Criminal Finances Bill
Public Bill Committee, 15 November 2016.
Examination of Witnesses
Victoria Atkins (Conservative, Louth and Horncastle)
I used to practise as a criminal barrister and prosecute for many of the agencies that would use these powers.
Byron Davies (Conservative, Gower)
I am a former Metropolitan police officer and member of the National Crime Squad.
Rupa Huq (Labour, Ealing Central and Acton)
Thanks very much for coming in today. I have an easy question first. Because you all enforce this every day, what are the current difficulties with the legislation that we have in recovering assets from individuals who are suspected of involvement in criminal activity overseasQ ?
Rupa Huq (Labour, Ealing Central and Acton)
Q In relation to what you said about portable wealth, do you think the £100,000 limit is about right, or can people convert money into things worth £95,000 by buying paintings up to that value?
Rupa Huq (Labour, Ealing Central and Acton)
Q Is £100,000 a good figure or is it an arbitrary figure plucked from the air?
Rupa Huq (Labour, Ealing Central and Acton)
Q The Public Accounts Committee did a report on confiscation orders. It said that there was a tension between whether the point is to disrupt crime or recover criminal assets—sometimes they are facing in two different directions. Would you three agree with that? If we enact all the clauses in the Bill, will the new version improve the mismatch between those two limbs?
Rupa Huq (Labour, Ealing Central and Acton)
Q Do you think £100,000 is about right as a threshold or should it be lower for the unexplained wealth order?
Rupa Huq (Labour, Ealing Central and Acton)
Q And on asset recovery?
Rupa Huq (Labour, Ealing Central and Acton)
Q What do you think of the £100,000 figure?
Ben Wallace (Conservative, Wyre and Preston North)
I want to clarify the point: the seizure threshold is £1,000 and the unexplained wealth order threshold is £100,000. I did not want members of the Committee to get confused about the two. If we are talking about taking money out of a bank account, it is at the £1,000 level; if we are talking about confiscating assets on an unexplained wealth order, it is £100,000.
Flick Drummond (Conservative, Portsmouth South)
Are you confident that the enforcement agencies will have sufficient resources to make full use of the new powers in the BillQ ?
Roger Mullin (Scottish National Party, Kirkcaldy and Cowdenbeath)
I would like to take a slightly different tack and ask about the existing powers that you have that this Bill seeks to build upon. I am concerned that the National Crime Agency has declined to deal with the Hermitage case, which has been discussed, and which involves about $30 million laundered in London. Although the evidence provided to the National Crime Agency has been sufficient in other jurisdictions to take action, there has been a refusal to take action here. Why is that the case? Is it a lack of resources or a lack of willQ ?
Roger Mullin (Scottish National Party, Kirkcaldy and Cowdenbeath)
Q With all due respect, what I quoted was $30 million that was laundered in London. I am not talking about the other money laundered through Hermitage in other jurisdictions. My understanding is that they have been buying up different types of assets in London—they are not merely property assets—and that the individuals involved regularly visit London, which would seem to bring it entirely within the remit of the UK to do something about it.
Scott Mann (Conservative, North Cornwall)
I have three questions for you, Mr Toon, if I may. What have been the most significant challenges for the NCA in tackling economic crime? How will the measures in the Bill help the NCA to tackle economic crime? The third question is a small supplementary on the seizure orders and unexplained wealth orders. A small number of people make money from online gambling. Could you tell me how the Bill might affect them?Q
Scott Mann (Conservative, North Cornwall)
Q Just quickly to pick up on what Mr Toon said, could you give me the timeframe for the 58 arrests?
Peter Dowd (Labour, Bootle)
I want to come back to the issue of resources and capabilities. You all gave an answer but I did not get the sense that you were convinced that you have adequate resource. You told us that the capabilities in the Bill would give you just that—capability. You also said that additional resource was being put in and that other agencies, such as banks themselves, would do a lot of the investigation but you did not tell us that you believed that you were going to get sufficient resources for the proposals in the Bill and what you were being asked to do. I will ask a second time: do you believe that you will get sufficient resources to do the job that you are being asked in the BillQ ?
Peter Dowd (Labour, Bootle)
Q So it is reasonable to assume that you will not be coming back to us within, say, the length of this Parliament to ask for any more resources, all things being equal?
Peter Dowd (Labour, Bootle)
Q That is not the question I asked. I am getting quite exercised about the response to this question. You have told us that you have the current resources, and therefore it is reasonable for me to say, on the basis of your projections of the level of crime out there and in the future, that you do not believe you will be coming back to us with any significant additional asks for at least the length of this Parliament—both in terms of legislation and, more importantly, in terms of finance.
Peter Dowd (Labour, Bootle)
It is a no, then.
Antoinette Sandbach (Conservative, Eddisbury)
To pick up on that last matter, is it not correct to say that proceeds of crime seizures in effect go to central funds and can be used, and there is part that is returned to the agency bringing the prosecution? To a certain extent, therefore, it is self-financing.Q
Antoinette Sandbach (Conservative, Eddisbury)
Q So strengthening and broadening your powers will enable you potentially to seize more assets. Clearly, therefore, the aim of these measures is to deal with money laundering. How does the new criminal offence preventing the facilitation of tax evasion link in with that money laundering aspect of your investigations?
Antoinette Sandbach (Conservative, Eddisbury)
Q One criticism often levelled at law enforcement agencies is that they do not take enough steps nationally to recover assets that are the proceeds of crime. Apart from the disclosure orders and the aspect of portable goods—for example, jewellery—that you have already spoken about, what particular powers will help you with that asset recovery, and is there anything that is not in the Bill that you think should be?
Antoinette Sandbach (Conservative, Eddisbury)
Q Is that the same, for example, with regard to extending the powers to revisiting orders under the Proceeds of Crime Act 2002, which was a gap that was not there previously?
Antoinette Sandbach (Conservative, Eddisbury)
Q Are you therefore satisfied that the current procedures in the Bill tackle the major challenges you face in your aspect of the investigations?
Nicholas Dakin (Labour, Scunthorpe)
Thank you for your evidence. You seem to be saying there is more that perhaps could be done, Mr Beattie. What additional things should we take the opportunity to look at in the Bill, to make sure you have the powers you need to do your job?Q
Richard Arkless (Scottish National Party, Dumfries and Galloway)
For the most part, my questions have been dealt with by colleagues previously asking about additional powers, but I will come back to one point. There is a huge array of regulatory bodies that cover money laundering in the UK. Do you think that consolidating these would make life easier for you in the pursuit of money laundering activity?Q
Richard Arkless (Scottish National Party, Dumfries and Galloway)
Q You make it clear that there is an urge for law enforcement to have additional powers, but a balance needs to be struck. It is for Parliament to strike that balance, so take that out of your contemplation. You are not responsible for striking that balance, so what extra powers would you like to see in the Bill?
Byron Davies (Conservative, Gower)
Q My question is simply this, with respect to unexplained wealth orders and politically exposed persons. It is perhaps more to you, Mr Harman, than anyone. The measures reflect the concerns about those involved in corruption overseas and laundering of the proceeds of crime. How operationally viable do you think those are from an investigation point of view, particularly with some of the more difficult countries that we have to deal with?
Carolyn Harris (Labour, Swansea East)
I have one observation and one concern. The observation is that one of my colleagues mentioned that you would need to come back for more money, and another colleague said you would be self-funding. That means you will have to bring in far more than you cost to run, so just be aware of that.Q
I am really concerned that you are not concerned about money laundering in the gambling industry. You seem to have little or no evidence that that is an issue. I am very concerned that high street bookies are able to launder, and if they are not actually reporting any excessive or unusual activity, that is a great concern.
Carolyn Harris (Labour, Swansea East)
Q Is there a benchmark to which you would expect bookmakers to report high or excessive use in a high street bookmakers?
Carolyn Harris (Labour, Swansea East)
Q But you leave it them to decide at what level they report?
Carolyn Harris (Labour, Swansea East)
Q Would it be helpful if it was a mandatory reporting level? For excessive use of a fixed odds betting terminal, for example, if we set a level and said, “Anything in excess of £1,000 a day,” from someone who would not normally spend that money?
Nusrat Ghani (Conservative, Wealden)
I apologise for being late this morning; I was at another Committee meeting. My question is to Detective Harman. I think you have already tackled funding of terrorism this morning but, as we know, terrorism has no borders nor does the funding, and with technology it becomes increasingly difficult for you to follow the flow of these funds. The Bill proposes more information sharing between the public and private sectors, which you have said will be incredibly helpful. Could you share whether there will be pushback from the banking sector and, as we seize the assets of terrorists, what might they do? What will be their next steps, so we can be ahead of the curve? Can you give us some advice on where they might end up putting their funds, so we can be a position to start seizing those funds once they come out of the mainstreamQ ?
Rupa Huq (Labour, Ealing Central and Acton)
Q Thank you for coming in. I guess to the layperson there are many bodies involved in these issues—the police, who we have just heard from, the CPS, HM Courts and Tribunals Service and the Serious Fraud Office. The natural thinking is that there should be more co-operation between different bodies. I notice that the report from the Home Affairs Committee says that one person should take the overall lead. Where do you stand on being more joined-up and having a more overall person? It said for the recovery of criminal assets it should be the National Crime Agency that co-ordinates and oversees the various different agencies operating at local levels, with the proviso of adequate resources and tools. Where do you stand on the point about an overarching person and who that should be, if we did have one?
Rupa Huq (Labour, Ealing Central and Acton)
Q And you are happy with how it is at the moment with you all working in concert. Does anyone think there should be overall supervision?
Rupa Huq (Labour, Ealing Central and Acton)
Q Part 3 of the Bill introduces the controversial criminal offence of failing to prevent the facilitation of tax evasion. Some people who have given evidence to the HMRC consultation have argued against the new corporate offence. How do you rate the risk posed to the Exchequer from illegal tax evasion, compared with tax avoidance and other activities that contribute to the tax gap? There are some really scary figures; the most shocking one I saw was that over the last 26 years, the Government have collected 26p of every £100 generated by criminal activity. What do you think of the new offence? Nobody here has a crystal ball, but could you comment on the scale of offshore tax evasion?
Rupa Huq (Labour, Ealing Central and Acton)
Q This is modelled on section 7 of the Bribery Act 2010. Am I right in thinking that so far under that Act there have been zero prosecutions—[Interruption]—or a very low level of prosecutions, shall we say?
Ben Wallace (Conservative, Wyre and Preston North)
We are getting there.
Rupa Huq (Labour, Ealing Central and Acton)
That is only from 2010, so it is not an old Act, and again, nobody here is Mystic Meg, but do you have the tools in this legislation to bring about successful prosecutions or are there too many obstacles, such as that the SFO is involved and that behavioural change would be needed, as you said? Do you foresee there being a low or high level of prosecutions when the Bill is enacted?
Mike Wood (Conservative, Dudley South)
This question is directed in particular to MrQ Thompson. Could you tell us more about the challenges faced by the Serious Fraud Office in investigating a suspected criminal financial activity, and how the specific measures in the Bill will help you to do that more effectively? In particular, I would like to know more about how unexplained wealth orders might be expected to help in pursuing foreign officials suspected of grand corruption.
Nicholas Dakin (Labour, Scunthorpe)
Q The new corporate offence relates only to tax evasion, which makes sense. But is there a case for extending it to dissuade companies from facilitating quite aggressive tax avoidance?
Victoria Atkins (Conservative, Louth and Horncastle)
Thank you, and it is a pleasure to serve under your chairmanship, Sir Alan. I want to pick up on the point about avoidance and evasion. Mr York, you said that these powers are directed at tax evasion, which is a crime. To give us an idea of the complexity of veering into the world of tax avoidance and tax efficiency, is it not right that a person simply investing in a pension can be described as being tax efficient because that prevents them from paying as much tax as they would otherwise pay?Q
Victoria Atkins (Conservative, Louth and Horncastle)
Q On behalf of all the lawyers in the room, only one person may be convicted, but that conviction may mean that many hundreds of millions of pounds has been stolen from the Exchequer. With one conviction, you have solved that crime. Is that correct? In other words, one conviction does not necessarily reflect the extent of the damage that that particular defendant has inflicted on the UK economy.
Roger Mullin (Scottish National Party, Kirkcaldy and Cowdenbeath)
Q I have two short questions. First, what types of business formations are most susceptible to use by criminals?
Roger Mullin (Scottish National Party, Kirkcaldy and Cowdenbeath)
Q Perhaps this is for HMRC again then. How effective are we at supervising for anti-money laundering purposes all trust or company service providers that register UK companies?
Antoinette Sandbach (Conservative, Eddisbury)
Q I want to come back, Mr York, to attributing criminal liability to corporates. You felt that that would prompt good behaviour. For example, there have been some well publicised cases of licence payments where profit will be taken out of the UK because of some form of licensing agreement or other device that removes profits from the UK. How do you see the new advisory part 3 capability in tackling that? That is tax avoidance, rather than tax evasion, is it not?
Antoinette Sandbach (Conservative, Eddisbury)
Q Can I perhaps take it to the other extreme, where, for example, single parents are trying to claim support from non-resident parents who are not declaring their income appropriately? That would be tax evasion. Would you see this offence as dealing with those people’s accountants and advisers? In other words, if professional accounts have been filed and there is then a tribunal finding that there has been an inappropriate amount declared for income tax, would you get involved?
Antoinette Sandbach (Conservative, Eddisbury)
Q Could it, for example, affect a high street accountant that was providing advice on something that may be on one or the other side of the line?
Antoinette Sandbach (Conservative, Eddisbury)
Q Mr Price, will unexplained wealth orders help the CPS make greater use of its existing civil recovery powers?
Antoinette Sandbach (Conservative, Eddisbury)
Q Will extending the moratorium period on SARs assist you in getting the material that you need to get cases to a point where you can charge?
Peter Dowd (Labour, Bootle)
Q The Chartered Institute of Taxation has expressed some concern that the new corporate offence of failure to prevent the criminal facilitation of tax evasion may lead to a string of prosecutions in relatively small cases where current civil penalties already provide enough punishment. What is your view about that?
Peter Dowd (Labour, Bootle)
Q Some people suggest that HMRC has got form for not going after the big organisations—the Googles—for tax avoidance. What confidence can you give us that you will not just avoid the big ones because they are in the “too difficult to do” box?
Peter Dowd (Labour, Bootle)
Q Which brings me nicely to my last question, which is about your confidence in whether you as enforcement agencies have sufficient resources under the new provisions to do your job properly.
Flick Drummond (Conservative, Portsmouth South)
Q I will be quick because you have touched on a lot of the stuff about which I was going to ask, particularly about the overseas corporate offence and how that works in practice. Mr York, will this actually pick up companies that operate mainly out of the overseas territories and the Crown dependencies?
Flick Drummond (Conservative, Portsmouth South)
Even though they have headquarters over there?Q
Richard Arkless (Scottish National Party, Dumfries and Galloway)
Q First, to Mr York, the UK tax code has a reputation for being unnecessarily complicated. I am sure you are acutely aware of those allegations. To what extent does that complication play a role in criminality? Does it make it more susceptible to criminality? Do any specific examples arise out of the complication that would encourage, facilitate or make criminality easier?
Richard Arkless (Scottish National Party, Dumfries and Galloway)
I am acutely aware of time. Mark and Nick, do you think that the threshold of £100,000 for unexplained wealth orders is at a fair level? Should it be lower or higher? International standards would dictate that it should be a little bit lower. What are your views?Q
Richard Arkless (Scottish National Party, Dumfries and Galloway)
Many properties in my constituency are valued at less than £100,000 but more than £50,000, so I hope we are not basing that on London property prices.Q
Mr Thompson, on corporate economic crime, it is clear that the provisions in the Bill extend to employees facilitating tax evasion, and it does not go beyond that. Do you think there is a case for going beyond that? It strikes me that there is nothing in the Bill that gets at what the public understand as being the problem with corporate criminality. There is nothing that could catch the riggers of the LIBOR market, for example. There is nothing that could catch swathes of unscrupulous mortgage advisers giving 120% mortgages to dogs in kennels, which many people would argue has caused a great deal of the suffering that we are still all trying to recover from. Is there is a case for that?
Scott Mann (Conservative, North Cornwall)
There are information and data-sharing initiatives as part of the Bill. How would you interact with those measures and with the joint money laundering intelligence taskforce?Q
Rupa Huq (Labour, Ealing Central and Acton)
Are there any other changes to the existing proceeds of crime regime that you would like to see in the Bill? I was thinking of some sort of parallel enhanced supervision of the property market. Is there anything else on your wish list that you would have liked to see?Q
Rupa Huq (Labour, Ealing Central and Acton)
Finally, I would like to ask a question that I asked the other selection of witnesses. The Public Accounts Committee’s report on confiscation orders said that sometimes there is a bit of tension between whether the point of those orders is to disrupt crime or to recover the proceeds and collect criminal assets. What would you say to that statement?Q
Rupa Huq (Labour, Ealing Central and Acton)
Q It is a pleasure to serve under your chairmanship, Sir Alan. It is good to have two academics in front of us; I am an academic trapped in an MP’s body.
Part 3 of the Bill would introduce the new criminal offence of failure to prevent facilitation of tax evasion. How do you rate the risk posed to the Exchequer by illegal tax evasion? We have just heard the figure of £5 billion a year. Is that accurate? Is it a conservative estimate? What are your thoughts on tax evasion versus tax avoidance and other activities that contribute to the tax gap? What would you say is the true scale of offshore tax evasion?
Rupa Huq (Labour, Ealing Central and Acton)
Q Several stakeholders who responded to the HMRC consultation—these clever people who know how to get around the rules—argued that a new corporate offence was unnecessary. It sounds as if you take issue with that. Do you think there is enough in the Bill to provide the significant behavioural change that is really needed to drive this out?
Tristram Hunt (Labour, Stoke-on-Trent Central)
One of the attempts to deliver that kind of behavioural change is among the new clauses I am submitting. Will they garner your support for asking the Secretary of State, for example, to make an annual report to Parliament about unexplained wealth orders, to make it a duty to prevent corruption, and to establish quite swiftly a publicly accessible register of beneficial ownership of UK properties? Do you think the good intentions of the Bill could do with a boost to make sure the foot is on the accelerator on some of thisQ ?
Roger Mullin (Scottish National Party, Kirkcaldy and Cowdenbeath)
Q I have been concerned for some time about the Scottish limited partnerships and similar vehicles. To what extent do you think that there are particular types of business formations that are most susceptible to criminal activity and tax evasion?
Roger Mullin (Scottish National Party, Kirkcaldy and Cowdenbeath)
Q You mentioned a review, so I take it that you would support the new clause we have tabled calling on the Government to have a specific review of Scottish limited partnerships?
Roger Mullin (Scottish National Party, Kirkcaldy and Cowdenbeath)
Q You have mentioned the issue of money laundering and have given us an estimate of the tax gap. Do you have any estimates of the extent of money laundering in the UK?
Antoinette Sandbach (Conservative, Eddisbury)
Q Professor Murphy, I want to come back to your evidence that the new offence of corporate liability will effectively target small or mid-range companies. In relation to the “bad apple” point you made, do you accept there is still reputational damage for a company if one of its employees is charged, and that that in itself may make big companies’ compliance far more rigorous?
Antoinette Sandbach (Conservative, Eddisbury)
Q If I can go back to the smaller business point, I do not know if you were here when I asked Simon York about the other end of the scale. Some tax evasion is not for the purposes of evading tax—the purpose is to evade other liabilities that follow on from declaring taxable income. That can be supported by small accountancy firms that may not apply regulations as rigorously as they should do. Do you think this offence will have a deterrent effect on the smaller and mid-range companies?
Nicholas Dakin (Labour, Scunthorpe)
Q You both spoke earlier in giving evidence about the great opportunity to bring about behavioural change or improve compliance. Are there measures we ought to be looking at in this legislation that you would like to see us take the opportunity to put in?
Victoria Atkins (Conservative, Louth and Horncastle)
Q Professor Murphy, there is good precedence in the world of health and safety, where companies are prosecuted for causing workplace fatalities and accidents or bringing about an environment in which they occur. Do you agree that that success in health and safety bodes well for sending out the message to corporate entities that tax evasion is not permissible and will be prosecuted where evidence of it exists?
Richard Arkless (Scottish National Party, Dumfries and Galloway)
Q Professor Murphy, you have highlighted the difficulty with the Bill’s proposals on tax evasion in relation to corporate economic crime. Your solution would be a position of strict liability. Do you see any case to extend the provisions on corporate economic crime beyond tax evasion, leaving aside the problem of strict liability and enforcing it? Is there a case, for example, to extend the provisions to catch people who rig the LIBOR market, or perhaps mortgage brokers who fraudulently completed application forms that caused the mess we are in? Do you think there is a case for extending corporate economic crime beyond facilitating tax evasion?
Peter Dowd (Labour, Bootle)
Q On resources for agencies—enforcement or otherwise—in relation to prosecutions and chasing up, do you believe that the authorities have sufficient resource to do their job, or are they just misdirecting the resources that they already have?
Ben Wallace (Conservative, Wyre and Preston North)
Q The ARIS scheme allows HMRC, the investigators and the prosecutors to keep 50% of the proceeds of any confiscation. If the Bill leads to further confiscation, would you say that therein lies some of the solution that you are going to highlight across the road? If they will be able to keep what they recover, will unexplained wealth orders, for example, or seizures improve their budgets?
Ben Wallace (Conservative, Wyre and Preston North)
Q Unlike Corbyn economics, we live in the real world.
Rupa Huq (Labour, Ealing Central and Acton)
Thank you for coming to give evidence. To continue the thread, although I guess you were not here this morning, I will compare some of your answers to what we heard from the panels then. Part 3 of the Bill would create a new criminal offence to prevent the facilitation of tax evasion. Quite a few of the stakeholders who provided evidence to the HMRC consultation do not think that that is necessary. Why do you think that might be, and do you think that it is needed or notQ 7070?
Rupa Huq (Labour, Ealing Central and Acton)
Q So it is a good step up, but it was not absolutely necessary?
Rupa Huq (Labour, Ealing Central and Acton)
Q There is also evidence that since 2009, a lot of specialist trained investigators of financial crime who were trained on the public purse have jumped ship and gone over to the commercial sector, some of them even to gambling. An amendment that we are tabling would keep people within—I cannot remember the exact wording, but they would have to repay the cost of training. Do the three of you have any thoughts on that and potential poaching?
Roger Mullin (Scottish National Party, Kirkcaldy and Cowdenbeath)
A lot of research indicates that about 70% of major organisational crises are caused by culture. Why has the FCA scrapped the proposed review of the culture of banks? How is that going to assist in an attack on criminalityQ ?
Roger Mullin (Scottish National Party, Kirkcaldy and Cowdenbeath)
Q I will try another familiar area. There has also been removal of a proposal regarding the reverse burden of proof. How is the removal of that proposal going to assist in an attack on holding people responsible for criminal behaviour?
Roger Mullin (Scottish National Party, Kirkcaldy and Cowdenbeath)
Q Are you content with what exists?
Richard Arkless (Scottish National Party, Dumfries and Galloway)
I would like to push Ms Delfas on the point about banking culture. Do you see a link between banking culture and criminality? Do you think that a bad banking culture—to put it in layman’s terms—could be a conduit for criminality, or could exacerbate the potential for criminality in the financial sectorQ ?
Richard Arkless (Scottish National Party, Dumfries and Galloway)
Q Do you agree with the Government’s decision to row back from the oversight committee and the reverse burden of proof? You rightly mentioned that it was a decision by Government. Do you agree with that decision?
Richard Arkless (Scottish National Party, Dumfries and Galloway)
Q The inference is clear. There is a link between banking culture and a financial system with banks being susceptible to criminality. I think it would be remiss for us to ignore that dynamic.
Richard Arkless (Scottish National Party, Dumfries and Galloway)
Q We heard evidence earlier that the new provisions for corporate economic crime may disproportionately impact smaller organisations, the theory being that larger organisations would find it easier to demonstrate protocols and processes that they could use to rebut the allegations that employers and their systems have failed to flag it up. Is that something that your members have discussed and that you have a view on? This may well be obvious, but as a former consumer lawyer, I can tell you the amount of times that big banks used to roll out their processes and protocols in defence of various actions, which smaller companies found it hard to do. Is that something that concerns you that might impact widely and disproportionately on your membership?
Richard Arkless (Scottish National Party, Dumfries and Galloway)
Q Do you think that your members are in favour of the Bill’s corporate claim provisions? How do you think your members would react to those provisions being extended beyond tax evasion?
Antoinette Sandbach (Conservative, Eddisbury)
Back in 2012, Coutts was fined £8.75 million by the FCA for systemic failings that had resulted in an unacceptable risk that it had handled the proceeds of crime. Do you think part 3 of the Bill will effectively address those risks at a banking level? In the not so distant past, we had HSBC Switzerland accounts being used to evade UK tax. Are you confident that the measures in part 3 will address those systemic failings in the banking sectorQ ?
Antoinette Sandbach (Conservative, Eddisbury)
Q Will they help you as a regulator?
Antoinette Sandbach (Conservative, Eddisbury)
Q The corporate responsibility obligations are only on tax evasion. They would not pick up issues around the LIBOR scandal, for example. Do you think any other measures are needed in the Bill or are you satisfied that it provides the appropriate tools?
Antoinette Sandbach (Conservative, Eddisbury)
Q Mr Browne, you spoke about other pieces of legislation. Those have clearly not stopped the kind of matters that I referred to, in terms of the way the law has been interpreted or applied by your members. You said that you felt your members would be willing to have the scope of the Act extended to a broader economic crime.
Antoinette Sandbach (Conservative, Eddisbury)
Q Ms Bell, do you think part 3 of the Bill will affect your members more, particularly the high street firms that may be caught by its provisions?
Antoinette Sandbach (Conservative, Eddisbury)
Q But should not your members be aware of what constitutes tax evasion?
Antoinette Sandbach (Conservative, Eddisbury)
Q And you are providing guidance on that, or you will do.
Victoria Atkins (Conservative, Louth and Horncastle)
Q Just to pick up on that point, tax evasion is tax evasion, whether it is committed by small companies or large companies.
Victoria Atkins (Conservative, Louth and Horncastle)
It involves an element of dishonesty. So any member of your profession or any other business who is conducting tax evasion is liable to be prosecuted in the criminal courts. I am slightly concerned about that distinction, that tax evasion conducted by small companies is not quite as bad as tax evasion conducted by large companies.
Peter Dowd (Labour, Bootle)
ThisQ question is not specifically directed at you, Ms Bell, but I notice that you are the head of compliance and training at the Jackson Canter Group. One of the new clauses we have before us relates to the National Crime Agency making a report to Parliament about the training it provides to its staff on financial investigation and the operation of the Proceeds of Crime Act 2002. In a more general sense, what is your view about the whole question of training within, let us say, the finance sector, in relation to the issues before us? Do you think there is enough training? Too much? Give me a view about that.
Peter Dowd (Labour, Bootle)
Yes, take that for a start.
Peter Dowd (Labour, Bootle)
Q May I ask the other two witnesses their view about training in general? By training I might mean awareness and the extent of trying to prod that awareness within the industry.
Peter Dowd (Labour, Bootle)
Q Do you think that the amount of training within the system fits the Bill, so to speak? Is there enough there?
Ben Wallace (Conservative, Wyre and Preston North)
Q Thank you very much for your input into the formation of the Bill. It helps the Government, and hopefully the Bill reflects some of that. I am keen to find out from the regulated sectors and the professions what you envisage could or would happen to any one of your members should they be convicted of the offence of corporate tax evasion or money laundering. What penalties are available to you to deal with either law firms or the individuals who could be convicted?
Ben Wallace (Conservative, Wyre and Preston North)
Q And for the banking and financial sector?
Ben Wallace (Conservative, Wyre and Preston North)
Q And they could potentially lose their banker’s licence, if they are a bank.
Ben Wallace (Conservative, Wyre and Preston North)
Q Ultimately, if an international bank loses its British banker’s licence, what does it mean for that bank in the global world? Is it usually the case that if they lose their banker’s licence in a developed market, it is pretty much curtains for them in the rest of the world?
Ben Wallace (Conservative, Wyre and Preston North)
Q Do you think some of the overseas offences here will have a change of behaviour effect on foreign-owned banks that operate here as well? Ones that may previously have been able to exploit their jurisdiction elsewhere will find that the stakes are higher for them.
Ben Wallace (Conservative, Wyre and Preston North)
Q But the US regulator does have a say in things like foreign and corrupt practices over examples such as the one you used. You do not have to have an entity with their extraterritorial reach in their other legislation.
Ben Wallace (Conservative, Wyre and Preston North)
Q But we do not really want tax evaders anywhere, do we? We do not want to allow tax evaders to rob other countries of their wealth either. We do not want to be a permissive society.
Ben Wallace (Conservative, Wyre and Preston North)
We have not had any representations from the United States objecting to this.
Roger Mullin (Scottish National Party, Kirkcaldy and Cowdenbeath)
Q I would like the panel’s views on whether there is a case for strengthening protection for whistleblowers in the financial sector.
Roger Mullin (Scottish National Party, Kirkcaldy and Cowdenbeath)
Q Are you satisfied it is working satisfactorily?
Nicholas Dakin (Labour, Scunthorpe)
From the evidence we had this morning I formed the opinion that there is a view that banks are pretty good at spotting irregularities and bringing them forward to the authorities but other parts of the regulated sector are less proactive in that way. That seemed to be what was coming through the evidence this morning. Does that ring true to you? Are the measures in this legislation likely to improve the performance of other parts of the regulated sector?Q
Peter Dowd (Labour, Bootle)
Q This morning we had evidence from the National Crime Agency, the National Police Chiefs Council, the Met police SO15 counter-terrorism policing, Her Majesty’s Revenue and Customs, the Serious Fraud Office and the Crown Prosecution Service. To a man—they were all men, by the way—I would say that they looked at the Minister, gulped and said that they had enough resource to do their job. Will you give me a view from outside, so to speak, as to whether you get the sense that those agencies have sufficient resource to do their job, given that you presumably have pretty close relationships at points in the investigatory process?
Tristram Hunt (Labour, Stoke-on-Trent Central)
This question might not quite fall within your competencies but I will ask it anyway, given your knowledge of law, finance and the City. It seems that one of the challenges in the current legal set-up is a kind of fear among statutory and investigative authorities about the cost of pursuing certain lines of inquiry, with all the legal ramifications if those who are pursued for unexplained wealth orders and so on are found innocent. How does it affect the culture of investigation within the City when there is a fear about reputational and financial impact on those pursuing those lines of inquiry? Do you have any thoughts on that either from a legal or financial stance? There is a chance to think about an amendment regarding capping the reimbursement of costs or not allowing for the costsQ .
Tristram Hunt (Labour, Stoke-on-Trent Central)
Q I will pursue this slightly differently. Do you have any sense of the international comparisons? Is the UK behind the curve on these investigations or is it out in front?
Rupa Huq (Labour, Ealing Central and Acton)
Q Can you think of anything that is not in the Bill that you would have liked to have seen in it? I was kind of thinking sideways—maybe enhanced supervision of the property market or something. I know that is not one for you three directly, but if there is anything you would like to see in the Bill, we are told that the Minister is in listening mode.
Ben Wallace (Conservative, Wyre and Preston North)
Always.
Rupa Huq (Labour, Ealing Central and Acton)
Q Do you think that the £100,000 for an unexplained wealth order is about right as the threshold where that kicks in? Would you like to see it higher or lower?
Rupa Huq (Labour, Ealing Central and Acton)
Q Is there anything you would like to see?
Richard Arkless (Scottish National Party, Dumfries and Galloway)
Q You have made it clear that you are broadly supportive of the measures in the Bill and you have given the reasons why. I think most people in the Committee are broadly supportive. The point of contention comes when some of us do not think that the Bill goes far enough.
I am quite perturbed by some of the answers you have given in relation to what could be done to make it easier for the people you regulate or your members. I am not getting the impression that those are things that you think would make it easier to catch the criminals. Am I confused by this? It smacks of self-preservation. What I want to hear are things that we could put in the Bill to make it easier to catch the criminals, not to make your lives easier.
Rupa Huq (Labour, Ealing Central and Acton)
Q Thank you for coming in, gentlemen. Part 3 of the Bill introduces a new criminal offence to prevent the facilitation of tax evasion.
Rupa Huq (Labour, Ealing Central and Acton)
Before we were so rudely interrupted, Toby, because of the stuff you have published, I was going to ask you—this may also be relevant to David—about the new corporate offence, which will apply to tax evasion offences both in the UK and overseas. Will the foreign tax offence have a significant impact on developing countries?
Rupa Huq (Labour, Ealing Central and Acton)
Q The same question about other jurisdictions—which Scotland might be if certain things continue going in one direction.
Rupa Huq (Labour, Ealing Central and Acton)
Q How do you rate the risk posed to the Exchequer by illegal tax evasion? We heard different figures this morning: the witness from HMRC told us the tax gap was £5 billion and the professor said it was £70 billion. Do you have estimates on that?
Rupa Huq (Labour, Ealing Central and Acton)
Q Christian Aid’s evidence keeps going on about the need for the beneficial registers of ownership to be made public. Will you stress again why you think it is important that it can be consulted when needed, and why it is not enough just to have it?
Rupa Huq (Labour, Ealing Central and Acton)
Q Do you have a list of your investigations?
Rupa Huq (Labour, Ealing Central and Acton)
Q The Public Accounts Committee has raised concerns that there is not a sufficient number of successful prosecutions of offshore tax evasion for it to deter people effectively. Do you agree and do you think that the new corporate offence in part 3 will make a difference?
Antoinette Sandbach (Conservative, Eddisbury)
Q I am not as familiar with the Scottish devolution settlement as you are, but I had always understood that Scotland had a separate legal jurisdiction.
Antoinette Sandbach (Conservative, Eddisbury)
Q Can that legal jurisdiction not regulate the Scottish companies that you refer to? Where does the ultimate responsibility for that regulation lie? Is it with the Scottish Parliament or with Westminster?
Antoinette Sandbach (Conservative, Eddisbury)
Q I accept that, but what I am asking—it may well be that you do not know the answer and we need to get that from elsewhere—is whether company law is devolved in Scotland.
Antoinette Sandbach (Conservative, Eddisbury)
My suggestion was that, given that there is a separate legal jurisdiction, there is the power already in Scotland to deal with these matters, but I see my colleagues are shaking their heads. To that extent, would the changes, particularly in part 3 of the Bill in terms of corporate responsibility for tax evasion, largely address the concerns that you have?
Antoinette Sandbach (Conservative, Eddisbury)
Q Have you looked at the Bill and read the provisions that are in it?
Antoinette Sandbach (Conservative, Eddisbury)
Q You cannot give us an opinion on whether you think it will tackle the abuses that you are trying to describe to us?
Antoinette Sandbach (Conservative, Eddisbury)
Q We heard the evidence of the various law enforcement authorities in earlier sessions. I do not know whether you were here for that, but they were quite clear about the additional protections the legislation will afford them in tackling illegal tax evasion.
Roger Mullin (Scottish National Party, Kirkcaldy and Cowdenbeath)
Q I will direct my questions to Mr Leask, but I would be very happy if Toby decided to join in as well. If it had not been for Mr Leask’s groundbreaking research over the past year or more, I would not have been aware of the seriousness of the situation, so I would like to put that on the record. Could you give us a sense of your perception of the scale and type of criminality that is associated with Scottish limited partnerships?
Roger Mullin (Scottish National Party, Kirkcaldy and Cowdenbeath)
Q To follow up on that, I read the article yesterday and I was taken aback, to say the least, when it alleged that there could be contacts with what used to be known as the KGB.
Roger Mullin (Scottish National Party, Kirkcaldy and Cowdenbeath)
Q You have already started to give us a sense of the type of criminality that is involved. To confirm, we are talking about financial criminality, but not just financial criminality—I think one of your investigations was into things that involved, for example, paedophile websites. Is that correct? Could you say a bit more about that?
Roger Mullin (Scottish National Party, Kirkcaldy and Cowdenbeath)
I will allow other Members to speak, but I want to ask one more follow-up question. I can understand why you are reticent to suggest what legislators should do but, as far as I am aware, you have been one of the leading researchers in the field. However talented you may be, Mr Leask, you are limited in your resources to research further. Would you welcome the UK Government putting their shoulder to the wheel, as it were, and conducting a detailed review of the use of SLPs for criminal purposes?Q
Flick Drummond (Conservative, Portsmouth South)
This question is really a supplementary to some of Dr Huq’s comments on the overseas territories. I asked a previous panel including the Serious Fraud Office, HMRC and the Crown Prosecution Service whether they thought they had the resources to go in there. They have automatic access to all the records, although I know that it is not public document. I want to know a bit more about that, Mr QuantrillQ , because obviously you are a great expert on it. To add to that, are you confident that the enforcement agencies have enough resources and the capability to do what is in the Bill and prosecute people in the overseas territories and Crown dependencies?
Flick Drummond (Conservative, Portsmouth South)
Q As far as the Bill goes on transparency, obviously it is only for the UK. You have also been talking about other countries and it is up to them to follow our lead and have more transparency.
Flick Drummond (Conservative, Portsmouth South)
Yes, but I think Mr Leask was talking about other countries and corrupt Governments. We cannot cover that in the Bill. We can cover the overseas territories. Were you not talking about other countries outside the overseas territories when responding to Mr Mullin?
Ben Wallace (Conservative, Wyre and Preston North)
Q I thank The Herald for what you have done. I have read some of your stuff and it has been quite an eye-opener. The SNP obviously raised it in the debate and that prompted me to have a meeting with one of my business Minister counterparts to see where we can go forward with it. Some of the stuff that you have identified—well done for it—is the truest form of good investigative journalism that can be produced. It was the Glasgow Herald when my grandmother wrote for it way back 40 or 50 years ago. It is clearly a structure that has been abused, and I think we want to ensure that that does not happen.
I want to ask Mr Quantrill about a bigger issue: the Crown dependencies and overseas territories. If we stack it up, going back to the anti-corruption summit chaired by David Cameron back in May, we have got to a position now where all of them will have a central register of beneficial ownership, except the Caymans, which will have a linked register of ownership. Our law enforcement agencies will have access to them. We are the only country in the G20 to have a public one. Never mind the dependencies or anywhere else; our neighbours in Europe do not have them yet, so the trajectory is in the right direction. It seems to boil down to a call to make the Crown dependencies make them public—that we, the UK Government, impose our will on the Crown dependencies and territories, in primary legislation.
Do you recognise what that actually means? I have many constituents who, for example, have very strong feelings on abortion. Does that give this sovereign Parliament the right—technically, we are sovereign over Scotland and the Crown dependencies—to impose that very strong will on those Crown dependencies? That is the next step. The step you are suggesting is for us to ignore their own Parliaments and impose our will on them, because it is a subject that you and many other people feel passionately about. I respect that, but it is what you are proposing. Is that something that you are happy to do?
Ben Wallace (Conservative, Wyre and Preston North)
By working with them, we have got to a position rather quickly of having central registers and getting our law enforcement automatic access to those data without long, drawn-out court cases. We have done that in the space of a year. Is Christian Aid proposing that we override the democratic expression of those countries, whether they like it or not, because it is a subject that you have decided is more important than other issues?
Ben Wallace (Conservative, Wyre and Preston North)
Q You quote the Panama papers, which was a significant leak, and there have been previous ones—Liechtenstein and others. The access that our law enforcement agencies will now get will be greater than the Panama papers. The Panama papers are not complete, and they are effectively within the control of the journalists in the sense that they were selectively leaked to them and then published. No one is able to get the full picture because we do not have open access to Panama, which is not a Crown dependency or an overseas territory; it is a place that Scotland had a bad relationship with a few hundred years ago.
What we are proposing, and what the Crown dependencies are giving our law enforcement access to, is the complete picture. In one sense, we will have a greater advantage than the Panama papers because our law enforcement agencies will be able to have full access to the full range automatically. Therefore, in one sense we are 90% there. As you said, we do not have the transparency bit, but the Government’s intention is to do that. We are doing it, first, by leadership. We are the first in the G20 to say it is our aspiration. The step that seems to be mooted is to impose the sovereign will of Parliament on them, but in 12 months we have gone 90% of the way.
Carolyn Harris (Labour, Swansea East)
Have you ever heard of the Magnitsky clauseQ ?
Carolyn Harris (Labour, Swansea East)
Okay. It is not relevant, then.
Carolyn Harris (Labour, Swansea East)
Q This is a blank piece of paper. If you had the opportunity to write what is in the Bill, what would be on it?
Richard Arkless (Scottish National Party, Dumfries and Galloway)
Q First, David, thank you for your groundbreaking work. I was very heartened to hear what Ben, the Minister, said about reading your work and taking note of it. I was encouraged to hear that. Let me be the matchmaker in the middle here. Would you be willing to work with the Government and provide them with all the evidence you have uncovered in the past few months, based on what Ben has said?
Richard Arkless (Scottish National Party, Dumfries and Galloway)
Q Perhaps that is something that the Minister could consider. He very helpfully expressed a willingness in the Chamber to have a look at the issue, and he clearly demonstrated that he is doing so, so hopefully there can be communication from here on. For lay people watching this who find it difficult to conceptualise how transparent companies can be conduits within a system that can lend itself to criminality, is there a way that you can explain very simply what it is about SLPs that makes them susceptible to criminality?
Richard Arkless (Scottish National Party, Dumfries and Galloway)
Q How do they differ from normal companies, then?
Richard Arkless (Scottish National Party, Dumfries and Galloway)
Q That is very useful, Mr Leask. Thank you very much indeed.
Mr Quantrill, it seems from the discussion today that most people around this table would agree with most of the Bill’s content. As you have rightly said, the point of contention comes with what is not in the Bill. You have mentioned overseas territories and Crown dependencies, but those aside, could you quickly run us through perhaps two or three aspects that you think ought to be included in the Bill but are not?
Richard Arkless (Scottish National Party, Dumfries and Galloway)
Q Do you have any idea of which crimes you would extend it to?
Richard Arkless (Scottish National Party, Dumfries and Galloway)
How about market manipulation?
Tristram Hunt (Labour, Stoke-on-Trent Central)
Q I was struck by what you said about the debate in Africa about the amount of money flowing out of that continent. We obviously give a huge amount of money to different countries in Africa through development aid. Will you give us a sense of the nature of people’s frustration about some of the money leaving the continent of Africa and their analysis of where they see London and its role in all this? What kind of reforms are being urged in many of those countries on the continent that, on the one hand, we are supporting through development aid, but from which on the other hand, it seems to me, we are allowing too much wealth to leave?
Examination of Witness
Rupa Huq (Labour, Ealing Central and Acton)
Q It is great to have you here, Dame Margaret. You were the Chair of the Public Accounts Committee when a landmark report came out in 2014. How much of the stuff that you recommended is reflected in this legislation? You hinted that there are some omissions that need addressing. Could you tell us about those?
Rupa Huq (Labour, Ealing Central and Acton)
Are there examples of where that has been done before? You probably know more than me but I think there is precedent.Q
Rupa Huq (Labour, Ealing Central and Acton)
A last question from me: the new corporate offence relates to cases of tax evasion, so is there a case for extending it to come down on companies for facilitating tax avoidance?Q
Antoinette Sandbach (Conservative, Eddisbury)
Q Dame Margaret, I am very interested by your proposal that that should apply effectively to every company’s beneficial ownership, because it was, of course, the Government that you were part of in 1998 that passed the Data Protection Act, which recognised that there should be privacy around individuals and disclosure of their data. Why, at that time, did you not—
Antoinette Sandbach (Conservative, Eddisbury)
You are talking about disclosure of beneficial ownership—
Antoinette Sandbach (Conservative, Eddisbury)
By companies, which would presumably relate to named individuals. The register looks at controlling interests—
Antoinette Sandbach (Conservative, Eddisbury)
Yes, of named individuals or other companies. I can see why, if it is another company, there would not be an issue, but if it is a named individual, this Parliament decided to protect data around individuals. Does your premise not assume that every company is therefore acting in a way that is, in effect, criminal, and should not the burden be the other way? In other words, having private registers allows the Government to interrogate the data where there are serious allegations of crime, but still to protect the privacy of individuals.
Antoinette Sandbach (Conservative, Eddisbury)
Q Clearly there is a distinction between evasion and avoidance. One is legal, and the other is illegal.
Antoinette Sandbach (Conservative, Eddisbury)
Certainly.
Antoinette Sandbach (Conservative, Eddisbury)
Q I understand that there are now changes. We are awaiting tribunal assessments where there is doubt about whether it is legal avoidance or illegal evasion, but the law has now been changed to require individuals to pay up front.
Antoinette Sandbach (Conservative, Eddisbury)
The burden has been reversed.
Antoinette Sandbach (Conservative, Eddisbury)
Q Given that this is a really important first step, and that the Government are working with the overseas territories to get co-operation, would it not be useful, rather than going to a broader system that is more difficult to manage, to focus on the more serious cases and allow that co-operation initially? If it is then seen to be inadequate, we can perhaps broaden it out.
Tristram Hunt (Labour, Stoke-on-Trent Central)
Q Our previous witness from Christian Aid proposed the idea of looking into unexplained wealth orders for overseas territories. I just want to know your views on that.
Roger Mullin (Scottish National Party, Kirkcaldy and Cowdenbeath)
Q Is there a case for extending public registers to cover trusts?
Examination of witnesses
Rupa Huq (Labour, Ealing Central and Acton)
Q I have an easy question first of all. What difficulties in recovering assets from individuals suspected of involvement in criminal activities overseas have you encountered? Can we start with Susan Hawley?
Rupa Huq (Labour, Ealing Central and Acton)
Q Are you confident that enforcement agencies will have sufficient resources to make full use of the new powers in the Bill? I am thinking of the creaking IT system, ELMER, which was designed to cope with 20,000 SARs a year, and the figure at the moment, before this legislation, is more than 300,000.
Antoinette Sandbach (Conservative, Eddisbury)
Q Mr Keatinge, may I pick up on the point about reporting to Parliament? It is very easy to get data in the public domain about the number of requests or prosecutions under a particular Act: you can use the Freedom of Information Act, or parliamentarians can table written questions to get those data in the public domain. Why do you feel that that requires a report? Dr Hawley, in relation to the cadre of specialised financial crime judges, why do you say that judges are not capable of adequately dealing with financial cases when effectively you have juries sitting on them? If you cannot explain them to the jury, you will certainly not be able to explain them to the judge.
Antoinette Sandbach (Conservative, Eddisbury)
Q That could apply to any crime, whether it was murder or child pornography.
Tristram Hunt (Labour, Stoke-on-Trent Central)
Q Could the Committee have some examples from Global Witness of case studies of that three-way process—the extraction of wealth, often from developing nations, the facilitation via London and the hiding of that wealth in overseas territories or Crown dependencies? It would be good to have some narrative examples. Secondly, one issue that has been put to the Committee and on which I will pursue a probing amendment is the fear among enforcement agencies that, if they use unexplained wealth orders or go after those who have allegedly hidden wealth and committed crimes, they will be liable for the costs involved. That has serious ramifications for the culture of risk within an organisation. I am interested in whether you think either that those costs should not be borne by the state or that they should be capped.
Peter Dowd (Labour, Bootle)
Q The Home Office set out the intentions of the Bill, which are about giving
“law enforcement agencies, and partners, the capabilities and powers to recover the proceeds of crime, tackle money laundering and corruption and counter terrorist financing.”
The Bill also aims to make the UK a more hostile place for those seeking to move and hide proceeds and so on. Do you think the Bill is a game-changer in terms of that aim?
Witnesses: Yes.
Peter Dowd (Labour, Bootle)
Q The second thing is this: you mentioned the key element of resources, and you almost intimated earlier that you were not convinced about the capacity and resources of the enforcement agencies. Is that a fair assessment? What would you say to that? Do you think the capacity and the resources are available to the agencies to make the Bill a game-changer?