- Committee (3rd Day)
- Relevant document: 27th Report from the Delegated Powers Committee
- 1:00 pm
- Amendment 68
- 68: After Clause 99, insert the following new Clause— “Overseas companies: international co-operation Within six months of the day on which this Act is passed, the Secretary of State must report to Parliament on what arrangements with foreign states and international organisations have been agreed to verify information about overseas companies within the scope of this Act, and the identity of their directors.”Member’s explanatory statement Verification of information about companies and directors based overseas will require co-operation with foreign governments and with organisations responsible for monitoring cross-border finance, trade and crime. This amendment seeks to probe that the government is putting such arrangements in place, and will report them to Parliament.
- My Lords, this amendment is to ask for much more information from the Government on the international implications of the Bill, which is a way of asking whether the Bill is serious in terms of enforcement. Most serious economic crime—indeed, all serious economic crime nowadays—is cross-border: the money is taken out of your bank account and rapidly moved to another jurisdiction. One of the huge problems we all face in a globalised economy is that policing is bounded by sovereign borders and criminals are not. Therefore, Governments are forced to co-operate across them.One of the questions I hope we will pursue on these amendments and the ones that follow on the overseas territories is how Whitehall ensures that the various parts of it that deal with the various parts of our international efforts to combat different forms of crime—terrorist financing, drug smuggling, people smuggling, et cetera—co-ordinate, and which are the lead departments for what. Reference has already been made to HMRC and the Treasury. I note that, in Washington, the US State Department has now established a State Department-led but cross-department anti-corruption board to deal with these necessarily cross-border problems. I hope the Minister will be able to tell us—if not now then perhaps, as I asked at Second Reading, in a briefing in the context of the Bill—how Whitehall will make the necessary changes to ensure that different departments work together coherently in coping with these very complex problems.It might help if I remark briefly on how I became involved in some of these problems of international crime. In 1989 I was director of research at Chatham House, the international affairs think tank. I was approached by a chief inspector who was then head of the strategy unit at the Metropolitan Police to ask if we could run a seminar on the international dimensions of policing, now that it seemed likely that the Berlin Wall might come down. As it happened, I was then attached briefly to an institute in Germany, in Bavaria, and when I asked it whether I could get any briefing on the subject, which I knew nothing about, I found myself very rapidly being taken to the Bundesnachrichtendienst headquarters and given a very thorough intelligence briefing on how the German Government were approaching the likely explosion of cross-border crime that would accompany the end of that very hard border that had kept a lot of crime away from western Europe.
- I will respond to the comments made by the noble Lord, Lord Wallace, in moving his Amendment 68. I was very struck, looking back at the comments from Second Reading. He very forcibly talked about the international dimension and how important it is, and the fact that the international dimension in the Bill generally is thin; I think those were the words he used. I think we all knew that we would require amendments to look at this area. I am keen to understand from the Minister what actually is being proposed.We talk a great deal about collecting data, but one of the rules of thumb I have always worked with is that data is of use only if it is open and transparent, there is a responsibility for the data to be analysed and, where things are held up as being untoward, appropriate action is taken.I do not want to draw out the debate, but this could be an opportunity for the Minister to give us an update about the progress made since the Government launched the register of overseas entities on 1 August. What is the Government’s assessment of the success of the register and of the beneficial ownership registration being set at 25%? Do we know whether many companies are avoiding this by spreading out shares throughout a family? We know that there were significant concerns about nominee arrangements being used to disguise true beneficial owners. What is the Government’s assessment of this, now that the register has been introduced, and will they use the regulation-making powers in the existing economic crime Act to address this?I anticipate a full response to the issues raised by the noble Lord, Lord Wallace. I would like to understand and am seeking reassurance that the Government are putting arrangements in place. As we have heard, the scale of the co-operation is quite significant. It needs constant review, and it needs to relate to finance, trade and crime. I look forward to the Minister’s response.
- I thank noble Lords very much. It is a great pleasure to be here again to continue this valuable and important inquiry into how to make our company structures more transparent, fairer and more effective for our long-term business needs.I thank the noble Lord, Lord Wallace of Saltaire, for this amendment. Over the next few hours, I hope to cover many of the points raised and clarify further points from our discussions earlier this week. Specifically on this amendment, I hope it will be of some reassurance to noble Lords that Companies House already has excellent relationships with overseas counterparts—it is important to emphasise that. It works closely with authorities in the Crown dependencies and overseas territories on the implementation of the register of overseas entities.The noble Baroness, Lady Blake, asked about the progress of the register of overseas entities in relation to UK companies and, specifically, property ownership. We have come a long way: I think we are now 75% to 80% registered. Some overseas entities have not fulfilled our requirements, and I am happy to send a note to Peers about that. This changes regularly but it is a minority, which is important. I am pleased about that, and we are grateful for the collaboration of the Crown dependencies and overseas territories.As a government Minister it is important that I say that, if you listened only to this debate and did not have any experience of the outside world, you may be forgiven for thinking that every single authorised corporate service provider, Crown dependency and overseas entity was somehow engaged in and designed for criminal undertakings, which we all know is not the case. It is important that I state that many of these measures and the discussions we are having are about a very small minority of bad actors and that the overall industry is worth while and valuable. The principles around high-quality corporate service provision, Crown dependencies managing their own affairs and how companies are structured are very much to be celebrated and embedded. What we are doing here is making sure that there is transparency and legitimacy. I want to make sure that is on the record.
- 1:15 pm
- While Companies House will not be able to directly share data with overseas entities, new data-sharing powers included in the Bill will enable it to better share information with UK law enforcement agencies, such as the National Crime Agency, which may have intelligence on overseas companies and entities that they will be able to share with the registrar, or request it from overseas bodies to help her fulfil her functions. As I say, Companies House has excellent relationships with law enforcement bodies, such as HMRC and the NCA. A key area of transformation for Companies House is close working with law enforcement to allow for an efficient flow of intelligence and investigative support between the two. We have debated already, either at Second Reading or in this Committee, a great deal of the legislation that is being brought to enable for better data sharing and transparency.
- The noble Lord, Lord Wallace, also seeks to require a report on the verification of the identities of directors of overseas companies. The Bill contains a power to impose identity-verification requirements on directors of overseas companies, which the Government intend to use to ensure that companies governed by the laws of other jurisdictions that operate in the UK are subject to the same identity-verification requirements that will apply to UK company directors. That is at the core of a great deal of the work that we are undertaking, which is why I promised to give a specific numeric update, for example on overseas entities and their beneficial owners when it comes to property ownership and other asset ownership in the UK.
- Clause 187, which was added to the Bill in the other place, will also require the Secretary of State to publish an annual report on the implementation and operation of Parts 1 to 3 of the Bill, which we have discussed. That is very important, so when we are asked about reporting we are unambiguously doing that. We want the reports to be clear, and to show that the reforms we are making are being effectively implemented and that we have made significant and seismic changes to how Companies House operates and how transparency is seen. This is here and it is what the Bill is about.
- I am happy to have further conversations about how we can include, as I have said clearly from this Dispatch Box, further data—whatever that may mean—to provide us with a sense of assurance that we are doing the job, because that is the plan. If we do not do it, we need to find ways to do it—we are committed to that. I just think we may end up going around in a bit of a circle on that. The reports may include information about the exercise of this regulation-making power and how we have a look-through.
- As for the detail of any operational arrangements with international partners, which will be broad and varied, I hope the noble Lord will agree that they do not need specific reporting on. However, he has quite rightly raised that. This is not necessarily specific to his amendment, but I am happy to cover it anyway and to have further discussions with him on the FATF.
- We recently published our Economic Crime Plan 2, which I think came out in March and which I am happy to furnish the noble Lord with. The plan is to reduce money laundering, recover criminal assets, combat kleptocracy, drive down sanctions evasion and cut fraud. We have a variety of key committees, including the economic crime strategy board chaired by the Home Secretary and the Chancellor. We have a joint anti-corruption unit in the Home Office and, of course, we have the National Crime Agency and HMRC, which would feed the data into that as well.
- The Government are very aware of the need to make sure that this is properly policed and of our duties to co-operate with Crown dependencies and other jurisdictions. I am happy to be prompted by the noble Lord and delighted that this has been raised in Committee, but it would not necessarily be practical to include his specific amendment in the Bill and I would be very grateful if he would withdraw it.
- I took it as an implicit, or rather an explicit, criticism of His Majesty’s Opposition, us and others who have spoken to amendments to the Bill that we somehow regard the whole industry as corrupt. I would take the Minister to task and suggest that he reads Hansard for the previous session, where I made it clear that that is not our view—and I know it is not the view of His Majesty’s Opposition. The fact is that we are speaking about bad actors because the whole purpose of the Bill is to deal with them. It can be taken on faith, but perhaps we have to say it every time, that we consider bad actors to be a minority of players in this sector, but they are the purpose for which the Bill has been brought forward.
- I greatly appreciate the comments from the noble Lord, Lord Fox; I am so glad that he said that. I do not mind if some friction is sometimes required in order to make sure that the messages are heard loud and clear. I am glad that the noble Lord has reaffirmed his position, that of his party and that of the main opposition party. We all agree on this, but it is important because I was picked up on it today. It sounds as if we are at war with a legitimate sector and the legitimate concept of how to structure companies, which are at the very core of our capitalist system and have created so much wealth for us. I am glad that we are united on this point.I was asked by the noble Baroness, Lady Blake, about the number of entities that have registered with the register of overseas entities. I have a figure of 27,000, which represents a high level of compliance. I hope that figure satisfies her request, but I would be happy to publish further figures or to answer her in writing on that.
- I will just reinforce the point that the noble Lord, Lord Fox, made. To be honest, I do not think the Minister was implying that we were condemning the whole of business, but the noble Lord, Lord Fox, made an important point. The Committee is trying to say that, overall, we all support the Bill but we want to ensure that it is effective, understandable and enforced. In challenging the Government, we seek not to undermine business but to improve what most of us regard as a reasonable Bill.The only other point I make to the Minister is that—I think we all accept this—public opinion is frustrated about what it sees as a lack of action in respect of certain bad business practices, such as the laundering of money. Lots of fraud and economic crime takes place but is not seen as a priority by the state—irrespective of whether you mean Labour, the Liberal Democrats, the Conservatives, the Scottish nationalists or whoever—which does not take this seriously. I suggest to the Government that, if I were a government Minister, I would parade much more powerfully than the Government have done that we are trying to ensure that public anger is assuaged by the fact that we are no longer prepared to see Russian money used in the way it has been nor to see bad practice, which means, frankly, that good business is undermined.This is the point made by the noble Lord, Lord Fox. Good businesses, which represent the majority of the country, want something done about bad business because it undermines them. This is a really important point; I think it is the point that the Minister was trying to make. This is a good Bill but it needs to be improved. From what he has said to us, I think the Minister will take on board many of the comments that have been—and will be—made and change the Bill. But it is also about saying, “Of course the majority of business is good, but there is bad practice out there and it needs sorting out”. Good business wants that to happen as much as members of this Committee do.