My Lords, the Bill, which has been welcomed across the House, has been the Government’s response to the undoubted need to give law enforcement agencies the necessary capabilities and powers to recover the proceeds of crime, tackle money laundering and corruption and counter terrorist financing. No one could doubt that these are very real problems, and we must ensure that we respond adequately to the threats posed by corruption in its many guises. Throughout the passage of the Bill through your Lordships’ House, the Minister and the Bill team have been very helpful in providing information and explanations in respect of this quite complex legislation. The Government have also tabled some useful amendments as the Bill has progressed.
I am particularly enthusiastic about the potential use that could be made of unexplained wealth orders, which are featured in Chapter 1. There has been precedent for this, provided principally by Ireland and Australia. By and large those orders have been useful, and they have the potential to provide the basis for investigating criminal offences and recovering the proceeds of criminal activity. My concern has always been to ensure that the provisions are as effective as they can be. The opportunities for further legislation in the next few years are going to be very limited, for reasons that the House is only too well aware of. I hope UWOs will be used much more than was suggested. The revised impact assessment indicated that only about 20 UWOs a year might be obtained. The Minister assured me that that was only an estimate, that I hope it was a very conservative one.
Until last Friday we had not seen the promised code of practice relating to UWOs and other provisions in the Bill. Somewhat at the 11th hour, after I had tabled a number of amendments, it arrived. I am grateful to the Minister for providing it, and I will of course factor its contents into my remarks on the amendments in my name and that of my noble friend Lord Hodgson.
We had a number of debates about the safeguards in the Bill. I feel confident that the House is satisfied that they are perfectly adequate, particularly now that there is even a provision for compensation to a respondent whose assets have been wrongly frozen. In addition, there are of course restrictions on the freezing orders that would normally accompany a UWO, and any orders can be varied and discharged.
My concern, however, remains how easy it will be for respondents to deal inadequately to a UWO and render ineffective the Bill’s provisions. It has to be accepted that UWO respondents who have invested the proceeds of tax evasion and/or bribery in specific property will be unlikely to want to be frank about their conduct if they can possibly avoid doing so. Why, then, can it not be appropriate for there to be a power to make an order to compel a respondent to give evidence on oath? It would be only a power, and in many circumstances I concede that a court might be satisfied with a statement, but if the statement is inadequate the very existence of the power, which could be exercised only by a High Court judge, would in my view be extremely salutary.
The Bill sets out the requirements that must be met before an unexplained wealth order is made, and allows a respondent a reasonable excuse for failing to comply with any order. I invite my noble friend to explain to the House why she still thinks it is inappropriate for this power to exist. Nothing in the code of practice gives any answer to that.
The remainder of the amendments with which I am concerned in this group—apart from that which relates to property, particularly in central London—are about provisions in respect of non-compliance. My no doubt simplistic view is that you either comply with an order or you do not. The references to purported compliance seem to leave open the possibility that a respondent could simply go through the motions of providing information and say that they have purported to comply with the order. I take the point that the Bill contains the proviso that a misleading or reckless statement can constitute an offence, but it is not so much the deliberately misleading statement that I am worried about; rather more I fear the short, uninformative, heavily lawyered response which will provide no useful information but may still technically be a purported compliance with the order.
I looked for assistance on this point on the recently provided code of practice. Paragraph 20 states that a respondent will be treated as having failed to comply with a UWO if, without reasonable excuse, he fails to comply with all the requirements imposed by the order. The paragraph continues by stating that it is important to note that where a response is provided to a particular requirement in the UWO but that response is considered unsatisfactory, this does not mean that he has failed to comply with the order; this would amount to purported compliance. That was precisely the point that I was making in the original amendment. A footnote states that an example of this would be where an individual provides nothing more than the bare minimum of information necessary to address each requirement in the order and as a result the agency is not satisfied by his explanation as to the derivation of the property. The footnote goes on to state that, in those circumstances, the rebuttable presumption that the property is recoverable does not arise, but the enforcement agency may elect to take further civil recovery action against the property in the light of evidence or lack of evidence provided by the individual. I should be grateful if the Minister could set out why the Government think it so important, in a number of areas identified in the amendments, to have these provisions about purporting.
Amendment 2 in this group and Amendment 24, which we will debate in the next group, concern a substantial problem: in central London, property—often extremely valuable property—is being bought by overseas companies and then left either empty and dark or occupied for only short periods. Parts of central London are entirely dark at night and, although London is the most obvious example, there is plenty of evidence of buying-up of property in other major cities and in some rural areas. Apart from the fact that it cannot be desirable that property is owned by those whose money has often come from illegal activities, there is the knock-on effect that it is having on the property market in general. Noble Lords are only too well aware of the intense difficulty faced by young people in buying property anywhere remotely near where they work, particularly in London, or indeed buying property at all. There are a number of reasons for this, but the situation is hardly helped when, according to the Land Registry figures, 100,000 properties are registered in the name of overseas companies. Unlike some countries, there is no restriction on foreign ownership of real property, and at the moment there is no sign of any decrease in the enthusiasm with which foreign investors are approaching the possibility of buying property here. Because of our respect for the rule of law and the independence of our judiciary, among other reasons, we are an attractive country in which to invest—particularly, I am afraid, to those who have ill-gotten gains for which they want to find a safe haven.
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I asked my noble friend the Minister in Committee and at Second Reading about the envelope tax which, for those who have not taken part in the debate so far, enables those who use what is often dirty money to buy up luxury properties to pay as much as £218,000 a year rather than declare which of the many £20 million-plus mega-mansions they may own. Bringing in this tax was supposed to deter corrupt investment; in fact, it appears that many are perfectly happy to pay the tax. In the last financial year, it brought in some £44 million, up from £25 million the year before. The total tax receipts, according to an article from the Observer on 5 March, on properties worth more than £1 million, came at £178 million. I look forward to the Minister saying on the record whether the Government are happy with this tax, which allows billionaires to buy their anonymity in this way.
Lest I should sound too critical of the Government, I should say how much I welcome the recent publication of the call for evidence in relation to setting up a register of beneficial owners of overseas companies and other legal entities, a consultation paper issued by the Department for Business, Energy and Industrial Strategy. I pay tribute to the Home Office for its assistance in bringing forward the publication of this document. The ministerial foreword shows that this is part of a desire to create a new register, showing the beneficial owners of overseas companies, consistent with the international anti-corruption summit held in London in May 2016. I look forward to hearing more from the Minister on this when she deals with the second group of amendments, later in the debate.
I fear that I have been unable to resist the temptation to take advantage of this ministerial largesse—hence the amendment requiring the Government to set up this register within six months of this Bill coming into force. Having read the call for evidence, I see no doubt that there will and should be such a register, although the precise nature and terms of the register are still up for debate; hence the fact that the amendment does not seek to define in any detail how the register will work. Given, however, the few legislative opportunities that are likely to exist in the next few years, it is important that we should translate aspiration into activity and thus incorporate in this legislation an obligation to set up the register. The published plans have been widely welcomed, but I agree with the comments of Robert Barrington of Transparency International that,
“ministers must not give way to vested interests that will be lobbying to keep property ownership secret or allow Brexit to delay measures”.
Finally, I come to Amendment 2, in relation to unexplained wealth orders. The requirements under new Section 362B mean that the High Court has to be satisfied that there are reasonable grounds for suspecting that the known sources of the respondent’s lawfully obtained income would have been insufficient for the purposes of enabling the respondent to obtain the property. For example, if a foreign official’s income is known to be £30,000, how can they afford a £10 million property? Further, the High Court must be satisfied either that the respondent is a politically exposed person or that there are reasonable grounds for suspecting involvement in serious crime. So far, so good—but what I am concerned about is that a respondent who is in effect a gangster may fall outside the definition of a PEP, although my children do not, and that there may not be quite enough to say that there are reasonable grounds for suspecting involvement in serious crime so as to satisfy subsection (4)(b) of the new section.
On the other hand, if you are someone with a beneficial interest in an overseas company that owns UK real property then that should, of itself, be enough to provide the basis of a requirement to make an unexplained wealth order. In case this is thought to be draconian, noble Lords should bear in mind that this is a civil remedy and it is always open to a respondent to provide an explanation of their wealth, or a reasonable excuse for not doing so, before any steps are taken in relation to the property. However, the purpose of adding this provision is to deter what is, in effect, money laundering. There can be no doubt that the involvement of agents and solicitors in these corrupt deals has not been sufficiently marked by money laundering prosecutions, as the House will hear later in the debate. However, having a register, and an additional ground for an unexplained wealth order should, first, deter wealthy foreigners from concealing their identities when investing—often with ill-gotten gains—in London properties. Secondly, it would allow the agency to recover substantial assets acquired through criminal activity.
I do not pretend that this is a perfect solution to what is a real problem. Various attempts have been made around the world to deal with such problems but they have only ever achieved partial success. However, let us not miss this opportunity of doing what we can
to deal with the cancer of corruption in our society. This House should send a clear message to the Government about the level of its concern. I beg to move.