The Criminal Finances Bill includes new corporate offences of domestic and foreign failure to prevent tax evasion, as well as legislation on money laundering and related issues. Following the passage of a large number of government amendments to the Bill at Lords committee stage (see report here) a further 38 amendments were passed at Lords report stage on Tuesday. These were endorsed by MPs the following day.
House of Lords Report Stage – Tuesday 25 April
The first group of amendments discussed related to unexplained wealth orders. The minister, Baroness Williams of Trafford, explained that government amendments in this group sought to ‘fine-tune’ the Proceeds of Crime Act 2002. “Amendments 6 and 7 make explicit that unexplained wealth orders can be used in cases where the property of interest is registered in the name of an overseas company,” she said, while amendments 15, 16 and 50 would “clarify our existing provisions to ensure that in Scotland the ability to obtain vacant possession of a property can be dealt with at the same hearing as civil recovery relating to that property.” Related to these provisions, Amendments 25 to 31 correct an inconsistency in the Bill: “They will allow Scottish Ministers and Northern Ireland Ministers to make consequential amendments to legislation, including UK legislation that is within their legislative competence.” A number of non-government amendments seeking to strengthen the provisions were also tabled but these were not pressed to the vote.
The second group of amendments related to company ownership transparency in the British Overseas Territories and Crown dependencies. The minister resisted opposition amendments but did put forward two of her own. “Following careful consideration, I have brought forward Amendments 8 and 32 to address the concerns raised by [Labour peer Lord Rosser] and others. The amendments provide for a report to Parliament on the effectiveness of the bilateral arrangements in place between the UK and the Governments of the overseas territories with financial centres and the Crown dependencies on the exchange of beneficial ownership information.” She said there was already “provision in the exchange of notes agreements with the overseas territories and the Crown dependencies for reviews of the arrangements six months after they come into force - that is, on 31 December this year - and for further reviews annually thereafter. The arrangements also provide for continuous monitoring by both parties. However, placing a review of the first 18 months of operation of the arrangements on a statutory basis will provide further assurance that careful parliamentary scrutiny will be given to their effectiveness and demonstrate that they are being implemented properly, working effectively and meeting our law enforcement objectives.”
Crossbencher Baroness Stern spoke to a cross-party amendment (amendment 14) backed by Christian Aid and Transparency International which “would put a timetable in place for the British Overseas Territories to have public registers. It would require the Government to give all reasonable assistance possible to the overseas territories to help with this. If registers have not been made public by the end of 2019, the amendment requires that public registers should be brought in by an Order in Council.” Lord Kirkhope (Conservative) was another co-signatory of amendment 14 and also praised the government amendments in this group. However Lord Blencathra (also Conservative) argued against amendment 14 calling it ‘wrong and misguided’. Referring to his former role as director of the Cayman Islands office in London (while making clear he has no connection now with the Cayman Islands Government) he said he deeply admired the way the territory is run and the ‘exceptional level of integrity that it brings to financial services, which is greater than in the United Kingdom’. The Earl of Kinnoull (crossbench), a former chief executive of a reinsurer in Bermuda, also opposed amendment 14, worrying about a public register encouraging ‘vigilante posses’ and also helping kidnappers in some countries identify targets. Lord Beith (Lib Dem) said the priority was ‘to get for our law enforcement and tax authorities, and those of other countries, access to information that is reliable, up-to-date and verified.’
The next group of government amendments were uncontroversial, technical provisions. Amendments 9, 11 and 12 ensure that the Bill accurately reflects the common-law position in Scotland, recognising the role of the Procurator Fiscal in directing criminal investigations. Clause 10 permits, on a voluntary basis, the sharing of information between regulated-sector entities for the purpose of tackling money laundering. Amendment 10 increases the time limit for those entities to share information following an initial notification from 28 days to 84 days. Amendment 49 amends POCA to ensure that extensions to the moratorium period and further information orders that are issued in one jurisdiction in the UK, such as Scotland or Northern Ireland, will be recognised in the others.
Lord Hodgson of Astley Abbotts (Conservative) tabled amendments to give the proposed office for professional body anti-money laundering supervision (OPBAS) powers to directly monitor and advise all practitioners subject to criminal finances legislation - a significant extension of the responsibilities of the Financial Conduct Authority (within which OPBAS will sit), and to require the powers the Government will pass to the FCA to be subject to an affirmative (as opposed to a negative) statutory instrument. Responding to a question from Lord Rosser (Labour) about why the Government are not splitting the supervisory and advocacy functions of professional body supervisors, the minister replied that the 2017 money laundering regulations, which transpose the fourth money laundering directive, “will require all professional body anti-money laundering supervisors to ensure that their supervisory functions are exercised independently of the advocacy functions”.
Baroness Kramer (Lib Dem), a former banker, introduced an amendment to provide for the regulator to give additional protection to whistleblowers in the financial services industry and require the regulator, as part of those powers, to provide mandatory compensation to whistleblowers who provide original information that leads to prosecution or sanction with financial consequences for the institution. “This is very much modelled on Dodd–Frank and a much longer tradition of mandatory compensation for whistleblowers in the United States,” she said. The minister replied that the Government believe that the right body to investigate the concerns of a whistleblower is the body that regulates the issue about which concerns are raised. She also disagreed with the proposal to introduce a power to award compensation to any worker voluntarily providing information on wrongdoing to organisations in the financial sector.
That concluded the Bill’s report stage and a brief third reading debate was held before the Bill was returned to the Commons, including a total of 147 government amendments made during its passage through the Lords.
House of Commons Consideration of Lords Amendments – Wednesday 26 April
The Government has made a number of amendments to the proposed workings of unexplained wealth orders, said Ben Wallace, Minister of State at the Home Office. SNP MPs, as well as the Northern Ireland Assembly, had raised concerns that the £100,000 threshold for the imposition of unexplained wealth orders could disadvantage law enforcement agencies in certain parts of the country, particularly where property values may be lower or the proceeds of crime more evenly shared out. It will be lowered to £50,000. Richard Arkless (SNP) welcomed the amendment and said bringing the threshold down went a long way towards closing off the gaps for the criminals.
On Scottish limited partnerships the minister noted the consultation which closed in March and praised Roger Mullin MP for being “an effective champion on this issue. I hope that, once the review is completed and we see the results, he and I will be in agreement about the next steps. Department for Business, Energy and Industrial Strategy officials are analysing the responses and expect to submit advice on options to Ministers shortly after the election.”
For Labour Rupa Huq said the party believed the Government’s concessions were a missed opportunity because it has a moral duty to ensure that our overseas territories and Crown dependencies adopt publicly accessible registers of beneficial ownership. “They contribute to geopolitical instability, and they do our reputation harm as well. They [such territories] know that having a centralised, as opposed to a decentralised, platform brings them one step closer to laying the foundations for a public register in the future.” She vowed: “If the forthcoming review demonstrates that the decentralised platforms favoured by the overseas territories are impeding the operational efficacy of our enforcement agencies, Labour Members will demand that the Government react immediately to ensure that all platforms are centralised and made public.”
However Richard Arkless (SNP) said: “I would have preferred a situation where we could justify persuading or compelling overseas territories to publish registers of beneficial ownership, although we in the SNP would, rightly, always stop short of allowing this place to tell another jurisdiction what it can and cannot do.”
The 147 Lords amendments were approved, with Commons financial privilege waived in respect of Lords amendments 11 and 33. The relevant part of the Bill debate can be read here.
The Bill gained Royal Assent on Thursday 27 April.