War in Ukraine: Illicit Finance — [Clive Efford in the Chair]

– in Westminster Hall at 1:30 pm on 17th November 2022.

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Photo of Bob Seely Bob Seely Conservative, Isle of Wight 1:30 pm, 17th November 2022

I beg to move,

That this House
has considered the Second Report of the Foreign Affairs Committee, The cost of complacency: illicit finance and the war in Ukraine, HC 168, and the Government response, HC 688.

It is a pleasure to serve under your chairmanship, Mr Efford. In speaking to the report today, I will outline a series of points made by the Committee in this report and in its 2018 “Moscow’s Gold” report. I will also talk about SLAPPs—strategic lawsuits against public participation —and the case for more action on lawfare.

Our report finds that the UK sanctions response to the war, while ambitious, was initially limited by a lack of resourcing, and the new beneficial owners register still contains loopholes that put some individuals under the threshold for having to declare beneficial ownership. That is against the public interest. The report, which I strongly endorse—I encourage folks to read it should they have time—proposes a number of reforms, including new transatlantic sanctions partnerships, so that London and New York can work more closely together, and the appropriate resourcing of enforcement agencies. Both reports, and the Intelligence and Security Committee, note the lack of funding for the National Crime Agency and other serious crime organisations in the country and that some of them are threatened by the lawyers of oligarchs—potential bad actors. We believe that to be very strongly against our national interest.

In my opinion, and I think also in the opinion of the Committee and many people engaged with this issue, including Dame Margaret Hodge and other hon. Members, the UK and its offshore territories have for too long turned a blind eye to the transfer and concealment of illicit or semi-licit—if that is a word—wealth, and have granted a number of high-risk individuals political and judicial protections that they do not deserve.

We have built a significant industry catering to the needs of some really quite unsavoury characters. To date, vast sums of both illicit and licit finance have been recycled through the UK’s bespoke package of the financial services industry, legal services, public relations services, private eyes, estate agents, luxury assets, concierge services, visa and citizenship routes and the private education system.

Transparency International and various other bodies have estimated that the amount of wealth, criminal or otherwise, that has flowed from the former Soviet Union via corrupt German and Scandinavian banks, via UK shell companies, to tax havens—sadly, very often the UK—is probably between £500 billion and £1 trillion. That is one of the greatest flows, probably the greatest flow, of illicit wealth in the history of humanity. The fact that we in London are a core part of that flow is frankly pretty shameful.

I was discussing the issue with the great Bill Browder the other day. One of the problems is that this is not just Colombian drug cartel money; this is money that has come from deeply corrupt, but potentially legal deals. For example, an executive at one of the big state gas or oil firms at some points in the 1990s could, if they had the connections, buy an oilfield or a gasfield equivalent to the North sea, for $100,000.

By borrowing that money off organised crime or other areas, that person would effectively become a billionaire overnight, by the sometimes legal, sometimes not, but deeply unethical transfer of state assets—the privatisation of state assets using organised crime as muscle and bureaucratic connections to facilitate it. That is what has happened in the former Soviet Union—in not only Russia, but also Ukraine back in the day, especially under Yanukovych and others, and Kazakhstan. Clearly, that has enriched a small number of people in the United Kingdom, but I do not believe it has been good for the United Kingdom as a whole. It is not good for our reputation and for London as a service industry—although it is undoubtedly true that it has very considerably enriched a small number of people.

In 2018, the Foreign Affairs Committee published an excellent report under the previous Chairman, my right hon. Friend Tom Tugendhat, called “Moscow’s Gold: Russian Corruption in the UK”. That report detailed that, despite the Government’s crackdown on Russian activity in the wake of the Skripal poisoning, back before the Ukraine war, business simply continued as usual for most of Putin’s allies in the United Kingdom.

One of the depressing things for me is that I was saying this before I was an MP, so nobody was listening, and have said it as an MP—and still nobody really listened. In 2007, back in the Munich conference speech, Putin declared a new cold war against the west. We have studiously done our best to turn a blind eye because it was too difficult for western states to get their heads around the fact that, in President Putin, we had an aggressive rival who did not accept the international system, would openly challenge it and would fight wars on his borders to secure what he thought were his vital interests—we can debate that or not. After his speech the invasion of Georgia happened, and then in 2014 there was the invasion of Ukraine through proxy groups that confused some people, but should not have done.

Before, during and after those events we have had a wave of assassinations, imprisonments and arrests. I met with Alexei Navalny’s chief of staff. Navalny now may be the most high profile political prisoner in the world; he is in a detention camp in permanent solitary confinement. That is the price for challenging President Putin. Last night, I was chatting to Marina Litvinenko, the wonderful wife of Alexander Litvinenko, who was murdered in Piccadilly back in 2006—he died of radiation poisoning. The problem is that we repeatedly turned a blind eye. Our love of Russian money flowing through the financial and legal systems clouded our moral judgment. That has enabled Putin’s regime. We need to learn from those errors and mistakes.

What is the scale of the problem today? From 2008 to 2015, there were no state checks on tier 1 golden visas. At least eight individuals now sanctioned, or under investigation, are thought to have obtained citizenship through those means. They are citizens like you or me, Mr Efford. How can that be right or in the national interest? The National Crime Agency estimates that money laundering costs the UK £100 billion annually. Serious or organised crime is estimated to have a price tag of £37 billion.

Russians accused of corruption or having close links to the Putin regime have bought at least £1.5 billion worth of property in Great Britain according to Transparency International—that is a vast amount of property. One of the reasons why so many people are struggling with their mortgages is that there are vastly inflated prices for property in London and the south-east. That is in part because it is seen as an easy way to launder money: to pay over the odds for property and then to sell. Even if it is then sold at a loss of 10% or 20%, these people have laundered—legalised—a vast amount of corrupt and criminal, or semi-corrupt and semi-criminal, money.

That £1.5 billion is part of nearly £5.5 billion worth of property in the UK that has been purchased through offshore shell companies. That problem happened under new Labour and the coalition with the Liberal Democrats. What on earth is this country doing allowing offshore shell companies to be vehicles to buy property? It is just wrong. It is wrong that so many people close to Putin own so much property in this country. It is wrong that so many offshore vehicles have been used. What on earth are we doing allowing that to happen, and what on earth are we going to do to stop it? I would love the Minister to reassure us, rather than just saying that we are concerned about it.

Photo of Neil Coyle Neil Coyle Labour, Bermondsey and Old Southwark

The hon. Gentleman is making an excellent speech and I congratulate him. I want to be clear that this is not just an issue about Russia. In my constituency and elsewhere, the red princes and princesses of communist China are buying up property and inflating prices. We should not just focus on Russia when we talk about illicit finance.

Photo of Bob Seely Bob Seely Conservative, Isle of Wight

I thank the hon. Member for his very sensible point. There is absolutely a wider issue. As well as shell companies, there are vast developments on the south side of the river, around the US embassy, where entire blocks are being bought up as investment options rather than being used to provide housing for Londoners. That is shocking, especially because we have a housing shortage. There is a wider argument on reform of our housing in the UK for giving options first to allow ordinary folks to be buying it, rather than—as much as we love them—Hong Kong, Chinese or Indonesian investors to block buy endless numbers of flat and rent them out or never have them occupied.

I was going to talk a bit about the Azerbaijani laundromat. Between 2012 and 2014, about £3 billion went through UK shell companies as part of the so-called Azerbaijani laundromat; funding was dispersed from Azerbaijani officials to various outlets in this country. As well as that, London’s open economic environment has been a key centre for raising finance for companies or individuals over whom there are now very considerable question marks.

In 2017, En+ was floated on the London stock exchange, raising £1.5 billion from international investors in an initial public offering. We now know—well, we knew at the time—that En+ was very closely associated with Oleg Deripaska, despite his ownership of companies linked to supplying Russian military materials and sanctioned Russian shareholders. He himself is now sanctioned, I believe. En+ and Oleg Deripaska were part of a considerable lobbying effort by a former Member of the House of Lords—a former Conservative Minister, as much as it shames me to say it—to separate Deripaska from En+ in frankly pretty questionable circumstances.

Shortly after the Skripal poisoning, Russia continued to sell Russian sovereign debt in London, facilitated by the sanctioned Russian bank VTB. While our financial services provide anonymity to those who wish to invest, many UK legal firms have sought to further silence those who question the origin of investments.

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon

My hon. Friend is making a very powerful case. I agree with everything he has to say. On sanctions, he will know, not least from the talk he did yesterday afternoon with a group of Ukrainians, that there is a big call in Ukraine at the moment to turn the freezing sanctions into confiscation sanctions, and to use the money we are holding, which would presumably otherwise be given back to the oligarchs, for the reconstruction of Ukraine. Would my hon. Friend comment on that?

Photo of Bob Seely Bob Seely Conservative, Isle of Wight

I would love to; we were debating that yesterday at the Henry Jackson Society with Bill Browder and a number of other people. My hon. Friend is welcome to correct me on this, but I think Canada has prepared an Act to enable that frozen money effectively to be given to the Ukrainian authorities or set up in some kind of international fund to help reconstruction in Ukraine.

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon

The Act is quite straightforward. By way of clarification, it takes the existing sanctions legislation, including the Canadian Magnitsky law, and latches on to that the ability to change freezing orders into confiscation orders. It is a relatively simple way of going about what could be a very complicated process.

Photo of Bob Seely Bob Seely Conservative, Isle of Wight

Indeed. If it is effective, I look forward to working with my hon. Friend, and potentially other Members, to see how we can bring in such a law in the UK, so that we move from freezing money to taking money and using it for a more moral purpose.

Photo of Fleur Anderson Fleur Anderson Shadow Minister (Cabinet Office)

The hon. Member is making a powerful speech. I am pleased to see this report and the recommendations in it. I have been talking to Ukrainian MPs since the visit that he and I made to Kyiv. One of the biggest issues they have raised is about not just having sanctions but having a sanctions regime that ratchets up internationally. The sanctions partnership is absolutely essential.

Just now in the House, the Prime Minister was congratulating the work done already on sanctions, but we cannot stop there. We need to move on. The ramping up of sanctions and the seizing—not just freezing—of assets are absolutely being called for by Ukrainian politicians and people.

To put into context the sums the hon. Gentleman has been referring to, right now there is a $38 billion budget gap for the running of Ukraine and billions also need to be paid back in reparations. This solution is much needed and would restore the reputation of London as a financial centre, not a money laundering centre.

Photo of Bob Seely Bob Seely Conservative, Isle of Wight

That was a brief question!

Photo of Clive Efford Clive Efford Labour, Eltham

I think it was a speech.

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Human Rights), Shadow DUP Spokesperson (Health)

I congratulate the hon. Gentleman on bringing forward this debate; I will speak for a wee minute in support of him. My understanding is that in earlier questions in the Chamber, the Government indicated that they were prepared to look at—I am not sure they committed themselves entirely—not just seizing the goods belonging to Russian oligarchs, but using that money for a purpose. The purpose we all asked for in the Chamber that day was for the money to be given to Ukraine. Would there not be some poetic justice if Russian money was used to directly help the Ukrainians?

Photo of Bob Seely Bob Seely Conservative, Isle of Wight

The hon. Gentleman makes a very good point. One of the things we were discussing yesterday was quite how that could happen. The initiative is being led by Bill Browder, who has championed the cause of Sergei Magnitsky ever since he was tortured and murdered 13 years ago yesterday. Ten years ago—a decade ago this month—the late, great John McCain brought in the first Magnitsky laws in the United States, and everyone else across the globe, or at least 35 nations, has followed suit.

The person dealing with this issue in Ukraine is a very powerful Ukrainian politician called Kira Rudik, who was also with us yesterday. She is in London today. She is trying to get a global coalition to do just what we have been discussing. I hope that we will soon have a draft law here that we can send to Government, debate and put down in some form to say, “These are the next steps.”

I pay tribute to Kyle Parker, too, who was also in the discussions we had yesterday. He is great man. A senior congressional staffer—these people have much more power in the US than they tend to in the UK—he wrote the Magnitsky Act and worked with Congressmen and Senators to get it through both Houses in the US system. We should be doing the same here.

Strategic lawsuits against public participation, or SLAPPs—it is a bit of a mouthful—are effectively the abuse of law by the rich to intimidate journalists, campaigners and others. SLAPPs are absolutely part and parcel of this system. Imagine the great caravan of wealth that flowed from the former Soviet Union to the tax havens of the Caribbean. It needed facilitators, which were the financial services companies, some of which are corrupt German and Scandinavian banks. I think their names are out there: Deutsche Bank, in Estonia, I think, and one or two others.

The system also needed attack dogs to protect the flow of that vast caravan of sometimes criminal wealth, and those were the legal firms. Those lawyers effectively built a business model of legalised intimidation whereby journalists and campaigners can be threatened. If someone in the Soviet Union, or Russia post the collapse of the Soviet Union, wanted to stop a journalist from trying to investigate them, they would ultimately just kill them. In the UK and the west, that is more difficult—not impossible, but it is more difficult to kill people and get away with it.

People are not physically destroyed in this country; instead, the legal system is used to financially destroy them. That has sadly happened to a number of people, including Charlotte Leslie, a former colleague of ours, and the wonderful journalist Catherine Belton. Various campaign groups have also been targeted. Most recently, Chatham House has been a target. Sadly, I understand it has given in to threats and is having to rewrite some of its reports.

This business model was set up to service the needs of the aggressive rich and powerful, including organised criminals and oligarchs, who did not want their affairs investigated. The three methods were the abuse of libel law, the abuse of privacy law—the right to privacy, meaning no one else can look into someone’s affairs—and data protection. The aim in all the cases was to mount up such staggering costs that even a technical victory would destroy the opponent, render them bankrupt or destroy their reputation. If they were a journalist, the aim was to make a newspaper or publishing house invest hundreds of thousands of pounds in defending them against the vast sums that oligarchs were willing to throw at them to make their lives difficult.

A slightly different case is that of the Maltese corruption journalist Daphne Caruana Galizia. It was a great privilege to recently meet her son, who works in the UK media. At the time she was murdered, she was facing 47 libel lawsuits, almost all of which were from UK law firms. That is staggering: before she was physically destroyed, she was being psychologically and financially destroyed.

I have discussed Catherine Belton and the costs of SLAPPs. My final point is that it is extraordinary that, as Spotlight on Corruption and Global Integrity have found, law firms in the UK currently face almost zero risk of criminal prosecution for money laundering, and there is a very limited prospect of their facing any meaningful fines. I was told privately that a number of UK law firms support that criminal money-laundering activity. Yet almost nothing is done, and almost nothing is investigated.

What are the solutions? First, close the loopholes in Companies House. I know that the Government have made strides on that, but there is more to be done. The right hon. Member for Barking is working with a number of Members on both sides of the House to tighten up the regulations. If the Government could be sympathetic, we would be grateful. Secondly, the UK’s economic crime enforcement system remains under-resourced. It needs to be better resourced, so that we can fight the bad guys and girls better.

Thirdly, we need to better supervise the so-called professional enablers, so that they cannot effectively operate outside money laundering regulations. Fourthly, as we tighten up regulations here, we need to expand our UK regulations to British overseas territories. It is absolute nonsense that criminal and organised crime and tax havens benefit people in the Caribbean.

We very much welcome the Ministry of Justice’s response to the call for evidence on SLAPPs and its proposals for legislative reform. Liam Byrne and I—and perhaps others—will present a Bill on SLAPPs, so that a Bill is ready when the Government want to introduce one; we love saving Government time, and increasing the productivity of Government and politicians. We will provide a model for SLAPPs law. It will ensure that SLAPPs are disposed of more quickly in court, that the costs of being attacked by SLAPPs are kept to a minimum, and that the costs for SLAPP filers are higher, which will potentially deter further SLAPPs. There are other measures, but I will not go into them now.

In summary, as a result of the UK’s economic permissiveness, we have for too long become a safe haven for kleptocrats. That has to end. The situation is getting better, but it is a shame that it took a major war in eastern Europe for things to change dramatically. We take pride in the openness and transparency of speech, and in the UK’s open economic system. However, that freedom of speech and open economic system must be better protected. A laissez-faire, criminalised free-for-all is not an open economic system; it is a corruption of that system. We need to clamp down on the sources of illicit finance coming through the UK. I urge the Government to continue reforming Companies House, to resource our enforcement bodies, and to read and take in the many excellent recommendations in the Foreign Affairs Committee’s report.

Photo of Neil Coyle Neil Coyle Labour, Bermondsey and Old Southwark 1:54 pm, 17th November 2022

It is a pleasure to rise with you in the Chair, Mr Efford. I thank the Liaison Committee for providing time for the debate, and congratulate Bob Seely on his excellent opening speech. I also thank the Foreign Affairs Committee Clerks for notes in advance of the debate, and the UK Anti-Corruption Coalition for its excellent briefing. I speak as a member of the Foreign Affairs Committee, and also as someone who is just glad to be reunited with Jim Shannon—I knew he would be here today.

The FAC report, “The cost of complacency: illicit finance and the war in Ukraine”, in October made many recommendations, some of which have been touched on. Those that have not been mentioned include the need to implement beneficial ownership rules and to reform Companies House, including by giving the registrar powers to verify information and to remove corporate entities for wrongdoing and provide robust identity verification mechanisms. It also recommends making enforcement more effective by reforming unexplained wealth orders, or by at least assessing why they have not been as effective as the Government originally intended. The report also suggests making better use of the exchange of notes process in relation to companies incorporated overseas, reforming corporate criminal liability laws and whistleblower legislation, professionalising the sanctions unit of the Foreign, Commonwealth and Development Office, and making more concerted efforts to seize assets that have been frozen by sanctions.

The Government’s response is, at best, tepid. They say that they are aware of the security threat of illicit finance and suggest that the war in Ukraine is the driving political force for action, but that leaves many people who are focused on this issue concerned that no effort was made previously and wondering why it has taken a war in Europe to drive reform and action in this area, when it has been clear to so many that illicit finance has been entering the UK at colossal levels for some time.

The Government’s response is largely being taken forward in the Economic Crime and Corporate Transparency Bill, but there is broad concern that it does not go far enough. For example, the Government have committed to reform of Companies House, but the UK Anti-Corruption Coalition says that they need to go much further to prevent UK-registered companies from providing a veneer of legitimacy for secretive offshore networks, by ensuring transparency over shareholders, partners and members. The Government have acknowledged the risk associated with opaque corporate ownership, but the Bill in its current form does not make the changes that would prohibit private limited companies, limited liability partnerships, limited partnerships or Scottish limited partnerships from having opaque corporate partners, and it must go further.

The UK Anti-Corruption Coalition also asked the Government to improve the register’s accuracy by verifying and publishing shareholder information. The information it holds on shareholders needs to be transparent and accurate, including names, company numbers and addresses—all the criteria that we assume is held but is not. The Bill also needs to give Companies House the power to review verification documents provided by third-party agents—usually trust and company service providers—because without that level of work, Companies House’s data will simply not be robust enough.

The Government have said that they will undertake a review of whistleblower protections and are assessing time and scope. It would be really good to have an update on that, because there is a lot of concern that, while journalists may be covered, they are not the only people who warrant protection. Journalists rely on whistleblowers inside companies and organisations, and they should be the focus of further and greater protection. I hope, therefore, that the Minister will tell us whether the Government are considering introducing a whistle- blowing Bill to protect those who seek to speak out against or uncover economic crimes and wrongdoing. That is not covered by current Government plans, so I hope the Government will follow through on their commitment to review the UK’s whistleblowing framework and present the timeline and scope of that review.

The Government say that they accept the Committee’s recommendation to establish a professional and permanent sanctions group within the FCDO. However, the global anti-corruption sanctions regime, which the UK introduced its in April 2021, has been used significantly fewer times than the 30 designations a year that the Government originally envisaged. Why has the performance been so much worse than expected? What steps are being taken to improve it, when will they be implemented, and when will they be put to use?

In response to the Committee’s recommendation to grant additional funding for law enforcement, all the Government have offered is money to fund the reform of Companies House, and they have said that the Home Office will set out an annual report to Parliament on unexplained wealth orders. Frankly, that is pathetic, and today’s statement means that the uplift in the Serious Fraud Office’s core resources budget is simply not good enough to match the level of crime in this country. The UK spends £850 million a year on funding core national level economic crime enforcement bodies, but economic crime costs the UK £290 billion a year. The National Crime Agency has suffered a 4.2% decrease in its core budget over the past five years, yet fraud has risen dramatically. It accounts for 40% of all recorded crime, yet fraud prosecutions have fallen from 42,000 in 2011 to 13,500 in 2021—a 67% decrease in a decade. The Government are simply lagging far behind the scale of the problem. The NCA needs resourcing to the scale required, and the Minister needs to raise the Government’s game.

The Committee has put forward additional asks. Given the speed with which the two economic crime Bills were put before the House, does the Minister anticipate additional legislation to rectify any gaps? Will the Government be reviewing the implementation of the two Acts? When does the Minister expect to see measurable outcomes from changes to resourcing the fight against economic crime? What outcomes is he prioritising? How does the new sustainable funding model support long-term planning to support those goals? How does public-private information sharing feed into those enforcement aims?

It would be good to hear from the Minister what progress is being made on suspicious activity reports reform. The Government have mentioned that they are interested in that, but we have not seen action on it yet. It would also be good to hear from the Minister whether the Government’s understanding of the threat of economic crime has changed. Do they see illicit finance as primarily a criminal issue or a security threat?

Golden visas—the tier 1 visa scheme—allowed a recipient to stay in the UK for three years in exchange for a minimum £1 million investment, but they became a vehicle for much laundering of corrupt money in the UK because of a lack of checks. That scheme was shut in February in response to the full-scale invasion—the second invasion—of Ukraine, but a review of the scheme, commissioned by the Home Office in March 2018, has still not been published. The Committee called for the review to be published without delay. The Government have said that they will publish it “in the near future”. I really hope that the Minister can tell us what is happening. If the Government are at all serious on this issue, they will be able to tell us today when that report will be published.

The Government did not even bother to respond to the Committee’s recommendation that they review visas issued since 2015. Have the Government concluded that none of the outstanding visa holders pose a security threat? Especially given that the Government tell us that they have changed their policy towards both Russia and China in recent weeks, will the Government be reviewing that decision? The Government have not responded to whether they plan to review those granted visas who had gone on to gain residency or citizenship. The Home Office should set out how it will deal with people with corrupt or criminal sources of wealth who have already received indefinite leave to remain or subsequent citizenship through the golden visa route. Those visas may still need to be withdrawn and other measures taken.

It would be good to hear what the Government plan to do, especially in the face of those of us who deal with the Home Office week in, week out, on behalf of constituents desperate to get family members into this country to work here, to contribute here and to care for other family members who are sick here. I have constituents who have had family members pass away while waiting for visa application decisions. I recently saw a constituent who has waited more than a decade for an asylum application to be decided—while corrupt millionaires have been able to gain access under a Government-sponsored programme, which is, frankly, simply despicable.

The UK Anti-Corruption Coalition says that 6,312 tier 1 visas—more than half of all golden visas—are being reviewed for possible national security risks. That is the scale of the problem. The Government opened the door to this. By April 2022, 10 Russian nationals subject to sanctions had previously been granted golden visas. That is what this Government have permitted in this country. In the light of today’s news from the director general of MI5 about potential attacks in this country from Iranian agents, could the Minister tell us whether any of these golden visas were issued to Iranian nationals?

How many people got this red-carpet treatment when they should have had the rug pulled from under their feet? And how are the Government now quantifying the level of damage that these visas, and their approach, have caused? The message sent across the globe has been that London and the UK have been open to blood- soaked money from wherever it comes. Frankly, secret meetings with agents of other countries—this goes right to the top of Government under Boris Johnson— have simply not been documented. This is a Government who have undermined national security on so many levels and damaged the UK.

The Government have made some reforms to tier 1 visas since 2015, but there remain glaring loopholes, including one that allowed 100 golden visa applicants to borrow money from a firm owned by Russian nationals in order to make investments that ultimately went back to Russia. How are the Government penalising those involved, and how are they seeking to capture the money that should have been here? Can the Minister give any further clarity on timing for the review of the whistleblower legislation?

I have three final points, which are much wider. The first is on corporate criminal liability. The Committee said that the Foreign Office should work across Government to encourage reform of outdated and ineffective corporate criminal liability laws that mean that it is difficult to hold large companies to account for economic crime. In response, all the Government said was that they had commissioned a report from the Law Commission and were considering further action. The initial call for evidence by the Government concluded in March 2017—five and a half years ago. The Government then reported on this in November two years ago. And the Law Commission’s options paper was published in June 2022. I hope the Minister can give us today an update on progress, because frankly it looks like the Government are not even dragging their feet; they have not even got out of bed.

I have already touched on unexplained wealth orders. Since the passage of the emergency legislation this year, only one unexplained wealth order has been applied for by law enforcement. In total, only nine UWOs relating to four cases have been obtained by the NCA since the tool was introduced in January 2018, and just one unsuccessful application for a UWO left the NCA facing £1.5 million in legal costs. The hon. Member for Isle of Wight touched on the cost imbalance and the resourcing issue. The problem is much wider, because aid cuts have led to a £3.6 million budget cut for law enforcement bodies tackling illicit finance and doing international corruption work, and have resulted in the target for the use of UWOs based on aid-funded investigations being reduced to zero. I ask the Government to increase their ambition. Through the Government, law enforcement should be able to obtain UWOs, and they should have a boost in resources to fund the expert staff and technical capabilities that they require.

The UK Anti-Corruption Coalition suggests hypothecation to boost resources and capability. It suggests that funds generated through law enforcement activities be reinvested in law enforcement budgets to fund things such as the state-of-the-art IT infrastructure and data analysis capabilities required to do the job. Law enforcement bodies are hamstrung at the moment and are desperate for resources and capability.

Between 2016 and 2021, law enforcement bodies responsible for fighting economic crime in the UK brought in £3.9 billion in confiscation and forfeiture orders and fines. If that money had been reinvested in the agencies on top of their core budgets, an additional £748 million a year would have been provided to help tackle the problem. That is nearly double the resources that the Government currently provide, so I hope the Minister will respond to the UK Anti-Corruption Coalition’s recommendation.

SLAPPs allow oligarchs to supress evidence of their corruption and protect their reputation through vexatious litigation, unfortunately and very sadly through British law firms, against those seeking to tell truth to power, including journalists and publishers. The pressure of excessive costs coupled with the personal strain of legal threats hampers the ability of investigative journalists, academics and campaigners to shine a light on evidence of illicit wealth. Between March and May, the Government called for evidence on SLAPPs, and concluded in their report that they intend to pursue legislative reform at the earliest opportunity. That requires significant change, so will the Minister outline how the Government will take forward that well overdue legislation? Will they introduce early dismissal so that courts can dismiss any case that is in the public interest, and cost protection for defendants? I hope the Minister will tell us when the Government will legislate and, more importantly, when those powers will be in place to protect those who seek to shine a light on illicit finance in the UK, which is a growing problem.

Photo of Mary Robinson Mary Robinson Conservative, Cheadle 2:07 pm, 17th November 2022

It is a pleasure to serve under your chairmanship, Mr Efford, and to speak about the Foreign Affairs Committee report on illicit finance and the war in Ukraine. I am grateful to my hon. Friend Bob Seely for introducing this important debate. It is a pleasure to follow Neil Coyle.

Illicit finance is not new or geographically isolated, but Putin’s war on Ukraine has shone a public light on the massive scale of economic crime. We know that Russian money is being laundered through the UK, and in the view of the report it is more likely than not being used to fund the war in Ukraine. We cannot and must not allow Britain’s financial intuitions to continue to be used to house or move dirty money.

The Foreign Affairs Committee report sets out in stark terms that there is a cost of complacency. There is a cost to our global financial standing and our national security, and a cost in lives, when laundered money is used to pay for war. Continuing this complacency and doing nothing is not an option.

Valuing, listening to and protecting those who speak out to uncover corruption is part of the answer. I particularly welcome the Committee’s recommendation that:

“The FCDO should…push for a Whistleblowing Bill to offer protection to those who speak out against, or uncover, economic crimes and other wrongdoing.”

It is often journalists who investigate and uncover critical evidence of corruption. They frequently rely on informed insiders—whistleblowers—who have usually been frustrated by failed attempts to raise the alarm internally. I welcome the Government’s commitment to stop the use of SLAPPs, as has been set out so well by the two previous speakers. It demonstrates the Government’s commitment to upholding the fundamental democratic values of free speech and a free press, ending the abuse of the UK legal system and defending investigations in the public interest.

As the report points out, journalists are not the only truth tellers who need protection. As chair of the all-party parliamentary group for whistleblowing, I am campaigning for a whistleblowing Bill, and in the previous parliamentary Session I promoted a private Member’s Bill to create an office of the whistleblower. I note that in their response to the Committee’s report, the Government point to existing legislation designed to protect whistleblowers—the Public Interest Disclosure Act 1998, known as PIDA—stating that it provides

“protection to those who speak up in the public interest.”

However, PIDA, the UK’s current whistleblowing legislation, applies only to some employees, not all workers or anyone else who may reasonably learn of impropriety or criminal activity, such as trustees, volunteers, family members or customers, or others in the supply chain. It is limited. Moreover, a person who speaks out receives only limited protection from the harm or detriment that often arises when they are bullied or harassed out of their work as a result of their whistleblowing. That is no comfort for people considering speaking out where illicit finance, rogue regimes and criminal gangs are involved—the risks are simply too high.

I firmly believe that the way to uncover economic crime and illicit finance is to encourage people to report wrongdoing. Research shows that more than 40% of fraud, for instance, is detected through whistleblowers, but for people to come forward, they must feel safe. Although I was glad that the Government reiterated their commitment to reviewing the whistleblowing frame- work, I am disappointed that the scope and timing remain under consideration. The Committee report expressed a concern that the Government lack

“sufficient resources and expertise to ensure the effective implementation and enforcement of these sanctions”.

If resources to do that are lacking, they will also be lacking to collect and investigate those whistleblowing tips. That is yet another reason for including whistleblower provisions in our fight against illicit finance.

For those reasons, I am calling for a unified office that will set standards for whistleblowing to which every organisation, industry and Government will comply. It will ensure that they put in place proper mechanisms to receive, examine and escalate reports where appropriate and work with law enforcement where there is evidence of wrongdoing. The Committee recognises the need for a whistleblowing Bill. I am being helpful and urging the Minister and the Government, in the light of this important report, to get behind my whistleblowing Bill, which I promoted in the previous Session, but which fell due to time. It is ready and waiting to be taken up, and I would love the Government to bring it forward as part of their legislative agenda.

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Human Rights), Shadow DUP Spokesperson (Health) 2:13 pm, 17th November 2022

First, may I say what a pleasure it is to speak in this debate? I commend Mary Robinson; I am pleased to follow her. I agree wholeheartedly with her comments about whistleblowing and the importance of having that Bill in place. I hope that the Government will look sympathetically on that, because it is a positive step in the right direction. There are many things in this House we would like to do—we have ideas, we bring forward Bills, and they are not always accepted—but that Bill is certainly one that would be worthy of acceptance.

I commend Bob Seely for setting the scene so well. He has a vast knowledge, and I mean that genuinely. I very much look forward to his contributions in the Chamber. They are always detailed, informational and evidential, which I think helps us all—it helps me, anyway—to better understand things, and I appreciate that. It is always a pleasure to hear Neil Coyle speaking as well. He also has a depth of knowledge on this subject. We have had exceptional contributions today and others will follow, whenever the shadow Ministers speak as well.

I thank the members of the Foreign Affairs Committee for their findings in the second report into illicit finance and the war in Ukraine. Monday’s debate was the first on Ukraine that I could not attend, primarily because I was stuck at Belfast City airport and could not get away because of the fog and all the other things that were happening that day. However, I have spoken in nearly every debate involving Ukraine. I had a deep passion and interest in Ukraine long before the Russians invaded, because churches in my constituency have done missionary work and provided humanitarian aid in Ukraine for many years, way back into the 1990s. Indeed, I sponsored a Christian family in Ukraine back then.

It is clear, given the levels of illicit money laundering by the Russian kleptocracy, that the UK’s response was somewhat underprepared. This debate has followed a theme: what have we done to respond? In all honesty, the answer is probably, “Not as much as we should have.” Ultimately, to combat illicit crime from Russia, we must commit to a transatlantic partnership, so I welcome the findings of the report and the Government’s reply. At least they have understood the issue, but I do not think they went far enough. The hon. Member for Isle of Wight referred to that, and I am certainly going to say the same thing.

At the very start of the invasion, Transparency International identified more than £1.5 billion of UK property owned by Russians accused of financial crime or with links to the Kremlin, and that will have increased since then. Mr Djanogly referred to how Government need to be able to take all the assets they seize and turn them into financial assistance to help the Ukrainians to rebuild their land, their country, their buildings and their infrastructure. In all honesty, I believe that that £1.5 billion—probably more now—would go a long way to helping rebuild Ukraine. It would be poetic justice if those moneys were used for that purpose.

We want calls for action. In 2019, the “Moscow’s Gold: Russian Corruption in the UK” report found the laundering of dirty money from Russia to be an instrumental problem. Until the invasion of Ukraine, there was unfortunately little commitment to tackling the problem. Through many sanctions and Bills brought forward to Parliament, we have learned our lesson about taking lax approaches to corrupt and autocratic regimes. It seems there have never been so many autocratic regimes in the world as today. The report being discussed today also stated:

“By the Government’s own measure, ‘there is a realistic possibility that the scale of money laundering impacting the UK annually is hundreds of billions of pounds’.”

The £1.5 billion I referred to earlier on is almost just picking the scab of the real corruption.

Unexplained wealth orders were used in 2021 to recover the proceeds of illicit crime. In Northern Ireland, England and Wales, £219 million was recovered. In a debate in the Chamber on that very issue, I referred to a case of money that came from Latvia and right through Germany, France and Belgium into England and it ended up in Northern Ireland. It was a massive amount of money—more than £200 million—and an example of corruption on a very high scale.

While unexplained wealth orders are a welcome move in recovering the proceeds of illicit crime, London has unfortunately become a hub for illicit money. Where does that leave the smaller regions, such as Northern Ireland, Scotland and Wales, where it will become increasingly attractive for launderers to invest money? The hon. Member for Isle of Wight referred to some of the ways in which that money can be invested in an attempt to legitimise it through a legitimate company, yet that money is still economically and criminally wrong.

The Economic Crime and Corporate Transparency Bill has been introduced to fight the flows of dirty money. I previously raised with the Secretary of State the fact that Companies House was identified as taking part in 89 economic crime incidents, which came to a total sum of £137 billion of potential economic damage. The Bill must introduce regulatory objectives to tackle illicit finance across this United Kingdom. I welcome the fact that it introduces new powers for robust verification requirements to ensure that business ownership across the UK is as transparent as possible. That has to be good news. When the Government do something well, I like to give them credit for that.

We must not let it slip our minds that Kremlin-backed oligarchs rely on the western transatlantic system. As I mentioned earlier, we need to protect our good relationships with other western allies to ensure that proactive steps are taken to reprimand the enablers and their proxies to whom illegal wealth is transferred. The hon. Member for Isle of Wight outlined how that is done, the procedures that take place and the ways that people cover their tracks.

The integrated review named Russia as

“the most acute threat to our security”,

and I believe that to be the case. China is undoubtably trying to catch Russia and is biting at its heels. Russia has proceeded to diminish every aspect of Ukraine’s domestic security. I am proud of our Government and Ministers’—even in the Chancellor’s statement earlier—continued commitment to Ukraine. This great United Kingdom of Great Britain and Northern Ireland is leading the way and all the other countries—I say it with great respect to them—have almost been shamed into matching what the United Kingdom is doing. The Foreign Affairs Committee report concluded:

“The Government cannot afford to rely on rhetoric if it is to deliver on its commitment to tackle illicit finance” so let’s get it done. We have been seen to be under-resourced in the past and that has led to our own constituents, including many of mine, losing their hard-earned money.

Our United Kingdom of Great Britain and Northern Ireland prides itself on the rule of law and the protection of our economy and citizens. If we do not put in the necessary means and resources, we allow Putin and his illegal regime to take advantage of the freedoms of the western world. That must stop. Like the hon. Gentleman and others, I call on the FCDO and the Minister to ensure the immediate enactment of this Economic Crime and Corporate Transparency Bill for the betterment of our economy and the protection of our assets from Russian interference. The quicker that happens, the quicker the world will be a better place.

Photo of Alyn Smith Alyn Smith Shadow SNP Spokesperson (Foreign and Commonwealth Office) 2:22 pm, 17th November 2022

It is a pleasure to see you in your place, Mr Efford. I am glad to wind up for the SNP in this important debate. I commend Bob Seely—he is a leading expert in the House on these issues. As ever, he made a powerful contribution and I commend him on his efforts. I thank the Foreign Affairs Committee for this important piece of work. I am here partly on behalf of my good and hon. Friend Stewart Malcolm McDonald, who is presently engaged in a by-election in Glasgow.

If we boil down my speech to its essence, the SNP supports the report and wants to see it all implemented. I urge the Minister to show a bit more ambition and oomph than we have seen thus far in the official Government response to the report. I appreciate that there is collective responsibility, but I stress to the Minister that this is a cross-party report and these are cross-party recommendations. Where there are serious efforts to tackle this stuff, the SNP will play our part in that coalition. There is a real opportunity for the Government to make meaningful progress on these important matters, because we do have a problem. There has been a triptych of reports from the House: the “Moscow's Gold” report, which has been mentioned; the Intelligence and Security Committee of Parliament’s Russia report; and this report, which sits alongside both of those previous efforts.

The report broadens the point, which has been well made, that we are not just speaking about dirty Russian money. Dirty money is dirty money, wherever it comes from. Dirty money corrodes and hides in the shadows. The fewer shadows we have in our economic governance the better. I speak as a former financial services solicitor in the City, so I am familiar with the ways these rules can be gotten around. We are dealing with some of the most slippery, best-advised and richest people in society who are really good at getting round rules. We need to make sure that there are as few loopholes and grey areas as possible, because, as we have heard, the numbers are vast. The UK’s financial and professional services sectors have played a key role in bankrolling the Kremlin regime, and other regimes. That should really shame us all and give us all pause.

Illicit finance needs to be tackled. London is a major international finance centre, but it is also an international dirty finance centre, and I include Edinburgh in that and various other place in the UK, as well. This is a common effort that we need to work upon.

I do not propose to rehearse the points that have already been made, but I will pick out a few things on which I urge the UK Government to act. And I pledge SNP support in this House and the co-operation of the Scottish authorities as well, because much of this matter is reserved as opposed to devolved, and Holyrood cannot touch it.

On the golden visa review, others have called for the review to publish. Yes, the scheme has ended, but important lessons need to be learned and some individuals still give cause for concern. We need to better ventilate that issue and see that review come forward.

On the slightly misnamed Scottish limited partnerships, people should not let the name fool them; the Scottish Government and the Scottish Parliament cannot regulate these legal vehicles and we need to see much greater transparency about them. The fact that we can see vast tracts of the highlands, including parts of my constituency in Stirling, being owned by opaque trusts, whereby we are not sure who the ultimate beneficial owner is, is absurd. We need to get that system fixed.

I warmly endorse the comments that made about whistleblowers, but I also endorse the recommendations in the report. We need to see greater protection for whistleblowers who bring to light facts that are of public interest. I also warmly endorse the points about SLAPPs and judicial intimidation. If the hon. Member for Isle of Wight is looking for a SNP name for his Bill, count me in; I will happily swing in with those efforts.

Regarding overseas territories, at every point that we have discussed the sanctions regime on Russia after the invasion of Ukraine—I have been involved in all those discussions—I have made the point about ensuring that there is complementarity and that there are no gaps with the overseas territories. I have been assured that there is neither complacency nor such gaps, but I am still not convinced that that is entirely the case. We need a lot more due diligence to ensure that the overseas territories are joined up and in lockstep with what we are trying to achieve because, as I have already said, some of the best-advised and slipperiest people in the world are really good at finding loopholes where they exist, or indeed creating them where they can.

There is also the point about the professional enablers: the public relations professionals; the lawyers; the accountants; and the others who have facilitated malfeasance. We need to see the professional bodies step up as well, but we also need the Government to expect much better of them. As I say, I now speak as a former solicitor, but I am still aware that there are gaps that can be exploited.

We also need to better finance the organs of Government that deal with economic crime. Good work is under way, and a lot of good people are working on this issue, but they need more support and more resources.

In closing, Companies House’s role should be that of an active, muscular regulator with teeth. However, it is not that at the moment. That is not a criticism of anybody in Companies House, but it is not doing what it needs to be able to do. It needs more resources and more powers to do it.

I hope that I have struck a consensual note in my contribution. Not much can be gained from a party political bidding war about which party is dirtiest or which party is the most in hock to dirty money. There is a common effort that we need to work upon here; it is in the interests of all our citizens to get this problem fixed. If the Minister here today is going to give these plans a bit more oomph than we have seen to date, he will have the SNP’s support in doing so.

Photo of Catherine West Catherine West Shadow Minister (Foreign and Commonwealth Affairs) 2:28 pm, 17th November 2022

It is a pleasure to serve under your chairmanship, Mr Efford. I think it is for the first time and it is lovely to see you in the Chair.

I thank the Chair of the Foreign Affairs Committee, Alicia Kearns, who is not currently present, and the other Committee members who have been here today: my hon. Friend Neil Coyle and, of course, Bob Seely, who knows Russia well and has been talking about these issues since before February 2022. I am sure the Committee will be as concerned as I am about the events of recent days. My thoughts and my condolences are with the people of both Poland and Ukraine at this immensely challenging time for both countries.

Labour is unwavering in its commitment to NATO, to Europe’s collective security and to providing long-term support to Ukraine and its people as they put everything into the defence of their country and the values of democracy, freedom, peace, security and self-determination. Labour also maintains that the bravery, courage and resolve of Ukrainians must be met with commensurate action, not only in our direct support to President Zelensky and his people but by eradicating Russian influence from our economy and our politics.

The Select Committee report states:

“The Integrated Review named Russia as the ‘most acute threat to our security.’”

It should not require a war on our continent for there finally to be the impetus to do something about illicit Russian finance, which has polluted our society and economy for decades. The hon. Member for Isle of Wight and my right hon. Friend Dame Margaret Hodge have worked consistently on the issue in the all-party parliamentary group on anti-corruption and responsible tax. I was a member of that group before I became a Front Bencher—or rather, in my time between being a Front Bencher and a Back Bencher.

Years of inaction have seen our capital dubbed “Londongrad”. My hon. Friends the Members for Bermondsey and Old Southwark and for Putney (Fleur Anderson) were quite right to talk about the heavy influence that inaction has had on property prices for Londoners trying desperately to get on to the housing ladder, and the way in which prices have rushed up, particularly in the current climate. We are now reaping the impact of hundreds of billions of pounds having been laundered here in the UK, much of which will be being deployed to fund Putin’s war machine.

The Labour party has been pressing the Government for action for years and has raised the issue of illicit finance on the Floor of the House dozens of times. At our conference in 2021, prior to the invasion of Ukraine, my hon. Friend Lisa Nandy, then shadow Foreign Secretary, committed to a specific taskforce to look at the matter in depth.

Even now, it is fair to assert that the measures adopted in the Economic Crime (Transparency and Enforcement) Act 2022 do not go far enough to tackle the problem. The report says that the steps taken by the Government since February

“are not preventative but rather constitute damage limitation”,

brought about by years of apathy. The report catalogues a litany of errors and shortfalls and the Government’s unwillingness to bring forward legislation and the culture change required, which could truly stem the flow of dirty money, deal with its enablers and provide sufficient resourcing to enforce any changes in the law.

This challenge did not originate in February 2022; the Opposition have been calling for action on it for years. We have known of Putin’s corrupt regime—and the risks that it has posed for our region and globally—since 2008, when he flagrantly broke international law to invade Georgia to retain control over the Caucasus, after brutally repressing the people of Chechnya. He did it again in Crimea in 2014, and later unleashed a brutal attack against the people of Syria. Who can forget the images of blown-out Idlib and how similar many of the bombed-out cities in the east of Ukraine appear now?

As well as Putin’s heinous war against Ukraine and his bid to wipe it from the map—the latest manifestation of almost two decades of relentless warmongering at the expense of civilians around the world—we are also aware of the threat posed by Russia as a state of sprawling kleptocracy. Oligarchs have exploited our economic set-up to expand their wealth, protect their assets and further the Kremlin’s nefarious intent. As the report highlights, we are still nowhere near where we need to be to remedy years of inaction in rowing back the tides of polluted Russian finance.

On the substance of the report, I am sure that the Minister will cite the 2022 Act, which Labour supported and welcomed earlier this year as a step in the right direction. The hon. Member for Isle of Wight and my right hon. Friend the Member for Barking tabled amendments and brought improvements to the Bill. The report rightly asserts that although the legislation makes welcome changes in some areas, it represents only a fraction of the changes needed to address the systemic vulnerability to Russia’s illicit finance. It was also lacking in reforms to Companies House, which are still not sorted, and it failed entirely to get to grips with cryptoassets to strengthen anti-money laundering regimes.

To inject a little bit of humour into this rather dry topic, I am sure Members will be interested in the Royal United Services Institute video in which an individual called “Mr Crooked Crook Crook” bowled up to Companies House to register his business and was welcomed with open arms. RUSI being that worried about a dodgy crook trying to register their company with Companies House highlights, with some humour, the issue that we face.

Even the limited progress that the legislation offers is hampered by the fact that the Government are not sufficiently resourcing the UK bodies that are tasked with enforcing the changes. The report finds that only 0.042% of GDP is spent on funding national-level economic crime and enforcement bodies. As a result, money laundering prosecutions have dropped by 35% over the past five years. We have talked about the issue regularly in the House, yet the opposite seems to have occurred in terms of the number of successful money laundering prosecutions.

The existing budget for economic crime law enforcement is £400 million, with only £100 million of that coming from the Treasury. That appears to be entirely inadequate. The National Crime Agency, the Serious Fraud Office and other bodies urgently need more funding to row back years of inactivity in this area, protect legitimate business and safeguard our national security.

We must also do far more to oppose those who seek to use their wealth to avoid scrutiny, skirt the law and remain beyond the reach of those who enforce it. The non-governmental organisation Spotlight on Corruption highlights the fact that money laundering prosecutions have dropped by 35% over the past five years. The UK is by far the most frequent country of origin for SLAPPs, with 31% of cases originating in the UK.

The hon. Member for Isle of Wight mentioned the famous author Catherine Belton; I recommend that everybody goes and buys her book for Christmas. “Putin’s People” comes highly recommended by members of the Foreign Affairs Committee. It considers the connections between kleptocracy, the UK and Londongrad, and the serious action that needs to be taken. Unfortunately, the judicial system was used to bully her publisher, as the hon. Member said. That is something we need to stop. It is a waste of court time and we must tighten things up and not allow such disgraceful acts to occur.

Although Labour welcomes changes brought in through the statutory instrument debated in October, which introduced a cap on the damages that oligarchs can win through protracted legal showdowns, we must go further. These oligarchs are concerned with only one thing: retaining their ostentatious wealth of questionable origin. They are litigious and resourceful, many will circumvent any rule to keep what they have and, in many cases, the Government do not have the basics in place to oppose them. Even the former Foreign Secretary—and briefly Prime MinisterElizabeth Truss slammed the Government’s record as a “decade of drift” on Russia.

Labour maintains that, in expanding our regime against Russia, the Government have been taking time that the people of Ukraine simply do not have. We have been sounding the alarm for years and will continue to do so. Today’s Financial Times reports that the Russian economy has contracted by 4%. It is an interesting percentage because I think it is about the same amount as ours has contracted since 2016. It shows that this is a very slow process and we need to get a wriggle on and get a move on. The report clearly states:

“Last-minute changes to last-minute legislation” are not indicative of an effective or coherent policy, so we need to get moving. Labour will be very happy to hear of further amendments and statutory instruments that will push this further.

On 11 October 2022, the Government were asked in a parliamentary intervention what consideration had been given to sanctioning cryptocurrency mixers Tornado Cash and Blender. I do not expect the Minister to have the answer right now, but perhaps he could write to me with it and put a copy in the Library for members of the Foreign Affairs Committee to look at as well. Mixers such as these obfuscate the origins of transactions, making them virtually untraceable. Indeed, Tornado Cash has been used to launder more than $7 billion-worth of virtual currency since 2019. The US Treasury has sanctioned both; why have we not? Will the Government bring the UK into line with the US Treasury’s approach? Putin and his cronies are more than capable of exploiting such gaps in our regime, so why are we so slow and allowing this to persist?

Finally, I put on the record a question for the Minister. Will he assure us that the funding that has enabled an increase in full-time staffing numbers will not quietly be depleted following today’s announcements of tax increases for working people and a decrease in public spending? We desperately need excellent Treasury officials to keep on at this and must provide long-term funding for the critical units across both the FCDO and the Treasury. Prior to the war, some countries, such as the US, were well prepared to apply sanctions clearly and efficiently, but the UK was not. The Government have lagged behind and we must close the gaps in export bans to Russia regarding materials that have a potential for internal oppression. Some of that has now been dealt with by statutory instruments, but I would like to see a complete approach and not a colander effect that sees things slipping through.

I conclude by thanking the Select Committee for its challenging and crucial work on illicit finance. I look forward to further action in this regard and further statutory instruments, so that we can increase the pressure on the Kremlin to stop its vile activity in Ukraine.

Photo of Leo Docherty Leo Docherty Parliamentary Under-Secretary (Foreign, Commonwealth and Development Office) 2:39 pm, 17th November 2022

It is a pleasure to serve under your chairmanship, Mr Efford, and to respond to the debate on the Government’s behalf. I thank all Members for a constructive and useful debate.

I am grateful to my hon. Friend Bob Seely for leading the debate. I acknowledge his long-standing interest and expertise in this field. We are grateful to the members of the Foreign Affairs Committee for producing this extremely useful report. I hope the Government response shows that we regard it as a serious and useful piece of work, and that the overall tone of the response shows that we treat it as a grave matter that requires our urgent attention.

I was grateful for the contributions from Neil Coyle, my hon. Friend Mary Robinson, and the hon. Members for Strangford (Jim Shannon), for Stirling (Alyn Smith) and for Hornsey and Wood Green (Catherine West). I should say that this topic lies in the portfolio of my departmental colleague, the noble Lord Ahmad; I am pleased to respond today on his behalf. I will try to cover off as many of the questions raised as possible, while giving some assurance that the Government’s response treats the issue extremely gravely and seriously.

The hon. Member for Hornsey and Wood Green asked about our approach to tackling the use of cryptocurrencies. We recently introduced legislation to tackle their use when it comes to sanctions. I will write to her, or have the noble Lord Ahmad write to her, with an update on that statutory instrument, which sought to ensure that the application of sanctions keeps pace with the developments in financial markets, especially when it comes to the use of cryptocurrencies and platforms such as Blender.

A number of colleagues asked about the use of offshore shell companies to purchase property in London. We are tackling the use of offshore shell companies. We are reforming the role of Companies House and improving transparency over UK companies and properties in order to strengthen our business environment and support our national security, while delivering a more reliable companies register to underpin what is important business activity.

The reforms will bear down on the use of thousands of UK companies and other corporate structures as vehicles for facilitating international money laundering, corruption, terrorist financing and the illegal arms movement. The reforms will include the identity verification of people who manage or control companies and other UK-registered entities; greater powers for Companies House to query and challenge the information it receives; enhanced protection of personal information provided to Companies House to protect individuals from fraud and other harms; more effective investigation and enforcement powers for Companies House; and better cross-checking of data. Those are some of the reforms; that is not the entire list. We are aware of the issue and we are tightening up the relevant legislation.

A number of colleagues mentioned the use of SLAPPs and eloquently painted a picture of how they are hugely detrimental to the fabric of civil life. We are committed to protecting free speech and the rule of law in this country; they are cornerstones of our democracy. We are clear that SLAPPs are an abuse of the legal system. They involve the use of legal threats and litigation to silence journalists, campaigners and public bodies. That is deeply detrimental to a free and fair media and to the freedom of individuals. Addressing SLAPPs is a key part of the Government’s work to combat corruption and kleptocracy.

Colleagues will know that earlier this year the Government ran a call for evidence on SLAPPs reform. Our response, published on 20 July, outlined plans for a legislative definition of SLAPPs and an early dismissal process, supported by a formal cost-protection scheme to shield defendants and neutralise the chilling effect of high costs. I am sure colleagues will be reassured to hear that, and we will keep colleagues updated as the process develops.

A number of colleagues mentioned tier 1 investor visas, which they will know are now closed to new entrants. The Home Office lead on visas. We are currently finalising the historical review of the tier 1 provision. We expect the response to be published in the near future. We recognise the interest in the issue, and it is a complex piece of work. The Home Office is of course looking at how to operate a safe and sustainable approach while also attracting investment. We have to get the balance right, but we are clear that any future system must make sure that settlement must be earned and not bought, through applicants actively engaging in the UK economy and delivering job creation and other tangible economic benefits. I hope that information is useful.

Photo of Catherine West Catherine West Shadow Minister (Foreign and Commonwealth Affairs)

Is the Minister aware that just two weeks ago the Home Secretary mentioned in the House of Commons that a number of visas had been sold? She was referring to the change in policy, but I note the difference in the language that the Minister has used today. Will he clarify what the Home Secretary meant when she said that certain visas had been sold?

Photo of Leo Docherty Leo Docherty Parliamentary Under-Secretary (Foreign, Commonwealth and Development Office)

Although I am grateful for the invitation to speak for the Home Secretary, I am going to pass on that opportunity. The hon. Member might seek clarification from the Home Secretary herself.

We are proud that we have sanctioned more than 1,200 individuals and 120 entities since the start of Putin’s outrageous invasion of Ukraine. That includes sanctioning Russia’s major banks, as well as more than 120 oligarchs with a combined net worth of more than £140 billion. This was made possible due to cross-Government planning months before the Russian invasion. Our planning proved pivotal to the swift designation of individuals and the introduction of new measures within days of the invasion. The legislation enabled the Foreign Secretary to sanction more individuals and entities at a greater pace.

We are taking robust action across Government, and with our international partners, to ensure that sanctions are effectively enforced. That is done through the Russian elites, proxies and oligarchs taskforce, which brings together international partners to ensure the effective enforcement of financial sanctions implemented against Kremlin-linked elites and entities.

Photo of Neil Coyle Neil Coyle Labour, Bermondsey and Old Southwark

Ten of the people sanctioned by the Government are Russian nationals who were recipients of tier 1 visas. Does the Minister have any sense of shame at the level of misuse of that system? When will the review of the 6,000 people who took tier 1 visas but were under investigation for being a national security risk conclude? He has not given us any information on that.

Photo of Leo Docherty Leo Docherty Parliamentary Under-Secretary (Foreign, Commonwealth and Development Office)

I repeat that the review will be published in due course. We recognise that there has been a problem, which is why it is under review. It will come forward in good time, I hope.

Let me turn to the resources committed to sanctions. As noted in the Government’s response to the report, we agree that the skillset of staff focused on sanctions has been central to our success in bringing those sanctions to bear. In recognition of the central role that sanctions continue to play as a key part of UK foreign policy, our Department has established a permanent sanctions directorate, in line with one of the report’s recommendations. As part of this new directorate, our Department has established a cadre of sanctions experts to build the enduring expertise that we need in the long term.

Additionally, I can confirm that the Office of Financial Sanctions Implementation will have more than 100 staff by the end of this financial year, with current staffing having already more than double compared to last year. That will enable the OFSI to continue to lead the implementation of UK sanctions and ensure that assets in the UK are frozen.

On our approach to asset freezes as opposed to seizures, and getting that balance right—many colleagues have mentioned this and it has come up on the Floor of the House—we are exploring further options to finance the reconstruction of Ukraine using Russian-linked assets. That presents complex legal and policy challenges that officials are considering in detail with other Departments. We are looking at it seriously because we recognise that the scale of assets currently frozen is very significant. I am sure we would all be pleased if there was a route through good legal policy to ensure that that money could be used to make a positive difference.

On overall funding, combatting illicit finance requires the necessary resources to enforce our anti-money laundering laws and bring kleptocrats to justice, which is why the Government have developed a sustainable funding model that demonstrates our commitment to tackling economic crime. We are investing in the National Crime Agency and have increased its budget year on year since 2019. Since February, we have also created a new unit in the NCA, the combating kleptocracy cell, which is focused on targeting corrupt elites and their wealth in the UK. The combination of last year’s spending review settlement and private sector contributions through the new economic crime levy will provide funding of £400 million over the spending review period. That includes £63 million for Companies House to implement its transformation programme, which I already mentioned.

On the speed and scale of our response, we have taken robust action over the past decade. We published a landmark economic crime plan in 2019; we increased the number of investigations into corrupt elites; we established the National Economic Crime Centre; we passed the Criminal Finances Act 2017; and we became the first major economy in the world to implement a public register of beneficial ownership of domestic companies.

Earlier this year, the Government took swift action by passing the expedited Economic Crime (Transparency and Enforcement) Act 2022. The Act is already helping us to crack down on dirty Russian money in the UK. The Economic Crime and Corporate Transparency Bill, which builds on that Act, is currently in Committee. The Bill will help us to bear down on kleptocrats, criminals and terrorists who abuse our open economy, thus strengthening the UK’s reputation as a place where legitimate business can thrive while driving dirty money out of the UK.

A number of colleagues, particularly the hon. Member for Stirling, mentioned the role of Crown dependencies and overseas territories. Of course, all Crown dependencies and overseas territories with financial centres are committed to meeting international standards on illicit finance, tax transparency and anti-money laundering, including those set by the OECD and the Financial Action Task Force. All Crown dependencies and inhabited overseas territories have committed to introducing publicly accessible registers of company beneficial ownership. That is a major shift that puts them ahead of most jurisdictions.

I am pleased that significant progress has been made by several of the jurisdictions, including Gibraltar, which I visited recently. Gibraltar’s register is already operational. The Cayman Islands is working at pace and is completing a consultation on the details of its register. The British Virgin Islands also recently passed legislation that will enable the framework for regulations to be made for a register, in preparation for 2023. Smaller overseas territories, such as Montserrat and Anguilla, are working with the FCDO to update their systems to enable public access. We have funded Open Ownership, a specialist NGO, to provide technical assistance to each overseas territory.

I reiterate our gratitude to the Foreign Affairs Committee for its detailed and useful report. We hope that the Government’s response will assure colleagues that we are gripping the issue at the policy and technical levels. We also hope that it sends the message that London and the UK are no place for dirty Russian money and that our legal framework and institutional strength will deter anyone who thinks that is not true. I also hope it will provide reassurance to our friends and allies, especially Ukraine. We are determined to ensure that we are able to help Ukraine to rebuild its country and defend its sovereignty against outrageous Russian aggression, which all too often has been connected to Kremlin-linked international assets. I hope the Government’s response reassures people that we are getting after it.

Photo of Bob Seely Bob Seely Conservative, Isle of Wight 2:53 pm, 17th November 2022

I thank everyone for taking part in the debate and I thank you, Mr Efford, for chairing.

Question put and agreed to.

Resolved,

That this House
has considered the Second Report of the Foreign Affairs Committee, The cost of complacency: illicit finance and the war in Ukraine, HC 168, and the Government response, HC 688.

Sitting suspended.