place.

I want to speak to the two amendments in my name—amendments 37 and 38—and weigh in on the debate on amendment 26 and new clauses 2 and 29. Let me start with amendment 26, because I was a Home Office Minister for a couple of years, and I have won and lost many cases as a Home Office Minister. I have to say to the Minister that the failure to remove the words “knowingly or recklessly” from the Bill is frankly the oligarchs’ loophole—their “Get out of trouble free” card. I add my plea to those of other hon. Members that we remove those words. Otherwise, frankly, we will stand by and watch the richest people on earth driving a coach and horses through our legislation.

My second point is about new clause 2. As my right hon. Friend Dame Margaret Hodge said, the heart of our problem with sanctioning—our frankly embarrassing performance on it—is that as well as not having the right powers, we just do not have the right resources in place. The fact that the Government took away the title of Minister for Economic Crime tells us everything we need to know about their performance and attitude hitherto.

As my hon. Friend Chris Bryant said, the United Kingdom has sanctioned 34 individuals and entities since the extension of the invasion; the EU has sanctioned more than 500. Of the Navalny list of 35 that Layla Moran read out in the House the week before last, the UK has sanctioned just eight; the EU has sanctioned 19. However, what really troubles me is the question of resources, because that is obviously the core problem.

When I submitted parliamentary questions to the Foreign Office, the Treasury and the Home Office last week, I was frankly horrified. My question to the Foreign Office, which leads on sanctioning policy, was pretty straightforward: how much money is devoted to sanctioning, and how many civil servants are working on it? The answer from the Under-Secretary of State, Vicky Ford, was about 16 lines long and did not mention either how many civil servants are working on sanctioning or how much money is being spent.

An answer to the same question came back from the Minister for Security and Borders. In a way, I admire the number of tropes folded into his answer:

“The National Crime Agency welcomes the announcement on the Combatting Kleptocracy Cell…They have already surged additional officers to support existing efforts and will”— wait for it—

“move at pace to enhance the unit further”.

I put the same question to the Treasury. The Treasury being the Treasury, it said:

“The staff in post in OFSI was 37.8 FTE…This information can be found in HM Treasury’s Outcome Delivery Plan”.

That is the level of precision that we ask of every Department. Frankly, the silence tells us that all is not well. That is why new clause 2 is so very important.

New clause 29, tabled by Mr Davis, is incredibly important, but I push the Minister to go further. We need to be able not only to freeze assets, but to seize them. Paragraph 3.1.3 of the UK financial sanctions guidance in December 2020 says that the use of an asset, even when it is frozen, is not prohibited.

The Minister will forgive the Opposition for growing frustrated over the years at the economic policy that the Government have pursued, which has created a country of haves, have-nots and have-yachts. He can imagine how frustrated we are that the Government will not even seize the yachts when they belong to oligarchs. Somebody has very kindly shared with me a list of candidates that the Minister might want to consider: the My Solaris, owned by Roman Abramovich; the Eclipse, which is sailing in the north Atlantic and which the Government would have no means of either seizing or freezing as an asset if it docked at a UK port; the Valerie, owned by Sergey Chemezov, which is currently in Barcelona; the Lady Anastasia, which is currently in Mallorca in Spain; the Tango, which is also in Mallorca; the Palladium, which is currently in Barcelona; the Aurora, in Barcelona; Here Comes the Sun, in Mallorca; Ice, in Genoa; the Ragnar, in Narvik; Sailing Yacht A, owned by Melnichenko—

Photo of Eleanor Laing Eleanor Laing Deputy Speaker and Chairman of Ways and Means, Chair, Standing Orders (Private Bills) Committee (Commons), Chair, Standing Orders (Private Bills) Committee (Commons)

Order. I appreciate that the right hon. Gentleman has a long list. It is enlivening proceedings and we are all grateful, but we do not have time. Will he please truncate his speech? Just say, “and 12 more,” or something like that.

Photo of Liam Byrne Liam Byrne Labour, Birmingham, Hodge Hill

I am grateful for your guidance, Dame Eleanor, because I think I have made my point: the Government need to take on more power to seize and freeze these assets.

The final point I wish to make is about strategic lawsuits against public participation. We recently had a good debate on lawfare, sponsored by the right hon. Member for Haltemprice and Howden and myself. In amendments 37 and 38, we make proposals that the Government could adopt. I do not wish to press them to a vote tonight, but I would like the Minister to confirm what the Foreign Secretary and the Justice Secretary said in the media on Friday. The Justice Secretary told “BBC Breakfast” that SLAPPs were an

“abuse of our system and I’m going to be putting forward proposals to deal with that and to prevent that”.

The Foreign Secretary later told The Guardian that she had asked Government lawyers to “find literally any way” to crack down on SLAPPs. I would like this Minister’s confirmation that that is indeed going to happen, not in some consultation response to the Human Rights Act, but as a stand-alone piece of legislation, so that we can live in truth in this country. It is outrageous that English courts are being used as a means to silence journalists such as Tom Burgis, Carole Cadwalladr and Catherine Belton. I want great books such as “Butler to the World” by Oliver Bullough to be written with the freedom to tell the truth, and at the moment the oligarchs are denying us that freedom. They are launching a war on free speech in English courts, of all places. That scandal has surely got to stop.

I will conclude by saying that it is now clear that what our country needs Russia is a recontainment strategy towards Russia. That will entail a refortification of the NATO frontline to the east; resupplying the Ukrainian forces; and suppressing and repressing the Russian economy. Sanctions do not produce instant results—Presidents Mugabe and Maduro presided over economies in ruin for many years—but this would give us progress.

Photo of David Linden David Linden Shadow SNP Spokesperson (Work and Pensions)

I rise to speak to amendment 63, which stands in my name and those of my colleagues. I am grateful to you, Dame Eleanor, for selecting it as a manuscript amendment, particularly at such short notice. I am not normally a fan of ramming a Bill through in such short order, but I understand the need for speed in this case.

As others said on Second Reading, the Bill is to be broadly welcomed, but it does not go far and fast enough. A much bigger and more wide-ranging debate stems from the Elections Bill, which is currently in the other place, and the eligibility of overseas voters and donors to influence our politics, but I do not think we want to go too far down that rabbit warren this evening. However, clause 38 makes provision for financial penalties to be applied in respect of overseas entities, and I support that.

My amendment seeks to close off a loophole: we could apply significant financial penalties to an individual, yet said individual, even if they lived overseas, would still be able to vote and, more concerningly, donate significant sums to UK political parties and influence our elections. I am the first to accept that our focus right now should be on applying the maximum economic sanctions on Russia to alleviate and end the military bombardment that it is subjecting the poor people of Ukraine to. It strikes me as a little bizarre that we can have a debate—and indeed legislate tonight—on the issue of dirty Russian money in these islands, but miss a trick by not also cleaning up our politics of said dirty Russian money. Countless warnings have been sounded on this issue, most notably in the Intelligence and Security Committee’s Russia report, which flagged up the vulnerability of our politics to Putin’s influence in cyber and in funnelling money into some political parties and referendum campaigns.

Photo of Cat Smith Cat Smith Labour, Lancaster and Fleetwood

The point made earlier by my hon. Friend Chris Bryant was that so much of this Bill has been so slow in being forthcoming. There were huge delays in publishing the Russia report. Does the hon. Gentleman share my concerns that, given the report’s findings of Russian influence in British politics, that was another act by a Government who were perhaps benefiting from that?

Photo of David Linden David Linden Shadow SNP Spokesperson (Work and Pensions)

I am grateful to the hon. Lady for that. Even the Minister who is piloting the Elections Bill through in the Commons admitted that she had not read the Russia report, so it is no surprise that the Government are so ignorant towards it. It is an indisputable, though regrettable, fact that the Conservative party has previously accepted donations from people who have ties to the Kremlin. Such gifts to the party are legally, if not ethically, legitimate, in so far as they are within current electoral law when properly declared. However, lines have been drawn between senior Conservatives and some pretty unsavoury characters.

Photo of David Linden David Linden Shadow SNP Spokesperson (Work and Pensions)

If I may, I will continue.

The genesis of my amendment comes from the fact that the Bill, as drafted, would make provision for an individual to be found to have committed an offence under part 1 of the Bill. The registrar would be able to impose significant penalties which I—indeed, I assume all of us—would support, but without the inclusion of my amendment 63 in the Bill, that individual would still be permitted to participate in UK democracy and, crucially, to donate money—dirty money—to influence our elections. If we leave this loophole open and unchecked, we will be in a perverse position in which Putin’s cronies are still polluting our politics with dirty money, even after they have been sanctioned through the use of the very legislation that we are discussing this evening.

One of the problems of rushing legislation is that we miss many issues that would be found during a proper process of scrutiny by both Houses. As I have said, there is much more than we can do in this regard. I should be interested to hear from the Minister, when he winds up the debate—probably just about now—why the Government would think that this small but important amendment, intended to tie up a loophole, should be rejected tonight. I look forward to his response.

Photo of Hywel Williams Hywel Williams Shadow PC Spokesperson (International Development), Shadow PC Spokesperson (Work and Pensions), Shadow PC Spokesperson (Defence), Shadow PC Spokesperson (Cabinet Office), Shadow PC Spokesperson (International Trade), Shadow PC Spokesperson (Foreign Affairs), Shadow PC Chief Whip 9:15 pm, 7th March 2022

It is both telling and deeply disappointing that it has taken a vicious and horrific conflict to bring us to this point of closing down the London laundromat.

I am speaking on behalf of my party rather than proposing any specific amendments, so I shall be very brief. I welcome amendments 42 to 44, tabled by Dame Margaret Hodge, to toughen penalties for non-compliance with the register. We see this as a necessary precondition to increase the immediate costs of non-compliance with UK law. We will also be supporting the right hon. Member’s new clauses 2 and 3.

Past actions, including the much-trumpeted unexplained wealth orders, have done little to dent Russian influence in London, partly owing to the Government’s poor resourcing of enforcement agencies. New clause 2 would bring long overdue scrutiny of that significant weakness, and renewed support for our enforcement agencies. As the Russia report made clear, illicit money does not simply flow into London and the UK by its own volition; it is eased in by a wide network of enablers, from bankers to lawyers to estate agents—Russia’s little helpers in stashing ill-gotten gains and off-the-shelf influence. That is why we will also be supporting new clause 3, as well as amendment 41, tabled by my SNP colleagues, in order to curb the ability of shell companies and other indirect ownership instruments, as well as their paid London enablers, to obfuscate ownership structures for their clients. Those measures, along with new clauses 4 and 9, will tighten the massive loophole that prevents us from having a properly resourced, properly empowered and properly directed Companies House.

New clause 21 would help to address the issue of enforcement in Crown dependencies and British overseas territories. My hon. Friend Ben Lake has already raised with the Foreign Secretary the issue of the enforcement of sanctions in overseas territories such as Bermuda, where more than 700 Russian civilian aircraft are registered. We hope that new clause 21 will bring clarity to this long-standing grey area of enforcement.

However, none of this matters if the targets of the Bill are able to make off with their loot in the next few weeks. I therefore urge the Government to work with the Opposition, and to support new clauses 28 and 30 to ensure that the sanctions and the powers work to the maximum possible effect.

Photo of Angela Eagle Angela Eagle Labour, Wallasey

I support all the amendments that are intended to close loopholes in this long-overdue legislation, narrowing the gap between the Government’s rhetoric and the reality of what it is possible for them to do, strengthening the legislation, and ensuring that we have transparency so that we know who owns what, so that people can indeed be sanctioned, and so that their progress across our financial system can be followed in a meaningful way to make sanctions a reality. I also support new clauses 7 and 2, which seek to beef up enforcement.

Today, we in the Treasury Committee heard that the Office of Financial Sanctions Implementation has 37.8 full-time equivalent staff. I put it to the Government that that is not nearly enough for us to make sanctions against Russia workable and effective. We also learned recently that the National Crime Agency had no Russian speakers. I am not sure how it is meant to pursue sanctions against Russia if it does not have anyone with the appropriate language skills to do so. I hope that it will be beefing up its enforcement activities as well.

We understand and support what the Government are trying to do with this legislation. It is long overdue, and we think it needs to be strengthened. The bewildering and fragmented nature of enforcement, and its underfunding, must be put right if we are to get to the stage where we can finally deal with the corruption of our financial system and its infiltration by those authoritarian regimes and kleptocrats who are putting our democracy at risk, and who, even as we are having this debate, are murdering and bombing innocent people in Ukraine and threatening the peace and prosperity of Europe and the world. I hope that the Government will listen and accept a lot of these amendments by the time the Bill comes back to this House in due course.

Photo of Kim Johnson Kim Johnson Labour, Liverpool, Riverside

I rise to speak in support of new clauses 7 and 8, but I want to start by expressing my solidarity with the people of Ukraine, who face unimaginable heartbreak and horror, and particularly to black residents who have been subject to unacceptable levels of racism and brutality. I call on this Government to open our doors and welcome without discrimination all refugees who are fleeing oppression, violence, occupation and war. I applaud the courageous protesters in Russia, at home and across the world who are demonstrating for peace.

The National Crime Agency estimates that £100 billion of dirty money flows through the UK every single year. This is not a new phenomenon. Since as early as 2016, the Government have been making empty promises for tighter regulations to prevent these illicit activities, but since then, £1.5 billion-worth of property here has been bought by Russian oligarchs accused of corruption with links to the Kremlin. As long ago as 2018, draft legislation was published by this Government for a register of beneficial ownership to consolidate and clarify our legal structures in order to prevent profiteering by way of laundering money through the UK property market, but despite a wealth of evidence pointing to the illicit activities of oligarchs in London and elsewhere in the UK, the Government have done nothing but kick the can into the long grass. Given the almost £2 million received in Russia-linked donations by the Tory party since the current Prime Minister entered No. 10, it seems pretty clear why.

Labour has consistently been on the front foot when it comes to clamping down on oligarchs. Our plan included an oligarch levy to tax secret offshore purchases of UK residential property, the application of the Magnitsky clause to apply sanctions against human rights abuses, and to extend the beneficial ownership register for Crown dependencies and overseas territories. Labour has not just jumped on the bandwagon now that this has become the issue of the day; we have been putting forward detailed plans to tackle this injustice for many years, as my hon. Friend Chris Bryant has pointed out. Our amendments today will give this toothless Bill some bite, speeding up action against some of the worst offenders and bringing forward reforms to Companies House that will root out the activities of criminal elites who are legitimising their loot in the UK without scrutiny or repercussions. I hope the Minister will commit today to backing our amendments.

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

I thank all hon. Members who have spoken in this important debate for their constructive approach to this important legislation, and for their engagement prior to today as well. Let me quickly whip through as many of the points that have been raised as possible. Liam Byrne talked about SLAPPs. The Deputy Prime Minister made a call for evidence on Friday, and it is definitely not just a listening exercise. It is important that we act when we need to act.

Nominees were raised both on Second Reading and in Committee. If nominees are directed by someone else—say, the beneficial owner—the person doing the directing is caught by condition 4 in paragraph 6 of schedule 2 and is therefore a registerable beneficial owner. My hon. Friend Sir Robert Neill and Dame Margaret Hodge both made important points, and I am keen to work with them in the coming days to make sure we do not leave any gaps. We have a common interest in doing so.

The Government tabled the amendments to reduce the transition time from 18 months to six months but, as I said in my closing speech on Second Reading, I see merit in requiring all those selling property to submit a declaration of their details at the point of transfer of land title during the transition period. In effect that means we will be giving sellers a zero-day transition period. They will have to register ownership, so we will get their ownership details either when they sell or at the end of the transition period.

I am keen to work with my hon. Friend Kevin Hollinrake to see how far we can go in the other place, because this is difficult to draft. I hope he is satisfied will an invitation to sit down with me in the coming days so that we can give further consideration ahead of finalising the Bill in the Lords. I therefore ask that the other amendments in this area are not pressed.

On new clause 7, tabled by Keir Starmer, it would serve little purpose to introduce new legislation at the end of this parliamentary Session as it would actively harm the quality of the measures we are introducing in the broader economic crime Bill early in the third Session—I accentuate the word “early.”

We spelled out the Government’s position on the further reforms to increase the reliability of the information on the register and the ability of Companies House to share data in the “Corporate Transparency and Register Reform” White Paper, and the forthcoming economic crime Bill will introduce those measures early in the next Session, but we want to make sure that we get it right because this is the biggest change to Companies House law for nearly 200 years.

On amendments 10 and 11, also tabled by the right hon. and learned Member for Holborn and St Pancras, I point out that the Government tabled amendment 49, which commits to introducing regulations under clause 16 on information verification so that they come into force before any applications for registration may be made under clause 4(1). Amendment 49 achieves in practice what amendments 10 and 11 seek, so I hope those amendments will not be pressed.

Alison Thewliss talked about Companies House reform and verification, which is something we are introducing. People with anti-money laundering expertise will look at this within Companies House.

I think I have highlighted my intentions regarding amendments 24 and 25, which obviously seek to add to the list of statements an overseas entity must provide to the registrar when applying for registration or when complying with the updated duty. I see the merit of the proposals made by Chris Bryant, and we take these matters seriously. As I said, we will look further at these proposals and we will work together to make sure we can do this in the other place.

I heard the hon. Gentleman’s protestations that amendment 26 takes out three words. However, it is our opinion that removing those three words may have unintended consequences. It is not quite as easy as simply taking out those three words. I would like to work with him to make sure that, if there are any unintended consequences, we can have something that gets the drafting absolutely correct. I therefore ask him not to press the amendment, in the spirit of unity in this House on standing together to make sure we have the strong measures we all want in the Bill.

Photo of Chris Bryant Chris Bryant Chair, Committee on Standards, Chair, Committee on Standards, Chair, Committee of Privileges, Chair, Committee of Privileges

The more we can present a united front—particularly tomorrow—the better, so I will of course not press the amendment.

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

I am grateful for the spirit the hon. Gentleman shows.

Let me turn to new clause 29, tabled by my right hon. Friend Mr Davis. I thank him for his innovative suggestion to provide a power for the Secretary of State aimed at the prevention of asset flight prior to the formal imposition of sanctions. Members will have seen that since my right hon. Friend tabled his new clause we have expanded the Bill with new provisions from the Foreign, Commonwealth and Development Office. Those additional measures aim to ensure that we can respond even more effectively to world events using sanctions.

We strongly support measures to ensure that sanctions are effective. The Government amendments will ensure that we can go further and faster to make new sanctions designations. It is hoped that our amendments will go a significant way towards dealing with the kinds of situation that my right hon. Friend may have in mind. I remind the House that the register is not a seizure mechanism in itself. Law enforcement agencies already have the powers to seize property if there is evidence of wrongdoing. Such powers underpinned the restraining, freezing or seizure of more than £979 million-worth of assets in 2020-21. We have swiftly implemented the strongest set of economic sanctions ever imposed against a G20 country.

I see the intent behind amendments 3 and 40, the latter of which would have no effect as the Bill already provides that a beneficial owner must register as a trustee of a trust if they are one. Amendment 3 would not have the effect that we believe is sought, but I can see the potential merit in such an amendment and assure the House that we will look further at the intent behind the proposal to see whether there is a workable alternative.

I thank the right hon. Member for Barking for tabling new clause 2, which seeks to place an obligation on the Secretary of State to provide additional reporting on the funding of enforcement agencies. The NCA and enforcement agencies like it have a duty to be open and transparent in their deployment of public funds. The agencies publish annual reports on their expenditure that can be found online. The Government have developed a sustainable funding model that demonstrates our commitment to tackling economic crime. The combination of this year’s spending review settlement and the private sector contributions through the levy will provide around £400 million of funding in respect of economic crime over the spending review period. Since 2006-07, just under £1.2 billion-worth of assets recovered under the Proceeds of Crime Act 2002 have been returned to law enforcement agencies, prosecutors and the courts to fund further asset-recovery capability or work that protects the public from harm.

New clause 4, tabled by the hon. Member for Glasgow Central, would make the registrar of companies the AML supervisor of overseas entities. We believe that is unnecessary as the Bill already requires the verification of registerable beneficial owners and the managing officers of overseas entities. We expect that that will be done by a UK anti-money laundering supervised professional so believe that such supervision is already in place.

On amendment 4, the Bill currently enables the Secretary of State to exempt a person from the requirement to register in three circumstances. The circumstances outlined in the Bill have been carefully considered to provide clarity and flexibility for unforeseeable but legitimate scenarios. Given that the register’s key objectives are to improve transparency and combat money laundering, the exemptions will be used carefully for evidenced and legitimate reasons.

I thank everybody who has been involved in the Bill. The process has been done at such pace but we are determined to use the next few days to get this absolutely right.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Six hours having elapsed since the commencement of proceedings on the allocation of time motion, the debate was interrupted (Order, this day).

The Chair then put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No.83D).

Clauses 2 to 7 ordered to stand part of the Bill.