“(1) For the purpose of preventing money laundering, the Secretary of State must provide all reasonable assistance to the governments of—
(c) the British Virgin Islands;
(d) the Cayman Islands;
(e) Montserrat; and
(f) the Turks and Caicos Islands,
to enable each of those governments to establish a publicly accessible register of the beneficial ownership of companies registered in that government’s jurisdiction.
(2) No later than 1 January 2019 the Secretary of State must prepare an Order in Council in respect of any British overseas territories listed in subsection (1) that have not by that date introduced a publicly accessible register of the beneficial ownership of companies within their jurisdiction, requiring them to adopt such a register by 1 January 2020.
(3) In this section a ‘publicly accessible register of beneficial ownership of companies’ means a register which, in the opinion of the Secretary of State, provides information broadly equivalent to that available in accordance with the provisions of Part 21A of the Companies Act 2006 (information about people with significant control).”—
This new clause would require the Secretary of State to take steps to ensure the governments of specified British overseas territories introduce public registers of beneficial ownership of companies.
“(1) For the purpose of preventing money laundering, the Secretary of State must consult with the authorities of governments in each Crown Dependency on establishing a publicly accessible register of the beneficial ownership of companies registered in their jurisdictions.
(2) Within 6 months of this Act being passed, and every 12 months thereafter, the Secretary of State must report to Parliament on progress within the Crown Dependencies on establishing registers as referred to in subsection (1).
(3) In this section a ‘publicly accessible register of beneficial ownership of companies’ means a register which, in the opinion of the Secretary of State, provides information broadly equivalent to that available in accordance with the provisions of Part 21A of the Companies Act 2006 (information about people with significant control).”
This new clause would require the Secretary of State to consult with the governments in each Crown Dependency about introducing public registers of beneficial ownership of companies in the Crown Dependencies, and to report to Parliament on the progress of establishing such registers.
Before we broke for Justice questions, I was speculating about why David Cameron’s Administration were quite enthusiastic to make progress on this issue but the current Administration seem less enthusiastic. I had basically made my arguments and I was about to bring my speech to an end.
I say to the hon. Member for Bishop Auckland that there are Government Members who are in favour of public registers of beneficial ownership in British overseas territories. I studied international financial reporting standards extensively in my former life as an accountant—I draw Members’ attention to my entry in the Register of Members’ Financial Interests—and I am a member of the Public Accounts Committee. Having more transparency through country-by-country reporting and ensuring public oversight and increased transparency of a lot of our transactions will mean that we actually raise standards, not only in the UK mainland, where we have done so by introducing a public register, but in our overseas territories. Given the opportunity that Brexit provides us, in terms of having to reinvigorate our economy and our brand, it is important that we lead. Certainly, what is good enough for the mainland should be good enough for overseas territories.
I know from conversations with my right hon. Friend the Minister for Europe and the Americas that the Foreign and Commonwealth Office has concerns about whether it is right to impose measures on overseas territories. There is precedent for that, as the hon. Member for Bishop Auckland said, but there are concerns about whether it would be right to do so in this case. I do not believe in “devolve and forget”, although overseas territories have different constitutional arrangements. As MPs, we are responsible for taking a leading role. Westminster is here to lead, not to follow, and the United Kingdom should be a leading light when it comes to financial transactions and financial transparency, as it has been on so many global reporting standards.
The distinction that the hon. Gentleman makes suggests to me that, although he may hesitate to vote for new clause 1, he will agree to new clause 8, which merely calls for a consultation.
Yes, exactly. I am conscious that we have discussed new clause 1 at length and that my right hon. Friend the Minister has listened to private petitions from me and other Members. I reiterate that I am sensitive to the different constitutional arrangements for each overseas territory, the way that local legislatures pass their laws and the reasons why they have interests in different areas of financial services, as the hon. Lady highlighted. However, the United Kingdom Parliament should be clear that, if we find a wrong, we should try to right it. I have received correspondence from overseas territories about the cost of implementing a public register and how that might negatively impact their economies. The United Kingdom Government should try to help them with any transition or implementation costs. In the longer term, if it means a shift in their economies and if implementing a public register creates a large gap, we should commit to helping their economies to transition. We must not just take away one aspect of their economies and leave them to fend for themselves.
I ask my right hon. Friend the Minister to commit to engaging with the overseas territories. We have already made a lot of progress. The United Kingdom mainland is the leading light on financial transparency, and we have led the way with the public register. We must engage with the overseas territories, take them on the journey with us and help them to overcome some of the challenges they will inevitably face in a positive and constructive way.
It is a pleasure to follow the hon. Member for Ochil and South Perthshire. My hon. Friend the Member for Bishop Auckland probably shares quite a few of these views. She made a comprehensive and weighty case; I just want to build on a couple of elements of it. We have recognised on Second Reading and during this discussion that Britain and the British Parliament have a really good record in this area. We should be proud that we are world-leading, and we should continue to be so. As we debate this transition Bill, which is a Brexit Bill at its heart, we should ensure that we remain at the forefront.
We can have the best fence in the world, but there are limits to what we can do if this goes on to our neighbours’ properties. If we have a special relationship with our neighbour, perhaps there are better ways of doing it—I will not torture that metaphor further. At its root, this is clearly a problem that needs solving. The hon. Member for Ochil and South Perthshire characterised it as a wrong that needs righting. The Panama papers listed the British Virgin Islands as the No. 1 location for those issues. Similarly, as my hon. Friend the Member for Bishop Auckland said, Oxfam listed Bermuda as No. 1, and we have seen the briefing materials from Christian Aid. Just so this cannot be portrayed as an activist campaign—as though that could be a bad thing—HSBC and even BHP Billiton say that this is the sort of thing we need. BHP Billiton is the world’s biggest mining company, so it is not often that it and I are bedfellows, but it understands that unclear audit trails for money are bad for its business. They are bad for the communities from which the money comes, but also bad for BHP Billiton’s global finance enterprises, so it is urging us to take action.
This proposal is proportionate. We heard on Second Reading that, given that the overseas territories have had a difficult few months, time has been built into the proposal. There is recognition of how the Crown dependencies ought to be supported. Ministers have said throughout this Bill Committee that, when it comes to the overseas territories, we are responsible for foreign affairs and security. Absolutely—I could not agree more—and anti-money laundering and dirty money passing over borders in massive quantities are at the root of security and foreign affairs. Money laundering underpins global terror, and we ought to be squeezing it wherever we can, because that is one way of cutting off those networks. The combatants we engage with may seem like they are hidden in hills and hard to find, and are perhaps not like us, but from all we have been through over the past 20 years, we know that they have some very sophisticated cells, behind which is big money. This is a chance to clamp down on that.
This will say a lot about us as we go into the brave new post-Brexit world. We have heard the phrase “brand Britain”—the hon. Member for Ochil and South Perthshire talked about our brand—and who we are and where we place ourselves in the world will be very important to it. On the one hand, our Ministers are going round the world saying that we have a great approach to money laundering, but on the other, these are British overseas territories—the Minister referred to them as overseas territories, but they are British overseas territories, and our name is attached to them.
Does my hon. Friend agree that, although there are some very good things in the Bill, not dealing with secrecy in relation to the overseas territories will damage the credibility of the rest of the Bill and will put it in danger?
I thank my hon. Friend for that useful intervention. I absolutely agree. We should not see the Paradise papers and the Panama papers as the past, and assume that we will not see anything about this issue again. We are likely to see such things periodically on different programmes and in different newspapers. Every time that happens, people will ask, “What did you do about it? When you heard about it last time, how did you act?” If we say, “Well, we have this brilliant law, which we consider world-leading, but we stopped short of doing this,” people will wonder why we did that, and that will damage our brand.
This is not just about the British overseas territories—people will say, “Hang on a minute. They are British. What are you doing in your engagement with them?”—but about the Crown dependencies. The Crown will, dare I say, be a very important part of brand Britain, and people will draw a very straight line. Even if we feel that we should not be able to act in this area, people will expect that we can, so we ought to have a pretty clear picture on it. What is being asked for in the two new clauses is proportionate and sensible, and hopefully something that we can all support.
I do not want to speak for very long, or repeat what colleagues have said. I very much agree with the comments made by my hon. Friends the Members for Nottingham North and for Bishop Auckland. However, there are a couple of aspects that I would like to emphasise, and provide the Committee with a bit more information on.
First, it is the friends of the overseas territories and Crown dependencies who are deeply concerned about the lack of action in this area. I have had many meetings with representatives from both groups of jurisdictions over the years, both as an MP and as a Member of the European Parliament before that, when I sat on tax committees and the Panama papers committees in the European Parliament. I have had many discussions on these topics. I acknowledge that there is currently some resistance, but there is also an awareness of the reputational damage that is being done to their jurisdictions, as my hon. Friend the Member for Nottingham North mentioned.
There is also concern about having the resource necessary to implement more transparency. I strongly agree with what the hon. Member for Ochil and South Perthshire said in that regard. That is why our new clause calls for support for the overseas territories to implement the changes. We do not want to end up in a situation similar to what happened in the Turks and Caicos Islands, where there were repeated warnings that there were problems but nothing was done until it got to such a height that there had to be what some would say was a very draconian response. We do not want to get to that situation; we want to see change. I will go on to explain what happened in the Turks and Caicos Islands in a moment, because colleagues need to know about that. We have not yet talked about the instances where Britain has exercised its relationships and the levers it possesses.
It is also important that we acknowledge that for many of the overseas territories and Crown dependencies there has been positive legislative change, particularly around 2013 and 2014. However, that has died off a bit recently. One thing that worried me was the fact that the British Virgin Islands have passed new laws against whistleblowers. That has caused a lot of concern, and appears to suggest a shift in the wrong direction. The US State Department, for example, has commented on the fact that low numbers of prosecutions are coming from some of the jurisdictions. Frankly, it is a bit of an embarrassment that the US State Department has commented on that, and we have not seen the necessary action.
It is also a major concern for our country. Others have commented on this, but we have not yet quoted from the National Crime Agency’s “National Strategic Assessment of Serious and Organised Crime 2016”. That report spelled out the problem with having our open register of beneficial ownership without having commensurate obligations in our associated jurisdictions—not to mention the register’s own problems, which we will come on to. The report said:
“When legislation to report beneficial ownership begins to be fully enforced…the UK will be less vulnerable to shell companies formed by professional enablers and others within the UK for the purposes of enabling bribery, corruption and money laundering. The UK will remain at risk from company formation in overseas jurisdictions where similar legislation is not in place.”
It is a direct concern for Britain that we have this leaky fence, to stretch again the metaphor of my hon. Friend the Member for Nottingham North.
It is particularly worrying that the British Government’s position seems to have shifted backwards. Other colleagues have mentioned that, and I wanted to draw attention to the precise language that is now being used by the Government. David Cameron gave us a commitment to beneficial ownership registers—not to public ones. We wanted him to go further, but he committed to getting registers that could at least be used by law enforcement agencies.
As of the debate on the Bill in the other place, we have a new formulation of words, talking instead about either registers, or similarly effective mechanisms to beneficial ownership registers. It would be helpful to hear from the Minister exactly how they are similarly effective. I asked a parliamentary question about this issue and I was told that, for example, electronic search platforms are a technical solution designed to achieve precisely the same result. Well, they do not achieve the same result if it takes longer for law enforcement agencies to get the information they need to root out crooks and prosecute them.
Let me turn to where the UK has used its available levers to achieve change in a consensual, and sometimes respectful, manner. Colleagues have mentioned that there are different governance arrangements, which is correct. In some areas, Governors are directly responsible for the oversight of the financial sector, so surely in Anguilla, Montserrat and the Turks and Caicos Islands there should be a quick move in that direction. As I understand, Montserrat has committed to implementing this public register, but in other territories that is the role of financial services commissions, which in turn are in contact with the UK Government. It would be helpful for the Committee to understand exactly how the Government are using their influence over those commissions to try to seek this necessary change.
The British Government have already worked towards a different approach to budgeting in some jurisdictions, and there is now much more oversight over budgeting processes in the overseas territories. I want to inform the Committee of three specific cases that I think are relevant and indicate how pressure from the British side—appropriate, not disrespectful, pressure—can been applied, where necessary, for a positive outcome in those jurisdictions.
The first case is directly relevant and concerns the EU savings directive. Back in the early 2000s, that directive was introduced to cover all EU countries. As we have discussed, EU legislation is not directly applicable in the overseas territories, and although a number of them said that they were willing to implement the directive, the Cayman Islands were not initially willing to do so. The then Chancellor, Gordon Brown, said that if necessary he would use an Order in Council to ensure that the directive was implemented in the Cayman Islands. I do not claim that there was then a consensual process to which everyone immediately agreed—they did not. However, after the UK offered the Cayman Islands compensatory measures to offset any possible negative effects, they implemented the requirements in that directive. It is possible to achieve change, including on taxation.
Secondly, as my hon. Friend the Member for Bishop Auckland said, although Montserrat does not currently have a large financial sector, it did attempt to develop one in the early to mid-1980s, before the horrendous natural disaster took place. When such development was occurring with those financial firms, a number of concerns were expressed about the potential for corruption and money laundering. The then Governor was so disturbed that he ordered police officers to raid one of the banks that had been accused of breaching banking regulations, and eventually it was necessary for a completely new regulatory system to be put in place, following widespread evidence that those institutions had been used inappropriately.
My final case relates to the broad concerns that were raised about governance on the Turks and Caicos Islands. There had been rumours about those concerns for a long time, and the problems meant that the individuals living on those islands were having their due stolen from them because public resources were being dealt with corruptly. Unfortunately, it took a very long process, until eventually the Foreign Affairs Committee investigated the territories—including the TCI—and the FCO Minister at the time was forced to bring about change.
Unfortunately for the hon. Lady, she seems unaware that I was the Minister responsible for Turks and Caicos, as a Minister in the Department for International Development at the time. The reasons she cited for our intervention are completely inaccurate. There was a growing financial deficit of £30 million, forecast to be £60 million and then £90 million—it would have been half a billion pounds within a very short time. On that basis, we stepped in and parachuted in a chief financial officer to get the public finances back into shape. It was a great success and is a good example of us intervening in a perfectly proper way in co-operation with the Governor and the Government there.
I am grateful to the Minister for those comments; I might agree with the second half of them. I wonder whether his remembering of the time is the same as that of the relevant FCO Minister. I am terribly sorry; I do not know who the individuals were, but I was not in the House at the time. He or she commented:
“These are some of the worst allegations that I have ever seen about sitting politicians” and
“when things go badly wrong…we need to act”.
I suspect that they were not talking simply about a budget deficit at that stage; they may have been talking about other matters.
The hon. Lady is conflating two separate issues. There was a parallel legal issue over the plight and fleeing of Mr Misick, but that was not the basis on which we intervened.
Whether the intervention was due to alleged corruption in the activities of the former leader or budgetary matters, the arguments point in the same direction. When the British Government saw there was a problem, they decided it was appropriate to take action. We are lucky to have the Minister here. We are grateful to hear of his experience, and I hope he will inform us of how, in that regard, we can use that experience, in a consensual, respectful manner, to deal with our associated territories in relation to ownership registers.
This has been a lively and interesting debate on an issue that we all agree is of importance. It boils down to how we think it appropriate for the Government to act. I am grateful to hon. Members for tabling new clauses, and I appreciate the desire for the overseas territories and Crown dependencies to adopt public registers. However, we should acknowledge the significant steps already taken by those jurisdictions in this area and continue to build on that progress.
While we continue to push for public registers to become the global standard, we should recognise that the arrangements that the territories and dependencies have concluded with the UK exceed the international standards set by the Financial Action Task Force, which do not require private registers, let alone public registers. Nevertheless, should public registers become the global standard, we would expect the overseas territories and Crown dependencies to meet that standard.
As the Committee knows, the overseas territories and Crown dependencies are separate jurisdictions with their own democratically elected Governments. We have therefore legislated for them without their consent only in exceptional circumstances—for example, to decriminalise homosexuality in certain territories, to ensure they were compliant with international human rights obligations. By contrast, financial services are an area of domestic responsibility for territory and dependency Governments.
Legislating for those jurisdictions without their consent effectively disenfranchises their elected representatives and risks harming our overall relationship with them. It also risks leading to a flight of business to other, less regulated jurisdictions, with the undesirable consequence that our law enforcement authorities would not have the same level of access to beneficial ownership information as under the existing bilateral arrangements. Imposing public registers of company beneficial ownership on the overseas territories would carry with it the risk that the territories would be less willing to work with us on this important issue.
[Dame Cheryl Gillan in the Chair]
I would like to draw parallels with the devolved Administrations and the Sewel convention. The hon. Member for Glasgow Central addressed the point on Second Reading:
“Much as I do not wish the House to legislate on Scottish matters, I do not want us to legislate for overseas territories or Crown dependencies without consent.”—[Official Report,
I agree with her that that is the right approach.
The overseas territories and Crown dependencies have already made significant progress on beneficial ownership. Since we concluded our exchanges of notes with them in 2016, they have passed new primary legislation and delivered technological improvements to comply with the terms of the arrangements. They have committed to provide UK law enforcement authorities with automatic access to beneficial ownership information within 24 hours of a request being made, or within one hour in urgent cases. Those arrangements strengthen our law enforcement authorities’ ability to investigate serious organised crime, including money laundering and tax evasion.
The hon. Member for Oxford East asked about what are termed similarly effective systems. Some jurisdictions have opted under the bilateral arrangements concluded with the UK to establish an electronic search platform, allowing them to gain access to beneficial ownership information held by their authorities or by corporate service providers.
The exchanges of notes permit such similarly effective arrangements, provided that the following criteria are met. Law enforcement authorities can obtain beneficial ownership information without restrictions, and that information is available for use in both civil and criminal proceedings. Law enforcement authorities can also quickly identify all corporate and legal entities connected to a beneficial owner, without needing to submit multiple and repeated requests. Corporate and legal entities, or those to whom the beneficial ownership information relates, are not to be alerted to the fact that a request has been made or that an investigation is under way. We will monitor that arrangement to ensure that it does indeed provide the same results.
I hope that hon. Members agree that the overseas territories, in some cases in the most challenging circumstances, and the Crown dependencies have made significant efforts to move forward on this agenda. The effective implementation of the exchanges of notes will put them ahead of many G20 countries and many individual states of the USA, and demonstrates what can be achieved through working co-operatively.
Does my right hon. Friend agree that, as a result of the steps that have been taken in the Crown dependencies, there is a far greater degree of transparency in Jersey and Guernsey than in Delaware in the United States, for example?
My hon. Friend is absolutely right. It is exactly that comparison that we need to see in the round, in order to understand that there could be unforeseen detrimental consequences of any kind of imposition proposed for the overseas territories.
I understand the Minister’s point about overseas territories and the challenges faced by other jurisdictions such as the United States. Britain leads in a number of global reporting initiatives. Without compelling overseas territories to change their ways, we could still lead the conversation with the United States and the overseas territories in the round, to ensure that we progress this reporting and show the benefits that we have already recognised on the mainland. I urge my right hon. Friend not to draw parallels with the devolved settlement in the UK because we have Scottish MPs in this House, and they are there making laws in Scotland, whereas the overseas territories do not have MPs in this House.
You have been transformed, Dame Cheryl. The second point is within the constitutional settlement with the devolved Assemblies that has been reached in the United Kingdom. On the first point, I would have no objection to any hon. or right hon. Member urging the Government to take a lead in such areas. I hope that, at least by example and in international forums such as the UN, we do just that. I hope the UK’s leadership role will continue.
I am a little perplexed by what the Minister said. It seems that he conflated the comments of my hon. Friend the Member for Glasgow Central with the intent of the amendment, which is to encourage—not to compel—Governments in overseas territories to do that. Perhaps I am mistaken and he can clarify that, but it seems that there is a misrepresentation.
The hon. Lady is not being unreasonable; there are some arguments where some people say compel, and others say urge and consult. My argument would be that we are consulting—we do it all the time. We have a regular dialogue, and in that, we are urging them in the right direction. Anything that smacks of us in any way telling them what to do is counterproductive, because rather than imposing new requirements on these jurisdictions, it is better to continue to focus our efforts on the consolidation of the existing arrangements.
The exchange of notes provides for the operation of these arrangements to be reviewed six months after they come into force. We are working very closely with the territories and dependencies on this review, and plan to conclude it by the end of March. That is a very good example of the sort of consultation we are engaging in on a regular basis.
When those letters are exchanged, will they include the logistics of this operation? I am trying to get my head round how we can genuinely say that contacting potentially myriad trust and company service providers and getting information from them is equivalent to having access to a register. How are the Government truly going to assess that in this exchange of letters? Will it be a question of time? We could be talking about hundreds of TCSPs.
I am not directly involved in this, but as I have said frequently, I am very happy to offer the expertise of officials to the hon. Lady so that she can fully get to grips with the intricate detail of the question she has asked.
Hon. Members will recall that the Criminal Finances Act 2017 provides for a review of the effectiveness of the bilateral arrangements. That report must be prepared before
A key feature of the Government’s approach has been to maintain a level playing field between all the overseas territories with financial centres and the Crown dependencies. As I have described, we have robust review processes regarding the implementation of these arrangements. If these reviews demonstrate that the full implementation of the exchanges of notes is not taking place in any individual jurisdiction, it would be right for hon. Members to consider this issue further. For the time being, however, we should continue to focus on the full implementation of the existing bilateral arrangements. We are on a good and solid track; therefore, I urge hon. Members to withdraw the new clause.
It is nice to see you in the Chair, Dame Cheryl. I wish to remind members of the Committee of two things: first, the Government’s own statement in 2012 that, as a matter of constitutional law, the British Parliament can legislate for Crown dependencies and overseas territories. Secondly, the current approach, where the authorities in London have to ask individual questions, is not as effective in tracking down and deterring illegality as having a transparent approach. That was demonstrated by the fact that, when the Panama and Paradise papers were leaked, they were able to initiate more inquiries and take more action against people because, as I was trying to explain this morning, they were able to see the overall pattern.
I am disappointed in the Minister’s response—not surprised, but disappointed—because he has not shown any flexibility at all. However, I do not wish to put the hon. Member for Ochil and South Perthshire on the spot. I think we will come back to this on Report, so I do not wish to put the motion to a vote. I beg to ask leave to withdraw the motion.