Economic Crime and Corporate Transparency Bill
Thursday 20th April 2023
(1 year ago)
Grand CommitteeEconomic Crime and Corporate Transparency Act 2023 View all Economic Crime and Corporate Transparency Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 96-III(a) Amendments for Grand Committee (Supplementary to the Third Marshalled List) - (20 Apr 2023)
Lord Wallace of Saltaire
“Overseas companies: international co-operation
Within six months of the day on which this Act is passed, the Secretary of State must report to Parliament on what arrangements with foreign states and international organisations have been agreed to verify information about overseas companies within the scope of this Act, and the identity of their directors.”Member’s explanatory statement
Verification of information about companies and directors based overseas will require co-operation with foreign governments and with organisations responsible for monitoring cross-border finance, trade and crime. This amendment seeks to probe that the government is putting such arrangements in place, and will report them to Parliament.
Lord Wallace of Saltaire (LD)
My Lords, this amendment is to ask for much more information from the Government on the international implications of the Bill, which is a way of asking whether the Bill is serious in terms of enforcement. Most serious economic crime—indeed, all serious economic crime nowadays—is cross-border: the money is taken out of your bank account and rapidly moved to another jurisdiction. One of the huge problems we all face in a globalised economy is that policing is bounded by sovereign borders and criminals are not. Therefore, Governments are forced to co-operate across them.
One of the questions I hope we will pursue on these amendments and the ones that follow on the overseas territories is how Whitehall ensures that the various parts of it that deal with the various parts of our international efforts to combat different forms of crime—terrorist financing, drug smuggling, people smuggling, et cetera—co-ordinate, and which are the lead departments for what. Reference has already been made to HMRC and the Treasury. I note that, in Washington, the US State Department has now established a State Department-led but cross-department anti-corruption board to deal with these necessarily cross-border problems. I hope the Minister will be able to tell us—if not now then perhaps, as I asked at Second Reading, in a briefing in the context of the Bill—how Whitehall will make the necessary changes to ensure that different departments work together coherently in coping with these very complex problems.
It might help if I remark briefly on how I became involved in some of these problems of international crime. In 1989 I was director of research at Chatham House, the international affairs think tank. I was approached by a chief inspector who was then head of the strategy unit at the Metropolitan Police to ask if we could run a seminar on the international dimensions of policing, now that it seemed likely that the Berlin Wall might come down. As it happened, I was then attached briefly to an institute in Germany, in Bavaria, and when I asked it whether I could get any briefing on the subject, which I knew nothing about, I found myself very rapidly being taken to the Bundesnachrichtendienst headquarters and given a very thorough intelligence briefing on how the German Government were approaching the likely explosion of cross-border crime that would accompany the end of that very hard border that had kept a lot of crime away from western Europe.
Since then, we have had 30 years of globalisation, the communications revolution, digitisation and international banking deregulation, which have made cross-border economic crime far easier, far faster and far harder to keep up with. It is no accident that the Financial Action Task Force, one of the main mechanisms for international intergovernmental co-operation in combating money laundering, was also founded in 1989 by the G7; it saw what was coming. Perhaps the Minister can consider whether we could have a briefing on this to be told more about how effective the Financial Action Task Force is.
When I looked rapidly for an update on the FATF, I was a little worried to find that there is rather more up-to-date information on Wikipedia than there is in statements from GOV.UK, which tend to be from 2015, 2018 or 2019. The Wikipedia comments say that the FATF is now pretty good at setting standards and maintaining a blacklist and a grey list of countries that do not observe basic international standards. Some of your Lordships will have seen the article in the Financial Times yesterday about the Government of Panama hoping that it may finally be about to be taken off the grey list, which has clearly damaged its position as an international financial centre. But apart from reporting and setting standards, the FATF does very little in terms of enforcement. The question of enforcement, verification and the exchange of information is extremely relevant to whether the Bill is really going to make a difference to our pursuit of economic crime.
I followed the development of international police co-operation in the 1990s, partly because, when I came here, I became chair of the sub-committee of the European Union Committee that dealt with justice and home affairs, and thus followed quite closely the development of Europol, the Schengen Information System and those other forms of European police co-operation. I was struck by the extent to which progress was driven not by any commitment to some fantasy of a European superstate but by the demands of police forces and intelligence agencies in different countries. They needed to share information—in good, constant time if possible—and share activities and operations, as they now do. Of course, we have now left Europol and the Schengen Information System, which has denied the British authorities access to one of the closest ways in which we used to share information on transborder economic crime. I am not very well informed about the other mechanisms, apart from the OECD’s various activities on beneficial ownership and the FATF, which we find useful.
As the noble Baroness, Lady Blake, may remind us, David Lammy, the shadow Secretary of State for Foreign Affairs, proposed some weeks ago that there should be a transatlantic anti-corruption council to bring together more closely the various agencies, authorities and law enforcement bodies concerned with these areas. I am not aware that the British Government are actively engaged in all this, so my amendment asks the Government to tell us what the current situation is, what their strategy is and how this intrinsic element of any serious approach to economic crime will be treated. If they are unable to do that, they cannot be very serious about the enforcement of action against economic crime, which is not, after all, primarily a domestic matter. I beg to move.
Baroness Blake of Leeds (Lab)
I will respond to the comments made by the noble Lord, Lord Wallace, in moving his Amendment 68. I was very struck, looking back at the comments from Second Reading. He very forcibly talked about the international dimension and how important it is, and the fact that the international dimension in the Bill generally is thin; I think those were the words he used. I think we all knew that we would require amendments to look at this area. I am keen to understand from the Minister what actually is being proposed.
We talk a great deal about collecting data, but one of the rules of thumb I have always worked with is that data is of use only if it is open and transparent, there is a responsibility for the data to be analysed and, where things are held up as being untoward, appropriate action is taken.
I do not want to draw out the debate, but this could be an opportunity for the Minister to give us an update about the progress made since the Government launched the register of overseas entities on 1 August. What is the Government’s assessment of the success of the register and of the beneficial ownership registration being set at 25%? Do we know whether many companies are avoiding this by spreading out shares throughout a family? We know that there were significant concerns about nominee arrangements being used to disguise true beneficial owners. What is the Government’s assessment of this, now that the register has been introduced, and will they use the regulation-making powers in the existing economic crime Act to address this?
I anticipate a full response to the issues raised by the noble Lord, Lord Wallace. I would like to understand and am seeking reassurance that the Government are putting arrangements in place. As we have heard, the scale of the co-operation is quite significant. It needs constant review, and it needs to relate to finance, trade and crime. I look forward to the Minister’s response.
The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)
I thank noble Lords very much. It is a great pleasure to be here again to continue this valuable and important inquiry into how to make our company structures more transparent, fairer and more effective for our long-term business needs.
I thank the noble Lord, Lord Wallace of Saltaire, for this amendment. Over the next few hours, I hope to cover many of the points raised and clarify further points from our discussions earlier this week. Specifically on this amendment, I hope it will be of some reassurance to noble Lords that Companies House already has excellent relationships with overseas counterparts—it is important to emphasise that. It works closely with authorities in the Crown dependencies and overseas territories on the implementation of the register of overseas entities.
The noble Baroness, Lady Blake, asked about the progress of the register of overseas entities in relation to UK companies and, specifically, property ownership. We have come a long way: I think we are now 75% to 80% registered. Some overseas entities have not fulfilled our requirements, and I am happy to send a note to Peers about that. This changes regularly but it is a minority, which is important. I am pleased about that, and we are grateful for the collaboration of the Crown dependencies and overseas territories.
As a government Minister it is important that I say that, if you listened only to this debate and did not have any experience of the outside world, you may be forgiven for thinking that every single authorised corporate service provider, Crown dependency and overseas entity was somehow engaged in and designed for criminal undertakings, which we all know is not the case. It is important that I state that many of these measures and the discussions we are having are about a very small minority of bad actors and that the overall industry is worth while and valuable. The principles around high-quality corporate service provision, Crown dependencies managing their own affairs and how companies are structured are very much to be celebrated and embedded. What we are doing here is making sure that there is transparency and legitimacy. I want to make sure that is on the record.
Earlier today I met a former regulator from one of our Crown dependencies, who was surprised at the tone that some noble Lords are taking in the debate, given what he had done with his own regulator in his Crown dependency. He felt that it had set the standard—a higher standard, maybe, than some other Crown dependencies. He felt that they had lessons to teach us in the United Kingdom. We ought to be aware of this. I do not want to belabour the point, but it is important to get the tone right and make sure that the messages are clear.
Lord Fox (LD)
I took it as an implicit, or rather an explicit, criticism of His Majesty’s Opposition, us and others who have spoken to amendments to the Bill that we somehow regard the whole industry as corrupt. I would take the Minister to task and suggest that he reads Hansard for the previous session, where I made it clear that that is not our view—and I know it is not the view of His Majesty’s Opposition. The fact is that we are speaking about bad actors because the whole purpose of the Bill is to deal with them. It can be taken on faith, but perhaps we have to say it every time, that we consider bad actors to be a minority of players in this sector, but they are the purpose for which the Bill has been brought forward.
Lord Johnson of Lainston (Con)
I greatly appreciate the comments from the noble Lord, Lord Fox; I am so glad that he said that. I do not mind if some friction is sometimes required in order to make sure that the messages are heard loud and clear. I am glad that the noble Lord has reaffirmed his position, that of his party and that of the main opposition party. We all agree on this, but it is important because I was picked up on it today. It sounds as if we are at war with a legitimate sector and the legitimate concept of how to structure companies, which are at the very core of our capitalist system and have created so much wealth for us. I am glad that we are united on this point.
I was asked by the noble Baroness, Lady Blake, about the number of entities that have registered with the register of overseas entities. I have a figure of 27,000, which represents a high level of compliance. I hope that figure satisfies her request, but I would be happy to publish further figures or to answer her in writing on that.
Lord Coaker (Lab)
I will just reinforce the point that the noble Lord, Lord Fox, made. To be honest, I do not think the Minister was implying that we were condemning the whole of business, but the noble Lord, Lord Fox, made an important point. The Committee is trying to say that, overall, we all support the Bill but we want to ensure that it is effective, understandable and enforced. In challenging the Government, we seek not to undermine business but to improve what most of us regard as a reasonable Bill.
The only other point I make to the Minister is that—I think we all accept this—public opinion is frustrated about what it sees as a lack of action in respect of certain bad business practices, such as the laundering of money. Lots of fraud and economic crime takes place but is not seen as a priority by the state—irrespective of whether you mean Labour, the Liberal Democrats, the Conservatives, the Scottish nationalists or whoever—which does not take this seriously. I suggest to the Government that, if I were a government Minister, I would parade much more powerfully than the Government have done that we are trying to ensure that public anger is assuaged by the fact that we are no longer prepared to see Russian money used in the way it has been nor to see bad practice, which means, frankly, that good business is undermined.
This is the point made by the noble Lord, Lord Fox. Good businesses, which represent the majority of the country, want something done about bad business because it undermines them. This is a really important point; I think it is the point that the Minister was trying to make. This is a good Bill but it needs to be improved. From what he has said to us, I think the Minister will take on board many of the comments that have been—and will be—made and change the Bill. But it is also about saying, “Of course the majority of business is good, but there is bad practice out there and it needs sorting out”. Good business wants that to happen as much as members of this Committee do.
Lord Wallace of Saltaire (LD)
My Lords, as I said in moving this amendment, our concern is around the Bill, when it becomes an Act, having the resources and the international co-operation structure to make it effective.
The Minister talked about exchanging information, but there is also the question of enforcement. If we are trying to enforce on someone who is based in the UAE, Panama or Singapore—let alone Hong Kong—these things are not easy. We all recognise that since 1989 a number of mistakes have been made. This Government—and this country under different parties in government—made a succession of mistakes in our handling of Russian money as it came into the country. Many of those mistakes have now been corrected, but we have to admit that we did not handle this very well and we now find ourselves in a situation in which other financial centres are extremely difficult to investigate. One looks at the Wirecard scandal, for example. One of the world’s major accounting firms failed to discover that a substantial chunk of the assets that Wirecard was declaring, which were alleged to be in Singapore and Malaysia, did not exist.
Clearly, the need for active exchanges between Governments, central banks and others is vital in this situation. That is what we are trying to ensure happens. Yes, it is a small number of companies, but it is not a small amount of money. That, therefore, has to concern us if the Bill is to be a useful reform and a worthwhile Act.
I remind the Minister that that the FATF grey list at the moment includes the Cayman Islands and Gibraltar, as well as the United Arab Emirates, Turkey and a number of other countries with which we have close ties. I am conscious that 100,000 British citizens now live in the United Arab Emirates, many of whom are actively engaged in the international financial industry. That has to be a matter of concern to us. Not very long ago, some in the House were talking about the activities of UAE intelligence services with regard to UAE nationals on British soil. There are a great many difficult issues that we have to cope with here. We also understand that this situation is not static. The communications revolution has already made the transfer of money around the world much faster than it was 10 to 20 years ago, and we need to keep up with that.
I should have mentioned another OECD initiative that is related to economic crime, on base erosion and profit shifting. It is concerned with tax evasion, which I include as part of economic crime. That is another area in which Governments are beginning to co-operate. It is very difficult to gain co-operation. The entire British Government are not always as keen on co-operation as some parts are, because some departments naturally have different interests from those of others. I raised the question of Whitehall co-ordination and where its leadership sits, and it probably needs to change, as it just has in America, because the nature of the problems we face is also changing.
I withdraw my amendment, but I hope that these conversations will continue. I express our shared concern that legitimate international finance will prosper and that aspects of international finance that are illegitimate will be carefully monitored and prevented.
Lord Agnew of Oulton
“Publication of information about trustees
In section 22(1) of the Economic Crime (Transparency and Enforcement) Act 2022 (material unavailable for inspection), omit paragraph (c).”Member’s explanatory statement
This amendment would enable Companies House to publish the names of parties to trusts which own Overseas entities in the Register of Overseas Entities. Currently Companies House collects this information but does not publish it.
Lord Agnew of Oulton (Con)
My Lords, I probably ought to start by checking with my noble friend the Minister and his officials that his own amendment, Amendment 76H, does not solve the problem that I am seeking to solve. That will be a very quick answer from my noble friend if it does. It is Amendment 76H—I am slightly flummoxed by section numbers, clauses and subsections.
I will explain to the Committee why the amendment is important. Companies House now collects the information that I am keen for us to have more visibility of, but it does not publish it. I am asking simply that we allow for the information being collected to be published. The register of overseas entities that has just been created is working. I agree with all the comments made a few moments ago about most people involved in business being honest, but this Bill focuses on bad people.
Lord Faulks (Non-Afl)
My Lords, I support the amendment. I have benefited, as I dare say have a number of other noble Lords, from the briefing from Transparency International explaining why the amendment is so important and very much consistent with the theme and title of the Bill.
I too will probe a little what the Minister said about the register of overseas entities. I think he said there were 27,000 on it at the last count—I am sure the figure changes regularly—and that is encouraging. The move for a register of overseas entities was, I fear, prompted mostly by the fact that on large wastes of central London and other parts of the United Kingdom were properties whose ownership was very unclear. In reality, they were often owned by what we now seem to be calling “bad actors”—at least, we did not know who they were, whether they were bad or good actors. That information should now be much more available than it was.
I think the Committee would be most interested to know whether, with the information that is now obtained, there has been any follow-up. In the evidence we were given about the register of overseas entities, it was explained, for example, that it should enable some link-up with pursuing people under the unexplained wealth order provisions, because there would be more information—you could identify who owned a property and why, if they were a fairly low-grade official in a Russian company, for example, they now owned a property in Belgravia worth several million pounds. Similarly, how is the information assisting in sanctions and the like, and with anti-money laundering?
Generally, there is a lot of information that should be available to the various agencies as a result of the register, rather than simply ticking a box. There may be a theme in the debate that we have been having. Yes, we are enthusiastic about the increased information that is in Companies House and the increased information that will flow from the identity of those on the register, but what we really want to know is whether it will be translated into valuable information that will fulfil the aim behind this legislation.
Lord Vaux of Harrowden (CB)
My Lords, I support the amendment in the name of the noble Lord, Lord Agnew. To follow up on what has just been said, at the date of Second Reading, approximately half of the expected 32,000 companies that were going to register had done so. I gather that this figure is now 27,000, which is a good step forward. At that time, when it was a rather smaller number, I think 4,000 of those companies suggested that they were owned by trusts, which shows the scale of this issue.
I think it was the noble Lord, Lord Leigh of Hurley, on the first day in Committee, who was sceptical about whether my amendments identified the ultimate beneficial owners of trusts. He was right to be sceptical; I do not think they did. But that ultimate beneficial ownership and control is what we are trying to get to with this process. Trusts are probably the most common method used for hiding the ultimate true ownership. As I say, 4,000 out of the 16,000 companies that had filed at the time of Second Reading—a quarter—were owned by trusts, and we could no longer see where they went.
It seems very perverse that this information is hidden. I am keen to hear from the Minister a convincing explanation of why the Government feel that it should be hidden. Like the noble Lord, Lord Agnew, I see that the Minister has tabled Amendment 76H, which will extend the information required on trusts. That is very much to be welcomed. I am not at all clear—I do not think that the noble Lord, Lord Agnew, is either—on whether that information is intended to be transparent or hidden. Clearly, it should be public.
To be honest, there seem to be a lot of areas where information is hidden. We have had a number of discussions already in Committee about that. We need to step back and apply a simple principle that there should be maximum transparency, and that we should hide information only where there is genuinely a strong privacy issue. At the moment, it feels very much as if the balance is tipped too far towards privacy and too far away from transparency.
Lord Garnier (Con)
My Lords, I entirely agree with what the noble Lord has just said. Trusts are and have been frequently discussed in this Bill and its predecessors as one of the most effective ways of hiding information that ought to be made public. Clearly, some matters are properly to be kept confidential, but much of the material covered by the law of trusts ought, in the public interest, to be disclosed.
I happily support the amendment that my noble friend Lord Agnew moved a moment ago. Like him, I want to know whether the Government’s Amendment 76H renders his amendment redundant. I do not think it does, because it seems to me that there is a difference between the publication of information about trustees, which is what my noble friend talks about, and the registration of information about trusts in the Government’s proposed new clause. We can register as much as we like, but if you cannot open the box and see what is inside and has been registered, it is a pretty futile exercise. Public opinion, public policy and an assessment of the public interest suggest to me—for the reasons already given by the noble Lord, Lord Vaux, and my noble friend Lord Faulks—that the Government, if they want to maintain the difference between registration and publication, are behind the curve.
We learned a lot in my noble friend’s committee in 2019 about the huge amounts of real estate, particularly within London and a couple of its boroughs, which are owned by people, companies and trusts of which we know nothing. Many of these houses and properties were unoccupied; they were merely the physical dumping grounds for money. Obviously, they had to be paid for.
The committee on which the noble Lord, Lord Faulks, and I served was not able to discover, but sought to encourage the then Government to expose, the route by which criminal funds were laundered into London by money launderers. Any number of blocks of flats and very expensive houses, all year round, 24 hours a day, never have a single light on. You can go down smart squares in Kensington or Westminster and see places that look utterly unoccupied—because they are. They are dumps for dosh. We need to make sure that this new law is effective at exposing and, if not exposing, inhibiting before it gets here, the translation of laundered money from dodgy jurisdictions into ours. It is as simple as that. I hope the Minister is able to persuade the Committee that my noble friend’s amendment is redundant, because the Government’s amendment comprehensively and effectively does what we would like.
Lord Wallace of Saltaire (LD)
I will just add to this. As it happens, the other week my wife and I were going around the Nine Elms development, Battersea Power Station, et cetera, with an eye to when we downsize. We were told that, until then, over 40% of the apartments had been sold to people living abroad. That partly explained why it was so very quiet there; not many people were present in the complex. That raises all sorts of large questions about housing practices in London, which we need not touch on at the moment.
I want to pick up on the point made by the noble Lord, Lord Agnew, about how one establishes the ultimate beneficiary when one company is owned by another company, which is owned by a trust in another jurisdiction. That is part of what my amendment was trying to get at, as a key element before one can even begin to enforce is accurate information from regulators in other jurisdictions and territories, and how we do our best to ensure that the information we are receiving is accurate. That requires active diplomacy and co-operation between the financial parts of different Governments. We are looking for some assurance from the Minister that that is part of what is intended when the Bill becomes an Act and that we will know which parts of Whitehall will be pursuing it.
On the first day in Committee, there were some references to the role of HMRC. We have been told that Companies House will not be concerned with regulation or enforcement, but we need to know a little more about which parts of our government machine will take the lead on ensuring that we begin to unpick the cascade of trusts and companies referred to by the noble Lord, Lord Agnew, and will tell us who, in effect, the beneficial owners are.
Lord Fox (LD)
I will speak very briefly in this interesting debate. The noble Lord, Lord Faulks, referred to a theme. I agree and would characterise that theme as what Companies House knows and what is published. That publishing process turns information into actionable information, rather than just stuff in a box. We have had some useful meetings with the department and I thank them for that, but on a number of occasions the department talked about what Companies House knows; here, however, we are talking about the balance between what it knows and what is published. We are pushing much harder for more to be published. This is not prurient; it is about the point at which information becomes actionable and useful in order to do the things that your Lordships have spoken about.
I am sure that there will be issues around privacy and all sorts of things, but those can be dealt with by special process. We should not use the fact that some can legitimately require privacy to prevent all the rest of the data being published. We are asking the Minister to reassure us that his amendment does this. My sense is that it probably does not, and therefore it would be as well if he could acknowledge and address this difference between what Companies House knows and what is published, particularly in this case but there are other areas too.
Baroness Blake of Leeds (Lab)
To follow on from those comments, my comment will be very much in the same vein. We need to bring this part of the conversation into the general understanding that if we are to be successful, there has to be a root and branch reform of Companies House and the way in which it works. We need a massive cultural shift. Moving away from being a passive receiver of information to a dynamic analyser of data will be quite a step. It speaks to the need for resource to make sure that everything we are doing can be delivered. I emphasise the comments that have been made: of course we want this to succeed, but I am sure that everyone will understand our calling for more information and calling out opportunities to improve what is before us. Significant improvements can be made as we move forward.
Following on from what the noble Lord, Lord Agnew, said, we need to make sure that we do not follow the law of unintended consequences by introducing new measures and then creating new loopholes which will let bad actors fall through the net. We need to triple-check everything proposed through these measures to ensure that that cannot happen. As we have all said throughout this debate, the best way is to make sure that the data is transparent and can be viewed and seen. There have to be ways to introduce safeguards so that sensitive matters can be protected as and when they occur. It cannot be outside the bounds of possibility to make these improvements and move forward in a way that gives greater protection to all those involved.
Lord Johnson of Lainston (Con)
I thank the noble Baroness, Lady Blake, for those well-expressed sentiments. I hope the Committee knows my passion for these important reforms. I apologise for not declaring my interests at the beginning of this debate, as I should have. We have had so many different meetings it is easy to forget. It is important that I declare them because I do own companies, I have set companies up and I have been a participant in LLP structures and so on—although I do not believe I am now; please refer to my entry in the register. There is no conflict in my mind; if anything, I hope that gives me quite a good perspective on how these structures can be used for good but also by bad actors.
On the importance of eradicating corruption in our economy, there is, potentially, no greater value that a person can engage in than allocating capital to the highest point of return. That may sound a bit cynical and clear-cut but the point is that the effective functioning of our economy is what gives us the goods, services and quality of life that allow us to exist in harmony and happiness. Corruption, which we are trying to eradicate, is extremely invidious in allowing us to have successful economic growth and, in many cases, it is invisible. It is also assumed to be victimless, which is not the case: it is highly corrosive to our economy and every crime has a victim, even if they are not immediate or apparent.
Our determination to eradicate corruption and economic crime is at the core of our agenda to make our economy work better to provide better lives for our citizens. The noble Lord, Lord Coaker, raised a good point when he said that the public demand this. That is absolutely right. If one believes, as I do, in business and capitalism, and the power of capitalism to do good, if it is being distorted, that destroys our foundation and means that we do not have the true legitimacy to carry on effectively legitimate affairs, because they are conflated with illegitimate affairs.
I am completely dedicated to this mission and am grateful to all noble Peers. I am very glad that we have put on record our group support, if I can call it that, for an industry that, as we have discussed, is incredibly valuable and performs enormously important functions for companies that work in it. It is important; I am happy to state that.
Given this opportunity, I will go back over some of the statistics. The noble Lord, Lord Faulks, raised the issue of compliance. This has been well flagged; there was an assumption, perhaps, that the compliance rate is low. It has taken time for these overseas entities to register themselves. The population of entities in scope is around 32,000 but it is assumed that some of them—perhaps as much as 10%; let us say around 2,500—are dormant, defunct, in the process of being wound up or just part of the general churn of overseas entities. We now have 28,000 entities that have complied with our requirements; that is a high level if one assumes that, as I said, 2,500 or so are probably part of natural churn. So we are already looking at a non-compliance rate of maybe 1,500 to 2,000 companies out of 30,000—I know that I am making estimates; I would be happy to write to the Committee with specific numbers.
Lord Vaux of Harrowden (CB)
The Minister might be coming on to this but, when he says “compliance”, that means an entity has made a filing; it does not necessarily mean that the filing itself is compliant. The statistics that would be interesting for us are those on what the beneficial holdings behind these entities look like. Are they trusts? Are they opaque companies? It would be helpful to know that. Also, what has Companies House done—and what is it doing—to follow up on those that seem to be unduly opaque?
Lord Johnson of Lainston (Con)
I appreciate that intervention. As I said, I would be happy to write with specific information as I do not have details on all 28,000 registered businesses.
The point I want to make, which is important, is that a very large number of overseas entities have registered and, we assume, sent in information that can be confirmed and will lead to them being compliant. That is quite a high number; it allows us to focus. That is the point. The question was about what happens to the 1,500 to 2,000 or so companies that have not registered. Well, they cannot transact; they cannot participate in transactions in this country. Their assets are untransactable, which, in my view, negates the value of those assets to a significant degree. In effect, they are compelled to register and comply if they want to get their money out; that is important. Clearly, the next phase is to do the work on the companies that have registered to ensure that the information we have is accurate. We then have to make sure of why those companies that have not registered have not done so. Sometimes, there are perfectly legitimate reasons why that would be the case but, on the whole, we have made significant process.
Following our discussion earlier in Committee and the sensible points from the noble Lord, Lord Wallace—I have been glad to discuss them with my colleagues—let me say that compliance and law enforcement are at the crux of this issue. There is no point in bringing in any of this legislation—not even a single line of it—if it will not be enforced and overseen properly. My view has often been that sometimes we may not need new legislation but we need to enforce properly the legislation that we have, where a great deal of our effort will be far more effective.
Lord Faulks (Non-Afl)
I am grateful to the Minister for his clarification about the level of compliance. If will press him on one point. Last week we were provided with a useful series of notes that made this point, among others:
“Public registers allow multiple eyes to interrogate data, including the absence of data, to inform a risk-based approach to investigation and enforcement”.
I think that what the Committee would like to know is this: now that there is this compliance, who are those “multiple eyes” and what are they doing with the information that was thought necessary to eradicate some of the kleptocracy that has clearly been identified?
Lord Johnson of Lainston (Con)
I greatly appreciate the noble Lord, Lord Faulks, flagging so well the sentence that I was about to deliver. I would like to investigate further, personally as a Minister and for the benefit of this Committee, a more detailed assessment of the crime-fighting efforts that we will employ around this.
I have some good information to impart to the Committee, which to some extent answers the questions. I have particularly looked into the comments by the noble Lord, Lord Wallace, about the UAE and so on. We have signed an anti-corruption pledge or framework with the UAE in the last few years. We have in the Foreign, Commonwealth and Development Office—
Lord Johnson of Lainston (Con)
Can I just finish this particular flow of information, because I will cease to remember it if I do not get it out? I believe we have 12 Foreign Office crime experts located around the world. One of them is in the UAE, for example, and we work very hard with those countries that sit on the so-called grey list. It is important to note this. I am aware, as a Minister and a consumer, that the value and brand of a jurisdiction are extremely important. It is not effective for companies to operate easily in jurisdictions that have been classified as at risk or on the grey list.
There is clearly a hierarchy of regulatory power or brand, with the UK at the very top. When dealing with international companies, I personally always look at where a company is registered. If it is registered in the UK, we hope that the brand will grow to be even more enhanced; if it is registered in a jurisdiction about which you have doubts or that has been highlighted as at risk, it makes a significant difference to how you treat that information and the brand of that business.
Lord Agnew of Oulton (Con)
Given my noble friend the Minister’s commitment to give us some data on the whole disclosure exercise that has happened following the first economic crime Act, he mentioned that there has been a high level of compliance. We are all delighted with that, but my worry—to the point made earlier by the noble Lord, Lord Vaux—is what that actually means.
Transparency International estimates that there are at least 7,000 entities on which no light at all will be shed. In my example, JTC (Suisse) SA is a registered overseas entity. We now have that information but it means absolutely nothing, because beneath it is a cascade of other entities that we seem to have no visibility on. When the Minister puts together his reporting suite, can he let us know how many are essentially just a number or a name on a piece of paper?
Perhaps I should have raised this earlier, but in our very useful briefing with officials on Monday they explained that the ROE was set up specifically for property, and therefore a lot of the enforcement was around property assets. Property—real estate—is of course a much easier concept to deal with than the rest of the things we are talking about in commerce. A piece of paper or digital ownership of a share is much harder. I am interested to know what enforcement will happen for those much more invisible assets.
Lord Johnson of Lainston (Con)
I am constantly grateful to my noble friend Lord Agnew for his interventions and thoughtful input. I am pleased to say that we have to look forward—unfortunately not today, but maybe next week—to the section on crypto assets and similar assets. I believe that we have made great headway; this is technical and complex, and we welcome interventions and input from this Committee and anyone else that will allow us to more effectively police that area. I am very much on my noble friend’s side on this. It was certainly worth him mentioning that the register of overseas entities relates to property, which is true. I cannot comment on the specific case that he raises, but the assumption is that the data will be checked and verified. The whole point is that a registered overseas entity has to conform to our people with significant control regime and so on. That will allow us to make that assessment. I will confirm to the Committee what we are going to do in terms of reporting against that data.
As I say, there was a discussion earlier in the week about the budgetary allocations for economic crime fighting. It is very important that we show this House, and the nation at large, how much money the Government are putting into this area and how seriously we take it. I am proud of our record and want to put together a strong case to show your Lordships what we are doing. Can more resources be allocated to anything? All of us here have experience, if we have been in government, and of course it is possible. But the fact is that if I look magnitudinously over the last few years at the attention placed on this subject and the money put into it, it is a completely different story from, say, 2010—and for good reasons. It has become crucially apparent that the world has changed, and we need to react to that.
Lord Vaux of Harrowden (CB)
The noble Lord is right that it is sometimes necessary to protect the privacy of individuals. I do not think anyone in the Room would argue otherwise, but it is true that trusts can be and are used to hide real beneficial ownership. The noble Lord will correct me if I am wrong—I apologise for not having the Act in front of me—but I recall that a process within the Act allows entities to apply for their information not to be on the public register. That should cover the privacy issue. The default should be that the information is on the register. If the entity has applied for the information not to be and Companies House has accepted its reason as valid, that is fine, but the default should surely be that the information is public.
Lord Johnson of Lainston (Con)
I appreciate the noble Lord making that comment, which I will come on to but, if the Committee does not mind, I would like to correct some of my statistics. Slightly fewer than 28,000 of our overseas entities have registered, although it is very nearly that. My officials want me to be accurate, so that I never mislead this august Committee. I should also be specific about the PSC regime relating to registered overseas entities. As noble Lords know, but were kind enough not to pick me up on, they have a separate regulatory regime, which is similar to it but not actually called that. I apologise and hope that has been corrected.
Baroness Blake of Leeds (Lab)
It would be helpful if we were regularly updated on the number of overseas entities that have registered, with a running total. Otherwise, we keep having to come back and it is not clear where we are in the process.
Lord Vaux of Harrowden (CB)
I would also be grateful if the Minister could answer the question about whether there is a process for privacy.
Lord Johnson of Lainston (Con)
I am just coming on to that. The noble Baroness, Lady Blake, is right to ask for there to be a running total, because a further 717 overseas entities have complied in the recent period since my own figures were updated—so it would be quite useful to see how that is going. I would also like to separate the comments of the noble Lord, Lord Vaux, about the ability to keep some information private from the presumption of this Bill, which is the presumption for privacy for trusts rather than it being the exception.
This matter was well debated in the other place during the passage of the Bill—I am sure that some of your Lordships have had the opportunity to read that debate—but the question was what level of information should be published. Let us remember that all this information is collected by Companies House, so it is on record. In terms of crime fighting, it will be fully available to Companies House for the processes that all companies are obliged to undergo. It is perfectly reasonable to have a debate about what level of transparency there should be when it comes to publishing information. As I said before an intervention, it may also be appropriate for there to be a presumption of privacy for small, micro-entity information, given that some of those very small businesses are in effect people’s private wealth.
We should not conflate the work that we are trying to do here on Companies House, corporate transparency and reducing crime with some of the powerful principles around privacy, investment, family and protection, which are not irrelevant. It is important that we have a debate about this. The Government have committed actively to explore levels of information that should be published. The Treasury is very specific on my mandate in this discussion. I am not mandated to commit to any level of transparency above and beyond what we are already doing, which is a significant change, yet, at the same time, I can, and am keen to, commit to further debate about the level of transparency.
Lord Garnier (Con)
My noble friend’s own Amendment 76H is in a different group to this one, but it is likely that we will debate it later today. By then, he may not have had time to take further advice about the default position that we would like to see; that is, everything should be made open unless there is a good reason for it not to be. I was struck by the expression that he used a moment ago, particularly when dealing with micro-companies, that the default position should be one of confidentiality—“secrecy” is an emotive word—in favour of the micro-company and its owners as opposed to the other way around.
We are looking for a general rule, a general default position, that there should be openness unless there is a very good reason for there not to be—and, as my noble friend pointed out, there will be occasions when there is a very good reason not to have an open-source register. Is my noble friend in a position, even if he is not able to do so later this afternoon when government Amendment 76H comes to be debated, to amend or clarify the Government’s position? Can he assure us that Report will be the occasion when this further debate will be held? To say that there will be opportunities for a debate about the default position does not pin it down to a particular date or time. My noble friend will know, and the usual channels will know, that time is precious and Governments can often find an excuse, based on inconvenience, not to allow a debate that is required to take place.
Lord Johnson of Lainston (Con)
I thank my noble and learned friend for that point. Going back to the comment the noble Baroness, Lady Blake, made about the statistics on registered entities, I understand that there is a website that tracks this, which the Committee can log on to each day to see progress. We will send that link around to encourage your Lordships to look at it, but at the same time we will make sure that we provide more information about the statistics.
I cannot commit to a debate on trust transparency at this stage, but what I can commit to is that the Government are exploring this topic, which I think is separate to some of the discussions we are having. I would like to clarify my own point, which the noble Lord raised, about micro-entities and the assumption of publishing. I believe that the assumption is that the information would be published. My point was that I think it is perfectly reasonable to have differing views over this on account of areas such as privacy, if I can have a personal view as a Minister. I am very happy to have a debate about whether there is a discussion to be had around privacy for micro-entities publishing all their information, given how personal that can be. I think it is perfectly legitimate for trusts, in many instances, to be considered private affairs, so long as the authorities themselves have the transparency of information that they need.
Lord Cromwell (CB)
To pick up on the noble and learned Lord’s point about consultation, I am sure we have all welcomed the multiple times that the Minister has referred to further discussion and further consultation about topics raised today and on the previous day of debate. I think we would welcome the chance to get our diaries out fairly soon and see when those discussions could actually take place.
The other separate and more pedantic point I wanted to make is that I think the Minister said—I agree with him largely on privacy, by the way—that the trusts are repositories of assets and do not transact business, although I am ready to be corrected. I am not sure that that is a fair representation. I think that many trusts own companies and the trustees run the companies and businesses that are held, as it were, in a holding group.
Lord Johnson of Lainston (Con)
I am not surprised that the noble Lord and a Member of this Committee has corrected me on that specific point; my tone may have been misunderstood. However, I hope he understood what I was trying to get at when I differentiated trusts from corporate entities or corporations themselves. They do business, and they must be regulated. If I could differentiate my language again, between a debate and a discussion, I am very keen to have a discussion with Members of this Committee about this matter, so we can certainly get diaries out and find a time over the coming weeks to look into this in more detail. It is a very important debate to have, and I would welcome as many participants in the industry as possible to join us in that discussion.
Given what I have said and the fact that this is being actively explored by the Government, please do not think that this discussion is somehow being shut down. As I say, this policy area is controlled by the Treasury, and it is very specific about that. I am comfortable that we will have the powers in this Bill to have the flexibility to ensure that we can, when the decision is taken, provide the right amount of transparency around trusts. As a result, I ask the noble Lord to withdraw his amendment.
Lord Agnew of Oulton (Con)
My Lords, with very deep reluctance, I will withdraw it, but I want to leave on the record that the self-proclaimed “very good” Amendment 76H could be truly excellent if the Government added the simple two-line sentence that I have offered in my amendment. I suggest that there are rarely times in legislation where so much can be achieved with so little and so quickly.
Baroness Blake of Leeds
“Beneficial owners in overseas territories
In section 51 of the Sanctions and Anti-Money Laundering Act 2018 (public registers of beneficial ownership of companies registered in British Overseas Territories), after subsection (5) insert—“(5A) The Secretary of State must take all reasonable steps to ensure that an Order in Council of a kind mentioned in subsection (2) comes into force on a date no later than 30 June 2023.””Member’s explanatory statement
This new Clause would amend the Sanctions and Anti-Money Laundering Act 2018 to ensure that an Order in Council requiring open registers of beneficial ownership in the British Overseas Territories, for the purposes of the detection, investigation or prevention of money laundering, comes into force no later than 30 June 2023.
Baroness Blake of Leeds (Lab)
My Lords, included in this group is Amendment 108, which I am sure the noble Lord, Lord Wallace, will refer to. Amendment 73A is straightforward. It seeks to amend provisions in the Sanctions and Anti-Money Laundering Act 2018 to require the introduction of open registers of beneficial ownership in each of the British Overseas Territories for the purposes of detection, investigation or prevention of money laundering, and for those to come into force no later than 30 June 2023.
Lord Wallace of Saltaire (LD)
My Lords, I support this amendment. I will speak to my Amendment 108, and first make a couple of preliminary observations.
The Minister referred to “eradicating” corruption—a wonderful aim. I do not recall any economy or political system that has entirely eradicated corruption, but minimising corruption is a necessary part of any market economy. I grew up within Barclays Bank. They moved us every five years; they moved their local staff because it was a way of minimising corruption—stopping my parents getting too close to their clients. That was the sort of petty corruption that unavoidably crept into the British financial system.
Now that we have an entirely different financial system the opportunities for corruption are very different. What we are trying to do here is minimise levels of corruption in a globalised economy and financial system. I say to the Minister: even if we were to succeed in eradicating corruption entirely in this country, which would require some quite astonishing changes in our culture, we would still import corruption from abroad, as we have painfully discovered in the past 30 years. The best that we can do is to hope to mitigate and minimise.
On trusts, secrecy is often an aid to tax avoidance or tax evasion. We all know that the boundary between avoidance and evasion is very delicate, managed by large numbers of well-paid accountants and lawyers based in London, the Crown dependencies and elsewhere, and that tax evasion is an economic crime.
I have been concerned by extent clauses in a number of Bills since I entered this House. I have been increasingly puzzled by the way in which such clauses are used, partly because they normally come at the end of a Bill by which time everyone is exhausted and does not want to discuss them. I note that, in the National Security Bill—the last Bill that I dealt with—Jersey and Guernsey were included in the extent clause, but the Isle of Man was not. Moreover, the sovereign base areas of Cyprus were included in the extent of the Bill but not most of the other overseas territories; I was unable to discover why the other overseas territories in which we have military bases, such as the Falklands, Tristan da Cunha and Ascension Island, were not included. The Minister then was unable to answer that question.
This is an area of quite astonishing ambiguity—deliberate ambiguity, in a sense. The Crown dependencies and the overseas territories are not part of the United Kingdom, but they are not foreign. They are governed under British law, but they do not immediately implement all changes in British law, as my noble friend remarked. That is very convenient but, occasionally, it leaves room for ambiguity, which can be exploited.
I remind the Minister that there have been substantial problems in some overseas territories; for example, the Turks and Caicos Islands and the BVI. There are, of course, enormous temptations in territories with a small population and a huge amount of money going through. We have seen that in the past in the Channel Islands—we very much hope that things are much better there now—and more recently in some of the Caribbean territories. So we must be careful and well aware that, if this Bill is to become a successful Act with enforcement, our close financial connections with the overseas territories and Crown dependencies must form part of what we address and part of what we make sure they follow.
In one of our briefings, we were told:
“We are comfortable with the journey that the overseas territories are on, but they are not yet there.”
We are concerned that they should get there, and in good time. We are all conscious that the overwhelming majority of properties owned by overseas entities are registered in the overseas territories, primarily the BVI. So why are they not in the extent clause, given that some Crown dependencies and overseas territories have been included in the extent clauses of other Bills passed in this Parliament? How are the Government going to ensure that the commitments made that the territories will follow changes in British legislation are carried through? How will we ensure that we follow up on that? I say that with a degree of embittered experience: I recall several occasions over the past 15 years on which Ministers from different Governments promised that changes in British law would be followed within a limited period by the overseas territories, only for us to discover three or four years later that those changes had not been implemented by some of them.
This is an important area; I know that the Minister will recognise how important an area it is. The personal, financial, accountancy and legal links between Britain, the Crown dependencies and the overseas territories are extremely close, intricate and fairly opaque. We therefore need, again, some reassurance that this Bill, when it becomes an Act with the hope that it will be enforced effectively, will be enforced throughout those British territories that are not part of the United Kingdom.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to follow the noble Lord, Lord Wallace of Saltaire, and to speak chiefly to Amendment 108, to which I attached my name. I entirely agree with everything he said, and indeed with the introduction to the group. I will just add a couple of points.
My first point is about the cost. A few years ago, Transparency International calculated that the economic damage resulting from corporate secrecy in the UK’s overseas territories alone significantly exceeded the UK aid budget. These are crimes that have real victims and real costs. We must not forget that. The fact is that one hand is operating one way and the other another way, unless we take some action.
The Atlantic Council is not necessarily an organisation with which I am always 100% in agreement, but it produced an article in January entitled “Authoritarian kleptocrats are thriving on the West’s failures. Can they be stopped?” It recommended that the UK should
“address the close connections between the City of London and British Overseas Territories and Crown Dependencies”.
A further recommendation was that the UK should:
“Reduce regulatory mismatches between the primary UK jurisdictions and the Crown Dependencies.”
There is a real hole here. We can drive a cart and horses through the gaps between what is happening here and what is happening in the Crown dependencies and overseas territories. To extend the metaphor a little, for which I apologise, we might be slamming the stable door, but we are leaving the barn door open unless we address this issue.
In thinking about how these two amendments are connected, and to join them up, let us be really charitable about the capacities of these overseas territories and Crown dependencies. The population of the 14 overseas territories is 270,000 people; that of the Crown dependencies is rather less. Let us be charitable when we think of the size of their Administrations and their capacities, and think about the extreme inequality of arms between the kleptocrats and their enablers and those organisations. Even if those territories and dependencies want to do something, with the best will in the world, how can they conceivably have the capacity to do it? We have a responsibility, given the UK Government’s role, for this economic crime Bill to include this coverage. This is protection, support and assistance, as well as something that protects the whole world.
Lord Faulks (Non-Afl)
My Lords, I have great sympathy for these amendments. I congratulate the noble Lord, Lord Wallace, on his tenacity on this issue, which I have noticed on a number of different Bills. He is quite right that this issue tends to come up at the fag end of debates, so it can be overlooked. It is very important.
I have one point to make about this. There is, of course, a distinction between the Crown dependencies and the overseas territories. I speak as a former Minister with responsibility for the Crown dependencies. Their position is such that, before legislation that includes them is brought forward—certainly before it is passed—there is a well-established convention whereby the Government consult the Crown dependencies before including them in legislation, certainly by way of an amendment. I ask the Minister whether any such consultations have taken place. If not, why not? This is clearly important, and it is a long-standing issue that the Crown dependencies will no doubt have strong views about, but we need to know them before legislating.
My second point is slightly different—the Minister is quite understandably looking elsewhere at this point. I was rather disappointed by his response on the question of trusts that we would not have a debate on them now. I gently remind him that the Joint Committee on the Draft Registration of Overseas Entities Bill, which I had the privilege of chairing, reported in 2019. It emphasised the importance of trusts as a potential vehicle for fraud. The committee’s report set that out between paragraphs 76 and 79 and said that the matter needed looking at as a matter of urgency. The committee was given assurances that it would be; it was not. It took the invasion of Ukraine before the register came in. Here we have the second and final chance to look at economic crime, which would include the use of trusts as a vehicle for fraud. In those circumstances, it is very disappointing to hear from the Minister that we will not have a debate on that now.
Lord Agnew of Oulton (Con)
My Lords, I support the amendments and want to make a couple of points. First, it is not a very ambitious request that we are making of these territories: simply that they have proper anti-money laundering processes in place. If we link it to my own amendment, which I have withdrawn, we are now in a position where we have no knowledge of the ultimate owner of many of those assets and no reassurance that there is any anti-money laundering going on.
Secondly, we need to remember that it is our reputation being damaged by these territories which are not stepping up to the plate, because they are using the principles of English law and that is how they are making a very good living out of it. I again ask my noble friend the Minister what is happening to move this along. It has been sitting around for a long time and it is damaging the reputation of this country.
Lord Garnier (Con)
My Lords, I have an interest to declare in that I am presently instructed by the Government of the Isle of Man in a legal matter. Under the new rules of the House, that is declared specifically in my entry in the register—I have just been checking. It is not a very exciting piece of work: I am required to report to the Isle of Man Government on the state of their legal services sector—I know that many of you will be very jealous of that exciting piece of work. One thing that the Isle of Man is particularly keen to have recognised is that it is an independent jurisdiction. Yes, the United Kingdom and the Isle of Man share through the Lord of Mann—namely, the sovereign—a head of state. Yes, it shares many of the legal traditions and concepts that we recognise in this jurisdiction, but it is a separate jurisdiction. It has its own parliament; indeed, its parliament is probably older than this one: the Tynwald. I have received instructions, not recently but in the past, from states within the Channel Islands and from British Overseas Territories. They are all fiercely proud of their independence as separate jurisdictions. I fully understand the points and the thrust of the arguments made by noble Lords who have spoken ahead of me, but we need to be careful about how we approach extending the ambit of this legislation.
To look as though we are retaining some sort of colonial mastership over those fiercely proud and independent jurisdictions is not a good look. It does not matter whether you are in the BVI, the Cayman Islands, Guernsey, Jersey or the Isle of Man; we just need to tread politely, quietly and with consensus. I accept that noble Lords have said that this has been going on for far too long and it is time that the UK Government got their act together and started to do something about it. Of course, that would be the ideal, but, often, the best is the enemy of the good. I want the Minister to know that although this is a forum in which he might seem, from time to time, on his own, he is not. No matter of which party we are or whether we do not belong to any party at all, we are trying to achieve workable legislation which is not only comprehensive and comprehensible but carries the respect of the people against whom it might bite, because law which is not respected is law which does not have any value or purpose.
If my noble friend the Minister sometimes thinks that he is the only man standing at the gate as the barbarian hordes—the noble barbarian hordes—assail him, would he please accept from me that he has our personal friendship and our professional respect? I am sure that this sentiment covers the whole of the Committee. We know the difficult job that he is doing so please, when we come to discuss this amendment, will he accept from me that I understand it is not easy to tell the Channel Islands, the Isle of Man or the British Overseas Territories that they must do what this Parliament says?
There will therefore be many discussions, it seems to me, between his department, the FCDO and the Treasury with their counterparts in these various jurisdictions. If we can bring them with us, as opposed to clobbering them with unilateral legislation, we will achieve a much longer lasting result—albeit that I entirely accept the purpose of the amendments from the noble Lord, Lord Wallace, and the noble Baroness, Lady Bennett of Manor Castle. Here at least, going with and coming alongside, as opposed to hitting head-on, is the way to go forward.
Lord Fox (LD)
I was going to take the benefit of what I hope will be some free consultancy, when it would otherwise be highly expensive, to ask a genuine question. Were His Majesty’s Government not to take the noble and learned Lord’s advice but wished to exert their will over these territories, is the means by which that is done through an order of the Privy Council or are there other ways of doing it? If the answer is yes—I see another noble Lord nodding—what are the precedents for that in recent times?
Lord Garnier (Con)
The noble Lord saw my noble friend Lord Faulks nodding. The fact that we went to the same school, the same college at Oxford and the same Inn of Court has absolutely no bearing on this, save to say that he will answer that question in a moment. I am sure he would wish to catch the Committee’s eye. That having been said, I want to finish on this rather wishy-washy point. I sympathise with what has been said in support of these amendments, but we need to take a step back and have a reality check to see how this would be received by the people against whom it will bite.
Lord Faulks (Non-Afl)
I will, then, as I usually accept that invitation. As I understand the position, an Order in Council is the mechanism. The convention and the arrangement with the Crown dependencies that I spoke of is not the same with the overseas territories, although the points made about consulting them very much apply.
Lord Wallace of Saltaire (LD)
If I may respond to the noble and learned Lord, Lord Garnier, since I have been involved in discussion on this on a number of previous Bills, we are normally assured by the Government as a Bill goes past that there are ongoing consultations with the CDs and the OTs, and that they have been assured that the key proposals will be incorporated into their domestic law within a limited period. As I said, there have been a number of occasions when that has not happened in some territories. It has often been the weakest territories concerned and, after all, this Government have spent a good deal of money on taking over the government of the Turks and Caicos—having to intervene where things have failed. This is rather like saying, “On most occasions, we do not expect most banks or overseas territories to be involved in any form of corruption, but sometimes some will be tempted”. Some may be overcome and that is what we are trying to guard against.
Lord Garnier (Con)
The noble Lord is right, and it has not been an easy history, but these small jurisdictions have a choice. I am well aware of the criminal cases currently going on in the Turks and Caicos, and the need for direct rule there. But I have seen too many occasions—not a vast number, but too many none the less—when these small jurisdictions are prepared to be seduced by China rather than maintain their relationship with the United Kingdom. We need to be careful that we do not force these smaller jurisdictions into the arms of the Chinese, when it would be much better for their well-being and ours if we were to maintain them within our own family. I will leave it there.
Baroness Blake of Leeds (Lab)
With apologies, as I am not sure whether this is an appropriate time to raise this, but given that our amendment refers to the Sanctions and Anti-Money Laundering Act, perhaps the Minister can explain what sensitive negotiations and discussions, as the noble and learned Lord, Lord Garnier, mentioned, have taken place and the reasons for the disappointing progress. It would be helpful to have a better understanding of why we have not been able to progress.
Lord Johnson of Lainston (Con)
I greatly appreciate the noble Baroness’s comment. I would be delighted to go through this in as much detail as I can. I am very aware, as a Minister in the department and someone guiding this legislation through, as a Peer in this House and as a member of the public, of the issues the Crown dependencies and overseas territories have when it comes to reputational issues surrounding financial probity. It has been well reported and widely discussed. I am very happy to comment on that and to come back to the Committee with more information on the specific work we are doing.
If noble Lords allow me to go through my notes, I should be able to answer some of the questions. I am very grateful to the Committee for the complimentary clerking advice we received from my noble and learned friend Lord Garnier and the noble Lord, Lord Faulks, although, since they both seem to have been educated in exactly the same way, I am not quite sure why they did not both have the same answer. That might be something to revisit.
I thank the noble Lords, Lord Coaker and Lord Wallace, who I have named in my brief, for their amendments; of course, the noble Baroness, Lady Blake, spoke to her part. Before I respond to the amendments, it will be useful for me to set out the long-standing constitutional relationship that exists between the UK Government and the Crown dependencies and overseas territories, although I do not want to repeat the very helpful comments made by noble Lords, particularly my noble and learned friend Lord Garnier.
The Crown dependencies and overseas territories are not part of the UK. It may seem obvious to state that, but it is very important. They are separate jurisdictions with their own democratically elected Governments responsible for their domestic affairs, including in these areas. The noble Lord, Lord Wallace, raised the National Security Bill, which I am advised would be more relevant since we are responsible for the national security of the Crown dependencies and overseas territories, or at least many of them—I am receiving reassuring nods. It would have been appropriate, in that instance, for there to have been some mention of them in the legislation. I will explain why there is no mention of the Crown dependencies and overseas territories in this Bill.
I make very clear my sympathy with the principles expressed in this debate. I cannot remember the exact phrase that the noble Baroness, Lady Bennett, used because the metaphor was very mixed, but it was something about there being no point shutting the stable door if we leave the barn door open. I very much agree with that principle; it would seem peculiar to go to all these lengths to make our system right if there were a backdoor through a Crown dependency or overseas territory, but I do not believe that will be the case. I assure the Committee that anything that happens in the UK has to have the additional level in terms of the equivalent regulatory framework to the PSC register, whatever the framework is so called, and so on.
We have a great deal of protection around us, but we should be aware of the fact that the Crown dependencies and dependent territories make their own laws in these areas. There is a well-established constitutional convention that the UK does not legislate for the Crown dependencies on domestic matters or otherwise intervene without their consent, except in very limited circumstances. I am sure that the noble Lord, Lord Faulks, would be comfortable talking to this, but it really is in very limited circumstances. We should be aware of that and very respectful of it, since we do far better collaborating in a more powerful way to ensure that our frameworks are meshed together so that we learn from and support each other rather than being heavy-handed, even in this specific and practical sense. Furthermore, the UK Government also recognise the long-established practice that the UK does not legislate on domestic responsibilities for the overseas territories without first consulting them, other than in exceptional circumstances.
I am grateful for the thrust of these amendments. On Amendment 73A, tabled by the noble Lord, Lord Coaker, I am aware that beneficial ownership registers in British Overseas Territories and Crown dependencies have long attracted significant interest from across the House, as I said earlier, and in general from the public. But it is worth mentioning that, when these types of amendment were tabled to Bills several years ago, we were in a very different place. The point is that all inhabited overseas territories and the Crown dependencies have now committed to introduce publicly accessible registers of company beneficial ownership.
Lord Wallace of Saltaire (LD)
I will simply comment on the capacity question, which the Minister raised. There is a clear distinction between our Crown dependencies and some of our smaller overseas territories. The Crown dependencies have a lot of qualified people, and I am well aware that, in recent years, they have increased their staff capacity to cope with the rising amount of international financial business they have been dealing with. One regrets that, in some of the smaller and, I have to say, weaker overseas territories, there is not enough capacity and trained staff. They are further away from the United Kingdom. There are reputational questions and costs if and when a major scandal breaks out, as in the Turks and Caicos Islands, to the UK’s standing in the world because they are under our protection, they follow UK law and they have the reputation of having UK law.
I am conscious that this is part of a wider problem in the global financial system. The argument has been made to me in the past by people from these territories: “After all, if people do not come here as their offshore financial centre, they’ll go to somewhere dodgier and smaller, perhaps in the Pacific rather than the Caribbean.” We are all conscious of there always being that set of issues, but the UK and its associated territories need to ensure that, in managing a complicated global financial system, our overall contribution is one of which we continue to be proud and that all those territories for which we are responsible maintain higher standards. That is what this is really about.
We recognise how much has been done and how well Crown dependencies have improved the quality of their oversight in recent years, but some territories will simply not have enough people who are prepared to live there for 12 months a year to deal with the quantity and complexity of the financial movements through them. That has to be a matter for our long-term concern. I would love to hear more about the Open Ownership charity that is involved in helping them with this, because we clearly have to assist them to develop their capacity to cope with an increasingly complicated, and often dodgy, set of offerings from countries with which we have to deal but which do not have the same standards as us.
Baroness Blake of Leeds (Lab)
I thank all noble Lords who have contributed to this group of amendments. We have uncovered some important areas, but the overarching consideration, as we know and as has been mentioned, is the damage to our reputation if this matter is not addressed.
I take some comfort from the Minister’s offer to meet us to talk this through in more detail, but I remain concerned about the very real question of progress. If the necessary progress has not been made across the piece by the end of the year, I would like to know exactly what the Government are intending.
Given the sensitivity about relationships and the different stages that places are at, which has been highlighted so well, it would be useful to know whether there is an established framework around support and approach to make sure there is consistency in achieving this. This is not a terribly ambitious request; it should be straightforward. I look forward to our further discussions and, with those comments, beg leave to withdraw my amendment.
Lord Leigh of Hurley
“Requirement to notify registrar of change of auditor
(1) The Companies Act 2006 is amended as follows.(2) In section 485 (appointment of auditors of private company), at the end insert— “(6) Following the appointment of a new auditor or auditors of the company, the company must give notice to the registrar within 10 working days of the date of change, along with the name and address of the auditor or auditors.”(3) In section 489 (appointment of auditors of public company), at the end insert—“(6) Following the appointment of a new auditor or auditors of the company, the company must give notice to the registrar within 10 working days of the date of change, along with the name and address of the auditor or auditors.””Member’s explanatory statement
This new Clause introduces a requirement for private and public companies to notify Companies House within 10 working days of the appointment of a new auditor or auditors, and provide the registrar with associated details.
Lord Leigh of Hurley (Con)
My Lords, for this amendment, I will add to my previous disclosures that I am a member of the Institute of Chartered Accountants in England and Wales. By qualification, 40 years ago, I rummaged around companies Acts hoping never again to see them. Sadly, here I am again, but hey ho. In fact, I rummaged around Sections 516 and 517 of the Companies Act 2006, as amended by the Deregulation Act 2015. This imposes an obligation on a company to tell Companies House if there has been a change of auditor, but not an obligation about the details of that change.
Lord Fox (LD)
Perhaps the noble Lord, Lord Leigh, can confirm this at the end of the debate, but it is not clear to me whether losing your auditor before you appoint another would be reportable within the subject of his amendment. That is a key diagnostic, which he did not mention, of trouble afoot within an organisation. One of the benefits that we would have seen if the fourth member of the Vaux/Fox/Faulks/Foulkes group—the noble Lord, Lord Foulkes—had been here is that he would have emphasised very fully that had we seen the loss of an auditor in a particular case, we would have known that there was trouble. So, there is another element to the argument made by the noble Lord, Lord Leigh, that, in a sense, this is a very good diagnostic.
Lord Ponsonby of Shulbrede (Lab)
My Lords, I agree with everything that has been said. I too was going to allude to the case of the SNP and to make the point about auditors resigning before they are replaced. That is obviously a warning sign. I am intrigued to hear the Minister’s response. It seems such a practical suggestion. I will leave it at that, because the ball is in his court.
Lord Johnson of Lainston (Con)
I thank my noble friend and guru Lord Leigh for his Amendment 73AA, and the noble Lords, Lord Fox and Lord Ponsonby, for their contributions. I assure my noble friend that this amendment is not necessary. The Government hear his comments loud and clear but, as with all outings at this Dispatch Box as a Minister, I am unable to give the purity of the answer that we might all prefer to hear.
However, I will say that the Government are taking forward reforms to audit and corporate governance regulation separately following the publication last year of our response to the White Paper consultation on restoring trust in audit and corporate governance. The White Paper considered the information that must be provided to Companies House when an auditor leaves office, so this covers the point about the auditor leaving office rather than necessarily the appointment of a new one; that is a core point that has been raised and heard. The Institute of Chartered Accountants in England and Wales—many noble Lords in this Room have declared an interest as being a member of that august body so they will know this already, although I am not—has raised with my officials the lack of up-to-date information on the Companies House register about the appointment of new auditors.
The Government are therefore already considering how the public record might be improved in respect of appointments of auditors, including possibly via a combination of notifying the appointment when it is made, as well as updating the register if needed as part of the annual confirmation statement. We covered the point about the auditor stepping down or leaving office. This could work in much the same way that it does for the identities of company directors, which I believe will satisfy this Committee. There are already secondary legislative powers in the Companies Act 2006 on the content of the confirmation statement, and amendments to this framework are already being considered as part of the implementation of the Government’s White Paper proposals on restoring trust in audit and corporate governance.
I hope that satisfies the Committee and I therefore ask my noble friend kindly to withdraw his amendment.
Lord Leigh of Hurley (Con)
I thank my noble friend. I am not surprised by his response, although one would have thought that a Bill on corporate transparency might stretch itself this far. In answer to what we might call the Vaux-Fox syndicate, when an auditor resigns, the company has to notify the Registrar of Companies of that within 14 days. I think it is a criminal offence not to do so, for both the company and the officer. That is pretty tight; it is just what is in the notice and making sure we are aware of what is going on thereafter. However, given the reassurances from my noble friend that the Government are beavering away day and night on the audit reform, I beg leave to withdraw my amendment.
Lord Johnson of Lainston
(b) in subsection (8), at the appropriate place insert—““disqualified under the directors disqualification legislation”—(a) in relation to a statement about a person delivered to the registrar for England and Wales or Scotland, means that the person falls within any of the entries in the first column of Part 1 of the table in section 159A of the Companies Act 2006;(b) in relation to a statement about a person delivered to the registrar for Northern Ireland, means that the person falls within any of the entries in the first column of Part 2 of that table.””Member’s explanatory statement
This amendment removes a requirement to make a statement in circumstances that can in fact never exist and is otherwise consequential on the amendments to page 94 and page 96, line 20, which are tabled in the Minister’s name.
Lord Johnson of Lainston (Con)
My Lords, I will speak first to government Amendments 73B to 73E, 73G to 73J, 73N, 74A and 74B—I hope I have read them out in the correct order—on the application of disqualification provisions to general partners and registered officers. I believe these amendments are very uncontentious but stand ready to be corrected by noble Lords in this Committee.
These amendments clarify certain parts of the Bill concerning disqualified officers in limited partnerships. They ensure that the restrictions introduced by the Bill on disqualified persons in relation to companies, which noble Lords will recall were debated and agreed on the first day in Committee, will apply correctly and coherently in the context of limited partnerships.
Specifically, Amendments 73B, 73C and 73G adapt the definition of a disqualified person, as inserted by the Bill under the Companies Act 2006, to general partners and registered officers. This will determine how a disqualification under the directors disqualification legislation affects the ability to be a general partner, or a registered officer of a corporate general partner in a limited partnership, and prevents disqualified persons being registered as such by the registrar. If I can summarise them correctly, they basically mean that if you are disqualified as a company director you cannot be a general partner of a limited company, and vice versa—which obviously makes great sense, because for some reason that was not necessarily the case.
Amendments 73B, 73D to 73F, 73N, 74A and 74B remove triggers or references concerning situations that cannot, in fact, exist and replace them with clearer text. This is because the Bill currently provides for general partners and registered officers to retain their management role if they are disqualified but have a court’s permission to act. However, unlike the position for companies, the law does not currently allow the courts to disqualify a person from acting in the capacity of a general partner or registered officer. Consequently, no court is allowed to grant permissions to act in such a capacity despite disqualification. If you cannot be disqualified, you cannot be permitted to act if disqualified, if that is the correct summary.
We do, however, intend to make changes related to this in secondary legislation so that people can be disqualified from acting as a general partner of a limited partnership and so that a court can grant permissions for disqualified general partners to act in limited partnerships where appropriate. We have discussed this and, historically, there are cases in which permissions for disqualified general partners and persons are required to facilitate necessary corporate transactions.
Section 7A of the Limited Partnerships Act 1907 and the powers in Clauses 149 and 150 allow regulations to be made to apply provisions concerning companies, including the director disqualification legislation, to limited partnerships. This includes allowing disqualified individuals to be disqualified from acting as a general partner and be given permission to act in a limited partnership. However, until these regulations are made, it is essential that the primary legislation reflects the current state of the law and is clear. These amendments, I hope the Committee will agree, achieve that. They are needed as they will remove provisions relating to court permissions, which, as I stated earlier, cannot be applied. Amendments 73B, 73E, 73H and 73J will also ensure that this change is reflected in the statements that must be delivered to the registrar in relation to the status of a general partner and a registered officer.
Finally, Amendments 73H and 73J ensure that the meaning of “disqualified” is properly applied in respect to the general partners’ ongoing duty to take any steps necessary to ensure that a disqualified general partner is removed from the partnership. This group of amendments is therefore necessary to ensure clarity regarding the definition of disqualified, and the obligations on individuals in relation to disqualified general partners and registered officers. They will make the legislation clearer and stop bad actors partaking in the management of limited partnerships.
Amendments 76A to 76G concern extending the application of the company director disqualification legislation to other entities in Northern Ireland. Currently, Clause 150 of the Bill gives the Secretary of State the power to amend the Company Directors Disqualification (Northern Ireland) Order 2002 in relation to relevant entities in Northern Ireland. On reflection, because this power will be used to amend a piece of Northern Irish legislation in a devolved area, these amendments extend the power to amend the order to the Department for the Economy in Northern Ireland. They also require the Secretary of State to obtain consent from the department before making any amendments. The amendments tabled will not result in a change in policy or in the intended use of these regulations.
I therefore believe that these are reasonable amendments. They will enable the continuation of collaborative working across the devolved nations while upholding the balance of devolved law. I believe that they are uncontentious; I have had the opportunity to discuss them broadly with noble Lords here. I very much hope that we can move on this and that noble Lords will support the various amendments I have proposed so that we can continue in our work debating other issues.
Lord Fox (LD)
My Lords, I have just a couple of questions for the Minister. First, can he confirm that, in seeking to define a disqualification more clearly and explicitly—I think that is what he said—the intention is not to change that definition but merely to codify it? Secondly, in what circumstances does the Minister envisage a disqualified director being allowed, in essence, to be reinstated? In what circumstances do the Government think that might be necessary, so to speak?
Lord Johnson of Lainston (Con)
The concept of disqualification does not change. As I am sure noble Lords are aware, these amendments simply bring historical legislation in line and tidy up some points in the Bill that apply to the provision on directors acting as qualified directors when they have been disqualified but cannot actually be disqualified under the original legislation. There is not enough coherence in what happens between limited partnerships and companies. If an individual, whatever you wish to call them—a general partner, a director or so on—is disqualified, they should not be able to be a corporate person in another corporate entity, however you wish to describe it; I think we all agree with that. These amendments clearly bring consistency here. There are no changes to any expectations; this is just good practice and, as I say, tidies up important areas of consistency.
On when a director or limited general partner would be enabled to continue in operation, this would relate specifically to discharging vital duties to ensure that a company could be wound up or, if necessary, some form of share sale or transfer could be authorised. This measure is necessary to ensure that. As I understand it, the Secretary of State directs exceptions to disqualification; I will correct that if I am mistaken. It happens in exceptional circumstances; the cause is normally that specific things need to be done to release assets, make payments, et cetera. A good example is that, if a board was disqualified for good reason but there were suppliers that needed to be paid, it would not be unreasonable for one of the disqualified directors to be able to pay the suppliers. It is specific, the idea being that, once you have disqualified a director, they are disqualified although, according to this amendment, they may be enabled to perform specific functions. That is logical and common sense.
I believe that concludes my proposal.
Lord Johnson of Lainston
“(3) A general partner in a limited partnership is “disqualified under the directors disqualification legislation” if— (a) where the limited partnership is registered in England and Wales or Scotland, the general partner falls within any of the entries in the first column of Part 1 of the table in section 159A of the Companies Act 2006;(b) where the limited partnership is registered in Northern Ireland, the general partner falls within any of the entries in the first column of Part 2 of that table.”Member’s explanatory statement
This amendment makes it clear that only the first column of the table in section 159A of the Companies Act 2006 is relevant to determining whether a general partner is disqualified under the directors disqualification legislation. This is because a disqualified general partner cannot be given permission to act.
Lord Johnson of Lainston
“(a) who is one of the general partner’s managing officers,(b) who is not disqualified under the directors disqualification legislation (see subsection (8)), and(c) whose identity is verified (within the meaning of section 1110A of the Companies Act 2006).”Member’s explanatory statement
This amendment is consequential on the amendment to page 93, line 36, which is tabled in the Minister’s name. That amendment introduces a new definition of “disqualified under the directors disqualification legislation” that applies for the purpose of section 8A of the LPA 1907.
(b) be accompanied by a statement by the individual who is the proposed registered officer confirming that the individual—(i) is one of the general partner’s managing officers,(ii) is not disqualified under the directors disqualification legislation (see subsection (8)), and(iii) is an individual whose identity is verified (within the meaning of section 1110A of the Companies Act 2006).”Member’s explanatory statement
This amendment removes a requirement to make a statement in circumstances that can in fact never exist and is otherwise consequential on the amendment to page 93, line 36, which is tabled in the Minister’s name.
Member’s explanatory statement
This amendment is consequential on the amendment to page 96, line 20, which is tabled in the Minister’s name.
“(1A) The registered officer of a general partner in a limited partnership is “disqualified under the directors disqualification legislation” if—(a) where the limited partnership is registered in England and Wales or Scotland, the registered officer falls within any of the entries in the first column of Part 1 of the table in section 159A of the Companies Act 2006;(b) where the limited partnership is registered in Northern Ireland, the registered officer falls within any of the entries in the first column of Part 2 of that table.”Member’s explanatory statement
This amendment makes it clear that only the first column of the table in section 159A of the Companies Act 2006 is relevant to determining whether a registered officer is disqualified under the directors disqualification legislation. This is because a disqualified registered officer cannot be given permission to act.
Lord Johnson of Lainston
Member’s explanatory statement
This amendment removes a requirement to make a statement in circumstances that can in fact never exist.
Member’s explanatory statement
This amendment removes a requirement to make a statement in circumstances that can in fact never exist.
Lord Johnson of Lainston
“Power to make provision about winding up
After section 29 of the Limited Partnerships Act 1907 (inserted by section 130 of this Act) insert—
“29A Power to make provision about winding up(1) The Secretary of State may by regulations make provision in relation to the winding up of a limited partnership under section 28 or 29 that corresponds or is similar to any provision of the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989 (including any provision of that Act or Order that relates to the allocation of jurisdiction or distribution of business between courts in any part of the United Kingdom).(2) Before making regulations under subsection (1) the Secretary of State must—(a) obtain the consent of the Department for the Economy in Northern Ireland, so far as the regulations relate to limited partnerships registered in Northern Ireland; (b) obtain the consent of the Scottish Ministers, so far as the regulations relate to limited partnerships registered in Scotland.(3) The provision that may be made by regulations under subsection (1) by virtue of section 35(1) includes provision amending, repealing or revoking provision made by or under either of the following, whenever passed or made—(a) an Act;(b) Northern Ireland legislation.(4) Regulations under this section are subject to the affirmative resolution procedure.””Member’s explanatory statement
This amendment would mean that the Secretary of State can make provision corresponding or similar to any provision of the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989 to govern the winding up of limited partnerships under new section 28 or 29 of the Limited Partnerships Act 1907.
“Winding up of limited partnerships: concurrent proceedings
(1) The Limited Partnerships Act 1907 is amended as follows.(2) In section 6 (modifications of general law in case of limited partnerships), for subsection (3D) substitute—“(3D) Subsections (3A) and (3B) have effect subject to any order of a court as to the winding up of the affairs of the partnership and any award of sequestration of the partnership’s estate under the Bankruptcy (Scotland) Act 2016.”(3) After section 29A (inserted by section (Power to make provision about winding up) of this Act) insert—“29B Winding up of limited partnerships: concurrent proceedings(1) Where a petition under section 28 in respect of a limited partnership is pending, a general partner of the limited partnership who is or becomes aware of any of the circumstances mentioned in subsection (3) must notify the court to which the petition was presented.(2) Where an application under section 29 in respect of a limited partnership is pending—(a) a general partner of the limited partnership who is or becomes aware any of the circumstances mentioned in subsection (3) must notify the court to which the application was made, and(b) if the application was made by a person other than the Secretary of State, the applicant must notify the court to which the application was made if the applicant is or becomes aware of any of the circumstances mentioned in subsection (3).(3) The circumstances are that—(a) a petition for sequestration of the limited partnership’s estate under the Bankruptcy (Scotland) Act 2016 is before a sheriff,(b) an application to the Accountant in Bankruptcy for sequestration of the limited partnership’s estate under that Act is pending,(c) sequestration has been awarded by virtue of any such petition or application and the limited partnership’s estate is being sequestrated,(d) a trust deed in respect of the limited partnership’s estate has been sent to the Accountant in Bankruptcy for registration under that Act and the registration has not been refused,(e) a protected trust deed (within the meaning of that Act) is in force in respect of the limited partnership’s estate, (f) an application by the limited partnership for approval of a debt payment programme under the Debt Arrangement and Attachment (Scotland) Act 2002 is pending, or(g) such a programme has been approved under that Act and has not been completed.(4) A person is not required to notify the court of circumstances under subsection (1) or (2) if another person has notified the court of those circumstances.(5) If a person fails to comply with subsection (1) or (2) an offence is committed by—(a) the person, and(b) if the person is a legal entity, any of its managing officers who is in default.(6) A person guilty of an offence under this section is liable on summary conviction—(a) in England and Wales, to a fine;(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-tenth of level 5 on the standard scale.(6) A managing officer is “in default” for the purposes of this section if they authorise or permit, participate in, or fail to take all reasonable steps to prevent, the contravention.(8) But a corporate managing officer does not commit an offence as a managing officer in default unless one of its managing officers is in default.(9) Where any such offence is committed by a corporate managing officer the managing officer in question also commits the offence (subject to subsection (8)).(10) For the purposes of this section a petition or application is “pending” if it has been presented or made and it has not fallen, been withdrawn or been determined.29C Power to amend circumstances for notification under section 29B(1) The Secretary of State or the Scottish Ministers may by regulations amend the list in section 29B (3).(2) Before making regulations under subsection (1) the Secretary of State must obtain the consent of the Scottish Ministers.(3) Regulations made by the Secretary of State under subsection (1) are subject to the affirmative resolution procedure.(4) Regulations made by the Scottish Ministers under subsection (1) are subject to the affirmative procedure (see Part 2 of the Interpretation and Legislative Reform (Scotland) Act 2010 (asp 10)).””Member’s explanatory statement
This amendment would mean that if a petition has been presented under new section 28, or a person has made an application under new section 29, a general partner or person who made the application under new section 29 must notify the relevant court about other concurrent proceedings.
“Sequestration of limited partnerships: concurrent winding up proceedings
(1) The Bankruptcy (Scotland) Act 2016 is amended as follows.(2) In section 17 (concurrent proceedings for sequestration or analogous remedy)—(a) in subsection (2)(b), after “awarded” insert “and the debtor’s estate is being sequestrated”;(b) in subsection (2)(c)— (i) omit “has been made”;(ii) after “estate” insert “is pending”;(c) in subsection (2)(d), after “application” insert “and the debtor’s estate is being sequestrated”;(d) in subsection (2)(g), after “under” insert “section 27 of the Limited Partnerships Act 1907,”;(e) after subsection (2)(g) insert—“(ga) such a petition has been granted,(gb) an application in respect of the debtor is before a court under section 28 of the Limited Partnerships Act 1907,(gc) such an application has been granted,”;(f) after subsection (7) insert—“(7A) For the purposes of subsection (2)(c), a debtor application is “pending” if it has been made and has not fallen, been withdrawn or been determined.”(3) In section 18 (powers in relation to concurrent proceedings)—(a) in subsection (1), for “(g)” substitute “(gc)”;(b) in subsection (2), for “or (g)” substitute “, (g), (ga), (gb) or (gc)”;(c) in subsection (8), for “(g)” substitute “(gc)”.”Member’s explanatory statement
This amendment would mean that, if a limited partnership is in the course of sequestration proceedings, the petitioner, debtor or creditor must notify the sheriff court or AiB if they become aware of winding up proceedings under new section 28 or 29 LPA 1907 in relation to the limited partnership.
Lord Johnson of Lainston
Member’s explanatory statement
This amendment is consequential on the amendments to page 95, line 23 and page 95, line 39, which are both tabled in the Minister’s name.
Lord Agnew of Oulton
“Limited partnerships: registration of persons of significant control
(1) The Secretary of State must by regulations make provision about the registration of persons of significant control in relation to limited partnerships. (2) For the purposes of regulations under this section, “persons of significant control” may include persons with a right to—(a) 25% or more of the surplus assets on winding up,(b) a voting share of 25% or more,(c) appoint or remove the majority of managers,(d) exercise significant influence or control over the business, or(e) exercise significant influence or control over a firm which would be a person of significant control if it were an individual.(3) No regulations to which this section applies may be made unless a draft of the statutory instrument containing the regulations (whether or not together with other provisions) has been laid before, and approved by a resolution of, each House of Parliament.”Member’s explanatory statement
This amendment creates an obligation on the Secretary of State to make new provisions for Limited Partnerships to be brought into the PSC register. This is intended to improve transparency in relation to Limited Partnerships in line with companies.
Lord Agnew of Oulton (Con)
My Lords, I will treat Amendments 74 to 76 together because they all try to achieve the same thing: to ensure a similar level of transparency for limited partnerships, limited liability partnerships and Scottish limited partnerships as we are trying to achieve for companies.
I had a brief discussion with my noble friend the Minister before we started, and he felt that I was flawed in my approach. I absolutely recognise that he has a more formidable intellect than I have and has at his disposal a very accomplished drafting team. I may not have the amendments exactly right, so I would rather consider them more as probing amendments to understand why we cannot not have the same level of transparency for these entities as we have for companies.
One of the points my noble friend made was that you should not have to have a natural person as one of the partners. My answer is that, if you do not, you are back to my original Amendment 73, because you just cascade off into another miasma of entities where there is no transparency. I would be interested to hear from the Minister how we will sort out this problem if my amendments are not adequate.
I have an example of an LLP, Atlas Integrate Services LLP, that was incorporated in September 2018, where the person of significant control was two months old. My noble friend said he wished his own children were showing such entrepreneurial flair so early in their careers. This person was also married at two months but, more importantly, the incorporation document stated:
“This person holds the right, directly or indirectly, to appoint or remove a majority of the persons who are entitled to take part in the management of the LLP”.
Will the Bill get rid of that sort of behaviour? That is my concern at the moment. There are apparently some 4,000 beneficial owners across the database who are aged two or less. This is an issue, and perhaps the brave new world of the Bill will eliminate it. I would be grateful for reassurance that that will happen or to hear what the plan is.
Lord Coaker (Lab)
My Lords, I do not know whether the amendments from the noble Lord, Lord Agnew, are flawed but, if I followed them correctly, Amendments 75 and 76 in particular seek to put a human face on limited partnerships, so that at list one partner is a natural person and they are not all corporate entities.
Before I make a couple of general comments about that, can I ask the Minister a question? I could not make out from the various debates I have read about this whether the Government are saying that they will look at it in secondary legislation or that they are not going to do it. I will be corrected if I am wrong, but I thought I had read that the Government are intending to require this, but by secondary legislation.
I do not think it is adequate to require this by secondary legislation. What the noble Lord, Lord Agnew, alighted on goes to the point made earlier by the noble Lord, Lord Vaux, which has run through all the Committee—namely, who is the ultimate beneficiary? Who, in the end, gains from these various business practices? The most obvious way around that is to require a human face or somebody who is actually real.
The Minister, who is a businessman himself as well as a government Minister, said that he understands the importance of keeping public opinion on side. The public have lost trust in business from the many ways in which bad business is conducted. We had debates earlier about trusts and about privacy, and I think the Minister disappointed the Committee by saying that this was not the place for a debate about privacy and that that would be for a further debate.
The Minister is saying that the amendment from the noble Lord, Lord Agnew, is flawed because this will be dealt with through secondary legislation. My view is that it is of such symbolic importance that, somewhere along the line, the Bill requires a human face. I know that this is in respect to limited partnerships, but I think the noble Lord, Lord Agnew, has alighted on quite an important point. We continually go back to this: how do we get transparency, restore public confidence and hold bad businesses to account? How do we overcome the fact that large numbers of people, including me, think that trusts, corporate entities, limited partnerships, et cetera, are in some instances set up to hide what is actually going on? That is something that the amendment from the noble Lord, Lord Agnew, is trying to do. Ultimately, it makes a human face, somebody who is a Mr, Ms, Mrs or whatever, responsible for this aspect of business. They will be held to account.
I say to the noble Lord, Lord Agnew, that there is nothing flawed about making at least one partner in a limited partnership a natural person. It is a really important statement about how business ought to operate, which should be required not through secondary legislation but in the Bill, to show how the Government intend to ensure that we have proper business practice that is consistent with the will of Parliament. One of the ways of doing that is to ensure that, instead of some faceless bureaucracy somewhere, however it is dressed up legally, we actually have an individual who can be held to account.
Lord Fox (LD)
I will be very brief. I think that your Lordships need once again to thank the noble Lord, Lord Agnew, for his ability to get around the issues. This is a genuine issue around seeking to obfuscate the ownership of particular assets. The noble Lord seemed to have some confidence that the Minister will help us on this. The point here is that this is a genuine issue about which the Government should genuinely be concerned.
This extends beyond fraud. We were talking about trusts. One of the issues that came up after the Grenfell Tower disaster was that people found they could not know who owned the accommodation they were living in because of the protections that we have been discussing today. So they could not have a realistic conversation about whether their landlord would make their residence safe again. That is another issue, which is separate from this Bill, but it gives lie to the point that this is used to hide ownership for a variety of different reasons.
I look forward to the Minister achieving the optimism that the noble Lord, Lord Agnew, just expressed. I also thank the noble Lord for introducing the phrase “natural person”, which I have not come across before. Is that a legal definition of a human? That would be an interesting and useful thing to know for the future. With that, we on these Benches fully support these amendments.
Lord Johnson of Lainston (Con)
As always, I am grateful to noble Lords for their contributions to this debate. I have been reassured that, for the purposes of this debate, a “natural person” is a human. There was nodding behind me in the Box, which is reassuring.
Lord Johnson of Lainston (Con)
Do we have some artificial intelligence in the Civil Service Box? I think that we have natural persons’ intelligence. While I have this opportunity—I am sure that I say this on behalf of the Committee—I would like to say that the officials behind this Bill are extremely hard-working and focused; they have done everything they can to deliver a very complex piece of legislation. They have been very helpful to me and my colleagues personally and to the Ministers taking the Bill through the other place. I hope noble Lords feel that they have interacted with them appropriately. I know that they continue to stand ready to support us as we craft what I think is a magnitudinous piece of legislation that will have significant positive ramifications in the decades ahead.
I turn to the amendments presented by my noble friend Lord Agnew. I have taken advice on elements of them and their technical relevance to the Bill so, when the noble Lord, Lord Coaker, suggested that they were somehow not relevant, that was a private, legal and specific statement; it was not a philosophical one. They are very relevant to the Bill and at the core of much of what we are trying to establish: who is behind the companies and corporate entities?
The comment from the noble Lord, Lord Fox, about the ownership of property following the Grenfell Tower tragedy is a very good example. We hope that the reforms that we are making will ensure that we know who is behind corporate activity and ownership of property in this country. We have made huge strides in doing so and the Bill is very important. That is not to say that it cannot be improved but, where we feel we are including these principles, we do not suggest that noble Lords unnecessarily improve it further or confuse it. I rely to some extent on the draftsmen who advised me on this; I hope that the Committee sees this as well intentioned, in the way it is being presented.
I will first speak to Amendment 74. I commend my noble friend’s intention to increase the transparency of limited partnerships. I stress again that there is a difference between a limited partnership in Scotland, a limited partnership in England, Wales and Northern Ireland, a limited liability partnership across the United Kingdom and a limited company. They all operate slightly differently in the different jurisdictions. Please bear this in mind, as we have drafted this legislation to ensure that we have transparency across all the different concepts and principles in the right way.
I know that my noble friend Lord Agnew shares the same concerns that Dame Margaret Hodge has expressed previously. I have had the privilege of meeting her personally, as well as hearing her views, which have been extremely helpful in informing my knowledge base around this debate.
The proposed new clause would duplicate the Scottish Partnerships (Register of People with Significant Control) Regulations 2017. Scottish limited partnerships have legal personality, as noble Lords will know, which means that, among other things, they are able to own assets, enter into contracts and hold bank accounts. This results in a greater degree of opacity around Scottish limited partnerships, which is one of the features that the Bill is specifically designed to tackle.
However, as noble Lords will know, English, Welsh and Northern Irish limited partnerships are required to register with Companies House. While they are, they do not possess a legal personality separate from that of their partners. This means that it is the general partners themselves who transact on behalf of the partners. One of our senior officials likened it to a marriage, if that helps to clarify that point, in the sense that, if you are married and you own a home, the marriage does not own the home, nor does the couple; the partners—the husband and wife—own the property. I hope that that makes it clearer to some extent; it certainly did for me, although I will not go into my own home ownership percentages during this debate.
I stress that this Government completely agree with the principle that we should have greater transparency over who is managing and controlling a limited partnership. There is much in the Bill that will achieve exactly that. This is very important. I know that my noble friend Lord Agnew and the noble Lords, Lord Coaker and Lord Fox—indeed, all noble Lords in the Committee—take this extremely seriously. In fact, it is the core principle of the Bill, which includes, to go back to the specific moment, a range of measures that will make it mandatory for limited partnerships to submit a much greater range of information about their partners, including their current and former names, addresses and dates of birth.
The general partners of limited partnerships who have management responsibility—there is, of course, a difference—will be required to have their identities verified. Where a general partner is a corporate entity, it must name a managing officer with a verified identity who can be contacted about the limited partnership. That is very important as well and goes significantly further.
Lord Agnew of Oulton (Con)
Can my noble friend confirm that all the information he has just listed will be available for public inspection so that we do not get back into this cul-de-sac of my earlier concerns?
Lord Johnson of Lainston (Con)
I believe that I can confirm that but I will ensure that those facts are properly presented. It is clearly helpful for us to be specific on that.
Lord Coaker (Lab)
If somebody fails to comply properly with registering their PSC, that is a criminal offence, as I understand it. Can the Minister confirm that failing to register the PSC properly is a criminal offence? Secondly, what are the penalties for that offence?
Lord Johnson of Lainston (Con)
I am going through a slightly different point in this amendment, if the noble Lord will forgive me. I can confirm that it is a criminal offence. There is a published tariff that varies according to jurisdiction. If noble Lords do not mind, we will present that. I believe that there might be sections of the criminal tariffs in the Bill, but it is important as this is criminality. Perhaps one of the noble Lords in the Committee will be able to extract the tariff from the Bill but I will certainly write to noble Lords. They are significant penalties and fines; it is more than six months in prison in some jurisdictions. It depends on whether it is tried in Scotland and so on. I do not have all those details to hand but we will clarify that.
This is very serious. Criminality in the corporate world is an important element of what we are trying to prevent. As noble Lords know, we will discuss the “failure to prevent” principles in the next day of Committee. It changes significantly, as has been seen to be successful, in jurisdictions such as the United States of America. As the noble Lord has raised before in terms of public participation in our belief in a liberal, democratic, property-owning capitalist system, it is felt that, if we do not punish the perpetrators of financial crimes and it is felt that they are getting away with it, through either their being unable to easily prosecuted or their not being punished severely, it brings the system into disrepute and causes significant long-term philosophical and societal damage.
We look across the Atlantic at the United States and feel that it takes a different view. Financial crime is treated there as serious and significant crime, and commensurate penalties go with it. The case of Madoff was raised, where the initial tariff was a pretty significant landmark sentence—many hundreds of years, if I am not mistaken. It was certainly over 100 years or close to it, which obviously shows the principles by which that country approaches this point. While we are not operating under similar tariffs, it is important that we see criminal acts in financial crimes as significant. The tariffs around that need to reflect it, but I am happy to provide further information.
Perhaps I may finish this piece, because I hope it is relatively straightforward and that Committee members will be reassured by what we are doing. We will not support this amendment and I will ask the noble Lord to withdraw it, but the principles around making sure that we have transparency and identifiable actors in corporate structures are clearly made.
On the case of the two month-old married individual who was registered as a beneficial owner of the entity that my noble friend Lord Agnew cited, the point actually raised is that it has been recorded. It will certainly now be possible, if not essential—to some extent, with a situation as significant as that, it should have been possible—that Companies House now investigates that type of registered entry. I raise that in the sense that we are trying to ensure that the information is provided, which will set off alarm bells and allow for inquiry. We cannot prevent people from false entry. What we can do is to ensure that the penalties are there to discourage it, the investigative powers and data-scraping are sufficient to enable us to pursue it, and the data we have is clean and clear.
I do not have too long to go on these two amendments, if noble Lords will indulge me. I wish to stress to my noble friend Lord Agnew that this Government completely agree with the principle that we should have greater transparency over who is managing and controlling a limited partnership. There is much in this Bill which will achieve exactly that. The Bill includes a range of measures that will make it mandatory—I restate this—for limited partnerships to submit a much greater range of information about their partners, including their current and former names, addresses and dates of birth.
The general partners of limited partnerships will be required to have their identities verified. The PSC regulations apply to certain legal entities, including incorporated bodies such as companies and LLPs, and are about exposing who controls them. This can be otherwise unclear, given the corporate structure of those entities. While companies and partnerships share many similar characteristics, they are nevertheless fundamentally different. A limited partner, for example, does not have voting rights in the way that a shareholder does and, unlike an LLP, there is nothing in law which would force a limited partnership to have a written partnership agreement—I think this dates back to the 1880s—though many will have one.
As I have said, partnerships in England, Wales and Northern Ireland are registrable business relationships, not separate legal personalities. As such, they cannot be beneficially owned in the same way that companies and LLPs can. It would take a fundamental review of partnership legislation more broadly to apply beneficial ownership-style transparency measures to English and Welsh, and Northern Irish, limited partnerships in the way that my noble friend intends. For these reasons, I ask my noble friend to withdraw his amendment but I am very comfortable about discussions to ensure that he and any other members of the Committee are comfortable that what we are doing achieves these ends.
Amendments 75 and 76, also tabled by my noble friend Lord Agnew, would require limited partnerships and limited liability partnerships to have at least one partner who is a natural person. The Government consulted extensively on the reforms to these corporate structures. It was clearly found that corporate partners can be a legitimate and critical part of certain UK fund structures, allowing them to operate effectively. While I understand the intent of these amendments and share the desire to tackle opaque chains of corporate partners in partnerships, as with companies, having discussed the principles of these structures, it is difficult to suggest that now would be an appropriate time to make such a change.
Clause 144 already contains powers which will enable restrictions to be placed on corporate partners, as with corporate directors of companies. However, limited partnerships and limited liability partnerships have very different corporate structures to companies. Therefore we must have careful consideration and consultation is needed before any restrictions are made.
Lord Agnew of Oulton (Con)
I thank my noble friend the Minister for his comprehensive answer. He has been very reassuring.
I just want to re-emphasise the important points made by the noble Lords, Lord Coaker and Lord Fox, about the principle of accountability. If we go back to my slightly specious example of the two month-old child, we have the identity of that child so we have transparency but where is the accountability? That is what I am worried about. However, I accept that my noble friend is committed to both transparency and accountability and believes that this Bill, accompanied by the other partnerships Bill that he mentioned, will deliver them, so I beg leave to withdraw my amendment.
Lord Johnson of Lainston
Member’s explanatory statement
This amendment is consequential on the amendment to page 95, line 23, which is tabled in the Minister’s name.
Member’s explanatory statement
This amendment is consequential on the amendment to page 95, line 39, which is tabled in the Minister’s name.
Lord Johnson of Lainston
Member’s explanatory statement
This amendment is consequential on new section 29C of the Limited Partnerships Act 1907 which is inserted by new Clause (Winding up of limited partnerships: concurrent proceedings)(which is inserted after Clause 130 of the Bill).
Lord Johnson of Lainston
Member’s explanatory statement
This amendment allows the Department for the Economy to make regulations under new Article 25D of the Company Directors Disqualification (Northern Ireland) Order 2002.
“(2A) The Secretary of State must obtain the consent of the Department before making regulations under this Article.”Member’s explanatory statement
This amendment requires the Secretary of State to obtain the consent of the Department for the Economy before making regulations under new Article 25D of the Company Directors Disqualification (Northern Ireland) Order 2002.
Member’s explanatory statement
This amendment means that regulations made by the Department for the Economy under new Article 25D of the Company Directors Disqualification (Northern Ireland) Order 2002 cannot amend an Act of Parliament.
“(6A) The provision which may be made by regulations made by the Department by virtue of paragraph (5) includes provision amending provision made by or under Northern Ireland legislation, whenever passed or made.”Member’s explanatory statement
This amendment means that regulations made by the Department for the Economy under new Article 25D of the Company Directors Disqualification (Northern Ireland) Order 2002 can amend Northern Ireland legislation.
Member’s explanatory statement
This amendment is consequential on the amendment to page 136, line 10, which is tabled in the Minister’s name.
Member’s explanatory statement
This amendment is consequential on the amendment to page 136, line 10, which is tabled in the Minister’s name.
“(9) Regulations made by the Department under this Article are subject to negative resolution.”Member’s explanatory statement
This amendment is consequential on the amendment to page 136, line 10, which is tabled in the Minister’s name.
Lord Johnson of Lainston
“Registration of information about trusts
(1) Paragraph 8 of Schedule 1 to the Economic Crime (Transparency and Enforcement) Act 2022 (required information) is amended as follows.(2) In sub-paragraph (1), for paragraphs (d) to (f) substitute—“(d) the specified details of each beneficiary under the trust;(e) the specified details of each settlor or grantor and, in relation to any settlor or grantor that is a legal entity, the specified details of any person who at the time at which the trust is settled—(i) is a registrable beneficial owner in relation to that entity (if it is overseas entity), or(ii) would be a registrable beneficial owner in relation to the entity if that entity were an overseas entity;(f) the specified details of any interested person under the trust and the date on which they became an interested person.”(3) After sub-paragraph (1) insert—“(1A) In sub-paragraph (1)(d) to (f)“the specified details”—(a) in relation to a person who is an individual, means—(i) name, date of birth and nationality;(ii) usual residential address;(iii) a service address;(b) in relation to a person that is a legal entity, means— (i) name;(ii) principal office;(iii) a service address;(iv) the legal form of the entity and the law by which it is governed;(v) any public register in which it is entered and, if applicable, its registration number in that register.”(4) In sub-paragraph (2), for “sub-paragraph (1)(c)” substitute “sub-paragraphs (1)(c) and (1A)(a)”.”Member’s explanatory statement
This clause extends the information that must be provided in connection with the registration of overseas entities where a person is a beneficial owner by virtue of being a trustee.
Lord Johnson of Lainston (Con)
My Lords, I shall speak to government Amendments 76H, 77A, 77B, 77E, 77F, 77G, 77H, 77J, 77K and 77L, on the register of overseas entities provisions in Part 3 of the Bill—I am just checking that I read out the right amendments.
Lord Johnson of Lainston (Con)
I thank noble Lords; at this stage, I feel that we are operating as one team to make sure that we are creating good legislation, which is very important. I am grateful to all Members of the Committee for their helpful interventions and constructive collaboration as we come to the conclusion of the Companies House section of the Bill.
The register of overseas entities—“the register”—was created by the Economic Crime (Transparency and Enforcement) Act 2022, which I will refer to as “the 2022 Act”. This was expedited through Parliament as part of the government response to Russia’s invasion of Ukraine, as I am sure all noble Lords are aware. Overseas entities owning land in the UK must provide information about themselves and their beneficial owners to Companies House in order to retain their ability to freely transact with their land or property, which noble Lords have already discussed in some detail.
These requirements are retrospective. Overseas entities owning land in England and Wales from 1 January 1999, and in Scotland from 8 December 2014, must register with Companies House. A transitional period of six months was provided. The register went live on 1 August 2022 and the transitional period ended on 31 January 2023. At the time that the register opened, there were an estimated 32,000 overseas entities in scope, which noble Lords have discussed. Well over 27,000 entities are now registered. Given the emerging finding that a number of entities registered as proprietors may now be dissolved or struck off and the inherent challenge of contacting overseas entities, we think that this is a high compliance rate. Overseas entities seeking to acquire land or property since 5 September 2022 must provide an overseas entity ID number issued by Companies House or their application to any of the UK’s three land registries will be rejected.
I turn to the related amendments and shall speak first to government Amendments 76H, 77A, 77E, 77F, 77G, 77H, 77J and 77L, which require overseas entities that had to register on the register of overseas entities by 31 January 2023, in particular where there is a trust involved, to provide further information to the register of companies in order to counter avoidance. I believe that this amendment was raised earlier in Committee proceedings in relation to trust transparency, which, as I hope to explain, is not specifically accurate. However, noble Lords will be pleased with our efforts to ensure that we are always aware of ways in which companies can use loopholes to create avoidance and by how firm we are intending to be. As I have said, Amendment 76H is a very good amendment and I hope your Lordships share the Government’s view of that.
Overseas entities owning land in the UK are required to provide details about their beneficial owners to Companies House. Where a beneficial owner has this status because they are the trustee of a trust, the entity is required to also provide information about the trust. The kinds of arrangements that are used to hold property in the UK can be complex and difficult to penetrate, none more so than arrangements that include one or more trusts in the ownership chain.
The Government heard a lot of concern about trusts during the passage of the 2022 Act and have done so again during the passage of this Bill. The Government have listened, and this set of amendments is designed to address some of those concerns. The amendments are complex, as are the structures they seek to look through. They have been tabled to ensure that those entities that are associated with a trust cannot circumvent the requirements.
Where there have been changes to the beneficial owner of an overseas entity, to the beneficiaries of a trust, or to which trust owns the overseas entity between 28 February 2022, which is the date the Act was first published, and 31 January 2023, the end of the transitional period, these amendments require the entity to provide additional information. If changes have been made in a deliberate attempt to avoid transparency requirements, they will have been futile because under these amendments the overseas entity will be required to provide the information anyway.
Although information about trusts is not publicly available, it is a valuable and rich source of data for law enforcement agencies, including HMRC. These amendments will enhance the information held about trusts associated with overseas entities and prevent those seeking to disguise their involvement in property-owning arrangements from doing so. The amendments also make a number of consequential changes to the Act so that the new provisions can be properly inserted into the Act.
Amendment 77L provides a power for the Secretary of State to make regulations to exclude certain registrable beneficial owners from these anti-avoidance provisions. The purpose of providing this power is to ensure that the new provisions do not impose undue burdens on businesses. For example, many overseas entities holding UK land are in turn owned by large, legitimate pension funds which are trusts. It would be disproportionate to expect large pension funds to report every change in beneficiary for the relevant period, as I am sure we are all aware. The overseas entities in question will still be required to provide information about the pension fund trust and to update that information annually. The new requirements will strengthen the regime and demonstrate our intent to leave nowhere to hide.
Amendment 77A ensures that an overseas entity cannot remove itself from the live register without providing any scheduled annual update. This will help to prevent any attempt to circumvent the disclosure requirements by selling up and applying to remove the entity—I notice that the noble Lord, Lord Vaux, is nodding enthusiastically—from the register without providing the required information. This strengthens the updating requirements further and will increase the robustness of the register.
When an overseas entity is removed from the live register, the information relating to it will remain publicly visible, but there will no longer be a requirement to update it on an annual basis, as seems sensible. An entity can successfully apply for removal only if it has disposed of all its land and property assets in the United Kingdom. I hope that noble Lords will welcome and support these amendments.
Amendment 77K amends the power in Clause 166 of the Bill to provide a consent mechanism for devolved Administrations. We have included in Clause 166 a power to amend the Economic Crime (Transparency and Enforcement) Act 2022 in line with amendments made by Part 1 of the Bill to the Companies Act 2006, which relate to corresponding provisions in the 2022 Act. This power has been included to ensure that, as far as possible, we maintain consistency between the two Acts and in the way in which Companies House operates its registers.
When the 2022 Act was passed, it required legislative consent from the Scottish Parliament and the Northern Ireland Assembly because some of its provisions engaged areas of devolved competence. We have provided for Scottish Ministers or the Department of Finance in Northern Ireland to consent to any regulations made under this power that engage areas of devolved competence in Scotland and Northern Ireland respectively, as with the similar mechanisms in the amendments linked to winding-up of limited partnerships. This is a bespoke solution for this specific regulation-making power. I trust that noble Lords will support this amendment.
Lord Vaux of Harrowden (CB)
My Lords, I rise to speak to the three amendments in my name in this group, Amendments 77AA, 77C and 77D. I thank the noble Baroness, Lady Bowles, for her support for the latter two. This group addresses flaws in the original economic crime legislation, the Economic Crime (Transparency and Enforcement) Act, and makes improvements to it. That Act was rushed through as emergency business, so I welcome the Government making these improvements, and I hope that the noble Lord recognises that my amendments are trying to do the same thing.
The noble Lord has said several times now that his Amendment 76H is very good. I echo the words of the noble Lord, Lord Agnew, that it is very good but could be so much better if this information was made public by default—but we have already been there.
With these amendments, I acknowledge that I am revisiting discussions that we had during the passage of the Economic Crime (Transparency and Enforcement) Act, and I apologise to noble Lords who may feel a sense of déjà vu in that respect. Normally, I would not revisit things that we have already discussed, but I am relying on the very clear commitment from the noble Lord, Lord Callanan, who reassured us at the time that we would be able to use this Bill as an opportunity to revisit matters that would perhaps have been the subject of Divisions in less of an emergency situation than last time. I remind noble Lords that he specifically indicated a willingness to revisit the matter that my amendments in this group are trying to address. So, while it is unusual to come back to the same thing, that is why I feel justified in doing so.
Amendments 77C and 77D are aimed at removing an anomaly, or loophole, in the overseas entities register. Amendment 77AA, which is an amendment to the Minister’s Amendment 77A, follows on from the same issue. Currently, if the details on the overseas entities register are changed—for example, if there is a change in beneficial ownership—that needs to be updated on the register only annually. This means that a person could register an entity, filing all the necessary details, and could then change the ownership or other details the very next day, but they would not need to inform the registrar until the end of the year. In my view, that is an unacceptable length of time for a register to remain out of date and inaccurate. Properties could be bought and sold during that period, without anyone knowing who is really behind those transactions.
As a comparison, the PSC rules require an update within 14 days of the company becoming aware of a change. Amendment 77C aims to bring the overseas entities register into line with the PSC register and require an update within the same 14 days. This amendment is identical to one that I tried to put to the previous Bill.
This matters for two reasons. The whole point of the register is to ensure that we know who the beneficial owner of the property held by the overseas entity is. If the information can be up to a year out of date that means we do not know. More importantly, this could lead to the risk of an innocent party who buys a property from an overseas entity unwittingly enriching a criminal or sanctioned person. That cannot be desirable.
The argument against accepting this amendment that the noble Lord, Lord Callanan, made last time we debated it was that, if there was a 14-day updating duty, a person buying a property from an overseas entity could not know if the entity would be in breach of the updating requirement. Because of the way the Act works, that could mean that the innocent party might not be able to register ownership of the property that they acquired. That is obviously very serious and it is a valid concern, which is why I did not push the matter last time round.
However, the Act actually includes a solution, in that it is possible for an overseas entity to shorten the annual reporting period, so a purchaser of the property could make it a condition of the purchase that the entity shortens the period and files an update before the purchase goes ahead. That would solve the problem, but I acknowledge that that requires the purchaser to be well advised and puts the onus on the purchaser, which is not right.
This time round, I have tried to address that problem by tabling Amendment 77D, which would require that, before an overseas entity can enter into an agreement to buy or sell a UK property, it must update the register no more than 14 days before entering into such an agreement. That would both safeguard any innocent purchaser and, combined with Amendment 77C, ensure that the register is kept up to date in the same way as the PSC rules are. I hope that would solve the problem that the noble Lord, Lord Callanan, highlighted last time round so that we can bring the overseas entities register into line with the PSC register to ensure that it is kept up to date and is not up to 12 months out of date at any one time.
Amendment 77AA aims to close the same loophole when an overseas entity applies to be deregistered. I welcome the Minister’s Amendment 77A—he said that I was nodding enthusiastically and he was right—but although that amendment would require any outstanding updates to be made before an entity can be deregistered, the same loophole exists. If no update is pending, the information on the register could be a whole year out of date because there is no requirement to update the register for a year.
Amendment 77AA would simply add a requirement that an entity should make a statement that the information on the register is up to date and accurate before deregistration can be accepted. That seems an incredibly simple way of ensuring that the register is up to date before the deregistration can happen, which is important.
I hope the Minister will see these amendments as helpful and intended to improve the overseas entities register, to remove a loophole and to make it the same as the PSC rules. It is very hard to see why it should not be. I hope he feels able to accept them.
Lord Agnew of Oulton (Con)
I strongly support these very sensible proposals from the noble Lord, Lord Vaux, which really show why hereditary Peers still have such an important role in this House. It will be very interesting to hear from my noble friend the Minister why he might wish to dismiss these amendments, because they make such a lot of sense: if you are buying from one of these opaque entities, why should all the responsibility lie with the buyer, not the seller?
Lord Macpherson of Earl’s Court (CB)
My Lords, I will very briefly support the proposals. It makes sense to ensure that people who think that they are buying something legitimately are adequately informed. I like the series of amendments from the noble Lord, Lord Vaux, to solve the problem that was pointed out on a previous day.
The fact is that those of us involved with companies and so on regularly have to update the Companies House register very quickly indeed. Fortunately, because of modern technology, that is relatively easy to do. Similarly, we have to update our register of interests on a regular basis, so I see no reason why this should not apply in this important, specific case.
Lord Faulks (Non-Afl)
My Lords, the Joint Committee was certainly very concerned with the need to update when it provided its report in respect of the register of overseas entities. It particularly acknowledged that an event-driven update requirement was a much better way of securing the accuracy of the register. I entirely endorse what the noble Lord said.
Lord Fox (LD)
I thank the Minister for introducing his amendments. I broadly support them from these Benches. I note, not churlishly, that this again boosts what Companies House knows but not what it publishes. I make the point again that perhaps the default position should be the other way around.
I particularly welcome Amendment 77K. Consultation with the Scottish and Northern Ireland Governments is an important feature of what should happen.
My noble friend Lady Bowles of Berkhamsted co-signed two of the amendments and, were she here, I am sure that she would have something important to say in addition to what the noble Lord, Lord Vaux, said, but I do not. However, I have a memory of history which the Minister did not experience because he was not here at the time—namely, the process we went through to pass the precursor to this Bill.
The reason why many of us stayed our hands on this issue at the time was that the Government intended to put this through in two days: one day in the Commons and one day in the Lords. We went through all the processes in one day. The passing of amendments would have seriously jeopardised that process and none of us on opposition Benches, the Cross Benches or indeed the Government Benches wanted to do that. The Government made one or two changes to the Bill on their own account, but the promise was that, come this Bill, we would have the opportunity to revisit some of those issues.
To accommodate the point made by the noble Lord, Lord Vaux, the noble Lord, Lord Callanan, was pretty explicit about the opportunity we would have in this Bill to have the debate. That is why we are having this debate and why we all have some expectation that the Minister should be able to help us along these lines.
Lord Coaker (Lab)
My Lords, I will very briefly support the remarks made by the noble Lords, Lord Faulks and Lord Fox, and the amendments tabled by the noble Lord, Lord Vaux. I look forward to the Minister’s response.
I also broadly welcome the Minister’s amendments. I have just one question, on Amendment 77L, to which I am sure there is an easy answer. It says:
“In this Schedule ‘the relevant period’ means the period … beginning with 28 February 2022 … ending with 31 January 2023”.
How were those dates arrived at?
Lord Johnson of Lainston (Con)
I appreciate the input of all noble Lords in this Committee. That period comprises the implementation, when the Act came into force, and the compliance date. Effectively, the law announced that you had to be compliant by a certain date. There is a seven-month lead-in time and the Government are concerned that people used that time to avoid the date at which they have to declare. We are, in effect, backdating the transparency, which is very sensible. I hope the noble Lord supports that.
Lord Vaux of Harrowden (CB)
There are two elements to my amendments. One is that, if there is a change of beneficial ownership, it should be registered within 14 days, in the same way as the PSC works, because of the way that the Act works in relation to the ownership of property, the inability to dispose of property and, therefore, the risk to a potential buyer if they did not know that the company should have given an update. The second is based on the transaction. If there is to be a transaction, the information must be updated before then, which gets around the issue that the noble Lord, Lord Callanan, quite rightly raised last time. So there are two elements: one is the 14 days—we should keep the thing up to date at all times, regardless of whether there is a transaction—and the second is that we should update it if there is a transaction.
Lord Johnson of Lainston (Con)
I am grateful to the noble Lord for that further clarification. As I said, I am very aware of our desire to make sure that the register is clear and transparent, and to make sure that people, corporations, individuals and beneficiaries cannot move ownership and obfuscate the intention of transparency. What I will say is that there has to be a record of activity during the year. It is not a snapshot but a story in terms of beneficial ownership, so any beneficial ownership change has to be catalogued in that period of time.
Lord Vaux of Harrowden (CB)
That may be true, but Companies House is informed of it only at the end of the 12-month period. Therefore, the point remains that if you register a company on 1 January, change the beneficial ownership on 2 January and then do lots of transactions on 3 January, 4 January, 5 January or whatever, you can then tell Companies House that it has changed on 31 December. It could have changed multiple times in that period.
Lord Johnson of Lainston (Con)
I was coming on to make that point. I do not disagree with the philosophy of the noble Lord’s points; my point is that it is reasonable to look at this from every angle. I think that is right. We do not want to create hasty legislation, certainly not at the Dispatch Box, so I am very reluctant—as your Lordships can imagine—to support an amendment that would put me in that position. I am not unreluctant at all to try to intellectualise further how we make sure that there is a sufficient degree of transparency of overseas entities’ beneficial ownership, without putting at risk the necessary level of confidence that transactors have to have over the compliance of the transacting party. I mean no disrespect to the noble Lord by my phraseology, but it may sound like a good idea to bring these changes to bear, but I am advised that it is more complicated than it looks and it may not give us the security or transparency that we wish.
Lord Fox (LD)
I think we welcome the tone of the Minister’s comments to some extent. I wonder whether he expects to have completed the intellectual and practical investigation of this in time for Report, so as to bring forward amendments of the Government’s own making that address the issue he has signed up to intellectually. Or do the Government feel that there would be some other vehicle to deliver this?
Lord Johnson of Lainston (Con)
I thank the noble Lord, Lord Fox, for his question, which I am not able to answer as conclusively as he might wish. There may be alternative mechanisms to approach this if so desired, and if the Government believe it is the way forward and the House decides accordingly. I hope the Committee will forgive my language at the Dispatch Box and that they hear the tone of—
Lord Agnew of Oulton (Con)
I am sorry to interrupt my noble friend but, given that he is now embarking on an intellectual journey on this subject and that we are not sure when that journey may conclude, I want to add a couple of nuances. First, he is right to ask what the unintended consequences are of introducing a new step. I accept that that needs to be challenged but, to give a simple example, if you are buying a property and the conveyance has dragged on a while, I think the buyer is required to carry out further searches at the last minute to ensure that a new Tube line has not suddenly been announced under the building they are buying. There is a mechanism to do it.
The other area of interest to me goes back to the point I made earlier about the great things that have been achieved with the register of overseas entities, with its high level of compliance. None the less, Transparency International thinks that there may be up to 7,000 entities and that, although we might know their names, we do not know what they really are. The proposal of the noble Lord, Lord Vaux, would flush them out before the sale. I am sure that HMRC might be very interested in a lot of these organisations, so there would be a beneficial element which has not necessarily been thought about at the moment. I would like my noble friend to add to that to his contemplation.
Lord Faulks (Non-Afl)
To add further to the intellectual challenge, and in support of what the noble Lord, Lord Agnew, said, when you transfer land quite a lot of formalities have to be gone through, in terms of conveyancing and the like. We are just talking about another formality that needs to be complied with. I do not understand that to be particularly onerous and it is consistent with what is expected. An event-driven matter was what we raised in our report; I am not sure that it should come as a great surprise that we think this is a sensible idea.
Lord Johnson of Lainston (Con)
As I hope I have illustrated, my enthusiasm for intellectualisation is paramount, even after an enjoyable light afternoon of committee debate. If I may expand further on the difference with the legislation relating to overseas entities and other types of purchase, using my noble friend Lord Agnew’s concept about the bus route or discovering moments before one buys a house that they are going to build past it some terrible thing—I was going to say a high-speed rail line, but of course we are enthusiastic here about building high-speed rail lines in this country—that is not the same thing at all.
Here, we are talking about the concept of overseas entities and the whole principle around this is to ensure that non-compliant entities are unable to transact. That is the only way to make this process workable. It is not a question of caveat emptor or something that can be corrected later, or whatever. This will prevent a transaction from happening. If a noble Lord purchases something—we were hearing earlier about the noble Lord, Lord Wallace, going to Battersea Power Station to purchase himself a downsized retirement villa, which seemed to be an upgrading, certainly for the Johnson household—is it reasonable to have a situation in which you cannot be sure whether the party you are dealing with is compliant?
I can see the noble Lord, Lord Vaux, waiting to leap up from his seat to tell me how it is possible. If it is possible to find a solution to this principle, I would be happy to have a discussion, but I am extremely reluctant to make a decision at the Dispatch Box.
Lord Vaux of Harrowden (CB)
I do not think anyone disagrees with the Minister. I said as much when I introduced my amendments, as I am conscious that the way that the Bill works means that there is a risk to the purchaser. We need to make sure that does not happen, and I have attempted to deal with it with these amendments. If that does not work, I am open to discussions, but it would be helpful to hear the Minister confirm, as I think I understand it, that he is sympathetic to the concept of making sure that the register is updated on a timely basis. That is the core thrust of these two amendments—a way to get around that and solve the very problem that the Minister is talking about. Therefore, I am looking for confirmation that he is sympathetic to keeping the register updated, if it is possible to do that and if we can solve the property ownership problem and bring it into line with the PSC rules.
Lord Johnson of Lainston (Con)
As always, I am grateful to the noble Lord, Lord Vaux, for his comments. I just repeat the point that we have been involved in markets where there has been misregulation. If it is believed that you cannot, in effect, undertake a transaction with a registered overseas entity because it is not possible to confirm compliance, whether Companies House is able—
Lord Vaux of Harrowden (CB)
The Minister is just repeating what he said before. I am looking for something more. The thrust of these amendments is that the register should be updated more regularly than annually. It should be updated when the information changes. Is he sympathetic to that and will he accept something along those lines, as long as we can find a solution to the property ownership issue?
Lord Johnson of Lainston (Con)
I hope noble Lords will forgive me if I thought myself entitled to a small preamble to my answer. Simple yes or no answers at the Dispatch Box are rather blunt instruments for creating finely tuned legislation. Noble Lords would not respect that process if that was the case.
I hope I am not repeating but clarifying the point, for me and my officials as much as for the Committee. What is worrying the Government, and should worry us all in this Room, is the chilling effect of our regulation. We must make sure that we balance our intended ambitions with the need to ensure that business functions properly. That is what this is about. If it does not do that, it will counter the effect that noble Lords want. That is the concern.
I am coming to answer the noble Lord’s question, if he will indulge me for a few more minutes. The question of non-compliance, which is at the core of this legislation, is not the same as a caveat emptor, additional, post-purchase risk. It is totally different. If the concept of these amendments makes it difficult to be assured of the compliance of a registered overseas entity, it makes it very difficult to welcome them. If it is possible, I am open to having a discussion around ensuring a timely mechanism—I do not wish to commit to anything specific—for matters of key interest, which are more than recorded data but are relevant to the intentions that we will bring to bear in our Bill and can be managed appropriately. I am always open to discussions about how we can make that process more transparent, cleaner and easier to manage. With that very clear commitment, I ask the noble Lord to withdraw his amendment.
Lord Vaux of Harrowden (CB)
The Minister has not actually addressed Amendment 77AA, which is an amendment to his Amendment 77A. I apologise for amending his amendment again.
Lord Johnson of Lainston (Con)
If the noble Lord will allow me, I will turn to my notes on Amendment 77AA. I thank all noble Lords for their valued contributions during this debate, as I have done consistently. I know that the register of overseas entities remains an issue of keen interest to all of us—it is at the core of much of the well-placed description from the noble Lord, Lord Coaker, of public anger at what has happened over the past decades—not least the noble Lord, Lord Faulks, who I know was involved in the issues in the debate two years ago now, I believe, and others who led the pre-legislative scrutiny of the original draft legislation.
Lord Vaux of Harrowden (CB)
I am not sure that the Minister has done so because, as things stand, as I understand it, all his amendment requires is the information that is already required—that is, the annual statement. In other words, there are no statements that have not been made. Even if no pending statements are required, information can still be up to a year out of date. The whole point of this is to try to ensure that, at the point of deregistration, the information is fully up to date and has been completely updated before that happens. It is the same as when you sell a property. Even if there are no updates pending, that information could be up to a year out of date.
Lord Johnson of Lainston (Con)
I apologise to the noble Lord if I have got this wrong but, as I understand it, to be given approval to be removed from the register, an entity has to provide final information. If that is not correct, I will certainly return to the noble Lord. I am looking at my officials to see whether I have misinterpreted this but I am very grateful to noble Lords in assisting us in ensuring that we have drafted our legislation properly.
Lord Fox (LD)
Further clarification on that would be very helpful because I have lost track of where we are on that. However, I have another question for the Minister. He has on a number of occasions talked about the chilling effect. Could he enlighten us, perhaps in writing, as to how that is measured or assessed? If it is by anecdote, how many anecdotes are required to know that there is a chilling effect? If it is by objective determination, I would like to know what that objective determination is. If it is by consultation—the Minister has mentioned a number of times on a number of occasions that there has been detailed consultation but I have been unable to find any evidence of that—I think your Lordships would be pleased to be told where they can find the results of that consultation. All this would help us to understand a little bit how decisions are being made on what to put into and what not to put into the Bill.
Lord Johnson of Lainston (Con)
I am grateful to the noble Lord for that point. It inspires and helps us to come to good conclusions. We have consulted widely on a wide range of issues to ensure that we come to the right conclusions in this legislation. We also rely on the good counsel, great knowledge and intellectual capabilities of noble Lords in this Committee to help us draft, shape and form our legislation.
On the question of how we decided whether something may have a chilling effect, clearly that is a figure of speech—perhaps it has no place in such an intellectual crucible as this Room—but I reassure the noble Lord that if someone have a significant counterparty risk they will not be able to make a transaction. There are numerous organisations, companies, corporates and individuals that simply will not transact if they feel that there is no transaction security.
Lord Fox (LD)
I think I was minded to recognise that. What I was interested to receive was the input that the Minister is using to make that point—in other words, for the results of the consultations to which the Minister has referred to be shared more widely than simply the Minister’s circle and team. As far as I can tell, they have not been published. I am quite happy to keep them confidential if they need to be, but for us to empathise properly with the point that the Minister is making we need to be singing from the same hymn sheet.
Lord Johnson of Lainston (Con)
I appreciate that comment; I had not thought about that. We have not done a government impact assessment that could be published, such as the ones relating to the trade Bills that I have worked on, but if we can provide useful feedback on how we have come to some of our conclusions it would be helpful to do that. I would have thought that, in the lead-up to this, noble Lords would have made inquiries from some of the key sectors to gain good information from them, as we have.
I know for a fact that not every element, clause or amendment has been specifically consulted on because that would be impractical but, broadly speaking, we have received a great deal of information, as I understand it. My noble friend Lord Leigh’s amendment, on the publication of auditor changes, which we discussed earlier, came from our consultation with whatever august body of auditors it was that we discussed. As all noble Lords here know, I am comfortable being as open as possible. However, if I may, I will bring us to a conclusion because I would like to finish our last piece of business today, without a cost to democratic scrutiny.
I will attend to the comment from the noble Lord, Lord Vaux, about Amendment 77AA. I refute his point that this information can be a year old because that cannot be the case. The application for removal must contain information about the state of affairs at the date of the application. I do not mean to be pugnacious, but I believe that I am correct in saying that, in terms of removal from the register, the information that the noble Lord wishes to see—as we do—to prevent exactly the sorts of things that he is talking about will be there. I am very happy to double-confirm after the debate that, broadly speaking, I am right in my commitment. I would not like to give false promises, but the assumption—I have been reassured by officials during this debate—is that we are in line.
Lord Coaker (Lab)
May I just make one point about process? I think my noble friend Lord Ponsonby made this point earlier, and we have just heard it again. On quite a large number of occasions the Minister has said that he will write, provide reassurances, come back to Peers, and share letters, information, how various conclusions have been arrived at and what consultations there have been. I know that the Minister and his officials will do that but, to help move us to Report, I ask them to reflect on how to do all that in as short a period of time as possible to allow those of us who want to to consider what happened in Committee and the various conclusions. That is important so that we have a manageable Report and we deliver the sort of Bill that we want.
Lord Johnson of Lainston (Con)
I am grateful to the noble Lord for those points. As I have made clear, I hope noble Lords do not think that I am kicking the can down the road.
Lord Coaker (Lab)
I honestly do not think that the Minister is doing that; I was just trying to stress to him the importance of that process.
Lord Johnson of Lainston (Con)
Fair enough; I totally agree. Our officials are very much working on making sure that we have not missed anything. Please forgive us if we do, but I do not believe we will. My point about further discussion, as I say, is that I am convinced we are correct and there is no need for this amendment. I am convinced that we have the information that will be provided at the time of removal from the register—but I am always cautious to make sure that the exact specificity of my comments is backed up in facts. If that is not the case, I am very comfortable coming back to the Committee and being clear about it. With that in mind, I ask noble Lords not to press their amendments.
Lord Johnson of Lainston
“Applications for removal
(1) Section 10 of the Economic Crime (Transparency and Enforcement) Act 2022 (processing of application for removal) is amended as follows.(2) In subsection (2), after “land” insert “and there are no updates pending”.(3) In subsection (3), after “land” insert “or there is an update pending”.(4) After subsection (3) insert—“(3A) For the purposes of subsections (2) and (3) an update is pending if—(a) an update period for the entity has ended and the entity has not yet complied with the duty under section 7 in respect of that period, or(b) the entity is required to deliver information under Schedule 6 but has not yet done so.””Member’s explanatory statement
This requires the registrar to refuse an application for the deregistration of an overseas entity if it has not yet filed an update or certain other information that is due.
Lord Johnson of Lainston
“Verification of registrable beneficial owners and managing officers
(1) Section 16 of the Economic Crime (Transparency and Enforcement) Act 2022 (verification of registrable beneficial owners and managing officers) is amended as follows.(2) In subsection (2)—(a) after paragraph (a) insert— “(aa) about how the information is to be verified (including provision about the kinds or sources of evidence to be used);(ab) about the standard to which verification is to be carried out;”;(b) after paragraph (b) insert—“(ba) about the records that must be kept in connection with verification;”;(c) after paragraph (d)(inserted by section 156 of this Act) insert—“(e) about the information that must be provided to the registrar to enable the registrar to monitor compliance with any requirements imposed by the regulations.”(3) After subsection (2) insert—“(2A) Regulations under this section may create offences in relation to failures to comply with requirements imposed by virtue of subsection (2)(ba) or (e).(2B) The regulations must provide for any such offence to be punishable—(a) on summary conviction in England and Wales, by a fine;(b) on summary conviction in Scotland, by a fine not exceeding level 5 on the standard scale;(c) on summary conviction in Northern Ireland, by a fine not exceeding level 5 on the standard scale.””Member’s explanatory statement
This amendment makes it clear that regulations about verification can make provision about how it is carried out and the standard to which it is carried out. It also allows requirements imposed about the retention of records etc to be enforced by the creation of a summary-only offence.
Lord Johnson of Lainston
Member’s explanatory statement
This is consequential on Schedule (Overseas entities: further information for transitional cases), which is inserted before Schedule 6.
Member’s explanatory statement
This is consequential on Schedule (Overseas entities: further information for transitional cases), which is inserted before Schedule 6.
Member’s explanatory statement
This is consequential on Schedule (Overseas entities: further information for transitional cases), which is inserted before Schedule 6 to the Bill.
(b) any information required by paragraph 4(2)(c) of Schedule 6 (information about beneficiaries).” Member’s explanatory statement
This is consequential on Schedule (Overseas entities: further information for transitional cases), which is inserted before Schedule 6 to the Bill.
Lord Johnson of Lainston
“Overseas entities: further information for transitional cases
Schedule (Overseas entities: further information for transitional cases) (overseas entities: further information for transitional cases) amends the Economic Crime (Transparency and Enforcement) Act 2022 to impose further duties on overseas entities to deliver information to the registrar.”Member’s explanatory statement
This introduces Schedule (Overseas entities: further information for transitional cases).
Lord Johnson of Lainston
“(2) The Secretary of State must obtain the consent of the Scottish Ministers before making regulations under this section that contain provision that would be within the legislative competence of the Scottish Parliament if contained in an Act of that Parliament.(3) The Secretary of State must obtain the consent of the Department of Finance in Northern Ireland before making regulations under this section that contain provision that—(a) would be within the legislative competence of the Northern Ireland Assembly if contained in an Act of that Assembly, and(b) would not, if contained in a Bill in the Northern Ireland Assembly, result in the Bill requiring the consent of the Secretary of State under section 8 of the Northern Ireland Act 1998.”Member’s explanatory statement
This amendment requires the Secretary of State to obtain consent before making regulations under clause 166 that contain provision within the legislative competence of the Scottish Parliament or the Northern Ireland Assembly.
Lord Johnson of Lainston
“SCHEDULE 5A OVERSEAS ENTITIES: FURTHER INFORMATION FOR TRANSITIONAL CASES1_ The Economic Crime (Transparency and Enforcement) Act 2022 is amended as follows.2_ In section 16 (verification of registrable beneficial owners and managing officers), in subsection (1), after paragraph (c) insert—“(d) complies with the duty under Schedule 6 (duty to deliver further information about transitional period).”3_ After section 43 insert—“43A Duty to deliver further information for transitional casesSchedule 6 (duty to deliver further information for transitional cases) imposes further duties on overseas entities to deliver information.”4_ After Schedule 5 insert—“SCHEDULE 6 DUTY TO DELIVER FURTHER INFORMATION FOR TRANSITIONAL CASESApplication of this Schedule1_(1) This Schedule applies in relation to an overseas entity if—(a) the entity—(i) is registered as an overseas entity when this Schedule comes into force or has been so registered at any earlier time, and(ii) was registered as the proprietor of a relevant interest in land in England and Wales or Scotland at any time during the relevant period, or(b) the entity has committed an offence under paragraph 5 of Schedule 3 or paragraph 10 of Schedule 4 (duty to register as overseas entity in certain transitional cases).(2) For the purposes of sub-paragraph (1)—(a) an overseas entity is registered as the proprietor of a relevant interest in land in England and Wales if the entity is registered in the register of title kept under the Land Registration Act 2002 as the proprietor of a qualifying estate within the meaning of Schedule 4A to that Act;(b) an overseas entity is registered as the proprietor of a relevant interest in land in Scotland if the entity—(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,(ii) in relation to a lease that was recorded in the General Register of Sasines or registered in the Land Register of Scotland before that date is, by virtue of an assignation of the lease registered in the Land Register of Scotland on or after that date, the tenant under the lease, or(iii) is the tenant under a lease that was registered in the Land Register of Scotland on or after that date.(3) Expressions used in sub-paragraph (2)(b) are to be construed in accordance with section 9(11) and (12).(4) In this Schedule “the relevant period” means the period—(a) beginning with 28 February 2022; (b) ending with 31 January 2023.Duty to deliver statements and information2_(1) The overseas entity must deliver to the registrar—(a) any statements or information required by—paragraph 3 (changes in beneficial ownership of overseas entity),paragraph 4 (information about trusts and changes in beneficiaries under trusts),paragraph 5 (information about changes in trusts in which beneficial owners trustees),(b) a statement that the entity has complied with paragraph 8 of this Schedule (duty to take steps to obtain information), anything required by regulations under section 16 (verification of information) to be delivered to the registrar, and(d) the name and contact details of an individual who may be contacted about the statements and information.(2) If an overseas entity is registered as an overseas entity when this Schedule comes into force it must deliver the statements and information required by this Schedule—(a) at the same time as it delivers the statements and information required by section 7 on the first occasion after the end of the period of 3 months beginning with the day on which this Schedule comes into force, or(b) if it applies under section 9 for removal before then, at the same time as it delivers the statements and information required by that section.(3) If an overseas entity is not registered as an overseas entity when this Schedule comes into force it must deliver the statements and information required by this Schedule within the period of 3 months beginning when it comes into force.Information about changes in beneficial ownership3_(1) The overseas entity must deliver to the registrar the statement in row 1 of the following table or the statement and information listed in row 2.
Statement | Information | |
1 | A statement that the entity has no reasonable cause to believe that anyone became or ceased to be a registrable beneficial owner during the relevant period. | |
2 | A statement that the entity has reasonable cause to believe that at least one person became or ceased to be a registrable beneficial owner during the relevant period. | 1. The required information about each person who became or ceased to be a registrable beneficial owner during the relevant period, or so much of that information as the entity has been able to obtain. 2. The date on which each of them became or ceased to be a registrable beneficial owner if the entity has been able to obtain that information. |
Statement | Information | |
1 | A statement that the entity has no reasonable cause to believe that anyone became or ceased to be a beneficiary under the trust during the relevant period. | |
2 | A statement that the entity has reasonable cause to believe that at least one person became or ceased to be a beneficiary under the trust during the relevant period. | 1. The information specified in paragraph 8(1)(d) of Schedule 1 about each person who became or ceased to be a beneficiary under the trust during the relevant period, or so much of that information as the entity has been able to obtain. 2. The date on which each of them became or ceased to be a beneficiary under the trust, if the entity has been able to obtain that information. |
This requires overseas entities to deliver to the registrar further information about events occurring during the period beginning on 28 February 2022 and ending with 31 January 2023.