As I said earlier, I thank the hon. Member for Bassetlaw (John Mann) for bringing this issue to everyone’s attention and for providing an opportunity for us to debate it this afternoon. He has already raised the effect that anonymous shell companies have on facilitating the corruption that keeps many poor countries poor. Hidden company ownership may be a particular problem. I welcome the efforts of the Prime Minister during his G8 presidency, particularly his calling on the EU and the G8 to work together to break through the walls of corporate secrecy and to ensure much more transparency.
Any move that can clean this whole business up will have a major impact on the world’s efforts to tackle poverty. If we are to commit regularly to having a substantial percentage—0.7%—of moneys being put
into aid, we need to make sure that the money is used effectively and that there is a clean-up. It has been noted that a third of the world’s poorest 1 billion people live in resource-rich countries, but as a result of weak governance and widespread corruption, finances do not always reach Government accounts. In fact, many of those resource-rich countries have been looted by the very politicians who are meant to be running them and developing their economies.
It is primarily companies that are used to move dirty money. The World Bank reviewed 213 large cases of corruption between 1980 and 2010, more than 70% of which were found to have relied on anonymous shell companies. Companies registered in the United States topped the list, but the United Kingdom and its Crown dependencies and overseas territories came second.
It seems to be terribly easy to set up anonymous companies and trusts. It is very cheap to create complex corporate structures, and the practice of using “nominees” does not help at all. I hope that the Minister will emphasise the need to put beneficial share ownership into the public domain. A “many eyes” procedure would ensure that company ownership was subjected to continuous tests. I agree with the hon. Member for Bassetlaw that we should not just leave it to HMRC. Beneficial owners are individuals—living people, real-life human beings. We are not talking about yet another company and yet another trust.
The financial action task force, the intergovernmental body that sets global anti-money laundering standards and makes recommendations, has said that the system does not work, and that it is much too easy to avoid due diligence. In many countries, company service providers are all too willing to flout the law. A large number of the world’s major economies are ineffective in preventing companies from being misused by money launderers. Six of the G8 countries and 18 of the 27 European Union member states are listed as being “not compliant” or only “partially compliant” with the new recommendations on beneficial ownership.
Many countries do not require banks, lawyers or company service providers to identify beneficial owners of corporate clients. The penalty in the United Kingdom and the United States for having a fake identity in the form of a passport is up to 10 years in prison, yet anyone who is willing to pay a small amount—I think it is £200 or £300—can create a fake ID through a company and then use the company to hide behind, and the penalties for that are very small.
One way of preventing abuse of anonymous companies is for countries to require all information about beneficial owners, the names of all people behind trusts and foundations, to be put into the public domain. It is essential for such information to be public, rather than being accessible only to the police and other law enforcement agencies. There is no interrelationship between most of these countries, and they cannot carry out the necessary tests. If only HMRC or the police can gain access to our information when fraud is suspected, it will not be possible for us to check other countries’ systems, or for them to check ours.
It is cheap to put beneficial ownership into the public domain. It has been suggested that 99% of companies that are registered in this country are family companies or micro, small or medium-sized businesses. There is a clear relationship between the ownership of companies and individuals. Only 1% of companies registered in this country have a complex financial structure.
We have said that banks could be charged with greater duties to ensure that they are more compliant and rigorous in exercising their duties to ensure that money laundering does not take place, but they have a conflict in that they stand to make very big profits in accepting the business of rich and dodgy customers. Our anti-money laundering laws sound fairly stringent, but, as has been said already, they bear down heavily on smaller companies and it is the big, professional organisations that are trying to launder money through the system on a major scale and that can do that quite easily.
There is little personal responsibility from individual bankers—HSBC is a strong example. In 2012, it agreed to pay a record $1.9 billion fine levied by the US authorities after admitting that its anti-money laundering systems had failed; it laundered hundreds of millions of dollars at least for drugs cartels, terrorists and pariah states such as Mexico. The Senate sub-committee that carried out the investigation described HSBC’s cultures as “’pervasively polluted”.
During that time, over 47,000 people died in Mexico at the hands of drug traffickers, so it is important that we deal swiftly and effectively with such companies. The penalties could be toughened greatly. As I said earlier, we should make individual people on the board responsible for looking after that part of the business. However, I accept the point made by the hon. Member for Bassetlaw that every bank executive should be responsible and made liable for the damage that they cause and that there should be a rigorous system of penalties, which should include the option of imprisonment.
I do not want to go on too much longer. The most important point is that bringing in a public register of beneficial ownership will not involve a huge amount of red tape. The point has been made already that a number of individuals are clear that it would be easy for this country to make such a move. I cannot stress enough how important it is to small businesses to ensure that everyone gets a fair deal, that taxes are paid and that there is absolute clarity when money passes back and forth across the world.
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