Disclaimer In this beta version data has been captured from the initial report of proceedings (Hansard) which can be subsequently corrected, therefore it cannot be guaranteed to be 100% accurate. At this time deferred divisions are not included in the data sets. We use cookies to give you the best possible experience on our site. By continuing to use the site you agree to our use of cookies.
Thank you for you feedback!

Criminal Finances Bill

Committee (2nd Day)

Relevant documents: 22nd Report from the Delegated Powers Committee.

Clause 42: Failure to prevent facilitation of UK tax evasion offences

Amendment 161

  1. Baroness Bowles of Berkhamsted

    Moved by

    161: Clause 42, page 107, line 27, at end insert —

    Read more

    “(9) The Secretary of State may by regulations made by statutory instrument create, amend or remove further facilitation offences in respect of economic crimes other than UK tax evasion.

    (10) Regulations under subsection (9) may create offences conferring liability on a relevant body where a person commits an economic crime when acting in the capacity of a person associated with the relevant body.

    (11) Regulations made under subsection (9) must contain the safeguards set out under subsections (2) to (8) and sections 44 to 47.

    (12) For the purposes of subsections (9) and (10), “economic crimes” means any of the offences listed in Part 2 of Schedule 17 to the Crime and Courts Act 2013 (offences in relation to which a deferred prosecution agreement may be entered into) with the exception of an offence under section 1 of the Theft Act 1968.

    (13) A statutory instrument containing regulations under subsection (9) may not provide for more than one facilitation offence, but, for the avoidance of doubt, more than one statutory instrument may be made under subsection (9).

    (14) A statutory instrument containing regulations under subsection (9) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”

  2. Baroness Bowles of Berkhamsted (LD)

    My Lords, the Bill creates a second failure to prevent or facilitation offence for tax evasion, the first such offence being in the Bribery Act. It therefore makes sense to have an extended family of failure to prevent offences for other serious crimes for which the UK has spectacularly failed to prosecute large companies. The purpose of this type of offence, along with a defence of due diligence, is to make companies have better prevention procedures as well as providing deterrent and punishment. These offences have a far-reaching effect on corporate governance and culture, encouraging own-up instead of cover-up, responsibility instead of denial. I do not know how many more times it is necessary to listen to the public outcry, but public trust in business is at an all-time low, as reported in the International Business Times in January. There is an urgent need to fix a problem we have known about for a long time.

    Amendment 161 and Amendment 163—the alternative, narrower version—explore putting additional failure to prevent offences into the Bill and bringing them into effect later. I suggest creating an option in this way because it gives time to evaluate the recent call for evidence and because of the limited legislative opportunities due to Brexit. Amendment 161 is broader and more flexible and uses a statutory instrument to introduce further failure to prevent-type offences. I know that sounds a bit scary, so I encourage noble Lords to look at the whole of the amendment, because there are significant constraints on the SI’s content. First, as specified in proposed new subsection (11), the new offences “must” have the same safeguards and procedures that the Bill introduces for tax avoidance. Importantly, this will include due diligence defence and provision of guidance concerning procedures for preventing the offence.

    Read more

    Secondly, the new offences are not plucked from thin air. Proposed new subsection (12) states that they have to be from the serious crimes listed in the Crime and Courts Act for which deferred prosecution agreements are possible. That list can be added to under that Act, but it will always be for serious crimes. Thirdly, to compensate for the flexibility, proposed new subsection (13) provides that each SI should introduce only one offence. The idea here is that each receives individual consideration and scrutiny.

    Amendment 163 is the narrowest way I can see to pursue the same objective. It creates four specific additional offences and provides for separate commencement from the general commencement provisions in the Bill. There is also a sunset clause so that, if the decision is not to commence, there is no hanging about. The four offences are those named in the Government’s call for evidence: common law fraud, statutory fraud, money laundering and Theft Act false accounting. These are the high-profile and costly areas where we have failed to prosecute large companies. As before, the defence guidelines and procedures follow the same pattern. That is important for businesses so that there is no additional complexity.

    In proposed new subsection (5) I put in an avoidance of doubt provision whereby the standard of proof for the due diligence defence is only to the civil standard. I believe this is how these defences are intended to operate—perhaps that is inevitably how the standards of evidence work—but I could not find it anywhere, so I would like to hear the Minister confirm that for the existing offences.

    Those are the technical points, but why the urgency? First, we are not looking at unknown economic crimes—they are already criminal—but the modern large corporation escapes justice unless guilt is pinned on a specific senior individual who is considered the directing mind. As long ago as 2010, the Law Commission in its consultation paper No. 195 at paragraph 5.84 called the identification doctrine,

    “an inappropriate and ineffective method of establishing criminal liability of corporations”.

    The Crown Prosecution Service legal guidance states under its evidential considerations in paragraph 21:

    “The smaller the corporation, the more likely it will be that guilty knowledge can be attributed to the controlling officer and therefore to the company itself”.

    At paragraph 34, concerning exclusion from participation in public contracts, the guidance states:

    “A prosecutor should take into account the commercial consequences of a relevant conviction”.

    No wonder it is only smaller companies that get pursued. I fear that we do not have equality before the law.

    The Attorney-General, in identifying LIBOR as one of the cases the UK was not able to prosecute, noted the,

    “clear implications for the reputation of our justice system”.

    The Telegraph chief business correspondent said of LIBOR and forex in 2016 that we outsource,

    “corporate accountability for criminality in the City to US prosecutors”.

    It is not as if there is no financial incentive to fix it. In May 2016, the Annual Fraud Indicator put the cost of fraud to the UK economy at £193 billion, with the largest element being procurement fraud, estimated to be £127 billion a year, including from false invoicing.

    Last week, in discussing Amendment 11, we debated money laundering, property, the role of banks and the sorry tale—far stronger action in the US, regulatory fines here, no culprits. Therefore, it seems particularly unfortunate that the crimes of fraud and money laundering, which feature in the high-profile failure to prosecute cases, have not yet been covered by failure to prevent offences. When will we truly be a failure to prevent jurisdiction, not a failure to prosecute jurisdiction? In replying on Second Reading, the Minister said that the call for evidence was part of a two-stage process, and that, should it justify changes, a consultation on a firm proposal would follow. However, I would say that the consultation was wider. There is plenty of evidence concerning failure to prevent offences. It is in use for bribery, is in this Bill for tax evasion, and is a Conservative manifesto promise. Why not give ourselves this option to get it done?

    Fraud and money laundering cost billions, fund terror and misery and make us a low-justice country for big business—and could even be used against us in seeking trade agreements. There is urgency. I beg to move.

  1. Lord Rosser (Lab)

    My Lords, I will speak to my Amendment 166, which is also in this group. It would require the Secretary of State to issue a public consultation on new criminal offences for corporate criminal liability and for economic crime within six months of the day on which the Bill becomes an Act, and for the Secretary of State then to bring forward legislative proposals in response to the consultation within 12 months of the day on which the Bill becomes an Act.

    The Bill makes it a corporate offence to fail to prevent tax evasion and adopts a similar approach to prosecution of bribery offences. However, as the noble Baroness, Lady Bowles of Berkhamsted, said, gaps remain in the law as regards the practical possibility of prosecuting companies for important economic crimes such as fraud, false accounting and money laundering, let alone the severe harms caused to individuals, including those overseas.

    Read more

    As the noble Baroness, Lady Bowles of Berkhamsted, again indicated, the issue was raised at Second Reading, when the Government said that,

    “it would be wrong to rush into legislation in this area”,

    of corporate liability for economic crime, and that there was,

    “a need to establish whether changes to the law are justified”.

    The Government said that they launched a public call for evidence—the closing date for which has now passed—and that if the responses,

    “justify changes to the law, a consultation on a firm proposal would follow”.

    Accordingly, the Government declined to comment on a timetable for reform,

    “should that be the way forward”.—[Official Report, 9/3/17; col. 1518.]

    The Business & Human Rights Resource Centre recorded just over 300 allegations of human rights abuses made against 127 UK-linked companies between 2004 and 2014. Although there is clear evidence that some companies were potentially serial offenders, it seems that there have been no corporate criminal prosecutions. Nearly half the allegations were made against extractive companies.

    If there is a consultation following the call for evidence—and that may well be a big if—will the Government also consult on the need, or otherwise, to change the law on corporate criminal liability on human rights violations as well as economic crime? When an individual injures or kills another person, a criminal prosecution is initiated, but when a company is involved in causing similar harm—not least overseas—the ability to prosecute companies successfully is much reduced to the point of it being almost a deterrent to proceeding at all.

    Overall, the corporate criminal law needs to provide that companies can be held liable for committing offences and not just for omitting to prevent them. No UK financial institution has faced criminal charges as a result of the 2008 financial crisis, and there appear to have been some recent serious issues which have resulted in no prosecution against companies as opposed to an ability to resolve the matter through financial payment.

    There is also the issue that it appears from a relatively recent case that, under corporate liability laws, it is not illegal for companies to mislead their auditors. As has been said, current laws seriously disadvantage small and medium-sized businesses compared with larger businesses. SMEs, where directors are more involved, are much more easily prosecuted under the existing corporate liability regime, since current UK corporate liability laws rely on a “directing mind” test that requires prosecutors to prove that senior board-level executives intended the misconduct to occur. The Crown Prosecution Service, for example, stated that because of corporate liability laws it could not mount a successful prosecution against the companies involved in the phone-hacking scandal.

    When do the Government intend to commit themselves to address this issue of the deficiencies within the current corporate criminal liability laws? They could do so today by accepting one of the amendments in this group. They could do so today by accepting my amendment, with its timetable for a public consultation and then legislation. If that is more than the Government are prepared to do, they could today at least announce that there will definitely be a public consultation on a firm proposal on the issue, following the call for evidence, and say when that public consultation is likely to commence.

  2. Lord Leigh of Hurley (Con)

    My Lords, I declare my interests, principally as a member of the Chartered Institute of Taxation. I wish to speak particularly on Amendment 161. The noble Baroness, Lady Bowles of Berkhamsted, is right that the mood of the public has changed dramatically and significantly against those who practise tax evasion—and to some extent tax avoidance, which I think she mentioned, although we are focusing here on tax evasion—so having such a clause in the Bill is very welcome.

    Turning my mind back to 20 or 30 years ago when I was a tax practitioner, in many respects it would have been remarkable to think that this clause might appear in a Bill. Indeed, many of your Lordships may have noticed in Sunday’s and today’s national papers a two-page advertisement by a large Swiss bank protesting that it does not in any way condone tax evasion. It is quite extraordinary to see that—and most welcome—and it has no doubt come about in part because of the pressure to change public opinion brought to bear by the Government and Members of this House.

    Read more

    However, in respect of Amendment 161, I agree that the damage caused by economic crime is very serious. I welcome the Government’s consultation on corporate criminal liability for economic crime, but this is an extremely complex legal area that could significantly impact on the UK’s financial sector, in which I work, and in particular on the UK’s SME financial sector, which has a lot on its plate at the moment. Therefore, I hope that the Government will bring forward a consultation on possible options for reform following the conclusion of the call for evidence, which I think has just ended or will close shortly. We should wait until that is completed before a decision is made on introducing new legislation.

  3. Lord Beith (LD)

    My Lords, my noble friend has explained with magnificent clarity the purpose and nature of her two amendments. However, in discussions that I have had with her, she has still not quite convinced me that the use of a statutory instrument to create further facilitation crimes is something that I ought to be enthusiastic about. I well understand the purpose that she is pursuing and the care with which Amendment 161 incorporates various safeguards both within its own text and by reference to other legislative provisions. My concerns are not raised by Amendment 163, which she offers as an option.

    As your Lordships look further at this matter, I just hope that we can focus a little attention on the fact that, if anything is created as a crime by a statutory instrument, it is done by a process which, although affirmative in terms of the amendment, is not capable of amendment. Therefore, any defect in the way it is worded or presented can only result in either it going through in a faulty way or the Government accepting that they should withdraw the amendment and come back with a better one. I wish that they would do that more often and quite quickly, because it would resolve some of the problems that we have with statutory instrument procedure. However, I listened to that part of the debate with still unresolved anxiety about the use of a statutory instrument without further qualification.

  4. Lord Hodgson of Astley Abbotts (Con)

    My Lords, I think it is worth making two points. I understand the point that the noble Baroness, Lady Bowles, was making and the importance of the topic that she has raised. It is quite a serious matter to introduce a change of this nature by a statutory instrument—an issue that has concerned your Lordships’ House in the past. I understand that the noble Baroness has drafted her amendment to try to avoid some of the worst excesses but it is something which—with Henry VIII powers and so on—we are very concerned about. Widening this provision through a statutory instrument could lead to some difficulties regarding the appropriate level of parliamentary scrutiny, given that statutory instruments are, by definition, not amendable.

    My second point relates to Amendment 166 in the name of the noble Lord, Lord Rosser. I always support him when he wishes to do post-legislative scrutiny. I think that part of what he is getting at here is that we should look at whether all the holes have been blocked up. However, to do so within six months of the day on which the Act is passed will not give much time to see how the new legislative provisions are bedding down. Therefore, from my point of view, it would be more appropriate if a longer time was allowed during which the serious impact of the Act would, I hope, make itself felt.

  1. Baroness Kramer (LD)

    My Lords, I speak very much in support of my noble friend Lady Bowles on this occasion. The issue she is attempting to tackle is that of delay. There are serious gaps in the Bill—as they have just finished a consultation, I suspect that the Government recognise that. The “failure to prevent” focus which it has brought on a limited number of issues should have been applied to the broader range of very serious business and economic crimes. On these Benches, our great fear is that if occasion is not taken in this Bill to put in place the structure that will enable action to be taken on those issues, there will be a long delay, because bringing forward new legislation in the environment of Brexit will mean that everything is very seriously delayed. In that time, we will find ourselves in a situation where companies believe that they are potentially able to get away with it.

  2. Lord Judge (CB)

    My Lords, I had intended to speak at a little length but the noble Lord, Lord Beith, has said everything that I wished to say about the dangers of creating criminal offences by secondary legislation.

  3. The Minister of State, Home Office (Baroness Williams of Trafford) (Con)

    My Lords, I am very pleased to be able to return today to our debate in Committee, beginning with the very important issue of corporate criminal liability. Through this Bill the Government are building on the efforts of the last Labour Government, when they created the Bribery Act, by creating new corporate offences of failure to prevent the facilitation of tax evasion. These are significant proposals and I look forward to debating them further shortly. The amendments in this group relate to corporate criminal liability for other types of economic crime—that is, other than bribery and the facilitation of tax evasion. This issue has, of course, arisen a number of times in both Houses during the passage of the Bill, and these amendments have allowed us to have an insightful and constructive debate.

    As noble Lords have said, the damage caused by economic crime perpetrated on behalf of or in the name of companies—to individuals, businesses, the wider economy and the reputation of the United Kingdom as a place to do business—is a very serious matter. As this House will be aware, the Bribery Act is widely respected as both a sound enforcement tool and a measure that incentivises bribery prevention as part of good corporate governance. As I have said, this Bill makes similar provision in regard to the facilitation of tax evasion. That provision has followed a process of full and lengthy public consultation, as did the implementation of the Bribery Act. As my noble friend Lord Leigh alluded to, these are very complex legal and policy issues with the potential for significant impact on companies operating in the UK.

    Read more

    I hope noble Lords will agree that this level of detailed consideration of both the existing legal framework and any proposals to extend it was crucial. That is why the Government announced, at the time of last year’s London Anti-Corruption Summit, that we would consult on the creation of new forms of criminal liability. The Government’s public call for evidence on corporate criminal liability for economic crime was published on 13 January. It openly requested evidence for and against the case for reform, and sought views on a number of possible options, such as the Bribery Act’s “failure to prevent” model, as an alternative to the current common law rules. The consultation closed only last week, on Friday 31 March. The Ministry of Justice is now assessing the responses received, but, as noble Lords will appreciate, it is too early to confirm the outcome. Should the responses received justify changes to the law, the Government would then consult on a firm proposal, as the noble Lord, Lord Rosser, articulated. I hope that reassures him that we are continuing to explore this issue as his amendment proposes. I trust noble Lords will agree that it would be wrong to rush into legislation, or to commit to doing so in the future, prior to giving the matter the appropriate consideration, as my noble friend Lord Hodgson said.

    Amendment 161 provides for the novel approach that we could add additional offences to the legislation by regulations. I commend the noble Baroness on her ingenuity—I was promised she would show it—but, as I have said, these are complex issues with potentially significant implications for companies across the country. The Government do not, therefore, believe that it would be appropriate to extend the failure to prevent offences via secondary legislation, which would not allow for the appropriate level of parliamentary scrutiny of proposals such as this.

    The noble Baroness, Lady Kramer, asked about the timing of the failure to prevent measures and why the Government do not act now. She said we cannot afford to delay and made a point about the upcoming Brexit legislation. I remind noble Lords that the Bribery Act offence has been on the statute book for a number of years, allowing us to assess its effectiveness. We are now legislating on tax evasion and already looking closely and openly at the question of extending it to wider economic crimes. The Government are not delaying, we are acting—and we are doing so in a sensible and considered way.

    The noble Baroness, Lady Bowles of Berkhamsted, asked about the standard of proof for the failure to prevent economic crime. Her Amendment 163 allows for the defence of reasonable procedures to be satisfied by the civil standard—that is, the balance of probabilities. I can confirm, as she wanted, that it mirrors the approach in the Government’s proposed offence of corporate failure to prevent the facilitation of tax evasion.

    The noble Lord, Lord Rosser, asked whether HMG will legislate to create corporate liability for failure to prevent serious harm or human rights abuse. I wrote to the noble Lord about this—it is obviously seared in his brain or, probably, was passed straight to his outbox. All businesses are expected to comply with the legislation that comes under the jurisdiction of the UK, including that which relates to human rights. While the Government have no ability to regulate UK businesses operating in overseas jurisdictions, we encourage them to honour the principles of internationally recognised human rights wherever they operate. More broadly, in 2013, we were the first country in the world to produce a national action plan in response to the United Nations guiding principles on business and human rights.

    Large UK-domiciled businesses must also comply with laws that require them to report certain human rights issues, including the Companies Act and our world-leading Modern Slavery Act, which requires them to produce annual statements on what they have done to ensure that such issues do not occur in their business and supply chains.

    I hope I have fully answered noble Lords’ questions and that the noble Baroness, Lady Bowles, will feel free to withdraw the amendment.

  4. Lord Rosser

    My Lords, I suspect I am on a mission that is not going to succeed, but it is unfortunate that a number of key decisions are likely not to be taken by the Government until this Bill becomes an Act. The Minister said that the closing date of the public call for evidence in relation to corporate criminal liability has just gone, but do the Government expect to give any indication before Report as to whether or not they will be moving to consultation on a firm proposal or, alternatively, are they likely to indicate before Third Reading whether they will be moving to consultation on a further proposal?

  5. Baroness Williams of Trafford

    Perhaps I may look into that and let the noble Lord know because I am reluctant to make sweeping promises at the Dispatch Box without knowing exactly what the timescales will be. I will let him know, certainly before Report, what the expected timescales are.

  6. Baroness Hamwee (LD)

    Before my noble friend responds, the Minister referred to the Modern Slavery Act. I do not want to be overly pedantic but I do want to be a bit pedantic because this is an important point. She mentioned the requirement on certain companies to report on the steps that they are taking under Section 54 with regard to their supply chains. I think that she will agree that their statement as regards the steps they are taking can be a statement,

    “that the organisation has taken no such steps”.

    Read more

    That would be regrettable. However, there seems to be a feeling that every organisation has got to report the detail of the steps when that is not quite the case.

  7. Baroness Williams of Trafford

    My Lords, I would say that the statement a company makes reflects the company, and if a statement of no effort is made, it will be for others to judge the efficacy of that company.

  8. Baroness Bowles of Berkhamsted

    My Lords, I thank the Minister and other noble Lords for this debate and of course I appreciate that it is a little awkward that the call for evidence and consultation process are lagging behind the progress of the Bill. That is why I had my novel idea that we could put in place a framework here which is only an option. The circumstances are such that it would not be an outcry if the decision was that you had to do it in a different way, so as in my Amendment 163, the provision would just fall away. Of course, that provision would not be introduced by statutory instrument, it is just a delayed commencement. I still feel that there is some mileage in taking a further look at this kind of provision.

    As a result of this debate, I think we have the answer to one of the questions in the call for evidence because of what the Government have said that they are thinking of introducing for the four criminal offences I have picked up on and that it may be by statutory instrument for the others. We have heard some good reasons as to why statutory instruments are not such a good idea, and indeed I think the Minister has conceded that. That may be the outcome of the ticks in the call for evidence. I would like to know how many ticks were made in that box; perhaps she could count them and let me know.

    Read more

    I reserve the right to have another go along the lines of Amendment 163, but at this stage I beg leave to withdraw the amendment.

Amendment 161 withdrawn.

Clause 42 agreed.

Clause 43 agreed.

Clause 44: Guidance about preventing facilitation of tax evasion offences

Amendment 162

  1. Baroness Hamwee

    Moved by

    162: Clause 44, page 108, line 27, leave out “can put in place to” and insert “shall have regard to in order to”

  2. Baroness Hamwee

    My Lords, this is a probing amendment. Clause 44(1) provides that the Chancellor,

    “must prepare and publish guidance about procedures that relevant bodies can put in place”,

    Read more

    to deal with certain matters. My amendment suggests that organisations should “have regard to” such guidance, and is really intended to probe precisely what is meant here. The phrase “can put in place” strikes me as an interesting one to use in the middle of a piece of legislation. Does it mean “must put in place”, or if they want to have guidance on procedures, it is only what the Chancellor prepares and there can be no other procedures? I wonder whether the Minister can explain what is actually required in subsection (1). I beg to move.

  1. Lord Leigh of Hurley

    My Lords, I spent quite a lot of time reading the amendment and trying to understand it. I am grateful to the noble Baroness, Lady Hamwee, for explaining it to us. As I understand it, the clause does not require relevant bodies to put these procedures in place; it just mandates the Chancellor to produce some presumably helpful guidelines, which the amendment would then require those relevant bodies to adopt. I think that is the gist of it.

    If the amendment is prompted by concerns raised about the guidance the Chancellor will have to offer as a result of the clause, I hope the Minister might consider returning to that issue at subsequent readings as no explanation is given in the clause as to what the guidance will be. It would be very helpful for corporations affected to understand how they can rely on the defence of “reasonable prevention procedures”, so that they can put in place an appropriate strategy to ensure compliance with their new obligations if those are put on them through this amendment, or possibly—as is perhaps my great concern—at a later stage in the Bill or by statutory instrument.

    Read more

    It must be sensible to allow corporations to build on their current policies and procedures already in place under other legislative requirements to show that they have a defence to this offence. If not, the compliance costs would be significant. Even where current policies are acceptable there will still be costs involved in training staff, certification and reporting processes. There is, therefore, clearly a need to ensure that the measures can be implemented in a way that mitigates additional costs as far as possible.

    Guidance can help corporations to identify how they can demonstrate that they have followed satisfactory due diligence procedures and have a “reasonable care” defence in the event that one of their associates is discovered to have criminally facilitated tax evasion. However, it must be recognised that every business is different. The importance of the guidance will be enhanced if the legislation explicitly states that the courts should “have regard to” it. This would provide a valuable extra—although not absolute—safeguard for corporations that have relied on the guidance when implementing their procedures, although, of course, it cannot be a safe harbour.

    In short, the amendment will be onerous to apply to every relevant body. I therefore speak against it.

  2. Lord Kennedy of Southwark (Lab)

    My Lords, I support Amendment 162, proposed by the noble Baroness, Lady Hamwee. It would strengthen Clause 44, which is in a part of the Bill concerned with corporate offences of failure to prevent tax evasion. Failure to pay the right levels of tax due as an individual or as a corporate body hurts everyone. Having robust procedures in place to combat these offences is important. Some corporate entities will employ lawyers and accountants to minimise their tax liability, but where that steps over the line into tax evasion we have to be prepared to take swift action.

    The clause so far will place a requirement on the Chancellor of the Exchequer to publish and prepare guidance, using the word “must”, which is not something we often see in government Bills—I have always thought parliamentary draftspersons preferred “shall”—but since it uses the word “must”, noble Lords can draw from that that great importance is implied about this guidance on the procedures. The idea is to help relevant bodies. The Bill then moves on and says,

    Read more

    “can put in place to”,

    which negates the emphasis in the earlier part of the clause.

    The amendment from the noble Baroness would place the right emphasis, saying that relevant bodies “shall have regard to” this important advice prepared by the Treasury and published by the Chancellor. The Government clearly thought it was important that companies should be aware of this advice. I hope they will tell us why they think their wording is sufficient and that that of the noble Baroness is not necessary in this case.

  3. Baroness Vere of Norbiton (Con)

    My Lords, I am grateful to the noble Lady, Baroness Hamwee, for tabling this amendment, which allows us to discuss the Government’s guidance on the new corporate offences in Part 3 of the Bill. Part 3 creates two new offences for relevant bodies that fail to prevent the criminal facilitation of tax evasion. It also provides a defence for a body to show that it has put in place reasonable prevention procedures designed to prevent such criminal facilitation.

    The Government produced guidance on the offences, and the related defence, in 2015 and conducted a full public consultation on it. Much of the guidance focuses on the operation of the defence and helps to inform businesses’ understanding of how to determine what prevention procedures are reasonable in their circumstances. The guidance has been discussed extensively with a wide range of businesses and organisations both within the UK and overseas. Following the consultation, the updated guidance was published last year.

    Read more

    In addition to the government guidance, officials have been working with a number of representative bodies to support them in producing their own sector-specific guidance, which can be endorsed by the Chancellor if it is clearly in keeping with the overarching government guidance. The Chancellor’s endorsement of external guidance will provide a hallmark of quality for individual businesses to identify good practice for their sector.

    The government guidance makes it clear that it is just that: guidance. It does not set out a tick-box exercise of mandatory requirements for businesses but rather six principles to help each business decide what prevention procedures, if any, are reasonable for them in their individual circumstances.

    The government guidance makes it clear that, for each business, there may be a number of appropriate approaches for them to take and that departure from suggested procedures will not mean that an organisation does not have reasonable prevention procedures. Likewise, different organisations may implement the same or similar procedures differently due to their individual circumstances. For example, what is reasonable for a large, multinational financial institution will be different from what is reasonable for a small, domestic retail business.

    Conversely, while departing from the guidance will not mean that a relevant body does not have reasonable prevention procedures, nor does complying with the guidance necessarily guarantee that prevention procedures are reasonable. The guidance is not intended to be a safe harbour.

    The new offences also provide a defence for a business where it was reasonable for it to have no procedures in place. A business can therefore avail itself of the defence without having followed the Government’s guidance if it was reasonable for it to have no procedures in place; for example, because the risks it faced were so remote that it would be unduly burdensome for it to put in place prevention procedures.

    I hope that noble Lords will therefore agree that it is not necessary, and may impose undue burden, to force businesses to have regard to the government guidance. Those businesses which need to put in place prevention procedures and which seek to be compliant will likely already have regard to the government guidance. This has been demonstrated by the excellent engagement from many sectors on the development of the guidance. Accordingly, I invite the noble Baroness to withdraw her amendment.

  4. Baroness Hamwee

    My Lords, the noble Lord, Lord Kennedy, understood my thinking exactly, although I wonder whether it would helpful to this House to use a procedure which is often used in the Commons to explain that one is probing to try to understand whatever is proposed and the thrust of a particular amendment—I was probing, as I had indicated to the Bill team.

    I had not expected that answer, but I now understand the range of things which can happen under this clause. One is accustomed to phrases such as “for different purposes and for different persons”, which is what I think we are being asked to read into this provision. I note that the Minister said that guidance,

    Read more

    “can be endorsed by the Chancellor”—

    I was not sure what route that was taking me down. I am grateful to noble Lords for indulging me. I, for one, now understand better what is proposed. I beg leave to withdraw the amendment.

Amendment 162 withdrawn.

Clause 44 agreed.

Clauses 45 to 47 agreed.

Amendment 163 not moved.

Amendment 164

  1. Lord Kennedy of Southwark

    Moved by

    164: After Clause 47, insert the following new Clause—

    Read more

    “Exclusion of companies from public procurement

    The Secretary of State must publish an annual report on the number of companies which have been excluded from tendering for public contracts under the Public Contracts Regulations 2015 or had an existing public contract terminated as a result of being charged with an offence under section 42 or 43 of this Act.”

  2. Lord Kennedy of Southwark

    My Lords, Amendment 164, proposed by myself and my noble friend Lord Rosser, seeks to add a new clause to Part 3 of the Bill requiring the Secretary of State to publish a report on the number of companies that have been excluded from tendering for public sector contracts, or had an existing contract terminated as a result of being charged with the offence of failing to prevent the facilitation of UK or foreign tax evasion offences. The more light that is shone into the whole area of corporate failure in respect of tax evasion, the better, as this in itself would force companies that are sloppy or that do not follow procedures to take more notice of the provisions, take greater care and be clear that the Government and the tax authorities do not take such matters lightly.

    Amendment 165, again in my name and that of my noble friend Lord Rosser, would be, in effect, a supervision order imposed by a court on a company convicted of a serious offence in these matters. The court could appoint a third party, such as an expert or body, to supervise the probation period of companies that co-operate with law enforcement bodies to the extent that they are offered a deferred prosecution agreement. Companies convicted under the Corporate Manslaughter and Corporate Homicide Act 2007 may have an order imposed on them to remedy the management system that allowed the manslaughter to occur. However, there are currently no powers available to a court to impose such an order on companies convicted of non-manslaughter offences which have not co-operated sufficiently with law enforcement agencies for a DPA. The perverse result is that companies that co-operate with law enforcement bodies have greater external scrutiny of their corporate governance programmes than companies that do not co-operate with enforcement agencies. This lack of scrutiny represents a missed opportunity to improve corporate governance among convicted companies, but also a powerful disincentive for companies to co-operate with enforcement authorities.

    Read more

    Corporate probation orders are used in other jurisdictions. The US Sentencing Commission, for instance, has given the courts the power to introduce any probationary condition relating to the nature and circumstances of the entire case when sentencing companies convicted of criminal offences. Introduction of such a power in the UK would add another significant tool to the armoury of courts and prosecutors in dealing with financial crime and ensure that that the discrepancy of treatment for companies that co-operate with law enforcement authorities and those that do not is evened out, creating a more level playing field for business.

    Amendment 170, in the names of the noble Baronesses, Lady Bowles of Berkhamsted and Lady Kramer, and the right reverend Prelate the Bishop of Oxford, addresses the very real issue that senior executives rarely face any consequences when companies they run engage in criminal activity—a point made made numerous times from all sides in Committee. The lack of senior executives being held to account properly is a serious matter of public concern. I look forward to the contribution of the noble Baroness, Lady Bowles, who will shortly be speaking to her amendment, and I beg to move.

  3. Baroness Bowles of Berkhamsted

    My Lords, I shall indeed speak to Amendment 170 and I thank the noble Lord for his comments on it. This concerns the procedure for disqualification of directors where there has been a criminal conviction of a company, or a deferred prosecution agreement. The amendment seeks to make it possible, following a criminal conviction of a company, for the court to consider whether any directors should be disqualified. This is not seeking to make a criminal conviction against directors—disqualification is a civil procedure—but to put company criminality procedures on a par with that which exists when there is a breach of competition law.

    Under Section 9A of the Company Directors Disqualification Act, the court must make a disqualification order against a person if a company of which they are a director commits a breach of competition law and the court considers that their conduct as a director makes them,

    Read more

    “unfit to be concerned in the management of a company”.

    This means that the Competition Commission can seek disqualification orders as part of its suite of enforcement powers. In contrast, after a corporate criminality finding, the matter would have to be brought to the attention of the Secretary of State, who is the only person entitled to make a disqualification application to the court. However, there does not seem to be a mechanism by which conduct reports or the like are sent to the Secretary of State in such a case, as they would have to be for insolvency; nor does the Secretary of State have the specialised knowledge to address the public interest issues arising out of the prosecution. It also prevents the prosecuting authority having the power to use disqualification as a direct tool to punish or deter criminal behaviour by companies.

    When I raised disqualification at Second Reading, the Minister explained three things. First, she said:

    “Where a director is convicted, they can be disqualified as part of their sentence”.

    I agree; it happens some of the time. Last year there were 47 disqualifications under Section 2 out of 483 referrals.

    Secondly, the Minister said:

    “Where a company is convicted of a Part 3 offence and the director is not party to that, fairness requires a separate hearing of application to disqualify”.

    I do not understand why criminality differs from competition breach. The Minister will recognise that there is a sequence, as in the recent competition case, where the director disqualification was dealt with after the finding of competition breach. If there has been a “failure to prevent” conviction under the Bribery Act or under this Bill, or indeed if the company has been convicted of fraud, money laundering or some other serious crime and it appears that one or more of the directors has not exerted the right kind of responsibility and control, why is that treated less seriously than competition breach or various aspects of insolvency, where reports on director behaviour are required?

    Thirdly, the Minister explained:

    “Where a director of a corporation is implicated in wrongdoing, they can be subject to prosecution. If their actions amount to criminality or facilitating tax evasion where their actions fall short of being criminal, investigators can already investigate whether they are fit and proper to continue to hold the position of a company director and report their findings to the Secretary of State”.—[Official Report, 9/3/17; col. 1521.]

    With due respect to the Minister, I think this misses the point. The point at issue is not the criminality or near-criminality of the director—that is the identification doctrine hang-up—but their role in adequate governance. As I mentioned before, there are no comprehensive provisions for reports to be prepared beyond those in Section 432 of the Companies Act 1985, which relates to fraud or misfeasance towards members.

    When disqualification was raised in the other place, the Minister of State, Mr Wallace, gave a similar answer to that given by the Minister, and also said:

    “There is no evidence of which we are aware that the power is not being used in the appropriate cases. When not used, it is not used for appropriate reasons”.—[Official Report, Commons, Criminal Finances Bill Committee, 22/11/16; col. 149.]

    There are a lot of negatives there, which of course are hard to prove. After some investigation by me, aided by some QCs—it is still ongoing—I have a negative of my own: I can find no evidence that the general Section 8 powers are being used. I have discovered from BEIS that Section 8 was used five times last year. I understand this was on referral from the insolvency agency and with respect to Sections 447 and 432 of the Companies Act 1985. That takes us back to behaviour and reports that affect members—shareholders—not anything that is in the public interest. So who does the report on bribery or tax evasion? Is it ad hoc? If a prosecutor did it, could he be challenged as outside his remit in some way?

    Of course one problem is that getting convictions against large companies is notoriously difficult but the point of principle, clearly brought out in a failure to prevent conviction, is: “What was the role of the directors in making sure that the appropriate procedures were in place?”. This goes to the heart of governance. There is no other public accountability mechanism and if it is right for competition, why not for bribery, tax avoidance or other serious criminality? Why should the specialist prosecutor not have the full toolkit?

  1. Baroness Butler-Sloss (CB)

    My Lords, I have some doubts about Amendment 165. I find a corporate probation order to be rather unusual and although I am not an expert on crime, it seems to me that there would be considerable difficulties with it. Also, if one looks at subsection (5) of the proposed new clause in Amendment 165, the liability is,

    “on conviction on indictment, to a fine”,

    Read more

    but it does not say how much. There would be a fine,

    “on summary conviction in England and Wales”,

    but there are limits to fines in the magistrates’ court. Whatever that figure is, it is not included. This seems an inadequately drafted amendment.

  2. Lord Judge

    My Lords, I add my voice to that. I support the general idea behind Amendment 165 but it proposes rather a bureaucratic new clause. Why cannot the court simply have power to make orders in accordance with its subsections (2)(a) and (2)(b), where it thinks it appropriate? Why do we need subsections (3) and (4) at all, as company B has already been convicted? It is a matter for the court to decide what sentence should be imposed; it does not need permission or an application by the prosecution. If I may say so, it seems that this would make a complex process to deal with something very straightforward. The court needs to be vested with the powers which are understood to be included on the basis of this amendment. Its compliance procedure would require an external body and, if we are doing that, can we perhaps add that there should be a report to the court about whether the appointed verifier is satisfied that verification has taken place?

    As to Amendment 170, I am just a little troubled about subsection (2ZB) in its proposed new clause. It says:

    Read more

    “The court must not make any order under this section unless it is satisfied that the person bears responsibility”.

    Fine—I understand that—but this is a penal decision. Are we saying that the court must be satisfied to a criminal standard or to a civil standard?

  3. Baroness Kramer

    My Lords, perhaps I may add one phrase only to this debate. I want to speak to Amendment 170 and suggest to the Government that this is frankly a no-brainer. We cannot afford to have inappropriate directors continuing to run companies, particularly when their inappropriate or inadequate behaviour has been exposed in the kind of circumstances discussed under Amendment 170. It is really important that the courts have a full range of tools. We no longer live in a world where the old-school tie and friendships determine who the appropriate directors of companies are. They have to be held to professional and appropriate standards. This proposed new clause would enable that to happen and I frankly cannot see why it should present any difficulties to the Government.

  4. Baroness Williams of Trafford

    My Lords, I am pleased that the amendments in this group have allowed us to have an extended debate on the tax evasion offences in Part 3 of the Bill. I am pleased to say that the Government are supportive of the intentions of these amendments, although that is not to say that further legislation is necessarily required.

    Amendment 164 seeks to require the Secretary of State to publish an annual report on the number of companies that have, under the Public Contracts Regulations 2015, been excluded from tendering for public contracts, or had existing contracts terminated after being charged under the new offences. I fully agree that contracting authorities should be able to exclude bidders that have been convicted under the new offence. The Public Contracts Regulations allow for this in appropriate cases. They grant contracting authorities discretion to refuse to award a public contract to an entity that has been involved in grave professional misconduct. Such misconduct may include committing the new offences of corporate failure to prevent the criminal facilitation of tax evasion. However, government does not collect information centrally on the number of organisations that have been excluded from public contracts under the 2015 regulations. This is because these decisions to exclude are taken by individual contracting authorities on a case-by-case basis, and this may include the new corporate offences.

    Read more

    Introducing a reporting requirement would create a burden on contracting authorities. Each contracting authority would have to make a return to central government, detailing the occasions that exclusion from a bidding process has occurred, and central government would then have to collate all these reports in order to compile national statistics to be published in the report. Such a reporting requirement would go against the Government’s drive to simplify the public procurement process and to cut red tape.

    Current efforts are focused on ensuring that contracting authorities have the necessary information to know whether those bidding for contracts have relevant convictions so that contracting authorities can make more informed decisions on whether to exclude them. This includes the introduction of a robust conviction-checking process to prevent bidders with convictions for relevant offences—including the new offences—winning public contracts. This was announced at last year’s anti-corruption summit and is about to be piloted by the Crown Commercial Service.

    Amendment 165 seeks to introduce a system of corporate probation orders. This would allow a court to require relevant bodies found guilty of the new corporate offences to amend their prevention procedures. I welcome the noble Lords’ amendment. It is absolutely right that relevant bodies convicted of the new offences, and thus found to have inadequate prevention procedures, should be required to implement changes to those procedures. In response, I draw noble Lords’ attention to Clause 48(2) of the Bill, which adds the corporate offences to the list of offences for which a serious crime prevention order can be imposed under the Serious Crime Act 2007. This enables a court passing sentence on a person, including a legal person such as a corporate body, to impose a serious crime prevention order to prevent, restrict or disrupt their involvement in serious crime by imposing prohibitions, restrictions or requirements on them. The terms of these orders may require the relevant body to allow a law enforcement agency to monitor how it provides services in the future.

    Relevant bodies convicted of the new offences are criminals. They do not require special or different sentencing powers. They can be adequately sentenced under the existing criminal law, using a serious crime prevention order to enforce change to prevention procedures. Such an order can do anything that a corporate probation order would. Alternatively, similar provision can be included within the terms of a deferred prosecution agreement. I trust therefore that noble Lords will see that their commendable objective can already be achieved within existing law.

    I thank the noble Baroness, Lady Bowles, for Amendment 170. I share concerns about ensuring that those who are unfit to be directors are identified and disqualified from holding such posts. The amendment seeks to amend the Company Directors Disqualification Act 1986 in order to allow a company director to be disqualified by the court when a relevant body is found to have committed one of the new corporate offences, or a similar failure to prevent an offence under the Bribery Act 2010.

    At present, under the Company Directors Disqualification Act 1986, a company director can be disqualified on conviction by the sentencing court. Alternatively, the Secretary of State for Business, Energy and Industrial Strategy can apply to the High Court for an order that a company director be disqualified. In either case, the company director would be a party to the proceedings, and thus given the opportunity to present their defence.

    However, under the amendment, a company director could be disqualified simply because the relevant body was found liable for failing to prevent the facilitation of tax evasion or bribery. This would be the case even where the company director was not a party to the proceedings. This could see a director disqualified without the opportunity to present their case or defend themselves. There may be cases where, despite the relevant body committing the offence, an individual director is not sufficiently culpable to warrant disqualification. That is why it is so important that the director can make representations in their own defence.

    The orders have draconian consequences, and they must be made fairly—the noble Baroness mentioned fairness. The right to a fair hearing is protected by human rights legislation.

    I can nevertheless assure noble Lords that, where a director has been personally complicit in tax evasion, it will be possible for the director to be prosecuted for tax evasion and tried alongside the relevant body charged with the new offences. Where the director is convicted, disqualification can be considered by the sentencing court under existing law.

    I shall answer some other questions that the noble Baroness, Lady Bowles, asked. Who reports on bribery or tax evasion? A sentencing judge can invite the prosecuting agency—for example, the CPS—to refer the matter to BEIS on its own volition. On Amendment 170, she also asked: why not allow for a director to be disqualified? Conviction for the new offence does not necessarily mean that an individual director is at fault or necessarily involve director wrongdoing. The sentencing judge can recommend referral by the prosecutor in such cases.

    Finally, I reassure noble Lords that, where a director has been personally complicit in tax evasion, it will be possible for the director to be prosecuted for tax evasion and tried alongside the relevant body. We therefore take the view that the existing powers are sufficient and that the approach taken under the amendment would be disproportionate and at risk of successful legal challenge.

    I hope that, with those words, noble Lords are satisfied with my responses and feel able not to press their amendments.

  1. Baroness Bowles of Berkhamsted

    The point is that a procedure exists when there is a breach of competition law. That does not have to be referred back to the Secretary of State. There is a subsequent hearing as to whether the director was culpable by not having established the right procedures. It does not automatically say that, if the company is guilty, the directors are guilty. If the circumstance is such that the judge says, “I think we should look further at this”, why should it not then be in the prosecutor’s toolbox to say, “We want to continue smoothly on to the next stage”, which the prosecutor has probably already investigated? It is a civil procedure to disqualify a director, I remind the Minister, so the human rights implications are slightly different. If it works for competition, why can it not work for criminality? It seems to be saying that there is a stricter rule, where directors sit up and take notice of the fact that it looks a little bit more automatic even though the same defence is there. Therefore, it has a huge impact on corporate governance in making sure that the procedures are there. It may even be on a piece of paper on the boardroom table. I have personally heard, “Oh, this is something we can get disqualified for if we don’t get it right”. That is exactly how more boards should be thinking. This kind of procedure induces that. Maybe the Minister can write to me and explain why it is good for competition and not for criminality.

  2. Baroness Williams of Trafford

    The noble Baroness foxed me when she asked that question the first time and she is still foxing me. I shall write to her before Report because I really do not know the answer.

  3. Lord Kennedy of Southwark

    My Lords, I thank all noble Lords who have spoken in this short debate, and I am pleased that the Minister understands the spirit and intention behind our amendment. The comments of the noble and learned Baroness, Lady Butler-Sloss, and the noble and learned Lord, Lord Judge, are points well made. They have vast legal experience and if I bring the issue back at all on Report, I shall take on board their comments and wise legal advice and draft my amendment accordingly. I certainly thank all noble Lords for their contribution today, and beg leave to withdraw the amendment.

Amendment 164 withdrawn.

Amendments 165 and 166 not moved.

Clause 48 agreed.

Amendment 167

  1. Baroness Stern

    Moved by

    167: After Clause 48, insert the following new Clause—

    Read more

    “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).””

  2. 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.

    Read more

    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.

  1. Baroness Meacher (CB)

    I support Amendment 167, so ably moved by my noble friend Lady Stern. I apologise to the House that I was not able to be present at Second Reading. I applaud the Government for bringing forward this important Bill, which will do much to improve our capability to recover the proceeds of crime and to tackle money laundering and corruption.

    My particular interest in the amendment comes from my awareness, over the past decade in particular, of the devastation to many countries—particularly Colombia, Mexico, Guatemala and many others in central America and, increasingly, west African states—caused by the production of, and international trade in, narcotics. The Governments of the drug-producing countries have to spend billions of dollars dealing with the drug barons. These are scarce resources which need to be devoted to the development of their infrastructure and to social support for their people, who are, frankly, pretty poor. The secrecy surrounding bank accounts in our overseas territories enables huge wealth to accumulate untaxed, and to be used to control substantial tracts of these countries. For example, I understand that one-third of Guatemala is completely under the control of drug barons, not its Government. Perhaps the single most effective criminal justice response to the situation is through access to their bank accounts in tax havens.

    Read more

    The prevention of corruption and money laundering is therefore of the utmost importance to those countries and Britain, along with our European neighbours, is of course a major contributor to these problems. Britain is a substantial consumer of narcotic drugs: without the demand for these there would be no production or trade. We therefore have a particular responsibility to deal with corruption and money laundering by those involved in the drugs trade. The Minister did assure me that our overseas territories are making good progress towards producing registers of beneficial ownership of companies registered in their territories, albeit not public ones. Like my noble friend Lady Stern, I hope that the Minister will say more in her response about the progress made so far. For example, how many of the territories will actually have registers accessible to police services in place by the end of this year? When do the Government anticipate that all our overseas territories will have such registers in place?

    The key element of Amendment 167 is that the registers must be publicly available. The potential for kidnap of innocent very rich people with large balances held in our overseas territories needs consideration. Clearly, none of us would want to create a system which would increase the risk of kidnap. However, rich people are very inclined to be easily recognised by their lifestyle—the size of their yacht or their private plane, for example. People who amass great riches generally do not want to hide them. They really do want the world to know what they have achieved. It is their own actions which appear to me to cause risk of kidnap. I therefore do not believe that we should reject the proposal in Amendment 167.

    The important underlying point is that the UK, together with our tax havens, is still the biggest financial secrecy jurisdiction in the world. I have no doubt that much of the black money from the drugs trade in Central America and west Africa is lodged within the wider UK jurisdiction. Having led the world in legislating for a public register of beneficial ownership in 2015 for the UK, money will surely have been moved to our overseas territories. Is the Minister able to give the House any information about the transfer of funds to our overseas territories following the 2015 Act? Presumably, for the very reasons why we need Amendment 167, the Government may not be in a position to give us that information, which would be very helpful to know.

    According to Christian Aid, Save the Children and other leading charities, Ministers have for more than three years made it clear that they want public registers of beneficial ownership in the overseas territories, and that they are working to get them. Despite the Minister’s comments to my noble friend Lady Stern a little earlier, I hope that she will therefore agree that the case remains as strong as ever to extend transparency to those territories and to bring them into line with the UK itself.

  2. Lord Kirkhope of Harrogate (Con)

    My Lords, I rise as a signatory to Amendment 167, which I fully support.

    As the noble Baroness, Lady Stern, highlighted, the recent “global laundromat” revelations make the need for our amendment rather pressing. As she said, it is exactly a year since the Panama papers were published and we have yet another leak. Must we wait for the next one before we follow through on the commitment made by our former Prime Minister David Cameron?

    Read more

    In general, of course, I add my support to the overall measures in the Bill. I know that they will go a long way to addressing corruption. I think that almost all Members of Parliament and Peers who have spoken have supported its measures, which should give the Government comfort. I also agree that the Government deserve enormous praise for the work they have done both here in the UK and internationally to tackle corruption, tax evasion and avoidance. Since David Cameron put the issue at the centre of his 2013 G8 summit, the Government have shown global leadership on an issue that blights so many countries. I very much support the progress made on this agenda, particularly at the anti-corruption summit in May last year, and the work taken forward by the OECD to tackle corporate tax avoidance. It is also worth noting that the former Prime Minister committed himself to seek to persuade the overseas territories to introduce transparency. That is the element I want to take forward today.

    We all welcome the progress that has been made by the overseas territories. I am pleased that they have now agreed on the importance of having registers of beneficial ownership and I look forward to them being in place very soon. However, we must also recognise that the UK’s Crown dependencies have made real progress on this in recent years. My understanding is that they will all have central registers of beneficial ownership. While these will not be publicly accessible yet, central registers are much easier to interrogate, and crucially they will be much easier to make public in due course. This contrasts with some of the overseas territories that have not yet put in place central registers. The British Virgin Islands and Cayman Islands are, as I understand it, instead implementing—or wishing to implement—a complex system of linked registers. Is my noble friend the Minister content with this? Exactly how would linked registers work in such places? If, for instance, the UK Government made a request, would the Government in the jurisdiction concerned then make a separate request to whoever administers that bit of the register? Is the Minister satisfied that these linked registers will give the UK Government the ability to request information quickly, and does she have any concerns about how they will work, and whether they will make making requests for information easier or harder for the UK Government?

    Also, to what extent and with what vigour are the UK Government making representations to the overseas territories about introducing central registers, so that they will be easier to make public when public registers become the new global standard? Naturally, such registers are a good first step for law enforcement agencies to be able to access information quickly. But the Government have already accepted that in order to properly tackle corruption, this information must be open to public scrutiny. Journalists, NGOs and the public must be able to examine the information, not just for us in the UK but also for those developing countries which suffer most from corruption and need access to the information the most. People in developing countries cannot currently benefit from the huge plethora of information-sharing agreements that we have around the world.

    I admit that I am a bit confused by the Government’s recent comments on this issue. I was of the impression that it was our strong desire to see public registers of beneficial ownership. I need hardly remind noble Lords again of David Cameron calling them the “gold standard” at last year’s very welcome anti-corruption summit in London. Yet, I noted the Minister’s comments in the other place that we do not expect our overseas territories to have public registers until and unless they become a global standard. My concern is that if we wait for this to happen, it could be an excuse for no progress to be made for many years. Can the Minister assure me that this will not be the case and say how we can guarantee faster movement? I understand that in some cases, there has even been a failure to respond positively to UK inquiries on the subject.

    We should remember that the historic relationship with the overseas territories has benefits for all of us. 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. This is not about destroying a country’s economic business model or anything like that. That is why this amendment has given an extra two years to make registers public. It is about working with them and making sure that they are following the rules in taking clean money and not gaining from illicit finance. The UK’s global reputation is also very much at stake.

    I know that there are concerns in this House about interfering in the affairs of overseas territories, but I remind noble Lords that we have done this before, as the noble Baroness, Lady Stern, said, on issues of equivalent moral importance. I confess that if the Government now think that we should not insist on these registers being made public, why on earth did they suggest it in the first place, and why did Ministers expend so much energy over such a period of time on it? Surely we should not give up at this point. David Cameron was right. We should keep trying as hard as we can and should give all the assistance we possibly can to the overseas territory Governments to achieve this.

    Finally, can the Minister give an assurance that all overseas territories will at least have central registers of beneficial ownership by that June deadline? If not, when will all of them have them? The complex arrangements for linked registers seem overly problematic and will make publishing registers more difficult in future. What specific progress has been made in persuading the overseas territories to adopt those public registers? Simply saying that they will adopt them if other countries do it is not enough, and neither is not mentioning transparency while the private registers are being put in place.

    As we look towards the UK’s role in a post-Brexit world, we must continue to lead in this important area of anti-corruption and transparency.

  3. Lord Rosser

    My Lords, my name is attached to Amendment 167, and I will also bring my Amendments 168 and 169 into play, not least because, unless I have misunderstood the situation, my noble friend Lord Eatwell will certainly wish to speak about one of my amendments in this group, if not all three of them.

    I fully support Amendment 167 and will touch on some of the arguments in support of it when referring to Amendments 168 and 169. Amendment 169 would provide a duty on the Secretary of State to hold a consultation on the establishment of a publicly accessible register of the beneficial ownership of UK property by companies registered outside the United Kingdom within six months of the commencement of Section 1 of this legislation. It would also require the Secretary of State to bring forward legislative proposals to set up such a register within 12 months of the commencement of the section.

    Read more

    We had a discussion last week in Committee about the state of the London property market in particular. What became evident from the Panama papers was that just under 3,000 less-than-transparent companies set up by Mossack Fonseca held 6,000 Land Registry titles in this country, with combined historical costs of £7 billion, and that more than 40,000 properties—10% in the London borough of Westminster—are owned by offshore companies with unknown beneficiaries. Not only has that had an impact on housing costs, to the detriment of those on lower and middle incomes, including first-time buyers, both within and beyond London, but it has also given rise to strong suspicions about property being used for money laundering and for keeping finance hidden. If offshore companies holding property titles in this country were required to declare their beneficiaries, it would be in line with the requirement on UK companies to disclose ownership. Having a public register as provided for in this amendment in relation to UK property would help to lift offshore secrecy and eradicate money laundering in the United Kingdom.

    In Committee in the Commons, the Government said that they planned to create a beneficial ownership register of overseas companies that owned or wished to purchase property in the United Kingdom. They said that they were developing the detail of how the register would work before issuing a call for evidence “in the coming months”. They said that their intention was,

    “to bring forward legislation to provide a statutory basis for the register in due course and as soon as possible”.—[Official Report, Commons, Criminal Finances Bill Committee, 22/11/16; col. 182.]

    During discussion on this issue in the Commons, the Government said that the register would apply throughout the United Kingdom but that Scotland and Northern Ireland had different land registration requirements from those of England and Wales, which made the drafting more complex. Can the Minister confirm that this register will be publicly available and accessible? I do not doubt the point about the complex nature of the drafting; nevertheless, for the Government to say simply—if they are not prepared to accept this amendment—that they will bring forward legislation,

    “in due course and as soon as possible”,

    is being, to put it mildly, just a trifle vague.

    As the call for evidence will be on how the register would work, and therefore the Government appear to have accepted that it should be created, surely they can be a little more precise about how long it will be before legislation is brought forward, and indeed when the call for evidence will he made. Will the legislation appear in time for it to be properly debated, passed by both Houses and implemented before, say, the end of this Parliament, bearing in mind the concerns that have been raised about the potential lack of legislative time for anything other than matters related to the triggering of Article 50? That would hardly be an ambitious timescale, but it would at least provide an assurance that the register of beneficial ownership of UK property would not just be talked about but would actually happen.

    My Amendment 169 provides a duty on the Secretary of State to provide all reasonable assistance to the Crown dependencies to create public registers of beneficial ownership of companies before the end of 2018. It also provides for the Secretary of State to lay a report before Parliament on progress.

    As I think has already been said, in 2014 the then Prime Minister made it clear that beneficial ownership and public access to a central register were key to improving the transparency of company ownership and vital to meeting the urgent challenges of illicit finance and tax evasion. He said also that it would,

    “give businesses and individuals a clearer picture of who ultimately owns and controls the companies they are dealing with and make it easier for banks, lawyers and others to conduct due diligence on their customers. It will shed light on those who have provided false information, helping to tackle crime where it occurs and deterring people from providing this false information in the first place”.

    He said it would help,

    “reduce the cost of investigations for tax and law enforcement authorities … particularly in developing countries, by making information more easily available to them at the very start of an investigation”.

    He said he hoped that the overseas territories would,

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

    Perhaps the Minister will say what the responses were to that 2014 letter from the then Prime Minister to the overseas territories on consultation on a public registry.

    In a letter of 6 March this year sent to Members of this House, the Government confirmed that they had significantly changed—and in my view weakened—their previous stance to which I have just referred. This letter says that the Government’s stance is as follows:

    “It remains our ambition that public registers become a global standard. If and when they do, we would expect the Overseas Territories and Crown Dependencies to follow suit”.

    In other words, we will no longer take a lead where we can in seeking to ensure that public registers become a global standard, since it is now only an “ambition” and not, presumably,

    “vital to meeting the urgent challenges of illicit finance and tax evasion”.

    So we will not be making it clear to the overseas territories and Crown dependencies that they should take a lead, since we would expect them only to “follow suit” if and when public registers become a global standard.

    In essence, our amendment in respect of the Crown dependencies, where there are central registers and exchanges between tax and law enforcement authorities but where there is no movement towards public registers, provides for the Secretary of State to provide a progress report on the creation of public registers to Parliament before the end of 2018. It requires the Government to report by the end of next year on the progress being made, in the light of the recent letter, towards the Government’s declared “ambition” of public registers becoming a global standard in relation to the Crown dependencies.

    When the Minister comes to respond to my amendment, perhaps through her the Government will clarify, as the noble Baroness, Lady Stern, requested, what the letter of 6 March means. Since the Government will require the overseas territories and Crown dependencies to “follow suit” once public registers become a global standard, will the Minister confirm that this means that until public registers of beneficial ownership of companies have been adopted globally—as we have done in this country—there will be no pressure from this Government on the overseas territories and Crown dependencies to follow suit and do likewise?

    Will the Minister confirm that what the letter also means is that if overseas territories do not move to a public register, the Government would not expect the Crown dependencies to go down that road, and that if the Crown dependencies did not go down the road of public registers, the Government would not expect the overseas territories to do so either, as public registers would not be a global standard with the omission of the overseas territories or Crown dependencies? Perhaps the Minister could clarify that point one way or the other.

    If the wording in the letter does not mean what I have just suggested, what does it mean? What are the criteria against which the Government will determine whether public registers have become a global standard and that, therefore, the overseas territories and Crown dependencies would then be expected to follow suit? Does this mean that we will no longer be encouraging or expecting the overseas territories and Crown dependencies to take a lead with public registers, as opposed to following suit?

    At the moment it very much appears that the Government under the previous Prime Minister giving the impression that they would act on public registers and then subsequently adopting rather different and much more limited policy goals and objectives on public registers of beneficial ownership beyond the UK without any real explanation of why the tenor of the Government’s commitment has changed.

    I await the Government’s response to my questions and to the amendments in this group.

  1. The Lord Bishop of Peterborough

    My Lords, I support the amendment. I also support the Bill and I am grateful for it.

    I particularly support and follow a point made by the noble Baroness, Lady Stern, about this being a moral issue. I refer to Amendment 167. This time last year, shortly after the publication of the Panama Papers, there was a question in the House about this issue. I asked a supplementary and was assured by the then Minister that this was seen by the Government as a moral issue. It is important that we hold to that.

    Read more

    It is particularly a moral issue because of the effect of tax havens on people in developing countries. According to the United Nations conference on trade and development, tax havens cost developing countries at least $100 billion a year. That means three times the global aid budget is lost to developing countries in this way. It is a huge amount which would be able to do a great deal in terms of health, education and so on in those countries which so badly need it.

    My right reverend friend the Bishop of Oxford spoke on this issue in the Second Reading debate. He is sorry that he cannot be here in your Lordships’ House today but, on his behalf and others, I gladly ally these Benches with the four signatories to Amendment 167, who come from four different parts of the House.

  2. Lord Beith

    My Lords, I wish to refer to Amendment 169, to which the noble Lord, Lord Rosser, has spoken. In doing so, I declare an interest as having been chairman of the Justice Committee of the House of Commons, which produced two reports about the constitutional relationship between the United Kingdom and the Crown dependencies. It made recommendations which were accepted by the United Kingdom Government and the Governments of the dependencies and appear to be working successfully. That relationship involves respect for the democratic nature of the dependencies and their jurisdiction as legislatures and sets clear limits on what it is appropriate for the United Kingdom Government to do.

    An amendment was considered and voted on in the House of Commons which ignored the constitutional relationship. This Parliament does not legislate for Crown dependencies, the Channel Islands and the Isle of Man except by consent, and rarely does so even by consent. I am grateful that the noble Lord, Lord Rosser, has given some thought to this. We had a brief discussion about it and the amendment he has included in this group is a much more ingenious and respectful one towards those provisions but it is still somewhat in breach of the spirit, although not the letter, of them.

    Read more

    There are obviously real benefits to be had from public open registers of beneficial ownership. In those areas and parts of the world where public authorities are taking no action in the kind of circumstances noble Lords have described, exposure and publicity can lead to action being taken. In circumstances where what was being done may not have been criminal but did not seem consistent with being the Prime Minister of Iceland, say, public reaction can play a real part.

    There are also problems with public registers, particularly if you are in a jurisdiction that is competing with others which have no intention of going in that direction for legitimate financial business properly conducted—the position which to some extent, the Crown dependencies find themselves in. The place to pursue the argument for public registers of beneficial ownership in the dependencies is of course in the legislatures of those dependencies, and that discussion ought to be taking place. However, there is another route, which the Government refer to rather negatively but it is in fact quite positive. We should seek international agreement imposing similar conditions across the world, accepted by a whole range of nations which are engaged in the kind of trade that can legitimately be carried out but can also be grossly abused by those with wealth ill-got by criminal means. The importance of a global standard is that it would create a level playing field for the various jurisdictions involved, and that is why it is seen as significant in the dependencies. If agreement was reached internationally, the Crown dependencies would have to revise their current view; not only that, the UK Government would then acquire responsibility because the United Kingdom has a responsibility for international treaties to which the Crown dependencies are committed. The Government would have to represent their interests in any discussion about the achievement of a global standard when such a standard takes the form of a treaty. They would have a responsibility to make sure that the Crown dependencies abided by it, but that is not the situation we are in.

    Nor is that the priority in this legislation because here, the priority is to achieve effective action by law enforcement and the tax authorities, and what they most need is accurate and up-to-date registers which can be accessed quickly in real time. By June there will be no Crown dependency which does not have exactly that: a central register which can be accessed in all cases within 24 hours, or significantly less in urgent circumstances such as a terrorist case. That is the main thrust of this legislation and we should not ignore the fact that that has been achieved. It is partly a result of the Cameron exchanges by letter which have been referred to, but also of developments that were already taking place in the dependencies. I mention these points simply to underline that the way to approach this issue in the Crown dependencies is different.

  1. Lord Eatwell (Non-Afl)

    My Lords, I regret that I did not have the opportunity to participate in the Second Reading debate on this Bill as I was abroad. I have, however, read with care the record in Hansard, in particular those speeches by noble Lords who referred to the matters under consideration in this group of amendments. I wish to speak to Amendment 169 and do so because I have a particular interest to declare. I am the chairman of the Jersey Financial Services Commission. The company register in Jersey, which maintains the register of beneficial ownership, is a division of the Financial Services Commission and hence Amendment 169 refers to matters which are my direct personal responsibility.

    I should say at the outset that I will not comment on the main issue of this debate, which is whether a register should be publicly available other than to comment on the claims by Her Majesty’s Government that link public availability to effective verification. The issue of public availability is a political matter. The JFSC is an independent regulator; that is, it is independent of the political authorities in Jersey and hence the question of public availability is not a matter for me. What is a matter for me is subsection (4) of the proposed new clause in this amendment which states that,

    Read more

    “‘a publicly accessible register of the 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”.

    It is of course this information that forms the basis of the register at Companies House. I regret that this subsection reflects a serious lack of relevant understanding of the issue of reliability both of the Jersey register of beneficial ownership, and of the Companies House register of People with Significant Control. Reliability depends upon verification, whether the information is true or false. The Panama papers were so successful in revealing ill-doing because they happened to contain information that was broadly true. I am afraid that this is not the case in the Companies House register.

    Jersey has maintained a register of beneficial ownership since 1989. Initially, the legal requirement was for a statement of beneficial ownership when a company was first registered. That statement had to be updated when there was a change in circumstances amounting to a 25% change in ownership. Today, the requirement is for regular updating. At this very moment a detailed survey of beneficial ownership is under way to provide a complete picture of the state of affairs on 30 June this year. Thereafter, it will become a requirement to update information in Jersey on a 21-day limit when information is available.

    This information is subject to detailed supervision and verification. For example, trust companies are required under the money laundering order to obtain and maintain beneficial ownership information. Client files are checked on supervisory visits to ensure that they have done so. Record-keeping failures are subject to enforcement action with failures resulting in individuals being banned from the industry and firms being subject to significant remediation. As was noted earlier, the Jersey register is available to all relevant authorities, including the National Crime Agency’s financial intelligence unit, and in the next year or so will be available in real time. In addition to current procedures, an annual validation process on beneficial ownership and control is to be introduced in 2019 to replace annual company returns.

    Jersey not only maintains a detailed register of beneficial ownership, but subjects that register to detailed supervision and verification. Compare this state of affairs with the UK’s register of People with Significant Control. Almost all UK companies are required to maintain registers of people with significant control, known as PSCs. This information is maintained on the Companies House register and is available publicly through the Companies House website. But note: Companies House carries out no noticeable verification of the information provided. It certainly does not in terms of annual returns or regular confirmation. Companies House has always seen itself as a repository of information—a library, if you like, but not a regulator. Of course, company formation agents are often used in the UK and they are subject to anti-money laundering supervision by Her Majesty’s Revenue & Customs. However, I understand it is standard practice for such agents to argue that setting up a company is a one-off transaction and thus exempt from anti-money laundering requirements. So HMRC does not verify either.

    Just as in Jersey, it is of course an offence to submit false information to Companies House and a company will commit an offence if it does not declare its beneficial ownership information accurately. But I am afraid that enforcement of this offence is akin to the enforcement of the offence of not putting the ball in straight at a rugby scrum. The consequences for the UK register are well known. For example, an investigation in November last year by the organisation Global Witness noted that with respect to the UK register there were,

    “2,160 beneficial owners born in 2016. Now either these are a very precocious bunch of toddlers or the data has been entered incorrectly”—

    there is no verification. It continued:

    “We also had people who listed 9988 as their year of birth—clearly a visitor from the future”.

    It will not surprise noble Lords that the UK register has been the subject of some criticism, notably in the recent consultation on the fourth money laundering directive. Referring to such criticism in the consultation, Her Majesty’s Treasury argued:

    “Some responses argued that consideration should be given to the accuracy of data on the PSC register, and the benefit of introducing verification measures in the incorporation process conducted by Companies House. The government is confident that maintaining one of the most open and extensively accessed registers in the world is a powerful tool in identifying false, inaccurate, or possibly fraudulent information. With many eyes viewing the data, errors, omissions or worse can be identified and reported. This means that the information held on the register can be policed on a significant scale by a variety of users. Ongoing consideration is being given as to whether this could be complemented by any additional measures”.

    With all due respect, this is just wishful thinking. It amounts to saying that it is the responsibility of civil society to find out for itself what the structure of beneficial ownership might be, because our register is unreliable. Unearthing the reality of beneficial ownership requires the advanced skills of a financial services supervisor or, as I have learned, a forensic accountant. The deliberate provision of false, inaccurate or possibly fraudulent information is to deceive the authorities and civil society. We are not talking about simple mis-registration of a date of birth; it is false information which is the key. It is fanciful to suppose that many untutored eyes will identify clever fraud. I regret to say that, as a regulator, it is my personal opinion that Her Majesty’s Government’s unwillingness to verify the register of PSCs is a dereliction of regulatory duty.

    Indeed, it is evident that, in reality, Her Majesty’s Treasury has no confidence in the Companies House register. In the draft regulations published by Her Majesty’s Treasury for the implementation of the fourth money laundering directive, Regulation 28 sets out the requirements for a firm to carry out due diligence on its customers. In doing so, Regulation 28(9) states that firms,

    “do not satisfy their requirements … by relying only on the information … contained in … the register of people with significant control kept by a company under section 790M of the Companies Act 2006”.

    In other words, Her Majesty’s Treasury will not accept information taken from the register at Companies House as fulfilling any due diligence responsibility. It does not believe the register.

    Given that Her Majesty’s Treasury clearly regards the Companies House register as inadequate, I would be grateful if the Minister would tell the House what are the current conclusions of Her Majesty’s Government’s “considerations” as to whether the Companies House register will be verified. When will the UK produce a register that can be believed in?

    To return to the main point, I hope that it is now clear that proposed new subsection (4) in Amendment 169, which calls for information in Crown dependency registers to be “broadly equivalent” to the Companies House register, would result in a major deterioration in the quality of the Jersey register. The amendment calls for the replacement of information that is subject to detailed and regular supervisory scrutiny with information that is not verified at all. I hope that, on this basis, the noble Lords will not press their amendment having been made aware of the damage that it would do to the cause of the availability of accurate and verified information on beneficial ownership.

  2. Lord Naseby (Con)

    My Lords, it is always a pleasure to follow the noble Lord, Lord Eatwell. I apologise to the noble Baroness for not hearing the totality of her speech.

    I shall not repeat what the noble Lord has just said. He cited in particular Jersey. I declare an interest as vice-chairman of the All-Party Group for the Cayman Islands, and I necessarily had some discussions about this Bill. I also have a member of my family working in the Cayman Islands. As to verifying beneficial ownership, which is what we are primarily talking about here, the situation in the Cayman Islands is that it has been a legal requirement there for 10 years now, and the authorities do verify the accuracy of the information that is given, in contrast to what the noble Lord rightly says about the UK Companies House, which is basically a self-registration system. That is clearly nowhere near comparable to the norm in the best of the overseas territories.

    Read more

    However, it goes further than that, certainly in the case of Cayman: that register is constantly updated, and therefore more accurate. That is much more useful to the law enforcement agencies and the regulatory authorities. It will be of interest to noble Lords that in June—only a couple of months away—there will be a new Cayman beneficial ownership platform which will give the UK authorities access to accurate, real-time and verified beneficial ownership information within 24 hours, seven days a week. In dealing with the rogues in the world, time is often of the essence. For the interest of noble Lords, including my colleague who spoke earlier, I asked how often Her Majesty’s authorities had sought information. Over the past 13 years, UK law enforcement has made an average of only five requests a year. On the other side, beneficial ownership information for Cayman companies has been collected and verified, as I have said, for 15 years.

    I do not need to say any more on that, but there are two other dimensions. As far as all the overseas territories are concerned, they should obviously be brought up to the best standard that is available among the overseas territories. But we have to realise that this is happening in the real world: there remain four states of the United States, the largest and richest economy in the world, which do not have any register of any sort and refuse to co-operate with the central government. So it would be lunacy, certainly for the West Indies overseas territories, to go out on a limb and lose all their business to Delaware, Utah, et cetera, with the resulting adverse effects on the UK, which would be quite significant. Of course, if there is a global agreement, that is a different kettle of fish, but it must be global and include the United States.

    Finally, in 2009, at the meeting at Lancaster House, the Cayman Islands entered into a new constitution. That is not very long ago. That constitution contained measures on the rule of law and human rights that meet the most stringent international and European standards, including a bill of rights which includes a right to privacy and laws on data protection. That was entered into after much discussion and is working and successful. I submit to your Lordships that the amendments before us are certainly extremely premature in terms of the world situation, and not needed in relation to the Bill. This Bill is a good Bill and needs to be supported.

  1. Baroness Butler-Sloss

    My Lords, as vice-chairman of the All-Party Parliamentary Group on Gibraltar I am grateful to the noble Baroness, Lady Stern, for having noticed that I was here and expressly excluded Gibraltar from Amendment 167. It is possible, however, that the omission of Gibraltar might be misunderstood; consequently I want to put on record Gibraltar’s position on its financial affairs. It is compliant with all the financial requirements. The OECD, in its phase 2 review of Gibraltar, ranks it equal with the United Kingdom and the United States on transparency, effectiveness and exchange of information.

    Gibraltar, as we know from earlier discussions in this House, is the only overseas territory within the European Union at the moment. It continues to be bound by EU law for at least the next two years and is transposing the fourth anti-money laundering directive by June of this year. That includes the creation of a central register of beneficial ownership, which points out that Gibraltar is doing well as a financial centre and is compliant.

  2. Lord Hodgson of Astley Abbotts

    My Lords, the theme of corruption and the damage it does to society has been the thread running through all our debates this afternoon and, indeed, on our first day in Committee last week. When you have powerful speeches from the noble Baronesses, Lady Stern and Lady Meacher, the right reverend Prelate the Bishop of Peterborough and my noble friend Lord Kirkhope, you have to be influenced by what they are telling you. When they link it to the idea of a gold standard of a publicly available register—although after the noble Lord, Lord Eatwell, had finished with Companies House, gold was no longer the metal that I would associate with that institution—you feel that there may be an exceptionally strong case. Equally, as you reflect on it, you begin to wonder whether the best may not become the enemy of the good.

    In trying to clarify my thinking on this very difficult issue, I ask my noble friend on the Front Bench to focus in her reply on three points that are important to me. They relate to the big three of the overseas territories mentioned in the amendment: Bermuda, the British Virgin Islands and the Cayman Islands. The others are much smaller; they may be important in the future but the major difficulties will arise with the first three.

    Read more

    First, can my noble friend confirm what the noble Lord, Lord Beith, said—that those three territories are going to have an up-to-date register of company ownership—and the date by which it is going to be in place? If it is going to be in place, are the Government satisfied that each register operates effectively and accurately?

    Secondly, I come to the verification point raised by the noble Lords, Lord Eatwell and Lord Naseby. Since information is put into these registers by third parties, which have titles such as corporate service providers—CSPs—trust or company service providers, and so forth, are the UK Government satisfied that the regulatory regime in each of these territories ensures that the CSPs operate to timely and accurate standards? Are there adequate checks on their performance? For example, are there, as we have in the City of London, fit and proper person tests to make sure that those who are providing the information have decent standards of behaviour imposed on them?

    Thirdly and finally, as my noble friend Lord Kirkhope said, are UK law enforcement agencies satisfied with the level of co-operation and assistance provided by these regulatory authorities? Do they get prompt and helpful responses or are the responses dilatory and evasive? If my noble friend was to say that she could give the Committee assurances on those points, my concerns about the best being the enemy of the good would rise in significance. Of course we are seeking a gold standard but surely in the short term what is vital is not that I or other Members of your Lordships’ House should be able to interrogate the register but that the relevant law enforcement agencies should be able to do so, and should be able to do so promptly and to get information promptly. Then, I hope, as enforcement standards rise and, as my noble friend Lord Naseby said, the United States begins to bring all parts of its dominion into proper behaviour, the gold standard of full public disclosure may well be appropriate.

    I quite understand why the noble Baroness wishes to do this but my concern is that if we go too far, too fast now, the malfeasant—and it will be those who go first—will drift away to still murkier regimes. We may have only half a loaf and the noble Baroness would like the full loaf, but at least we have half a loaf. If we go to murkier regimes, there will be no way of getting any sort of collaboration, co-operation or help at all to tackle what I think everybody in your Lordships’ House agrees is a really important problem and is imposing terrific damage and harm on our fellow citizens, particularly in the developing world.

    I hope my noble friend can answer my questions. Are there going to be prompt and accurate registers in the major territories—and, if so, by when—or are they there now? Are those who upload information into the registers properly checked, verified and regulated? Do our law enforcement agencies really get wholehearted collaboration and assistance from their opposite numbers in those three territories?

  3. Baroness Kramer

    My Lords, I am a signatory to Amendment 167, which was moved so eloquently by the noble Baroness, Lady Stern. I have signed that amendment because I struggle to see any effective way forward other than a route that essentially follows the lines that she outlined.

    In this House, I think that every Member is utterly dismayed by the level of corruption in many countries across the globe, particularly those with some of the poorest and weakest populations. But there are also kleptocracies with sophisticated developed populations which do huge damage to their countries and to international affairs. If we look at the strife that drives people to become refugees and migrate across borders, on a scale that we have hardly seen in the past, there are criminal groups which manage themselves so effectively. All of those groups are enabled—indeed, can survive—only because they can find a portal with which to interface with the legitimate financial services community.

    Read more

    The work we are trying to do with these amendments is to close down those portals because the impact of that would be phenomenal, and not just for developing countries. It would have a great impact on the developing world and potentially on us. There is almost nothing we could do that would have more impact in bringing peace, opportunity and prosperity across the globe. This takes great courage, but it is also a great prize.

    On the argument being made today, first, I congratulate many of the countries which have moved forward, for example to establish central registers. Work is being done in the overseas territories—I know it is true in the Crown dependencies as well but I understand their different constitutional position, which is why they are not included in Amendment 167—to establish a powerful relationship with UK enforcement authorities. If that were sufficient to close down those portals to the people who we know should not be able to use them, I would be happy to stop at that point. But I have found no one who believes it is true that enforcement authorities would be able to act through those central registries in ways sufficient to close down the routes and effectively shut out so many of the people who we think should be shut out from the legitimate financial world.

    The only route I can see to make this reasonably or wholly effective is transparency. I fully accept that transparency at the global level is the obvious ideal, but I am a realist. I do not think anybody in this House believes that a global standard of transparency, with public access to central registers, will be available in my lifetime—and probably not in my children’s lifetime. Achieving that global standard is near impossible, so how do we move forward and at least create the reality that more and more portals will be closed down to those who try to use them? I was proud of this country when it took a very strong and difficult position to lead not only on central registers, for example, but on transparency. It said that if nobody takes the lead and moves out in advance, the rest will never follow. There is no basis if one waits for everybody to move together. We still face that situation.

    I have met with representatives of the BVI and Bermuda and I hear the case presented for the Cayman Islands, and others such as Jersey and Gibraltar. I fully understand that every country which is on our list, and even those who think they are touched by the underlying principle of the amendment, are quite offended. They feel that they are reputable places which have done a great deal to make progress on the elimination of corrupt practices. I understand their sensitivity on that issue, but the problem with which we are dealing is so much bigger.

    Do the Government truly believe that central registers, well linked into our enforcement agencies, will shut down access to those portals for the corrupt kleptocracies and criminals, or do the Government believe only that they will somewhat reduce the ability of those groups to access the legitimate financial services industry? I would be very interested to hear the number of enforcement actions that have been carried out through those growing linkages that are in place for many of the overseas territories. I fear that not very many enforcement actions have been taken—there certainly do not seem to have been any that have managed to make their way into the public arena. If this is not an effective tool, it surely is not a satisfactory point at which to stop.

    I very much take the point that the noble Lord, Lord Rosser, is making with his Amendment 168 on the failure of the UK to establish a proper register of beneficial interests in UK property. That has to be tackled. It really is an appalling scandal and a great weakness, and I can understand why many of the overseas territories point to that when they argue their own case. I join very much with the noble Lord, Lord Eatwell, in pointing out the inadequacies of Companies House and the regime that we have there. We have to fix those, but we surely do not stop at that point in time. It is for that reason that I support Amendment 167.

  1. Lord Leigh of Hurley

    My Lords, it may come as a surprise to some, but having carefully researched the matter, I find I have no interests or conflicts to declare in respect of this matter—perhaps sadly.

    The financial services sectors of the overseas territories and the Crown dependencies are crucial as global hubs. Our close connections with them contribute to the UK’s position as a global financial centre—which is of course close to all our hearts—and, now more than ever, it is important we maintain and strengthen our ties with key economic partners.

    Read more

    At the same time, as with all financial services, there must be appropriate transparency to prevent abuse by those who would seek to exploit them for criminal purposes, as the noble Baroness, Lady Kramer, has just so eloquently said. It is quite clear to me that the UK is leading the way in this, which is in no small part due to the foundation stones set down by the former Prime Minister, David Cameron, who ensured that the issue of transparency was prominent in the coalition Government, from the time he chaired the G8 summit in Lough Erne and it was at the top of the agenda of that meeting.

    That led to the PSC clauses in the Small Business, Enterprise and Employment Bill, on which I spoke quite extensively. Those applied only in the UK, but I recall that the noble Lord, Lord Watson of Invergowrie, commented in Committee that the overseas territories and Crown dependencies were next. Accordingly, I welcome the subsequent commitments made by the overseas territories and Crown dependencies to establish central registers of beneficial ownership—clearly, those territories are listening very carefully to Labour Peers in Committee. Once these have been implemented in June 2017, UK law enforcement will gain access to previously inaccessible information on entities registered in those jurisdictions. That will enable it to investigate corruption and money laundering through BOSS—beneficial ownership secure search systems. These are significant benefits for UK law enforcement, and I am pleased to see the overseas territories and Crown dependencies make strides towards improved financial transparency and integrity. It is an approach that will reap dividends for our law enforcement agencies and their ability to investigate financial crime, while maintaining the positive relations that we enjoy with these territories.

    It is right that we should aspire to public registers of beneficial ownership, not just for the overseas territories and Crown dependencies but for all jurisdictions. I welcome the continued government commitment for public registers to be the global standard, as an aspiration. But it is clear we will achieve more by working in partnership and collaboration than by forcing legislation—to the extent we can—on independent jurisdictions with their own elected legislatures. If we threaten that, I foresee that those territories might not continue to co-operate gladly with the UK on issues such as this. We may even take backward steps.

    My heart skipped a beat when the noble Baroness, Lady Stern, said that 3 April was an auspicious day: had someone told her that it was my birthday? No, it was because of the Panama papers. Panama is very different. To make the comparison with Panama is a false parallel. Part of Panama’s very different business proposition is a far lower level of financial regulation. The Financial Action Task Force gave Panama the worst rating—non-compliant—for 14 of its 40 recommendations in its most recent evaluation of Panama, one of the worst records for any country in the world.

    Law enforcement agencies do not support public registers, as they do not improve their capabilities. David Lewis, formerly of the NCA and now heading the global anti-money laundering standard-setter, the Financial Action Task Force, told the Commonwealth anti-corruption summit last year:

    “Incomplete, unverified, out of date information in a public register is not as useful as law enforcement agencies being able to access the right information at the point they need it”.

    Tax authorities also do not support public registers, as they encourage people to report less fully and accurately. The OECD stated that for taxpayers to abide by their obligations, they,

    “need to have confidence that the often sensitive financial information is not disclosed inappropriately”.

    Those multilateral organisations, and the efforts to raise standards globally, are undermined by unilaterally adopting different standards, such as public registers. That is why OECD Secretary-General Angel Gurría said:

    “A proliferation of different standards is in nobody’s interests”.

    Indeed, much of the United States’ aversion to implementing international standards, as explained by my noble friend Lord Naseby, is the belief that it will lead to pressure to make personal information public. I cannot imagine that that situation will improve much with President Trump in the White House.

    The UK rightly wants to raise implemented standards globally, but it cannot do so by undermining multilateral efforts to create a level playing field. We should not impose legislation on independent jurisdictions when financial services are matters for their internal affairs and their citizens have no representation in this House or the other place. Instead, I ask the Government to increase their efforts to raise global standards and make public registers the norm. The overseas territories and Crown dependencies have said that, should that happen, they will comply.

    Equally, I am not convinced that we should unduly disadvantage the overseas territories’ economies. Indeed, an amendment such as that of the noble Baroness, Lady Stern, which excludes Gibraltar and the Crown dependencies, may give them an unfair advantage when competing for new investment with the Caribbean overseas territories. There should be a level playing field, but that means the vast majority of major financial centres moving in that direction, with encouragement from international bodies such as the Financial Action Task Force.

    However, I encourage the Government to keep this matter under review and Parliament updated. That way, we can return to this issue in due course and assess the effectiveness of the central registers. That is the right thing to do, rather than hypothetically committing to legislation in two years’ time.

  2. Lord Thomas of Gresford (LD)

    My Lords, the right reverend Prelate the Bishop of Peterborough reminded us that corruption in the modern world is a moral issue—and so it is; perhaps one of the greatest moral issues that we face. I was reminded by the speech of the noble Lord, Lord Naseby, that the great moral issue of the late 18th century and the beginning of the 19th century was slavery. It was the judgment of Lord Mansfield in the 1780s that put an end to slavery in this country.

    The anti-slavery movement then began to campaign on the basis that if slavery is abolished in this country, how can it be that we permit it in our colonies, so that when a slave from the colonies comes to this country, the shackles fall away? It took until 1833 for William Wilberforce to lead a movement to pass the anti-slavery Act. Even then, it did not abolish slavery in the East India Company territories or in Ceylon.

    Read more

    However, at that time slavery continued in the United States; it took a civil war to put an end to slavery in the United States. The arguments advanced then were that if we abolished slavery in the colonies and the West Indies, it would undermine the economies of those territories. The same argument again was used: how will those colonies in the West Indies able to compete with the United States in the production of sugar and cotton if slavery is abolished there?

    The important point is that this country laid down the standard. We did not wait for global standards to be brought about; we took the lead. I urge the Government to take the lead, along the lines that have been advanced today by the noble Baroness, Lady Stern, who sees not only the importance of having registers in the overseas territories but that there should be something behind it—the possibility of an Order in Council to deal with that moral issue if they do not take up the cudgels in the way that they should.

  3. Lord Faulks (Con)

    I have a very short and slightly less theatrical point than the noble Lord’s—although the point he made was good. It relates to Amendment 169, which concerns the Crown dependencies. As at Second Reading, I declare an interest as the former Minister with responsibility for the constitutional relationship between the Crown and the Crown dependencies. It is a relationship of considerable importance to all parties involved, and of particular importance now with the prospect of Brexit. It is important that we maintain the competence of the Crown dependencies and it is also important that we do not exceed our constitutional role, as the noble Lord, Lord Beith, said, in seeking to make laws that in my view are not consistent with the specific constitutional relationship that we have with the Crown dependencies.

    I notice that the noble Baroness, Lady Stern, eschewed any reference to the Crown dependencies. Amendment 169 does not, however. Quite apart from the point made by the noble Lord, Lord Eatwell, in relation to subsection (4), I invite the Minister to accept that there is a real problem legally with this amendment and to endorse what I said at Second Reading: that all the Crown dependencies have made very real progress in co-operating to produce a register which is available to all law enforcement agencies.

  4. Lord Borwick (Con)

    My Lords, I became alarmed when I saw Amendment 167, and I then received a joint briefing on this specific amendment from groups such as Christian Aid, Oxfam and Save the Children—all great charities doing tremendously important work around the world.

    What is clear is that this group of NGOs believes that countries like Bermuda cannot be trusted to run their own affairs and need orders from legislators in Britain. Noble Lords will know that Bermuda started its central register of beneficial ownership some 70 years ago—long before it was started in Britain. It is therefore offensive to believe that it is only the great parties here, and a bunch of patronising charities, that can help them. In fact, according to the IFC Forum, information on beneficial ownership of companies will be centrally held by all overseas territories from next year.

    Read more

    Data can be provided to the relevant authorities on the same day that it is requested. So Bermuda is actually ahead of other jurisdictions in this area. Targeting them, as has been done in this amendment, is especially misguided. In fact, the UK is the outlier. International standards do not require that we adopt a public register—and, unsurprisingly, most other countries are not adopting public registers. Our competitors in the US, Hong Kong and elsewhere will not be doing so.

    We should consider what we risk losing. Reinsurance provision from Bermuda covered over 20% of flooding losses from the 2015 winter. It supports around 70,000 jobs in the UK and has provided our economy with £10 billion of capital since 2008. Forcing the overseas territories to go beyond what is required will simply mean that business moves elsewhere. It will move to financial centres that are less well regulated than ours—centres that will not co-operate with UK authorities—which is surely the opposite of what noble Lords are trying to achieve with this amendment.

    Most politicians and civil servants simply do not understand the rule of unintended consequences. They think in straight lines, but the real world works differently. There are a large number of urgent problems in the world to be solved, and the efforts of these NGOs to create the ability for self-selecting, worldwide tax collectors to examine registers is unwise. Have these charities really decided that they have not got anything better to do?

  1. Baroness Williams of Trafford

    My Lords, I thank all noble Lords who have taken part in an excellent debate. I pay particular tribute to the noble Baroness, Lady Stern, along with others who have spoken with passion and given considered contributions on a crucial issue.

    I have addressed much of what has been raised in correspondence with noble Lords, but I hope that the House will allow me to put certain points on the record. As David Cameron said last year, international corruption,

    Read more

    “is the cancer at the heart of so many of the world’s problems”.

    The Panama papers revealed the extent to which anonymous shell companies are used to hide large sums of wealth and circumvent sanctions. The UK is a global leader in the fight against corruption, and we are proud to be at the forefront of international efforts to increase corporate transparency. This includes working with all UK overseas territories with financial centres, and with the Crown dependencies, to tackle money laundering, terrorist financing, corruption and fraud. The territories and dependencies are, in turn, committed to fully meeting international standards, and in some respects are going beyond them, and to working with us to ensure that they do not act as a hiding place for illicit financial flows.

    Last year, the UK signed an exchange of notes with all overseas territories with significant financial centres and with the Crown dependencies, setting out new arrangements on law enforcement access to beneficial ownership data. The exchange of notes provides that, when they have not already done so, overseas territories and Crown dependencies must all set up central registers or similarly effective systems of beneficial ownership information. It also provides that UK law enforcement authorities should have the automatic right to access this information, which means that beneficial ownership information will be available within 24 hours, or within one hour in urgent cases. Ensuring that law enforcement authorities are able to establish who is the ultimate owner of companies registered in the overseas territories and Crown dependencies is a crucial part of tackling the complex criminal networks that can exploit the system.

    These arrangements are due to be implemented no later than June this year and will put them well ahead of most jurisdictions in terms of transparency, including many of our G20 partners and other major corporate and financial centres, including some states in the United States. Once in place, these arrangements will bring significant law enforcement benefits. They will prevent criminals hiding behind anonymous shell companies and mark a significant increase in UK law enforcement authorities’ ability to investigate bribery and corruption, money laundering and tax evasion.

    The noble Baroness and other noble Lords started off by asking for a global standard definition, and I thought that I might address that up-front. There is no single definition of a global standard for reach and coverage, but organisations such as the OECD and the Financial Action Task Force are key to the development of international standards in this area. As the noble Lord, Lord Eatwell, said, the UK believes that a public register is a powerful tool, and we will continue to make that point in international fora. However, the OECD has focused on accurate, independently verifiable data as an important standard, which all the overseas territories are looking to implement.

    The EU has also played an important role in advocating transparency, but the fourth anti-money laundering directive does not require EU states to make their registers public. In this context, I reiterate that the overseas territories and Crown dependencies are actually ahead of the current standard in implementing the exchange of notes. I will come back to this when I address the point made by the noble and learned Baroness, Lady Butler-Sloss. We are not saying that the global standard means that every country must have a public register, but we would certainly expect it to reflect the recommendations of groups like the OECD and FATF. The UK is leading the way in this area and we are, of course, working on transparency issues with international partners through these groups. I make it clear that the UK firmly believes that public registers are the gold standard. Our position has not changed, but putting a timeline on this work simply does not reflect the scale and complexity of these issues. The OTs and Crown dependencies will be significantly ahead of the global standard as it stands. They have their existing commitments and this, in itself, is moving the standard in the right direction.

    Many noble Lords have asked about progress to date and I am pleased to be able to talk about that. We have been working closely with both the overseas territories and the Crown dependencies on implementation by the deadline. I can confirm that significant progress has been made and I will briefly share some highlights with noble Lords. The British Virgin Islands, one of the overseas territories, has already completed the technical construction and testing of its new cloud-based platform. It is now taking forward engagement with corporate service providers to ensure that data formatting is fully standardised in order to enable beneficial ownership data to be uploaded on to the system in advance of the deadline.

    In December, the Cayman Islands Government passed an amendment to the Police Law, which is necessary for law enforcement co-operation, and have recently successfully amended three key pieces of legislation to underpin the functioning of their new system: the Companies Management Law, the Companies Law and the Limited Liability Companies Law. Bermuda has a long-standing central registry of beneficial ownership data. It is currently moving legislation through its legislature to enhance the register, including a requirement on legal entities in Bermuda to maintain registers of up-to-date information on their beneficial owners, and to file updated beneficial ownership information with the Bermuda Monetary Authority. Gibraltar is already committed to implementing the EU fourth anti-money laundering directive and has prepared legislation to take forward these commitments and the exchange of notes. The technical construction of its system is well advanced and it is now considering steps to populate the registry with data.

    All these jurisdictions have also committed to the automatic exchange of beneficial ownership information, along with 50 other countries. This is important progress, but there is more to be done and we are not resting on our laurels. We are committed to following up on these arrangements to ensure that they deliver in practice. The exchanges of notes with all overseas territories and Crown dependencies make explicit provision for the Secretary of State and the Premier or Chief Minister to undertake a review of the arrangements six months after they come into force—that is, on 31 December 2017—and for further reviews to take place annually thereafter. The arrangements also provide for continuous monitoring by both parties. I hope this provides clear assurance that the effectiveness of the arrangements will be kept under careful scrutiny to ensure that they are meeting our law enforcement objectives.

    The NCA has confirmed that it is already seeing enhanced co-operation from some overseas territories, and much shorter turnaround times for processing requests for information. We expect to see this further improved to meet the agreed standards by June this year. This progress demonstrates what can be achieved by working consensually with the overseas territories and Crown dependencies. It is reaping benefits and I believe it will continue to do so.

    I turn to the amendments. Amendment 167 is similar to one tabled on Report in the Commons, in that it envisages a timetable for the adoption of public registers of beneficial ownership by the overseas territories. If they have not done so by the end of 2019, it would require the Government to force them to do so. The key difference with this amendment is that it does not cover Gibraltar.

    Amendment 169 also requires the Government to support the Crown dependencies to establish public registers of beneficial ownership by the end of 2019, and to report to Parliament on the progress made. However, it does not require the Government to impose public registers on them.

    A key feature of the Government’s approach is that it creates a level playing field between all of the overseas territories with financial centres and the Crown dependencies. By taking a different approach to the Crown dependencies and territories, these amendments risk disrupting this level playing field, creating weaknesses in certain jurisdictions that could be exploited and damaging the spirit of co-operation we have been able to create between them.

    The noble and learned Baroness, Lady Butler-Sloss, made the point that Gibraltar need not be covered by Amendment 167 as it is committed to implementing the EU’s fourth anti-money laundering directive. However, it is important to note, as I said earlier, that the fourth anti-money laundering directive does not require member states to establish publicly accessible registers of beneficial ownership information, so to impose such a requirement on the overseas territories and Crown dependencies would go beyond what has been agreed with our neighbours in Europe. The provisions in the exchange of notes also go beyond the fourth anti-money laundering directive in providing UK law enforcement with access to information within 24 hours, and within one hour in certain cases.

    Rather than imposing new requirements on the overseas territories, the Government feel strongly that we should continue to work with them and focus our efforts on the implementation of the existing arrangements, including the passage of new primary legislation in the territories and complex technological improvements. I recognise that it is the wish of some noble Lords that a timetable be set for public registers. However, the UK Government respect the constitutional relationship with the overseas territories and the Crown dependencies. My noble friend Lord Faulks queried whether there might be a legal issue. I suspect that he is right but I shall look into that before Report.

    As I noted earlier, legislating for the overseas territories is something we have done only very rarely. It is done on issues such as the abolition of the death penalty, which raised issues of compliance with human rights obligations for which the UK retains responsibility. While tackling this kind of complex criminality and its consequences is extremely serious, there is a clear constitutional difference in the fact that financial services is an area that is devolved to territory Governments and, in the case of the Crown dependencies, the UK has never legislated for them without their consent. That may be the point to which my noble friend Lord Faulks referred.

  2. Lord Faulks

    I confirm that that is precisely the point I was making.

  3. Baroness Williams of Trafford

    I am so glad that I read it right. The UK is directly responsible for the OTs’ and the CDs’ compliance with international obligations, including the European Convention on Human Rights. It is our responsibility in international law, as the overseas territories have no legal personality under international law. That was a key factor in the UK taking the rare step to legislate for the OTs on the issue of, for example, the decriminalisation of homosexuality. While I acknowledge the moral dimension of tackling criminal finances, the same responsibility does not exist for financial services policy, which is OT government responsibility.

    I am sorry that I have taken up so much of noble Lords’ time, but this debate has created a lot of interest in the Chamber. I will talk now about the long-term ambition. The UK is the only G20 country to have established a public register, which has been in operation for less than a year. The Government have made it very clear that it is the Government’s long-term ambition that publicly accessible registers of beneficial ownership will in time become the global standard. Should this happen, we would expect the overseas territories and Crown dependencies to implement this standard. Given that so many jurisdictions fail even to reach the standards set by the Financial Action Task Force for beneficial ownership transparency, it is right to focus our efforts on persuading others to up their game, while ensuring that the overseas territories, as well as the Crown dependencies, deliver on what they have promised.

    Read more

    Finally, on the Opposition’s Amendment 168, as noble Lords will be aware, the Government announced at the London Anti-Corruption Summit in May last year their intention to create a register of overseas company beneficial ownership information where the company owns UK property. The register will be an important tool in law enforcement investigations and will bring transparency to the ownership and control of overseas companies that own UK property. I welcome the Opposition’s support for this proposal and hope that it will go some way to addressing the concerns raised by my noble friend Lord Faulks last week. Since the summit, the Department for Business, Energy and Industrial Strategy has been working closely with experts in many disciplines to develop the proposals and ensure that the register will work effectively across the whole UK.

    The policy is unusually multifaceted, bringing together complex legal areas of international company law and land law across the UK. It is therefore taking time to develop effective proposals to ensure that we deliver full transparency without creating undue burdens on business or adversely impacting commercial property transactions. We intend to publish a call for evidence, which will set out the policy proposals in full, in the coming weeks. We will also introduce legislation to implement the register as soon as parliamentary time allows.

    I will mop up some other questions that were asked. My noble friend Lord Kirkhope asked whether all the overseas territories will have central registers by June. I think he probably knows the answer by now, given the debate that we have had, which is that all the territories are working towards implementation by June 2017. I should make noble Lords aware that in the cases of Anguilla and the Turks and Caicos Islands, specific challenges have arisen.

    Anguilla is a very small jurisdiction of just 15,000 people, and has faced in the last year the significant challenge of the resolution of its two national banks, which has placed certain constraints on its public finances. It has therefore requested support to fund the upgrade of its electronic register, which UK officials are currently considering. While it is important that Anguilla is held to the same standard as other overseas territories, I am sure that noble Lords will appreciate the need to follow all proper processes to ensure value for money and the use of any UK public funds.

    In the Turks and Caicos Islands, general elections were held in December 2016 and a new Government were elected. In February my noble friend Lady Anelay met the newly elected Premier, who confirmed her intention to stand by the agreement signed by her predecessor. The Premier has also recently instructed that the drafting of the necessary legislation to give effect to the arrangements should begin and that a project should be prepared on IT infrastructure and related issues.

    The noble Lord, Lord Eatwell, asked about the verification of—oh, he has gone; I think I might have bored him to death, but I will get my reply on the record. The UK register of PSCs is public, which means that many people view the information and check its accuracy. The UK does not directly verify the information on the register; instead, it relies on others to check it in the course of using the register.

    The noble Lord, Lord Rosser, asked about the timing of legislation on the public register of beneficial ownership. He will understand that I cannot say what legislation might be announced in this House in the coming months. However, I can assure him that it is my strong expectation that legislation to introduce a public register of beneficial ownership of UK property will be introduced before the end of the Parliament.

    My noble friend Lord Kirkhope asked about similarly effective systems and electronic search platforms. As he explained, under the bilateral arrangements concluded with the UK, some jurisdictions have opted to establish an electronic search platform allowing them to access beneficial ownership information. The exchange of notes permits similarly effective arrangements provided that the following criteria are met: law enforcement authorities can obtain beneficial ownership information without restriction, and this information is available for both civil and criminal proceedings; law enforcement authorities can quickly identify all corporate and legal entities connected to a beneficial owner without needing to submit multiple and repeated requests; and corporate and legal entities or those to whom the beneficial ownership information relates are not to be alerted to the fact that a request has been made or that an investigation is under way. We will be monitoring this arrangement to ensure that it does indeed provide the same results.

    My noble friend Lord Hodgson asked whether TCSPs are regulated. They are regulated in the OTs by their financial service commission or monetary authorities. Law enforcement authorities have reported enhanced co-operation since the signing of the exchange of notes, and we expect to see co-operation improve further once the deadline for full implementation is reached.

    I am sorry that I have taken so long. I hope that I have given as fulsome an explanation as noble Lords expected.

  1. Lord Rosser

    Perhaps I may ask the Minister to clarify a couple of points. First, in the light of what she has said and what has been said in this debate about competitive disadvantage, are the Government arguing that accepting Amendment 167 would place the overseas territories at a competitive disadvantage and that that is a key reason for the Government opposing the amendment? Secondly, in view of what the Government have said about wanting to work with the overseas territories in particular, is the reality that if either the overseas territories or the Crown dependencies do not agree to public registers of beneficial ownership, then that will not happen in relation to the overseas territories and Crown dependencies?

  2. Baroness Williams of Trafford

    Can the noble Lord repeat his last point?

  3. Lord Rosser

    Certainly. My question relates to what the Government have said about working with the overseas territories. Does that mean that if either the overseas territories or the Crown dependencies decline to agree to public registers of beneficial ownership, then that will not happen in relation to the overseas territories and Crown dependencies? Is that the Government’s position?

  4. Baroness Williams of Trafford

    My Lords, they are all committed to working towards the same end. It would be perverse if, having signed up to this arrangement, they then decided that they were not going to work with the Government. If they suddenly stalled on working with the Government, the Government would encourage them to do so in strong terms.

  5. Lord Rosser

    I did not realise they had signed up to public registers. Since the Government say they want to work with the overseas territories in particular, I am simply asking what would happen if either the overseas territories or Crown dependencies declined to agree to have public registers of beneficial ownership. Is the Government’s position that it would therefore not happen as far as the overseas territories and Crown dependencies are concerned?

  6. Baroness Williams of Trafford

    My Lords, the Government are fully committed to working with the Crown dependencies and overseas territories to achieve the ultimate end of public registers. I have now forgotten what the noble Lord asked me on Amendment 167.

  7. Lord Rosser

    I was simply saying that, in the light of what has been said in this debate by a number of noble Lords about the overseas territories being placed at a competitive disadvantage if the amendment was accepted, are the Government arguing that to accept Amendment 167 would place the overseas territories at a competitive disadvantage and that that is a key reason for them opposing the amendment? Or is the reason for the Government’s opposition to the amendment a dislike of what they would describe as imposing something on the overseas territories rather than working with them?

  8. 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.

  9. 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.

Amendments 168 and 169 not moved.

Clause 49 agreed.

Amendment 170 not moved.

Clause 50 agreed.

Schedule 5: Minor and consequential amendments

Amendments 171 to 176

  1. Baroness Williams of Trafford

    Moved by

    171: Schedule 5, page 152, line 27, leave out from beginning to “in” in line 28 and insert—

    Read more

    “ _(1) Section 18 of the Civil Jurisdiction and Judgments Act 1982 (enforcement of UK judgments in other parts of UK) is amended as follows.

    (2) In subsection (2)(f), at the end insert “or an unexplained wealth order made under that Part (see sections 362A and 396A of that Act)”.

    (3) ”

    172: Schedule 5, page 152, line 31, at end insert—

    “ _( ) In subsection (3) for “and (4ZA)” substitute “, (4ZA) and (4ZB)”.

    ( ) After subsection (4ZA) insert—

    “(4ZB) This section applies to the following orders made by a magistrates’ court in England and Wales or Northern Ireland—

    (a) an account freezing order made under section 303Z3 of the Proceeds of Crime Act 2002;

    (b) an order for the forfeiture of money made under section 303Z14 of that Act;

    (c) an account freezing order made under paragraph 10S of Schedule 1 to the Anti-terrorism, Crime and Security Act 2001;

    (d) an order for the forfeiture of money made under paragraph 10Z2 of that Schedule.”

    ( ) In subsection (5)(d), for the words after “measure” substitute “other than an order of any of the following kinds—

    (i) a freezing order of the kind mentioned in paragraph (a) or (c) of subsection (4ZB) made (in Scotland) by the sheriff (in addition to such orders made by a magistrates’ court in England and Wales or Northern Ireland);

    (ii) an order for the making of an interim payment;

    (iii) an interim order made in connection with the civil recovery of proceeds of unlawful conduct;

    (iv) an interim freezing order under section 362I of the Proceeds of Crime Act 2002;

    (v) an interim freezing order under section 396I of that Act.””

    173: Schedule 5, page 160, leave out lines 19 and 20

    174: Schedule 5, page 169, line 30, at end insert—

    “74A_ In section 414 (property), in subsection (3) before paragraph (a) insert—

    “(za) property is held by a person if he holds an interest in it;”.”

    175: Schedule 5, page 170, line 3, at end insert—

    “( ) After subsection (7) insert—

    “(7ZA) “Settlement” has the meaning given by section 620 of the Income Tax (Trading and Other Income) Act 2005.””

    176: Schedule 5, page 170, line 3, at end insert—

    “75A_ In section 438 (disclosure of information by certain Directors), in subsection (1)(e) at end insert “or 8”.

    75B_ In section 439 (disclosure of information to Lord Advocate and to Scottish Ministers), in subsection (1) at end insert “or 8”.

    75C_ In section 441 (disclosure of information by Lord Advocate and by Scottish Ministers), in subsection (2)—

    (a) in the words before paragraph (a), after “5” insert “or 8”;

    (b) in paragraph (d), after “5” insert “or 8”.”

Amendments 171 to 176 agreed.

Schedule 5, as amended, agreed.

Clauses 51 to 53 agreed.

Clause 54: Extent

Amendments 177 to 179

  1. Baroness Williams of Trafford

    Moved by

    177: Clause 54, page 113, line 42, at end insert—

    Read more

    “( ) section (Reconsideration of discharged orders)(2) and (3);”

    178: Clause 54, page 114, line 20, at end insert—

    “( ) section (Reconsideration of discharged orders)(4);”

    179: Clause 54, page 114, line 27, at end insert—

    “( ) section (Reconsideration of discharged orders)(5) and (6);”

Amendments 177 to 179 agreed.

Clause 54, as amended, agreed.

Clause 55: Commencement

Amendments 180 and 181

  1. Baroness Williams of Trafford

    Moved by

    180: Clause 55, page 114, line 38, at end insert—

    Read more

    “( ) section (Reconsideration of discharged orders)(4);”

    181: Clause 55, page 114, line 44, at end insert—

    “( ) section (Reconsideration of discharged orders)(5) and (6);”

Amendments 180 and 181 agreed.

Amendment 182 not moved.

Amendment 183

  1. Baroness Vere of Norbiton

    Moved by

    183: Clause 55, page 115, line 18, at end insert “or areas”

  2. Baroness Vere of Norbiton

    My Lords, as my noble friend Lord Dunlop set out to your Lordships’ House last week when repeating a Statement from my right honourable friend the Secretary of State for Northern Ireland, the current political situation in Northern Ireland is highly unusual. The Government are, none the less, committed to the central principles of the Sewel convention. Noble Lords will recall that the Government have made a commitment to not commence provisions relating to matters devolved in Northern Ireland without the appropriate consents having been obtained. Although it should already be possible to commence provisions at different times in different parts of the UK, Amendment 183 puts this beyond doubt, helping to ensure that we can fulfil this commitment. I beg to move.

  1. Baroness Hamwee

    My Lords, if the Minister needs to answer my question after today, that will be fine. I well understand what the noble Baroness has said but some of the provisions to which this amendment will apply deal only with one area—mostly with Northern Ireland but one or two with Scotland. If there is a provision that regulations may apply to areas, how does that work when you have only got one area, as I understand it, being one of the four nations? They are not sub-divisible after that.

  2. Lord Kennedy of Southwark

    I am happy with the amendment. It is, unfortunately, necessary in this situation. I hope the parties can get round the table and get the Administration back and up and running again.

  3. Baroness Vere of Norbiton

    I thank the noble Baroness for her comments and, of course, I will write with further clarification.

Amendment 183 agreed.

Clause 55, as amended, agreed.

Clause 56 agreed.

House resumed.

Bill reported with amendments.