Richard Rosser on the weakening of government plans to tackle the scourge of corporate tax evasion
The Criminal Finances Bill not only aims to tackle money laundering and corruption, but to also increase the powers of enforcement agencies to recover proceeds of crime and combat the financing of terrorism. In doing so, the bill provides for a new Unexplained Wealth Order, the extension of seizure and forfeiture powers, a strengthening of suspicious activity reporting, and a new corporate offence of failing to prevent the facilitation of tax evasion.
During the Bill’s passage through the Commons, Labour colleagues raised concerns that it does not go far enough to deliver on its aims – something we will be begin to reinforce today as we start the Lords Committee stage.
The gaping hole in the Bill is the lack of action on tax havens, including UK Crown dependencies and overseas territories. In 2014, then Prime Minister David Cameron wrote to the overseas territories stating that public access to a register of beneficial ownership was vital to meeting the urgent challenges of illicit finance and tax evasion. We agree. So does Transparency International, which has argued the importance of beneficial ownership information being made public, in a format that is free and searchable. The UK now publishes a central register of beneficial ownership, so why not our overseas territories as well?
Money laundering and corruption hits developing countries hard, with around one trillion dollars lost each year via illicit financial flows. The OECD has estimated that tax havens may be costing these countries a sum of up to three times the global aid budget, and private registers of beneficial ownership will not be accessible to those suffering the most from financial secrecy.
Over half of 214,000 corporate entities that came to light in the Panama Papers were registered in the British Virgin Isles. Progress is being made but it is slow and the government seems to have weakened its stance in recent years, now saying it remains an ‘ambition’ that public registers become a global standard, adding: ‘If and when they do, we would expect the Overseas Territories and Crown Dependencies to follow suit’. So much for ministers’ claims the UK is a ‘world leader’ in tackling corruption.
Of course, other key questions need answering during the Bill’s scrutiny in the Lords. Does the offence of ‘failing to prevent’ tax evasion go far enough to tackle corporate behaviour? Should it be extended beyond bribery and tax evasion to include money laundering, fraud and other economic crime? Is our anti-money laundering regime fit for purpose? How well is it being regulated?
To be effective, the welcome measures, as far as they go, proposed by the government must be backed up by adequate resources; and Labour will seek assurances that enforcement agencies will have what they need. This is not a Bill which seeks to address victimless crimes. We want it to be about more than good intentions, and to be used as an opportunity to show what can be achieved internationally.
Lord Richard Rosser is Shadow Home Office Minister in the House off Lords
Published 28th March 2017
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