Economic Crime: Law Enforcement — House of Commons, 2022-07-07
Topic: Law and Crime
Margaret Eve Hodge (Labour, Centre-left): I completely agree with those observations, which are so well made. The National Crime Agency has dropped its prosecutions by 35% in the past five years. The record of Her Majesty’s Revenue and Customs, which we do not often talk about, is equally awful. It sees its purpose entirely as simply getting tax revenues in. That is important, but it also has a duty to ensure that anybody who acts unlawfully in the way that they deal with the revenue authorities—or, more seriously, evade tax—is pursued. Yet it simply does not see that as part of its functions. Compare that to the Department for Work and Pensions, where anybody who has an allegation of fraudulently claiming benefit is pursued with vigour by the authorities in that agency. A similar attitude should be taken to what I consider the serious crime of deliberately avoiding tax and not paying into the common pot for the common good There are some egregious cases of schemes dreamt up with no purpose other than to avoid tax. One example was Working Wheels, which hit my desk when I was Chair of the Public Accounts Committee. In that instance, the person who wanted to avoid tax pretended that they were selling second-hand cars. That created money that then whirled through the system to create a debt, which they were able to claim against the tax liability from their legitimate earnings. Chris Moyles was persuaded that he could become a second-hand car dealer. Telling people that you are a second-hand car dealer is fraudulent. It is a fraud. And why that is not pursued with the same vigour as somebody who tries to lie about their circumstances to get a better benefit settlement is beyond belief. One of our recommendations is that HMRC should have an absolute statutory duty to pursue wrongdoing with the same vigour with which it pursues getting money into our coffers All the agencies are grossly underfunded. The Government trumpet the £100 million they will get from the economic crime levy, but that is peanuts when set alongside what the banks themselves spend on anti-money laundering and what other countries spend. Under Biden, the Americans have increased their expenditure on enforcement by more than 30%, because they define it as a security issue. What have we done here? We have had a real cut of 4.5% We have lots of ideas that would not require a call on taxpayers’ money. We could enable a percentage of the fines collected from successful actions to be used to fund further activity and staffing within the enforcement agency. We could follow the American example and say that costs incurred by the defendant, were we to lose cases, should in no way be met from the public purse. Why should people against whom we allege wrongdoing in relation to Government funding be allowed such a contribution? One thing we will come back to is the sanctioning of individuals. We have frozen the assets of a lot of Russian oligarchs, but we have no mechanism to seize those assets. A move from freezing to seizing—we are doing some work next week to look at the practical changes that would have to be brought in to enable that to happen—would release more resources not just for enforcement activity but, in this instance, to help with the reconstruction of Ukraine after the war Staffing must grow. For example, there are only 118 employees to deal with more than half a million suspicious activity reports a year that the agencies receive. By my arithmetic, that is 4,250 reports per official. In Germany, there are 500 reports per official. In Australia, there are 1,400 reports per official. They are all better staffed than we are here. This is so much an invest-to-save activity. It is a nonsense that the Government do not distribute their resources in a way that enables that to happen There is also the chaos of our existing regulatory infrastructure, which is fragmented. As the hon. Member for Thirsk and Malton said, lots of stuff falls through the holes. A lot of whistleblowers and people come to me with cases, and I refer a case to one agency, which tells me to refer it to another, and it then disappears and I never hear about it again We must take on board the failure of the professionals to self-regulate. There are too many bodies; 13 bodies supervise the accountancy sector. The hon. Member and I met representatives of one of those the other day. I think that they have suspended seven people in the past year. That is a nonsensical figure in relation to the activity that is taking place—the collusion and facilitation of wrongdoing—so we have to sort out the regulation of the enablers and the regulator. There is an overarching regulator, which regulates all the regulators. That should be sorted out and personal responsibility must be taken I will make two other points. The most egregious case that I have come across—this is a comment on all our regulatory systems and our failure to enforce—relates to Lebanon, where there was a tragic explosion in a warehouse that had fertiliser, which was supposed to go to Mozambique. That resulted in hundreds of deaths, thousands of injuries and massive damage to property. A few weeks after that occurred, I got a phone call from a Reuters journalist with whom I regularly work. He told me that the company that owned the fertiliser was British-registered. I gave my usual comment about "hopeless, lax regulation" and did not think twice about it. About three weeks after that, I got a number of phone calls from people in Lebanon, the Lebanese Bar Association and others. It emerged that the company had been set up here as a UK-based company by a woman in Cyprus who was in fact the company service provider. She put herself down as the beneficial owner, but she obviously was not. She told HMRC that it was a dormant company, but it obviously was not because it was dealing in fertiliser. It then emerged that the real owners were Russian-Syrians and that the fertiliser was going nowhere near Mozambique, but to Assad to be used in barrel bombs to kill his people. That is a shocking story, but it demonstrates how our regulatory infrastructure and the failure of our enforcement agencies damages the lives of people not just here at home but abroad I have a final story, which, again, causes me great concern. After the Kazakhstan tragedy—a demonstration against the kleptocrats who run the regime where Russian soldiers were used to fire at the crowds and people were killed—two British academics came to me with their research, which demonstrated that there were 30 individuals in Kazakhstan who were involved in money laundering and human rights abuses and whom we should sanction. I used the privilege of the House to mention the 30 individuals in an Adjournment debate and then sent the list to the Foreign Office. A few days after that, I got a letter from one of the people I had named, asserting his innocence. Obviously, he wanted me to respond outside the House, so I acknowledged the letter and did nothing more. I then got a second letter with a phone call, asking whether we had received the letter. My assistant said that we had. I then got a letter from the desk at the Foreign Office asking me whether we had received the letter, whether we were responding and what we were going to do about it. I asked the Foreign Office why it was pursuing this and on whose behalf it was working. It said that it thought that it was important to facilitate relations between kleptocrats and British politicians That is shocking and leads me to think: are the Government really serious about bearing down on all the economic crime and corruption that week after week, year after year, we talk about in the House? If they are, they must pursue consistently and vigorously every instance of it, and not just the Russian kleptocrats—evil though they are—but kleptocrats elsewhere who are stealing from and killing their people and creating instability in the world.