Amendment 42

Economic Crime (Transparency and Enforcement) Bill - Committee – in the House of Lords at 7:30 pm on 14th March 2022.

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Lord Eatwell:

Moved by Lord Eatwell

42: Clause 16, page 10, line 24, at end insert—“(A1) All information delivered to the registrar for the purposes of sections 4(1)(c), 7(1)(d) and 9(1)(e) must be verified by the registrar.”Member’s explanatory statementThis amendment places a statutory responsibility on the Registrar to secure the verification of the relevant information in the register.

Photo of Lord Eatwell Lord Eatwell Labour

My Lords, I explained at Second Reading that lack of data verification at Companies House has been a fundamental factor in enabling—indeed, encouraging—the flow of dirty money to London. Lack of data verification has played a major part in securing London’s position as the money laundering capital of the world. As I argued last week:

“Companies House is a library in which any shameful book can be deposited”—[Official Report, 9/3/22; col. 1496.]

and accepted without fear of exposure or retribution. Indeed, just earlier this afternoon, the noble Lord, Lord Callanan, described Companies House procedures as “dumb”.

This afternoon, we have been debating amendments to the Bill that will define more accurately and more widely the sort of information that will, as a result of the Bill, be required to be offered to the registrar. However, nothing we have discussed so far will guarantee that the information is accurate. If it is not accurate, it is useless or indeed worse than useless.

We are dealing with sophisticated crooks. In the past they have been successful in subverting our financial system by providing inadequate, misleading or downright false information to Companies House, which has meekly accepted it. The crooks will try to do the same in the future, perhaps especially with respect to the information required as a result of the Bill. The only way to prevent the objectives of the Bill being undermined is to have in place the best possible system of data verification. What does that involve? It involves forensic accountants using the wide range of electronic information systems that is available today, reinforced by the National Crime Agency, backed up by agreed information gateways with fellow regulators in other jurisdictions and with foreign economic crime enforcement agencies such as the FBI, and, of course, supported by our own security services. It is quite obvious that that sort of programme can be conducted only by an official public agency—an official public registrar.

This amendment would make it a statutory requirement for the registrar to secure the verification of the relevant information in the new register. It would place the registrar at the heart of the verification process. Noble Lords should note that this does not mean that Companies House must right away have in place the trained staff and appropriate systems, or in six months’ time. In due course, Companies House must have those capabilities, but even if in the short run it does not have the necessary technical resources, they exist within the British Isles and can be commissioned to help to do the job.

The statutory requirement would also pose the financial resources question: does Companies House have the financial resources to do the job? If it does not, then, as pointed out by the Institute for Government in its discussion of the Bill, we have all been wasting our time. Making verification a statutory requirement would place the financing question at centre stage. It just cannot be fudged. Of course, even a thorough verification system will not be infallible, but, without it, all our efforts this afternoon will have been in vain. I beg to move.

Photo of Lord Faulks Lord Faulks Non-affiliated 7:45 pm, 14th March 2022

My Lords, I entirely support what the noble Lord, Lord Eatwell, said. It is very much along the lines of the recommendations of the Joint Committee which I had the privilege of chairing. I quote just one paragraph:

“It is regrettable that, as currently conceived, the proposed Register of Overseas Entities will have insufficient verification checks to deter criminals who wish to submit false information. It therefore seriously risks failing in its central policy aim: to provide a reliable and transparent record of the beneficial ownership information of overseas entities investing in the UK property market.”

We discussed a number of the points that the noble Lord made so eloquently at Second Reading and today, including placing a greater burden on professionals to verify information. It is clearly fundamental; without verification, the Bill will not be as successful as it should be.

Photo of Baroness Kramer Baroness Kramer Liberal Democrat Lords Spokesperson (Treasury and Economy)

My Lords, I will speak briefly on this issue, because I am very much of the opinion, as are many in the Committee, that a combination of both a public register—so that civil society groups, journalists, activists and people in different countries will have access to different kinds of information—and vigorous verification is the kind of safeguard we need if we are to end the history of the London laundromat and prevent London remaining a magnet for a great deal of dirty money that is floating around the globe.

Like many people, when I heard that there would be a register of beneficial owners of property that would have a verification component and that verification would be introduced at Companies House, I was elated. Then I actually read the language in the Bill and it seemed, as the noble Lord, Lord Faulks, said, so light touch that there might be something vigorous, but on an exceptional basis and not as a matter of routine. As there is little in the Bill to strengthen the responsibilities of the enablers, I am worried that we will end up with the worst of all worlds—a headline that makes it looks as though we are taking significant and serious action, but implementation that completely misses the mark.

I know the Minister has sometimes said that we have plenty of legislation to deal with enablers, and which has been strengthened somewhat, but if we had adequate legislation to deal with enablers we would not have a single instance of money laundering in this country, because nobody bringing in dirty money is able to buy a single piece of property, take control of a company or engage in any other activities without using an enabler. You need the lawyers, accountants and property developers. We clearly cannot choke off that particular avenue to sustain the London laundromat. All these things come together. I hope the Minister will look again at verification. It will partly be a matter of resources—those absolutely matter—but it also has to be standard practice that a very high level of verification is embedded to deal with every item in the register.

Photo of Lord Pannick Lord Pannick Crossbench

My Lords, I share the concerns expressed about the need for rigorous verification. I note that Clause 16 confers a broad power on the Secretary of State to make regulations in this field. Is the Minister able to assure the Committee that those regulations will impose a rigorous form of verification and requirements along the lines of those that have been proposed?

Photo of Lord Cromwell Lord Cromwell Crossbench

Before the Minister tries to answer that, we need to recognise delivering what the noble Lord, Lord Eatwell, wants would be absolutely transformative to Companies House. There is no tinkering at the edges here; this would be a massive transformational change and, unless we get that, this amendment will not deliver what is being asked of it.

Photo of Lord Vaux of Harrowden Lord Vaux of Harrowden Chair, Finance Committee (Lords), Chair, Finance Committee (Lords)

I will quickly add to the comments from the noble Lord, Lord Pannick. Clause 16 sets out the regulations must

“make provision … about the information that must be verified … about the person by whom the information must be verified … requiring a statement, evidence or other information to be delivered to the registrar for the purposes of sections” et cetera. Perhaps the Minister could enlighten us as to what he has in mind there.

Photo of Lord Coaker Lord Coaker Shadow Spokesperson (Defence), Shadow Spokesperson (Home Affairs), Opposition Whip (Lords)

My Lords, I am grateful to my noble friend Lord Eatwell for moving Amendment 42. As we all know, he has a huge amount of experience in this field, having overseen many of these matters in another jurisdiction. He has long pressed the Government to introduce a register of this kind, but Amendment 42 calls for proper data verification. As we have heard from a number of noble Lords—the noble Lords, Lord Vaux and Lord Cromwell, the noble Baroness, Lady Kramer, and others—it is essential to the credibility of this Bill to ensure that any data is verified and accurate, as my noble friend Lord Eatwell put it.

The Government moved a little on this topic when the Bill was in the House of Commons, passing what was then Amendment 49, as we heard from other noble Lords, requiring the Secretary of State to lay regulations outlining the verification process before the register goes live. We welcome that move as it provides greater certainty, but as we have already heard, it prompts a number of supplementary questions and, in our view, does not go far enough. That is what Amendment 42, which we support, seeks to address.

When will we see the regulations? Will the process be based on previous consultations or require a separate engagement exercise? What if they are brought forward and the envisaged process is deemed inadequate? What if we end up getting the Bill before the SI has been laid? As with the earlier group on the transition period, we need greater clarity on process and timescales. Surely, accurate, verified data as required by my noble friend Lord Eatwell’s Amendment 42 is essential; without it, the Bill simply will not succeed.

Photo of Lord Callanan Lord Callanan Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

I first thank the noble Lord, Lord Eatwell, for tabling Amendment 42 and for his thoughtful contribution at Second Reading on the same subject. He is, of course, absolutely right: I agree wholeheartedly that ensuring the public can be confident that the data on the register is reliable is of the utmost importance. That is why, as has been referred to, the Bill already provides for the making of regulations to create a robust and effective verification mechanism.

Clause 16 sets out that:

“The Secretary of State must by regulations make provision requiring the verification of information”, which must be in place before an overseas entity can undertake certain actions. These actions include applying for registration to, or removal from, the register. Clause 16 sets out that these regulations can include provisions about

“the information that must be verified … the person by whom the information must be verified … requiring a statement, evidence or other information to be delivered to the registrar for the purposes” of registration, updating of information and removal from the register.

This amendment seeks to add a statutory responsibility on the registrar to ensure the verification of any information provided to the registrar in accordance with the regulations made under Clause 16. The amendment would place responsibility for ensuring that information is verified on to the registrar, which means that the registrar would have to be satisfied that the information provided at the application stage is verified. We believe that such an addition would be nugatory to the already robust verification process that will be set out in regulations attached to this Bill once it has passed through Parliament.

The regulations that will be made under Clause 16 include the ability to specify the types of statements and evidence that the registrar can require in order to be satisfied that the information submitted to the register is appropriately verified. We expect that UK professionals regulated under the money laundering regulations will have a role to play in the verification process. We are, of course, aware of concerns raised in this House about enablers who might seek to undermine our systems. The verification process that will be set out in regulations will ensure that, whatever process is used, it cannot be undermined by enablers of unlawful activity. To support this, as was referred to by the noble Lord, Lord Coaker, we have also put forward an amendment that would ensure that, where anyone submits information that is false or misleading without reasonable excuse, they can be held to account for that.

I would also direct noble Lords’ attention to the amendment tabled by the Government in the other place, which committed to bringing regulations made under Clause 16 into force before any applications for registration may be made under Section 4(1). Therefore, creating a specific statutory requirement for the registrar to secure verification, as the amendment proposes, is in my opinion not necessary. The verification mechanism already contained in the Bill will ensure that those engaging with the regime have confidence in the information held on the register. I therefore hope that the noble Lord will feel able to withdraw his amendment.

Photo of Lord Eatwell Lord Eatwell Labour

My Lords, I always think that the government defence of “not necessary” is the weakest we ever hear in this House. My amendment calls for a clear statutory requirement for verification. Just think of the contrary, which the noble Lord is supporting: that there will not be final statutory verification, and that information will be provided by professionals, enablers. He says that we can ensure that this will not “undermine the process”. If he believes that, he will believe anything. How can he ensure that it will not undermine the process, unless there is a means of checking that it is not undermining the process?

We are dealing with very sophisticated crooks with the best legal advice that money can buy and the Minister is leaving the Bill naked, with the key protection lacking that is necessary to sustain confidence in financial markets in this country. This is a sad day for the probity of those markets. Having said that, regrettably, I beg leave to withdraw the amendment.

Amendment 42 withdrawn.

Clause 16 agreed.

Clause 17 agreed.

Clause 18: Exemptions