Economic Crime and Corporate Transparency Bill
Public Bill Committee, 27 October 2022.
Hannah Bardell (Scottish National Party, Livingston)
Good morning, everybody. We will go into private session to discuss lines of questioning. With the agreement of the Committee, we will delay the end of each panel of witnesses by five minutes, because we have been held up.
Examination of Witnesses
Hannah Bardell (Scottish National Party, Livingston)
I thank Members and those giving evidence for their flexibility in moving rooms, and I inform Members and those giving evidence that we will be in this room all day today. Could the witnesses please introduce themselves for the record?
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Forgive me, Ms Wood; my hearing is not very good. Can you speak straight into a microphone?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Thank you very much for coming to give evidence today. I wanted to start by asking about the Bill’s reforms of information-sharing provisions—perhaps this is particularly to Ms Wood. In your view, do those provisions go far enough, and if not, do you have examples of where it is done better internationally? If information-sharing provisions are not improved, how much of a hindrance could it be to the effectiveness of the BillQ 170?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q So your view is that we could be going further, and that we need to be going further.
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Could you be a little more specific about what you think would make a difference—what information is not being shared?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q On the economic crime plan, you suggested that quite a number of commitments made in 2019 have not been implemented. Could you briefly say something about that? Then Duncan Hames might share, from Transparency International’s point of view, the top three changes that he would like to see in the legislation.
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
On the proposal in the Bill—
Hannah Bardell (Scottish National Party, Livingston)
May I say to the hon. Member that she has had quite a few questions and we are limited on time, so this will be her final question?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q This is just a quick follow-up for clarification. The Bill arguably makes shareholder information less transparent, because it takes away the opportunity to put information relating to shareholders on the central register.
Alison Thewliss (Scottish National Party, Glasgow Central)
I want to ask Duncan about Scottish limited partnerships and limited partnerships more generally. The Bill does not really crack down on the opaqueness of ownership. Could you explain a wee bit more to the Committee why that is a particular issue?Q
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Helena, in terms of tightening up Companies House registration, is there more that needs to go into the Bill to prevent abuse of the system?
Hannah Bardell (Scottish National Party, Livingston)
I call Eddie Barnes—[Interruption.] Sorry, I mean Eddie Hughes.
Eddie Hughes (Conservative, Walsall North)
You slightly confused me there, Chair; I thought I had forgotten my own name.Q
When Seema was asking about data sharing, Helena, you were saying that the Government are not going far enough. It is odd for me to ask you to second-guess the Government, but why do you think we are not going far enough? Sometimes it feels to me that people are in a hurry for legislation to do everything that needs to be done to improve a situation, whereas that, sometimes, is almost counterintuitive because it is better to do it incrementally. Let us do some stuff, get it right, come back, revise, learn and move forward again. What are your thoughts with regard to their pace of movement?
Eddie Hughes (Conservative, Walsall North)
May I ask a very brief question on ID verification?
Hannah Bardell (Scottish National Party, Livingston)
I am very sorry, but we are going to have to move on to other Members. I will come back if there is time at the end for further questions.
Margaret Hodge (Labour, Barking)
I hope the Committee will look at our amendments on information sharing, the funding of enforcement agencies, shareholder information, Companies House checks and AML supervision; we tabled them in a spirit of improving the situation. I agree with all that.Q
I am going to ask about another issue, just to get it on the table. People engaged in the debate over dirty money are very anxious that we should move from just freezing the assets, particularly of the Russian Government and Russian oligarchs, to seizing the money so that we can use it—particularly for the reconstruction of Ukraine, when that war comes to an end. Can I have your views on that, starting with you, Duncan?
One final thing: a big thank you to both of you for the work your organisations do in exposing a lot of the problems and for the very positive attitude you have taken to establish solutions. Thank you to both of you, individually and to your organisations.
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Hear, hear!
James Daly (Conservative, Bury North)
I want to go back to information sharing. My understanding of the Bill—please tell me if I am wrong—is that the clauses will allowQ
“direct sharing between two businesses in the AML regulated sector”
and
“indirect sharing through a third-party intermediary for businesses in the financial sector”.
That is what the Bill does. Putting it bluntly, what is wrong with that? What is the criticism of those aims and the things it allows businesses to do?
James Daly (Conservative, Bury North)
Q I am sorry to interrupt you—we are short of time. Subject to that, the things I have just read out are good, are they not? We should welcome them.
Hannah Bardell (Scottish National Party, Livingston)
Very briefly, because I have two more people to bring in.
James Daly (Conservative, Bury North)
Can we very quickly come to you, Mr Hames?
Liam Byrne (Labour, Birmingham, Hodge Hill)
Duncan, I think I heard you say that UK corporate structures were the structure of choice for money laundering in what was the biggest money laundering scandal in Europe. That chimes with a piece of work you put out on 10 October, which said that there are more than 21,000 limited liability partnerships that have red flags—characteristics of organisations associated with economic crime—and that economic crime could have cost tens or hundreds of billions of pounds. That is a hell of a state for this country to be in. Does the Bill fix the problem you have identifiedQ ?
Liam Byrne (Labour, Birmingham, Hodge Hill)
Q Did you say “doesn’t”?
Liam Byrne (Labour, Birmingham, Hodge Hill)
Q So UK corporate structures are being used for the worst money laundering, pretty much, in the world and the Bill does not fix the problem?
Hannah Bardell (Scottish National Party, Livingston)
For the final question I come to Tom Tugendhat.
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Q Clearly, Liam’s point is entirely valid, but it is worth pointing out that that was a scandal in Estonia, which was very strongly dealt with by the Estonian Government. It is important to recognise that it is not just a UK issue. That being said, the Bill does open up an awful lot of information. Mr Hames, can you tell me how your organisation is going to use that information to start to address some of those issues?
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Q Your point that this is a partnership is entirely correct. The Government have approached the issue in the way that we spoke about, you will remember, when I was doing a different job, as Chair of a different Committee. We spoke about the fact that the UK is a hub for so much of that crime for very obvious historical reasons, such as the depth of our capital markets, the use of the English language, the openness of our financial system and the importance of the rule of law. It is not simply a legal question—it is a cultural and a deep historic one as well.
Do you agree that those reforms begin that process and that fightback? Do they make a difference by scrubbing, as it were, the inside of the whitened sepulchre to ensure that we are exposing it to sunlight, so that organisations such as yours, the media, and many others around the world, will be able to identify where that money is going and from where it has come? This is also about jurisdictions overseas who are losing money through our system, not just about us who have to control it.
Thomas Tugendhat (Conservative, Tonbridge and Malling)
I have only just come into post.
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Q You will forgive me for recognising that there may be other jurisdictions closer to their home that are also involved in that.
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Q We must get this right, but it is an international problem that we must all get right.
Thomas Tugendhat (Conservative, Tonbridge and Malling)
That is absolutely true, which is why the partnership that we have to put in place alongside agencies, NGOs and journalism, to make sure the application programming interfaces are open is so important.
Hannah Bardell (Scottish National Party, Livingston)
Order. I am afraid that brings us to the end of the time allotted for the Committee to ask questions.
I very much thank our witnesses, Helena Wood and Duncan Hames, for their time, and I thank Members for their questions. We now move on to the next session.
Hannah Bardell (Scottish National Party, Livingston)
We now hear from Chris Taggart from OpenCorporates and Elspeth Berry from Nottingham Law School. You are both very welcome; thank you very much for joining us this morning. Could you please introduce themselves for the record? We have until 12.35 pm.
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q First, thank you for coming to give evidence today; it is much appreciated. We have had some discussion on information-sharing; I think you overheard that. If there is anything that you wanted to add, rather than repeating what we may have heard, that would be useful.
I want to ask you a bit more about the lack of transparency when it comes to shareholders. How much do you see that as an issue? Can you suggest any specific measures to increase shareholder transparency?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q First, I want to follow up on that point about unique identifiers and how those would help. I have looked myself up in the Companies House register, and I appear as three separate people. Can you tell us what the benefits of having a unique identifier would be?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Do you think it would be necessary for Companies House to set about the work of going backwards through the register? There are companies being registered every single day. The legislation comes into force and things going forward will be registered, but how much work does Companies House now need to do to go backwards through the register and get rid of all the guff information in there?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Is there an amendment you would make to make that clearer?
James Daly (Conservative, Bury North)
I want to pick up on the question about Companies House. On Tuesday, Companies House described themselves as a passive organisation at this moment in time; potentially, they are now turning into—I do not know if this the correct word—an investigative or certainly proactive organisation. All that we have heard so far, which I fully accept, is that it has to be resourced. How do you think this change of culture and investigation will work with some of the problems that you talked aboutQ ?
James Daly (Conservative, Bury North)
Q The reason I ask is that the example was given on Tuesday of a chip shop in Barnsley—great town that it is—has 50 legal entities registered to it. There are thousands of examples all over the country. It would take one investigator months to investigate the information for every separate legal structure attached to that chip shop. What do you feel about that, Ms Berry?
Margaret Hodge (Labour, Barking)
Q I very much take your point, and I hope some of the amendments we put in address what you said about wanting to tighten up on the proactive role of Companies House.
I wanted to ask about shareholders and then about the disappearance of limited companies if they dissolve. I agree that shareholder information is really important—Usmanov brought that home to me. When we sanctioned Usmanov, he just gave everything to one of his daughters or something—anyway, it disappeared into other people’s hands. Can you explain a little what we need to do on shareholder information? At the moment, there is a 25% shareholding barrier. Should that be reduced to 5% or 10%? That is my question.
Then, on limited partnerships disappearing, that was brought home to me very much as a result of the terrible incident in Lebanon—the explosion in Lebanon. It was found that a British-owned company was behind that, with a beneficial owner in Cyprus who happened to be a corporate service provider. It then turned out that it was a nasty situation where the actual owners were some Syrians, and the fertiliser was not going anywhere near Mozambique—which was where it was meant for—but was being used for barrel bombs to kill Syrian citizens. The moment that happened, they tried to dissolve the company and get it to disappear, and obviously in that area of wrongdoing, we need to hang on to any knowledge that we have.
This is for both of you: what amendments do you think are necessary to enable us to stop people dissolving companies and to force information out, so that where there has been that terrible terrorist wrongdoing, we can pursue the wrongdoers? That said, I take the view that a lot of what we are trying to do is prevent these things from happening in future.
Margaret Hodge (Labour, Barking)
Q Would you go down to zero—all shareholding data?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q I have a couple of specific questions. First, do you think there should be any sort of limit on the number of companies or partnerships registered at one address? Secondly, should there be any sort of limit—perhaps one beyond which there needs to be an application to increase, under specific criteria— on the number of directorships that any one director can hold?
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Q I am very interested in some of the identification elements that are raised. How much of a difference will the verified identification make to the identification of individuals?
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Q Mr Taggart, you will be aware that there is wider debate about unique identifiers because it ties in personal privacy aspects in healthcare, insurance and, in fact, every part of your life. Every single country that has introduced them has had a privacy pay-off. That is one that you may or may not be willing to address, but it is not just simply a question of companies.
Hannah Bardell (Scottish National Party, Livingston)
Order. I am very sorry. That brings us to the end of the time allotted for the Committee to ask questions. I am very grateful to our witnesses for giving evidence.
Examination of Witness
Hannah Bardell (Scottish National Party, Livingston)
We will now hear from Graham Barrow, a journalist and author appearing via Zoom. We have until five past 1 pm. Could you introduce yourself, Graham?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Thank you, Mr Barrow, for giving evidence today. To pick up on your point about becoming obsessed, I think that is an understatement of the contribution you are now making, which seems to be identifying so much more than Companies House is doing itself and documenting the flaws in the current system. Why do you think that is the case? You have played a very important role in documenting some of the most blatant abuses of the Companies House registration systems. How concerned should we be about the large number of companies you have identified that are incorporated in offshore jurisdictions with weaker money laundering laws than we have?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Thank you, Graham, for coming to give evidence and for all the work you have been doing on the Companies House register. You have exposed quite a lot of companies that are essentially fake. They do not really exist—they are not real companies. Some of them are set up to imitate existing companies. Can you tell us a bit more about the extent of that and the scale of the work that the Companies House register will have to undergo to have a register that has integrity?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Presumably very little of that gets picked up by way of an offence. It is an offence to make a false filing to Companies House.
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Are there additional measures in the Bill that you think would be useful to shut that door on new companies?
Hannah Bardell (Scottish National Party, Livingston)
I have asked for the volume to be increased, because I know that some Members are struggling to hear.
Hannah Bardell (Scottish National Party, Livingston)
Yes, if you could speak directly into your microphone, we would be very grateful.
Margaret Hodge (Labour, Barking)
Q Thank you, Graham, for all the work that you are doing. Even the suggestions you have made are very sensible. Obviously the data that is collected is important, but one of the ways in which we think we can tighten up the provisions a little bit is to increase the duties of Companies House to check. In a way, that is what you do. You go into these massive datasets and decide, “What the hell am I going to look at?” Can you give us some ideas as to how we could hone the measures to ensure that there is a red flag way—call it what you like—of going in and checking on everything?
Gavin Newlands (Scottish National Party, Paisley and Renfrewshire North)
A lot of the issues that the Bill rightly seeks to address are fairly high-level economic and corporate crimes, which are huge issues—and we are talking about huge amounts of money—but they do not directly have an impact on the vast majority of our constituents. One issue that does is phoenixing companies. Does the Bill do enough to address that type of issueQ ?
Gavin Newlands (Scottish National Party, Paisley and Renfrewshire North)
Q What specific amendments would you suggest for the Bill to address it a lot better?
James Daly (Conservative, Bury North)
Q Thank you, Graham. I think you have answered this question, but, in layman’s terms, if Fred Bloggs from Bury—my constituency—who has led a blameless life and is 95 years of age, finds that his name is down as a director of, or linked to, any company or legal entity that has sent a supporting application to Companies House, how does this Bill assist him?
James Daly (Conservative, Bury North)
Q Forgive me for interrupting, Graham—it is just because of time. When we look at red flags in various ways, we obviously talk about identification, but if the information produced is “Fred Bloggs of this address”, where would the red flag come?
James Daly (Conservative, Bury North)
Thank you, Graham.
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Q Could you give some live examples as to how you would use various aspects of the powers in the Bill to improve your ability to track? Of course, we have spoken on numerous occasions about the partnership that we need. If I may say so, Graham, you are an extremely active tracker of companies, and, I would therefore say, one of the top of the class in the public-private partnership.
Thomas Tugendhat (Conservative, Tonbridge and Malling)
I am very pleased to hear that. You are challenging me as Security Minister. You speak against cyber-security, which is an enormous element of the defences that we need for other areas of crime. I am sure you would not be recommending to anybody that they should never use VPNs or encrypted emails.Q
Thomas Tugendhat (Conservative, Tonbridge and Malling)
I understand the distinction. I just wanted to make the point. As you can understand, it would raise other difficulties.
Thomas Tugendhat (Conservative, Tonbridge and Malling)
I am very grateful for your input. I wonder whether you could say a little bit more on the issue of shell companies and how they are used. You will know very well the work of people like Oliver Bullough, Tom Keatinge and Luke Harding.Q
Thomas Tugendhat (Conservative, Tonbridge and Malling)
They are brilliant. These people are quite literally on the frontline of our democracy, defending our freedom by defending our corporate integrities. Their work is extraordinary important. I would be grateful if you would say a little bit more about shell companies.
Thomas Tugendhat (Conservative, Tonbridge and Malling)
I should put on the record that he is a friend of mine as well.
Margaret Hodge (Labour, Barking)
Of lots of us around the table.
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Q Thank you very much indeed. The amount of data coming out suggests that this legislation may do something to inform people about things such as phoenixing, which you have mentioned. Clearly, there are many aspects to that and I am not going to pretend for a second that the Bill answers every single one—it does not—but it certainly goes some of the way towards ensuring that people can be better informed when they enter into future agreements. How would you say that the information alongside the verification assists you?
Margaret Hodge (Labour, Barking)
Q I want to take you back to the work you did on Deutsche Bank. First, what additional powers did it lead you to think you needed? Secondly, how did the FCA respond—what was lacking or worked well there?
Hannah Bardell (Scottish National Party, Livingston)
If there are no further questions from Members, I thank the witness; Graham, thank you very much for your time.
(Afternoon)
Examination of Witnesses
Hannah Bardell (Scottish National Party, Livingston)
We will now hear oral evidence from Angela Foyle and Mike Miller from the Institute of Chartered Accountants in England and Wales. We have until 2.20 pm. Could the witnesses please introduce themselves for the record?
Hannah Bardell (Scottish National Party, Livingston)
Thank you very much. I will first call Liam Byrne.
Liam Byrne (Labour, Birmingham, Hodge Hill)
Thank you, Ms Bardell. Starting with you, Angela—thank you so much for coming to give evidence. First, what are the perceptions around the world of London, in particular, as a centre for money laundering? How serious a problem do people abroad think that we have hereQ 213?
Liam Byrne (Labour, Birmingham, Hodge Hill)
Q You used the word inevitable in your answer. Is it inevitable that there will be lots of dirty money on the scale we have flying through London today?
Liam Byrne (Labour, Birmingham, Hodge Hill)
Thank you—that is well put. Mike, what is your view on that?
Liam Byrne (Labour, Birmingham, Hodge Hill)
Q Angela, we heard evidence on Tuesday from UK Finance that it was concerned that the verification regime proposed in the Bill is much weaker than the regime used across the AML regulated sector. What is your view on that? Are you worried that a two-tier verification regime is emerging here?
Liam Byrne (Labour, Birmingham, Hodge Hill)
Q Do you think that is a weakness in the Bill that we should think about strengthening?
Liam Byrne (Labour, Birmingham, Hodge Hill)
Q That is very useful. Finally, the folks from Lloyds bank, and others, described how easy it is to move money through a network of banks and then consolidate it into a final bank, from which bad people may take their money out. We were worried about the way in which proxies in particular could be used by bad people to help with this kind of mechanism. In the Bill, we have a definition of “person with significant control”, which is someone with about 25%. Is that too high?
Alison Thewliss (Scottish National Party, Glasgow Central)
In your evidence to the Committee, you said that you wanted Ministers to amend the legislation to ensure that accountancy firms are in the scope for indirect information-sharing provisions. Will you tell us a bit more about why that is important?Q
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Thank you, that is useful. As one of the organisations under the OPBAS umbrella, how do you feel that is going with anti-money laundering supervision because there has been some criticism of that regime and its efficacy? Looking at the 2019-20 figures, I understand that you cancelled 10 memberships and issued 39 fines totalling £117,000 to members. What does that stand at now, and is it an effective deterrent?
James Daly (Conservative, Bury North)
Under the Bill exemptions from the main money-laundering offences would apply in two sets of circumstances. One is when a regulated business ends a business relationship with a client or customer and hands over property worth less than £1,000 for that purpose. The second is where a regulated business is dealing with property for a client or customer and prevents access to property of equivalent worth. Do you have any view on those exemptions and how they would potentially affect your professionQ ?
James Daly (Conservative, Bury North)
Q Time might mean that you will be not be able to answer this question as fully as you might wish. However, on where we are now, and where the Bill will take us, the general view that we have heard from witnesses is that it is good—maybe as a starting point to go forward from. In a few sentences, will you explain how you think the Bill will affect your profession, for good or for bad?
James Daly (Conservative, Bury North)
That is very helpful. Thank you.
Margaret Hodge (Labour, Barking)
ICAEW represents what proportion of the accountancy profession, do you reckonQ ?
Margaret Hodge (Labour, Barking)
Q You do not know the proportion, but the truth is that there will be people who are financial advisers and accountants who are not members. You have a policing role, but if they are not your members, they are not policed.
Margaret Hodge (Labour, Barking)
Q Yes, but you are the big one.
Margaret Hodge (Labour, Barking)
Q Quite. We know that most accountants are brilliant people who make sure we do not make mistakes when we fill in our tax return and all that sort of stuff. However, we know from all the leaks that there are a lot of bad apples in the accountancy world.
There are two things I wanted to ask. One is about the current system of regulation. You as professionals play a role in the system. What changes would you make to ensure the current regulation encompasses all those who call themselves financial advisers or accountants? Secondly, how good are you at your policing role? You obviously have a lobbying role and looking at both your CVs, you are on the lobbying side to make sure regulation fits what your profession wants. I am much more concerned about the policing role. Can you tell me how many people in the last year have been suspended, or whatever it is you do to them, if they have been found guilty of engaging in, facilitating or colluding with economic crime or money laundering or anything like that?
Margaret Hodge (Labour, Barking)
Q I had them, but unfortunately I have lost them. I think it is about 10 or 15.
Hannah Bardell (Scottish National Party, Livingston)
I am going to have to curb this and move on very briefly to Tom because we have to finish.
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Q This is a very brief question. What difference will this make to the solicitors’ profession as well? You will have noticed that there is not only a control of accountancy but an increase in penalty to solicitors’ regulations.
Hannah Bardell (Scottish National Party, Livingston)
Thank you very much. That brings us to the end of the time allotted for the Committee to ask questions. I thank our witnesses on behalf of the Committee for their evidence.
James Daly (Conservative, Bury North)
On a point of order, Ms Bardell. As a result of Mr Tugendhat’s question, I had better declare an interest: I am a practising solicitor.
Hannah Bardell (Scottish National Party, Livingston)
Thank you very much. That will be put on the record.
Margaret Hodge (Labour, Barking)
Can I ask something wicked? Can the witnesses provide written answers to my questions?
Hannah Bardell (Scottish National Party, Livingston)
They can indeed.
Hannah Bardell (Scottish National Party, Livingston)
We will arrange for the questions to be delivered to you in a written format and additionally distributed.
Examination of Witness
Hannah Bardell (Scottish National Party, Livingston)
We will now hear oral evidence from Peter Swabey of the Chartered Governance Institute UK & Ireland. I hope I have pronounced your name correctly.
Hannah Bardell (Scottish National Party, Livingston)
Q Thank you very much. We have until 2.50 pm for Members to ask questions. Could the witness please introduce themselves for the record?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Thank you very much, Mr Swabey, for coming to give evidence. Could you say a little about what you do in relation to issues around economic crime? What is the view of your members about what more needs to be done and whether there is enough going on in the Bill? Do you have two or three things that you think need to be improved?Q
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q What about gaps?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q To be a bit more specific, what more do you suggest should be in the Bill?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q We heard earlier about some of the deficiencies in the way that documents are delivered and uploaded to the Companies House website, and how they can be used thereafter. Are there practical improvements that could be made to improve that situation, both at your end of the process, in the filing, and for the use of those documents at the other end of the process?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q We have heard an awful lot about deficiencies in the register in terms of the information that is on there and the practical difficulties that that causes for companies who wish to interrogate the information for their own due diligence. Is that an issue you have come across?
James Daly (Conservative, Bury North)
One of the things we have talked about with every witness—you will probably give a similar answer, Mr Swabey—is that we all want to see Companies House resourced to be able to carry out the requirements in the Bill. One witness this morning made reference to the sheer volume of companies and legal entities that are registered at Companies House on a daily basis. If one of the consequences of the Bill is that registration at Companies House takes longer because people have to go through the regulations and comply with other duties, is there any consequence to that?Q
James Daly (Conservative, Bury North)
In layman’s terms, and very briefly, if I want to register a legal entity and I employ you or somebody else to do that, what information is submitted to Companies House?Q
James Daly (Conservative, Bury North)
So such a process—light-touch regulation at its finest—is certainly open to fraudulent activities.Q
Margaret Hodge (Labour, Barking)
Q It is the beneficial ownership that is revealed to Companies House, not necessarily even all the directors, as I understand it. The way you are talking, you obviously deal with big companies. The whole purpose, which I think we all share across the room, is that we want SMEs and the growth of new companies. The idea that every SME will have a company secretary is not really a viable alternative. That means it is really important that we can have faith in the company service providers, who are the people who check the data. Given the way the Bill is constructed, do you think you would have such faith, in particular given all we know from the Panama leaks onwards?
Margaret Hodge (Labour, Barking)
Q What would that entail?
Margaret Hodge (Labour, Barking)
Q Do you know how company service providers are regulated and supervised?
Margaret Hodge (Labour, Barking)
Q They are supposedly regulated and supervised by HMRC. Previous witnesses talked about OPBAS, which in its most recent report said that 81% of those supervisory bodies did not have a proper risk-based approach to ensure that those people were lawyers, accountants, bankers or whatever, that they were legitimate people not colluding in or facilitating economic crime. What do you have to say about all that? Basically, supervision is in a mess. HMRC does nothing to supervise company service providers. What is your view on that?
Margaret Hodge (Labour, Barking)
Q You give advice on what makes good supervision.
Liam Byrne (Labour, Birmingham, Hodge Hill)
Q I want to pursue that point for a moment. In the interests of good governance, would it not make sense to strengthen some of the obligations on directors to include, for example, a duty to take steps to prevent corruption in their organisations? We have similar measures on corruption; we do not have similar measures on economic crime and fraud.
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Q It is nice to see you, Mr Swabey. May I ask specifically about the governance aspect, which is your area? Accountability is fundamental to governance. You cannot hold people to account for things that they are not responsible for, or likewise the reverse. Will you touch a little on how you see that improving—not just the accountability in financial transparency, and all the anti-money laundering and various other aspects we have spoken about, but the ability to hold companies to account for other governance areas, whether those are corporate social responsibility, clean-up, environmental or many others?
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Q You do not think that cleaning up Companies House, making people accountable, and understanding who they are and who knows what are important for governance?
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Q I do not agree; let me push back on that. One of the things we have a problem with in the community that I am lucky enough to represent is dumping waste—fly-tipping—and it so happens that occasionally, it is done by companies that then disappear. I think the Bill helps to address that. Do you not?
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Q So it does have some environmental effect.
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Q Would you agree, then, that it may also support other areas of governance: the ability to oversee, for example, different areas of employment, human trafficking or whatever it might be, and to go through companies that set up and disappear far too quickly?
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Exactly—phoenixing.
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Q I am very glad you are supportive of that. I think this makes a huge difference; as you rightly say, it is one step on the journey, but it is still a huge difference from where we are.
I also wondered if you could talk a little bit about whether you think it is going to help with economic crime. Clearly, although I am not a BEIS Minister, one of my responsibilities is fraud. The presence and disappearance of corporate entities is, I am afraid, something that has caused more than its fair share of fraud. How do you think the Bill might be able to help with that?
Thomas Tugendhat (Conservative, Tonbridge and Malling)
I am very grateful, not only for your evidence today, but for the work you do and the oversight you bring. It does make a huge difference, and I am very grateful indeed for it. Thank you.
Hannah Bardell (Scottish National Party, Livingston)
Thank you very much. If there are no further questions from Members, we will thank the witness for his evidence and move on to the next panel. Peter, thank you very much for your time; we greatly appreciate it.
I am going to suspend the sitting, because we have a little bit of time before the next evidence session, and the witness is not in the waiting room yet because she is giving evidence via Zoom.
Hannah Bardell (Scottish National Party, Livingston)
I restart the sitting with our sixth panel . We will now hear oral evidence from Catherine Belton, journalist and author. Catherine is appearing via Zoom. We have until 3.10 pm. Catherine, could you please introduce yourself for the record?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Thank you very much, Ms Belton, for joining us to give evidence today, and thank you for all you do as well. In terms of the scale of economic crime and how much needs to happen nationally and internationally, what gaps do you see in the legislation as it currently stands that stop the UK from being able to tackle economic crime on the scale that we need to?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Thank you very much, Catherine. Could you tell us a bit more about why the UK has become the destination of choice for people wishing to use corporate structures for money laundering and other purposes? Could you tell us about the impact that has internationally?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Thank you; that is very helpful. I just wanted to ask about something else. Bill Browder had suggested a sort of “adverse costs” amendment, to prevent law enforcement companies from not being able to afford to take a case against these people. Would you support that?
Hannah Bardell (Scottish National Party, Livingston)
Catherine, I am really sorry to interrupt you—
Alison Thewliss (Scottish National Party, Glasgow Central)
I think my colleagues and I are interested in hearing this.
Hannah Bardell (Scottish National Party, Livingston)
It is a very important question, but unfortunately we have to stick to Members asking witnesses questions. However, I am sure that you can put those questions to our esteemed Members in other forums.
I will move on to James Daly now, because there are a couple of other Members who are keen to ask questions.
James Daly (Conservative, Bury North)
Q Catherine, thank you very much for giving evidence; what you have said is very helpful. You have investigated these matters and looked into them. You have talked about Companies House, which is a central part of this legislation, and we have talked with other witnesses about what needs to be done there.
However, I just wanted to ask about money laundering. To make a very straightforward point, you obviously need a bank. If you have got a fake financial institution, or a legal entity set up for criminal purposes, you need a means of transferring money, either out of that body or into it. Could you talk about any thoughts or experience that you have, including regarding anything that you have investigated, that touches on that point and on what we can perhaps do to address it?
Hannah Bardell (Scottish National Party, Livingston)
Catherine, we really want to hear from you and make sure that all our other members get to ask questions. We have two other members after James who want to ask questions, so please keep your responses as brief as possible, with all the information that is possible to get across.
James Daly (Conservative, Bury North)
Q On top of all the very important points that you have made, I think one of the things that I am left with from your evidence, Catherine, is that we have to ensure that the information-sharing links between Companies House and financial institutions are strengthened. Companies House was described as being a passive organisation at the moment, but what you are saying is that that has to change and there has to be a close link with financial institutions, so that these relationships are attacked throughout the criminal justice system. Am I right?
Hannah Bardell (Scottish National Party, Livingston)
Thank you very much.
Liam Byrne (Labour, Birmingham, Hodge Hill)
Q Catherine, I think I speak for all of us in saluting you for the courage you have shown in revealing what you have revealed. How important was it to President Putin that people around him—his friends and allies—were able to move money so easily out of Russia through UK corporate structures?
Liam Byrne (Labour, Birmingham, Hodge Hill)
Q Let me just crystallise this. Are you saying that allies of President Putin used UK corporate structures to move money out of Russia?
Liam Byrne (Labour, Birmingham, Hodge Hill)
Q I do not know whether you can see it, but the Bill is called the Economic Crime and Corporate Transparency Bill. How credible do you think corporate transparency in this country will be if we do not amend the Bill to include the protection of journalists like you, who have worked so hard and bravely to reveal the truth only to face legal action in English courts that sought to silence you?
Margaret Hodge (Labour, Barking)
Q I will ask one question, Catherine, because many have been asked. I join with others who have met you, or read your book, and are full of admiration for your courage. For those who have not, and do not know your story, will you quickly tell us what happened to you in relation to the SLAPPs, and why it is important that we try to tackle those in the Bill? You can do it very briefly; I am conscious of time.
Margaret Hodge (Labour, Barking)
Q How many were there altogether?
Hannah Bardell (Scottish National Party, Livingston)
Catherine, I am really sorry, but I have two more people waiting to ask questions and there is only five minutes. I am so sorry to curtail you.
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q I want to come back on how we can take practical steps to tackle this. I think you mentioned the Foreign Policy Centre. Are there more specific measures we could take in the Bill?
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Q Catherine, thank you very much for giving evidence to what must be your 20th or 30th Committee in the last 12 months. I am very grateful for the work you do. Could you tell us how you think the reforms to Companies House will improve oversight of listed finance? As you say, it is a building block.
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Okay, thank you.
Hannah Bardell (Scottish National Party, Livingston)
If there are no further questions from Members, thank you very much, Catherine, for taking the time to speak to us.
Hannah Bardell (Scottish National Party, Livingston)
Last but not least, we will hear oral evidence from Professor Jason Sharman, professor of politics at the University of Cambridge. We have until 3.30 pm. Professor Sharman, could you introduce yourself and give us your background for the record?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Thank you for coming to give evidence. Does the Bill go far enough in reducing the attractiveness of the UK as a destination for economic crime? You obviously have an international perspective, and I am keen to know whether you are seeing new behaviours that it would be useful for us to understand. Are the measures sufficient for tackling the challenge we face?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q On the attractiveness of the UK, you have mentioned enforcement, but from your research in this area, what would you highlight as being the weakest points in enforcement?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q There has been a lot of discussion about anti-money laundering supervision, and the effectiveness of the agencies that the Government expect to carry out those duties. Are they the weakest link in the chain, and could more be done to tighten up that anti-money laundering supervision, to shut the door, and to stop these companies from beginning their business here?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q That makes sense. Certainly, there have been lots of times when I have been in rooms with a group of people who have solutions to tackle this, and Government should be doing more to make sure that they are listened to. Could I ask about the abuse of limited partnerships, secrecy jurisdictions and things like that? Could more be done to tighten up those rules? It feels as though there is an awful lot of abuse of those corporate structures, and very little scrutiny.
Alison Thewliss (Scottish National Party, Glasgow Central)
Q The Government have talked up the benefits of being able to incorporate companies fast. Do you think there needs to be a bit more grit in the system to allow for scrutiny, rather than speed?
James Daly (Conservative, Bury North)
Q Thank you for that, Jason. You have given an example already, but I was wondering about the international context. We have Companies House. Can you give me an example of the equivalent in European countries or America and the difference you perceive between our Companies House and theirs?
James Daly (Conservative, Bury North)
Q That was my point, really. We have accepted the point about resources, but Companies House was described by one of the directors we heard from as a passive organisation in respect of these issues. I just wondered whether in other jurisdictions, say France or Germany—and I don’t know the answer to this question—they have that view of their equivalents, or do they view theirs as a proactive organisation that has to investigate the things we are talking about?
James Daly (Conservative, Bury North)
Q Forgive my naivety, but it usually takes a company or a legal entity about 15 minutes to register with Companies House. The intention behind that is for money laundering purposes. I am assuming—forgive me if I am wrong—that when Fred Bloggs and Co. was set up, the people who did so had to then open a bank account in the name of Fred Bloggs and Co. in order to transfer the money to this jurisdiction. Is that correct?
James Daly (Conservative, Bury North)
Q Just in general, using the banks as an example, should we be looking to put in the Bill requirements for them to play their part in the partnership to tackle money laundering?
Margaret Hodge (Labour, Barking)
Q Following on from that, I completely take the point about enforcement, but would a failure to prevent power make any difference, assuming it was enforced?
Margaret Hodge (Labour, Barking)
Q Because time is limited, I will not engage with that, but it is a really interesting view. I want to quote something to you that I think you said—apologies if I have got it wrong. You said:
“These host states now have a duty to block, trace, freeze, and seize these illicit funds and hand them back to the countries from which they were stolen.”
I do not know who you were referring to there, but, in our case, with the illicit Russian assets frozen in the UK, how do you suggest we seize those funds and how can we repurpose them?
Margaret Hodge (Labour, Barking)
Q That is very hard—you know that.
Margaret Hodge (Labour, Barking)
Q Sanctions.
Margaret Hodge (Labour, Barking)
Q That is the point. Did I quote you incorrectly, then?
Margaret Hodge (Labour, Barking)
Q I accept it is different from a Russian oligarch, but according to Bill Browder we have something like £30 billion of Russian state assets sitting frozen at the moment. Of course, it needs to change. I totally accept that we are not at war with Russia, so those powers do not exist. Do you think it is appropriate to introduce any new powers that would enable us to seize as well as freeze those assets and then repurpose them for the reconstruction in Ukraine? There is certainly a desire across the political divide here in the UK to try to achieve something along those lines. Do you think that is possible?
Margaret Hodge (Labour, Barking)
Q This is the state I am talking about.
Margaret Hodge (Labour, Barking)
Q The Italians appear to have conquered this—I do not know if you know about that—through the stuff they have done on the mafia. The Canadians appear to have introduced a new power that might take them there. The Americans are trying to think about it. The Europeans are. There is quite a lot of thinking. I am just picking your brain. Is there anything you have done in this field that could add value as we try to think about it?
Liam Byrne (Labour, Birmingham, Hodge Hill)
Jason, you are a political scientist. Why are we in this position where we have such weakness? Why has our political system failed to address these weaknesses for so long?Q
Hannah Bardell (Scottish National Party, Livingston)
Before the right hon. Member for Birmingham, Hodge Hill asks his next question, I remind him that our line of questioning has to relate to the legislation in front of us. With his extensive parliamentary experience, I know that he will be able to do that.
Liam Byrne (Labour, Birmingham, Hodge Hill)
I am grateful for those guard rails, Ms Bardell. At the moment, the Bill has a lacuna, which is any protections around safeguarding politicians from dirty money. We are not covered by suspicious activity reporting, for example. Some would argue that the £1.2 billion that has flown into British politics over the past 10 years from people with all kinds of motivations and ambitions may be one of the reasons that our political system has not acted hitherto to stop this corruption, and that should be something we fix in the Bill. What do you think about that?Q
Liam Byrne (Labour, Birmingham, Hodge Hill)
Q So it could be part of the solution.
Hannah Bardell (Scottish National Party, Livingston)
Thank you. I move finally to Tom Tugendhat.
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Q Professor, thank you very much indeed. I am grateful to you for reminding us that Magna Carta guarantees private property in various ways. Various legal jurisdictions, including the United States, Italy, the European convention on human rights, European property law and, indeed, many other jurisdictions around the world have all maintained and guaranteed it, which makes this so difficult. That said, do you agree that it is important to try to find out who owns what, so that we can at least take action where we have a legal ability to do so, and does this Bill help with that?
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Q No, that is true, and that is why the work being done between Companies House and the agencies is so important—to ensure that Companies House goes from being a pinboard to being a regulator and a check. That is a very important move. It is not the same as the FCA or a regulator of that kind, but at least it is beginning to verify in terms of ID and so on. How much of a difference do you think the overseas territories and Crown dependencies verifications have already made?
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Q It is clear that there is a huge number of changes. You will know about the work that we have done in the past on the Foreign Affairs Committee and now in Government on trying to clean this up. This is something that, sadly, has lasted for the best part of 100 years, with no Government really making any effort to do anything about it until now. It is interesting that we are here again with a number of registrations, many of which were warned about in the 1970s, ’80s, ’90s, noughties and, now, the ’10s and ’20s. I am glad that we are doing something about it. Do you think that Companies House is going to be able to do that if it has the proper resources, or is it going to require other agencies as well?
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Q Would you say that the extra powers given to organisations such as the Solicitors Regulation Authority and its equivalent in Scotland are important to ensure that such regulators actually do have teeth? At the moment, as you will know, the fines form both of them are very low. This would, one hopes, connect to the work that we did in 2017 or 2018—I cannot remember exactly when—for the report “Moscow’s Gold”, where the Foreign Affairs Committee highlighted the role of enablers, not just regulators.
Thomas Tugendhat (Conservative, Tonbridge and Malling)
Thank you very much.
Hannah Bardell (Scottish National Party, Livingston)
If there are no further questions from Members, I want to thank the witness for his evidence. Professor Sharman, thank you very much for taking the time to come and speak to us.