Well, I will also write to that individual, having transgressed. I apologise for that, Dame Rosie. I think I am okay on the other two: one is Guto Bebb, the former MP for Aberconwy, and the other is Mark Field, the former Member for Cities of London and Westminster.
I read out that list partly because we have the time to do so, but also to demonstrate how absolutely critical it is, I say to the Minister, that we start tackling economic crime seriously in this country. If we do not, we are in danger of allowing this to seep into our politics and seep into the public domain, and far from being a trusted jurisdiction, we will become a jurisdiction that is not very different from others to which we all too often preach that they should tackle the corruption endemic in their Administrations—we will become one of them.
Just to put that further into context, we are now the jurisdiction of choice for far too many kleptocrats, far too many criminals, far too many people who avoid tax and far too many people who launder money. Money laundering in itself is an activity that leads to the funding of terrorism, drug smuggling and all sorts of other crimes that we and the Government ought to want to bear down on in a very firm way, but we are just not doing so. The National Crime Agency has a figure of £100 billion that it thinks is laundered into the UK each year, but I think that is a very conservative estimate. It is probably plucked out of thin air a little bit, and I think the real or true figure is probably much greater. We only have to look at Moody’s credit rating, on which we have gone down a notch. One of the reasons for that happening is that it has argued there has been a
“weakening in the UK’s institutions and governance”.
To come back to my new clause 15, it is partly about our enforcement agencies, but it is also about the way in which all Government agencies tackle economic crime here.
The evidence of the toothlessness and the timidity of our enforcement agencies is overwhelming. In part, that is because of the regulatory framework in which they have to operate. As I have said time and again from these Benches, that deregulation started under the Conservatives and was continued by the Labour Government. Both parties take responsibility for that deregulation, and it is now time to revisit the issue and toughen up the regulations, so that we have an appropriate regulatory framework that can tackle not just tax avoidance and evasion, but the growth of the economic crime that is so insidious.
There is also pathetic enforcement by all our agencies. In part that is due to a lack of money, but I also believe that a lack of political will lies at the heart of it. We have only to look at the United States, ironically, which has a strong and clear resolve that it will pursue those guilty of financial crime and fine them heavily. Let me provide two examples of that. In 2019, the USA pursued and secured 25 penalties, which gave a total of $2.29 billion in revenue secured back to the public purse. In the UK, in the same year, we pursued and secured only 12 penalties, totalling £338 million.
Let me take one example of a British bank, Standard Chartered. In 2019, it was fined in both the USA and the UK, not only for its poor anti-money laundering controls, but for breaking sanctions in relation to Iran. Here in the UK, the Financial Conduct Authority fined
it a total of £102 million. In the USA—this is a British-based bank, not an American bank—it was fined £842 million. There is just a different approach between the USA and the UK in pursuing those who are guilty of economic crime and should be paying back to the public purse. Our role in money laundering and economic crime is growing. It is not just economic crime here in the UK; it is economic crime facilitated by the UK because of our regulatory framework.
The hon. Member for Glasgow Central (Alison Thewliss) spoke about Companies House, which is a vital ingredient in the leaks of all the documents we get. Someone can pay £12 to form a company in the UK. Endless people from all over the world use UK formation to form shell companies, which they then use to create complex financial structures that will facilitate money laundering and economic crime. We have seen that in a regular flow of leaked documents, and I will talk about two. The Financial Crimes Enforcement Network files came out in 2020, showing that $2 trillion was moved by global banks in just under 20 years between 1999 and 2017. That movement gave rise to suspicious activity reports, which banks have to provide to the American authorities when they have a red flag about a transaction. More UK companies were cited in that tranche of leaks than companies from any other country, showing the concentration of economic crime in the UK. Indeed, 3,267 of the companies cited were UK shell companies.
Formation agencies are one of the things that we do not regulate properly. We do not enforce the legislation strongly enough, and four formation agencies had created more than half of those UK shell companies. The sort of thing that happens is that a limited liability partnership is established and registered at the Belgian address of a dentist. A young worker in north London was paid £800 a month for his flat’s address to be used for the registration of companies, and when he gave up doing that, the same address was used by a cleaner who worked in Leicester. Underlying that is one example when J. P. Morgan allowed a company to move more than £1 billion through a London account. It later emerged that that company was probably owned by a mobster on the FBI’s “Ten Most Wanted” list. That is the sort of facilitation of economic crime that we allow to happen.
I do not want to take too much of the House’s time, but I turn to the Pandora papers, the largest cache of documents we have ever received. Again, the UK lies at the heart of everything that was revealed in those papers. Others have talked about the secret property transactions that have taken place, with £4 billion identified in the Pandora papers. There are more UK citizens than citizens of any other country cited in that tranche of leaks. The relationship between the UK and our tax havens is central to the facilitation of economic crime, and again we see the weak and toothless enforcement agencies.
That brings me to our new clause 15. The evidence for the need for well-resourced and determined enforcement is overwhelming, but the money to be raised by the levy is woefully inadequate. As the Minister said, it will be £100 million. I had a meeting recently with personnel from major banks who are responsible for implementing anti-money laundering provisions. They said that they—the regulated financial sector—spend £49.5 billion on financial crime compliance. That gives us an idea of how little our £100 million raised from the levy is.
We must act within the constraints of the Bill in tabling new clauses, but we think £100 million is a pittance. Far more should be raised—it should be doubled or tripled—and I think that case would be made if a review were undertaken. If the Minister is confident that she is right—if she is confident about everything she said in her opening remarks—she will not shy away from a review that could then be considered in the House. I often think that Ministers should think about propositions that are tabled; they should not just reject them because they are not their ideas, but should really consider whether they are worthwhile on their own grounds. In this case, I urge the Minister, if she is really committed to tackling economic crime, money laundering and the rest, to do something.
I suppose the only thing I would say about the new levy, while I welcome it, is that for the first time ever we see the Treasury agreeing that there should be a hypothecation of tax to spend on a particular issue. I always thought it was Treasury orthodoxy that there should be no hypothecation. In this case, we have broken that orthodoxy; the money is going to be spent on fighting money laundering. I welcome that change. I hope to see it in other areas where a hypothecated tax could do a lot to create a fairer society.
I also think that the bands are unfair. Why should a company with a revenue of £10 million pay £10,000, while a company with a revenue of £1 billion pays only £250,000? We need a more progressive system that reflects the revenue that these companies get.
Simply increasing the levy is not enough; there have to be other measures. We need to put a cap on the potential costs of litigation that the enforcement agencies will engage in. All too often, the potential cost to an agency stops it taking action that would bear down on economic crime. We have seen that with unexplained wealth orders, where the agencies started off with a great burst of energy, and then when they lost one case and got a huge bill, they stopped doing anything. We could do away with the entitlement to secure costs, except in cases where there is no reasonable justification to prosecute. I think we could provide a financial incentive to the enforcement agencies to litigate by saying that any money that they raised through action could come back to them to be used.
All that could be reviewed, and the level of the levy could be increased. I would be really heartened if, just for a change, Ministers listened to the strength of the argument and accepted new clause 15, with its cross-party support. Then, hopefully, we could come back and see who is right and who is wrong.