Alison Thewliss – 2022 Speech on Economic Crime and Corporate Transparency Bill
The speech made by Alison Thewliss, the SNP MP for Glasgow Central, in the House of Commons on 13 October 2022.
I am glad to follow the right hon. Member for East Hampshire (Damian Hinds), whom I believe was the Minister who said he was not happy with the progress that had been made on tackling economic crime thus far. None of us in this place are happy about the situation on economic crime.
SNP Members of course welcome this Bill, which is overdue. Many of its aspects could have been picked up in legislation years ago. Members of the anti-corruption coalition across the House have been clear in calling for more action from the UK Government on this, and all this delay has cost us very dearly; openDemocracy believes that economic crime across these islands costs us £290 billion a year—just think of the services we could all be enjoying if that money were not being plundered by those people engaging in economic crime. As with all things around dirty money, we have to ask: who benefits from this? Who benefits from action not having been taken for all these years? There is much to be done, and the panoply of agencies involved must be properly co-ordinated and resourced to tackle it.
This is a big Bill and there is a lot more that could be said. My not saying something in particular now does not discount my saying something about it later, when the Bill goes into Committee. I thank everybody who has sent briefings ahead of this Bill, because that has been incredibly useful.
The UK Government must go after not only those committing economic crimes, but those enabling it. Robust supervision and proper deterrents need to be in place for those responsible for economic crime. Directors and enablers of economic crime need to face proportionate sanctions, and effective anti-money laundering supervision needs to be carried out consistently across sectors. Legislation on economic crime needs to be futureproofed, as a failure to ensure that means that legislators are always playing catch-up with criminals. We see that particularly in the field of crypto.
As Companies House reform is a significant part of this Bill, I will start with a few red flags from the UK Government that I would like to deal with straight up. Having lots of companies on the Companies House register is not the win that Ministers often seem to think it is, mainly because a good chunk of the register is absolute guff. It is like a kid in the playground with an impressive looking pile of football stickers for swapsies; but instead of getting an easy trade for the Kevin van Veen of your dreams, you find that the kid has a pile of doublers, triplers, old stickers from previous seasons, stickers from rugby and cricket, a few with Stormtroopers on and some they have drawn themselves. Sorting out that pile of stickers is pretty easy, but sorting out the millions of companies on the Companies House register is a much tougher task. Even the Department for Business, Energy and Industrial Strategy impact assessment, which I would draw everybody’s attention to, hints at the difficulty in unpicking the duplicates from the system. It is riddled with error, never mind the impact of those using it for nefarious purposes.
Having looked myself up on the register, it appears that I am on it three times; three different Alison Thewlisses exist out there in the world—just imagine that! The register believes I am three separate people, rather than the same person having been a director at different points in my life. The Home Secretary, who, disappointingly, has disappeared out of this place before hearing from the third party in this House, is on the register in her own name and in her maiden name, with no link to suggests that we are talking about the same person. The BEIS Secretary is on it as the director of 11 companies with his surname hyphenated and a further three companies with it unhyphenated. I am unclear what the process is by which Companies House will set about tidying up this basic type of messiness within its register. It should not just be put on individuals to fix this; there needs to be some mechanism by which it is all corrected.
The new objectives being given to Companies House are welcome—they are a step up from its being a passive recipient of duff information—but it is unclear how exactly they will work. The querying power must be a wider, separate piece of work to pick through in detail the existing register and figure out what is actually valid, rather than relying on helpful citizens such as Oliver Bullough, Graham Barrow, Richard Smith and David Leask to report in their concerns, as they often do.
Peter Grant (Glenrothes) (SNP)
There is, of course, only one Alison Thewliss. She mentioned Graham Barrow as one of a number of exceptional individuals who do a lot to expose the kind of things going on at Companies House that it should really be doing. I do not know whether she has followed his Twitter account recently. On 10 October, he tweeted that Companies House had just accepted the registration of a business called “Legat Business Limited”, which has a single director, called “Andrei Perezhogin”. His nationality is “Russian”, his place of residence is “Russia”, and he describes his occupation as “Men”. He claims to have set up this company with £100 million of capital. Does she share my alarm that it appears that a Russian living in Russia can invest £100 million in a British company and—this is without the powers in this Bill—nobody at Companies House thinks anything of it?
Alison Thewliss
I absolutely agree and share my hon. Friend’s concerns. Graham Barrow does great work on Twitter and in other places to highlight such scenarios. Whether or not that person exists, whether or not that company is valid, and whether that money is even being invested anywhere, never mind in this company—this exposes the nature of the garbage in the Companies House register. The Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Watford (Dean Russell) should consider what he intends to do about that situation, because the register also contains abusive names and people being registered when they do not know they have been registered. How do such people go about correcting the register where companies have been registered in this way without their knowledge or consent? Home addresses are being used although the person who lives there has no knowledge that their address has been used until a whole wheen of paperwork from Companies House arrives at their door. These things are being regularly exposed; they should not come as news or as any surprise to Companies House or to Ministers in this place. In the interim between this Bill making progress through the House and its eventually coming into force, what will happen to stop these “companies”? They are among the thousands of companies registered every week at Companies House.
The power to query company names where people might be setting them up to impersonate another company or for criminal purposes stands in contrast with the continued objective to allow companies to turn around their registration in 24 hours. There is a substantial industry in creating fake but similar names, and then using those companies to rip off the public. Without a vast increase in staffing in Companies House to assess and sense-check all these applications coming in, it seems that many will continue to slip through the net, even after these reforms. I suggest to the Minister that perhaps it would be better to build in a slightly longer application period to allow proper verification to take place. It is unclear—I seek confirmation from the Minister—whether the verification that is being referred to will be though the existing UK Government verify scheme used for passports, driving licences and tax returns, or whether a separate verification scheme will used. Using the existing schemes seems to work reasonably well for passports, driving licences and tax returns, and I am not aware of any particular issues being flagged for those—if there are, I shall stand corrected.
The BEIS impact assessment dismisses the opportunity to verify the link between directors or persons of significant control and their companies. Again, this should be changed. Furthermore, we have a golden opportunity here to clamp down on opaque ownership structures and I cannot understand why the Government would not want to do so. The Bill must bring in provisions that prevent all companies from being controlled by opaque offshore entities, which do not need to disclose information on their owners or structures because of where they are based.
I still seek to understand from the Ministers why Companies House cannot be an anti-money laundering supervisor in its own right; this is a huge gap within the system. The Office for Professional Body Anti-Money Laundering Supervision has had mixed results in holding the AML supervisors under its wing to account; professional bodies have not done all they can to interrogate their members. That would perhaps fall into the area of a failure to prevent offence. Culpable directors, senior managers and other enablers of economic crime, including professional enablers, need to face sanctions, and rules on AML supervision need to be applied consistently. That is not currently happening.
The non-governmental organisation Spotlight on Corruption noted that there are 22 industry bodies that currently oversee AML compliance in the legal and accountancy sectors. In 2021, OPBAS found that just 15% of supervisors were effective in using predicable and proportionate supervisory action; 85% were not. It also found that just 19% had implemented an effective risk-based approach to supervision. This disjointed approach to tackling money laundering is just not working: it is allowing too many to sail through the net.
In the UK, an estimated £88 billion of dirty money is cleaned by criminals every year, compared with the lesser, but still significant, amounts of €54.5 billion in France and €51.53 billion in Germany. To tackle the issue, it is vital that support is offered to smaller firms, which are often targeted by those who wish to engage in money laundering, criminality and other illicit activities, to enable such companies to spot red flags in respect of potential clients.
It is beyond me why the UK Government allow the verification process for company registration to be carried out by company formation agents when they are the very bodies that have to a large extent created the problem that the Government are trying to solve. As the Home Office report “National risk assessment of money laundering and terrorist financing 2020” pointed out:
“Company formation and related professional services are…a key enabler or gatekeeper of TBML”—
trade-based money laundering. We should be reducing their power, not endorsing it.
Under the Bill, all third-party agents who set up a company on behalf of someone else will be required only to declare that the information they are providing on behalf of that person has been verified. I return to my verification question: what is the system for that? Without giving Companies House the ability to carry out independent checks to ascertain whether the “verified” third-party information is correct, it is just going to become a box-ticking exercise. The verification requirement in itself has no teeth and is unlikely to lead to any material change in how third-party agents carry out that key verification process.
Before I leave Companies House, I should say that I am deeply disappointed that the UK Government seem to show no willingness to increase the ridiculously low company registration fee: £10 or £12 is nothing in the scheme of things. In Germany the equivalent fee is €400, and in the Netherlands it is around €52; I am sure the Minister would regard neither country as anti-business. Having a low fee is not the benefit that Ministers seem to think it is. I am open-minded as to what the figure ought to be, but in its economic crime report the Treasury Committee agreed that £100 would be perfectly reasonable and give Companies House more resources to deal with the huge challenges it faces.
Improving relations between Companies House and the various law enforcement agencies is welcome. The Treasury Committee report on economic crime called the landscape “bewildering” and noted that both co-ordination and economic crime itself should be higher priorities for the Government. The scale of the issue is outlined in the BEIS impact assessment, with law enforcement referrals to Companies House rising from 1,400 per annum in 2015 to 9,300 in 2021. Given that we have heard how little economic crime is actually prosecuted, this feels like the tip of a very large iceberg.
With talk of future austerity and cuts, it is important that the UK Government invest in the enforcement agencies to investigate and prosecute economic crime. It is a specialist area and it requires well-paid specialist staff to tackle this scourge. The Scottish crime campus at Gartcosh is a great example of both efficiency and inter-agency working, but it can do this only if properly funded. A further round of Westminster austerity puts it all at risk.
I feel like I have been raising Scottish limited partnerships forever, and I have no hesitation about doing so again. Because SLPs hold legal personality and can possess property, they have become a very popular mechanism. The BEIS analysis was quite stark: between 2010 and 2016 they had a growth rate—one that the Government would love—of 459%. That alone should have set off alarm bells from Companies House to the Government Front Bench, but nothing terribly much happened for a long time. BEIS figures also state that as of 31 March 2021, SLPs made up 64% of all limited partnerships on the Companies House register. If we compare that with the fact that companies registered in Scotland make up just 5% of companies in the UK, we can see that something is badly out of whack.
SLP registrations have plateaued since the rules were tightened, but they have not gone away. They have also continued to be implicated in money laundering, arms running and sanctions busting, including in respect of the Russian aggression against Ukraine. They are set up with partners in secrecy jurisdictions, with companies named as persons of significant control, which is against the rules. Linking to an actual person with an actual address would be progress, as would limiting the number of times that an address or person could be a company director. To date, enforcement and fines for breaching the rules that the Government themselves set up have been few and far between. There is little point in having rules that are just not enforced.
As I have pointed out before in this place, there are also knock-on effects to our neighbours in Ireland. As there has been a slight tightening of the rules here, registrations of Irish limited partnerships have soared. What conversations has the Minister had with his counterparts in the Republic to ensure that we are not just shifting criminal activity from here to there? All possible co-operation must be undertaken to avoid criminals shifting their business over the sea.
I wish to ask about the links with other legislation that is currently going through this place. The Financial Services and Markets Bill has a significant section on the regulation of cryptocurrencies, which have become incredibly popular with organised crime incredibly quickly, as a means of shifting money as well as of scamming naive members of the public. It is unclear how the legislation before us interacts with that Bill and the halo effect that might be created by the regulation of certain cryptoassets but not others.
When the Treasury Committee took evidence on the Online Safety Bill—which has disappeared but will hopefully come back at some stage—we were concerned about crimes being carried out via the internet and social media platforms. Currently, the banks of those who are scammed have to pay up, but the social media companies themselves are not held accountable. For example, scams conducted over Instagram or Facebook Marketplace, scam messages sent over WhatsApp and unregulated financial advice given via platforms like TikTok are not currently covered. They should be given an awful lot more attention.
I was glad to hear from the Home Secretary that there have been some conversations with the Scottish Government about the implications of this legislation in Scotland, because Scots law is, of course, a devolved area. Registers of Scotland administers the register of persons holding a controlled interest in land, which was launched on 1 April and shows who controls the decisions of owners or tenants of land and property in Scotland. I would like a bit more information from the Government about the conversations they have had with Registers of Scotland and the interaction with the register of oversees entities. Scotland did not hang around waiting for the UK Government to make legislation on this issue; we got on with the job.
I look forward to tabling amendments to try to improve this Bill, and I really hope that for once the Government will listen and be constructive on some of the issues we raise. We would not be in the situation we are in today had they done so during the debates on the Sanctions and Anti-Money Laundering Bill or umpty other bits of legislation over the years. We are all clear in this place that robust supervision and proper deterrents need to be in place for those responsible for economic crime.
We on the SNP Benches are looking forward to independence and setting up our own robust systems to register companies and to prevent economic crime. Nobody would choose the UK system as it stands, and it remains to be seen whether it can be adequately repaired.
