Economic Crime and Corporate Transparency Bill

Lord Garnier Excerpts

Committee stage
Thursday 20th April 2023 Grand Committee

[Lord Vaux of Harrowden (CB)]

My Lords, I support the amendment in the name of the noble Lord, Lord Agnew. To follow up on what has just been said, at the date of Second Reading, approximately half of the expected 32,000 companies that were going to register had done so. I gather that this figure is now 27,000, which is a good step forward. At that time, when it was a rather smaller number, I think 4,000 of those companies suggested that they were owned by trusts, which shows the scale of this issue.

I think it was the noble Lord, Lord Leigh of Hurley, on the first day in Committee, who was sceptical about whether my amendments identified the ultimate beneficial owners of trusts. He was right to be sceptical; I do not think they did. But that ultimate beneficial ownership and control is what we are trying to get to with this process. Trusts are probably the most common method used for hiding the ultimate true ownership. As I say, 4,000 out of the 16,000 companies that had filed at the time of Second Reading—a quarter—were owned by trusts, and we could no longer see where they went.

It seems very perverse that this information is hidden. I am keen to hear from the Minister a convincing explanation of why the Government feel that it should be hidden. Like the noble Lord, Lord Agnew, I see that the Minister has tabled Amendment 76H, which will extend the information required on trusts. That is very much to be welcomed. I am not at all clear—I do not think that the noble Lord, Lord Agnew, is either—on whether that information is intended to be transparent or hidden. Clearly, it should be public.

To be honest, there seem to be a lot of areas where information is hidden. We have had a number of discussions already in Committee about that. We need to step back and apply a simple principle that there should be maximum transparency, and that we should hide information only where there is genuinely a strong privacy issue. At the moment, it feels very much as if the balance is tipped too far towards privacy and too far away from transparency.

[Lord Garnier (Con)]

My Lords, I entirely agree with what the noble Lord has just said. Trusts are and have been frequently discussed in this Bill and its predecessors as one of the most effective ways of hiding information that ought to be made public. Clearly, some matters are properly to be kept confidential, but much of the material covered by the law of trusts ought, in the public interest, to be disclosed.

I happily support the amendment that my noble friend Lord Agnew moved a moment ago. Like him, I want to know whether the Government’s Amendment 76H renders his amendment redundant. I do not think it does, because it seems to me that there is a difference between the publication of information about trustees, which is what my noble friend talks about, and the registration of information about trusts in the Government’s proposed new clause. We can register as much as we like, but if you cannot open the box and see what is inside and has been registered, it is a pretty futile exercise. Public opinion, public policy and an assessment of the public interest suggest to me—for the reasons already given by the noble Lord, Lord Vaux, and my noble friend Lord Faulks—that the Government, if they want to maintain the difference between registration and publication, are behind the curve.

We learned a lot in my noble friend’s committee in 2019 about the huge amounts of real estate, particularly within London and a couple of its boroughs, which are owned by people, companies and trusts of which we know nothing. Many of these houses and properties were unoccupied; they were merely the physical dumping grounds for money. Obviously, they had to be paid for.

The committee on which the noble Lord, Lord Faulks, and I served was not able to discover, but sought to encourage the then Government to expose, the route by which criminal funds were laundered into London by money launderers. Any number of blocks of flats and very expensive houses, all year round, 24 hours a day, never have a single light on. You can go down smart squares in Kensington or Westminster and see places that look utterly unoccupied—because they are. They are dumps for dosh. We need to make sure that this new law is effective at exposing and, if not exposing, inhibiting before it gets here, the translation of laundered money from dodgy jurisdictions into ours. It is as simple as that. I hope the Minister is able to persuade the Committee that my noble friend’s amendment is redundant, because the Government’s amendment comprehensively and effectively does what we would like.

[Lord Wallace of Saltaire (LD)]

I will just add to this. As it happens, the other week my wife and I were going around the Nine Elms development, Battersea Power Station, et cetera, with an eye to when we downsize. We were told that, until then, over 40% of the apartments had been sold to people living abroad. That partly explained why it was so very quiet there; not many people were present in the complex. That raises all sorts of large questions about housing practices in London, which we need not touch on at the moment.

I want to pick up on the point made by the noble Lord, Lord Agnew, about how one establishes the ultimate beneficiary when one company is owned by another company, which is owned by a trust in another jurisdiction. That is part of what my amendment was trying to get at, as a key element before one can even begin to enforce is accurate information from regulators in other jurisdictions and territories, and how we do our best to ensure that the information we are receiving is accurate. That requires active diplomacy and co-operation between the financial parts of different Governments. We are looking for some assurance from the Minister that that is part of what is intended when the Bill becomes an Act and that we will know which parts of Whitehall will be pursuing it.

On the first day in Committee, there were some references to the role of HMRC. We have been told that Companies House will not be concerned with regulation or enforcement, but we need to know a little more about which parts of our government machine will take the lead on ensuring that we begin to unpick the cascade of trusts and companies referred to by the noble Lord, Lord Agnew, and will tell us who, in effect, the beneficial owners are.

--- Later in debate ---

[Lord Johnson of Lainston (Con)]

I am just coming on to that. The noble Baroness, Lady Blake, is right to ask for there to be a running total, because a further 717 overseas entities have complied in the recent period since my own figures were updated—so it would be quite useful to see how that is going. I would also like to separate the comments of the noble Lord, Lord Vaux, about the ability to keep some information private from the presumption of this Bill, which is the presumption for privacy for trusts rather than it being the exception.

This matter was well debated in the other place during the passage of the Bill—I am sure that some of your Lordships have had the opportunity to read that debate—but the question was what level of information should be published. Let us remember that all this information is collected by Companies House, so it is on record. In terms of crime fighting, it will be fully available to Companies House for the processes that all companies are obliged to undergo. It is perfectly reasonable to have a debate about what level of transparency there should be when it comes to publishing information. As I said before an intervention, it may also be appropriate for there to be a presumption of privacy for small, micro-entity information, given that some of those very small businesses are in effect people’s private wealth.

We should not conflate the work that we are trying to do here on Companies House, corporate transparency and reducing crime with some of the powerful principles around privacy, investment, family and protection, which are not irrelevant. It is important that we have a debate about this. The Government have committed actively to explore levels of information that should be published. The Treasury is very specific on my mandate in this discussion. I am not mandated to commit to any level of transparency above and beyond what we are already doing, which is a significant change, yet, at the same time, I can, and am keen to, commit to further debate about the level of transparency.

[Lord Garnier (Con)]

My noble friend’s own Amendment 76H is in a different group to this one, but it is likely that we will debate it later today. By then, he may not have had time to take further advice about the default position that we would like to see; that is, everything should be made open unless there is a good reason for it not to be. I was struck by the expression that he used a moment ago, particularly when dealing with micro-companies, that the default position should be one of confidentiality—“secrecy” is an emotive word—in favour of the micro-company and its owners as opposed to the other way around.

We are looking for a general rule, a general default position, that there should be openness unless there is a very good reason for there not to be—and, as my noble friend pointed out, there will be occasions when there is a very good reason not to have an open-source register. Is my noble friend in a position, even if he is not able to do so later this afternoon when government Amendment 76H comes to be debated, to amend or clarify the Government’s position? Can he assure us that Report will be the occasion when this further debate will be held? To say that there will be opportunities for a debate about the default position does not pin it down to a particular date or time. My noble friend will know, and the usual channels will know, that time is precious and Governments can often find an excuse, based on inconvenience, not to allow a debate that is required to take place.

[Lord Johnson of Lainston (Con)]

I thank my noble and learned friend for that point. Going back to the comment the noble Baroness, Lady Blake, made about the statistics on registered entities, I understand that there is a website that tracks this, which the Committee can log on to each day to see progress. We will send that link around to encourage your Lordships to look at it, but at the same time we will make sure that we provide more information about the statistics.

I cannot commit to a debate on trust transparency at this stage, but what I can commit to is that the Government are exploring this topic, which I think is separate to some of the discussions we are having. I would like to clarify my own point, which the noble Lord raised, about micro-entities and the assumption of publishing. I believe that the assumption is that the information would be published. My point was that I think it is perfectly reasonable to have differing views over this on account of areas such as privacy, if I can have a personal view as a Minister. I am very happy to have a debate about whether there is a discussion to be had around privacy for micro-entities publishing all their information, given how personal that can be. I think it is perfectly legitimate for trusts, in many instances, to be considered private affairs, so long as the authorities themselves have the transparency of information that they need.

--- Later in debate ---

[Lord Agnew of Oulton (Con)]

My Lords, I support the amendments and want to make a couple of points. First, it is not a very ambitious request that we are making of these territories: simply that they have proper anti-money laundering processes in place. If we link it to my own amendment, which I have withdrawn, we are now in a position where we have no knowledge of the ultimate owner of many of those assets and no reassurance that there is any anti-money laundering going on.

Secondly, we need to remember that it is our reputation being damaged by these territories which are not stepping up to the plate, because they are using the principles of English law and that is how they are making a very good living out of it. I again ask my noble friend the Minister what is happening to move this along. It has been sitting around for a long time and it is damaging the reputation of this country.

[Lord Garnier (Con)]

My Lords, I have an interest to declare in that I am presently instructed by the Government of the Isle of Man in a legal matter. Under the new rules of the House, that is declared specifically in my entry in the register—I have just been checking. It is not a very exciting piece of work: I am required to report to the Isle of Man Government on the state of their legal services sector—I know that many of you will be very jealous of that exciting piece of work. One thing that the Isle of Man is particularly keen to have recognised is that it is an independent jurisdiction. Yes, the United Kingdom and the Isle of Man share through the Lord of Mann—namely, the sovereign—a head of state. Yes, it shares many of the legal traditions and concepts that we recognise in this jurisdiction, but it is a separate jurisdiction. It has its own parliament; indeed, its parliament is probably older than this one: the Tynwald. I have received instructions, not recently but in the past, from states within the Channel Islands and from British Overseas Territories. They are all fiercely proud of their independence as separate jurisdictions. I fully understand the points and the thrust of the arguments made by noble Lords who have spoken ahead of me, but we need to be careful about how we approach extending the ambit of this legislation.

To look as though we are retaining some sort of colonial mastership over those fiercely proud and independent jurisdictions is not a good look. It does not matter whether you are in the BVI, the Cayman Islands, Guernsey, Jersey or the Isle of Man; we just need to tread politely, quietly and with consensus. I accept that noble Lords have said that this has been going on for far too long and it is time that the UK Government got their act together and started to do something about it. Of course, that would be the ideal, but, often, the best is the enemy of the good. I want the Minister to know that although this is a forum in which he might seem, from time to time, on his own, he is not. No matter of which party we are or whether we do not belong to any party at all, we are trying to achieve workable legislation which is not only comprehensive and comprehensible but carries the respect of the people against whom it might bite, because law which is not respected is law which does not have any value or purpose.

If my noble friend the Minister sometimes thinks that he is the only man standing at the gate as the barbarian hordes—the noble barbarian hordes—assail him, would he please accept from me that he has our personal friendship and our professional respect? I am sure that this sentiment covers the whole of the Committee. We know the difficult job that he is doing so please, when we come to discuss this amendment, will he accept from me that I understand it is not easy to tell the Channel Islands, the Isle of Man or the British Overseas Territories that they must do what this Parliament says?

There will therefore be many discussions, it seems to me, between his department, the FCDO and the Treasury with their counterparts in these various jurisdictions. If we can bring them with us, as opposed to clobbering them with unilateral legislation, we will achieve a much longer lasting result—albeit that I entirely accept the purpose of the amendments from the noble Lord, Lord Wallace, and the noble Baroness, Lady Bennett of Manor Castle. Here at least, going with and coming alongside, as opposed to hitting head-on, is the way to go forward.

[Lord Fox (LD)]

I was going to take the benefit of what I hope will be some free consultancy, when it would otherwise be highly expensive, to ask a genuine question. Were His Majesty’s Government not to take the noble and learned Lord’s advice but wished to exert their will over these territories, is the means by which that is done through an order of the Privy Council or are there other ways of doing it? If the answer is yes—I see another noble Lord nodding—what are the precedents for that in recent times?

[Lord Garnier (Con)]

The noble Lord saw my noble friend Lord Faulks nodding. The fact that we went to the same school, the same college at Oxford and the same Inn of Court has absolutely no bearing on this, save to say that he will answer that question in a moment. I am sure he would wish to catch the Committee’s eye. That having been said, I want to finish on this rather wishy-washy point. I sympathise with what has been said in support of these amendments, but we need to take a step back and have a reality check to see how this would be received by the people against whom it will bite.

[Lord Faulks (Non-Afl)]

I will, then, as I usually accept that invitation. As I understand the position, an Order in Council is the mechanism. The convention and the arrangement with the Crown dependencies that I spoke of is not the same with the overseas territories, although the points made about consulting them very much apply.

[Lord Wallace of Saltaire (LD)]

If I may respond to the noble and learned Lord, Lord Garnier, since I have been involved in discussion on this on a number of previous Bills, we are normally assured by the Government as a Bill goes past that there are ongoing consultations with the CDs and the OTs, and that they have been assured that the key proposals will be incorporated into their domestic law within a limited period. As I said, there have been a number of occasions when that has not happened in some territories. It has often been the weakest territories concerned and, after all, this Government have spent a good deal of money on taking over the government of the Turks and Caicos—having to intervene where things have failed. This is rather like saying, “On most occasions, we do not expect most banks or overseas territories to be involved in any form of corruption, but sometimes some will be tempted”. Some may be overcome and that is what we are trying to guard against.

[Lord Garnier (Con)]

The noble Lord is right, and it has not been an easy history, but these small jurisdictions have a choice. I am well aware of the criminal cases currently going on in the Turks and Caicos, and the need for direct rule there. But I have seen too many occasions—not a vast number, but too many none the less—when these small jurisdictions are prepared to be seduced by China rather than maintain their relationship with the United Kingdom. We need to be careful that we do not force these smaller jurisdictions into the arms of the Chinese, when it would be much better for their well-being and ours if we were to maintain them within our own family. I will leave it there.

[Baroness Blake of Leeds (Lab)]

With apologies, as I am not sure whether this is an appropriate time to raise this, but given that our amendment refers to the Sanctions and Anti-Money Laundering Act, perhaps the Minister can explain what sensitive negotiations and discussions, as the noble and learned Lord, Lord Garnier, mentioned, have taken place and the reasons for the disappointing progress. It would be helpful to have a better understanding of why we have not been able to progress.