25 January 2023
Jonathan Djanogly proposes an amendment to tackle proceeds of economic crime

Jonathan Djanogly proposes an amendment to the Economic Crime and Corporate Transparency Bill aimed at preventing proceeds of economic crime entering the UK economy including proceeds from acts committed overseas and calls on the Government to look at whether frozen assets could be seized and the proceeds used for Ukraine reparations.

Mr Jonathan Djanogly (Huntingdon) (Con)

I rise to speak to new clause 23, in my name and those of the right hon. Member for Barking (Dame Margaret Hodge) and 17 other hon. Members on both sides of the House, for whose support I am grateful. This comprehensive Bill is significant in its scope and its intention to counter fraud, which is wholly welcome, but new clause 23 speaks to its lack of focus on the proceeds of economic crime, which are the proceeds resulting from acts committed in the UK and overseas.

Such proceeds have circulated in the national economy, largely unimpeded, for too long, and a host of existing limitations and issues, such as the lack of proper financing for related law enforcement bodies, which has been much discussed over the last two days, have a compounding negative effect. Unfortunately, those limitations are all too frequently at the expense of and to the detriment of hard-working and honest taxpayers in all our constituencies—not least mine—and those who often stand to benefit are the criminals and those sanctioned for reasons related to foreign affairs. Tackling that issue is the primary motivation behind the new clause.

More broadly, like-minded countries are increasingly focusing on this area, including our fellow parliamentarians in Canada. In June last year, they made technical yet significant changes to their economic sanctions legislation, including the Sergei Magnitsky law regime. Effectively, those changes allow existing sanctions for freezing assets to be converted into orders for the seizure of those assets. Similar measures are being considered by the European Commission, in other European capitals such as Tallinn, and in the United States. Unless our regulatory measures vis-à-vis the proceeds of economic crime are reviewed and strengthened, the UK risks falling behind, which I believe would be both morally and politically unpalatable.


I also believe that new clause 23 speaks to the wider lack of a much-needed national conversation about such proceeds, where they are held, why they are in the UK and, crucially, what the potential benefits of clamping down on them could be. It would, I suggest, be to the clear benefit of the taxpayer, but also crucially to those elsewhere in need of financial reparations such as in Ukraine, if the proceeds could be seized, repurposed and put to work. I say this recognising that in September it was estimated by the World Bank that at least $349 billion would be needed for Ukraine’s reconstruction, and one can only imagine that the figure is now much more significant.

It is, however, important to recognise that it is not enough for measures to be simply passed into law; their implementation must be backed, supported and seen through. The American authorities have provided a notable example of one such action that I thought would be of interest to the House. In May last year, a $300 million yacht, the property of a sanctioned Russian oligarch, was seized by Fiji at the request of the United States in a joint law enforcement operation. This followed the issuance of a seizure warrant that declared the yacht in question to be subject to forfeiture based on probable cause of violations of US law, including money laundering and conspiracy. In other words, it was not the asset-freezing sanctions themselves that enabled seizure, but rather the active enforcement of the breach of such sanctions.

Such violations and action should not, however, be looked at in isolation. Instead, they should be considered in the wider context of international affairs—namely Russia’s brutal, illegal and ongoing invasion of Ukraine. Co-ordinated through the US Justice Department’s KleptoCapture taskforce, the seizure of the yacht in question sent a blunt message that, in the words of the FBI director, Christopher Wray, those who contribute to the advancement of Russia’s malign activities will be sought and

“brought to justice, regardless of where, or how, they attempt to hide.”

This is a message—a strong message—that cannot be ignored or overlooked.

This yacht seizure was a clear example of the rigorous enforcement of the law, and one that I believe should be emulated here in the UK, with related regulatory measures subsequently strengthened on top. The recent arrest of another oligarch in London on suspicion of money laundering in breach of asset-freezing sanctions was a step in the right direction. The problem in the UK, however, is that the criminality of breaking sanctions attaches to the quantum of the breach, not to the overall value of the amount sanctioned. For example, if a sanctioned oligarch were to be found with a carrier bag full of sanctions-breaching cash, that cash amount is all that is liable for confiscation, not his wider sanctioned wealth.

This was why we attempted to table a cross-party amendment—the so-called chink in the armour amendment, as described by the right hon. Member for Barking. It proposed, in short, that non-disclosure of all assets by a sanctioned individual would itself be a criminal offence, and that the total frozen amount could be subject to seizure as a penalty for such an offence. Of course, this is a much lighter step than providing, as in Canada, for the Attorney General to be given the power to convert freezing orders into seizing orders, and I also tried to table such an amendment, by the way. Unfortunately, these proposals were deemed to be out of scope of the Bill, which is why we are only debating the broader terms of new clause 23.

However, given that this Bill follows on from the Economic Crime (Transparency and Enforcement) Act 2022, which involved fast-tracking sanctions laws in response to the invasion of Ukraine, it does seem slightly ironic to me that updating that sanctions regime falls outside the scope of this follow-on Bill. None the less, I of course accept the House’s ruling on that issue, but I implore the Minister and the Foreign Office who lead on this issue to stop passing the buck between Departments, as we keep seeing, and to listen to the majority of hon. Members across all parties who feel that Russia and Russians as the aggressors must pay for their barbarity and devastation of Ukraine, and not leave it up to British and western taxpayers to foot the Bill for Ukraine’s reconstruction.

New clause 4, which was so powerfully and expertly introduced by my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland), would create an offence of failure to prevent fraud. That important proposal attempts to close a large gap in our existing fraud legislation book. I go back to 2010 when, as shadow Solicitor General I led for the then Conservative Opposition on the Bribery Act, which we also did once we came into government. Working on a cross-party basis, we added into that Act the concept of senior managers of a venture being liable for bribery happening at the coalface, if they could not show that they took all reasonable steps to prevent that bribery from happening. Before that, prosecutors had to prove at each layer of management that those above them, the so called “directing minds”, were guilty of the crime. In practice, that was almost always impossible with larger companies—my right hon. and learned Friend explained this at some length earlier so I will not go into great detail. As he said, that Act focuses the minds of those in management, especially in big companies, so that they think carefully about the processes they have in place, and regularly review such processes. Such an approach also states that inaction is not acceptable, let alone an excuse.

The resulting new bribery law was considered a great success. I recall a discussion about a decade ago with the then SFO director, Sir David Green, who was publicly advocating for the same change to be made for the offence of fraud, and I note the SFO’s current director is saying exactly the same. To put that in context, the main fraud prosecutors in this country have consistently been saying for more than a decade that they need this legislation in order to do their jobs properly, yet here we are some dozen years later, and it still has not happened. I am frankly amazed by that, and I am not quite sure why it has not happened. I heard from my right hon. and learned Friend the history of how the measure was delayed, but I am still not sure why it was delayed. I recall the now Lord Chancellor talking of consulting on this issue back in 2016, so again—why the inaction?

Together with other right hon. and hon. Members I got a letter dated 20 January from Ministers from the Home Office and the Department for Business, Energy and Industrial Strategy saying that they are “carefully assessing options”. Does that imply another dozen years of assessing something that we all know needs to happen? If we are to be serious about combating fraud, we must get on with this. If the Government are not happy with the wording in new clause 4, they should come up with their own wording. Fraud now constitutes just under half of all crime committed in the UK, and we must be doing more to counter it at all levels.


Earlier interventions in the same debate

Mr Jonathan Djanogly (Huntingdon) (Con)

Will my right hon. Friend give way?

The Minister for Security (Tom Tugendhat)

I will give way; I should have known that I was lining that up.

Mr Djanogly 

Yes, because my right hon. Friend touched on asset seizures and tempted me. Of course, Canada has enacted an Act of Parliament that provides for freezing orders to be translated into seizing orders at the request of the Attorney General of Canada.

Tom Tugendhat 

My hon. Friend is absolutely right, but he is also no doubt aware that there is much discussion in the Canadian legal community about whether those orders will be challenged in different ways and how exactly they will work. There is still a serious debate about the nature of translating from forfeiture to seizure.

Mr Djanogly 

My right hon. Friend is generous in giving way again. All this law is new: our unexplained wealth orders were new, and they have been questioned in the courts, so that is not the question. The question is whether we have the guts to stand up and move on this issue, as the whole western world wants to see.

Hon. Members

Hear, hear!

Tom Tugendhat 

My hon. Friend is absolutely right, but I note that some hon. Members cheering would also cheer the provisions of the European convention on human rights that guarantee the right to private property and many of the areas that cause the difficulties that the UK has and Canada does not.

I do not deny that there is an enormous question for debate here and that many hon. Members would like to move quickly to seizure on many areas, but sadly, that may take a bit longer. One thing on which we all agree is that the UK’s place as a rule-of-law jurisdiction and as a home for justice, not just to ourselves but to many others around the world, is essential to our prosperity and to liberties around the world. It is therefore important to ensure that we correctly transfer from forfeiture to seizure, and recognise the rights and limits that we should respect.



Mr Djanogly 

Has my right hon. and learned Friend also considered the Bribery Act, where a similar set of procedures was forced on corporates, with dramatic results?

Sir Robert Buckland 

My hon. Friend is absolutely right. Of course, he was a Minister in the Ministry of Justice when the Bribery Act was brought into force at the end of the 2005 Parliament, and he has direct experience of this issue. He is absolutely right that the Bribery Act has been of huge value. In fact, under the regime of deferred prosecution agreements that the Government brought in in the early part of the last decade, of the 11 DPAs that have been made by the Serious Fraud Office with corporates, nine were for “failure to prevent offences”—failure to prevent bribery—and just three were for the offence of fraud. That accounts for 90% of the £1.7 billion in revenue that the SFO has brought in through DPAs. It is clear that that has been an important step change in the way we deal with wrongdoing or indeed the threat of wrongdoing.