Economic Crime and Corporate Transparency Bill

I must draw the House’s attention to the fact that financial privilege is engaged by Lords amendments 6, 7, 9 to 12, 14 to 21, 30, 32 to 34, 54, 68, 115, 117, 120, 124, 125, 173, 174 and 178 to 201. If those Lords amendments are agreed to, I will cause the customary entry waiving Commons financial privilege to be entered in the Journal.

After Clause 46

Register of members: information to be included and powers to obtain it

6.50 pm

I beg to move amendment (a) to Lords amendment 23.

With this it will be convenient to discuss:

Lords amendment 151, and Government amendment (a).

Lords amendment 153, and Government amendments (a) to (c).

Lords amendments 115 and 117, and Government motions to disagree.

Lords amendment 159, and Government motion to disagree.

Lords amendment 161, Government motion to disagree, and Government amendment (a) in lieu.

Lords amendments 1 to 22 and 24 to 55.

Lords amendment 56, Government motion to disagree, and Government amendments (a) to (c) in lieu.

Lords amendments 57 to 114, 116, 118 to 150, 152, 154 to 158, 160 and 162 to 229.

It is a pleasure to bring this Bill back to the House. It is crucial in ensuring that we can bear down on kleptocrats, criminals and terrorists who abuse our open economy, while also strengthening the UK’s reputation as a place where legitimate business can thrive. I am pleased to say that the Bill is now in a better place and there is a great deal more of it than when it left for the other place back in January. When introduced, the Bill ran to some 239 pages; it is now closer to 400. That reflects the spirit of genuine collaboration across both Houses and the fact that the Government have listened and taken many sensible proposals on board. I take this opportunity to thank Members of both Houses for their collaborative and cross-party approach.

The Government made significant amendments to the Bill in the other place. It is now unquestionably a milestone piece of legislation that takes the UK’s fight against economic crime to an entirely new level. I will summarise a few key changes, starting with the game-changing reforms to corporate criminal liability. As the Minister for Security, my right hon. Friend the Member for Tonbridge and Malling (Tom Tugendhat), committed to, the Government tabled amendments to introduce a new failure to prevent offence, which will drive cultural change towards improved fraud prevention in organisations and, failing that, hold organisations to account with prosecutions if they profit from fraudulent actions.

I thank the Minister for giving way so soon. It is undoubtedly a positive thing that failure to prevent, or at least part of it, has now been included in the Bill, but does he have any sympathy for those warning that because this measure is targeting the larger firms, the small boutique firms—the one-man bands that are very aware of what they are doing and know how to get around the system—will still be allowed to freely operate? Would he consider supporting the Lords amendment that would close that particular loophole?

I will speak in detail to the various amendments, including the non-Government amendments, one of which is on the threshold that the hon. Lady refers to. If I may, I will defer addressing that until later in my remarks.

The Government have also introduced reforms to the identification doctrine for economic crimes to make it easier to prosecute corporations in their own right for these offences. The House will know that this is the largest and most meaningful change to corporate criminal liability in decades. It will have a transformative effect on our ability to hold corporates to account for the actions of criminal individuals. I thank my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland) and my hon. Friend the Member for Bromley and Chislehurst (Sir Robert Neill) for all their work and engagement to further the cause for the reform of corporate criminal liability.

We have also made amendments to tackle strategic lawsuits against public participation, known as SLAPPs, that feature economic crimes. We believe that this is the first national legislation in the world to combat SLAPPs. The new clauses will enable an appropriate, fair and effective early dismissal procedure against SLAPP cases. I very much thank the right hon. Member for Birmingham, Hodge Hill (Liam Byrne) for his work in this area.

Members will also be pleased to hear that the Government have tabled amendments to improve the new statutory objectives for the registrar of companies, and I hope my hon. Friend the Member for Barrow and Furness (Simon Fell) and the hon. Member for Feltham and Heston (Seema Malhotra) in particular will welcome these improvements, given their previous amendments.

We also recognise the points made by several Members of this House, as well as in the other place, about the role of authorised corporate service providers in the identification process, and we have tightened the framework. Our amendments will improve the transparency of ACSPs, including by requiring verification statements made by ACSPs when they carry out ID verification on behalf of an individual to be made publicly available on the register.

May I thank the Minister? He always brings his points of view to the Chamber with clarity and helpfulness, and that is appreciated by everyone, including me.

We as a party are of a mind to support the Government on this Bill tonight. I want to ask a question that is probably very specific. It relates to Northern Ireland, where criminal gangs—that is what they are; they masquerade as paramilitaries, but they are criminal gangs—delve into business and economic crime. I am seeking assurance from the Minister—I think he probably will respond positively, but at the same time I seek to get his response on the record. Will this Bill ensure that criminal gangs that use illicit money and launder money from across the whole of Europe and further afield will be accountable, by ensuring that we can catch them, detain them and put them in jail?

I thank the hon. Gentleman for his work and his intervention. It is clear that fraud and money laundering are already criminal acts; what the Bill principally does is help to prevent fraud by requiring organisations to make sure that fraud is not happening within them in the first place. I think he has spoken to that in the past, as have I as a Back Bencher. I fully support it as the Minister concerned, and I absolutely believe that the Bill will have a major impact in clamping down on economic crime.

We must do more to tackle crime, but we must also ensure that the UK remains a great place to start and grow a business. As such, the Government strongly oppose putting additional burdens on legitimate business, unless there is a clear rationale for doing so. Any amendments made to strengthen the Bill have been carefully weighed up, and the Government are confident that we have struck the right balance in tackling economic crime and preserving the UK’s welcoming business environment.

I know that my hon. Friend will come on to make points about failure to prevent offences in relation to burdens on small businesses. May I tell him first that I welcome wholeheartedly the arrival of failure to prevent offences? Like my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland), I have argued for that when I was Attorney General and since, and I am glad to see it. In relation to failure to prevent and Lords amendment 151 in particular, the Minister will wish to argue that he is seeking to prevent excessive burdens on smaller organisations by limiting that offence to large organisations, but can he explain why subsection (4) of the new clause introduced by Lords amendment 151 does not do that job? It states:

“It is a defence for the relevant body to prove that, at the time the fraud offence was committed…the body had in place such prevention procedures as it was reasonable in all the circumstances to expect the body to have”.

Why would one of those circumstances not be the size and capacity of the organisation in question?

I thank my right hon. and learned Friend for his point and his work in this area. I will come on to that amendment, if I may, later in my remarks. He makes a valid point, and we want to ensure there are no loopholes while at the same time maintaining the position that the Bill does not put new burdens on businesses that are not likely to have a systemic effect on economic crime.

I interrupt my hon. Friend to pick up the intervention he received from my right hon. and learned Friend the Member for Kenilworth and Southam (Sir Jeremy Wright). I warn those on the Front Bench about what he just said. Leaving the burdens on business to the courts or whichever procedures to define is not a reasonable protection for small businesses. They need the protection that the Minister outlines, because in such circumstances people will go to the most conservative position they can. Although my right hon. and learned Friend suggested that that would provide significant and effective protection, it will not do so in practice as behaviour will change and burdens will increase. I think the Minister is getting the right balance on this.

My hon. Friend makes the other point, and these measures are about the delicate balance that we want to strike, ensuring that the right provisions are in place to prevent fraud without putting undue burdens on business. I am pleased that those interventions reflected both those positions so that we can see the legislation holistically rather than just through the lens of failing to prevent fraud.

Will the Minister give way?

If I may, I will make a little progress on that point.

We believe that the six non-Government amendments for debate would pose significant and disproportionate burdens on business, penalising reasonable companies and businesspeople with limited evidence that the burdens would be outweighed by any meaningful benefits. I will go into each amendment in detail, but I will begin by emphasising the Government’s position. We must insist that the balance achieved in the Bill through Government amendments made in the other place is maintained.

I am grateful to the Minister for saying that, because it was on that point that I wanted him to give way. Does he not think that any honest, upright business, whether large, small or micro, would aim within its own procedures to avoid fraud or money laundering?

The vast majority of the business community is honest and upstanding—that is the point. What we are trying to ensure is that those businesses are not disproportionately affected by putting in controls, checks and balances. I speak as a businessperson who did have to implement failure to prevent bribery and tax evasion measures in our business, and I tell the right hon. Member that there were significant administrative burdens around that legislation, and I believe they would be more so for fraud. I will come to that point in more detail.

I turn to Lords amendment 23. The inclusion of lines 84 to 96 would require all UK companies to declare whether they are holding shares on behalf of or subject to the direction of another person or persons as a nominee, and if so to provide details of the person or persons. Fundamentally, that is not necessary. Provisions in the person with significant control framework, as strengthened through the Bill, already require the disclosure of a person of significant control behind a nominee on pain of criminal sanction for non-reporting. That achieves the same intent. A combination of measures already in the Bill, the material discrepancy reporting regime in the Money Laundering and Terrorist Financing Regulations 2022 and Companies House’s new intelligence hub will more effectively flush out undeclared PSCs and deter the provision of false information.

I am afraid that the proposed approach is something of a blunt instrument. It would apply to all shareholders, when we should be focusing on the transparency of individuals exerting significant influence as already provided for under the PSC framework. As such, we would risk burdening millions of companies and their shareholders with new information requirements for no useful purpose. The proposition may sound sensible, but nominee arrangements can be complex, including having multiple layers of nominees and large numbers of beneficiaries for entirely legitimate reasons. For example, pension funds that own shares in a company would be caught. Listed companies would be particularly impacted as their shares are often held by nominee arrangements for legitimate administrative reasons—for example, in stocks and shares individual savings accounts, by custodian banks and by corporate sponsored nominees.

I am grateful to the Minister for his thanks for the progress we have made together on SLAPPs. Because of the amendment made on SLAPPs, we are now providing journalists and other truth-tellers with important protections when it comes to investigating economic crime. The Lords amendment is a complement to that. The truth is, there will never be enough enforcement resources for Companies House, HMRC and others, so we do need civil society to be able to bring the disinfectant of sunlight and undertake investigations. It is therefore vital that trust information is provided. Has he seen the new research published by Arun Advani, Andy Summers and their colleagues that shows that the current arrangements shield something like 152,000 properties from that transparency? If we genuinely want to be able to investigate where things are going wrong, where there is corruption, surely it is in the national interest for us to make that information more widely available.