Economic Crime (Transparency and Enforcement) Bill — House of Lords, 2022-03-09
Topic: Macroeconomics
John Anderson (Crossbench, Unknown): My Lords, as a brief declaration I remind noble Lords that I introduced a debate on relations with Russia in January 2018, then Salisbury occurred. Shortly thereafter, I introduced a debate on relations with Ukraine. In the same spirit, I also state that in 1997, I travelled in a delegation made up of Europeans to explore mechanisms to have Ukraine admitted to the European Union. I regret that that initiative did not advance I welcome the Bill. However, while the catalyst for it has been the war in Ukraine, it is a much-needed staged process, having been on the drawing board since 2018, to usher in overdue fiscal discipline to the United Kingdom. Once again, it is an illustration of the type of principled country we should be Put into context, the Bill has three elements—tactical, strategic and political—which should be considered. First, I shall deal with the tactical. The current draft leaves the door open to companies that hold UK property claiming they have no beneficial owner. This is already a common problem with the company register. The number of companies registered using overseas addresses that have been dormant since conception surprises me. It was explained to me that overseas people can have an accountant register a company and open a bank account; once established, there is an exchange of shares to the actual and final beneficiary. Alternatively, the horses have bolted, and I am told that moveable assets have already taken flight to such destinations as Hong Kong or Nauru in the Pacific Some 1,892 property titles were purchased by overseas companies before January 1999. These would be exempt from having to declare their owners under the current drafting. I favour research being done retrospectively, asking questions where concerns arise. There are concerns that the legislation will allow individuals to hide ownership of companies through nominee agreements with professional services firms. Such agreements could allow the true owners to claim that the offshore companies are controlled by, for example, a nominated law firm which is named on the register, rather than the true owner The Chartered Institute of Taxation, which sent a note to a number of your Lordships, raised a central point, however: it believes there is a lack of clarity over what the Government are trying to achieve. The Government might want to respond specifically to that point. If the Government’s aim is, as suggested in some government statements, revealing the real identity of foreigners who own UK properties, the institute does not believe the Bill will achieve this. This is because the legislation, as currently drafted, does not require the disclosure of the ultimate beneficial owner of the property, but rather disclosure of the beneficial owner of the overseas entity which, in turn, owns the property. Its response is that if a separate nominee company is set up for the particular beneficial owner, then it thinks they would be caught. But if a non-UK law firm’s general nominee company is used and acts for hundreds of different clients, it will be difficult to see that any one of them exercises significant influence or control of the nominee company. So says the Chartered Institute of Taxation The combination of the imposition of fines for sanctions breaches and the expansion of the unexplained wealth order regime should be a central plank, however, as they will be effective in allowing the NCA and other prosecutors to disrupt criminal activity It is with some trepidation, in the presence of such fine judicial minds, that I venture to move on to my next point. Clause 49 amends Section 146 of the Policing and Crime Act 2017, introducing a strict liability offence for the breach of financial sanctions. Significantly, the individual or entity did not, therefore, have to know, or have reasonable cause to suspect, that they were breaching a financial sanction. A defence is to illustrate that appropriate policies are in place that illustrate compliance with the law, as is the case under the Bribery Act 2010 Secondly, on the strategic element, the Bill probably shall not decisively weaken the Russian regime. It is wrong to believe that kleptocracy measures equate to a massive blow to the Russian leadership. The relationship of many oligarchs with the Putin power structure is often ambiguous. If anything, the proposed measures will be vocally lauded by much of the Russian public. The power structure of the regime is based on the siloviki, translated literally as "the powerful ones", consisting of the intelligence apparatus, the higher echelons of the military structure and the deep-state bureaucracy at federal and local levels. They are the people who need to be followed: they are estimated to be around 1% of the population. These people—and it is they who will decide the future of a Putin presidency—are normally not allowed to travel abroad or own any assets overseas. They are the people the Government need to keep an eye on Other measures will affect Putin’s cost-benefit analysis on the war in Ukraine, with a notable measure being the announcement that Russia’s central bank would have its foreign reserves frozen. The banning of all transactions with the Russian central bank, with the United States establishing the list of specially designated nationals, which would prevent financial brokers and central security depositories dealing with it, will have considerable effect Thirdly, on the political element, while this Bill is introduced in the context of Russia’s attack on Ukraine, it is important to note that its impact will not be limited to Russian entities or persons but will affect all non-UK entities and individuals in Britain. The purpose of this Bill is not to disrupt legal arrangements in our haste to target certain Russians Any law is only as effective as its enforcement. The provisions in the new Bill will make little difference unless authorities are provided with additional resource to enforce them. The UK already has strong tools to target illicit funds, but law enforcement agencies have struggled to make full use of them because of resourcing issues The Bill will place additional administrative burdens on Companies House and the Land Registry. Will the Government confirm today that funding for the enforcement of new powers—including the enforcement of the register of overseas entities and the sanctions proposed in the Bill—will be put in place In conclusion, and more generally, I will focus on what has brought us together this evening. Consequences for sanctions are a small price to pay for the blockades, the bombing of population centres, the targeting of hospitals, the abuse and mining of humanitarian corridors, the destruction of essential infrastructure and food supply disruption The situation is sickening, and those responsible must be held to account. The building blocks and justifiable slow drumbeat of a European war, defending our values and Ukraine, are possibly just on the horizon. President Zelensky’s call to arms to Parliament may be a precursor to Britain’s accepting engagement. Ukraine’s war is our war.