Economic Crime and Corporate Transparency Bill

Baroness Bennett of Manor Castle Excerpts

Committee stage
Tuesday 18th April 2023 Grand Committee

[Lord Naseby (Con)]

My Lords, I will be very brief. First, having chaired three public companies, I totally agree with my noble friend Lord Agnew’s Amendments 49 and 51, with the exception of subsection (1) of the proposed new clause in Amendment 51. I wonder about it being every three years; that basically means once a Parliament, and I wonder whether every two years would be more appropriate.

Secondly, I ask my noble friend: is there a difference between “foreign” and “worldwide”? Are they coterminous, or not? That is important.

Finally, proposed new paragraph (d) in Amendment 50A says that any authorised corporate service provider registering companies must

“disclose promptly on request from the registrar, or other relevant authorities including local authorities”.

Anyone who has been in local government or the chair of a major committee would like that to be a little more specific; otherwise, it opens the door to arbitration and legal matters as to whether the person making the representations is “relevant”.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I have added my name to Amendment 54 and those of the noble Lord, Lord Vaux, and the noble Baroness, Lady Bowles. I will be fairly brief, as this is an extremely unusual situation in that I agree with everything that has been said from all sides of the Committee. I will simply set out a couple of extra points.

I pick up particularly the points from the noble Lord, Lord Vaux, that journalists, campaigners and groups such as Transparency International have frequently and very bravely—at considerable financial and other risk to themselves—helped to uncover the situation that we have with the London laundromat, the centre of global corruption or whatever you call it. Many labels have been applied. These amendments, particularly Amendment 54, open this up so that people such as those can see and examine what is happening. We can see that the regulators have failed utterly to provide the sorts of checks that they should, and transparency at least enables NGOs, campaigners and others to do what should be the regulators’ work for them.

I would like to see Companies House not relying on any independent certification practices but doing its own checks. However, I acknowledge that the practical reality of that would require an enormous institutional set-up. You might ask who would pay for that. I say that, if you are going to benefit from being a limited liability company, the costs should cover it fully—but I can see that that is not going to happen. As it is not, the best possible thing is at least to make sure that these authorised corporate service providers are open to scrutiny from others.

We must not forget that we are asking those that have been the enablers of corruption, fraud and sheer robbery to become the enforcers. That is what we are doing now—asking the poachers to become gamekeepers, in more traditional terms. That carries a high level of risk. Your Lordships’ Committee has a huge responsibility to do everything we can to make sure that we have full oversight of that.

I will comment briefly on Amendment 51A in the names of the noble Lord, Lord Coaker, and others. It takes a risk-based approach in looking at the many industries we have that have huge problems. Some are identified here; the situation with car washes is a clear one. A recent study by Nottingham Trent University showed that only 11% of workers in hand car washes were getting payslips, which is the most basic arrangement to enable you to see what is going on. Not even that is happening there.

We have a huge problem in many sectors of our society. Just a couple of weeks ago, Farmers Weekly exposed huge levels of fraud and, as a result, significant public health risks in our food sector. We know what has happened in the building sector, where local councils, without the resources, have stepped away as we move to self-certification. We have huge problems with standards in that sector. These problems are there and many of them go back to the financial sector. These amendments are crucial to deal with problems right across our economy.

Finally, it sometimes seems like this is all financial, that it is not really related to people’s lives and that it is somehow a victimless crime. The reality is that we are robbing poor people around the world by enabling London to be a centre in which corrupt money is placed. In our own society, we are enabling whole sectors of our economy to be consumed by businesses built on fraud, corruption and the exploitation of workers. I have forgotten which, but a noble Lord opposite said that that makes it difficult or impossible for honest businesspeople to set up, run and thrive.

[Lord Leigh of Hurley (Con)]

My Lords, I will not join the complete love-in but I will focus on the amendment tabled by the noble Lord, Lord Cromwell, in particular on his provision that covers the point about SIC codes and the requirement that those are accurate. I will echo and perhaps take further his remarks about the problems that exist with SIC codes.

I appreciate that it would not be in the Minister’s remit to answer on this during our debate, but perhaps he might take time to write to us afterwards to comment on SIC codes. As he knows, they came into operation in 1948, when there was a very different business environment. They have been refreshed since then but the last refresh was in 2007 and a huge amount has happened since then. The Ron Kalifa report commented that about 50% of fintech companies do not have an appropriate SIC code. Many companies fall into a number of SIC codes, but a company can choose only four. In fact, out of the 5.3 million companies at Companies House, 3.9 million have chosen only one code, which says to me that they are just not taking it seriously.

Companies are not taking it seriously because they do not see SIC codes as particularly relevant or helpful to them. They often just repeat the previous year’s one, or indeed the one of incorporation, which an accountant may have chosen almost at random. As a result, many companies are choosing the SIC codes starting with “Other”, such as 82990 for other business services. In some areas, one-third of companies are going just for “Other”.

The reason this is important is that a whole lot of government decisions are made on understanding what businesses do and how many are in a particular sector. During Covid, it was apparent from the events industry that large numbers of events companies had not properly registered their business within the SIC codes, so the Government were not able to assess the needs of those companies. Likewise, for searches helping businesses to market to other businesses, unless they know what those other businesses, particularly conglomerates, undertake it is difficult for such businesses to make progress.

Private enterprise has come up with its own version of SIC codes: rating agencies and others, such as The Data City, have created their own codes that they apply to businesses. I very much hope that this might be an area of focus in the near future, so that we can enhance the existing SIC codes and give effect to the amendment tabled the noble Lord, Lord Cromwell. Then we can see what businesses actually do here in the UK.

Economic Crime and Corporate Transparency Bill

Baroness Bennett of Manor Castle Excerpts

Committee stage
Thursday 20th April 2023 Grand Committee

[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.

Economic Crime and Corporate Transparency Bill

Baroness Bennett of Manor Castle Excerpts

Committee stage
Tuesday 25th April 2023 Grand Committee

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure to rise to take part in this debate, which has been rich, full and powerful. I will seek not to repeat anything that has been said but simply to make a couple of points.

First, I offer the Green group’s support, showing that we have the broadest possible political support in your Lordships’ House for this approach. I also want to address the use by the noble and learned Lord, Lord Garnier, of “ingenious”. These amendments are not ingenious—they are obvious, reflecting an obvious step. It is interesting that a number of Members of your Lordships’ House, operating so far as I am aware entirely independently, have collectively brought together a group of amendments that forms a quite complete package. I am happy to accept that we can work on the detail, and I very much join others in wishing that the Government will work on the detail, but the package is there, approaching this issue from different angles.

I bring up a point made by the noble Lord, Lord Agnew, in the previous group, which reflected on the failures of HMRC to deal with money laundering. That is just one element of the way in which our institutions that are supposed to be taking on economic crime are simply not up to the task or resourced for it. I join the media crew here as a former newspaper editor, which is the perspective I come from. In many of the worst cases, as the noble Baroness, Lady Wheatcroft, outlined earlier, it is not law enforcement or HMRC that uncover situations that bring gross abuses and crimes to public notice but journalists and NGOs bravely stepping out to expose what is happening. The Government are not capable of doing that, and we desperately need the fourth estate to take those actions. It fills a gaping hole which otherwise will not be filled, and crimes will not be exposed if the media and NGOs are not in a position to do this.

I think the noble Lord, Lord Cromwell, referred to an important report from the Foreign Policy Centre and Article 19. Last night an event in the Houses of Parliament looked at an updated report that they had prepared called London Calling—a very timely event. To look at some of the contents of the report, it says that the UK is

“a leading jurisdiction for domestic and trans-national SLAPP cases”.

A 2020 study by the Foreign Policy Centre found that 63 journalists working on financial crime and corruption in 41 countries identified the UK as the leading international jurisdiction for legal threats. I also make the point—it was made by others, but it needs to be driven home—that this report notes that the use or threat of SLAPPs “rarely make the public record”. So, although the noble and learned Lord, Lord Garnier, says this is just a handful, it is the tip of an iceberg of people using the UK legal system for criminal purposes. It is not exposed, but we know that it is there.

I will make two final points. The world knows that that issue is there. If we think about the geopolitical state of the world now, this is broader even than the financial impacts. I note one estimate of the cost of worldwide economic crime: $274 billion. There is the financial cost, but also the impact in a world where the rule of law is under consistent attack, where we see not just individual oligarchs or kleptocrats but entire nation states attacking the rule of law. The UK is putting itself in a far weaker position by being the home where the kleptocrats, oligarchs and those states are able to use the law as a weapon.

Finally, we have mostly referred to the traditional mainstream media. Looking at the range of organisations involved in the initial launch of the Foreign Policy Centre and Article 19 report, on the panel were Tortoise Media, Open Democracy and English Pen. This concerns some very small, brave organisations with very few financial resources; it is not just the old legacy media, which still have some financial resources left. We have people stepping up to the plate. We think about London, but we have also seen a real rise of quality regional media in places such as Manchester, Liverpool and Sheffield, where local media is stepping up and doing investigative journalism. They have almost no resources to be able to take on the threats; they need legal protection, so this needs to happen at all levels. Your Lordships’ House has come up with a package that takes us a long way towards where we need to be. We must get there now. As many others have said, we cannot wait.

[Baroness Altmann (Con)]

My Lords, I add my support to my noble friend Lady Stowell’s Amendments 87, 88 and 89 and congratulate her and her committee on their work. I also support Amendment 80 from the noble Lord, Lord Thomas, and Amendments 105 and 106 from the noble Lord, Lord Cromwell. As I said at Second Reading, this is a vital issue that must be covered in this Bill. In this group, we are discussing threats and lawsuits whose intention is to silence, intimidate or censor critics such as investigative journalists. So often, as the noble Baroness, Lady Wheatcroft, explained so well, they stem from economic crime.

This issue is not just about actual lawsuits. As others have said, often the matter will start with a threatening letter or even a phone call, which is enough to stop journalists or investigators from pursuing inquiries. That is why so few SLAPPs have come to court. I respectfully disagree with my noble and learned friend Lord Garnier on whether the few cases are any indication of whether this legislation and these amendments are required. These threats and vexatious potential lawsuits threaten not just journalists, campaigners, authors or academics but everyone’s rights in this country. They limit the rights of the public to have matters exposed, such as bribe-taking, poisoning water supplies with toxic chemicals, or general economic wrongdoing, which falls squarely within the remit of this Bill. Our courts are supposed to be there to protect ordinary people and small companies without large resources against those with more power, money and influence. Without these amendments, that protection will be fundamentally weakened when we have an opportunity to strengthen it.

I am not a lawyer, but Amendment 80 seems sensible to me. I believe that the Law Society supports judiciary-led gatekeeping. Amendments 87, 88 and 89 from my noble friend Lady Stowell seek to remove the incentives to issue these kinds of threats by introducing properly meaningful fines and intend that payments should not be able to come from the proceeds of economic crime. Again, that seems eminently sensible. I will listen carefully to my noble and learned friend but, equally, I urge him to listen carefully to the powerful arguments across all sides of this Committee and either accept these amendments or introduce his own.

--- Later in debate ---

[Lord Bellamy (Con)]

I entirely accept that it is not impossible and, to take the phrase of a noble Lord earlier, that it is actually doable. I think that it was the noble Lord, Lord Cromwell, who used that phrase.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I was hoping that someone with a great deal more legal knowledge than me would rise to speak, but I feel that I need to challenge the Minister’s comment that this proposal is unprecedented. Other noble Lords will be able to say more, but we have a process of law about vexatious litigants who are unable to bring cases. There is a whole set of rules there, and there are rules in the family courts that eventually stop cases being brought. So it is not the case that this is something that has been miraculously conjured out of the air that does not exist in any form whatever in the legal framework.

[Lord Bellamy (Con)]

My Lords, on that last point I had primarily in mind the amendments that seek to criminalise bringing cases before the courts, which is the subject of some of the amendments.

--- Later in debate ---

[Lord Bellamy (Con)]

Indeed. I suggest that I meet with my noble friend and we go through it with a fine-toothed comb. I am happy to meet with anybody else who wants to go through particular amendments with a fine-toothed comb and see where we are, because there is no point in arguing about things where we are ad idem.

The same point arises on Amendment 89, which relates to POCA—I pronounce it “poker”, but others pronounce it “pocker”—and Section 327 of that Act. Amendment 89 aims to stop corrupt claimants using their criminal property to pay their legal fees. Our view on Section 327 of POCA is that that is already effectively covered because it makes it a criminal offence for anyone to convert, conceal or transfer criminal property, so the payment for legal services using criminal property is already a crime. I am led to believe that the Solicitors Regulation Authority will shortly publish new guidance on the application of POCA in relation to solicitors’ responsibilities in that respect. So our position on our amendment is that it is already covered, but again, let us discuss this in detail so that we can get it right. Formally speaking, for those reasons I ask my noble friend in due course not to press her amendment today.

I am grateful to the noble Lord, Lord Cromwell, for his Amendments 105 and 106, and for the care and attention that he has devoted to this. Again, the Government’s position is that these amendments do not quite cut the mustard, if I may put it that way.

As drafted, Amendment 105, which seeks to create a new defence, would cut across several other areas of jurisprudence. There is a common law public interest defence for a breach of confidence, and a very careful balancing, in Section 4 of the Defamation Act 2013, as to when you can have a public interest defence in defamation cases. This kind of provision should not be rushed through without a careful examination of its side effects on other legislation and potential unintended consequences. Neither does the amendment quite attack what the Government would suggest is the main problem, which is not whether you have a defence but whether you have the money to fight it in the first place. You need some cost protection to be built into the SLAPPs framework.

The same point applies to Amendment 106 on the power to strike out. There are already powers to strike out, and the noble Lord makes it clear that we need to clarify those powers—but one cannot get away from the fact that, typically speaking, a strike-out application is very expensive and complicated, because you are trying to throttle a case at the beginning and the court is having to go through a great deal of work to get there. In the end, a strike-out will probably not be effective in achieving what the noble Lord seeks to achieve. We share the objective, but we are not sure that this is the right way to do it.

While we are sympathetic to the sentiment behind the amendments, from a technical point of view, the Government do not think that they are quite right. Unscrupulous claimants could exploit all this by ensuring that the process remains very complicated, long and burdensome. That is the Government’s position on these amendments. I repeat that I am very happy to engage so far as I can in a dialogue with noble Lords to see whether we can make further progress on the technicalities of this issue and look for a proper legislative vehicle in which to carry it forward.

[Baroness Bennett of Manor Castle (GP)]

I do not believe the Minister addressed the point that I and a number of other noble Lords raised about the international dimension of this, and the UK’s position in the international framework. Noble Lords may have seen that the noble Baroness, Lady Kennedy of The Shaws, was joined in this Committee by some guests, one of whom was Sebastien Lai, the son of Jimmy Lai, who was a victim of what has been labelled lawfare by the Chinese state in Hong Kong. We are also seeing British institutions being used as a weapon for that lawfare. Does the Minister acknowledge that there is a true international reputational issue and that the whole rule of law across the world is under attack?

Reflecting on what the Minister said, I think we heard something of a hint about the Government’s thinking that cost protection could be one way of addressing this issue. That fails to address the point made by the Labour Front Bench and others that, even if there is cost protection, an enormous amount of time, energy and stress goes into a case. Even if you are able to take away the financial threat, you are taken away from doing other journalism if you have to spend months engaging in a case.

--- Later in debate ---

[Lord Bellamy (Con)]

Again, I thank the noble Lord for his remarks. The key problem is to distinguish access to justice from harassment. It is quite difficult, but it can be done. That is my answer to that question. On where the Government are, as I said before, we are working on drafts, but I cannot go any further than that until I know whether there is a legislative vehicle and which it can be. I am sorry not to be able to commit the Government at the Dispatch Box today any further than that but, as I said, I am hoping—and I can only express as a hope—that this is a short-grass and not a long-grass issue.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I apologise to the Committee, I perhaps should have declared my position as co-chair of the All-Party Parliamentary Group on Hong Kong in my last intervention.

[Lord Thomas of Gresford (LD)]

My Lords, I am grateful to Minister for his response and look forward to discussing these issues with him. I am grateful to all noble Lords who have spoken, and in particular to the noble Baroness, Lady Stowell. I commend her and her committee for the work they have done in investigation and taking evidence on this issue. I admire the guts and determination of the noble Lord, Lord Cromwell, and the fury of the noble Lord, Lord Agnew, on this issue.

I do not want to speak for too long: we have had a very long debate. The only dissenting voice was that of the noble and learned Lord, Lord Garnier. Your Lordships may recall that I said that, when the results of the consultation were looked at, the claimants’ lawyers were saying, “There’s nothing to see here, guv. It’s all the ordinary rough and tumble of litigation in this country”. The noble and learned Lord, Lord Garnier, referred to his experiences in the bear garden. I remember the bear gardens—I remember appearing in a bear garden for the leader of the Opposition in the Singapore Parliament; it was not an easy position. He was suing the Straits Times for libel, and the application to strike out was made on the grounds that he had no reputation in this country. When he died, some years later, he had obituaries in the Times, the Telegraph and the Guardian.

I know the games that these media lawyers play. They do not face up to some of the realities that we in the criminal courts perhaps have to face from time to time. But I have the highest regard for the noble and learned Lord, Lord Garnier, in his professional capacity, so nothing that I say should be taken as derogatory to him—otherwise, subject to professional privilege, I might find myself in court.

Economic Crime and Corporate Transparency

Baroness Bennett of Manor Castle Excerpts

Committee stage
Thursday 27th April 2023 Grand Committee

I urge the Minister to continue the discussions about what more can be done and to give serious consideration between now and Report to including this amendment, or something like it, in the Bill as it proceeds to the statute book. I beg to move.

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a great pleasure to follow that powerful, comprehensive and, I think, highly persuasive speech from the noble Lord, Lord Alton. I will be extremely brief but, given there was not space to attach my name to this amendment, I wanted to briefly offer Green support. I hardly need to declare my position as co-chair of the All-Party Parliamentary Group on Hong Kong, as the noble Lord, Lord Alton, has already done that, but I will do so for the record.

I just want to make two points. I am perhaps slightly less optimistic than the noble Lord, Lord Alton, who said that if we create this law, the sanctioned individuals will declare. However, this amendment would create a weapon to use against them when they do not. So I would perhaps frame that slightly differently. This really relates to the debate on the previous day in Committee when we talked about SLAPPs. We know the limitations—we have just been discussing the limitations of the resourcing and capacity of our enforcement vehicles. It will likely very often be NGOs and journalists who expose this, but if we bring in the anti-SLAPP rules and this rule, we will see the seizures actually happening and the Bill being effective.

Secondly, through this Bill we are aiming—as we aimed with the previous economic crime Bill—to close lots of loopholes. I assume, however, that not even the Minister will say that, once we have done all this, everything will be fixed and we will not have any future problems. As evidence for that, in August last year the register of overseas entities came in and yet the figures show that little more than half the relevant properties owned by overseas companies have been declared.

We in this Committee are looking at making a difference not just in theory but in practice, and that is what this amendment would do.

[Lord Fox (LD)]

My Lords, it is a great pleasure to support the noble Lord, Lord Alton, on this amendment. I have supported him on a number of amendments in other areas, and I have learned not to do too much research because however much you have done, he will have said it by the time you get the chance to say it.

The Government have recognised the importance of asset seizure. Back in the heady days of March 2022, the then Exchequer Secretary to the Treasury, James Cartlidge—he has of course moved on since then—said that the Government were looking at

“how we can go further to crack down on illicit money in British property, including considering temporary asset seizures beyond the freezing regime that we already have in place”.—[Official Report, Commons, 22/3/22; col. 147.]

However, that is not an easy task, and this is a bit more than closing a few loopholes. Many experts have flagged risks relating to seizing assets—I am sure that the Minister will remind us of that when we come to it—particularly without the necessary proof of criminality. For assets belonging to individual oligarchs, concerns have been raised over the rule of law, due process and property rights. In the case of state assets, objections include sovereign immunity—something that I think I mentioned in a previous debate—and the fear that other states may withdraw their reserves. This is a big issue, as the noble Lord, Lord Alton, mentioned. When we focus on the Russian sanctions, for example, we see that the UK has frozen billions of pounds of Russian assets under the sanctions following the invasion of Ukraine. The Office of Financial Sanctions Implementation—OFSI—has reported that £18 billion owned by individuals and entities associated with Russia’s regime has been frozen since the beginning of that war. Some estimates suggest that more than £40 billion could be frozen or immobilised if further sanctions were put in place.

However, assets frozen under sanctions are passive. Funds frozen under the UK sanctions regime cannot be retrieved or repurposed. In fact, these should be returned at the end of the war if sanctions are lifted. Meanwhile, as the noble Lord, Lord Alton, pointed out, the UK is asking the taxpayer to fund the war effort and, no doubt, the repair of Ukraine if and when we get to that point. So, there is quite a lot at stake.

Amendment 85 is a way of trying to do this and cut through the complication relatively simply and ingeniously —for which I claim no credit. It seeks to strengthen the UK sanctions regime and find a route that allows us to recover these frozen assets, which have been concealed in the past. As we have heard, the mechanism we propose would impose a duty on sanctioned persons proactively to disclose all their assets held in the UK and criminalise the failure to disclose such assets as a form of sanctions evasion.

If a sanctioned person fails to declare all their assets and further assets are uncovered by the authorities, they are guilty of a criminal offence—sanctions evasion. Those undisclosed assets may then be seized under the Proceeds of Crime Act 2002. This seizure would be subject to the same safeguards that courts currently uphold in criminal and civil recovery processes, following due process and ensuring that any deprivation of private property is not disproportionate to the public interest in seizing the proceeds of crime.

Given that sanctions evasion is already a criminal offence in the UK, this amendment would be a straightforward way rapidly to scale up assets that may be susceptible to seizure. Adding a requirement to disclose all assets held within six months prior to designation would also capture assets such as those set out by the noble Lord, Lord Alton. It is for these reasons that we support this amendment.

--- Later in debate ---

[Lord Vaux of Harrowden (CB)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Morgan, who so ably chaired the Fraud Act 2006 and Digital Fraud Committee of which I was also a member. She has given a lot of detail, so I will try to slash out bits of my speech that she has already covered and not repeat too much—I apologise if I fail slightly in that.

I think that we all know about the scale of fraud in this country. However, I think it is worth repeating what the noble Baroness, Lady Morgan, said about the impact that fraud has on the victims. This is not just a financial crime and “Oh, I’ve lost some money”. We heard stories about mental health issues, even suicide, arising from frauds. It is a really serious matter. Losing your life savings is serious but it goes way beyond that.

Yet we do not seem to have taken much action. We have heard several times about the 1% of law enforcement resources that are focused on it. The government response has been fragmented—we refer in our report to an “alphabet soup” of bodies dealing with it. Our report referred to this creating

“a permissive culture across Government and law enforcement agencies towards fraud and the criminals who perpetrate it”.

At the risk of sounding like a stuck record, we have been waiting for months for the national fraud strategy—I think I detect that the Minister is as frustrated as we are about the delay. I am pleased that it has moved from “shortly”, as he said on 15 November last year, to “genuinely imminent” today. We look forward to it. However, the delay does not inspire huge confidence in how seriously the Government are taking this.

The noble Baroness, Lady Morgan, described what we called the “fraud chain” in our report. It is sometimes known as the “kill chain”; we decided that that was not a particularly pleasant phrase, but it again conveys the seriousness of it. Some parts of the chain are, at last, taking action. In particular, the banking sector has taken a number of actions that have had a positive impact; the introduction of the confirmation of payee process is a good example. But why has that sector in particular taken action? I would argue it is because it has had, almost alone in the chain, a real financial incentive to do so with the voluntary reimbursement code. It has been on the hook for paying back and reimbursing, therefore it is trying to do something to stop it. The voluntary code is now becoming mandatory under the Financial Services and Markets Bill, which is welcome.

It is also interesting to see, in the financial services and banking area, some competitive elements creeping in. The TSB uses the fact that it now reimburses all APP fraud losses as a selling point, which is encouraging. On the other hand, those banks that did not sign up to the voluntary reimbursement code are often cited as being more likely to see greater fraud levels on their customers; with less incentive to take action, they have taken less action. Making the code mandatory will, I hope, force them to start to do so.

We have heard about the other players in the fraud chain, those who make it possible for the fraudster to carry out the fraud—the enablers, if you like. They have no such incentive to act at the moment and, as a result, they have not acted, or not in any meaningful way. These enablers are players such as social media companies, search engines, online dating companies, the telecoms industry, website hosting companies, email platforms, ISPs, online gaming platforms, intermediary platforms and those selling bulk SIM cards or SIM farms, which the fraudsters use—and many more. I am sure that, as this area moves and changes, as it does very rapidly, we will see fraudsters constantly jumping into new areas and doing new things. They will react; there will be plenty more that we have not thought about.

From speaking to a major UK fintech, I know that around half the frauds it sees start from platforms operated by Meta, and more than half arise on just four platforms. In a debate on protecting vulnerable people from fraud on 2 December 2021, the noble Baroness, Lady Williams of Trafford, answering for the Government, said:

“As for discussions with Facebook, I have lost count of the number of discussions that I have had. One thing that we said way back in the day was, ‘Look, if you don’t sort some of these problems out, we’re going to legislate to sort them out’—and this is where we are now”.—[Official Report, 2/12/21; col. 316GC.]


A year and half later, we are still there.

As we have heard, we were particularly unimpressed with the telecoms industry, which was at best depressingly complacent. Who in this Room has not received a fraudulent SMS message or phone call appearing to come from a UK number such as HMRC or Royal Mail? I guarantee that nobody in this Room has not. To be fair, some telecoms companies are now taking action. EE, for example, flags suspicious calls, which proves that it can be done. But most have not taken action. They are paid for all these calls and texts, as the noble Lord, Lord Sandhurst, has said but, because there is no come-back on them at all, they have taken little or no action to stop them. I have not been able to find reliable data as to what proportion of scams originate from telecoms companies; rough data seems to indicate that it is somewhere around 20% to 25%.

Amendment 94 aims to create an incentive for all players in the fraud chain to take action. Effectively, it creates an offence of failing to take reasonable steps to prevent the use of a company’s services for the purpose of committing fraud—by a third party; it does not have to be related to the company. The amendment is deliberately scoped widely, rather than industry by industry; it tries to make it so that anyone providing a service that could reasonably be expected to be used by fraudsters should have to take reasonable steps to detect and prevent that use. That does not seem particularly extreme. It creates a defence that the company had in place such procedures as it was reasonable, in all the circumstances, to expect to detect and prevent the use of its services for the purposes of committing fraud, or that it could not reasonably have known that they were being used for such purposes.

When we get to the discussion that we will no doubt have about this being disproportionate, I will disagree. Any court is going to look at a small company, and that is one of all the circumstances that it will take into account when deciding what would be reasonable for detecting and preventing fraud. It cannot be too much to ask that companies should have to put reasonable procedures in place. I think that it is a pretty low bar, but I am sure that we would all be very happy to discuss how the amendment might be tweaked or changed to ensure that it does not have a disproportionate impact on businesses. But it would be good to hear whether, first, the Minister agrees that there is genuinely a problem in this area and, secondly, whether he agrees conceptually that creating a real incentive for companies to take more care to ensure that their services are not being used by criminals is necessary.

The Online Safety Bill goes some way to achieving this in some respects—and I thank the Minister for arranging for me to meet officials yesterday, who were extremely helpful in getting me up to speed on what that Bill does. It does that especially in relation to fraudulent advertising, and that is very welcome, but it does not cover all the enabling industries, even the ones we know about now, let alone those in future. It does not cover telecoms, email providers or web-hosting companies, for example, and is more focused on the large players. It also does not cover all the activities. Previously I mentioned people selling SIM farms or other tools used by fraudsters. They would not be caught by it. It will not catch the SMS with a link to a fake Royal Mail site, for example.

What worries me is that the approach of using lots of different pieces of legislation to deal with this problem, such as the Online Safety Bill and the others that the noble Baroness, Lady Morgan, mentioned, leaves us in danger of creating a piecemeal approach, mirroring the alphabet soup of responsible bodies that I mentioned. This amendment would create an overarching obligation on any business to take reasonable steps to prevent the use of its services by fraudsters, whether on or offline.

Amendment 91, in the name of Baroness Bowles, attacks the problem from the point of view of regulators, conferring a duty on them, or giving them the option, to create a duty to prevent or facilitate crime regulation. It names a number of regulators, including Ofcom in respect of telecoms and other communications platforms. It mentions the ICAEW, so I should remind the Committee of my interest as a member of that body—I keep doing that, I am very boring. Personally, I think these two amendments would actually work quite well together. If Ofcom, for example, set out a code of conduct for telecoms companies to follow, that could work as the defence mentioned in Amendment 94.

However we do it, we must incentivise all enablers in the fraud chain to do the right thing. There is an excellent opportunity in this Bill to do it now. Further delay will lead to countless more innocent people losing their savings and being traumatised. I very much hope the Minister will be willing to approach this constructively, even if he does not like some of the specifics in the amendments. I support the noble Baroness’s suggestion about the analysis of how all these Bills work together, which would be very helpful.

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure to follow the noble Lord, Lord, Lord Vaux, and everyone who has contributed to this crucial debate. I feel I should begin with an apology for not taking part in the debate on the failure to prevent in the first group, but that is because I was in the debate on the Online Safety Bill, with an amendment to which I had attached my name. It is a grave pity that we are debating two such important and closely linked Bills on a Thursday, with the pressures that is putting on your Lordships’ House, but in this group we have seen that we are overcoming those challenges and doing a great job of scrutiny, as we should be doing.

I will be quite brief and again try not to go over any of the same ground as others, but something that struck me when I looked at the Online Safety Bill was that action against fraud and other crime was utterly missing from it. In fact, I considered tabling amendments, but the drafting job was, frankly, beyond the capabilities available to me. The way it has worked out fits very well with this Bill and draws on the capacity of people involved with this Bill, whereas the other Bill has been taken in a somewhat different direction. It is worth noting that this is a safety issue—the noble Baroness, Lady Morgan, and the noble Lord, Lord Vaux, referred to this. The noble Baroness said that it does not only affect older people, but it is worth noting that it is particularly an issue for them. If you are hit by a fraud when working in a system that you already found challenging and difficult to engage with, you lose confidence in your ability to operate in the world. We have a loneliness epidemic, with many people struggling to survive, with the Government stressing digital first, digital first. The impact on older people in particular is an earthquake through their lives, and that needs to be noted.

Lots of people talked about the scale of that problem, but I do not think anyone has mentioned that UK Finance, the trade association for the UK banking and financial sectors, said that financial fraud is now a national security threat. That ties in with the earlier amendment of the noble Lord, Lord Alton. In the first half of 2021, more than £750 million was stolen, and that was a 30% increase on the same period from the previous year, so we are looking at something that is escalating and absolutely demands action.

Economic Crime and Corporate Transparency Bill

Baroness Bennett of Manor Castle Excerpts

Committee stage
Tuesday 9th May 2023 Grand Committee

[Lord Fox (LD)]

My Lords, this is a mixed set of amendments. I do not think that we will debate the philosophy of what a fact is, although we may come back to that in a few minutes. I rise to move Amendment 102 on behalf of my noble friend Lord Wallace and to speak to both an amendment in my name and a series of amendments in the name of the noble Lord, Lord Coaker.

Amendment 102 refers to tier 1 investor visas, otherwise known as golden visas. As I am sure the Minister will jump up and tell me, the scheme was closed relatively recently, but that is not the point of this amendment. We know that the scheme allowed individuals with a high net worth into the UK through the investment of large sums. We also know that, during its operation, it became increasingly clear that there was abuse, or the possibility of abuse. Visa beneficiaries under the scheme largely came from Russia, former USSR states and China, more so than from any other third country. It must have been clear to the Home Office and others that the sources of the wealth of many of these applicants were dubious at best.

The scheme was closed in February 2022. When it closed, the Government promised a review into so-called golden visas, because they were clearly an issue and something that needed to be reviewed so that we could find out what went wrong and ensure that future decisions did not make similar mistakes. It was, therefore, an object of some despair when, instead of publishing the findings of the review in full, the Home Secretary published a Written Statement in January this year with a summary of the review’s findings. The Statement told us what we already knew, in fact, but not much more. The scheme had been used by individuals who were, to quote the Statement,

“at high risk of having obtained wealth through corruption or other illicit financial activity, and/or being engaged in serious and organised crime”.

It also told us that this concerned a

“small minority of individuals”

who had obtained visas under the tier 1 investor route but gave no indication of the actual figures on where a risk had been identified. More than 6,000 visa holders were reviewed. What is a “small minority” of 6,000? How many were at risk?

We also know that 10 oligarchs who had been sanctioned as part of the response to Russian aggression in Ukraine used this scheme. How many more applicants with ties to Putin have been given visas that allowed them to embed themselves in the UK economy and UK society? Are any still in the UK? If so, have they gone through the process of acquiring citizenship? The Statement answered none of these questions.

This amendment would require the findings of the review, where they relate to economic crime, to be published in full. It is a review of a scheme that, according to the Home Office, attracted a disproportionate number of applicants from the countries identified as being particularly relevant to cross-border money-laundering risks faced and posed by the UK. As I said, the scheme benefited Russian and Chinese oligarchs above all. Key questions remain unanswered. Parliament needs to know what went wrong so that we can hold the Government to account in future. We are entitled to know more about what the Home Office conducted in this review and the impetus that it gave to various other elements of what we are seeing now. In other words, has anything learned from the review seen its way into the legislation that we are now talking about? If not, why not?

The refusal to publish either this report or the fuller details of Russian penetration into British politics, which the ISC recommended should be published, makes it difficult not to conclude that the Conservative Government have some significant and embarrassing issues to hide, most probably around donations to the party. If the Minister has nothing to hide, I am sure that he will be able to announce the publication of these reports.

As I said, I also want to speak to Amendment 104 in my name, which has, to some extent, a similar motive to the three amendments proposed by the noble Lord, Lord Coaker. Without putting words in the noble Lord’s mouth, I suspect that, like me, he is an enforcement sceptic. He is sceptical not about the need for enforcement but that sufficient enforcement will support the legislation we have spent all this time debating. My amendment is one way of trying to expose the resources and the effect that they are having. I am sure that the Minister will step forward and tell us that the NCA publishes an annual plan but Amendment 104, particularly subsection (3) of its proposed new clause, sets out a rather different set of things that we would need to know but which are not currently included in the annual plan published by the NCA.

I am quite happy to support other ways of doing this, which the noble Lord, Lord Coaker, is probing, but, at the heart of this, Parliament needs to know how effective enforcement is and that the primary agency running the enforcement process has the resources it needs in order to meet the challenges that it faces. Those challenges are getting bigger, harder and more sophisticated every day. This is one way of exposing whether the resources are sufficient and what Parliament needs to worry about in future in terms of delivering support to agencies so that they can actually enforce these things. I beg to move.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I have attached my name to Amendment 102 in the name of the noble Lord, Lord Wallace of Saltaire. I begin by quoting the noble Lord, Lord Evans of Weardale, who chairs of the Committee on Standards in Public Life. Speaking in this Room last year, he said that

“we have clearly, as a matter of policy, turned a blind eye to the perpetrators of corruption overseas using London for business or leisure purposes”.—[Official Report, 13/10/22; col. GC 156.]

The golden visa scheme was clearly a significant part of that issue, as highlighted by the noble Lord.

I begin by paying great tribute to the noble Lord, Lord Wallace of Saltaire, who has been an absolute terrier—no, that sounds too small. A bulldog is better.

[A noble Lord]

A Yorkshire terrier.

[Baroness Bennett of Manor Castle (GP)]

We will not get into that one. The noble Lord, Lord Wallace, has been an absolute bulldog in pursuing this issue over a number of years. The reason why I chose to attach my name to this amendment is that I worked with the noble Lord on this issue, during my modest role in what became the Financial Services Act 2021. As the noble Lord, Lord Fox, outlined so clearly, we must be able to diagnose the illness fully if we are to find the medicine we need to deal with it. At the moment, we are not being allowed to see that diagnosis; we are getting a very rough, top-line kind of summary.

As the noble Lord, Lord Fox, said, we know that more than half of the visas issued—some 6,000—were being reviewed in 2022 for possible national security risks. Being told about a small minority does not get us anywhere near where we need to go. We are looking at this particularly in the context of the Russian attack on Ukraine and the current geopolitical situation. More than 200 Russian millionaires bought their way into the UK in the seven years after the scheme was supposedly tightened, before it was finally closed. We have to look at that with respect to security issues as well; we are talking about economic crime here but economic crime and security are surely interrelated. We need to know about those issues.

This amendment deals only with the review relating to economic crime. I am sure that that is because the Bill Office said that anything broader would be out of scope—I have no doubt about that—but it is worth putting on the record that, to learn lessons for the future, we need to assess the impact of the scheme much more broadly. I do not know whether the Home Office report looked at this—I cannot see it—but it would be interesting to see what impact it has had on our current housing crisis and on house prices; surely it has had an impact.

It is also worth highlighting the broader impact of entrenching wealth-based and racialised inequality in the UK. Take the contrast between the 250 family members and dependents of the Russian millionaires who came in versus the fact that so many British people are unable to live in their own country with their foreign spouse or partner because they do not earn enough money to be able to do so. That contrast is really shocking; we should be looking at the impacts of that on our society. These golden visas were a disaster. We can only understand that disaster and seek to deal with its effects if we are open about the Government’s own report.

[Lord Coaker (Lab)]

My Lords, I support much of what the noble Baroness, Lady Bennett, and the noble Lord, Lord Fox, have said. In speaking to my amendments in this group, I start by welcoming the publication of the fraud strategy last week. I know that the Minister has been pushing for it to be published as speedily as possible; its publication is helpful to the Committee.

The fundamental question behind much of what I am going to say is this: how will the fraud strategy published last week answer some of the problems that have been raised—indeed, that I will raise? My Amendments 106B, 106EA and 106EB are clearly probing amendments but they have at their heart the question posed by the noble Lord, Lord Fox: how will the Government bring together all this legislation, statutory instruments, enforcement papers, reforms of Companies House and so on? How is all of that in the landscape of government being brought together, co-ordinated and made effective? It is not an easy question to answer but, looking at all these things, they seem cluttered, to say the least. Even with this Bill, things are cluttered. Some sort of review or report to Parliament to try to do something about that would be helpful. Does the fraud strategy do that? How will the strategy report to Parliament to see whether it has been successful or not?

--- Later in debate ---

[Lord Sharpe of Epsom (Con)]

My Lords, I thank all noble Lords, who have made some extremely thought-provoking points in this debate. I will do my best to address them all.

Scrutinising the activity of government is obviously a key function of Parliament, and of course the Government are entirely supportive of it. I reassure the noble Lord, Lord Browne, that this particular part of the government machinery is always grateful for any help that is offered and will receive it in that spirit. However, the amendments in this group are unnecessary, as they are duplicative of existing reporting arrangements and scrutiny structures.

On investor visas, I take my noble friend Lord Leigh’s points. If done in the right way, they are potentially an important engine of economic growth—that should be acknowledged. Of course, we should not forget that they were introduced by a Labour Government and maintained during the coalition years. However, on Amendment 102, tabled by the noble Lord, Lord Wallace of Saltaire, and moved by the noble Lord, Lord Fox, I am aware that there are concerns about how the now-closed tier 1 investor route operated—in particular, that it was used by those relying on funds that had been illegitimately acquired and those who may have posed a wider risk to the UK’s national security.

It was because of those concerns that the Government committed in the first place to the review of the visas issued under the route between 2008 and 2015. As has been acknowledged, the Home Secretary made a Written Ministerial Statement on 12 January setting out the findings of that review. This included that the review had identified a minority of individuals connected to the tier 1 investor visa route who were potentially at high risk of having obtained wealth through corruption or other illicit financial activity or being engaged in serious and organised crime. The Statement of 12 January represents the Government’s substantive response to the commitment to undertake a review and publish its findings, including its findings in respect of economic crime.

Obviously, there was a delay; we are aware that considerable time elapsed between the commissioning of the review and the setting out of those findings. However, delay is regrettable but not unreasonable when issues of national security are at stake. Let me expand on that a little, if I may. It would have been preferable had the review been able to include more information about specific individuals but we have had to act sensibly and responsibly with regard to the UK’s national security; this includes striking the right balance between setting out the review’s broad findings and observing the constraints on disclosing sensitive details, which must be withheld, at the request of our operational partners, to protect our border and the vital work of our law enforcement agencies.

The noble Lord, Lord Fox, raised the subject of party-political donations. Without getting into a slanging match on this subject, I think it is worth restating that UK electoral law already sets out a stringent regime of spending and donation controls that prioritise transparency and safeguard the integrity of our elections. All political parties recognise that third-party campaigners and candidates must record their election spending and report it to either the Electoral Commission or their local returning officer. This information is all publicly available. The measures in the Elections Act 2022 also updated the political finance regulatory framework by increasing transparency and fairness and strengthening the controls against ineligible foreign spending on electoral campaigning. That is a fairly comprehensive transparency regime concerning the funding of political parties.

The House has considered similar amendments to other legislation, most recently during the passage of the National Security Bill. As before, the Government’s view is that this amendment is not necessary. The Government have set out the key findings of the review of the operation of this route and have acted to close it. I therefore ask the noble Lord, Lord Fox, to withdraw the amendment.

[Baroness Bennett of Manor Castle (GP)]

My Lords, the Minister suggested that it was the inability to identify individuals that meant that some aspects of the report could not be released. I think that everyone understands the retraction of names where necessary, but surely that would not prevent the release of absolute figures rather than a summary of the figures.

[Lord Sharpe of Epsom (Con)]

As I said, it was also to do with the disclosure of sensitive details related to operational partners—the sorts of things that protect our border and the work of law enforcement agencies.

I thank the noble Lord, Lord Fox, for tabling Amendment 104, to which I will now speak. The impact of fraud and economic crime affects the whole of our society. The cost of fraud to the UK runs into the billions and is assessed by the National Crime Agency to be the most common crime type in England and Wales. We take this threat type seriously and have delivered a strengthened approach to reduce its impact. Obviously, as I referenced, the fraud strategy is one part of that; I will come back to it in a moment. The NCA currently leads the national response to serious and organised crime, including economic crime. As predicted, the NCA’s director-general is accountable to the Home Secretary and, through the Home Secretary, to Parliament.

The agency already publishes an annual plan and an annual report. The annual plan sets out how it intends to exercise its functions in co-ordinating the operational response to serious and organised crime, having regard to the Home Secretary’s strategic priorities and the director-general’s operational priorities. The annual report details its performance over the previous financial year, including efforts to tackle economic crime. The NCA also reports annually on the impact of suspicious activity reports in tackling economic crime and, as I set out earlier in response to Amendments 93 and 95 in the previous group, in respect of UWOs. Given this current reporting and the potential for duplication, the Government do not believe that this amendment is required at this time, so I ask the noble Lord, Lord Fox, not to press it.

I thank the noble Lord, Lord Coaker, for his Amendment 106B. Before I get into the amendment itself, let me say that I take the noble Lord’s points about the diversity of response to the sorts of crime that are being discussed. Of course, that partly reflects the diversity of the crimes being investigated, as he will be aware. The fact is that this is a fast-moving, rapidly evolving space; there is no doubt that the operational response to it reflects that particular set of circumstances.

--- Later in debate ---

[Lord Oates (LD)]

My Lords, on behalf of the noble Lord, Lord Hain, who cannot be in the Committee today, I rise to move Amendment 103 in his name, my name and those of the noble Baronesses, Lady Wheatcroft and Lady Altmann. In doing so, I pay tribute to his tireless efforts in exposing corruption, particularly the key role he played in bringing the kleptocracy of former South African president Jacob Zuma to the world’s attention.

This amendment would require the UK Government to begin negotiations for the establishment of an international anti-corruption court, or IACC, within six months of the passing of this Bill. International corruption is estimated to cost $2 trillion, or 5% of global GDP, every year. In a 2021 report, the UN High-level Panel on International Financial Accountability, Transparency and Integrity calculated that as much as 2.7% of global GDP is laundered by criminals through illicit global financial flows. While these opaque transactions occur in all countries, they have a much heavier impact on low and middle-income countries. The Washington-based organisation Global Financial Integrity found in its most recent report that from 2004 to 2013 developing and emerging economies lost $7.8 trillion in illicit financial flows—around 10 times more than the entire sum of foreign aid, including aid from the UK, that they received over the same period. Illicit outflows are increasing rapidly at an average rate of 6.5% per year, nearly twice as fast as global GDP.

A substantial proportion of that corruption comprises theft by a nation’s leaders of state funds for their own use—in other words, kleptocracy. Putting an end to that kleptocracy and recovering assets stolen by corrupt leaders would enable millions of the poorest in our world to be adequately housed, clothed and fed by helping prevent national treasuries being looted to line the pockets of corrupt politicians and their business cronies.

That so many kleptocrats succeed is not because of a lack of domestic laws; there are 189 parties to the UN Convention against Corruption. Most of them have complied with their obligations under the convention to have appropriate domestic anti-corruption legislation, but to facilitate their criminal activities kleptocrats have gutted their domestic criminal justice systems and taken control of the prosecuting authorities, police and, frequently, courts. There is no better current illustration than President Putin, who with his oligarch accomplices has looted the country.

Another prime example, whom I have mentioned already, is former South African President Jacob Zuma, who with his business cronies the Gupta brothers looted on an industrial scale and deliberately disabled police and prosecutors, so much so that the country was estimated to have lost fully one-fifth of its GDP during his infamous state-captured decade. Across the border in Zimbabwe, the ZANU-PF regime is mired in corruption, which has robbed the Zimbabwean people of what should be a bright economic future. Instead of serving the people, regime leaders, aided by corrupt businesspeople and a prosecutorial and judicial system entirely captured by the ruling party, loot the country at will. Just last week, opposition politician Jacob Ngarivhume was sentenced to four years’ imprisonment simply for calling for peaceful protests against corruption in July 2020.

Few of these kleptocrats keep their ill-gotten gains at home. Billions of dollars of stolen assets are laundered in a number of countries, including China, Hong Kong, Dubai, Singapore, Monaco, Switzerland, some states of the United States, UK overseas territories and, shamefully, London. Recently, the Al Jazeera documentary “Gold Mafia” secretly filmed Zimbabwe officials and business contacts conspiring to launder illicit funds. Those filmed included at least three British citizens—Uebert Angel, Rikki Doolan and Kamlesh Pattni—who made clear on camera their willingness to act corruptly. I know that the Minister cannot comment on those individual cases, but I hope that the National Crime Agency is investigating the activities of these individuals and others named in the documentary and the sources of their wealth, and that the authorities will not hesitate to freeze their funds while these investigations are being pursued.

However, while British authorities can act on crimes committed under UK jurisdiction, there is no international mechanism to prosecute kleptocrats and to seize and return their illicit funds. This gaping vacuum can be filled only by establishing an international anti-corruption court that can hold corrupt leaders and their co-conspirators accountable.

If some of the countries where laundered funds are held would join such a court, the stolen assets could be frozen and then, through orders of restitution, be repatriated to the countries from which they were stolen. If the risk of those funds being misused if returned to a corrupted state are too high, they could be repurposed and repatriated only at a time when they would reach the real victims: the millions in need in those countries.

The envisioned court would have jurisdiction over crimes committed by nationals of an IACC member state and crimes committed on the territory of an IACC member state. It would enforce existing national anti-corruption legislation and would be a complementary new international counterpart to these laws against kleptocrats and their collaborators.

The IACC would be a court of last instance, meaning that it would acquire jurisdiction only in cases in which the appropriate domestic authorities are unable or unwilling to investigate or prosecute the corruption. For the IACC to succeed, it would not be necessary for the countries governed by kleptocrats to join the court—it goes without saying that they would not. The IACC could be established by treaty and quickly become effective if it consisted initially of even a relatively small number of representative states, so long as they included some financial centres and other attractive destinations where kleptocrats frequently launder, hide and spend their stolen assets.

In this way, the IACC would have the potential to prosecute, punish and recover illicit assets from kleptocrats who rule or are very powerful in the countries that might not initially join the court. Most importantly, the threat of criminal prosecution at the IACC would deter other potential crimes of grand corruption by leaders who may otherwise be tempted to emulate the example of the kleptocrats.

The cost of the IACC would constitute a small fraction of the amount of illicit assets that it could seize and return to their originally intended purpose for the public good. In addition to orders of restitution, it could levy funds on those found guilty, which could be used to defray some of the cost of its prosecutions and proceedings.

If the court demonstrates during its early years that it can work effectively and efficiently, many other countries are likely to join it. In the aftermath of kleptocratic government, some developing countries may not have the human and financial resources to fight kleptocracy, so could approach the IACC to come to their assistance. A senior United States federal judge, Mark Wolf, is leading a campaign to establish such a court. Together with others, including the renowned South African jurist Richard Goldstone, he launched a civil society called Integrity Initiatives International. Its main project is to establish the IACC, and it has convened a number of the world’s top international lawyers to begin drafting a treaty for the court. None of its supporters see the court as a panacea that will end the kleptocracy any more than the International Criminal Court has ended illegal or genocidal activity by political leaders. However, it would be one of many tools, domestic and international, that are absolutely essential to combat and, I hope, ultimately defeat kleptocracy.

Almost 300 leading figures from across the world, including 45 former presidents and Prime Ministers and 32 Nobel laureates, have signed a declaration calling for the creation of the IACC. Three Governments—the Netherlands, Canada and Ecuador—have made the establishment of the court an element in their official foreign policy. In January this year, Nigeria became the fourth country to publicly state its commitment to working with other states towards the establishment of the court. Recently, the President of Moldova, Maia Sandu, also committed to joining the emerging coalition of states for the IACC. Additional countries from each region of the world have also expressed their interest in the idea.

The United Kingdom and our legal profession have always led in establishing and participating in international courts of last resort. This started with the ground-breaking Nuremberg trials and went on to include the International Court of Justice and, of course, the International Criminal Court.

The Government’s Integrated Review Refresh, published earlier this year, committed the UK to championing global efforts to ensure that revenues and assets lost to illicit finance are identified and recovered so that low and middle-income countries can self-finance their own development. This commitment was reiterated by the Minister for Development and Africa in his Chatham House speech on 27 April when he said that

“we will bear down on money-laundering and the flows of dirty money which deprive countries of their legitimate tax receipts and represent money stolen particularly from Africa and African people”.

We must live up to these commitments. I therefore urge the Government to accept our amendment and ensure that the UK becomes one of the early and leading supporters of the establishment of the IACC, lending the UK’s weight and expertise to finding the fastest route to the creation of the court and the most effective framework for its operation.

I beg to move.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise with great pleasure to follow the noble Lord, Lord Oates, who made a powerful, persuasive and rich speech. I echo him in paying to the noble Lord, Lord Hain, for all the work he has done in this area.

The noble Lord, Lord Oates, rightly acknowledged that the international anti-corruption court, which I absolutely back—backing for it is clearly growing by the day—is one of many tools that we need to tackle economic crime. My Amendment 106A seeks to put another tool in the toolkit. At the moment, it is perhaps in a prototype stage and is earlier in development than the international anti-corruption court, but it is growing fast and has significant international backing.

I am proposing that the Government should provide leadership in supporting UN General Assembly Resolution 77/244, which was passed on 30 December last year with leadership from Nigeria and the Africa group. It calls on the Secretary-General to prepare a report on how

“to strengthen the inclusiveness and effectiveness of international tax co-operation”.

This has been seen as a step towards a UN convention on the issue and the establishment of international bodies to enforce it. I hope that some noble Lords who are taking part in this debate or who read Hansard later will be interested in joining me in pushing this forward as an issue on which Britain can and should be a leader. Due to the limited scope of the Bill, I have had to cut down somewhat what the General Assembly resolution says, but there are still steps that we can take forward here; I will be very interested to hear the Government’s response to this UN General Assembly resolution.

Following on from what the noble Lord, Lord Oates, said, it is clear that chasing economic crime money, particularly tax evasion, is what is known in the jargon as a wicked problem. The aims of the evaders are simple; their reach is global and the ability to act is measured in seconds. Money can be shifted in less than a click of my fingers. However, national states have very complex goals in development, rights and the rule of law, and their powers are individually restricted within their own borders. Their legal framework is limited in resources, as we discussed in our debate on the previous group, and frequently takes a lot of time to move into action.

It is worth looking at what Attiya Waris, the UN independent expert on the effects of foreign debt, told the UN General Assembly last year:

“The shortcomings of the international and national tax systems require international cooperation and assistance. They cannot be addressed unilaterally”.


The idea of a UN convention got virtually no coverage or attention in the UK but, internationally, there is a great deal of work going on. That was reflected in a letter sent in March to the UN Secretary-General by scores of civil society organisations—including some that will be familiar to noble Lords, such as Action Aid, the Tax Justice Network and World Economy, Ecology and Development.

--- Later in debate ---

[Lord Sharpe of Epsom (Con)]

My Lords, I thank the noble Lord, Lord Hain, and the noble Baroness, Lady Bennett, for their amendments in this group. I also thank all noble Lords for speaking in this debate.

I turn first to Amendment 103, which was tabled by the noble Lord, Lord Hain, but spoken to by the noble Lord, Lord Oates. If I may, I associate myself with the remarks of the noble Lord, Lord Ponsonby: the noble Lord, Lord Oates, made an incredibly powerful and eloquent case in moving this amendment 103, which also spoken to by the noble Baronesses, Lady Bennett and Lady Wheatcroft. Ensuring that those who are responsible for the most egregious acts of corruption are held to account is obviously vital. There should be no tolerance towards those who steal from the public to satisfy personal greed. The Government wholeheartedly endorse the premise that this amendment seeks to advance. The international community can and must do more to deter and punish acts of corruption.

The Government are taking robust action to ensure that the UK leads by example. That is why, in March, we published the second public-private economic crime plan, to which I referred in our debate on the previous group of amendments, which outlines ambitious actions to prevent the UK’s open economy being exploited by criminals and corrupt actors. The Government are also developing a new UK anti-corruption strategy to build on the progress made by the previous strategy and outline a refreshed approach to tackling corruption and illicit finance both in the UK and internationally.

The recently published fraud strategy also sets out the Government’s commitment to raise the priority of fraud on the international stage. We will drive forward global action through developing stronger relationships with international partners, culminating in a global fraud summit chaired by the Home Secretary and held in the UK next year. The summit will bring together leaders from Governments, law enforcement and the private sector to announce the ambition to deliver a comprehensive and co-ordinated approach to tackling fraud over the next five years.

The Government have consistently invested in efforts to bring those responsible for corruption to justice. The international corruption unit in the National Crime Agency is a specialist capability that investigates corruption cases with UK links.

[Baroness Bennett of Manor Castle (GP)]

On the summit, the problem with ideas such as that put forward by the noble Lord, Lord Ponsonby, about a transatlantic council or similar, is that it would be focused on global north countries. Can the Minister assure me that there will be full representation of global south countries at the summit he just outlined and that the UK will provide resources to ensure that some of the least developed countries, which are some of the biggest victims of this, are also able to participate in that summit?

[Lord Sharpe of Epsom (Con)]

I cannot provide that reassurance; I do not know who will be involved, but I will endeavour to find out and will write.

I shall return to where I was in my speech. In addition, the UK leads and hosts the International Anti-Corruption Coordination Centre—the IACCC—which brings together specialist law enforcement officers from multiple agencies around the world to tackle allegations of corruption. The IACCC has helped to secure convictions in high-profile money laundering cases, including in Malaysia and Angola. In 2022 alone, the IACCC identified more than £380 million of stolen and hidden assets.

I forgot to mention part of my previous paragraph. Since 2006, 30 people and companies have been convicted of corruption offences and more than £1.1 billion of stolen assets have been frozen, confiscated or returned to developing countries. That is in relation to the international corruption unit in the NCA.

Economic Crime and Corporate Transparency Bill

Baroness Bennett of Manor Castle Excerpts

Committee stage
Thursday 11th May 2023 Grand Committee

If there is going to be a register—and it is quite possible that there will be one as far as I can see for investment zones—for a whole variety of purposes, that register should be in the public domain as well, pursuing the underlying principle that has been established so long in the UK: that sunlight, transparency and the capacity of the public to see through are critical pillars of cleaning up transactions and our economy. I beg to move.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I apologise to the noble Baroness, Lady Kramer, because I would certainly have attached my name to these two amendments had I been able to get my head sufficiently above the parapet in the face of the barrage of legislation that your Lordships’ House currently faces. They are terribly important amendments, as was highlighted yesterday in the other place in Prime Minister’s Questions, when the Prime Minister in response to a question about what is happening on Teesside said:

“Contracts at the site will be a commercial matter for the companies involved”.—[Official Report, Commons, 10/5/23; col. 334.]


There is great public concern about what is happening on Teesside, and it is at the moment extremely opaque.

I shall concentrate mostly on freeports, because, as the noble Baroness said, investment zones are such a “fluffy” area that is very hard to grasp on to it. As to what we know about freeports and what is happening, a lot of the questions are being asked by the independent media and the civil society organisations referred to by the noble Baroness. I would point anyone who is interested to an excellent, 44-page report from the Byelines Network that was put out by local journalists from around the country in areas directly affected. It does a great job of examining some of the issues, but butting up again and again against commercial confidentiality and lack of recording. One of those reports notes that in 2020, the Royal United Services Institute Centre for Financial Crime and Security Studies submitted evidence to the International Trade Committee saying that

“there is evidence of criminal activity taking place in multiple freeports around the world. It often involves trade in counterfeit goods, drug trafficking, smuggling of untaxed goods or trade-based money laundering”.

If we were to think of something that is essential to the purposes of the economic crime Bill now before us, shining the light, opening the doors and being able to see what is happening would clearly be it. What we are talking about with freeports are huge concessions from the Government. As the noble Baroness, Lady Kramer, said, they include freedom from all kinds of usual customs controls, but also stamp duty land tax relief, enhanced structures and building allowance, enhanced capital allowances, employer national insurance contributions relief, and business rates relief and retention. Those are huge concessions. Surely it would only be absolutely fair and reasonable to demand full transparency about who is responsible and who is making those decisions.

It is very evident that there is great public concern. This is one way that the Bill or some other mechanism—I directly put the question, “If not this Bill, where else?”, to the Minister—will make sure of what will happen if we create these structures. The reason why people are so suspicious about this seems to go back to an uncredited blog from 2010 on the website of a right-wing lobbying group, the TaxPayers’ Alliance, which raised the idea of charter cities. People are very suspicious. Surely the Government would want to dispel some of those suspicions by ensuring that there is absolute transparency and openness.

[Lord Agnew of Oulton (Con)]

My Lords, I rise because I hope that I might be able to provide some help to my noble friend the Minister, as this is obviously not his area of expertise; this is at the Companies House end.

Right at the beginning of Committee, I tabled Amendment 44. Its explanatory statement says:

“This amendment mandates companies to disclose whether their shareholders are acting as nominees. Nominee shareholders protect the identity of the beneficiary of the shareholding. This measure will help mitigate the risk of abuse through nominee shareholders. Failure to comply would incur a penalty”.


Last night, I met the Minister, my noble friend Lord Johnson, who indicated to me that the Government were sympathetic to this approach. I do not want to put words into his mouth, as he is not here now, but I suggest to the Minister, my noble friend Lord Sharpe, that he talks to my noble friend Lord Johnson to see whether there is any way that we could look at this; that would deal with the specific concern raised by the noble Baroness, Lady Kramer, in relation to freeports.

Economic Crime and Corporate Transparency Bill

Baroness Bennett of Manor Castle Excerpts

Report stage
Tuesday 20th June 2023 Lords Chamber

[Lord Agnew of Oulton (Con)]

My Lords, I thank my noble friend the Minister for all the engagement and patience he has shown over the last few weeks and months, not just with me but with a wide congregation. We now have something that is much better than when it began its journey through the House, so I thank the Minister for that.

I am very pleased with two particular changes in this batch of amendments from the Government. First, that key, vital objective has been added for the registrar, so that it is absolutely crystal clear culturally for the organisation Companies House to know what it has to do. Added to that, giving her more discretion on how she delivers on that is very sound because, of course, it will be a mobile battlefield and she will have to be more fleet of foot.

Lastly—and I have said this before, but I think it is important that it goes on the record—we should not underestimate the extent of the cultural change needed in Companies House to move from being, as my noble friend said, a passive recipient of data to something far more dynamic and intelligent. That is why this reporting to Parliament—albeit with a sunset clause up to 2030—is really important to keep driving the momentum of that change. Every single employee of Companies House will need to be thoroughly retrained in this new mission.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I apologise for my croakiness; the hay fever is definitely winning. I join others in welcoming, in these government amendments, that we have seen significant change since Committee. It is worth highlighting a couple of comments from the Minister’s introduction. He said that the aim of the Bill to drive dirty money out of the UK; I hope we can all agree that that is essential. He also said that we had seen so many people abusing our open system; I think we have to acknowledge that we invited those people in, and that that is the situation we created. We are now trying to fix it.

In that light, I very much welcome the fact that the Minister said that we need to see how these changes bed in before going significantly further. I want to make sure that we acknowledge, and see on the record, the fact that the Government have acknowledged that this is not enough, and that a lot more will need to be done, in what is, after all, as described by UK Finance,

“the fraud capital of the world”.

[Lord Fox (LD)]

My Lords, there are political Bills, where the House divides on political issues and argues among itself, and there are Bills of practical importance, when the House can come together and pull in the same direction. We will not all agree about everything, but the motives behind what we are proposing have been similar. In this case, it is about helping to clear up and clean up a bad situation, and to do so in the best possible way. The Minister and his colleagues, the noble Lord, Lord Sharpe, and the noble and learned Lord, Lord Bellamy, must be congratulated on their openness and their listening ears. They have not just listened but acted on what they heard, and we should all be grateful that we have moved in this direction.

I am pleased that I can agree with the noble Lords, Lord Leigh of Hurley and Lord Agnew, in their characterisation of these changes, which are important. I think the change to the mission of Companies House is absolutely fundamental. It is vital that it is there, and it then plays to the point made by the noble Lord, Lord Agnew, about the culture change, as well as, I think, giving the flexibility and understanding that—again, as the noble Lord, Lord Agnew, said—this is going to be a mobile struggle that we have to move forward.

This group of amendments is followed by other groups which are other examples of where listening has turned into positive changes. From these Benches, we are really pleased that we are moving in this direction, and are grateful that we have done that. As we have heard, the Bill is improving as a result. So we are very supportive of these measures, and continue to be supportive of the other measures that we will hear about later.

Economic Crime and Corporate Transparency Bill

Baroness Bennett of Manor Castle Excerpts

Report stage
Tuesday 27th June 2023 Lords Chamber

Moved by

[Baroness Bennett of Manor Castle]

125: After Clause 194, insert the following new Clause—
“Update on the Fraud Strategy
The Government must publish, and lay before Parliament, an update by July 2024, and annually thereafter, on the progress and effectiveness of the implementation of the commitments made under Pillars 1, 2 and 3 of the Fraud Strategy published in May 2023, and the impact of the commitments, as it relates to the reduction of economic crime.”Member’s explanatory statement
This amendment requires the Government provide an update on the impact of the Fraud Strategy of May 2023 by July 2024 and then annually thereafter.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I may be able to assist the House by moving Amendment 125—if no one yells at me, I will assume I am doing the right thing—in the name of the noble Lord, Lord Agnew, to which I have attached my name. I shall keep going. Noble Lords will see that this amendment calls for an update on the fraud strategy and for the Government to publish and lay before Parliament

“an update … by July 2024, and annually thereafter”.

We have debated at considerable length the fact that the UK is

“the fraud capital of the world”—

and there I am quoting the head of UK Finance. I attached my name to the amendment because, as I do not need to say to the House, the noble Lord, Lord Agnew, is absolutely our stalwart leader on these issues, so I beg to move.

--- Later in debate ---

[Lord Sharpe of Epsom (Con)]

My Lords, I thank the noble Baroness, Lady Blake, for speaking to the amendment in the name of the noble Lord, Lord Coaker, and my noble friend Lord Agnew of Oulton for his amendment. These amendments seek to add further parliamentary scrutiny on economic crime matters.

However, I have been clear throughout the previous debates on this topic that it is the Government’s view that there is already more than sufficient external scrutiny in the areas outlined by the noble Lords. These amendments are therefore duplicative, and if accepted would lead to agencies and government departments being caught in resource-intensive reporting requirements that would have no real benefit to parliamentarians, detracting from their core roles of tackling economic crime. I have noted what my noble friend has said, and the Government are of course more than committed to doing the things he suggests.

Amendment 128 in the name of the noble Lord, Lord Coaker, would require the Government to issue a report on the performance of agencies and departments in tackling economic crime. I am aware of the strength of his feeling on the resourcing, performance and co-ordination of operational agencies. I hope that the sessions we have facilitated for him with Companies House and the Serious Fraud Office will have gone some way to reassuring him on this.

I can also reassure him and the House that the Government are ensuring that the response to economic crime has the necessary funding. The combination of 2021’s spending review settlement and private sector contributions through the new economic crime levy will provide funding of £400 million over the spending review period. The levy applies to the AML-regulated sector and will fund new or uplifted activity to tackle money laundering, starting from 2023-24.

In addition, a proportion of assets recovered under the Proceeds of Crime Act 2002 are already reinvested in economic crime capability. Under the asset recovery incentivisation scheme—ARIS—receipts paid into the Home Office are split 50:50 between central government and operational partners, based on their relative contribution to delivering receipts. In 2021-22 this resulted in £142 million being redistributed to POCA agencies. That should provide the necessary reassurance on resourcing and funding. Given what I hope to have shown is a significant amount of reporting, external scrutiny and indeed funding and resource, I ask the noble Baroness, on behalf of the noble Lord, Lord Coaker, not to press Amendment 128.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I refer to a comment made by another Minister at the Dispatch Box that we will come back to economic crime and fraud again and again. I have no doubt about that. In the meantime, I beg leave to withdraw Amendment 125.

Amendment 125 withdrawn.