Economic Crime (Transparency and Enforcement) Bill — House of Lords, 2022-03-09
Topic: Law and Crime
John Eatwell (Non-Affiliated, Unknown): My Lords, a considered assessment of this Bill requires some reflection as to why measures to thwart economic crime have failed so dismally up to now. At the centre of the Bill stands the registrar, embodied in Companies House. It is Companies House that is the prime source of the failings that have made London the money-laundering capital of the world. One of the political pantomimes of the last 10 years has been the spectacle of Conservative Prime Ministers referring regularly to the register maintained by Companies House as a gold standard, a beacon of openness, an example to the rest of the world. In reality, the manner in which the register is constructed has been and remains the key element in the inability of this country to stem the inflow of dirty money and the total failure to slow the growth of economic crime As has been known for years, the scandal derives from the fact that Companies House does not verify the beneficial ownership of the companies registered. Companies House is a library in which any shameful book can be deposited, as the noble and learned Lord, Lord Garnier, has just argued. That so many shameful books have been deposited is a matter of record. By the way, Companies House has led one prosecution in 150 years. That was of a person who deliberately registered a false company in the name of government Ministers to show how hopeless Companies House was at verifying the data. It then prosecuted this man when he owned up to what he had done Today, the Companies House register includes about 4.5 million UK businesses, but it operates in much the same way as it did 150 years ago, meaning that criminals have been able to set up seemingly legitimate shell companies without even the most basic identity checks. A study by Professor Jason Sharman of Cambridge University found that it was impossible to establish a shell company in the Cayman Islands, the Bahamas or Jersey, but easy to do it in London. A further study by Transparency International, in November 2020, reported that British shell companies were implicated in nearly £80 billion worth of money-laundering scandals. On top of that, the anti-corruption group Global Witness reported in 2019 that more than 336,000 companies on the register did not disclose their beneficial owner. It also found that just over 2,000 company owners were actually directors who had been disqualified, yet they were accepted by Companies House. It is this same organisation that we now ask to do more: to manage the new register of beneficial ownership of real property envisaged in the Bill In assessing whether Companies House can actually do the job, it is important to dismiss the comfortable fantasy that an open register provides sufficient scrutiny to detect wrongdoing. Protection against even moderately sophisticated financial crooks is provided only by verification and regular reverification of beneficial ownership by skilled forensic accountants. This fact was acknowledged by the noble Lord, Lord Callanan, in his foreword to the September 2020 White Paper Corporate Transparency and Register Reform—note that this was a document published two years ago The section on verification is to be found in Clause 16. Clause 16(1) refers to verification of information before an application is made by the overseas entity—that is, before the registrar is even aware of the application. I am sure that noble Lords have noticed that the wording of Clauses 4(1)(c), 7(1)(d) and 9(1)(e) indicates that the task of verification is assigned to the overseas entity. The Government may take some comfort from that, but I assure them that I do not. Clause 16(2) refers to "the person by whom the information must be verified", and "evidence or other information to be delivered to the registrar" Again, this suggests verification by a person other than the registrar, Companies House, to which the information is to be delivered, all ready, tied up with a fancy ribbon and a label reading "Nothing to see here." Nowhere in the Bill can I find a statutory obligation for the registrar, Companies House, to verify the data submitted to it. The Institute for Government has noticed the same omission, saying that "without strengthening the organisation—expanding its powers of inquiry and resources to investigate and remove false information, and requiring mandatory identity checks on those incorporating companies, on company directors and on those who ultimately control companies—the new register could have little impact." There is also a clear suspicion that the Government are not willing to provide the resources the job requires, as the noble and learned Lord, Lord Garnier, pointed out earlier. To quote the Institute for Government again: "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." In her introduction, the Minister informed the House that a new economic crime Bill, including reform of Companies House, will be brought forward in the next Session. This has been promised time and again by this Government: it is always in the next Session—and the next Session never comes. On verification, we must act now. Making the verification of data by the registrar a statutory requirement is essential if the Bill is to be a meaningful measure and not just another PR exercise. Without a statutory requirement for verification by the registrar, and without the resources to do the job, this House will be participating in a sham. We must ensure that this is not the case.