Foreign Affairs Committee Report on Illicit finance and the war in Ukraine - Statement from the APPGs on Fair Business Banking and Anti-Corruption & Responsible Tax

The Foreign Affairs Committee just published a damning report: ‘The cost of complacency: illicit finance and the war in Ukraine’. It sets out a sad indictment of the state of affairs of our economic crime response, and proposes a series of measures for the Government to tackle the scourge of dirty money.

The Committee finds that, so far, the Government’s rhetoric of “clamping down” has not been matched with constructive action. The report concludes that the Government’s lack of willingness to bring forward legislation stemming the flow of Russian money has directly contributed to the UK’s status as a safe haven for corrupt wealth. It is “shameful that it has taken a war to galvanise the Government into action”.

The Foreign Affairs Committee published a report back in 2018 that came to many of these same conclusions. Then already, it called for the Government to get serious about confronting the full spectrum of Putin’s offensive measures and highlighted the use of London as a base for the corrupt assets of Kremlin-connected individuals.

Very little has changed in the Government’s response since that time. Yet, allowing illicit finance to fester has wide-ranging ramifications, corroding trust in our institutions and undermining national security.

In this report, the Committee puts forward a series of recommendations for the government to finally square up to Britain’s dirty money problem. These proposals are closely aligned with those of our Economic Crime Manifesto.

We join the Committee in calling for beneficial ownership rules and robust reform of Companies House, including new powers for the company registrar to verify information to ensure accuracy as well as discretionary powers to remove corporate entities from the register for wrongdoing.

The report amplifies calls for a substantial increase in funding and expert resourcing for the National Crime Agency, Serious Fraud Office and other responsible agencies. The APPGs shares the view that law is only as effective as its enforcement. The Treasury must at the very least increase public spending to £300m in this Spending Review period, in order to match private sector funding raised through the Economic Crime Levy.

A further recommendation is reform of Britain’s outdated and ineffective corporate criminal liability laws. Despite the missed opportunity that the recent Law Commission Options Paper represents, we echo this proposal. We will continue to push for reform of the identification principle, for the introduction of a form of senior executive liability and of further failure to prevent offences.

In its report, the Committee welcomed the issuance of sanctions, which have frozen the assets of oligarchs who prop-up Putin’s brutal regime. It recommends that the relevant law enforcement agencies now take advantage of the time these asset freezes provide to consider if there is a criminal case for asset seizure. In the spirit of this recommendation, we will shortly be holding a parliamentary workshop to tackle the question of seizing vs freezing Russian assets.

The Foreign Affairs Committee urges the Government to build on this initiative and to develop a comprehensive transatlantic partnership to curb kleptocracy. We will continue to promote and participate in the Inter-Parliamentary Alliance against Kleptocracy, with our American and European colleagues, to align our policies in a way that bears down on corruption and bolsters democratic values.

We hope that the Government will heed the recommendations in this report and in our Manifesto by tabling its upcoming economic crime legislation in order to end the UK’s status as a safe haven for dirty money.