That this House has considered tax transparency in the Overseas Territories.
It is a pleasure to serve under your chairship, Mr Turner. Having worked on anti-corruption, open government and transparency issues for more than a decade, I am often asked why such issues matter when there are so many pressing challenges facing our country. It can often seem an intractable problem—billions and trillions flowing through the international financial system that will end up elsewhere. What difference does it make to our constituents? I hope this debate will show directly why it matters to our Treasury and our tax take; to the housing crisis; to the fight against organised crime; to the enforcement of our sanctions against Putin; to fighting poverty around the world; and to restoring trust, transparency and accountability to our democracy.
This Government have made a strong start on combating illicit finance and kleptocracy. I particularly welcome the Foreign Secretary’s personal campaign on this issue, which has seen an expansion of our sanctions, the appointment of Baroness Hodge as the UK’s anti-corruption champion, and a cross-departmental team of Ministers charged with developing a new anti-corruption strategy, to which I know my hon. Friend the Exchequer Secretary to the Treasury has a strong commitment.
The Foreign Secretary’s ambition to transform Britian from the dirty-money capital to the anti-corruption capital of the world is absolutely the right objective. It matters for our international reputation and our standing in the world. To be taken seriously as a leader on democracy and anti-corruption, our own house has to be in order. The uncomfortable truth is that while some of the most notorious and brazen enablers of illicit finance and money laundering are operating as part of the UK family, we will not be able to claim that leadership role. Despite years of warm words and communiqués about fighting economic crime, the overseas territories are still one of the premier global destinations for moving dirty money, and it is time for that to change.
Since the full-scale invasion of Ukraine in 2022, I have led the local Kensington Against Dirty Money campaign in my constituency of Kensington and Bayswater, where more than 6,000 properties are owned overseas. Our most popular activity is a local kleptocracy tour of often empty mansions owned by autocrats and their supporters from around the world. Transparency International found that £5.9 billion in suspicious funds had been used to purchase UK properties through shell companies registered in the overseas territories, with £1.1 billion of that in my constituency. The ownership vehicle of choice is an anonymous trust, with the most popular location being the British Virgin Islands. The BVI has a population of less than a quarter of my constituency, so it would be highly surprising if BVI residents were the beneficial owners of the properties.
Thanks to investigative journalists and a series of high-profile leaks from the Panama and Paradise papers to “Cyprus Confidential”, we know who the actual owners are. That is why the previous Government—with thanks to the right hon. Member for Sutton Coldfield (Mr Mitchell)—took action in the previous Parliament with cross-party support to implement a register of overseas entities. That gives us good and helpful information, but a glaring loophole remains. Trust-owned property does not need to be declared—and in the Royal Borough of Kensington and Chelsea that accounts for 40% of the foreign-owned property. That allows the UK property market to continue as a laundromat for illicit finance. I ask the Government to look at closing this loophole and adding trusts to the property register as soon as possible.
Does my hon. Friend agree that without those actions there is a real danger that significant sums of Russian assets and money, which could be sanctioned and used to reconstruct Ukraine, will be left in the hands of the supporters and perpetrators of the war in Ukraine?
I completely agree. Without transparency, we cannot follow the money. We have some prominent examples of properties owned by sanctioned oligarchs that came into the sanctions regime only after investigations uncovered those assets. Keeping the anonymous trust option available, without the requirement to declare the true owners, allows for exactly the sort of behaviour that my hon. Friend outlines.
The main opposition is from some highly self-interested trust lawyers, so I urge the Government to take on those claims and bring trust-owned property into the register, which would help us not only to fight economic crime but to revitalise our high streets, where buildings often sit empty because enforcement action cannot be taken when the true owners cannot be tracked down. Indeed, some of my constituents were evicted using a spurious section 21 notice by an anonymous landlord who was based overseas in a tax haven.
My local walking tour, as part of the Kensington Against Dirty Money campaign, ends outside Roman Abramovich’s frozen mansion, which he purchased for £120 million, on Kensington Palace Gardens. In the past week or so, Abramovich has again been in the news, this time for allegations that he owes approximately £1 billion in UK taxes. At the heart of this story are, again, the UK overseas territories. Abramovich and his advisers used a complex web of corporate structures, via Cyprus and the BVI, to use money from the sale of Sibneft back to the Russian Government at huge profit in 2005. They set up approximately 200 hedge funds and maintained that the operations were happening in the BVI, but it has now been uncovered that the real activity was continuing in London—indeed, in Stamford Bridge itself.
This is potentially the biggest tax case since Bernie Ecclestone, and it is vital that His Majesty’s Revenue and Customs has the resources it needs to investigate. Enforcement of the rules and regulations is critical to recovering as much money as possible for the Exchequer and supporting the Minister’s efforts to improve the public finances. It is also time to upgrade our anti-money laundering supervision regime for professional bodies such as accountancy and legal firms, so that dirty money does not flow through the City. The previous Government opened a consultation, but it has not been responded to.
It is a real pleasure to serve under your chairship, Mr Turner. This is the third time for me this afternoon, but the first time for you—we wish you well in the job you have been elevated to. I thank the hon. Member for Kensington and Bayswater (Joe Powell) for highting the concerns. I say well done on his speech and introduction to the subject matter; we do not hear enough about it in this House, but today gives us an opportunity.
I have been incredibly interested in the hon. Member’s goal to rid the UK of so-called dirty money. In Northern Ireland we have had more than our share of that, of course, through the paramilitary organisations—on both sides of the community, by the way. I remember a case that “Panorama” covered. Dirty money went from Estonia and Poland to the UK and then to Northern Ireland. That money flowed in either direction.
There is estimated to be at least £1.5 billion of UK property owned by Russians accused of financial crime or with links to the Kremlin. Along with others in this House—I can think of someone not too far away—I have already been sanctioned by the Russians. It is almost a badge of honour. I can be free with my words; I am not worried what they say about me. I think we should seize their properties, sell them and use the money to fund the needy in our palliative care units, or to build special education units throughout the UK—anything other than allow our nation to be used in such despicable ways.
I will come back to the point of the debate, which is the need to ensure that overseas tax havens are not providing more scope for tax evasion, or worse, for scurrilous, illegal behaviour. Sometimes it frustrates me, Mr Turner—I suspect it frustrates you every bit as much —when HMRC pursues someone for a slight overpayment or underpayment of tax, yet we have guys sucking away hundreds of millions of pounds and not a word about it.
Just last week I had a constituent in my office with his HMRC tax bill. He owed just over £500 in tax, and part of the reason was that he had not reckoned on the fact that the savings that he and his wife put aside for their pension, as they do not have private pensions, are being taxed. He said to me, “How do I get my hands on one of those foreign tax havens? The Government are taxing the money that I have saved for my future after they have taxed it before it goes into the bank account.” We all smiled—I know he does not mean it because I know him well—but the fact is that there are those who can use accounts in overseas territories to avoid taxes while hard-working middle-class families must pay twice on their income.
I thank my hon. Friend the Member for Kensington and Bayswater (Joe Powell) for securing this debate. I have joked in previous debates that I could be known as the Member of Parliament for frozen assets; nothing could be truer today, as that is the topic at hand.
At least £5.9 billion in suspect funds has entered the UK property market via shell companies registered in the overseas territories. Over half of that money can be found in my constituency of Cities of London and Westminster. These forces blight our communities, driving out residents and local businesses and replacing them with empty shells of buildings owned by empty shells of companies.
Over the past few months, key pillars of the City and Westminster communities have been at risk of closure, including the Jubilee Hall gym and the Prince Charles cinema. Most notably, the central London YMCA, the oldest YMCA in the world, will close its doors this week. These institutions have always had to compete against the great and the good of London’s residential and business community, but they are increasingly being crowded out. They are bidding in a rental market against shadowy owners with nigh unlimited funds.
Individuals who have frequently made their wealth from corruption and the abuse of power, by skimming money from state procurement contracts or directly acquiring assets, are funnelling the proceeds of this ill-gotten wealth into our property market. They include Alexander Zakharov, the creator of the deadly Lancet drone being used to terrorise the people of Ukraine, whose family own a £1.5 million flat overlooking Big Ben; Daim Zainuddin, a former Malaysian Minister of Finance accused of extraordinary misappropriation of public funds, who owns a £28.6 million office in the City of London; and Mikhail Gutseriev, a major backer of the Belarusian dictator Alexander Lukashenko, whose son Said owns a £160 million portfolio of properties across the Cities of London and Westminster. The immense level of money laundering in London corrodes our communities, damages democracy around the world and blocks the growth prospects of our capital’s economy.
It is a pleasure to contribute to the debate. I congratulate the three Members who have made speeches so far, particularly the hon. Member for Kensington and Bayswater (Joe Powell); he represents a royal borough and I represent a royal town, but this is an issue on which there is huge cross-party agreement. It has already been set out why that agreement exists. We know that this dirty money comes from the drug trade, from the sex trade and from modern slavery. Alas, credible sources indicate that something like 40% of it comes through London, the overseas territories and the Crown dependencies.
Parliament has already decided what should happen. On 1 May 2018, the House added new clause 6 to the Sanctions and Anti-Money Laundering Bill, under which all overseas territories must implement open registers of beneficial ownership by the end of 2020. As the hon. Member for Cities of London and Westminster (Rachel Blake) said, it was meant to be 2019, but because of the hurricanes, Lady Hodge and I agreed when tabling the amendment that it would not be necessary to do it until the end of 2020.
Subsequently, the Foreign Office arbitrarily extended that figure by three years to 2023. On 4 March 2019, in a succession of points of order to the then Speaker, two former Chairs of the Public Accounts Committee—my now noble Friend Lady Hodge and my right hon. Friend the Member for Goole and Pocklington (David Davis) —and two former Secretaries of State for International Development, namely the right hon. Member for Leeds South (Hilary Benn) and myself, made it clear that that had been done by sleight of hand and that the open registers had to be implemented as soon as possible.
Outrageously, we now find that the will of Parliament has been flouted. The letter from the BVI, which I think was received last week, amounts in my view to a contempt of Parliament. The remedy lies with an Order in Council. The Order in Council, which was published on 14 December 2020, insists that the overseas territories must comply with the requirements of section 51 of the Sanctions and Anti-Money Laundering Act 2018.
It is a pleasure to serve under your chairship, Mr Turner. I congratulate my hon. Friend the Member for Kensington and Bayswater (Joe Powell) on securing this crucial debate on tax transparency in the overseas territories, which goes to the heart of three issues that I will cover.
First, there is the matter of tax justice. Reporting from the Bureau of Investigative Journalism only last week found that sanctioned Russian oligarch Roman Abramovich dodged up to £1 billion of UK tax by structuring the ownership of his fleet of yachts and his hedge fund through the British overseas territories. I will bring this to life with the example of Mr Abramovich’s mega-yacht Eclipse.
According to corporate records, Eclipse was owned directly by Kane Global Holdings Ltd, which was incorporated in the British Virgin Islands. Kane was, in turn, owned by Lindeza Worldwide Ltd, incorporated in the BVI. Lindeza was owned by Electus Investments Ltd, held on trust in Cyprus and the BVI. Above Electus sat the Sara Trust, registered in Cyprus. Finally, there was the ultimate beneficial owner: Mr Roman Abramovich.
Let us be clear. This is a complex web of deceit intended to prevent taxes from being paid where they are due. It is conducted on an industrial scale and involves an army of immoral corporate service providers, lawyers and accountants who are only too happy to facilitate such demands. But this is not just about Mr Abramovich. Indeed, journalists in the Organised Crime and Corruption Reporting Project have reported on dozens of cases involving suspicious transactions linked to high-profile businesspeople from Bulgaria, Georgia and further afield, all systematically channelling money and assets into these jurisdictions to escape their tax liabilities in the UK and elsewhere.
It is simply unacceptable—indeed, it is morally indefensible—that we find ourselves in a situation in which a number of British overseas territories continue to incorporate entities hiding behind the corporate veil of secrecy. All the while, our constituents pay their taxes in good order.
It is a pleasure to serve under your chairmanship, Mr Turner. I join others in thanking the hon. Member for Kensington and Bayswater (Joe Powell). He has been a relentless campaigner on this issue for a number of years, and I hope that now he is in this place he can make a real impact on it.
I want to make a few short points. The first, which was mentioned by the hon. Member for Strangford (Jim Shannon), is about fairness, and the injustice that many of our constituents feel about this issue. Those who are most able to pay are also most able to avoid paying. The hon. Member spoke about his constituent being chased by HMRC, yet on a global scale it feels like that is not being done in the same way. The sense of injustice really burns people up. This is about restoring trust in politics and our economic system more broadly. The hon. Member for Kensington and Bayswater talked about how global corruption gets to hide under this, too. That underlines the unfairness of this issue.
My second point is about revenue. It is clear that our public services are under strain, and we should be able to assess what tax is owed and collect it. That is a very basic principle. I know that the Government have done some good work in terms of investing in HMRC. I welcome that and hope that it can be a model for what we do on a global scale, so that we go further and faster on this issue, too.
My final point, and the one I wanted to make the most, is about Britain’s responsibility on this global issue. It is a global problem, but it is one in which Britain has a really important role to play. We have probably all seen the statistic that one third of all global tax dodging is enabled by British overseas territories. I share the frustrations of the right hon. Member for Sutton Coldfield (Mr Mitchell) about British overseas territories not necessarily abiding by their constitutional demands or sharing the values we have been talking about today. It is incumbent on us to make sure that our Government act in the fullest and strongest possible way.
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This is urgent, because Abramovich’s is not an isolated case. For years, the BVI has been the global destination of choice for those seeking maximum secrecy for their money. It featured prominently in the Panama papers, in which half of the exposed entities were linked to the BVI. That is why Parliament has clearly stated its will that public registries of beneficial ownership should be implemented across the overseas territories and Crown dependencies.
At the first Joint Ministerial Council of this new Government, in November last year, the BVI, alongside other overseas territories, promised reforms to ensure maximum transparency, and the Government reiterated their commitment to full public access in due course. I absolutely support the Government in this mission, which is why it was so deeply disappointing to see the BVI’s proposals around company registries, which were published last month. Access would be severely restricted. One provision would even allow company owners to be notified not only that someone is attempting to uncover their identity, but of who is making the request and why, putting investigative journalists and anti-corruption activists at risk of legal or physical intimidation. Worse still, that warning system could tip off criminals and give them a head start, allowing them to move illicit assets before enforcement agencies can act. Such measures do not protect business or privacy; they protect kleptocrats and criminals.
We know it can be done: Gibraltar has shown us what can be achieved. It introduced a public register that is similar to the one that the UK has had for several years. If Gibraltar can do it and we can do it, so can the BVI, the Cayman Islands, Bermuda and all the overseas territories. We must not let our Crown dependencies off the hook, either.
Many overseas territories have cited the privacy concerns outlined in the European Court of Justice rulings, but I encourage them all to review the sixth anti-money laundering directive, which would ensure that journalists, civil society, law enforcement and businesses with anti-money laundering duties all have access to the register anonymously and in full. I continue to believe that public registers are the best solution for the overseas territories and Crown dependencies, but minimum progress would be to meet that European regulatory standard.
It is clear from all the evidence—I expect we will hear much more today—that we need to do far more collectively to support the overseas territories to make progress on economic crime. The path forward is challenging, but I know the Government are seized of its importance. The overseas territories must meet the June deadline to make progress towards public registers. There must be no further delays. Trust-owned property should be included in the register of overseas entities. AML supervision should be strengthened to halt the enablers of dirty money. HMRC, the National Crime Agency and other enforcement agencies must proactively make cases and have the skills and resources they need.
To galvanise our international partners, the Foreign Secretary’s proposal for a summit of financial centres here in London would create a focal point for aligning rules and policies. I hope this debate will galvanise support across the House for the vital mission of tackling corruption and economic crime.
Members can understand my frustration on behalf of my constituents whenever they are getting squeezed by HMRC. It is not that we are against paying tax—we pay the tax; that is the way it is—but that we see others blatantly abusing the system. Unfortunately, our British overseas territories have become tax havens to which the money is siphoned off to avoid tax. There is something wrong with that scenario.
I realise that other hon. Members want to speak, so I will finish with this point: it is despicable that overseas territories act as jurisdictions of secrecy because they do not have strong financial reporting rules. I very much look forward to what the Minister will say: he is a good Minister with an understanding of the issues and of these broken questions that I ask him. Others will ask them much more expertly than I can; I just want clarity and transparency, and I want to see those who do wrong held accountable. As a Christian, I know that those who do wrong in this world will be accountable in the next world to God himself, but there is something wrong in this world if they are not accountable under the systems that we have laid down.
People do not have to declare where their money comes from. That has to change, not only for the sake of our constituents, but to ensure justice for all. To those who use the overseas territories to avoid the taxes they should pay, I say, “Your time has come.” I want to see what the Minister can do about that. How many times will working families be taxed while others with more money pay less because of loopholes?
I very much support the hon. Member for Kensington and Bayswater in his fight, and I look forward to hearing from the Minister. I also look forward to hearing from the shadow Minister, the hon. Member for Wyre Forest (Mark Garnier). He is a man of integrity, and he is always there to uphold the issues that we bring forward.
We have already heard why it is so important for the overseas territories, particularly the British Virgin Islands, to implement public registers of beneficial owners. Knowledge about property ownership is a vital tool for protecting our country from kleptocrats. Stonewalling by the authorities in the BVI leaves those who work tirelessly to expose cases of corruption fighting with one hand tied behind their back. Currently, only those in law enforcement can access information about beneficial ownership, and they have to apply for it on a case-by-case basis. The move to fully public registers of beneficial owners is sorely needed and long overdue. Public registers were first meant to be implemented by the end of 2020, which was 1,497 days ago, or 30 Liz Truss premierships.
The BVI has now, finally, suggested an approach, but it is simply not good enough. It will require applicants to identify the beneficial owner when requesting corporate data; essentially, it asks them to know the precise information that they are after. Under the draft policy, applicants could get hold of company ownership information only if they were involved in regulatory or legal proceedings about financial crime or a criminal case in which a court has determined that the data could help to solve the investigation. Most alarmingly, the BVI registrar would be required to tip off beneficial owners within five days of an application being made, allowing beneficial owners to liquidate or move assets.
At this stage, we really need to ask whose side are the BVI authorities on. Do they stand with local communities like mine, with Parliament and with my constituents in the fight against corruption, or do they stand with the kleptocrats who are using the property market as a rainy-day fund? I am pleased to see that this is a priority for our Government and our relations with the overseas territories. This Government are pushing for greater transparency from them. I wholeheartedly support the Government in those efforts. I look forward to further updates and further opportunities to speak about the issue.
The position is very clear. Unless at this summit the overseas territories—we are talking particularly about Cayman and the BVI—say that they will follow the will of Parliament, which is clearly set out in that section of the 2018 Act, the Government must impose an Order in Council in the way that has been agreed. Let us be clear: the Government set out in 2012 the constitutional position on using an Order in Council. None of us wants to do it, but that is what Parliament is now pushed to do. The Government said:
“As a matter of constitutional law, the UK Parliament has unlimited power to legislate for the Territories.”
The overseas territories themselves recognise that they gain hugely from their relationship with the United Kingdom. If they want to travel under our flag—if they want to have the privilege under our monarch—they must accept our values as well. This has gone on far too long. I read that they were suggesting the Foreign Secretary was working to impose these orders in a colonialist way. I cannot think of any other Member of Parliament of whom that is less likely to be true than the current Foreign Secretary.
The brilliant officials in the Foreign Office, who are second to no one in my admiration, have been too willing to keep the peace between the overseas territories and London. They must now ensure that the open registers of beneficial ownership are implemented forthwith, in accordance with the will of Parliament. I very much hope that that will be the result of the summit to which the hon. Member for Kensington and Bayswater referred.
Secondly, there is a corrosive impact on the social contract between British citizens and the state. If it matters so much to the UK Government that UK taxpayers front up to fund our public services, why does it not matter that the mega-rich are exploiting the overseas territories? How can we look our constituents in the eye and say in good faith, “We are pursuing every avenue to pump much-needed resources into our NHS, our police service and our schools,” when the mega-rich and multinational corporations can escape their taxes by squirrelling their money away in British territories offshore?
Thirdly, at a time when the Government are focused on driving economic growth and unleashing the full potential of the private sector, we find ourselves in the bizarre situation that continued secrecy in the overseas territories places an immense regulatory burden on UK firms. As a former financial crime compliance officer in two UK banks, I know only too well the huge investment put into armies of due diligence professionals, who, unable to ascertain the ultimate beneficial ownership of entities incorporated in the overseas territories, spend an inordinate amount of time chasing their tails. That has a simple economic cost for UK businesses and consumers, and the British economy. That burden stands firmly at odds with the Government’s drive to deregulate and to drive up competitiveness.
We have a moral obligation, a societal imperative and an economic impetus to act. That is why we must have publicly accessible registers of beneficial ownership in the British overseas territories. That certain overseas territories continue to hide, obfuscate and deny, and prevent long-overdue reform, is a stain on our collective conscience.
The Minister of State, Foreign, Commonwealth and Development Office, my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty), confirmed in response to a written question of mine:
“We consider publicly accessible registers of beneficial ownership (PARBOs) a vital tool for combatting financial secrecy.”
He went on to say:
“I have been clear to OT leaders that full PARBOs are our ultimate expectation.”
The Minister for Security confirmed in response to another written question I submitted that the UK Government
“expects implementing legitimate interest access is an interim step to publicly accessible beneficial ownership registers”.
I sincerely hope that the Exchequer Secretary can provide similar assurances today that His Majesty’s Government are committed to working across Government to drive transparency in tax matters, and that it remains the case that they expect publicly accessible beneficial ownership registers to be implemented in the overseas territories.
Time is of the essence. We cannot allow secrecy to be used as a barrier to tax justice. That much I owe to my Bolton West constituents and we, as parliamentarians, owe to this country at large.
I hope the Minister will pledge that Britain will show leadership on this issue, that the Government will ensure that the deadlines are met quickly, and that trusts will be added to the register. I will add that Britain has shied away from participating in discussions on the UN tax convention. One way that we can play a leadership role on this issue is by choosing to be an active participant in that conversation and showing our leadership there too.
In conclusion, this is the right thing to do, it is in our interests to do it, and it is on Britain in particular to lead on it.