Tuesday 25th October 2016
(7 years, 6 months ago)
Commons ChamberCriminal Finances Act 2017 View all Criminal Finances Act 2017 Debates Read Hansard Text
The Minister for Security (Mr Ben Wallace)
I beg to move, That the Bill be now read a Second time.
First, may I, through you, Madam Deputy Speaker, apologise to the House on behalf of my right hon. Friend the Home Secretary, as she is unavoidably detained on departmental business pertaining to national security and has therefore asked me to open this debate?
Both terrorism and serious and organised crime pose a real and present threat to the UK. Those involved in terrorist activities endanger our domestic security and overseas interests. Terrorism may be the greatest threat we face, but serious criminality arguably causes the greatest harm, costing the UK at least £24 billion annually, causing loss of life, and depriving people of their security and prosperity. Right hon. and hon. Members must not doubt the scale of this problem, as it damages our economy and our communities. It also has impacts on real people, whether we are talking about a grandparent being scammed out of their life savings; the trade of weapons that enable the type of marauding firearms attacks we have seen in Paris; the smuggling of illegal drugs that blight our high streets and local neighbourhoods; or the organised trafficking of young women and children.
Those crimes have a corrosive impact on the most vulnerable in society—they ruin the lives of real people—but this is part of a truly global issue. As David Cameron has said, international corruption is
“one of the greatest enemies of progress in our time”
and the
“cancer at the heart of so many of the world’s problems”.
Financial profit is at the heart of almost all forms of serious and organised crime. The UK drugs trade alone is estimated to generate £4 billion of revenue, and Her Majesty’s Revenue and Customs estimates that more than £10 billion was lost to tax evasion and criminal attacks against the tax system in 2014-15 alone.
Gavin Robinson (Belfast East) (DUP)
I agree entirely with that comment from the former Prime Minister and with the thrust of the Bill. One great concern of Christian Aid is that the Bill does not extend to or legislate for the Crown dependencies or overseas territories. Will the Minister respond to that at this early stage?
Mr Wallace
I thank the hon. Gentleman for that point. The Bill does extend some of the offences and powers it contains to cover an extra-territorial extent, which will go a considerable way to getting to the bottom of money laundering, whether that be carried out here or elsewhere around the world. It also goes some way to dealing with people who evade tax overseas. Just because they are not evading our tax but are robbing another country, it does not mean that we would not still like to take action against those individuals. The Bill goes some way on that.
Mr Wallace
I will make some progress and Members will doubtless be able to make their points throughout the debate.
Many of the criminals who profit from such activities live in plain sight, untouched by law enforcement agencies. They reap the benefits by money laundering—moving, hiding and using the proceeds of their crimes to fund their lifestyles and enable further criminality. It is estimated that the annual amount of money laundered globally amounts to $1.6 trillion, while the National Crime Agency assesses that many billions of pounds are laundered into or through the UK as a result of international corruption.
We should be rightly proud of the UK’s status as a global financial centre. This is one of the best places in the world in which to do business, but we must recognise that the size of our financial sector and open economy and the attractiveness of the London property market to overseas investors make this country unusually exposed to the risks of international money laundering. That is why this Government are taking action—to combat money laundering, terrorist finance and corruption—here and overseas. We are sending a clear message that we will not stand for money laundering or the funding of terrorism through the UK.
Dame Margaret Hodge (Barking) (Lab)
I am extremely grateful to the Minister for giving way. I agree with the content of his remarks, but I wish to pursue further the issue that has been raised by the hon. Member for Belfast East (Gavin Robinson). Does the Minister agree that transparency is absolutely key to trying to tackle some of the corruption and money laundering that take place? If he does agree, why is he not using this Bill to ensure that the overseas territories and Crown dependencies, which come under our jurisdiction, publish publicly available registers of beneficial ownership?
Mr Wallace
Yes, I absolutely agree that transparency is one of the steps along the path of tackling both corruption and money laundering. That is why, at the anti-corruption summit in May, the Prime Minister basically reaffirmed that commitment. Even before that, we had worked with the overseas territories and Crown dependencies to ensure that, hopefully by the end of this year or into next year, there will be transparency, registers, of which a considerable number will be public, and automatic information exchange between our tax authorities and those of our dependencies. In that way, we will be able to have access to information about people hiding tax from us, and our law enforcement agencies will then be able to set about tackling the matter.
This Bill is part of that process. A key element of that approach will be ensuring that we work with the private sector to make the UK a more hostile place for those seeking to move, hide or use the proceeds of crime.
Liz Saville Roberts (Dwyfor Meirionnydd) (PC)
Prosecuting corporations for failing to prevent economic crimes was expected to be a core part of this legislation as it appeared during the consultation phase. It seems that, despite Government indications that they would include provisions to hold to account corporations that let their staff facilitate tax evasion and other economic crimes, those provisions are not part of the Bill. Will the Minister explain why he has chosen not to include such eminently sensible precautions?
Mr Wallace
Yes, but I will come to that part of the Bill later on. It is certainly our intention to prosecute those corporations, or the corporate body, that allow their companies to facilitate tax evasion. Under the current system, an individual can be prosecuted for evading tax, and someone within a company can be prosecuted if they facilitate that evasion. At the moment, it is very, very hard to prosecute the corporate body. We are intending to make that change in our Bill. If the hon. Lady reads the Bill, she will see how we will do that. We will go after not only the corporate body here in the UK, but overseas companies. Being an overseas company will not be an excuse, and we will go after them in the same extra-territorial way that we do with the Bribery Act 2010.
Keith Vaz (Leicester East) (Lab)
I congratulate the Minister on his appointment to the Home Office.
In evidence to Parliament earlier this year, the private sector made it very clear that it is trying to co-operate with the Government. There were 381,000 suspicious activity reports made under the ELMER system, only 20,000 of which could be looked into. What support is he giving the National Crime Agency to allow it to have a better system to deal with those reports?
Mr Wallace
I am grateful to the right hon. Gentleman for his intervention and for his kind comments about my appointment.
First, we will remove those barriers to information sharing. Often some of the regulators or the bodies that we deal with say that they would like to pass on more to us, but feel that they are not protected from sharing wider information. We will remove those barriers so that the National Crime Agency can see the full chain of a financial instruction. We will also empower the NCA with a stronger disclosure order so that it can force people—it can go and apply for an order—to release documentation or to comply with questions about a particular transaction. Such an order currently exists in the Proceeds of Crime Act 2002, but it only covers fraud. We will now do the same for money laundering. We will also extend the time limit for a suspicious activity report. At the moment, there is a one-off extension of up to 31 days, but we would like to see that extended to six months, which means that the NCA will have much longer for its investigations.
Keith Vaz
I thank the Minister for his very full answer, but the real problem is that the system is old. The ELMER system needs to be replaced and renewed. Will he give the National Crime Agency the additional resources to pay for the new system to do all the things that he is suggesting? Without a new system, 20,000 simply does not go into 381,000.
Mr Wallace
The right hon. Gentleman is absolutely right that 381,000 referrals is a hefty amount to get through. First, we need to ensure that there is time to get through them. Secondly, what we do not want is what has happened in the past, which is that the private sector makes a suspicious activity report by default. If we can remove those excuses about why it cannot get to the bottom of a transaction before it passes it on, that will ensure that it passes on proper suspicious activities, rather than the ones that it can satisfy itself are not such a problem. In that way, we can cut out some of the referrals that are unnecessarily done.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
I thank the Minister for giving way. He is being exceptionally generous.
Does that example not actually illustrate exactly what prosecutors are up against here and the complexity of these cases? Compulsion for transparency will be necessary, as it will put prosecutors on the front foot. Will he look at this matter again—it has already been raised by a number of Members—as the Bill progresses?
Mr Wallace
Yes, I can assure the right hon. Gentleman that that will happen throughout the passage of the Bill and even after. This is part of a longer process. We will make sure that, where we cannot get hold of the information that we need, we will prosecute people who are deliberately trying to evade tax, and also prosecute people who are trying to launder money. That is part of the process. Many of these powers, including the unexplained wealth orders, give us the benefit of the doubt and put it on to us to say, “Actually, we think you’re linked to serious organised crime, or we can show you are. Explain to us where your money is from.” At the very least, that will get over some of those hurdles about not being able to get to the bottom of the information in that process. That is one of the steps that we will take and that I hope the right hon. Gentleman will support as the Bill goes through.
Charlie Elphicke (Dover) (Con)
I welcome my hon. Friend to his place as Security Minister. His appointment is much deserved.
May I ask him about seizure and forfeiture powers? Previous legislation in this area has not been entirely successful in ensuring that the assets of criminals are seized. Can the Minister explain to the House why the provisions in this Bill will make a difference? We want to ensure that we grab the money off the criminals so that they cannot carry on with their illegal enterprises.
Mr Wallace
My hon. Friend is right that, in the past, it has been a challenge. Crafty hoods have been very good at taking their money out of cash and putting it into a range of moveable valuables, such as fast cars, paintings, jewels, or even betting slips, which I know the Scottish Government are quite keen for us to consider. We need to broaden it out and ensure that when they are crafty, we are crafty as well.
This Government have already done more than any other to tackle money laundering and terrorist financing. More assets have been recovered from criminals than ever before, with a record £255 million recovered in 2015-16, and hundreds of millions of pounds more frozen and put beyond the reach of criminals. We set up the Panama papers taskforce to ensure an effective, joined-up approach to those revelations. The London anti-corruption summit in May built capacity with overseas partners.
It is important to note that we are already doing this. In November 2015, the UK returned £28 million to Macau, which were the proceeds of corruption laundered in the UK. That is a concrete example of our giving back money to those countries that have been robbed by crooks who have used Britain to launder the money or to make the money in its jurisdiction. I want to see more of that and to see it go further.
There was a need for legislation and a need to build on the process of the anti-corruption summit and to find out where we were still vulnerable. In October 2015, the Government published the “National risk assessment for money laundering and terrorist financing”, identifying a number of areas where these regimes could be strengthened. Our response to that assessment was the action plan for anti-money laundering and counter-terrorist finance, which was published in April 2016. It represents one of the most significant changes to our anti-money laundering and terrorist finance regime in more than a decade.
The Bill will give effect to key elements of that action plan. It will significantly enhance the capability of UK law enforcement to tackle money laundering and to recover the proceeds of crime. It will strengthen the relationship between public and private sectors and combat the financing of terrorism.
Part 1 contains a number of measures that will amend the Proceeds of Crime Act 2002, including the creation of unexplained wealth orders. There are criminals who declare themselves almost penniless, yet control millions of pounds. Law enforcement agencies may suspect that assets are the proceeds of international corruption, but they are unable to freeze or recover them, often because they cannot rely on full co-operation with other jurisdictions to obtain evidence. A court will be able to make an unexplained wealth order to require an individual or organisation suspected of association with serious criminality to explain the origin of assets, where they appear to be disproportionate to their known income. If that person does not respond, this may enable the property to be recovered under existing civil recovery powers.
Part 1 chapter 1 will extend the use of disclosure orders, which allow a law enforcement officer to require someone who has relevant information to answer questions as part of an investigation. Those orders are already in use for civil recovery and confiscation investigations. They will now be available for money laundering cases.
Chapter 2 will enhance the process by which private sector companies report suspected money laundering—the suspicious activity reports, or SARs, regime. Where a company in the regulated sector, such as a bank, accountancy or legal firm, suspects that it may commit a money laundering offence, it is obliged to submit a SAR to the National Crime Agency, seeking consent to proceed. At present, there are occasions where these SARs are incomplete and where further information is needed to inform the NCA’s decision. The Bill will give law enforcement agencies more time to investigate those suspicious transactions that require consent and the NCA extra powers to request further information from companies to help to pursue those investigations and conduct wider analysis.
The Bill will provide a gateway for the sharing of information between regulated companies—subject to appropriate oversight—to help to build a broader intelligence picture of suspected money laundering. This has been piloted through a programme known as the joint money laundering intelligence taskforce. In the 12 months from February 2015, the taskforce led directly to 11 arrests, the restraint of more than £500,000 and the identification of 1,700 bank accounts linked to suspected criminal activity. We want to build on the success of that work, by providing the clearest possible legal certainty that companies can share information for the purposes of preventing and detecting serious crime.
Part 1 chapter 3 will improve the ability of law enforcement agencies to recover the proceeds of crime. Existing legislation contains civil powers to confiscate cash, but criminals hold proceeds in other forms, as I said earlier, and we must adapt. The types of asset covered by the power are listed in the Bill, so that Parliament can properly scrutinise its potential use. We continue to consult operational partners on their requirements, and I expect that we will introduce a Government amendment to extend the list to include gambling slips and tokens, which are often used by organised criminals to launder their ill-gotten cash. I hope that such an amendment will attract cross-party support.
The rest of part 1 will extend existing POCA powers to a number of other organisations, including the Serious Fraud Office, Her Majesty’s Revenue and Customs and the Financial Conduct Authority. It will make a range of minor and technical amendments to POCA.
The first duty of any Government is to keep their citizens safe. The terrorist threat is real and is growing. If we are to combat that threat, we must cut off the funding streams that enable terrorist-related activity. The 2015 national risk assessment identified two key weaknesses in this area: the raising and moving of terrorist funds through vulnerabilities in the financial sector, including money service businesses and cash couriering; and the abuse of the charitable sector for terrorist purposes. To combat these issues, part 2 will make complementary changes to powers for terrorist finance cases, by mirroring many of the provisions in the Bill, such as those on SARs, disclosure orders and seizure and confiscation powers, so that they are also available for investigations into offences under the Terrorism Act 2000.
Part 3 will deliver on the Conservative manifesto commitment to make
“it a crime if companies fail to put in place measures to stop economic crime, such as tax evasion”.
At present, if an individual evades tax and that is criminally facilitated by those working for a company, the individual taxpayer will have committed a crime and those individuals facilitating it could also be prosecuted, but it is very difficult and often impossible to hold the corporate entity to account. That needs to change. That is why we are creating two new offences of corporate failure to prevent the criminal facilitation of tax evasion—one in relation to UK taxes; another in relation to taxes owed to other countries.
Tax evasion is wrong. It is a crime. It cannot be right that a business operating in the UK can escape criminal liability simply because a tax loss is suffered by another country rather than the UK. The new offence in relation to foreign taxes will be of particular benefit in tackling corporate facilitation of corruption in developing countries. HMRC has conducted two public consultations on these offences, including engagement with the private sector—banks, accountants and legal practices—and everyone is clear of the need to take responsibility for ensuring the highest possible standards of compliance in this area.
As I have said, tax evasion and corruption in the developing world are key contributors to global poverty. Those crimes are frequently facilitated by companies in other jurisdictions. We cannot abdicate our responsibility and leave solving this problem to other countries. The UK’s financial sector should lead on the disruption of tax evasion, money laundering and corruption. This measure will help to do just that.
The Government are committed to reducing the regulatory burden on business, which can make it harder for companies to focus on real risks. The measures in the Bill were developed in close partnership with law enforcement agencies and the regulated sector, including major financial institutions, as well as other key representatives.
Robert Jenrick (Newark) (Con)
Although I support the Bill, does the Minister agree that there is no point in legislating if the agencies tasked with enforcing the legislation simply do not have the resources to do so? For example, since the creation of the Office of Financial Sanctions Implementation, as far as I am aware from talking to lawyers who work on white-collar crime practices, there has been no enforcement whatever. All of us who want to support the Bill would like to hear reassurance that there will be the resources to match the good intent.
Mr Wallace
I am grateful to my hon. Friend for his intervention. In the past few months, I have visited regional organised crime units up and down the country, including in his region, and the NCA, and they all say that their barrier to getting further with some of these problems is not the resource issue; they all say that their barrier has been the ability to find the cash, see the cash and seize it. Those three things are incredibly important. We can put all the resources in the world into our law enforcement agencies, but if they do not have the powers to take back some of the stolen assets, it will not make a difference.
The thing that struck me coming into this job only a few months ago, although I thought I knew a bit about terrorism from my previous life, and what has absolutely shocked me is the weight and strength of organised crime across the United Kingdom. To see its depth, how it affects my community in the north-west and how close it comes to us all really takes my breath away. I am absolutely determined not only that the guys and girls at the top, the Mr Bigs, get sent to jail for as long as possible, but that those people who consider themselves a little removed from it—the facilitators, the white-collar smoothies who launder the money into property and so on—also face their time in court, because they are the people who contribute to the message that there is a permissive society and that it is okay to be associated with crime. They are the people who help the nasties to put a gloss on themselves.
That is what I am determined to do with the Bill. All Members should rest assured that I will use the Bill to try to build momentum in non-legislative areas—in the non-regulated sector. I want to ask the regulators of estate agents and accountants what they are doing to play their part. If we can change the powers here, if their members get into trouble, what are they going to do to hold their members to account? Legislation is only one part of this. I hope that everyone supports the Bill and that the message goes out that there is more to do and that we will make sure that those people who facilitate and think that they live on the edge of the crime know that we are coming after them.
Charlie Elphicke
I thank my hon. Friend for giving way again; he is being incredibly generous. As he says, this is a question not just of laws but of the culture of the organisations. The NCA’s predecessor organisations all seemed to be more culturally bureaucratic. The NCA seems to be more intelligence-led. It seems to have more officials at the top who were intelligence operators in past times. From everything that I have seen, the NCA is far more vigorous at chasing down the intelligence, which is what it really needs to do.
Mr Wallace
There are several parts to this. The NCA has absolutely got the bit between its teeth, and I see a professional organisation up and down the country determined to tackle the threat that we face. I compliment police forces throughout the country that have put away the old-fashioned territorial boundaries that organised crime often exploited and have been determined to work together. When we visit Police Scotland and regional organised crime units in the north-west and all the other regions, we see police forces all sitting around the same table, working together for their own ends, led by intelligence, deciding on their priorities, sharing capabilities and knuckling down and getting on with it, rather than just focusing on their small areas. The NCA and regional organised crime units have provided the impetus on this, and the results will speak for themselves. I can assure the House that each of the Bill’s provisions will be subject to a set of stringent safeguards and robust oversight, so that they can be used only where it is necessary and proportionate to do so.
We considered carefully the responses to the public consultation on options for legislative proposals to implement the action plan. We published the Government response alongside the Bill earlier this month. I am grateful to everyone who responded to that consultation. There will inevitably be some additional pieces of statutory guidance to underpin the measures in the Bill. We will seek, wherever possible, to make that available to Parliament during the passage of the Bill, to ensure the widest possible consultation on how it will work in practice.
The Bill is only one part of a wider package of measures, as I have said, aimed at strengthening the Government’s response to money laundering and increasing the amount of criminal assets confiscated by the state. Our wider programme includes improving the effectiveness of the supervisory regime for the regulated sector; reforming the SARs regime, including investment in systems and processes; and further increasing our international reach, working with other Governments, overseas territories, Crown dependencies and international organisations to crack down on money laundering, tax evasion and corruption. We must ensure that the Bill and those other projects have the greatest possible impact on money laundering and terrorist finance in this country and abroad.
I welcome the hon. Member for Hackney North and Stoke Newington (Ms Abbott) to her post as shadow Home Secretary, and I am pleased that she has been able to meet me since her appointment to discuss this Bill. I would be delighted to continue to meet her and her team during the passage of the Bill to make sure that we get it right. Hopefully, we can work to ensure that the whole House agrees to support the Bill to send a message to the crooks, criminals and facilitators that we will not tolerate this any more. I hope that the hon. Lady, her colleagues and Members from the Scottish National party agree that it is in the public interest that the Bill be enacted at the earliest opportunity, hopefully with clear cross-party support.
I also congratulate the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper) on her recent election as Chair of the Select Committee on Home Affairs. I am afraid that she is not in the Chamber, but she has a wealth of experience in home affairs, and I look forward to discussing these issues with her and the Select Committee.
The Government are committed to protecting the security and prosperity of our citizens, and the integrity of our world-leading financial system. We must ensure that we can pursue vigorously those who abuse that for illicit means. That is what the Bill will do, and I commend it to the House.
Richard Arkless
I have a great deal of sympathy with both of the right hon. and learned Gentleman’s points. I suggest, however, that the first one is rather a half-house measure that does not go far enough. It will not pin criminal liability on the banks. On the second point about vicarious liability, it is interesting to note that the United States is often considered as the free market monster of the entire world, yet the US feels comfortable with criminalising banks for the actions of their rogue employees. I suggest that we should do the same in the UK.
Mr Wallace
It is a joy as a non-lawyer to be skewered between two barristers in this place, but may I point out to the hon. Gentleman that one reason why the Bill imposes an unlimited fine for a conviction of corporate facilitating of tax evasion is that we believe it will change behaviour. It is one thing to fine a company for a capped fee, but we need to change the attitude not only of the bosses but of the shareholders—and massive fines make a difference. If that is coupled with our provision to increase the powers of the Financial Conduct Authority, we hope that both will help to change behaviour.
Richard Arkless
I agree with the Minister, but my point is that under the Bill, corporate economic crime extends only to tax evasion and not beyond it. Within the four corners of the Bill, there is relatively little to disagree with, but it does not go beyond tax evasion, which I think is a huge omission.
SNP Members can support other parts of the Bill without much hesitation—for example, the expansion of the suspicious activity reports regime, information sharing disclosure orders and combating terrorism. We support all those measures in principle. Notwithstanding our in principle support, we do not think it goes far enough, as I have said.
I shall shortly go through some of the issues that we think are missing from the Bill. Before I do so, however, I wish to make a small point about the time we have had to consider this Bill and its contents. We do not agree that the Scottish Government were given adequate time to scrutinise them. The Bill has been instructed and drafted with high speed, admirable though that may be, but with limited consultation. Only in the last fortnight were we shown draft clauses that related to unexplained wealth orders and mobile items of value—and even then, they were tagged “in confidence”. That said, we welcome the move to extend to Scotland the powers for wealth orders and disclosure orders, as requested by the Scottish Government.
For these reasons, the Scottish Government have not had the chance—and neither have I—to consider the Bill in sufficient detail, to consult Scottish stakeholders properly or to provide the Minister and the Government with some detailed advice. The Scottish Government will do so in due course. In addition, we are already aware of concerns among some Scottish stakeholders, particularly the civil recovery unit, that their advice has not been fully listened to and acted upon by the Home Office, and that the current approach adopted in the draft seizure and forfeiture powers provisions may not be the most effective available. I would encourage the Minister to continue his dialogue with the Scottish Government. He demonstrated yesterday evening that that is ongoing, for which I thank him.
So what is missing? It remains the case for us that the most notable aspect of the Bill is what is not in it. The headline objective of the Tory manifesto in this context was to deal with tax evasion, but, as has already been pointed out, the Bill makes absolutely no mention of the United Kingdom overseas territories and Crown dependencies. Given the aforementioned statement of intent in the Tory manifesto and the problems highlighted by the Panama papers—and the public reaction to the Panama papers—that omission seems very odd and very peculiar indeed.
Dame Margaret Hodge
Indeed. I would also add that the Brexit provisions might also lead to increased activity through the overseas territories and tax havens, so there are several dangers.
A number of Members have mentioned the evidence that backs up the importance of the Bill, but I want to point out two or three facts that have not yet been raised. The World Bank reviewed 213 corruption cases from a 30-year period between 1980 and 2010. Shell entities were involved in 70% of them, and UK Crown dependencies and overseas territories were second after the US on the list of those who provided shell entities. That is clear evidence of the importance of the role played by the Crown dependencies and overseas territories. Do we always have to wait for another leak to understand that? We will keep on getting them—the Mossack Fonseca leaks and the Panama papers will be just one in a stream. If we look at the information we garnered from the leaks, over 200,000 corporate entities were exposed, more than half of which were registered in the British Virgin Islands. I ask the Minister to consider that.
I also came across the African Progress Panel, which found that citizens of the Democratic Republic of the Congo were deprived of some £1.35 billion—twice their health and education budgets combined—due to the sale of mining contracts to five anonymous BVI companies. Those assets were sold at about one sixth of their commercial value, enabling the secretive offshore companies to sell them on and secure profits of more than 500% of the original moneys they paid. Again, desperately needed resources were lost to the poorest countries in the world.
If we are really to tackle the corruption, evasion and avoidance that occur in jurisdictions over which we have ultimate control, we must have the transparency that a number of Members have asked for this afternoon.
Mr Wallace
I have listened carefully to what the right hon. Lady said. Will she not concede that since the lead-up to the London anti-corruption summit in May, the Crown dependencies and overseas territories have agreed to establish a central register of beneficial ownership and a data-sharing system with the UK enforcement agencies that will give us access to those data almost in real time, and that that goes a long way to meeting some of her concerns? I recognise that the Scottish National party would like this to be public as well as shared with our law enforcement agencies, but it still goes some way on this issue. On the other side, the unexplained wealth orders for politically exposed persons will allow us to grab the money should they put it in this country and live in the nice houses that they sometimes seem to live in.
Dame Margaret Hodge
In my view, and indeed the British Government’s view, publicising those registers of ownership is crucial. We decided to do that for ourselves, so why are we not using our powers to enforce it on the Crown dependencies and overseas territories? There are multiple reasons why we have decided to do it for ourselves, and I shall mention two of them. First, for many of the poorer countries, getting their agencies up to speed so that they can pursue people and know what questions to ask is tough, and public registers make it much easier for those people to be interrogated. Civil society should interrogate them, and the registers make it much more likely that the type of activity that I mentioned in the DRC is revealed.
Secondly, we are talking about a very reactive response; if a register can be interrogated only by the international agencies that are allowed to have access, people will have to know that there is something they are after before being able to discover whether or not there is information about beneficial ownership that is relevant to a criminal activity or to aggressive tax avoidance and so on. Such an approach presupposes a degree of intensive resources and knowledge that will not necessarily be in place. Although one of course welcomes the creation of these registers, having them made public is central to making them work.
The Minister should listen not to my words on this, but to those of the former Prime Minister, who was absolutely clear, year on year, when talking about these issues, that the openness and transparency of these registers was what mattered. In 2013, he said to the Crown dependencies and overseas territories that they had to rip aside the “cloak of secrecy” by creating a public register of beneficial ownership. In April 2014, he wrote to the overseas territories, saying that
“beneficial ownership and public access to a central register is key to improving the transparency of company ownership and vital to meeting the urgent challenges of illicit finance and tax evasion.”
He also expressed his hope that overseas territories would follow suit to
“consult on a public registry and look closely at what we are doing in the UK.”
On a trip to the Caribbean in September 2015, he said:
“Some of the British Crown Dependencies and Overseas Territories are making progress in this direction. And others, frankly, are not moving anywhere near fast enough. I say to them all today, including those in this region”—
the Caribbean—
“if we want to break the business model of stealing money and hiding it in places where it can’t be seen: transparency is the answer.”
When we established our own public register here in the UK, David Cameron said that
“there are also many wider benefits to making this information available to everyone. It’s better for businesses here, who’ll be better able to identify who really owns the companies they’re trading with. It’s better for developing countries, who’ll have easy access to all this data without having to submit endless requests for each line of inquiry. And it’s better for us all to have an open system which everyone has access to, because the more eyes that look at this information the more accurate it will be.”
I simply say to the Minister that I really do agree, in this instance, with the former Prime Minister and I hope the current Government will listen carefully to his wise words.
Dame Margaret Hodge
I, too, have seen that survey. Any action that the Minister takes will be warmly welcomed by the public across the whole of the United Kingdom—by people of all ages and all genders. This is a really important bit of work, and I hope that the Minister will take it seriously.
I am concerned about the action taken so far. I am concerned that in December 2015 when we had the Overseas Territories Joint Ministerial Council, the Government failed to persuade those territories to implement public registers. I am concerned that, in March 2015, the Cayman Islands and the British Virgin Islands refused to meet Ministers from the Foreign Office and the Treasury. I am concerned that they failed to meet the Financial Secretary’s request that they adopt registers by November 2015. I am concerned that—as I understand it—they have ignored letters from UK Ministers. I am deeply concerned that tax is not even on the agenda for the forthcoming meeting of the Overseas Territories Joint Ministerial Council. I hope that the Minister can address that point. We do have the powers, and, as was mentioned in a previous intervention, we have used them before. The Government must act.
If the Minister could at least tell us that he will set a timeline, at the end of which, if matters cannot be resolved in a collective and collaborative way with the overseas territories and the Crown dependencies, the Government will use their power. That would go a long way to settling some of our concerns today. I hope that he can at least consider that as a possibility for taking the matter forward.
May I briefly comment on some of the other provisions in what is a warmly welcomed bit of legislation? On the unexplained wealth orders, it is particularly welcome that they will be applicable no matter where in the world the offence takes place. May I ask the Minister two questions? If the money comes from an overseas territory —a developing country, for example—will there be a notification to that country of the setting of an unexplained wealth order? Again, our enforcement agencies will be more capable than some others in pursuing laundered money.
Mr Wallace
I can get an exact answer to the right hon. Lady’s question. Just around that, though, we have started to sign memorandums of understanding with a number of countries—we signed one in August with Nigeria—to help them recover their assets, without barriers between here and there, and to assist them, both in their country and here, with tackling crime. Once they find their assets, we will get them back to them as soon as we can.
Dame Margaret Hodge
I am grateful to the Minister for providing that information. Will he explain why the orders do not apply to politically exposed people inside the European economic area? Will he look again at that issue, because there may occasionally be a relevant instance where that is important?
Mr Wallace
That is quite straightforward. We are unable under EU law to discriminate against different members of the EEA in relation to the UK citizen. What we do for the UK citizen we also have to do for other members of the EU.
Dame Margaret Hodge
I wish to raise two other issues. One arises from a debate held in the House on March 2012, initiated by the hon. Member for Esher and Walton (Mr Raab), on what is known as the Magnitsky-style amendment. The argument there arose from the horrific and brutal killing of Sergei Magnitsky—a Russian lawyer who was tortured and murdered because he uncovered a huge $230 million tax fraud in Russia. Allegedly, $30 million of that found its way laundered into the UK, according to evidence given to the Home Affairs Committee.
The hon. Gentleman proposed something similar to an amendment enacted in America—he and I would support such an amendment during the proceedings on the Bill—that would have ensured that foreign individuals involved in corruption and human rights abuses had their assets frozen, be denied right of entry to this country and be publicly named and shamed. Again, although that is slightly different to other provisions in the Bill, I think that there is strong cross-party support for introducing a Magnitsky-style amendment into UK legislation.
I hope that the Minister will look favourably on such an amendment. I have looked at the details, and a particularly disturbing aspect is how many UK banks were involved in laundering the alleged $30 million into the UK, according to evidence given to the Home Affairs Committee. They include Barclays, HSBC, NatWest, Bank of Scotland, RBS, Citibank, Bank of America, Lloyds TSB and the Bank of Tokyo. I hope that, from that horrific tragedy, we can introduce an important change in our legislation.
Finally, I want to talk about the corporate failure to prevent tax evasion, which other hon. Members have spoken about. I welcome the Bill as the first attempt to place responsibility for tax evasion not just on individuals but on corporations. However, this is a very small first step towards making those who are responsible for devising, advising and facilitating evasion and avoidance accountable for their actions.
Before we go over the top on saying what a great change the Bill represents, we should realise that it will apply only where a criminal offence has been successfully prosecuted against an individual or where an individual adviser has committed an offence when working for a corporation. It does not cover negligence by the corporation. It will not make the corporation responsible for the crimes of its staff. It does not cover aggressive tax avoidance. Unlike my Front-Bench colleague, I think that that is where the important bit of action must be taken if we are to ensure that we get the resources into coffers according to people’s wealth and their profits and incomes.
The Bill simply asks that reasonable procedures are in place, which is a risk-based and proportionate exercise, so it does not represent a fail-safe procedure. As I think through some of the instances we heard about during my time chairing the Public Accounts Committee, where we felt that corporations were misbehaving, I do not think that it would cover PricewaterhouseCoopers and all the stuff that it was doing in Luxembourg, where it was clearly selling schemes in an industrial way that had no other purpose than to avoid tax. We had a discussion earlier today about Heathrow. I do not think that it would cover Heathrow, which has managed to avoid paying a heck of a lot of tax on massive billion-pound profits that it has made. I do not think that it would cover Google. I do not think that it would cover—this is really important—the fact that when we interviewed advisers about the tax advice they give to corporations and individuals, they said that they would give advice so long as there was a 50% chance that it was not challenged by HMRC. The reverse of that is that there is a 50% chance that it will be challenged by HMRC, but given the size of the task and HMRC’s limited resources, it takes a long time to catch up with such schemes and does not have the resources that some of the big accountancy firms, advisers, banks and lawyers et al. have. That will be caught not by the first welcome but small measures that are being taken.
From all the work that we did in the PAC, the only thing that I can think would be caught is probably HSBC’s actions. The non-executive director, Rona Fairhead, gave evidence to us, sought to blame the whistleblower in that instance for being a thief—I thought that that was pretty awful—and blamed the front-line staff for doing what was obviously expected of them by the organisation for which they worked. She, as a non-executive director earning £500,000 a year at HSBC, felt that she did not have any responsibility to ensure corporate governance. The measure might catch that sort of instance, but it is very limited, and as we examine the Bill, I would welcome opportunities to extend that important first step in ensuring corporate liability as well as individual liability and accountability for actions that have been taken. I warmly welcome the Bill and I hope that the Minister can take the further steps that I have suggested.
Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)
Many people in the Chamber consider much of the Bill to be praiseworthy. It struck me that all the critical speeches this afternoon—spanning all parties represented by the Members who have spoken—have been about what is not in the Bill, rather than what is in it. I wondered who would put the Bill in the context of the challenge that we face, and I think the Minister did that best in his opening remarks. He said of the extent of the criminality that he discovered on becoming a Minister that
“it…takes my breath away.”
The extent to which the Bill will deal with such criminality does not quite take the breath away.
I would like to comment on three areas that have been mentioned, the first of which is the permissive culture of banks. The best critique of that culture has come not from me or from anybody who is currently in the Chamber, but from the right hon. and learned Member for Rushcliffe (Mr Clarke) on 24 May this year. When talking about this forthcoming Bill, he commented:
“we in this country are very bad at dealing with white-collar crime, and there is growing awareness of that. If someone wishes to rob a bank, they go to the LIBOR market; they do not put on a balaclava and pick up a shotgun—that is much less profitable.”
He very succinctly drew out the problem of how the culture in banks has created a context in which it is easier to commit grand crimes in them than it is for the old-fashioned external robber to do so. He went on:
“London is still the money-laundering capital of the world. For an African despot or a serious international criminal, London is the best place to put their money, because they can trust the bankers to look after it and not to steal it from them.”
He concluded:
“I hope we will also impose a duty on those at the head of the institutions involved to ensure that they take positive steps to stop those working for them encouraging such activities.”—[Official Report, 24 May 2016; Vol. 611, c. 450.]
I doubt whether anybody in this debate would disagree with the right hon. and learned Gentleman’s words in May, but I do not think that his optimism about the Bill is reflected by the reality of what we now face.
On banking, I suggest that the Minister look at two things. The right hon. Member for Barking, who is no longer in her place, gave the example of what happened in HSBC, where someone was willing to speak up but was then pilloried by senior management. One thing I would suggest to the Minister that needs doing is to strengthen protection for whistleblowing in the banking and financial sector. If we could find a mechanism to encourage people to speak up about criminality or bad practice, that in itself would be a useful measure. Many people have commented that the crisis in the banking sector in 2008 was not predominantly because of the details of regulation, but predominantly because of the culture at the top level. It was caused by group-think on the boards of banks, and by the over-confidence of individual chief executives who were immune to considering anything other than a dash for cash. The other thing I would suggest to the Minister is that it would be useful for a requirement for proper cultural analysis to be built into the banking sector.
The second area on which I want to comment has already been hinted at by my hon. Friends the Members for Dumfries and Galloway and for Aberdeen North (Kirsty Blackman), but no one else has talked about it in this debate thus far. It is the topic of Scottish limited partnerships. This may be new to some hon. Members, so I hope they will allow me to give a few examples. Scottish limited partnerships are not a new phenomenon. They are not a devolved matter; they are a matter for this House. Although they were created by Asquith in the Budget of 1907—even I do not remember it—from 2008 they began to be used much more extensively for criminal behaviour. Since 2008, the use of SLPs has risen by approximately 40% year on year.
Scottish limited partnerships have been at the heart of some of the major corruption scandals in the world. For example, they have been named in major corruption scandals involving the former Soviet Union, particularly Ukraine, where they are still openly marketed as off-the-peg zero-tax offshore companies. Elsewhere, one Scottish limited partnership is at the moment at the heart of a $1 billion digital bootlegging case in the United States. The International Monetary Fund has warned that the risk posed by SLPs to the fight against money laundering and organised crime is something to which attention needs to be given. Other Scottish limited partnerships are involved in pornographic and even in paedophilia websites. Indeed, the span of criminal activity through these financial vehicles seems to know absolutely no bounds.
Closer to home, The Herald newspaper, which has done extraordinary work in this area, revealed barely six days ago that the tax haven bank owned by Lord Ashcroft is being used, without his permission, as a base to set up dozens of firms utilising SLP loopholes linked to a known fraudster. Indeed, two Belize companies have been falsely using the address of the HQ of Lord Ashcroft’s bank for at least six years. Those secret Belizean businesses, Sherbrook Assets and Whitmoore Solutions, have formed at least 70 other Scottish entities, most of them registered, I am sorry to say, to a convicted fraudster who lives in Fife in Scotland, Anzelika Young. The Bill should be ensuring that every SLP, along with any similar financial vehicle elsewhere in the UK, is exposed to rigorous due diligence at the very least.
During proceedings on the recent Finance Bill, I attempted to add a very simple new clause calling on the Government to investigate SLPs. They chose to vote that new clause down. When, subsequently, yet more criminal activity came to light, on 26 September I wrote to the Chancellor—I have a copy of the letter with me—seeking a meeting about this major international criminal activity. As of last week, when I was yet again chasing this up, the only response I have had—this is after a month, showing the Government’s lack of concern about international criminal activity—is that they are still considering how to respond to my request for a meeting. It is quite inappropriate for a Member of this House seeking a meeting about a major criminal activity to have to wait a month for any response.
Mr Wallace
I reassure the hon. Gentleman, given our meeting yesterday, that I have listened to what he said. I will meet my ministerial colleagues to discuss the problem he raised with me and see what we can do about it.
Roger Mullin
I am particularly grateful to the Minister for that clarity. Indeed, in coming to the Dispatch Box at that moment he confirmed what I was about to say in my closing line on the issue of SLPs. Given how he has discussed this matter with those of us on the Opposition Benches who are interested in it, and his understandable and quite appropriate concern about the matters raised, I was going to suggest that the Prime Minister could appoint him the formal tutor for all Treasury Ministers, in addition to his role as Minister for Security; I am sure they would learn a great deal from the appropriate way he deals with matters. I commend that new appointment to the House. I speak in jest, but surely there is an issue here, as some of the Treasury Ministers who have been turning a blind eye for months need to learn that these are matters of great concern and importance, and deserve to be treated as such.
The third area I will briefly mention—and it will be very brief, as many Members have already commented on it—is what has been happening post Panama papers on Crown dependencies and the like. The clear view expressed in this debate is that the Bill does not yet go far enough, particularly on the much needed transparency and openness on beneficial ownership. If the Minister would be willing to think about how we might, in a collegiate way across the House, begin to address that issue and some of the others raised today, he will win himself many friends indeed.
The Minister for Policing and the Fire Service (Brandon Lewis)
I thank right hon. and hon. Members for this informed and valuable debate. We have heard strong and important contributions, and there has been support from both sides of the House for the principles behind the Bill. We will have interesting and strong discussions in Committee.
As my hon. Friend the Minister for Security emphasised at the start of the debate, there can be no doubt about the seriousness of the threats of terrorism and organised crime, or about the scale of the challenge that we face in combating them. As of July last year, about 5,800 organised crime groups were operating in the UK. Fraud due to organised crime is thought to cost this country about £9 billion, and the social and economic costs of illegal drug supplies are estimated to be some £10.7 billion a year. As has been said, these are not faceless, victimless crimes; they have an impact on people we know and those who live in our constituencies.
As we have heard, the UK is a fantastic place to do business, and the Government want to maintain that. We want to send out a clear message across the country that we are open for business, but if we are to maintain our position, we must ensure that this is one of the cleanest and safest places to invest. We need to send a message to those who would seek to corrupt legitimate trade.
I am grateful to all right hon. and hon. Members who have contributed to the debate, and I particularly welcome the hon. Member for Ealing Central and Acton (Dr Huq) to her Front-Bench role. I also welcome the hon. Members for Dumfries and Galloway (Richard Arkless) and for Kirkcaldy and Cowdenbeath (Roger Mullin) to their roles. I was pleased to hear that the Minister for Security has had the opportunity to discuss the Bill with the official Opposition and Scottish National party Members prior to the debate—indeed, some of the paperwork was shared some two months ago—and I know that we will continue that conversation during the passage of the Bill.
It is clear that Members on both sides of the House want to contribute to make sure that we end up with a robust, strong system of which this country will be proud. Almost without exception, hon. Members who have spoken have understood the importance of these powers and been supportive of the Bill. Of course, it is right that on such issues as money laundering and terrorist finance, the House should present a united front, as it is doing on the principle behind the Bill. I welcome the fact that in our consultation on the Bill, a diverse group of stakeholders—ranging from the major banks, which have been mentioned today, to law enforcement investigators, prosecutors and civil society groups—have given an overwhelmingly positive response to its provisions.
Mark Field (Cities of London and Westminster) (Con)
I apologise that I was not able to contribute to the debate itself. I am afraid that I am a veteran of the consideration of the Bill that became the Proceeds of Crime Act 2002. Although I accept that there is a great deal of unity regarding some of this Bill’s provisions, the real issue is how enforceable those provisions are. It is important that the Bill is scrutinised very carefully in Committee because there is a danger that although we will put on to the statute book a lot of new laws, some of which might be regarded as rather draconian, they will not be properly enforced by the police, or will be ruled out by the judiciary when matters come to court. That is the one caveat I would set out, although it is right to say that these powers are important, especially the new ones in relation to counter-terrorism, which were not envisaged at the time of the 2002 Act.
Brandon Lewis
My right hon. Friend makes an important point, particularly by outlining the importance of the Bill’s Committee stage to ensure that Members have a chance to have an input into the debate, as indeed they have had this afternoon. He should have great faith in my hon. Friend the Minister for Security, who is determined to work with colleagues to ensure that the Bill is robust. The Bill gives a clear message to those who want to try to usurp our system that that will not continue—we will not allow it. Although we are a country that is open for business, we are also a country that believes in fairness and that will ensure that fairness prevails.
A couple of core issues have been raised by a number of Members, particularly about the overseas territories. We heard speeches from the right hon. Member for Barking (Dame Margaret Hodge), and the former Chair of the Home Affairs Committee, the right hon. Member for Leicester East (Keith Vaz). We have agreed that UK law enforcement and tax authorities will have, in real time, unrestricted and secure access to things such as the beneficial ownership initiative, and information about corporate and legal entities incorporated in the overseas territories and the Crown dependencies.
The right hon. Lady outlined the excellent work of David Cameron and the strong message that he gave when he was Prime Minister. This is something that the current Prime Minister is determined to continue. We will ensure that there is an end to people usurping the law. It is important that we work closely with our colleagues around the world to ensure that we have a strong and robust system. We have taken a lead on this. Those territories have agreed that they must commit to new global standards in tax transparency so that Her Majesty’s Revenue and Customs can investigate any untoward activity. As a result, later this year, HMRC will have new data on billions of pounds of accounts held in the overseas territories by UK taxpayers. This is a big step forward. I know that we as a Government are determined to ensure that we stamp out that kind of behaviour.
Funding was mentioned by a number of Members, including the right hon. Member for Leicester East. The NCA’s funding has increased from £448 million to nearly £478 million over the past year and police budgets have been protected. Funding for HMRC has also increased—up to £3.6 billion, with the £241 million input that was mentioned earlier.
I can be clear that we are determined to ensure that the police and the NCA have the resources that they need to be able to look at all this in the round, including IT issues. The right hon. Gentleman suggested that I use the debate to discuss the police funding formula, but he will have to excuse me for resisting that temptation for now. Over the past few weeks, I have written to all chief constables and police and crime commissioners to ask them to come to talk to me as we seek to deliver our election manifesto commitment of a fair funding formula for police, which we will do.
In response to comments about the overseas territories and Crown dependencies, I am pleased to announce that the British Virgin Islands and the Turks and Caicos Islands have just—conveniently, as I am here at the Dispatch Box this afternoon—committed themselves to the initiative on beneficial ownership, which many hon. Members have spoken about today. All the overseas territories have now agreed to have central registries, which will be accessible to law enforcement authorities. We will continue to push for all countries to introduce public registers. This is good news, and we will continue to work on it.
Richard Arkless
Clearly, I am delighted to hear the good news that the Minister has just given. Can he confirm whether his announcement confirms that those registers will be published?
Brandon Lewis
As I said just before the hon. Gentleman intervened, we will continue to push for all countries to introduce public registers. This is a step in the right direction. I welcome it, and we acknowledge that we want to continue to work on this. Another issue raised by his good self, as well as the hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin) and others, was about Scottish limited partnerships. I hope that they will take into account the fact that my hon. Friend the Minister for Security intervened to say that we want to work on that with colleagues across Parliament. We have very much taken those points on board.
My right hon. and learned Friend the Member for Harborough (Sir Edward Garnier) and my hon. Friends the Members for Kingston and Surbiton (James Berry) and for Wealden (Nusrat Ghani) spoke passionately and made incisive contributions. In particular, my hon. Friend the Member for Wealden outlined the Bill’s importance given the part that it will play in ensuring that we fight the funding of extremism. We have discussed the Bill’s vital importance in protecting the UK’s position and status as a global financial centre and in ensuring that criminals cannot benefit from the proceeds of their crimes. I expect and hope that right hon. and hon. Members will want to give in-depth scrutiny to the Bill, as they have suggested this afternoon, as we move on to clause-by-clause examination in Committee, and I look forward to a lively debate on its provisions.
I am proud that, by comparison to most European countries, we are positioned high in the league table for having a strong and independent judiciary, as well as a determined law enforcement environment. If we are to maintain our record and position, we always need to stay one step ahead of those who seek to undermine our attempts, especially in such a fast-moving global environment. That is why the Bill is so important, why it is reassuring that it has received principled, cross-party support in the House, as that sends a clear message, and why we must ensure that law enforcement agencies have the powers they need to combat the ability of criminals to launder the proceeds of their crimes, as well as to tackle terrorism financing and to bring more offenders to justice. I hope that the House will agree that that is in the public interest and that the Bill should be passed at the earliest opportunity with clear, continued cross-party support. On that basis, I commend the Bill to the House.
Question put and agreed to.
Bill accordingly read a Second time.
Criminal Finances Bill (PROGRAMME)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Criminal Finances Bill:
Committal
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 24 November 2016.
(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Proceedings on Consideration and up to and including Third Reading
(4) Proceedings on Consideration and any proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.
Other proceedings
(7) Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Andrew Griffiths.)
Question agreed to.
Criminal Finances Bill (MONEY)
Queen’s recommendation signified.
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Criminal Finances Bill, it is expedient to authorise—
(1) the payment out of money provided by Parliament of—
(a) any expenditure incurred under or by virtue of the Act by a Minister of the Crown or a government department; and
(b) any increase attributable to the Act in the sums payable under any other Act out of money so provided; and
(2) the payment of sums into the Consolidated Fund.—(Mel Stride.)
Question agreed to.