New Clause 53 - Beneficial owners in overseas territories

Economic Crime and Corporate Transparency Bill – in a Public Bill Committee at 2:00 pm on 24th November 2022.

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

(2) In section 51, after subsection (5) insert—

“(5A) The Secretary of State must ensure that the Order in Council under subsection (2) above comes into effect on date no later than 30 June 2023.”’—

This new clause would amend the Sanctions and Anti-Money Laundering Act 2018 to ensure that an Order in Council requiring open registers of beneficial ownership in the British Overseas Territories comes into force no later than 30 June 2023.

Brought up, and read the First time.

Photo of Stephen Kinnock Stephen Kinnock Shadow Minister (Home Office) (Immigration)

I beg to move, That the clause be read a Second time.

New clause 53 would amend the wording of provisions in the Sanctions and Anti-Money Laundering Act 2018 to require the introduction of open registers of beneficial ownership in each of the UK’s overseas territories.

Some of the Committee’s Members are veterans of the struggle to incorporate the requirement into the 2018 Act and will no doubt recall that it was only thanks to the persistent effort of certain Back Benchers against the determined resistance of Ministers that the necessary amendment was ultimately made. It would be remiss of me not to pay particular tribute to the efforts on this issue of my right hon. Friend the Member for Barking. The Minister also deserves recognition for his advocacy on the need for transparency to be extended to the overseas territories, albeit in his previous incarnation as a Back-Bench Member of this House.

Photo of Stephen Kinnock Stephen Kinnock Shadow Minister (Home Office) (Immigration)

My right hon. Friend asks a very good question, while chuntering from a sedentary position. I trust that the Minister’s views have not changed with his recent promotion.

The fundamental principle behind new clause 53 is simply that there should be no double standards in the legal requirements for transparency of beneficial ownership across different parts of the UK, including in the overseas territories. To put it bluntly, we have simply witnessed too many scandals involving money being laundered through territories for whose administration the UK is ultimately responsible to accept the idea that we must simply leave them to their own devices.

I will not name names here, but I think—

Photo of Stephen Kinnock Stephen Kinnock Shadow Minister (Home Office) (Immigration)

My right hon. Friend may well wish to do so.

I think that any member of this Committee will understand what I mean when I refer to certain “usual suspects” in cases involving financial dealings that, even with the most charitable interpretation, can only be described as being questionable at best.

The language that was ultimately added to the Sanctions and Anti-Money Laundering Act 2018 reflected a recognition from Members of all parties and in both Houses that the same standards requiring open, publicly accessible registers of beneficial ownership should apply to both the UK and its overseas territories. It also reflected the widespread consensus that if we wanted to ensure that the overseas territories played by the same standards, we should be prepared to use sticks as well as carrots.

The result of that consensus was the provision in section 51 of the 2018 Act that any overseas territory that had not established a beneficial ownership registry in line with the standards of our own by the end of 2020 should be subject to direct legislation by an Order in Council. As I have already mentioned, the Government practically had to be dragged kicking and screaming to the point where they accepted that provision in the first place. However, as subsequent events have demonstrated, the real problem is that Ministers have interpreted section 51 of the Act so creatively that in effect they have completely undermined if not the letter then certainly the spirit of the law.

It seemed clear to those who pushed for section 51 of the 2018 Act that what it required was for beneficial ownership registries to be in place by the end of 2020, whether as a result of the overseas territories’ own legislation or an Order in Council. According to the spin the Government chose to put on it, its obligation had been met simply by the publication of a draft Order in Council, regardless of when, or even whether, such an order might actually come into force. The result is that we are here yet again—almost five years later—still discussing how to ensure the implementation of registers to the same standards across all of the UK’s territories. Surely it should not be beyond the wit of Ministers—even in this Government—to have sorted this out by now—[Interruption.] I am just checking that hon. Members are still awake on the Back Benches.

I know exactly what the Minister will argue in response to this new clause. He will say that it is not the usual practice for the UK to legislate directly for the overseas territories. He will say that since each of the territories have already committed to introducing their own registers, there is no need for an Order in Council. These arguments are, at best, only partly true. For one thing, while it may not be commonplace to legislate directly for the overseas territories from Westminster, it is nevertheless perfectly permissible from a constitutional perspective and, in some cases, it may be constitutionally necessary—not least in cases where it appears necessary to ensure that the territories implement the laws that we expect and require them to abide by. If laws against money laundering do not fall within this category, I cannot imagine what does.

If the Minister intends to argue that assurances provided by the territories on the planned introduction of beneficial ownership of registries should be taken at face value, he will at least understand the reasons why at least Labour Members may be rather sceptical of that position. However, if any Member of this Committee wants to see an example of the problems that a completely hands-off approach to the overseas territories can lead to, I will gladly refer them to the 950-odd page report submitted to the Government by the British Virgin Islands independent commission of inquiry back in June.

Further examples in relation to other territories are not hard to find, which brings me back to section 51 of the 2018 Act and specifically the need to hold the Government to strict deadlines to ensure that registers of beneficial ownership are put in place across all parts of the UK and in each overseas territory without further delay. New clause 53 would help to secure that primarily by removing any scope for ambiguity or creative interpretation of the requirement for an Order in Council, which should take effect no later than six months into the new year. We have waited long enough for the promised registers to materialise, and we should not have to wait for another public scandal to jolt the Government into taking the action we all know is needed. Given the Minister’s extensive understanding of these issues, I hope he will not argue against the new clause.

Photo of Kevin Hollinrake Kevin Hollinrake Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy) 2:15 pm, 24th November 2022

I am certainly not arguing against the spirit of the new clause. I add my thanks to the right hon. Member for Barking and, indeed, my right hon. Friend Mr Mitchell, who took great action on this matter way before I became interested in the whole subject—although it is true to say that I took an active interest from the Back Benches on ensuring that we address this issue.

I do not accept the hon. Gentleman’s characterisation of our approach as being hands off. I do not consider 250 pages of legislation as being hands off at all. There is much we want to do and agree on, and I have to agree with what I said previously. The hon. Member for Aberavon may regard me as poacher turned gamekeeper, but I do not see that at all. I still want to ensure these measures are in place. In fact, we should go further than his new clause, and I will explain that in a second.

When amendments were tabled to the Bill that became the 2018 Act several years ago, we were clearly in a very different place. All inhabited overseas territories have now committed to introducing publicly accessible registers of company beneficial ownership, and the UK Government expect them to be in place by the end of 2023, so there is a deadline on which the order could be placed. As well as overseas territories, we have committed to asking the Crown dependencies to also do that, and that does not feature in the hon. Gentleman’s new clause, so it is important that this goes further than he set out.

Photo of Margaret Hodge Margaret Hodge Labour, Barking

The Minister is correct in what he says, but could he deny the rumour I have heard, which is that they are trying to get around ensuring public accountability by charging anybody who wishes to look at the register by entry? If a charge is levied for entry to everything that appears on the register, that would diminish the intended public accountability.

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

I am not aware of that. Clearly, it is important that the overseas territories and Crown dependencies respect the will of Parliament and the spirit of the will of Parliament, so we would be very concerned if that is the case.

Photo of Margaret Hodge Margaret Hodge Labour, Barking

I have raised this issue with the right hon. Member for Sutton Coldfield, who now sits in the Foreign Office, but I do not think it is entirely within his portfolio. Will the Minister agree to pursue the issue? If that is the way they have tried to avoid or play down the intent of Parliament, it is a very serious matter.

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

I do not think we should operate on the basis of rumours, but I hope that the overseas territories and Crown dependencies will be following this debate with interest. We want them to follow both the spirit and the letter of the legislation that is implemented. The information should be publicly available—that is the clear intention.

This is a major commitment that will put the overseas territories and Crown dependencies ahead of most jurisdictions, and it will be a vital element of promoting greater transparency around the control and ownership of companies. I have sought assurances that it is not a hollow commitment. The FCDO is providing support to the overseas territories through Open Ownership, a respected and expert NGO, to ensure that each territory can progress its publicly accessible registers, and significant progress has been made. For example, Gibraltar’s register is already live, so it will be interesting to hear about the right hon. Lady’s experiences of that.

Photo of Margaret Hodge Margaret Hodge Labour, Barking

The Minister has jogged my memory. It was actually from the implementation of the Gibraltar register that I heard that, although it is live, there is a charge for accessing information.

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

That may be something that the right hon. Lady will investigate. I am happy to make the commitment that we will do so as well.

The Cayman Islands has completed a consultation on the approach to its register, and the technical work to hit the target date is under way. The BVI recently passed primary legislation to enable the framework for regulations to be made for its register in preparation for the end of 2023. Smaller overseas territories are also working with the FCDO to update their systems to allow public access to this important information. Notably, in Anguilla the FCDO financed a completely new register, which is designed to allow public access.

The effect of new clause 53 would be to move the timeline forward by only six months for the overseas territories. All the territories are now willingly implementing publicly accessible registers and putting significant effort into the policy, despite the fact that most jurisdictions around the world are not doing so. To move forward an agreed timeline would not show good faith in our partnership with the territories. I can commit to keep the House regularly up to date on progress with the territories, and the UK Government will continue to work collaboratively, and as equal partners, with the overseas territories on their commitment.

Photo of Stephen Kinnock Stephen Kinnock Shadow Minister (Home Office) (Immigration)

I fear that it is a bit naive and complacent to think that this is going to be done by consensus. Five years have gone by since the 2018 Act was introduced and it is extraordinary that we may have to wait another 12 months, as the Minister says. Frankly, I remain sceptical that, without a stick as well as a carrot in this conversation, anything will ever happen. I would welcome any feedback that the Minister has on that point. I do not really have a specific question for him, but I am struggling to understand why we can possibly think it is acceptable that here we are, five years later, with a chasm in our ability to implement and go after the things that we want to go after. Does he really think it is justifiable to wait another 12 months, rather than just accepting the new clause?

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

As Ronald Reagan used to say about the Russians: trust, but verify. It is important that we trust our partners but also that we see what they are doing to put these measures into effect. I quoted a number of examples where that has been done. All these overseas territories are putting the measures in place. It is right to work on a basis of good faith. We have the stick the hon. Gentleman requires, if necessary. Beyond the end of 2023, we can then use the Order in Council procedure, as he suggests. I will ensure that we keep watch over the situation very carefully, as I have committed to do. The hon. Gentleman can rest assured that it is our understanding that these measures will be in place. I urge him to withdraw the new clause on that basis.

Photo of Stephen Kinnock Stephen Kinnock Shadow Minister (Home Office) (Immigration)

Unfortunately, we remain unconvinced by the Minister’s answers on these points and we wish to push the new clause to a vote.

Question put, That the clause be read a Second time.

Division number 13 Economic Crime and Corporate Transparency Bill — New Clause 53 - Beneficial owners in overseas territories

Aye: 6 MPs

No: 9 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

The Committee divided: Ayes 6, Noes 9.

Question accordingly negatived.