Criminal Finances Bill

Baroness Stern Excerpts

2nd reading (Hansard): House of Lords
Thursday 9th March 2017 Lords Chamber

[Baroness Stern (CB)]

My Lords, I begin by declaring my interest as an officer of the Anti-corruption APPG. My involvement in this Bill arises from my concern about corruption—and I am most grateful to the right reverend Prelate the Bishop of Oxford for his remarks about the effects of corruption in poor countries. I have in past years visited a number of countries where grand corruption has penetrated deeply into the administration. The outcomes are hugely damaging to the majority of people in those countries.

For many, corruption can mean, for example, living through a harsh winter with only a few hours of electricity per day, because the money that should have been invested in the electricity company has gone into a bank account somewhere far away from that country. It can mean many babies dying because there is no money for maternal health services. This can happen in an oil-rich country earning a lot from its oilfields, but where the money that should have gone into mother-and-child health has been diverted by corrupt politicians or officials to banks outside their country. The money is then used to buy penthouses in western capitals, or works of art, or jewellery.

The victims of grand corruption are too many to count. We are debating this Bill because a lot of the money that is not going to the electricity company, or to maternal or child health, is ending up illicitly in banks in the UK and in places such as the overseas territories—places where the UK has a special responsibility. So I warmly welcome the Bill.

Grand corruption is one of the major destabilising forces in the world today. It creates extreme poverty and misery. It deprives millions of education and healthcare that could lead to a fulfilling life. It makes a mockery of the rule of law. It prevents countries from developing healthy economies, and it leads to violence and insecurity. Only last month, Transparency International UK published a report linking corruption to the growth of violent extremism. Grand corruption also stands squarely in the way of the realisation of the United Nations’ sustainable development goals, which we in the UK strongly support.

The Government, and the coalition Government before them, have done a great deal to take corruption seriously. Many examples come to mind, such as: the anti-corruption summit, held in May last year, which was very successful; the introduction of a public register of beneficial ownership in the UK; the appointment of an anti-corruption champion, Sir Eric Pickles MP, who is doing a sterling job; and the Action Plan for Anti-money Laundering and Counter-terrorist Finance, which should bring about real improvements.

Now we have this Bill, which comes to us after receiving cross-party support in the other place for what is in it, and for some things that are not yet in it. There are many important measures in the Bill, as the Minister has explained to us. Strengthening the suspicious activity reports regime is essential. The Magnitsky amendment represents a huge step forward and I was very glad to hear the Minister talk about human rights abuses around the world in this connection. Some argue that grand corruption should be classified as a human rights abuse; I find that argument convincing.

The unexplained wealth orders, which Transparency International has described as a “valuable tool”, are very welcome. It is to be hoped that these orders will make it possible to take action when the prosecution route is not available, either in the country of origin or in this country, because of the complexity of operating in different legal systems.

In this context, the case of Maxim Bakiyev is relevant. He is the son of the overthrown President of Kyrgyzstan. After the overthrow, he sought refuge here and bought a house in Surrey for £3.5 million. He was convicted in absentia in his own country of embezzling millions from the state. I am sure the Minister will know that the Government of Kyrgyzstan are rather disappointed that the United Kingdom has not been able to take any action to help them recover some of the missing millions.

I hope that we can make progress in your Lordships’ House by revisiting the question of public registers of beneficial ownership of companies registered in the overseas territories. There is substantial disappointment in many quarters about the Government’s more cautious approach to moving to transparency and having public registers. The noble Lord, Lord Rosser, made the case for that very strongly. I must read the same newspapers as the noble Lord, Lord Faulks, because I too read about the people who were happy to pay £218,000 to keep their ownership of a property secret. I echo the question posed by the noble Lord: why do we allow this?

Finally, I put on the record comments made by Mr Nick Herbert MP on Report in another place. He was responding to the argument that, although transparency is a good idea in theory, it is not always practical, because if one place has open registers, those looking for a safe haven for a lot of money will choose another haven where secrecy still reigns. He said:

“We are talking about measures that are necessary to protect not just the UK taxpayer but the poorest countries in the world, which are disadvantaged and penalised because people are able to siphon off funds unlawfully and immorally and shelter them in various regimes. We are apparently saying that we are willing to accept that, because if we take action against it, some other regime will perform that immoral task. That seems to me to be a wrong position for the House of Commons to take”.—[Official Report, Commons, 21/2/17; col. 940.]


No doubt we in your Lordships’ House feel the same.

I end by saying to the Minister that she must be very happy today to be responsible for a Bill which has such profound implications, covering huge wealth and grinding poverty, shameless and unimaginable greed, and the heroism of campaigners such as Bill Browder, and which, when implemented, will surely make the world a slightly better place.

Criminal Finances Bill

Baroness Stern Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Monday 3rd April 2017 Lords Chamber

Moved by

[Baroness Stern]

167: After Clause 48, insert the following new Clause—
“Public registers of beneficial ownership of companies in the Overseas Territories
After section 2A of the Proceeds of Crime Act 2002, insert—“2AA Duty of the Secretary of State: Public registers of the beneficial ownership of companies registered in Overseas Territories(1) It shall be the duty of the Secretary of State, in the furtherance of the purposes of—(a) this Act; and(b) Part 3 of the Criminal Finances Act 2017,to take the steps set out in this section.(2) The first step is that, between the date on which this section comes into force and 31 December 2018, the Secretary of State must provide all reasonable assistance to the governments of—(a) Anguilla;(b) Bermuda;(c) the British Virgin Islands;(d) the Cayman Islands;(e) Montserrat; and(f) the Turks and Caicos Islands,to enable each of those governments to establish a publicly accessible register of the beneficial ownership of companies registered in that government's jurisdiction.(3) The second step is that, no later than 31 December 2019, the Secretary of State must prepare an Order in Council, and take all reasonable steps to ensure its implementation, in respect of any Overseas Territories listed in subsection (2) that have not by that date introduced a publicly accessible register of the beneficial ownership of companies within their jurisdiction, requiring them to adopt such a register.(4) In this section a “publicly accessible register of beneficial ownership of companies” means a register which, in the opinion of the Secretary of State, provides information broadly equivalent to that available in accordance with the provisions of Part 21A of the Companies Act 2006 (information about people with significant control).””

[Baroness Stern (CB)]

My Lords, I rise to speak to Amendment 167 in my name and those of the noble Baroness, Lady Kramer, and the noble Lords, Lord Kirkhope and Lord Rosser.

The amendment, as a proposed new clause, stems from our concern to fight grand corruption and tax evasion—two ills that damage the well-being of millions of people in a large number of countries, and increase insecurity, instability and violence worldwide. Specifically, the amendment addresses offshore banking and the secrecy that surrounds it. It is perhaps appropriate that we are discussing offshore banking and secrecy on 3 April—exactly to the day the first anniversary of the publication of the Panama papers.

The Panama papers revealed to the world very clearly the connection between offshore financial operators, shell companies and secrecy. One outcome of the publication which happened only two days later was that the Prime Minister of Iceland left his post because information about wealth he held in a company registered in the British Virgin Islands—information that had not been in the public domain—led to the Icelandic people losing confidence in him.

The amendment addresses those offshore financial centres that are British Overseas Territories. It excludes the Crown dependencies, where the constitutional issues are more complex. It calls for the Government to go further than they currently propose to do in ensuring that all the overseas territories that have financial centres—Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, Montserrat and the Turks and Caicos—allow public access to registers of beneficial ownership. I stress that the list does not include Gibraltar. I am grateful to all those who have spoken to me about Gibraltar and its special situation at this time of Brexit negotiations. We recognise the unique status of Gibraltar. I hope that the noble and learned Baroness, Lady Butler-Sloss, who is very active on matters to do with Gibraltar, accepts that position.

It must be said that the Government have already made great, admirable efforts to encourage the British Overseas Territories to put their operations within the framework of transparency which is slowly being developed across the globe. Four years ago, in 2013, the then Prime Minister David Cameron wrote to them asking them to consider public registers of beneficial ownership. In May 2014, he wrote again, saying that he was hoping that they would,

“consult on a public registry and look closely at what we are doing in the UK”.

That encouragement has had some welcome results; registers are slowly being developed, and there is a commitment to producing them by June this year. I hope very much that when the Minister replies she can update us on that development. The registers will not be public but will be open to UK law enforcement officials; only Montserrat has so far committed to producing a public register. As noble Lords will know, the UK produced the world’s first fully open register of beneficial ownership, which became available last year. Other countries have said that they will do the same as the UK has done.

The amendment requires, first, that the Government give help with the process of establishing the registers in the overseas territories, with the aim that they are all in place and fully operational by the end of next year, 2018—five years since the first David Cameron letter. Secondly, the amendment requires that if that help, support and encouragement is not successful in getting the registers into the public domain, the Government should secure compliance through an Order in Council by December 2019. That gives another two and a half years from now for the registers to be fully developed and made public.

The Government have not accepted that timetable—and I thank the Minister for arranging a very helpful discussion with me this morning on this subject. They are now arguing that moving in the direction suggested by the amendment is not the route that they wish to follow, which is very disappointing, as it comes rather suddenly after the Government showed, by their world-leading work on anti-corruption, money laundering and tax evasion, that they were determined to take the steps needed to curb these evils. It was very disappointing to many in the other place, where there was support from all parties for an amendment along these lines. I imagine that it is disappointing to many in your Lordships’ House, too, and to the members of the House of Commons International Development Select Committee, who in their 2016 report, Tackling Corruption Overseas, concluded that,

“lack of transparency in the Overseas Territories and Crown Dependencies will significantly hinder efforts to curb global corruption and continue to damage the UK’s reputation as a leader on anti-corruption”.

It is well understood that there are difficulties. Clearly, it is not ideal for the Government to have to make threats of using Orders in Council. It would be infinitely preferable if the Orders in Council did not have to be used, but they are needed as a backstop if the Government are unsuccessful in persuading the overseas territories to publish their registers.

At Second Reading, the Minister told the House that the power to legislate for the overseas territories is almost always done with consent and that the Government legislate without consent only,

“on moral and human rights issues, such as homosexuality and the death penalty”.—[Official Report, 9/3/17; col. 1516.]

It is hard not to see the moral and human rights issues that stem from money laundering and grand corruption. An Oxfam report quoted by the International Development Committee says:

“Almost a third (30%) of rich Africans’ wealth—a total of $500bn—is held offshore in tax havens. It is estimated that this costs African countries $14bn a year in lost tax revenues. This is enough money to pay for healthcare that could save the lives of 4 million children and employ enough teachers to get every African child into school”.


I have great respect for the Minister and hold her in high regard, but to me that is both a moral question and a human rights issue.

The Government have stressed the progress that has been made and the advantages that will come from the current plans, which help prosecutors here by giving our law enforcement agencies speedy access to the registers. That is indeed a step forward, but it is not far enough—transparency is essential. As Andrew Mitchell MP, former Secretary of State for International Development, said in the other place,

“The point is to enable civic society to hold the powerful to account”.—[Official Report, Commons, 21/2/17; col. 934.]

That is what the Icelanders managed to do as a result of the transparency provided by the Panama papers.

Finally, when the Minister replies, will she explain the Government’s new approach, set out in their response to the International Development Committee report, that the overseas territories will only be expected to introduce public registers when they become “a global standard”? How will “a global standard” be defined? How many countries will need to introduce a public register of beneficial ownership before they become “a global standard”, and is any time limit envisaged in waiting for that standard to be reached? I beg to move.

--- Later in debate ---

[Baroness Williams of Trafford]

The noble Lord’s latter suggestion is correct: we do not want to impose on the overseas territories but want to work consensually with them to achieve the aims that we seek. The overseas territories may face competitive disadvantage in the short term, but in the long term, the transparent and open way in which the territories intend to work, and we with them, will be to their advantage.

[Baroness Stern]

I thank all noble Lords who have spoken in this debate, which has been a cornucopia of oratory, wisdom and detailed, reliable knowledge. I am very grateful to my co-signatories for their strong support. I appreciate the words of the right reverend Prelate the Bishop of Peterborough that this is a moral issue, and the contribution of the noble Lord, Lord Thomas of Gresford, about the United States and the abolition of slavery. I am most grateful for the detailed information from the Minister on progress; it was a bit much to digest in one go, but I will read it with interest. There is much that has been said in this debate to reflect on and consider before Report.

I would also like to say that today is the birthday of the noble Lord, Lord Leigh, and I wish him many happy returns. On that note, I beg leave to withdraw the amendment.

Amendment 167 withdrawn.

Criminal Finances Bill

Baroness Stern Excerpts

3rd reading (Hansard): House of Lords & Report stage (Hansard): House of Lords
Tuesday 25th April 2017 Lords Chamber

[Baroness Stern (CB)]

My Lords, I will speak to Amendment 14 in my name and those of the noble Baroness, Lady Kramer, and the noble Lords, Lord Rosser and Lord Kirkhope. This amendment has already been discussed in Committee and is unchanged. Since the debate in Committee, I have been fortunate to have had lengthy and very enlightening discussions with the representatives in the United Kingdom of the British Virgin Islands and Bermuda. I also thank the Chief Minister of the Isle of Man and his colleagues for meeting me. I am grateful to the House of Lords Library for its excellent briefings and to Christian Aid and Transparency International for the additional briefings they provided and the work they do in this area.

The background to this amendment is the growing public understanding of how the lack of transparency in offshore financial centres helps the corrupt to find a haven for their ill-gotten wealth and tax evaders to sleep easily in their beds. Those in poor countries feel the effects of this most because they do not have the resources to pursue the money that has been taken from them. The understanding of this need for transparency was considerably enhanced by the publication of the Panama papers in April 2016.

On 8 November, the Chancellor of the Exchequer made a Written Ministerial Statement to Parliament on the work to date of the cross-agency Panama Papers Taskforce, a group of law enforcers set up to pursue the information that related to the United Kingdom about the illegality revealed. He said in his Statement that since the publication of the papers the task force had: opened civil and criminal investigations into 22 individuals for suspected tax evasion; identified a number of leads relevant to a major insider-trading operation; identified nine potential professional enablers of economic crime, all with links to known criminals; placed 43 high net-worth individuals under special review while their links to Panama were further investigated; identified two new UK properties and a number of companies relevant to a National Crime Agency financial sanctions inquiry; established links to eight active Serious Fraud Office investigations; and identified 26 offshore companies whose beneficial ownership of UK property was previously concealed and whose financial activity had been identified to the National Crime Agency as potentially suspicious. In addition to pursuing those 74 individuals, 26 companies, links to eight Serious Fraud Office investigations and other leads on insider trading and sanctions, a number of individuals had come forward to settle their affairs before the task force partners took action against them.

All the law enforcement activity I list is the result in just six months of bringing transparency to the files of just one legal firm in just one country. It gives an indication of the huge extent of illicit activity and illuminates the rationale behind the measures in this very welcome Bill. In passing, with great respect, I ask those noble Lords who oppose public registers whether they feel it is not worth bringing that number of people to justice, or whether they have a proposal other than transparency for achieving that end.

Undoubtedly, government Amendment 8, to which the Minister just spoke so eloquently, is a step forward in trying to curb the criminal activity, tax evasion and laundering of corruptly gained wealth that is illustrated by the work of the Panama Papers Taskforce. It is very welcome and makes clear that the Government look to the overseas territories and Crown dependencies to keep good and accurate information. Let us remember that half the companies disclosed by the Panama papers—some 140,000 of them—were incorporated in the British Virgin Islands.

However, Amendment 14 goes further than the government amendment. In relation to the overseas territories, it aims to bring transparency to their financial operations by allowing public access to registers of beneficial ownership. I note that Montserrat has already agreed to establish such a public register. This amendment would put a timetable in place for the British Overseas Territories to have public registers. It would require the Government to give all reasonable assistance possible to the overseas territories to help with this. If registers have not been made public by the end of 2019, the amendment requires that public registers should be brought in by an Order in Council.

In Committee, the Minister made it clear that she could not accept the amendment. However, in doing so she did not use the argument raised so frequently in discussions on this matter, that requiring the overseas territories to have public registers while other offshore financial centres maintain their secrecy puts them at a competitive disadvantage so that, in the evocative words of the noble Lord, Lord Hodgson,

“the malfeasant … will drift away to still murkier regimes”.—[Official Report, 3/4/17; cols. 898-899.]

I welcome very much the noble Baroness’s rejection of that line of argument. She said:

“The overseas territories may face competitive disadvantage in the short term, but in the long term, the transparent and open way in which the territories intend to work, and we with them, will be to their advantage”.—[Official Report, 3/4/17; col. 911.]


In Committee, her main reason for rejecting the amendment was that there would be a constitutional problem in accepting it. She repeated that today. Yet since Committee, I have been sent many documents on this subject, which I studied carefully. They make it clear that ultimately the UK Parliament could legislate for the overseas territories if it so wished but I understand completely why the Government would prefer to proceed with consent. So would I and I am sure there is wide agreement on that.

I remind the Minister of what she said in Committee: for the purposes of international law, the overseas territories are British. That Britishness is significant. In my various discussions, it has become clear to me that the attraction of the financial services in the overseas territories is primarily related to British identity and language, access to a common-law legal system, final recourse to the Privy Council and the appeal, as it is seen, of the Union Jack. It is worth repeating the words of the noble Lord, Lord Kirkhope, in Committee. He said:

“It is fair to ask those jurisdictions that while their economy and defence depend on the stability and integrity of the UK, they should also be expected to follow the same rules of business and investment that we follow here”.—[Official Report, 3/4/17; col. 888.]


We in the United Kingdom have a public register. It might not be perfect—I am sure that the noble Lord, Lord Eatwell, would agree with me on that—but it is our policy. We have one because we believe it is right and that it helps to prevent serious crime. I hope that by tabling this amendment we have made it clear that we in the United Kingdom understand the huge impact that secret offshore financial services can have on the poor countries of the world, good governance, democracy and security. We understand that the overseas territories are a United Kingdom responsibility and we hope very much that transparency of their financial operations will come sooner rather than later.

Finally, I thank the Minister for the way she has carried this hugely important Bill through the House, and for her support and helpfulness at all times.

[Lord Kirkhope of Harrogate (Con)]

My Lords, as one of the signatories to Amendment 14—and its predecessor, which we looked at in Committee—I thank the noble Baroness, Lady Stern, and congratulate her on her amazing vigour and courage and, indeed, her intuition in pursuing this matter, which is so important.

When I spoke in Committee, I made it very clear from the beginning that, first of all—and this is important still—the Government deserve enormous praise for the work they have done both here in the UK and internationally to tackle corruption and tax evasion and avoidance. I credit that also to the previous Government because one of the reasons I have been interested in this matter is that I followed the right honourable David Cameron’s lead when he put this issue very much at the top of the agenda at the 2013 G8 summit and subsequently, as was referred to in an earlier discussion, at the anti-corruption summit in May last year.

Of course, Mr Cameron and others did not refer just to global standards. Indeed, one of my noble friend the Minister’s responses in Committee was to talk about awaiting global standards before any further pressure was placed on overseas territories to comply with the public register or the enhanced register. But the truth is, of course, that the former Prime Minister referred to the gold standard, which the United Kingdom itself was very much in the vanguard of. This was accepted and understood, and it left this country, as it is now, in an enormously advantageous position in dealing with other countries as we go forward.

For my sins, I was one of those involved in the drafting of the fourth anti-money laundering directive. My friends always introduce me as an expert on money laundering. I do not like that description but undoubtedly we are looking in this enormously important piece of legislation at how we respond to the requirements under that fourth money laundering directive as well.

I maintain that the amendment I have co-signed is the best way forward but I also pay tribute to the Minister for the way she has listened to the concerns of those who hold our views. She listened very carefully in Committee—and not just listened. Often I think our Ministers listen but that is about it. She has in fact acted. Therefore, I will refer quickly to government Amendment 8, which is an enormous stride forward. It also gives us the ability, which is so important, to review the situation actively in two years’ time, when we can have reports to see how the overseas territories are getting on with the introduction of public registers. She has also given us good news this evening about developments even since Committee. We should welcome that and thank the Government for their interest in proceeding in that manner.

I am still of the belief that we need a level playing field and we need an agreement with our overseas territories that is at least compatible with and equivalent to the requirements that we place in the domestic setting. It makes no sense not to have that. I recognise the Government’s position on this and I realise they wish to proceed by consent. Of course, we all agree that consent is always better than enforcement. I wish the Government great success with this. As we proceed, I hope we will be getting regular updates and then, in due course, when the reports come in, we will have the opportunity, if necessary, to return to this matter. But this is a very important Bill in so many other regards as well. I certainly wish us to pass the Bill and allow it to proceed from here.