Economic Crime (Transparency and Enforcement) Bill

(Limited Text - Ministerial Extracts only)

Report stage
Monday 14th March 2022 Lords Chamber

Moved by

[Lord Callanan]

1: Clause 4, page 2, line 19, at end insert “and, where applicable, the statement and information mentioned in subsection (2A)”
Member’s explanatory statement
This amendment requires an application for registration as an overseas entity to include the information and statement required by subsection (2A) (information about trusts).

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, I thank everyone who contributed to a lively and interesting Committee. I will move these government amendments on trusts. The Government seek to make amendments that address concerns raised in this House and the other place about trusts. These amendments set out that, where a trustee of a trust or equivalent arrangement is a registrable beneficial owner, the overseas entity must give them formal notice to provide their personal information and information about the trust. This information will be disclosed to HMRC, law enforcement agencies and other specified persons with a public function for the purposes of taking action with any offences they commit. I beg to move.

[Lord Coaker (Lab)]

I am grateful to the Minister for bringing these amendments forward following the wide-ranging discussions we had earlier, when we had a full exploration of all the issues.

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Moved by

[Lord Callanan]

2: Clause 4, page 3, line 20, at end insert—
“(2A) Where an application includes information that a registrable beneficial owner is a trustee (see paragraphs 3(1)(f) and 5(1)(h) of Schedule 1), the application must also include—(a) the required information about the trust or so much of that information as the overseas entity has been able to obtain, and(b) a statement as to whether the entity has any reasonable cause to believe that there is required information about the trust that it has not been able to obtain.”Member’s explanatory statement
This amendment provides that where an application for registration as an overseas entity discloses that a registrable beneficial owner is a trustee, it must include additional information about the trust.

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Moved by

[Lord Callanan]

3: Schedule 1, page 41, line 6, leave out “the table in section 4” and insert “sections 4, 7 and 9”
Member’s explanatory statement
This amendment is consequential on changes to clauses 4, 7 and 9.

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Moved by

[Lord Callanan]

6: Schedule 1, page 42, line 21, at end insert—
“(g) whether the entity is a designated person (within the meaning of section 9(2) of the Sanctions and Anti-Money Laundering Act 2018), where that information is publicly available.”Member’s explanatory statement
This amendment would mean that the required information about a registrable beneficial owner which is a government or public authority includes information about whether the entity is designated by virtue of the Sanctions and Anti-Money Laundering Act 2018.

[Lord Callanan (Con)]

My Lords, the Government have put forward a number of amendments to the register of overseas entities provisions. These amendments will address a number of the concerns of Members of this House. The amendments expand the information requirements for registrable beneficial owners to include information about whether they are designated by virtue of the Sanctions and Anti-Money Laundering Act 2018.

The amendments also provide a revised threshold for the offence of providing false statements. These no longer have to have been submitted knowingly or recklessly. Rather, it will be an offence when the statement is merely misleading, false or deceptive and the person has no reasonable excuse for supplying such a misleading statement, with an additional aggravated offence carrying a higher penalty where it can be proved that a false statement was made knowingly.

The Government seek to make amendments to require the Secretary of State to consult with Scottish and Northern Ireland Ministers before making regulations to amend parts of the Bill that legislate on devolved land law matters. I beg to move.

Amendment 6 agreed.

Moved by

[Lord Callanan]

7: Schedule 1, page 42, line 36, at end insert—
“(h) whether the entity meets that condition by virtue of being a trustee.”Member’s explanatory statement
This amendment would mean that the required information about a registrable beneficial owner who is a legal entity includes information about whether the entity is a trustee.

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Moved by

[Lord Callanan]

11: Clause 7, page 4, line 13, at end insert “and, where applicable, the statement and information mentioned in subsection (2A)”
Member’s explanatory statement
This amendment requires an overseas entity when complying with the updating duty to include the information and statement mentioned in subsection (2A) (information about trusts).

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Moved by

[Lord Callanan]

16: Clause 9, page 6, line 14, at end insert “and, where applicable, the statement and information mentioned in subsection (2A)”
Member’s explanatory statement
This amendment requires an overseas entity when applying for removal from the register to provide the information and statement mentioned in subsection (2A) (information about trusts).

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Moved by

[Lord Callanan]

21: Clause 9, page 7, line 23, leave out sub-paragraph (i) and insert—
“(i) is entered, on or after 8 December 2014, as proprietor in the proprietorship section of the title sheet for a plot of land that is registered in the Land Register of Scotland,”Member’s explanatory statement
This amendment expands the scope of circumstances where an overseas entity is registered as the proprietor of a relevant interest in land for the purpose of clause 9 (to include, for example, Keeper-induced registration) by removing the requirement for there to have been an application for registration.

[Lord Callanan (Con)]

My Lords, the Government are putting forward a group of technical amendments on land registration and transactions in Scotland, in addition to some further substantive amendments. These amendments include obligations on overseas entities that disposed of land between 28 February 2022 and the end of the transitional period to outline the details of the beneficial ownership of the entity at the time of the transfer. I beg to move.

[Lord Coaker (Lab)]

My Lords, I want to say a few things about this group of amendments, and in particular to speak to my Amendment 62. As the Minister knows, we are generally supportive of the amendments in this group. The Government, to be fair, have moved in several areas, and that is to their credit. Once again, I thank the Minister and his ministerial colleagues for their engagement over the course of these last few days with respect to this Bill. It has been most helpful.

Earlier today, the Minister outlined several reasons for opposing a reduction in the transition period from six months to 28 days. In the spirit of compromise, we therefore tabled an alternative provision of 90 days for the transition period, and that is the subject of my Amendment 62. He will also know that this amendment is supported by the body representing accountants, which has said that it believes three months is a reasonable figure for the transition period. I shall not go over all the arguments on the length of the transition period that we have had today and at Second Reading, as the Minister will be very well aware of them. Noble Lords are worried that this will allow people to avoid the new rules and regulations and be able to circumvent them.

Furthermore, given the potential lengthy process that needs to be followedbefore Part 1 of the Bill can be formally commenced, we believe that there is also a case for accelerating the registration period. As I again said to the Minister, the commencement period is subject to the Secretary of State’s decision for Part 1, so there is no clarity as to when that will actually start. If there is a six-month transition period and six months until it is commenced, that will be a year. Therefore, we seek clarity from the Minister, even at this late stage, about the implementation of the measures in the Bill, not only with respect to the commencement date, but to some of the other issues. Can the Minister say anything further?

We would, of course, be delighted if the Minister were able to accept the amendment, but if he is to hold firm, would he be able to make certain commitments so that we would be clear on the steps that the Government are taking to ensure Parliament is appraised of the progress between this Bill receiving Royal Assent and the next, more substantial piece of legislation to be introduced—namely the Bill that has become known as economic crime Bill 2? We want to know something about the effectiveness of the measures within this Bill and the way forward to the next Bill.

Can the Minister confirm the scope of the next Bill? Will that be broad, and will there be an opportunity to amend some of the measures in this Bill as we move forward to the next Bill? As we know, many noble Lords have raised the issues within this Bill of the fact that there has not been proper scrutiny. It may well be that many of the points that noble Lords have raised will actually come to fruition, but we need some assessment of that from the Government so that we can then inform our deliberations with respect to the economic crime Bill 2.

Also, as I say, there is a general belief that, although we are allowing the Bill to pass because of the emergency we face, there are still significant weaknesses and omissions within it. There is, therefore, a need for the next Bill to be brought as soon as possible—that is absolutely crucial—rather than at some time in the future. Can the Minister give any assurances to the House as to when he expects the next economic crime Bill to come before your Lordships in order to discuss that? There are a number of questions for the Minister, and I look forward to hearing the answers to them to determine whether we wish to test the opinion of the House or not.

[Lord Fox (LD)]

Very briefly, my Lords, we thank the noble Lord and congratulate him on tabling this amendment. We on these Benches still remain concerned about the cumulative delay of transition and commencement—or the potential cumulative delay—so we are pleased that the Minister has another chance to respond to that particular concern. We also share the concerns of the noble Lord, Lord Coaker, about the speed with which ECB 2 arrives in your Lordships’ House.

[Lord Callanan (Con)]

I thank both the noble Lords, Lord Coaker and Lord Fox, for their extremely constructive engagement over the course of the weekend and over the course of a number of meetings and chats today. I really am very grateful for their constructive attitude and for their willingness to be open to the arguments that we have deployed in why we genuinely do not think that reducing the transition period further is a runner, for a whole variety of reasons we have discussed—I will not go into detail now. But I am grateful—I want to put that on record—for the support of the Opposition parties in accepting this as emergency legislation that we want to get through as swiftly as possible and passed down to the other place.

I also note their interest in seeing a rapid introduction of the measures of this Bill and their focus on ensuring its effective implementation—and also their interest in a wider range of issues that can be covered in the Bill. The forthcoming legislation on economic crime will, as I have said previously, provide for significant reform of the powers of the Companies House registrar. These will directly interact with the provisions of this Bill, enhancing further its effectiveness—for instance, by providing greater powers to query and act on the information on the register. I would be happy, therefore, to commit the Government that this House will have the opportunity to review the effectiveness of the current legislation in that wider context of our discussion on the new powers. I am also committed to the rapid implementation of the measures in this Bill, and I would also be happy to commit to updating the House on the Government’s progress on this within six weeks of this measure achieving Royal Assent.

I can reassure noble Lords that the further economic crime Bill that the Government intend to introduce in the next Session will be a broad one. We will, of course, consider and carefully examine any amendments put forward in either House which serve to strengthen our frameworks for tackling economic crime. As my honourable friend the Minister for Small Business, Consumers and Labour Markets—who I am pleased to see at the Bar of the House—said in the other place last week, we are committed to bringing forward the next economic crime Bill early in the next Session.

I hope that has provided sufficient reassurance for the noble Lord and that, therefore, he will feel able to withdraw his amendment.

[Lord Coaker (Lab)]

I thank the Minister very much for that reply. It does show that the parliamentary process works, because the Government have moved in a significant way to meet the concerns not only of myself and other noble Lords on this side but, indeed, noble Lords across the Chamber. These concerns are not resolved, but the Minister has given us a way forward, in particular by reviewing the effectiveness of the current legislation. That is an important concession from the Government, which will allow us to see whether the concerns raised about the Bill come to fruition or whether the Government are right to say that we are worrying about things that will not come to pass.

An update on progress within six weeks of Royal Assent is a significant step forward and another important concession from the Government. As my noble friend Lady Smith has raised on a number of occasions, we are particularly pleased about the Government’s commitment to an economic crime Bill No. 2 early in the next Session. I think the word “early” is significant for all of us because we believe that there are things that will need to be changed, and this means we will have the opportunity to do so. I thank the Minister once again for that.

Given the concessions that the Government have made and the demonstration of the way that the parliamentary process has worked within this context, I will not press Amendment 62.

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Moved by

[Lord Callanan]

22: Clause 9, page 7, line 33, leave out sub-paragraph (iii) and insert—
“(iii) is the tenant under a lease that was registered in the Land Register of Scotland on or after that date, or”Member’s explanatory statement
This amendment rephrases clause 9(8)(b)(iii) to ensure consistency with the language used at paragraphs 10(1) and 11(1) of Schedule 4.

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Moved by

[Lord Callanan]

25: Clause 12, page 8, line 28, leave out from “obtain” to end of line 29 and insert “, for the purposes of the application under section 4 or 9 or for the purposes of complying with the updating duty under section 7—
(i) the required information about each registrable beneficial owner, and(ii) in respect of any registrable beneficial owner who is a trustee, the required information about the trust.”Member’s explanatory statement
This amendment requires an overseas entity to take reasonable steps to obtain information about trusts, where relevant.

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[Lord Fox (LD)]

My Lords, the arguments have all been made in the previous stage, when the Minister stood up and said that the Government were prepared to accept what was then Amendment 43; I was delighted. It is now Amendment 27, which I beg to move.

[Lord Callanan (Con)]

My Lords, I am happy to confirm and accept the amendment from the noble Lord, Lord Fox, also signed by the noble Lord, Lord Coaker, which was originally Amendment 43. It removes an exemption from reporting where this is in the interests of the economic well-being for the UK. As I said in Committee, I have listened carefully and we have engaged on this. In reflection of this and, as has been said, in the interests of working together to progress this vital legislation collaboratively and swiftly, the Government are happy to support this amendment.

Amendment 27 agreed.

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Moved by

[Lord Callanan]

28: Clause 22, page 13, line 14, at end insert—
“(ba) any required information about a trust delivered to the registrar by virtue of section 4(2A), 7(2A) or (2B) or 9(2A) or (2B) (required information about trusts),”Member’s explanatory statement
This amendment means that the required information about trusts will be unavailable for inspection on the public register.

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Moved by

[Lord Callanan]

31: After Clause 22, insert the following new Clause—
“Disclosure of information about trusts
(1) This section applies to information delivered to the registrar by virtue of section 4(2A), 7(2A) or (2B) or 9(2A) or (2B) (required information about trusts).(2) The registrar may not disclose the information unless—(a) the same information is made available by the registrar for public inspection otherwise than by virtue of being delivered to the registrar by virtue of a provision mentioned in subsection (1), or(b) the disclosure is permitted by subsection (3).(3) The registrar may disclose the information to—(a) the Commissioners for Her Majesty’s Revenue and Customs, or(b) any other person who—(i) has functions of a public nature, and(ii) is specified for the purposes of this section by regulations made by the Secretary of State.(4) Regulations under this section are subject to the negative resolution procedure.”Member’s explanatory statement
This new clause generally prevents the registrar from disclosing the required information about trusts. But it also includes a new power to disclose information to HMRC or other specified persons with public functions.

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Moved by

[Lord Callanan]

32: Clause 25, page 15, line 26, after “21” insert “, (Disclosure of information about trusts)”
Member’s explanatory statement
This amendment is consequential on the new clause about disclosure of information about trusts.

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Moved by

[Lord Callanan]

33: Clause 31, page 18, line 13, leave out “knowingly or recklessly” and insert “, without reasonable excuse,”
Member’s explanatory statement
This amendment removes the mental element for the offence under clause 31 and introduces a reasonable excuse defence instead (for example to cater for cases where an overseas entity reasonably relies on information provided by others which turns out to be untrue).

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Moved by

[Lord Callanan]

37: Clause 32, page 19, line 13, at end insert—
“(5A) The Secretary of State must consult the Department of Finance in Northern Ireland before making regulations under subsection (4).”Member’s explanatory statement
This amendment requires the Secretary of State to consult a Northern Ireland department before making regulations under clause 32(4).

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Moved by

[Lord Callanan]

38: Schedule 3, page 55, line 20, leave out “period of 6 months beginning with the commencement date” and insert “transitional period”
Member’s explanatory statement
This amendment and related amendments align the transitional periods under Schedule 3 with the period in new clause (Applications in the transitional period: information about land transactions).

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Moved by

[Lord Callanan]

43: Schedule 4, page 57, line 29, leave out “granted” and insert “delivered”
Member’s explanatory statement
This amendment ensures consistency with paragraph 7 of Schedule 4, which prohibits the delivery of a qualifying registrable deed in specified circumstances.

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Moved by

[Lord Callanan]

60: After Clause 38, insert the following new Clause—
“Sharing of information by HMRC Sharing of information by HMRC
(1) The Commissioners for Her Majesty’s Revenue and Customs may disclose information to the Secretary of State or the registrar for the purpose of the taking of action in connection with an offence under this Part.(2) For the purposes of this section, the taking of action in connection with an offence under this Part includes any of the following—(a) investigating whether an offence has been committed;(b) prosecuting an offence;(c) imposing financial penalties for conduct amounting to an offence.(3) A person who receives information as a result of this section—(a) may not use the information other than for the purpose of the taking of action in connection with an offence under this Part;(b) may not further disclose the information unless the disclosure is necessary for the taking of action in connection with an offence under this Part.(4) It is an offence for a person to disclose, in contravention of subsection (3)(b), any revenue and customs information relating to a person whose identity—(a) is specified in the disclosure, or(b) can be deduced from it.(5) It is a defence for a person charged with an offence under subsection (4) to prove that the person reasonably believed—(a) that the disclosure was lawful, or(b) that the information had already lawfully been made available to the public.(6) Subsections (4) to (7) of section 19 of the Commissioners for Revenue and Customs Act 2005 apply to an offence under subsection (4) as they apply to an offence under that section.(7) In this section “revenue and customs information relating to a person” has the same meaning as in section 19 of the Commissioners for Revenue and Customs Act 2005 (see section 19(2) of that Act).”Member’s explanatory statement
This amendment permits HMRC to disclose information to allow the registrar and the Secretary of State to take action in connection with offences.

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Moved by

[Lord Callanan]

61: After Clause 38, insert the following new Clause—
“Applications in the transitional period: information about land transactions
(1) This section applies where an overseas entity makes an application under section 4 for registration before the end of the transitional period.(2) If the entity has not made any relevant dispositions of land during the period—(a) beginning with 28 February 2022, and(b) ending with the making of the application,the application must include a statement to that effect.(3) If the entity has made any relevant dispositions of land during the period mentioned in subsection (2), the application must include—(a) the required information about each relevant disposition of land made during that period (see subsection (5)),(b) in relation to each such disposition, the statements and information mentioned in paragraphs (a), (b) and (c) of section 4(1) expressed by reference to the state of affairs immediately before the making of the disposition, and(c) a statement that all of the information required by paragraphs (a) and (b) of this subsection has been included in the application.(4) In this section “relevant disposition of land”, in relation to an overseas entity, means—(a) a registrable disposition of a qualifying estate within section 27(2)(a), (b)(i) or (f) of the Land Registration Act 2002 other than—(i) a disposition made in pursuance of a statutory obligation or court order, or occurring by operation of law, or(ii) a disposition made by a specified insolvency practitioner in specified circumstances (within the meaning of paragraph 3(3) of Schedule 4A to the Land Registration Act 2002, as inserted by Schedule 3 to this Act);(b) the delivery by the entity of a qualifying registrable deed granted by it where the entity’s interest in respect of which the deed was granted was registered in the Land Register of Scotland on or after 8 December 2014, unless the deed was granted—(i) in pursuance of a statutory obligation or court order, or(ii) by a specified insolvency practitioner in specified circumstances (within the meaning of paragraph 2(5) of schedule 1A of the Land Registration etc. (Scotland) Act 2012, as inserted by Schedule 4 to this Act).(5) The required information about a relevant disposition of land is—(a) where the relevant disposition of land is within subsection (4)(a)—(i) the date of disposition, and(ii) the registered title number of the qualifying estate;(b) where the relevant disposition of land is within subsection (4)(b)—(i) the date of delivery of the deed, and(ii) the title number of the title sheet in which the entity’s interest is entered.(6) In subsection (4)(a) “qualifying estate” means—(a) a freehold estate in land, or(b) a leasehold estate in land granted for a term of more than seven years from the date of grant,of which the overseas entity became a registered proprietor in pursuance of an application made on or after 1 January 1999.(7) In subsection (6) “registered proprietor”, in relation to an estate, means the person entered as proprietor of the estate in the register of title kept by the Chief Land Registrar.(8) In subsection (4)(b) “qualifying registrable deed” means a registrable deed (within the meaning of the Land Registration etc.(Scotland) Act 2012) which is—(a) a disposition,(b) a standard security,(c) a lease (including a sub-lease), or(d) an assignation of a lease (including a sub-lease).(9) For the purposes of subsection (4)(b), a qualifying registrable deed is to be treated, as at the date of delivery, as having been granted even if at that time it has been executed by the overseas entity only.(10) In this section “the transitional period” means the period of 6 months beginning with the day on which section 3(1) comes fully into force.”Member’s explanatory statement
This new clause requires an overseas entity, when making an application within the first 6 months of the commencement of clause 3(1), to provide additional information about relevant dispositions of land on or after 28 February 2022.

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Moved by

[Lord Callanan]

63: After Clause 38, insert the following new Clause—
“Requirement for certain unregistered overseas entities to provide information
(1) An overseas entity, and every officer of the entity who is in default, commits an offence if—(a) at any time during the period beginning with 28 February 2022 and ending with the end of the transitional period, the entity has made a relevant disposition of land,(b) at the end of the transitional period the entity—(i) is not registered as an overseas entity,(ii) has not made an application for registration as an overseas entity that is pending, and(iii) is not an exempt overseas entity, and(c) the entity has not, after making the relevant disposition of land and before the end of the transitional period, delivered to the registrar—(i) statements and information of the kind mentioned in paragraphs (a), (b), (c) and (d) of section 4(1), expressed by reference to the state of affairs immediately before the making of the relevant disposition of land, and(ii) the required information about the relevant disposition of land (within the meaning of section (Applications in the transitional period: information about land transactions) (5)).(2) A person guilty of an offence under subsection (1) is liable on summary conviction—(a) in England and Wales to a fine and, for continued contravention, a daily default fine not exceeding the greater of £2,500 and one half of level 4 on the standard scale;(b) in Scotland or Northern Ireland, to a fine not exceeding level 5 on the standard scale and, for continued contravention, a daily default fine not exceeding one half of level 5 on the standard scale.(3) The contravention continues until such time as the overseas entity has delivered the statements and information mentioned in subsection (1)(c).(4) In the case of continued contravention, an offence is also committed by every officer of the overseas entity who did not commit an offence under subsection (1) in relation to the initial contravention but who is in default in relation to the continued contravention.(5) A person guilty of an offence under subsection (4) is liable on summary conviction—(a) in England and Wales, to a fine not exceeding the greater of £2,500 and one half of level 4 on the standard scale for each day on which the contravention continues and the person is in default;(b) in Scotland or Northern Ireland, to a fine not exceeding one half of level 5 on the standard scale for each day on which the contravention continues and the person is in default.(6) In this section—“exempt overseas entity” means an entity of a description specified in regulations under section 33(6);“relevant disposition of land” has the meaning given by section (Applications in the transitional period: information about land transactions) (4);“transitional period” has the meaning given by section (Applications in the transitional period: information about land transactions) (10).”Member’s explanatory statement
This new clause makes it an offence for certain unregistered overseas entities to fail to provide information about relevant dispositions of land made on or after 28 February.

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Moved by

[Lord Callanan]

65: Clause 39, page 22, line 22, at end insert—
“(2) A reference in section 12 or 13 to a person who is a registrable beneficial owner of an overseas entity includes, in connection with the obtaining of information required by section 7(1)(b), 9(1)(c), (Applications in the transitional period: information about land transactions)(3)(b) or (Requirement for certain unregistered overseas entities to provide information)(1)(c)(i), a reference to a person who has ceased to be a registrable beneficial owner.(3) A reference in this Part to a trust includes arrangements, under the law of a country or territory outside the United Kingdom, that are of a similar character to a trust, and any related expressions are to be read accordingly.(4) The Secretary of State may by regulations make provision specifying descriptions of arrangements that are, or are not, to be treated as being of a similar character to a trust for the purposes of subsection (3).(5) Regulations under subsection (4) are subject to the negative resolution procedure.”Member’s explanatory statement
This amendment makes further interpretive provision, including provision extending the provisions of Part 1 of the Bill in relation to trusts so that they apply to arrangements of a similar character outside the UK.