I am afraid that I am now going to reduce the level of excitement by returning to some rather technical and boring but I think important legal details of the Bill, because we all want to make sure that this works in practice. I am concerned that, despite what is in the Bill itself and in a number of the amendments, there still seem to be two important areas of potential loophole.
Can I start with the definition of registrable beneficial owner, largely in schedule 2? The concern that I have, and I am fortified by the briefing I have received from the Law Society of England and Wales—it mirrors the briefing that I suspect the hon. Member for Glasgow Central (Alison Thewliss) had from the Law Society of Scotland—is that there is a gap here, as the impact assessment of the Bill sets out. What has been done here is to take the existing domestic registry of persons of significant control and seek to build on that, which is fair enough, but it does not go far enough.
The problem that we have is this. There is a common misconception that analysing who the person of significant control of an entity is, is the same as analysing who the beneficial owner is. They are not the same and the objective we need to get to is: who is the economic beneficiary?
The position is this. The PSC regime seeks to establish ownership certainly, but only ownership in the context of leading to the control of the relevant entity. It does not seek to establish who the ultimate economic beneficiary of that entity is. So we could have a situation where the register disclosed the ownership of, let us say, a corporate group, but it would not then disclose who in fact are the people behind the corporate group. It might disclose individual named nominees, but it would not then disclose the people on whose behalf the nominees hold the property. There might in fact be no registrable person—no legal entity that holds significant control—so nobody would be shown up in that.
I urge the Minister to pay attention to what the Law Society suggests to get around that and to ensure the economic beneficiaries of the property are captured—the oligarchs and their families; they are the economic beneficiaries we want to get to. The trust and its beneficiaries—this will invariably be in the form of trusts of one kind or another—should also be registrable under regulation 45 or 45ZA of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. That is a mouthful, but it would do the job. The whole point is that then we would be able to capture the beneficiaries. That is missing from the Bill as it stands and I do not think any of the current amendments deal with that point. I hope the Minister, as he is taking things away, will take that away urgently in order to plug the loophole.
That relates to the relationship between the scheme under this Bill and the scheme of the trust registration service because that same set of 2017 money laundering regulations works in conjunction with the trust registration service: that is the body through which entities meet their legal obligation to register under those money laundering regulations. Express trusts are covered by that if they are UK trusts. Non-UK express trusts are obliged to register under the 2017 regulations if they hold UK property, or derive income from a UK asset—again, that is the sort of situation of the oligarchs that we are looking at.
We must be very clear in setting out which overseas trusts are going to be caught by the legislation. Are they under the regulations or under the Bill? If we extend the definition across, we might well cover that. It is also suggested—I think there is merit in this—that guidance should be issued to honest practitioners in this field setting out which entities are in scope of the scheme and
which are out of scope. That has happened in other forms of tax legislation and will be a sensible idea to take away.
The final point I make in relation to that guidance is that that would enable the Secretary of State to give better indication as to interpreting the meaning of “significant influence or control” within legislation. We have got who the beneficial owner is, capturing the economic beneficiaries, and who the person of “significant influence or control” is. We ought to make tally with the PSC regime as far as we possibly can. The logical way to do that is by introducing an amendment to introduce the same provisions we are introducing here into section 790C(7) —I am sorry, again, about the length—of the Companies Act 2006. That would enable us to bring in the equivalent PSC regimes for limited liability partnerships —again there is a gap here, as I read it—unregistered companies, and also Scottish partnerships, which have been referred to by Opposition Members.
Those are gaps that the Law Society has flagged up that could be plugged. There is plenty of time between now and next week to get that worked out. I just say this: the Government have many able lawyers—I worked with some of them when I was a Minister. Specialism in detailed trust law is not necessarily a core Government legal business. The Law Society, both north and south of the border, has access to real expertise in this field, objectively. It has written to say that it would be very happy to work with the Government in helping to fine-tune the legislation. I hope the Government will think about that. Not all wisdom purely comes from within Whitehall and we ought to look to experience in the sector to take that on board.
I hope those suggestions will improve a Bill that is well intended, but we want to nail everything down as much as we can. In that spirit, I hope the Minister will consider them.