That this House has considered the Second Report of the Foreign Affairs Committee, The cost of complacency: illicit finance and the war in Ukraine, HC 168, and the Government response, HC 688.
It is a pleasure to serve under your chairmanship, Mr Efford. In speaking to the report today, I will outline a series of points made by the Committee in this report and in its 2018 “Moscow’s Gold” report. I will also talk about SLAPPs—strategic lawsuits against public participation —and the case for more action on lawfare.
Our report finds that the UK sanctions response to the war, while ambitious, was initially limited by a lack of resourcing, and the new beneficial owners register still contains loopholes that put some individuals under the threshold for having to declare beneficial ownership. That is against the public interest. The report, which I strongly endorse—I encourage folks to read it should they have time—proposes a number of reforms, including new transatlantic sanctions partnerships, so that London and New York can work more closely together, and the appropriate resourcing of enforcement agencies. Both reports, and the Intelligence and Security Committee, note the lack of funding for the National Crime Agency and other serious crime organisations in the country and that some of them are threatened by the lawyers of oligarchs—potential bad actors. We believe that to be very strongly against our national interest.
In my opinion, and I think also in the opinion of the Committee and many people engaged with this issue, including the right hon. Member for Barking (Dame Margaret Hodge) and other hon. Members, the UK and its offshore territories have for too long turned a blind eye to the transfer and concealment of illicit or semi-licit—if that is a word—wealth, and have granted a number of high-risk individuals political and judicial protections that they do not deserve.
We have built a significant industry catering to the needs of some really quite unsavoury characters. To date, vast sums of both illicit and licit finance have been recycled through the UK’s bespoke package of the financial services industry, legal services, public relations services, private eyes, estate agents, luxury assets, concierge services, visa and citizenship routes and the private education system.
Transparency International and various other bodies have estimated that the amount of wealth, criminal or otherwise, that has flowed from the former Soviet Union via corrupt German and Scandinavian banks, via UK shell companies, to tax havens—sadly, very often the UK—is probably between £500 billion and £1 trillion. That is one of the greatest flows, probably the greatest flow, of illicit wealth in the history of humanity. The fact that we in London are a core part of that flow is frankly pretty shameful.
I was discussing the issue with the great Bill Browder the other day. One of the problems is that this is not just Colombian drug cartel money; this is money that has come from deeply corrupt, but potentially legal deals. For example, an executive at one of the big state gas or oil firms at some points in the 1990s could, if they had the connections, buy an oilfield or a gasfield equivalent to the North sea, for $100,000.
By borrowing that money off organised crime or other areas, that person would effectively become a billionaire overnight, by the sometimes legal, sometimes not, but deeply unethical transfer of state assets—the privatisation of state assets using organised crime as muscle and bureaucratic connections to facilitate it. That is what has happened in the former Soviet Union—in not only Russia, but also Ukraine back in the day, especially under Yanukovych and others, and Kazakhstan. Clearly, that has enriched a small number of people in the United Kingdom, but I do not believe it has been good for the United Kingdom as a whole. It is not good for our reputation and for London as a service industry—although it is undoubtedly true that it has very considerably enriched a small number of people.
In 2018, the Foreign Affairs Committee published an excellent report under the previous Chairman, my right hon. Friend the Member for Tonbridge and Malling (Tom Tugendhat), called “Moscow’s Gold: Russian Corruption in the UK”. That report detailed that, despite the Government’s crackdown on Russian activity in the wake of the Skripal poisoning, back before the Ukraine war, business simply continued as usual for most of Putin’s allies in the United Kingdom.
One of the depressing things for me is that I was saying this before I was an MP, so nobody was listening, and have said it as an MP—and still nobody really listened. In 2007, back in the Munich conference speech, Putin declared a new cold war against the west. We have studiously done our best to turn a blind eye because it was too difficult for western states to get their heads around the fact that, in President Putin, we had an aggressive rival who did not accept the international system, would openly challenge it and would fight wars on his borders to secure what he thought were his vital interests—we can debate that or not. After his speech the invasion of Georgia happened, and then in 2014 there was the invasion of Ukraine through proxy groups that confused some people, but should not have done.
Before, during and after those events we have had a wave of assassinations, imprisonments and arrests. I met with Alexei Navalny’s chief of staff. Navalny now may be the most high profile political prisoner in the world; he is in a detention camp in permanent solitary confinement. That is the price for challenging President Putin. Last night, I was chatting to Marina Litvinenko, the wonderful wife of Alexander Litvinenko, who was murdered in Piccadilly back in 2006—he died of radiation poisoning. The problem is that we repeatedly turned a blind eye. Our love of Russian money flowing through the financial and legal systems clouded our moral judgment. That has enabled Putin’s regime. We need to learn from those errors and mistakes.
What is the scale of the problem today? From 2008 to 2015, there were no state checks on tier 1 golden visas. At least eight individuals now sanctioned, or under investigation, are thought to have obtained citizenship through those means. They are citizens like you or me, Mr Efford. How can that be right or in the national interest? The National Crime Agency estimates that money laundering costs the UK £100 billion annually. Serious or organised crime is estimated to have a price tag of £37 billion.
Russians accused of corruption or having close links to the Putin regime have bought at least £1.5 billion worth of property in Great Britain according to Transparency International—that is a vast amount of property. One of the reasons why so many people are struggling with their mortgages is that there are vastly inflated prices for property in London and the south-east. That is in part because it is seen as an easy way to launder money: to pay over the odds for property and then to sell. Even if it is then sold at a loss of 10% or 20%, these people have laundered—legalised—a vast amount of corrupt and criminal, or semi-corrupt and semi-criminal, money.
That £1.5 billion is part of nearly £5.5 billion worth of property in the UK that has been purchased through offshore shell companies. That problem happened under new Labour and the coalition with the Liberal Democrats. What on earth is this country doing allowing offshore shell companies to be vehicles to buy property? It is just wrong. It is wrong that so many people close to Putin own so much property in this country. It is wrong that so many offshore vehicles have been used. What on earth are we doing allowing that to happen, and what on earth are we going to do to stop it? I would love the Minister to reassure us, rather than just saying that we are concerned about it.
The hon. Gentleman is making an excellent speech and I congratulate him. I want to be clear that this is not just an issue about Russia. In my constituency and elsewhere, the red princes and princesses of communist China are buying up property and inflating prices. We should not just focus on Russia when we talk about illicit finance.
I thank the hon. Member for his very sensible point. There is absolutely a wider issue. As well as shell companies, there are vast developments on the south side of the river, around the US embassy, where entire blocks are being bought up as investment options rather than being used to provide housing for Londoners. That is shocking, especially because we have a housing shortage. There is a wider argument on reform of our housing in the UK for giving options first to allow ordinary folks to be buying it, rather than—as much as we love them—Hong Kong, Chinese or Indonesian investors to block buy endless numbers of flat and rent them out or never have them occupied.
I was going to talk a bit about the Azerbaijani laundromat. Between 2012 and 2014, about £3 billion went through UK shell companies as part of the so-called Azerbaijani laundromat; funding was dispersed from Azerbaijani officials to various outlets in this country. As well as that, London’s open economic environment has been a key centre for raising finance for companies or individuals over whom there are now very considerable question marks.
In 2017, En+ was floated on the London stock exchange, raising £1.5 billion from international investors in an initial public offering. We now know—well, we knew at the time—that En+ was very closely associated with Oleg Deripaska, despite his ownership of companies linked to supplying Russian military materials and sanctioned Russian shareholders. He himself is now sanctioned, I believe. En+ and Oleg Deripaska were part of a considerable lobbying effort by a former Member of the House of Lords—a former Conservative Minister, as much as it shames me to say it—to separate Deripaska from En+ in frankly pretty questionable circumstances.
Shortly after the Skripal poisoning, Russia continued to sell Russian sovereign debt in London, facilitated by the sanctioned Russian bank VTB. While our financial services provide anonymity to those who wish to invest, many UK legal firms have sought to further silence those who question the origin of investments.
Mr Jonathan Djanogly (Huntingdon) (Con)
My hon. Friend is making a very powerful case. I agree with everything he has to say. On sanctions, he will know, not least from the talk he did yesterday afternoon with a group of Ukrainians, that there is a big call in Ukraine at the moment to turn the freezing sanctions into confiscation sanctions, and to use the money we are holding, which would presumably otherwise be given back to the oligarchs, for the reconstruction of Ukraine. Would my hon. Friend comment on that?
I would love to; we were debating that yesterday at the Henry Jackson Society with Bill Browder and a number of other people. My hon. Friend is welcome to correct me on this, but I think Canada has prepared an Act to enable that frozen money effectively to be given to the Ukrainian authorities or set up in some kind of international fund to help reconstruction in Ukraine.
Mr Djanogly
The Act is quite straightforward. By way of clarification, it takes the existing sanctions legislation, including the Canadian Magnitsky law, and latches on to that the ability to change freezing orders into confiscation orders. It is a relatively simple way of going about what could be a very complicated process.
Indeed. If it is effective, I look forward to working with my hon. Friend, and potentially other Members, to see how we can bring in such a law in the UK, so that we move from freezing money to taking money and using it for a more moral purpose.
The hon. Member is making a powerful speech. I am pleased to see this report and the recommendations in it. I have been talking to Ukrainian MPs since the visit that he and I made to Kyiv. One of the biggest issues they have raised is about not just having sanctions but having a sanctions regime that ratchets up internationally. The sanctions partnership is absolutely essential.
Just now in the House, the Prime Minister was congratulating the work done already on sanctions, but we cannot stop there. We need to move on. The ramping up of sanctions and the seizing—not just freezing—of assets are absolutely being called for by Ukrainian politicians and people.
To put into context the sums the hon. Gentleman has been referring to, right now there is a $38 billion budget gap for the running of Ukraine and billions also need to be paid back in reparations. This solution is much needed and would restore the reputation of London as a financial centre, not a money laundering centre.
I congratulate the hon. Gentleman on bringing forward this debate; I will speak for a wee minute in support of him. My understanding is that in earlier questions in the Chamber, the Government indicated that they were prepared to look at—I am not sure they committed themselves entirely—not just seizing the goods belonging to Russian oligarchs, but using that money for a purpose. The purpose we all asked for in the Chamber that day was for the money to be given to Ukraine. Would there not be some poetic justice if Russian money was used to directly help the Ukrainians?
The hon. Gentleman makes a very good point. One of the things we were discussing yesterday was quite how that could happen. The initiative is being led by Bill Browder, who has championed the cause of Sergei Magnitsky ever since he was tortured and murdered 13 years ago yesterday. Ten years ago—a decade ago this month—the late, great John McCain brought in the first Magnitsky laws in the United States, and everyone else across the globe, or at least 35 nations, has followed suit.
The person dealing with this issue in Ukraine is a very powerful Ukrainian politician called Kira Rudik, who was also with us yesterday. She is in London today. She is trying to get a global coalition to do just what we have been discussing. I hope that we will soon have a draft law here that we can send to Government, debate and put down in some form to say, “These are the next steps.”
I pay tribute to Kyle Parker, too, who was also in the discussions we had yesterday. He is great man. A senior congressional staffer—these people have much more power in the US than they tend to in the UK—he wrote the Magnitsky Act and worked with Congressmen and Senators to get it through both Houses in the US system. We should be doing the same here.
Strategic lawsuits against public participation, or SLAPPs—it is a bit of a mouthful—are effectively the abuse of law by the rich to intimidate journalists, campaigners and others. SLAPPs are absolutely part and parcel of this system. Imagine the great caravan of wealth that flowed from the former Soviet Union to the tax havens of the Caribbean. It needed facilitators, which were the financial services companies, some of which are corrupt German and Scandinavian banks. I think their names are out there: Deutsche Bank, in Estonia, I think, and one or two others.
The system also needed attack dogs to protect the flow of that vast caravan of sometimes criminal wealth, and those were the legal firms. Those lawyers effectively built a business model of legalised intimidation whereby journalists and campaigners can be threatened. If someone in the Soviet Union, or Russia post the collapse of the Soviet Union, wanted to stop a journalist from trying to investigate them, they would ultimately just kill them. In the UK and the west, that is more difficult—not impossible, but it is more difficult to kill people and get away with it.
It is a pleasure to rise with you in the Chair, Mr Efford. I thank the Liaison Committee for providing time for the debate, and congratulate the hon. Member for Isle of Wight (Bob Seely) on his excellent opening speech. I also thank the Foreign Affairs Committee Clerks for notes in advance of the debate, and the UK Anti-Corruption Coalition for its excellent briefing. I speak as a member of the Foreign Affairs Committee, and also as someone who is just glad to be reunited with the hon. Member for Strangford (Jim Shannon)—I knew he would be here today.
The FAC report, “The cost of complacency: illicit finance and the war in Ukraine”, in October made many recommendations, some of which have been touched on. Those that have not been mentioned include the need to implement beneficial ownership rules and to reform Companies House, including by giving the registrar powers to verify information and to remove corporate entities for wrongdoing and provide robust identity verification mechanisms. It also recommends making enforcement more effective by reforming unexplained wealth orders, or by at least assessing why they have not been as effective as the Government originally intended. The report also suggests making better use of the exchange of notes process in relation to companies incorporated overseas, reforming corporate criminal liability laws and whistleblower legislation, professionalising the sanctions unit of the Foreign, Commonwealth and Development Office, and making more concerted efforts to seize assets that have been frozen by sanctions.
The Government’s response is, at best, tepid. They say that they are aware of the security threat of illicit finance and suggest that the war in Ukraine is the driving political force for action, but that leaves many people who are focused on this issue concerned that no effort was made previously and wondering why it has taken a war in Europe to drive reform and action in this area, when it has been clear to so many that illicit finance has been entering the UK at colossal levels for some time.
It is a pleasure to serve under your chairmanship, Mr Efford, and to speak about the Foreign Affairs Committee report on illicit finance and the war in Ukraine. I am grateful to my hon. Friend the Member for Isle of Wight (Bob Seely) for introducing this important debate. It is a pleasure to follow the hon. Member for Bermondsey and Old Southwark (Neil Coyle).
Illicit finance is not new or geographically isolated, but Putin’s war on Ukraine has shone a public light on the massive scale of economic crime. We know that Russian money is being laundered through the UK, and in the view of the report it is more likely than not being used to fund the war in Ukraine. We cannot and must not allow Britain’s financial intuitions to continue to be used to house or move dirty money.
The Foreign Affairs Committee report sets out in stark terms that there is a cost of complacency. There is a cost to our global financial standing and our national security, and a cost in lives, when laundered money is used to pay for war. Continuing this complacency and doing nothing is not an option.
Valuing, listening to and protecting those who speak out to uncover corruption is part of the answer. I particularly welcome the Committee’s recommendation that:
“The FCDO should…push for a Whistleblowing Bill to offer protection to those who speak out against, or uncover, economic crimes and other wrongdoing.”
It is often journalists who investigate and uncover critical evidence of corruption. They frequently rely on informed insiders—whistleblowers—who have usually been frustrated by failed attempts to raise the alarm internally. I welcome the Government’s commitment to stop the use of SLAPPs, as has been set out so well by the two previous speakers. It demonstrates the Government’s commitment to upholding the fundamental democratic values of free speech and a free press, ending the abuse of the UK legal system and defending investigations in the public interest.
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People are not physically destroyed in this country; instead, the legal system is used to financially destroy them. That has sadly happened to a number of people, including Charlotte Leslie, a former colleague of ours, and the wonderful journalist Catherine Belton. Various campaign groups have also been targeted. Most recently, Chatham House has been a target. Sadly, I understand it has given in to threats and is having to rewrite some of its reports.
This business model was set up to service the needs of the aggressive rich and powerful, including organised criminals and oligarchs, who did not want their affairs investigated. The three methods were the abuse of libel law, the abuse of privacy law—the right to privacy, meaning no one else can look into someone’s affairs—and data protection. The aim in all the cases was to mount up such staggering costs that even a technical victory would destroy the opponent, render them bankrupt or destroy their reputation. If they were a journalist, the aim was to make a newspaper or publishing house invest hundreds of thousands of pounds in defending them against the vast sums that oligarchs were willing to throw at them to make their lives difficult.
A slightly different case is that of the Maltese corruption journalist Daphne Caruana Galizia. It was a great privilege to recently meet her son, who works in the UK media. At the time she was murdered, she was facing 47 libel lawsuits, almost all of which were from UK law firms. That is staggering: before she was physically destroyed, she was being psychologically and financially destroyed.
I have discussed Catherine Belton and the costs of SLAPPs. My final point is that it is extraordinary that, as Spotlight on Corruption and Global Integrity have found, law firms in the UK currently face almost zero risk of criminal prosecution for money laundering, and there is a very limited prospect of their facing any meaningful fines. I was told privately that a number of UK law firms support that criminal money-laundering activity. Yet almost nothing is done, and almost nothing is investigated.
What are the solutions? First, close the loopholes in Companies House. I know that the Government have made strides on that, but there is more to be done. The right hon. Member for Barking is working with a number of Members on both sides of the House to tighten up the regulations. If the Government could be sympathetic, we would be grateful. Secondly, the UK’s economic crime enforcement system remains under-resourced. It needs to be better resourced, so that we can fight the bad guys and girls better.
Thirdly, we need to better supervise the so-called professional enablers, so that they cannot effectively operate outside money laundering regulations. Fourthly, as we tighten up regulations here, we need to expand our UK regulations to British overseas territories. It is absolute nonsense that criminal and organised crime and tax havens benefit people in the Caribbean.
We very much welcome the Ministry of Justice’s response to the call for evidence on SLAPPs and its proposals for legislative reform. The right hon. Member for Birmingham, Hodge Hill (Liam Byrne) and I—and perhaps others—will present a Bill on SLAPPs, so that a Bill is ready when the Government want to introduce one; we love saving Government time, and increasing the productivity of Government and politicians. We will provide a model for SLAPPs law. It will ensure that SLAPPs are disposed of more quickly in court, that the costs of being attacked by SLAPPs are kept to a minimum, and that the costs for SLAPP filers are higher, which will potentially deter further SLAPPs. There are other measures, but I will not go into them now.
In summary, as a result of the UK’s economic permissiveness, we have for too long become a safe haven for kleptocrats. That has to end. The situation is getting better, but it is a shame that it took a major war in eastern Europe for things to change dramatically. We take pride in the openness and transparency of speech, and in the UK’s open economic system. However, that freedom of speech and open economic system must be better protected. A laissez-faire, criminalised free-for-all is not an open economic system; it is a corruption of that system. We need to clamp down on the sources of illicit finance coming through the UK. I urge the Government to continue reforming Companies House, to resource our enforcement bodies, and to read and take in the many excellent recommendations in the Foreign Affairs Committee’s report.
The Government’s response is largely being taken forward in the Economic Crime and Corporate Transparency Bill, but there is broad concern that it does not go far enough. For example, the Government have committed to reform of Companies House, but the UK Anti-Corruption Coalition says that they need to go much further to prevent UK-registered companies from providing a veneer of legitimacy for secretive offshore networks, by ensuring transparency over shareholders, partners and members. The Government have acknowledged the risk associated with opaque corporate ownership, but the Bill in its current form does not make the changes that would prohibit private limited companies, limited liability partnerships, limited partnerships or Scottish limited partnerships from having opaque corporate partners, and it must go further.
The UK Anti-Corruption Coalition also asked the Government to improve the register’s accuracy by verifying and publishing shareholder information. The information it holds on shareholders needs to be transparent and accurate, including names, company numbers and addresses—all the criteria that we assume is held but is not. The Bill also needs to give Companies House the power to review verification documents provided by third-party agents—usually trust and company service providers—because without that level of work, Companies House’s data will simply not be robust enough.
The Government have said that they will undertake a review of whistleblower protections and are assessing time and scope. It would be really good to have an update on that, because there is a lot of concern that, while journalists may be covered, they are not the only people who warrant protection. Journalists rely on whistleblowers inside companies and organisations, and they should be the focus of further and greater protection. I hope, therefore, that the Minister will tell us whether the Government are considering introducing a whistle- blowing Bill to protect those who seek to speak out against or uncover economic crimes and wrongdoing. That is not covered by current Government plans, so I hope the Government will follow through on their commitment to review the UK’s whistleblowing framework and present the timeline and scope of that review.
The Government say that they accept the Committee’s recommendation to establish a professional and permanent sanctions group within the FCDO. However, the global anti-corruption sanctions regime, which the UK introduced its in April 2021, has been used significantly fewer times than the 30 designations a year that the Government originally envisaged. Why has the performance been so much worse than expected? What steps are being taken to improve it, when will they be implemented, and when will they be put to use?
In response to the Committee’s recommendation to grant additional funding for law enforcement, all the Government have offered is money to fund the reform of Companies House, and they have said that the Home Office will set out an annual report to Parliament on unexplained wealth orders. Frankly, that is pathetic, and today’s statement means that the uplift in the Serious Fraud Office’s core resources budget is simply not good enough to match the level of crime in this country. The UK spends £850 million a year on funding core national level economic crime enforcement bodies, but economic crime costs the UK £290 billion a year. The National Crime Agency has suffered a 4.2% decrease in its core budget over the past five years, yet fraud has risen dramatically. It accounts for 40% of all recorded crime, yet fraud prosecutions have fallen from 42,000 in 2011 to 13,500 in 2021—a 67% decrease in a decade. The Government are simply lagging far behind the scale of the problem. The NCA needs resourcing to the scale required, and the Minister needs to raise the Government’s game.
The Committee has put forward additional asks. Given the speed with which the two economic crime Bills were put before the House, does the Minister anticipate additional legislation to rectify any gaps? Will the Government be reviewing the implementation of the two Acts? When does the Minister expect to see measurable outcomes from changes to resourcing the fight against economic crime? What outcomes is he prioritising? How does the new sustainable funding model support long-term planning to support those goals? How does public-private information sharing feed into those enforcement aims?
It would be good to hear from the Minister what progress is being made on suspicious activity reports reform. The Government have mentioned that they are interested in that, but we have not seen action on it yet. It would also be good to hear from the Minister whether the Government’s understanding of the threat of economic crime has changed. Do they see illicit finance as primarily a criminal issue or a security threat?
Golden visas—the tier 1 visa scheme—allowed a recipient to stay in the UK for three years in exchange for a minimum £1 million investment, but they became a vehicle for much laundering of corrupt money in the UK because of a lack of checks. That scheme was shut in February in response to the full-scale invasion—the second invasion—of Ukraine, but a review of the scheme, commissioned by the Home Office in March 2018, has still not been published. The Committee called for the review to be published without delay. The Government have said that they will publish it “in the near future”. I really hope that the Minister can tell us what is happening. If the Government are at all serious on this issue, they will be able to tell us today when that report will be published.
The Government did not even bother to respond to the Committee’s recommendation that they review visas issued since 2015. Have the Government concluded that none of the outstanding visa holders pose a security threat? Especially given that the Government tell us that they have changed their policy towards both Russia and China in recent weeks, will the Government be reviewing that decision? The Government have not responded to whether they plan to review those granted visas who had gone on to gain residency or citizenship. The Home Office should set out how it will deal with people with corrupt or criminal sources of wealth who have already received indefinite leave to remain or subsequent citizenship through the golden visa route. Those visas may still need to be withdrawn and other measures taken.
It would be good to hear what the Government plan to do, especially in the face of those of us who deal with the Home Office week in, week out, on behalf of constituents desperate to get family members into this country to work here, to contribute here and to care for other family members who are sick here. I have constituents who have had family members pass away while waiting for visa application decisions. I recently saw a constituent who has waited more than a decade for an asylum application to be decided—while corrupt millionaires have been able to gain access under a Government-sponsored programme, which is, frankly, simply despicable.
The UK Anti-Corruption Coalition says that 6,312 tier 1 visas—more than half of all golden visas—are being reviewed for possible national security risks. That is the scale of the problem. The Government opened the door to this. By April 2022, 10 Russian nationals subject to sanctions had previously been granted golden visas. That is what this Government have permitted in this country. In the light of today’s news from the director general of MI5 about potential attacks in this country from Iranian agents, could the Minister tell us whether any of these golden visas were issued to Iranian nationals?
How many people got this red-carpet treatment when they should have had the rug pulled from under their feet? And how are the Government now quantifying the level of damage that these visas, and their approach, have caused? The message sent across the globe has been that London and the UK have been open to blood- soaked money from wherever it comes. Frankly, secret meetings with agents of other countries—this goes right to the top of Government under the right hon. Member for Uxbridge and South Ruislip (Boris Johnson)— have simply not been documented. This is a Government who have undermined national security on so many levels and damaged the UK.
The Government have made some reforms to tier 1 visas since 2015, but there remain glaring loopholes, including one that allowed 100 golden visa applicants to borrow money from a firm owned by Russian nationals in order to make investments that ultimately went back to Russia. How are the Government penalising those involved, and how are they seeking to capture the money that should have been here? Can the Minister give any further clarity on timing for the review of the whistleblower legislation?
I have three final points, which are much wider. The first is on corporate criminal liability. The Committee said that the Foreign Office should work across Government to encourage reform of outdated and ineffective corporate criminal liability laws that mean that it is difficult to hold large companies to account for economic crime. In response, all the Government said was that they had commissioned a report from the Law Commission and were considering further action. The initial call for evidence by the Government concluded in March 2017—five and a half years ago. The Government then reported on this in November two years ago. And the Law Commission’s options paper was published in June 2022. I hope the Minister can give us today an update on progress, because frankly it looks like the Government are not even dragging their feet; they have not even got out of bed.
I have already touched on unexplained wealth orders. Since the passage of the emergency legislation this year, only one unexplained wealth order has been applied for by law enforcement. In total, only nine UWOs relating to four cases have been obtained by the NCA since the tool was introduced in January 2018, and just one unsuccessful application for a UWO left the NCA facing £1.5 million in legal costs. The hon. Member for Isle of Wight touched on the cost imbalance and the resourcing issue. The problem is much wider, because aid cuts have led to a £3.6 million budget cut for law enforcement bodies tackling illicit finance and doing international corruption work, and have resulted in the target for the use of UWOs based on aid-funded investigations being reduced to zero. I ask the Government to increase their ambition. Through the Government, law enforcement should be able to obtain UWOs, and they should have a boost in resources to fund the expert staff and technical capabilities that they require.
The UK Anti-Corruption Coalition suggests hypothecation to boost resources and capability. It suggests that funds generated through law enforcement activities be reinvested in law enforcement budgets to fund things such as the state-of-the-art IT infrastructure and data analysis capabilities required to do the job. Law enforcement bodies are hamstrung at the moment and are desperate for resources and capability.
Between 2016 and 2021, law enforcement bodies responsible for fighting economic crime in the UK brought in £3.9 billion in confiscation and forfeiture orders and fines. If that money had been reinvested in the agencies on top of their core budgets, an additional £748 million a year would have been provided to help tackle the problem. That is nearly double the resources that the Government currently provide, so I hope the Minister will respond to the UK Anti-Corruption Coalition’s recommendation.
SLAPPs allow oligarchs to supress evidence of their corruption and protect their reputation through vexatious litigation, unfortunately and very sadly through British law firms, against those seeking to tell truth to power, including journalists and publishers. The pressure of excessive costs coupled with the personal strain of legal threats hampers the ability of investigative journalists, academics and campaigners to shine a light on evidence of illicit wealth. Between March and May, the Government called for evidence on SLAPPs, and concluded in their report that they intend to pursue legislative reform at the earliest opportunity. That requires significant change, so will the Minister outline how the Government will take forward that well overdue legislation? Will they introduce early dismissal so that courts can dismiss any case that is in the public interest, and cost protection for defendants? I hope the Minister will tell us when the Government will legislate and, more importantly, when those powers will be in place to protect those who seek to shine a light on illicit finance in the UK, which is a growing problem.
As the report points out, journalists are not the only truth tellers who need protection. As chair of the all-party parliamentary group for whistleblowing, I am campaigning for a whistleblowing Bill, and in the previous parliamentary Session I promoted a private Member’s Bill to create an office of the whistleblower. I note that in their response to the Committee’s report, the Government point to existing legislation designed to protect whistleblowers—the Public Interest Disclosure Act 1998, known as PIDA—stating that it provides
“protection to those who speak up in the public interest.”
However, PIDA, the UK’s current whistleblowing legislation, applies only to some employees, not all workers or anyone else who may reasonably learn of impropriety or criminal activity, such as trustees, volunteers, family members or customers, or others in the supply chain. It is limited. Moreover, a person who speaks out receives only limited protection from the harm or detriment that often arises when they are bullied or harassed out of their work as a result of their whistleblowing. That is no comfort for people considering speaking out where illicit finance, rogue regimes and criminal gangs are involved—the risks are simply too high.
I firmly believe that the way to uncover economic crime and illicit finance is to encourage people to report wrongdoing. Research shows that more than 40% of fraud, for instance, is detected through whistleblowers, but for people to come forward, they must feel safe. Although I was glad that the Government reiterated their commitment to reviewing the whistleblowing frame- work, I am disappointed that the scope and timing remain under consideration. The Committee report expressed a concern that the Government lack
“sufficient resources and expertise to ensure the effective implementation and enforcement of these sanctions”.
If resources to do that are lacking, they will also be lacking to collect and investigate those whistleblowing tips. That is yet another reason for including whistleblower provisions in our fight against illicit finance.
For those reasons, I am calling for a unified office that will set standards for whistleblowing to which every organisation, industry and Government will comply. It will ensure that they put in place proper mechanisms to receive, examine and escalate reports where appropriate and work with law enforcement where there is evidence of wrongdoing. The Committee recognises the need for a whistleblowing Bill. I am being helpful and urging the Minister and the Government, in the light of this important report, to get behind my whistleblowing Bill, which I promoted in the previous Session, but which fell due to time. It is ready and waiting to be taken up, and I would love the Government to bring it forward as part of their legislative agenda.