Stephen Kinnock
MP for Aberafan Maesteg · Labour · United Kingdom
“I thank the shadow Secretary of State for her kind words and look forward to our exchanges across the Dispatch Box. I am ready to engage with her on getting the maximum benefits for the people of Wales.”
“I thank the right hon. Lady and look forward to working with her. My understanding is that there were challenges around the helicopter capability. Decisions were taken by Natural Resources Wales some time ago to change the way that the tendering for helicopter capability works. We certainly need to look at that.”
“I thank my right hon. Friend for his question. Like him, I pay tribute to all those involved in the collective and heroic response to the wildfires.”
“I thank the right hon. Lady for her question. Many of the ideas coming forward for devolving power right across our United Kingdom, beyond Cardiff Bay and Holyrood, are very exciting, and I look forward to exploring them with her.”
“Just to be clear, this is not about staying out of the issue; it is about respecting the devolution settlement, but being prepared to work constructively where we can in partnership with the Welsh Government. The hon.”
“I know about and welcome the right hon. Gentleman’s strong connections to Wales. I recognise the connectivity benefits that WSMR’s proposal could deliver, particularly for passengers in Wales and the west midlands.”
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“I beg to move, That the clause be read a Second time. Given the extensive discussions we have had on issues involving money laundering risks, including risks in relation to certain designated high-risk jurisdictions overseas, there is a fundamental question that we are not sure we have got to the bottom of. That question, which is addressed in part by new clause 54, is why we should allow a company incorporated overseas in a jurisdiction that operates on the basis of lax money laundering controls to do business in the UK at all, much less to own property or land here.”
“Friend the Member for Birmingham, Hodge Hill said, an ex post facto way, because once the damage is done, it is a lot more costly and a lot more insidious, because we have not dealt with the issue at source and then we are left to clear up the mess and pick up the pieces. That is the spirit in which the proposal is made. I invite the Minister to express any reflections that he has on what is actually a kind of philosophical point about the Bill. Is prevention better than cure—yes or no?”
“We are really just going back to the point about prevention being better than cure. Of course, what is really important here is that it is our sovereign Government, our Treasury, doing the designations. It is our Treasury and other expertise in our British Government saying, “That jurisdiction over there is high risk. It has lax control on money laundering. It has no sense, really, of what is going on. It’s a kind of wild west in its business environment.” That should raise many red flags and set many alarm bells ringing. The constructive spirit of this proposal is to say, “Look, we know where there are red flags. We should be acting on those red flags in a preventive way,” rather than, as my right hon.”
“I thank the Minister for those points. We remain unconvinced by the position and would like to push this new clause to a Division. Question put, That the clause be read a Second time.”
“A company could, at least in theory, report to Companies House that its beneficial owner was the same as it had been the previous year, without disclosing the fact that another individual had been a beneficial owner at some point during the intervening 12 months. New clause 55 is intended to probe the Government’s thinking in this area and, as with the previous new clause, to provide the Minister with an opportunity to set out in detail how the Government plan to ensure that the laws leave no foreseeable loopholes open for exploitation by criminals.”
“I beg to move, That the clause be read a Second time. New clause 55 also provides a simple solution to what appears to be a flaw in the Bill’s current drafting, which could be exploited by criminals seeking to exploit any legal loopholes left open to them. Under the Economic Crime (Transparency and Enforcement) Act 2022, companies required to register their ownership of UK property are required to provide annual updates on any changes to their beneficial ownership. It is not hard to see how that could be used as a loophole to conceal the ownership of property by, for instance, an individual designated by UK sanctions.”
“(2) For the purposes of regulations under this section, ‘persons of significant control’ may include persons with a right to— (a) 25% or more of the surplus assets on winding up, (b) a voting share of 25% or more, (c) appoint or remove the majority of managers, (d) exercise significant influence or control over the business, or (e) exercise significant influence or control over a firm which would be a person of significant control if it were an individual. (3) No regulations to which this section applies may be made unless a draft of the statutory instrument containing the regulations (whether or not together with other provisions) has been laid before, and approved by a resolution of, each House of Parliament.”— (Dame Margaret Hodge.) Brought up, and read the First time. Question put, That the clause be read a Second time.”
“I thank the Minister for those clarifications. This was an opportunity to set out those assurances, which we are happy to accept. I beg to ask leave to withdraw the motion. Clause, by leave, withdrawn. New Clause 56 Limited partnerships: registration of persons of significant control “(1) The Secretary of State must by regulations make provision about the registration of persons of significant control in relation to limited partnerships.”
“New clause 60 takes us back to some of the issues we touched on during Tuesday’s debate on part 4 of the Bill in relation to cryptoassets. Considering how many new regulations there are in this area, it is worth taking stock of how well the regulations already in place have been implemented to date and what more needs to be done to ensure that those responsible for enforcing the measures in the Bill have the powers, the expertise and the capacity they need.”
“There are already reports of rapidly growing cottage industries springing up in places such as the Cayman Islands, aiming to facilitate the incorporation of cryptoasset businesses with, we can only assume, minimal regulatory oversight. I thank the Minister for his comments, but will he say a bit more about how we are ensuring and building robust approaches to regulating crypto-related risks in our overseas territories, as well as the Crown dependencies, in the light of those growing cottage industries, the increasing risk, and our responsibility for what is happening there? Does he feel that there is anything more that could or should be done?”
“I thank the Minister for that feedback. We want to ensure there is a mechanism to check and verify that the FCA is able and resourced to do what we want it to do. Our worry is that if we take a hands-off approach and leave it to its own devices without looking at whether it is achieving what we want it to achieve, in this fast-moving world, we could potentially lose control of the situation. I am sure that that would be a matter of regret to the Minister and the Committee. New clause 61 is about ensuring that UK authorities can keep a close watch on developments in the overseas territories and take any necessary steps to ensure that we avoid the same kind of race to the bottom that has turned some of those territories into a magnet for a host of dodgy—and often outright criminal—financial transactions in recent decades.”
“(2) Subject to subsection (3), in determining whether the defendant has shown the matters mentioned in subsection (1), the court must have regard to all the circumstances of the case. (3) In determining whether it was reasonable for the defendant to believe that the disclosure or publication complained of was likely to be relevant to the investigation of an economic crime, the court must make such allowance for editorial judgement as it considers appropriate. (4) For the avoidance of doubt, the defence under this section may be relied upon irrespective of whether the statement complained of is a statement of fact or a statement of opinion.”— (Liam Byrne.) Brought up, and read the First time.”
“I thank the Minister for those points. We feel that it is a bit of a leap of faith but, on the basis of the assurances that he has given, I am happy to withdraw the clauses. I beg to ask leave to withdraw the motion. Clause, by leave, withdrawn. New Clause 64 Disclosure of information in the public interest likely to be relevant to the investigation of economic crime “(1) It is a defence to an action based on the disclosure or publication of information for the defendant to show that— (a) the disclosure or publication complained of was likely to be relevant to the investigation of an economic crime, and (b) the defendant reasonably believed that the disclosure or publication complained of was likely to be relevant to the investigation of an economic crime.”
“The Government have missed repeated opportunities to legislate against SLAPPs, and although consultations have been launched and expert advice and evidence has been reviewed, we still have not seen meaningful action to deal with these problems. It remains unclear when, or even if, new legislation will be forthcoming. I look forward to hearing what the Minister has to say on this important subject.”
“I will be brief. I fully support the comments made by my right hon. Friend the Member for Birmingham, Hodge Hill, and I fully support the new clause. I pay tribute to the other Members he mentioned who have played an important role in raising the profile and awareness of this very important issue. The Committee has an opportunity to reflect on the need for urgent action by the Government to crack down on abuses of our legal system by the wealthy and powerful individuals who seek to shut down dissenting voices whose investigations are inconvenient to them. Surely, the Government have been aware for some time of the most flagrant cases of jurisdiction shopping by oligarchs and kleptocrats in British courts, but recognition of the problem has not been backed up by the necessary legislation.”
“I hope that the Minister will seek to champion it rather than oppose it.”
“I wish briefly to concur with my right hon. Friend’s every word. He has made a powerful case about unexplained wealth orders. That was something of a false dawn for the reasons he set out. Similar to what we said about SLAPPs, we are concerned about the chilling effect—the vast disparity between the financial firepower of the people that the UWOs seek to go after and that of the NCA and, frankly, the British state. My right hon. Friend’s new clause would absolutely push the Bill in the right direction. It provides a means for us to level the playing field. On the basis of that common-sense proposal, we can start to have serious conversations about how to crack down on some of the kleptocrats. I thank my right hon. Friend for his clause and the manner in which he has proposed it.”
“Did he recently pull out of two meetings with council leaders at short notice? What mechanisms is he using to monitor the performance of contractors and subcontractors? I have heard from councils where the public health team was not informed about serious health issues, including pregnancies, so does he accept that he is failing to give local authorities key health-related information? What progress is he making on tackling the crisis of unaccompanied children being placed in hotels— 222 have already gone missing—and will he apologise to the couples who have had to cancel their wedding receptions in hotels at extremely short notice as a result of this Government’s chronic mismanagement?”
“The inevitable consequences were slower decisions, more decisions overturned at appeal, an increasing backlog and ballooning taxpayer costs. With the average time to process an asylum claim standing at 449 days, the people smugglers see the backlog as a marketing opportunity—an open invite from this Conservative Government to those who want to melt away into the underground economy. All this catastrophic incompetence has led to the Minister scrambling around to find contingency hotel accommodation, resulting in what the Home Secretary described this morning as “poor communication” between central and local government. Will the Minister therefore confirm whether he really feels that his undertaking to give local authorities as little as 24 hours’ notice is reasonable?”
“It seems that we come to the Chamber at least once a week to hear about the mess that the Home Secretary is making of an asylum system that her Government have broken. The root cause of today’s urgent question is the failure of the Government to process asylum claims with anything like the efficiency required. In 2012, the Home Office was making 14 asylum decisions a month; it is now making just five. Tory Ministers like to blame covid, but the truth is that this is a mess of their own making. They chose to downgrade asylum decision makers from higher executive officer grade to lower executive officer grade, leading to a less experienced workforce on lower wages with lower retention rates and collapsing morale.”
“Perhaps the Minister will shed some light on that strategic dilemma or ambiguity and on how the Government plan to reconcile those two apparently competing aims. I do not want to pre-empt what the Minister will say, but I imagine that he will claim that it is possible to do both.”
“The then Economic Secretary to the Treasury echoed that, saying in a speech at the Innovate Finance global summit in April: “If there is one message I want you to leave here today with, it is that the UK is open for business—open for crypto-businesses”; and “Because we want this country to be a global hub—the very best place in the world to start and scale crypto-companies.” It concerns me that the Government do not seem to have made up their mind whether as a country we should value crypto firms and want to entice them to the UK, or whether we should recognise the ease with, and scale at which, criminal activity within crypto markets is allowed to happen and therefore should prioritise tightening regulation and enforcement by cracking down on the widespread use of such assets to defraud individuals and undermine our national security.”
“There is also an increased risk that cryptoassets are being exploited to raise and move funds for terrorist activities.” On the other hand, earlier this year, the then Chancellor of the Exchequer, who is now the Prime Minister, said that it was his “ambition to make the UK a global hub for cryptoasset technology”.”
“For that to work, however, we need to be clear about what the legislation intends to achieve. It is fair to say that the Government have sent mixed messages about their approach to regulating cryptoassets. On the one hand, they have acknowledged the need to tackle the use of cryptoassets for criminal purposes, hence the decision to extend the money laundering regulations to cryptoasset businesses, which has been under the supervision of the Financial Conduct Authority since January 2020. In the factsheet published alongside the Bill, the Government set out their view: “Cryptoassets are now increasingly being used by criminals to move and launder the profits of various crimes including drugs, fraud, and money laundering.”
“It is a great pleasure to serve under your chairship today, Mr Paisley. I take the opportunity to welcome the Minister to his place; I do not think that I have done so formally, although I might well have done informally. It is good to see him in his place. I want to make some general comments about cryptocurrencies and about the clause and schedule 6. Broadly speaking, they have some positive aspects, but we also have some questions for the Minister, and I am sure that he will explain the position with his customary lucidity once I have sat down. Cryptocurrencies and other digital assets are not new, but how they should be regulated is still very much an open question in the UK and internationally. The Government’s decision to expand the legal framework for asset recovery under the Proceeds of Crime Act is a positive development.”
“The clause and schedule amend the Proceeds of Crime Act 2002, to extend to intangible assets the same confiscation powers that are already used to recover physical assets like cash. That is an important first step, but in many ways the Bill leaves open more questions than it answers. For instance, the Bill provides new powers to seize cryptoasset-related items, but the definition of those items is incredibly vague, encompassing any item of property that may provide access to some kind of information that could be relevant to an effort to seize a cryptoasset. Given the broad scope of the powers, alongside the related provisions on the destruction of confiscated property, we need more information from the Minister about how the powers are likely to be used in practice.”
“Despite that, however, a clear gap remains between the scale of criminal activity in the sector and the ability of the FCA and police forces to respond. In recent evidence provided to the Treasury Committee, Ian Taylor of the crypto trade body, CryptoUK, said that the recent collapse of high-profile crypto exchanges such as FTX could have been prevented had a stronger regulatory system been in place. Multiple witnesses testified to the Committee that, without additional staff with the right expertise, the FCA was unlikely to be able to regulate the crypto sector effectively. Let me turn to the substance of the clause and schedule 6. It is clearly necessary for the law to be brought up to date to reflect the use of digital assets for criminal purposes.”
“Will the Minister explain what is being done to prevent those 245 firms that operate outside the money laundering rules from scamming members of the public, facilitating money laundering or assisting the evasion of economic sanctions? The Government have been aware for some time of problems involving the use of cryptoassets to defraud members of the public. In October 2018, the Government’s own Cryptoassets Taskforce published a report that identified advertising that misleads people deliberately, by overstating the potential gains from investing in such assets and downplaying the risks involved, as a significant problem for the Government to address. Only now, after four years, are new rules being introduced to expand the FCA’s remit to include consumer protection in relation to misleading financial promotions.”
“The implementation of the register, however, has been beset by problems, not least of which is the fact that a very large number of the firms required to register have not done so. The FCA seems to have been unable to do much about that. Only a couple of weeks ago, the Financial Times reported that only 16% of applications for registration have been approved by the FCA. The FCA has said that a large number of firms that failed to meet the conditions for registration have withdrawn their applications and that many of those appear to have carried on doing business without the requisite permission. Indeed, the FCA maintains a list of unauthorised cryptoasset businesses operating in the UK. As of last week, 245 firms were on that list.”
“We have surely reached a point in time when that could be self-funding, if we did it properly. I am simply not convinced that the system for regulating cryptoassets is working as well as intended. Indeed, it is pretty telling that in response to written questions 86505 and 86504, which I tabled last week, the Minister admitted that none of the 200-plus crypto businesses operating without commission had been subject to any criminal or civil penalties. As I mentioned, since January 2020 there has been a requirement for new businesses carrying on cryptoasset activity in the UK to register with the FCA. The requirement was extended to existing businesses the following year.”
“But is it not simply the case that we are not putting enough resources into the enforcement of laws and the policing of such markets? That is fundamental to achieving the regulatory aim of that side of the equation. Crypto-expert Aidan Larkin recently told me how the US Government’s money laundering and asset recovery section brings in around $800 million a year in crypto-recovery alone, while the UK brings in close to nothing, because the UK Government fail to employ the handful of experts required simply to study the blockchains via things such as bitcoin analytics and to follow the illicit finance—“to follow the money”, as the saying goes. I cannot pretend to be an expert on the technical aspects of that, but it feels like a missed opportunity to go after illegal activity.”
“The Minister is being very generous. On that point about seizing the assets, will the Minister comment on the feedback that Aidan Larkin, an expert in this area, gave me, which is that in the United States money laundering and asset recovery measures bring in about $800 million per year? He says that we do not employ enough people doing block chain analytics. We are missing a big opportunity to generate revenue for the Exchequer.”
“It seems that this is an issue around resourcing and having the people in place—the handful of experts that we need to study the blockchains. Will the Minister assure the Committee that that resourcing will be provided?”
“The use of enhanced powers to seize and detain digital assets, as set out in schedule 6, will be subject to a court order. Clause 142 and schedule 7 and the related Government amendments extend civil recovery powers, which may be used in the absence of a criminal conviction, to a range of organisations including the National Crime Agency, His Majesty’s Revenue and Customs and the Serious Fraud Office, in addition to police forces. It would be helpful if the Minister could explain how the Government will ensure that these enforcement powers will be used effectively in a way that avoids duplication of effort and ensures that there is a clear division of responsibilities of the different agencies. As I have said before, numerous additional powers are provided for in the Bill that require further clarification.”
“I would be grateful if the Minister could set out what plans, if any, the Government have to update the asset confiscation powers we have been discussing and to extend the scope of the money laundering regulations to reflect technological developments such as non-fungible tokens and the use of digital works of art as a means of disguising illicit financial transactions.”
“I have no substantial comment on the Government amendments. I should have made that clear. As the Minister says, these are technical amendments that do not have a huge amount of consequence. I return to the issue of powers provided for in the Bill that require further clarification. I would be particularly grateful if the Minister could explain how the provisions enabling a digital asset to be converted into its equivalent value in cash might be used in practice. In my view, there are other important issues in this area, which the Bill fails to address.”
“Will the Minister explain, if we cannot even get such businesses to register, how on earth will we ever be able to identify which ones are breaking the law, much less impose any penalties? I look forward to his clarification.”
“The Opposition are concerned about enforcement. As the Minister and I have agreed throughout the debate, and as his ministerial colleague has frequently said, legislation without implementation is not worth the paper it is written on. There is little point in us passing a law that cannot or will not be enforced effectively. I am, and the Opposition are, genuinely concerned about the real risk in the proposals, partly because so much detail has yet to be made clear, but mostly because of the huge gap between what we expect of law enforcement and what resources the Government are prepared to put in. As I said about the FCA, even the most basic requirement for cryptoasset firms to register is starting to appear unworkable.”
“The same may well be true in other regulated sectors. Will the Minister set out what steps the Government are taking to ensure that regulated firms have a better understanding of their obligations under the law, and how official guidance might be improved to help firms to submit better quality reports? I point out that significant improvements could be made to the speed and efficiency of the SARs process by making use of new and emerging technologies. If the FIU could use more cutting-edge software applications and algorithms to help identify the most serious crimes, it would go a long way towards addressing the problems that the Government seek to tackle. Perhaps the Minister might comment on the Government’s work in that area.”
“The Government are right that the SARs process is in need of considerable reform. There are many steps the Government could take to improve the quality of reporting in addition to the measures set out in those clauses. For instance, the Solicitors Regulation Authority published a report last month in which it noted that, in two thirds of the reports it reviewed, the firms making the report did not include the glossary codes that enable the NCA to triage reports effectively and ensure an appropriate enforcement response. Additionally, the SRA found that as many as a quarter of the DAML reports it reviewed failed even to describe the criminal conduct that was suspected. Those findings are clear evidence that many law firms do not have an adequate level of understanding of the laws they are expected to help enforce.”
“The Government’s wish to reduce the number of DAML reports is understandable, but we must not throw the baby out with the bathwater. It is important for the Minister to explain to the Committee how those measures are sufficiently targeted that they reduce the number of unnecessary or unhelpful reports without causing a similar reduction in reports that might help to identify serious crime. Clauses 143 and 144 provide exemptions from money laundering offences for certain transactions involving property worth less than £1,000, and in cases where some but not all of a client’s assets may involve criminal funds. I would be grateful if the Minister would explain the Government’s reasoning in setting the relevant thresholds at the specific levels provided for in those clauses. I want to touch on a couple of broader points.”
“According to the Government’s impact assessment, the purpose of clauses 143 and 144, which expand the scope of exemptions from money laundering offences, is to reduce the number of ineffective defence against money laundering reports submitted to the NCA’s financial intelligence unit. It is worth bearing in mind that the purpose of the reporting system is to enable regulated firms to notify the FIU when they are asked by a client to make a financial transaction that may amount to a money laundering offence. The FIU has seven days to review the report, and if it turns out that there is a connection to money laundering, it can ensure that appropriate enforcement action is taken. The reports can, and often do, serve as a valuable means of identifying criminal activity.”
“I thank the Minister for that response. Would he care to comment on the feedback from the Solicitors Regulation Authority, which points particularly at the fact that many of the firms doing the reports were not including key information such as glossary codes and sometimes did not even describe the criminal conduct that they suspected? Is there something more that could be done so that the information at source was in a better state? Does he think that the feedback from the SRA could be a good basis on which to achieve that?”
“Clause 146 ordered to stand part of the Bill. Clause 147 Enhanced due diligence: designation of high-risk countries Question proposed, That the clause stand part of the Bill.”
“I thank the Minister for including the provisions in the Bill, which should make it easier for the NCA to access the information that it needs to gather intelligence and conduct analysis of the range of threats that we face from money laundering and terrorist financing. The provisions in the clauses should also help to ensure that the UK is able to provide more effective assistance to law enforcement bodies in other countries in response to requests for information. Given that so much economic crime is inherently an issue that cuts across international borders, it is absolutely right for the Government to do all that they can to enforce the law within our own borders and to help Governments in our partner countries overseas to do the same. Question put and agreed to. Clause 145 accordingly ordered to stand part of the Bill.”
“The changes made by clause 147 do not seem proportionate to any identifiable problem with the current system. The Opposition therefore strongly encourage the Minister and his colleagues to revisit the clause, on the basis that a convincing case for the need to remove Parliament’s oversight of this process has not been made.”
“Looking at the relevant impact assessment, it seems that the intention is to enable Ministers to update the list “more swiftly” when needed, thus making the UK’s list more “responsive” to emerging developments than is possible under the current system. But even if the aim is reasonable, the methods are questionable. For one thing, the 2018 Act stipulates that regulations updating the list of high-risk countries are subject to the affirmative procedure, under which Parliament is given the opportunity to retrospectively review changes that have already been made by the time the regulations are published. Together with the fact that updates are generally needed no more frequently than once every three months, this does not seem to place an undue burden on Ministers.”
“The problem with clause 147 is that it appears to enable the Treasury to make any future updates to the UK list, even in ways that diverge from the FATF lists, without any opportunity for Parliament to scrutinise or debate the proposals. Given the zeal for deregulation that we have often seen from the current Government, it takes no great stretch of the imagination to foresee a situation in which the Treasury determines that the FATF lists are unduly stringent and that certain countries and territories should be removed from the UK’s list of high-risk countries, even in cases where issues identified by the FATF remain unresolved.”
“Clause 147 raises a number of concerns for us, which I hope the Minister will be able to address. It aims to change the procedure for updating the Treasury’s list of countries designated as high risk due to serious deficiencies in their anti-money laundering and counter-terrorist financing systems, which was established by the Sanctions and Anti-Money Laundering Act 2018. The clause will enable the Treasury to update the list directly, without the need for regulations, in effect removing the opportunity for Parliament to scrutinise any changes to the list. During the passage of the 2018 Act, there was cross-party consensus on the need for any UK list of designated high-risk countries to reflect international standards, primarily by mirroring the lists maintained by the Financial Action Task Force.”
“Don’t worry, Mr Paisley—we could probably exchange notes on that at great length. I thank the Minister for those points. I recall his time as chair of the Foreign Affairs Committee, when he pushed relentlessly and convincingly for parliamentary scrutiny of a whole range of key issues and decisions. Given that parliamentary scrutiny was built into the 2018 Act, it seems difficult to justify its deliberate removal from the process by this Bill. It seems like it would be good to have those guard rails in place to avoid the risk of somebody in the Treasury deciding at some point that big decisions should be made without any parliamentary scrutiny at all. Does he not agree that this is a real missed opportunity?”