My Lords, I support most of the amendments in the group, including the government amendments, which are generally very helpful.
I will speak to Amendment 24 in my name and to the similar Amendment 23, in the name of the noble Baroness, Lady Chapman, both of which are intended to address the possibility of there being a very long
period between a change in the ownership of the entity and that change being reported in the annual update. I thank the noble Lord, Lord Cromwell, for his support in this. Amendment 23 would require an update to be filed within 14 days of when a person has become or has ceased to be a registrable beneficial owner. My Amendment 24 is slightly wider, requiring any changes in registered information to be reported within 14 days. However, both amendments seek to bring the overseas entity regime into line with the persons of significant control regime that UK companies must follow. To be honest, I would be content either way.
As the Bill is currently drafted, an overseas entity could register and then immediately change its beneficial ownership and we would not get to know about that for a full year, during which time any number of actions could take place, including the sale of the property to an innocent third party who unwittingly might find themselves enriching a criminal or someone subject to sanctions.
The Bill rightly puts restrictions on the disposition and registration of property, but it does nothing to deal with the more likely scenario of the overseas entity itself, or indeed an entity further up the ownership chain, being sold; indeed, this 12-month grace period almost wilfully ignores that. It seems rather perverse that the overseas entity regime should be more benign than the regime that applies to persons of significant control for UK companies.
In his helpful all-Peers letter of Friday, the Minister explained that the reason they have done it this way is to protect innocent third-party buyers from not being able to register the purchase of a property if the overseas entity turns out to be in breach of the requirement to report a change. That is obviously extremely important. However, a very simple solution is already built into the Bill. The overseas entity has the ability, under Clause 7(8), to shorten the update period and file an update immediately before it sells. Any innocent buyer would simply insist that this happens before the sale is completed, and that would deal with the problem that the Minister explained. Accordingly, I see no reason why one of Amendments 23 or 24 should not be accepted, so that overseas entities would have the same reporting requirements as UK companies have. The whole point of the overseas entity register is that we should know who beneficially owns UK properties. Allowing that information to be potentially up to 12 months out of date cannot make sense. I cannot think of any other corporate register that would allow such a long period to notify changes.
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Given the urgency, I will not divide the House, but this is just another example of a matter that requires proper, unrushed discussion, and I hope the noble Lord is ready to have those discussions as we progress through the wider economic crime landscape.
I want to comment also on Amendment 53 in the name of the noble Lords, Lord Clement-Jones and Lord Fox, and the noble Baroness, Lady Chapman. At Second Reading, the issue of enablers and how to disincentivise them was raised multiple times. The
Minister referred to the UK’s existing robust system of anti-money laundering regulations, but he went on to rather undermine that by saying that the Solicitors Regulation Authority had issued only 14 fines in 2021 and that the Institute of Chartered Accountants in England and Wales had cancelled the membership of only six firms—I remind the House that I am a member of the ICAEW. These are tiny numbers given the acknowledged size of the problem, and the fines are almost irrelevant, averaging just £11,600 for solicitors and just £3,000 for accountants. That is self-evidently not enough to disincentivise the enablers, which must explain at least in part why London has become known as the “London Laundromat” or “Londongrad”. Amendment 53 goes some way to deal with this by creating an express offence if a professional fails to disclose knowledge or suspicion of false or misleading information to the registrar.
While I strongly support that, I would go further and introduce an active requirement that a regulated professional must make a positive statement, added to the register, that they have carried out their due diligence and have satisfied themselves that the information about beneficial ownership is correct. As I explained at Second Reading, there is a world of difference between a duty to report suspicions and an active requirement to confirm the information. In the former, the professional remains unnamed. They are only on the hook if a problem later becomes public. So they may feel that the risk of turning a blind eye is quite low, especially set against the small fines that they would face, which I mentioned earlier. Their reputation is not affected unless they get caught, which happens rarely. The noble Lord, Lord Cromwell, alluded to this in his Second Reading speech when he referred to certain bankers who seem surprisingly willing to act for apparently high-risk clients.
Making a positive statement that they have verified the information, on the record, would publicly associate the professional with the information registered. That would seriously concentrate their minds both reputation-wise and legally—they would be putting their reputation clearly on the line. There could be no wriggling off the hook because they relied on someone else. Turning a blind eye would be an active decision rather than a low-risk, passive decision not to say anything.
I considered adding an amendment to this effect, but it can more easily be dealt with in the regulations to be issued under Clause 16, particularly subsection (2)(c). Given the desire to pass the Bill quickly, I decided not to submit an amendment. However, it is an important point and I would like to follow this up as part of those regulations. Would the Minister be willing to meet with me and perhaps others to discuss the matter further?
Finally, the noble Lord, Lord Sikka, has tried to add a number of information requirements, all of which are sensible. I hope that the Minister will actively consider those under the powers to regulate in Clause 4.