I start by echoing the comments of my noble friend Lord Mitchell that the Government are to be commended on making the UK the first country to introduce a register of people with significant control. I said that at Second Reading and am pleased that, although it is happening slower than I would like, developments are taking place in other countries. Significant work needs to be undertaken to make sure that that progress continues and speeds up.
I welcome the fact that the Minister recognised that much of the effect of shell companies and their activities impacts on developing countries. In fact, a staggering amount does so. It has been estimated that more than a quarter of the financial assets held in tax havens are in some way taken from developing countries—which lose far more in this way than the total global aid budget. That is a very worrying statistic.
The role of the British Overseas Territories and Crown dependencies is in some ways complicit in this. I use the example of the British Virgin Islands and the purchase of mining concessions in the Democratic Republic of Congo, which cost the DRC $1.36 billion—around twice that country’s annual education and health budget combined. That is an example of the extent of the problem. It is disappointing that, since the Prime Minister made his announcement at the summit in 2013, the Government have not yet followed through decisively enough. I was pleased to see that the shadow Chancellor gave a commitment that a Labour Government would require Overseas Territories and Crown dependencies to publish the names of beneficial owners of companies. That is very much to be welcomed.
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Of the amendments that stand in my name on the Marshalled List in this group, Amendment 37 tackles two concerns about how the register would function. First, I am concerned that the Bill does not put forward a plan to ensure that information on the register is properly verified and that the impact assessment
assumes an unlikely 100% rate of compliance. Secondly, under the Bill, the public register will only be updated annually. This amendment creates an obligation on the Secretary of State to ensure that Companies House regulations provide for the information to be sufficiently verified and, indeed, updated, which is crucial. By including this in primary legislation, I believe it will provide a mechanism to ensure that Parliament affirms the regulations brought forward and holds the Secretary of State responsible for the quality of information in the register.
When a similar amendment was discussed in another place at an earlier stage of the Bill, the Minister there argued against it, claiming that the Government would be able to,
“amend the frequency with which”
the register was “updated at Companies House” and that the Bill demands that information provided for the register is,
“accurate, which is enforced by the criminal offences”.—[Official Report, Commons, Small Business, Enterprise and Employment Bill Committee, 30/10/14; cols. 412-13]
I have to say that I find these arguments unconvincing. Without a proper verification regime—perhaps even with one—100% compliance simply will not happen. I am sure that the Minister knows that.
My amendment contains, I believe, a fundamental principle in that the responsibility for the information in the register being properly verified and kept up to date would rest with the Secretary of State rather than with Companies House. In addition, to make it more likely that companies will comply with the law in that circumstance, it would allow Parliament greater scrutiny over those important areas. If the Minister is not minded to accept this amendment, I would ask whether she could set out how the Government believe that they could ensure that the public register is kept up to date and how they would work with Companies House to ensure an adequate verification regime for the information that enters the register.
Amendments 39, 41 and 43, which use identical wording, seek to address a technical issue in the legislation relating to foreign companies. Under the provisions of the Bill, when a UK company has a chain of ownership that includes offshore elements, the register will not show that full chain of ownership. To some extent we are at a disadvantage here, as the Government are involved in a consultation on the use of corporate directors, which has concluded its public phase, but we do not have any indication of what it has produced. Could the Minister offer any illumination at this point to indicate what conclusions are likely and, indeed, when the conclusions will be published? Will the result be published before the Bill completes its passage in this House?
It is particularly important that the complete picture is reported for companies whose control chain extends outside the UK, because these are precisely the kind of high-risk companies that are more likely to be involved, directly or indirectly, in money laundering, organised crime, dealing with stolen assets, cross-border fraud and other criminal activity. As an example of the problem, I mentioned at Second Reading that the palace of Victor Yanukovych, then President of Ukraine,
was owned by an anonymous UK shell company. Blythe (Europe) Ltd is a shell company, based in the UK, that part owns the company that owns the palace and which itself is owned by a Liechtenstein trust. Without the full chain of control, although we could get the name of the person or persons who have significant control of Blythe (Europe), we would not get details of how that control was exercised and whether it was directly by the Liechtenstein trust or through any other vehicles, making it impossible to get the evidence required to bring any prosecutions. Surely the Minister cannot regard that situation as acceptable. Without details of the vehicles through which control is exercised, it will be impossible for the authorities to seek information to assist investigations, as they will not know about which companies and in which jurisdictions questions need to be asked.
This is a serious problem, which needs to be addressed. I am seeking to achieve that the legislation ensures that the register captures information on the full chain of ownership, even if sections of the chain, as we have heard in relation to the previous set of amendments, are not based in the UK. That is the spirit in which Amendments 39, 41, and 43 add to the list of required particulars that would be published in the register, so that it will list any intermediaries used by the person exercising significant control.
I believe that it is important that these matters are dealt with in primary, not secondary, legislation, as that would help in ensuring that the full chains of ownership are recorded in the register. If the Minister has other ideas as to how this might work effectively, I would be interested to hear them, but I urge the Minister to prioritise tacking this issue before this important piece of legislation completes it progress in this House. I beg to move.