New Clause 59 - Publication of information about trustees

Economic Crime and Corporate Transparency Bill – in a Public Bill Committee at 2:30 pm on 24th November 2022.

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“(1) The Economic Crime (Transparency and Enforcement) Act 2022 is amended as follows.

(2) In subsection (1) of section 22, omit paragraph (c).”—

Brought up, and read the First time.

Photo of Margaret Hodge Margaret Hodge Labour, Barking

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

We touched on this issue last week. The new clause is what I consider to be another perfectly sensible, rational, pragmatic amendment that enhances transparency and accountability. It would ensure that the legislation worked effectively rather than ineffectively, as we think will be the case at the moment.

The new clause is designed to close a loophole in the Economic Crime (Transparency and Enforcement) Act 2022. As I understand it, the register of overseas entities will require trusts that currently own property in the UK to declare the name of a trust; its creation date; and the name of all the trustees, the beneficiaries, the settlers, the granters or the interested persons. However, on the actual register all that will appear is the name of the trust. There will be no details of who actually owns the trust and has the ownership control and benefits of the assets that exist within that trust.

I understand that the information would be available to enforcement, HMRC et al. I get that. The whole point of much of the legislation, however—and I know the Minister knows this is true—is to extend the accountability beyond the enforcement agencies, so that, for example, businesses, civil society, the press and we as Members of Parliament can all understand who is really behind the overseas entity that owns the property here in the UK. That is what our little new clause would enable.

My right hon. Friend the Member for Birmingham Hodge Hill has reminded us that when we try to sanction assets, particularly those of Russian oligarchs—the friends of Putin who sustain him in his wicked endeavours—those oligarchs hide their assets in trusts. We have seen that in recent times. The Economic Crime (Transparency and Enforcement) Act 2022 calls on trusts to tell Companies House the names but it does not require them to do so. Let us consider the Usmanov example to which my right hon. Friend referred.

I am sad to say that Usmanov is an ex-Arsenal shareholder. He put millions into an irrevocable trust and was once said to be one of the UK’s richest individuals. The Russian asset tracker, which works in partnership with The Guardian and the organised crime and corruption reporting project and other international news organisations, has found out a little bit about where those assets went. He had a £350 million private jet and a helicopter, which he deregistered from the Isle of Man on the day that he was sanctioned here in the UK. His close relatives now own various properties in Italy, Latvia and Germany that he acquired with money stolen from the Russian people. And he has a private yacht, which has a concession to moor in Barcelona port until 2036.

That individual also owns two properties in London and the south-east, Beechwood House in Highgate, which is worth £48 million—it has probably gone up since I got that figure—and a 16th century house and estate: Sutton Place, in Surrey, which is worth about £34 million. That is getting on for £100 million. We tried to freeze those assets when we sanctioned him, but Sutton Place is owned by a company based in Cyprus, and Beechwood House is owned by a company based in the Isle of Man. If there is no transparency on who is behind trusts and ownership, bad people can obfuscate where they put their stolen assets. It is very difficult for us not just to freeze, but to seize the asset—as we will come on to on Report perhaps.

If we do not have the information out in the open, it is impossible for us as MPs, for civil society, for the non-governmental organisations or for journalists to follow the money. That is all we are trying to do. I urge the Minister, in the interests of making the Bill an effective bit of legislation, which is what we all seek, to accept the new clause and not to put forward any tenuous argument that belies common sense. The new clause is a common-sense proposal that would simply increase transparency and accountability, making it easier to follow the dirty money that has entered the UK.

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

It is a pleasure to serve under your chairship this afternoon, Sir Christopher, and to speak briefly in support of the speech of my right hon. Friend the Member for Barking. The new clause is short and, on that basis alone, the Minister might want to look closely at it for inclusion in the Bill. It is important and significant.

We almost thought we would not have this conversation when we debated the Government new clause 15 on Tuesday, until the Minister made it clear that information about trustees would not be published. That feels like a space that is a black hole for more to be hidden in. If we do not do this, the Minister will probably see a rise in the use of trusts to achieve less transparency.

For all the reasons my right hon. Friend the Member for Barking outlined, it is important that the information about trustees is available for public inspection. I will welcome the Minister’s comments. Perhaps he has thought further on the arguments since Tuesday. Here is further room for him to consider information on trustees, where it is held and its being published for public inspection. That would be in the public interest.

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

The word “trust” in this context sends shivers down all our spines. I understand the rationale behind the new clause, but the right hon. Member for Barking is right in that I will state my position.

There is a key matter here. The right hon. Lady cited a couple of examples, one a trust and one a company, where she implied a disguised ownership of certain assets. The current requirements of legislation are that information about a registrable beneficial owner of a trust is displayed publicly. If someone is a beneficial owner, their name is revealed publicly. She might argue that that person could be lying, but they can lie about ownership of anything—“I don’t own any of this and do not exert control”—as we have discussed before.

The amendment makes all trust information available, even if that sits below the 25% or whatever ownership there might be of the trust or its benefit.

Photo of Margaret Hodge Margaret Hodge Labour, Barking

Usmanov is the better example, although I could have talked about Gutseriev or Fedotov, or about Azerbaijan—I had a debate in the House on the leading family of Azerbaijan. The reason all those things hang together is that the beneficial ownership is passed to a daughter or sister, or the shareholding is below 5%, and we are creating all these legal loopholes that enable the Usmanovs, Gutserievs, Fedotovs and all those people to hide their real control of an asset. That is really the point. That is what we are trying to get at—having it out in the open. What we have said constantly with our amendments is that if there are minor flaws with the way we have put them together, we are happy to listen, but I am absolutely certain that the principle behind them is correct.

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

I just do not think that is right. The right hon. Lady might not have meant this exactly, but even if ownership is reduced—this goes for a company more than a trust—to below 5%, the amendment would not even solve that issue, would it? The legislation requires the beneficial ownership to be registrable and for there to be openly available information. Of course the person who is entering that information could lie. A lawyer or accountant could lie. But now they are subject to a criminal sanction for doing that if it is proven. As has been mentioned, information around trusts is a concern. It should raise red flags with Companies House. That information can of course be shared.

The other thing I would say is that trusts are used for legitimate purposes, including to protect the privacy and safety of children, for example, and other vulnerable individuals. The ECTE Act allows the registrar to disclose protected trust information to HMRC, and regulations will soon be made to allow the registrar to disclose the information to other persons with functions of a public nature, such as tackling crime.

Photo of Margaret Hodge Margaret Hodge Labour, Barking

The Minister often says this, but there are two issues here. If the trust or any of these entities are for legitimate purposes, the people involved should have absolutely no fear of transparency. That is the fallacy in the argument. If nobody is doing anything wrong, they should not worry about the information being public. If there are really good reasons, as there occasionally may be, for keeping confidential the name of a particular individual in a particular trust, we can and we are putting in legislation that covers those exceptional circumstances, but using the exceptional circumstance to justify the general rule is simply not good enough.

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

We may have to agree to disagree. The requirement to register somebody of beneficial ownership is quite clear. If there is a beneficial owner, that person will have to be publicly named. That is what we seek to achieve through this legislation, and that is what we think it does. There are some points in the amendment that we think are relevant, including potentially widening access to information in certain circumstances with certain authorities. We will consider that, but we cannot accept the totality of the amendment at this time.

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

Division number 16 Economic Crime and Corporate Transparency Bill — New Clause 59 - Publication of information about trustees

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.