Liam Byrne
MP for Birmingham Hodge Hill and Solihull North · Labour · United Kingdom
“The loss of 4,000 jobs at Jaguar Land Rover is a body blow for workers, families and communities across the west midlands, so I commend Richard Parker, the Mayor of the West Midlands, for moving quickly on Monday to put £500,000 on the table to help ensure that everybody gets back to work.”
“I wholeheartedly welcome this well-rounded statement from the Foreign Secretary, and put on record my thanks to the new Prime Minister for the hard yards that I know he has put in over recent days and weeks.”
“I am grateful to my hon. Friend for giving way, and I offer my warmest congratulations to her on her appointment to the role; she will be a brilliant Minister.”
“Let me start with a word of thanks to my hon. Friend the Member for Chester North and Neston (Samantha Dixon), who is not in her place, who said quite rightly that an awful lot has changed since the Bill was first introduced to this House. Indeed, a lot has been revealed over the course of the summer.”
“The effect of new clause 34 would be to ban off-ramping, ban new forms of digital currency transactions and ban memecoins, which are exactly the kind of measures that Ministers now need to bring forward. If we want to take the crypto system out of political finance, this is what we need to do.”
“No doubt we will learn that Mr Cottrell was in fact on the electoral register when that money was passed. No doubt we will discover that his mother, Fiona Cottrell, declared and did not disguise the fact that the money had ultimately come from her son.”
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“First, the Select Committee concluded that “assets laundered through the UK are financing President Putin’s war in Ukraine.” Secondly, the report said: “The Government’s unwillingness to bring forward legislation to stem the flow of dirty money is likely to have contributed to the belief in Russia that the UK is a safe haven for corrupt wealth.” It is very welcome that the Government introduced sanctions and have brought forward this Bill, but I am afraid the Foreign Affairs Committee came to the conclusion that our sanctions regime was “underprepared and under-resourced.” We on the Select Committee found that there was not the capacity in the FCDO to match the speed and power of the sanctions regime brought into force by our American colleagues and, indeed, the EU.”
“The Minister probably did not intend to set hares running, but he certainly has with his suggestions this morning. I know he will be alive to the Foreign Affairs Committee report on illicit finance that was published under the chairmanship of the right hon. and gallant Member for Tonbridge and Malling (Tom Tugendhat), who is now the Minister for Security, but I wish to share some of its headlines to underline a point that was wholly missing from the Minister’s presentation. Let us start with the really bad news.”
“The Minister is being characteristically generous. As he reflects on the huge wisdom of the amendments tabled by my right hon. Friend the Member for Barking and perhaps returns to the Committee with some of his own, could he share with us how many of the 1,200 individuals and 120 businesses that have been sanctioned since Russia’s invasion of Ukraine have had directorships suspended?”
“Let me give the Minister a bit of feedback from my time as Chief Secretary to the Treasury. If a spending Minister comes before the Chief Secretary to say: “I’m really sorry, but we have a legal duty to do this”, it is an awful lot easier for them to win the case for the resource that they need than when they do not have the weight of that legal duty on their shoulders. Therefore, automatic consideration of a sanctioned individual for suspension of a directorship is a good thing to enshrine in a legal duty. I am trying to be helpful to the Minister, because I want him to be able to win arguments with the Treasury for the resources that he needs to achieve the objectives we both share.”
“I join my colleagues in welcoming the Minister to his post, in what is a very welcome appointment, and I apologise to you, Mr Robertson, for being slightly late this morning. Surely the Minister must see that there is a world of difference between action to promote the virtue of something and action to prevent the badness of something. I have been a Minister too. I have created Government agencies. I have tried to enshrine objectives in agencies, from which a business plan is then written. It is incredibly important to say what we mean and mean what we say when we are specifying the objectives of an agency such as Companies House. I urge him to think again about the amendment. It is not simply a matter of word play. It is about doing what is needed to be done.”
“That is why the amendment is important, and why it is important that the Minister set out clearly today how he is going to approach the solution to this problem.”
“Indeed, the Minister, in his pre-ministerial life, is on the record as having speculated about what some of the resources might need to look like. We hope he will repeat those comments on the record as a Minister of the Crown in the Committee today. Let us be clear about the risks, which were starkly described for us last week by the independent reviewer of terrorism legislation: there is a direct relationship between economic crime and national security. This is not simply a question of bad people stealing lots of money from good people; it is about a threat to our country. The Minister has an opportunity to ensure not only that our economy is operating on a clean-trade basis, but that our national security defences are strengthened.”
“Friend the Member for Barking pointed out, there has been only one prosecution despite hundreds of billions being stolen and moved through UK corporate structures. In part, we are not prosecuting the crime because we are not policing the crime, and all of us on the Committee will have heard loud and clear last week’s evidence from City of London police and the National Police Chiefs’ Council, which said that they need more resource. It is as simple as that. They cannot afford the specialists they need to police this area, and the task of policing such crime would be an awful lot easier if we ensured that there was a proper gateway doing its job in Companies House. We know that Companies House needs more resource as there has already been a wide-ranging debate.”
“That is where economic advantages will flow from in the years to come. It is therefore a matter of enormous national shame that we have become such a hotbed of money laundering. It is appalling that about 40% of the corporate structures used for Danske Bank money laundering were here in the UK, and appalling that we have become such a country. Hundreds of billions of pounds-worth of money stolen from the Russian people has been laundered through UK corporate structures, yet last week we heard from Bill Browder and Catherine Belton that UK corporate structures are absolutely being used by friends and allies of President Putin to move money abroad to help to finance Russian intelligence operations and other nefarious activity. However, as Mr Browder said, we are not prosecuting the crime and, as my right hon.”
“This is an important debate, and I think that the Minister’s reply will be, in a sense, a useful “Second Reading” debate on how he will deal with the problem of resourcing. I know that he, as a new Minister, will have spent the weekend reading all of the evidence that we gathered last week. It was very much like an autopsy on the state of economic crime in our country—grisly and appalling. He will have been not shocked, because he is familiar with the facts, but reminded starkly that he is a Minister at a watershed in the debate. It is clear that the time to act is now. The world is divided, and there is a great kleptosphere from Kaliningrad to Kamchatka, so it is important that we set out our stall as a place not just of free trade, but of fair trade, as well as, crucially, clean trade.”
“The Minister is being characteristically generous in giving way. The point about Danske Bank is that the money was moved through UK corporate structures that should not have been set up in the first place. If we had a stronger verification regime—if we had a stronger set of obligations on Companies House and a better-resourced Companies House—we would surely have run a chance of the crime being prevented, because the checks would have created a tripwire that would have stopped the structures being set up and the money being moved through them. The point about resources and duties is incredibly important.”
“I suppose we may as well get all the details out now. The estimates for how much extra resource Companies House might need range from three times to 10 times its current level. I was very surprised to hear from Companies House that it was proposing to employ only 100 extra people. That is an increment of about £5 million to £6 million extra, which feels radically short of what is proposed and for the implications of the Bill. Will the Minister therefore put our minds at rest by saying to the Committee that those figures will be radically improved when the Companies House business case for the next financial year is approved?”
“My sense is that the Minister will steer clear of specifying the order of magnitude by which we need to increase Companies House resources. That is a disappointment to many of us, but will he therefore advise the Committee how as a House of Commons we best guard against the risk of under-resourcing Companies House once the Bill has reached Royal Assent?”
“I hope that he reflects and comes back—possibly on Report or in the other place—with a strong set of objectives and the resources to match.”
“I hope he will reflect on the debate we have had today and come back with stronger and proactive anti-corruption objectives, including a duty to prevent corruption placed on Companies House. To summarise the debate we have had, we are going to have a set of objectives for Companies House. Then we are going to match the resources to those objectives. The problem with setting the bar for our objectives too low, too soft and too weak is that we end up setting a resource base that is too low, too soft and too weak. On this side of the Committee—on both sides I think—we would rather see a much tougher set of policy objectives, and we would want Companies House to have the requisite resources to fill that role. I am afraid the Minister has found himself on the wrong side of the argument today.”
“I think this has been a disappointing start to the Committee. Last week in the evidence sessions, I read out the objectives and asked the witnesses what they thought of them. We had anti-corruption organisations there—people who have given their lives to tackling corruption and economic crime—and they were very clear, saying the objectives were too weak and needed to be stronger. I will set out the politics of this for the Minister, new in his role as he is. He is on the wrong side of the argument. He risks going into the debates we are about to have as someone who it is too easy for His Majesty’s Opposition to characterise as soft on economic crime. That is not his position. It is not a position he wants to be in.”
“Will he put in place measures that help us guard against that risk and ensure that we honour the principles that were agreed back in 1855, or will he leave our enforcement regime as weak as it is today?”
“Right now, too many people are not contributing to the common good, and are using UK corporate structures to circumvent their obligations to pay tax and obey the law of the land. We should be trying to crusade against that, and this amendment would help us do that. At the end of this year, the register of beneficial ownership for property will be published, but it is already clear that there are shell companies that own assets, including property in expensive parts of this country, whose nominal shareholders are resident abroad. There has been an enormous surge in non-resident, foreign national shareholders of shell companies that own property in this country. We have not only the phenomenon of shell companies but, as Oliver Bullough made clear, the new phenomenon of shell people. The Minister has a decision to take.”
“Let me go back to 1855 for a moment, which is when this House last debated the creation of limited liability companies. It is worth every member of the Committee studying the Hansards of those debates, because the speeches reveal that, when our ancestors in this place made it possible for people to pool together small amounts of capital but nevertheless receive a limit on the liability that they would encounter if things went bad, their view was that it was in the common good of the country to allow in Britain the invention of limited liability, which had operated in the United States for some time. The common good of the country was the guiding principle by which the debate was shaped, and eventually the Bill was passed.”
“In the light of that remark, will the Minister go further and tell the Committee how he will tackle the problem of shell people if we are unable to get information about them? Shell people is the phenomenon of having what look like foreign nationals or residents of other countries controlling shell companies, which may, in turn, own assets in this country. If it is not possible for us to establish the nationality or the ordinary residence of those people, how will we know whether we have a problem? If, for example, people put down their nationality as British, we would know where to find them, but if we do not have that information, we risk getting a little lost.”
“We might as well pursue this point while we have the time. The 25% threshold is obviously very high, and an amendment will be tabled seeking to lower it. If that does not go through, however, the risk is that there will be members on the register with a significant or even a controlling stake of below 25% in a company, yet we will not know where they are resident or where they live. We are now running that risk.”
“That is a very big number, but despite that fact, only 119 convictions had been secured for wayward directors. If we are going to give Companies House the new obligations and new duties that the Minister is taking through, but they are not going to be enforced, then frankly there is very little point in the Bill. If the Minister is not able to today, I hope that he will write to us later to confirm two things. First, will he confirm that his intention is for 100% of companies to meet their obligations under the Bill? Secondly, I think the whole Committee would welcome his setting out a timescale for seeing that target secured.”
“I want to reinforce the last point made by my hon. Friend the Member for Feltham and Heston. If we are going to equip the Minister with new powers, it is important that he tells the Committee, at this stage, how he intends to use them. The key question is: what is his deadline for ensuring that every single company on the register has fulfilled the obligations created by these clauses? Can he clarify what his risk tolerance for bad behaviour will be? I ask the Minister that because I was forced to table parliamentary questions in October last year, which revealed—extraordinarily—that 11,000 companies on the Companies House register had still not disclosed their persons of significant control, even though it was a legal requirement at the time.”
“That is an important point. The Minister is basically telling the Committee that he wants to ensure that the verification checks are proportionate, but across Government—in the Passport Office, the visa service and benefits agencies—there is a well-established infrastructure for verifying identities. If people are applying to become a director or a person of significant control, it is hard for many of us on the Committee to understand why the checks on their identity should be much lighter than those applying for other benefits from the state.”
“That is why we need a very clear story from the Minister about the regime that he will bring forward to ensure that the cloak of anonymity—these balaclavas on economic criminals—are gone once and for all. Unless we have that reassurance, the Bill will not be worth the paper that it is written on.”
“When we introduced them the first time around, and began washing those biometric checks against police computers, we discovered that visas had been issued in the past to some of the most obnoxious criminals on earth. Verification checks are a good thing. I would say that they are required if we are to grant individuals the economic privileges that come through limited liability. That is the privilege that we are giving people when they register a company at Companies House. It is not just a free-for-all; it is a privilege that we created for the common good, and we should therefore ensure that we give it to not just anybody who happens to turn up but people we know.”
“It is a pleasure to serve under your chairmanship, Ms Bardell. I support the amendment, and that tabled by my right hon. Friend the Member for Barking, because in many ways they go to the heart of whether the Minister is serious about stripping economic criminals of their balaclavas and cloaks of anonymity, which currently allow them to perpetrate some of the worst economic crime on the planet. I said this morning that when we offer privileges to people in this country, whether benefits or a visa, we put them through the most substantial identification checks. We put those applying for visas for this country through a whole set of biometric checks, which I introduced.”
“Witness after witness gave evidence to the Foreign Affairs Committee on the duty to verify the address, which is why that Committee, of which the Minister for Security was Chair, concluded that there must be a tough verification regime in place at Companies House.”
“The Minister is being characteristically generous in giving way. The problem the Committee has with the argument about ex post facto regulation is that, if we take the example I gave this morning of the requirement to register persons of significant control, there are still 11,000 companies that have not registered persons of significant control, but there have only been 119 convictions. There is an enormous enforcement gap, which is a real concern to the Committee, not least because the powers that the Minister is seeking are for companies to verify an address, rather than creating a duty to verify the address.”
“Perhaps the Committee could take more comfort from the approach the Minister has enunciated this afternoon if he could give us a sense of how many companies he thinks Companies House would be able to check under the new regime each year? Can he give us a sense of the scale and proportion?”
“When my right hon. Friend has those conversations with the Minister, will she ensure she also talks to the Minister for Security? He was Chair of the Foreign Affairs Committee when it took evidence from a number of witnesses who explicitly called for a duty to verify addresses. That point was underlined in the Foreign Affairs Committee’s last report on illicit finance.”
“Q 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 identified? Duncan Hames: It is a serious matter, and this Bill doesn’t. Although, as you say, we published that report very recently.”
“Then maybe we would not have a situation where rogue bankers in Baltic states were getting their clients to use UK limited liability partnerships to get around the compliance checks in their own organisations.”
“Q Did you say “doesn’t”? Duncan Hames: Doesn’t. What I said earlier was that if you use an offshore entity to hold UK property, as a result of legislation MPs passed this year you now have to register on the register of overseas entities who the beneficial owner of that entity really is. We find out who really owns bits of Britain. But you can control a UK limited liability partnership through offshore entities, and we do not find that out. There is no way of checking the information. We are presenting a respectable veneer behind an otherwise opaque offshore corporate network. If we could require the same level of declaration around the corporate partners of those limited liability partnerships, then we would lift some of that veil of secrecy.”
“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? Duncan Hames: Not yet. I hope you will be able to address that.”
“It is a bit of a mixed bag, depending on who you are talking to and in what context.”
“Q 213 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 here? Angela Foyle: Publicly, it is stated that London is one of the key capitals of money, but that is partly because it is the largest financial centre in the world, so you will inevitably have dirty money flowing through. There is that view. It is something that the US, in particular, has made comment on at times. On the other hand, when talking to Europeans, we are also recognised as being at the forefront of introducing legislation in relation to money laundering regulations and enforcing them, to some extent, compared with other jurisdictions.”
“It is a problem for London that we have to be acutely conscious of, and therefore we have a greater responsibility, in many ways.”
“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? Angela Foyle: I think what I meant by that is that it is inevitable that you will have some illicit finance where there are significant movements of finance. I am not saying it is good—I think it is wrong. I think we should stop it to the greatest extent that we can, but where do you hide a tree? It would be in a wood. So, where are you going to hide dirty money? It is going to be somewhere where an awful lot of money is flowing through. It is not that I think it is a positive thing at all; I think it is very negative. I actually spend most of my working life trying to see how we can prevent accountants and others—I have forgotten the word I mean—unknowingly getting involved with it.”
“We work very proactively with Committees, Parliament and across Government to make our representations about how this can be more effectively countered.”
“Thank you—that is well put. Mike, what is your view on that? Mike Miller: I agree with Angela. London is such a large financial centre and there is such a volume of money moving through it that there inevitably will be, as Angela said, some money that is not well sourced and not well processed. That being said, we work very hard, particularly at ICAEW, to try to clamp down on it. Illicit finance and illicit transfer of funds affect the profession particularly badly. They put people in a very difficult position, both reputationally and legally. You will find the vast majority of chartered accountants and other professionals do not want to engage in unprofessional and malicious practice when it comes to that finance.”
“I think those kinds of words always assist, so that you actually have to assess and understand the risk surrounding the people you are trying to verify first, and therefore, if necessary, enhance your level of verification.”
“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? Angela Foyle: It is interesting, because we would probably put it the other way around. The standard—sorry, I beg your pardon, I was thinking about the earlier Bill. Yes, this Bill has two forms of verification, by either Companies House or authorised corporate service providers. It does not appear to have the wording that would be in the money laundering regulations, which requires there to be reasonable verification measures using a risk-based approach.”
“Q Do you think that is a weakness in the Bill that we should think about strengthening? Angela Foyle: Around verification, yes. There is a spectrum, however. Requiring that someone has to verify, that is, prove, that that is true goes beyond what is possible for an accountant. I can look at documents. I can take careful measures to ensure that those documents are, or appear to be, valid, but I cannot actually ever say with 100% certainty that x is x; I can simply say that I have done the following work and, based on that, these are reasonable measures on the risk basis. I certainly think that is an area that could be, at the very least, clarified as to the standards expected to ensure that they are consistent.”
“It is one of those challenging issues because, in relation to things such as proxies, often it is not the about the levels that a person owns, it is the fact that x purports to be the person who holds it, when actually they actually do so on behalf on y, which can be very difficult to track through. Many people look below 25% in any event just to make sure. Particularly with sanctions, they will have a look there. But 25% is a global norm and changing it might cause other challenges. This is the question: are you satisfied that you understand who the people that you are dealing with are, and who is behind them, at all times? It is not necessarily a question of whether it should be 20%, 5% or 25%. It is a hard one for me to answer because I work with 25%, but I will generally have a good look around to see what else there is.”
“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? Angela Foyle: It is based on the Financial Action Task Force standards on beneficial ownership, which looks to people who own 25% or more, in some cases, or more than 25% in others.”
“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. Peter Swabey: You have the directors’ duties under section 171 of the Companies Act and so on. Those are there, but it is difficult to identify exactly how those directors’ duties can be pursued against any defaulting director. For me, that is one of the challenges. Were you to introduce something extra on that, that would be a solution, but again you would need to look at how that could actually be enforced.”
“We do not know where the money came from.”
“Vladimir Putin believes that the weakness of the west lies in our incessant drive for profits and the belief that the more Russian cash there is in the UK, the more Russia will have to follow our corporate governance standards. Unfortunately, there has been a great lack of corporate governance standards, which has allowed our system to be corrupted. It has really laid bare how powerless some of our oversight bodies and enforcement agencies are. You only have to look at the National Crime Agency’s investigation into the source of the donation that Arron Banks gave to the Brexit campaign to see just how feeble our institutions are, at a time when we really need to be empowering them. When the NCA had to look for the source of the £8 million, it could not go any further than the Isle of Man company co-owned by Arron Banks.”
“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? Catherine Belton: I think this has become a key way in which the Putin regime is able to extend its soft power and influence and undermine our democracies. That is very clear, because you can have vast flows of pretty much untraceable money, especially in the case of LLPs. Once it goes through a UK LLP, no one has any clue where any of that cash has gone.”