Chamber and committees

Good morning to the committee. Thank you for the opportunity to make a few brief remarks on the supplementary legislative consent memorandum for the United Kingdom Government’s Economic Crime and Corporate Transparency Bill.

Since my last appearance before the committee, on 24 May 2023, constructive engagement at official and ministerial level with the UK Government has continued and, I am pleased to report, has now resolved matters. The supplementary legislative consent memorandum lodged on Monday of this week now recommends promoting consent to all relevant provisions in the bill.

In the course of last week, a series of amendments was made to reflect the outcome of those negotiations. New amendments were also made to add new provisions relating to the register of overseas entities and the identification doctrine. As such, the bill now has a combination of consent mechanisms, consult-plus mechanisms, consult mechanisms, a sunset clause, and ministerial correspondence to offer reassurance on the policy intent of regulation-making powers relating to the forfeiture processes for crypto assets.

The Scottish Government remains fully supportive of the policy intent behind the bill and now recommends promoting consent to all the relevant provisions of the bill.

Yes. We are content. There are areas in which we would have liked to have a consent mechanism rather than a consult mechanism, but we are not going to make the perfect the enemy of the good. There is broad agreement on the policy intent behind the bill. I am pleased that, through the constructive work that has taken place between officials and ministers, we have been able to arrive at this point.

I thank the committee for the opportunity to address members on the legislative consent memorandum on the UK Economic Crime and Corporate Transparency Bill. The Scottish Government corrected the memorandum by letter on 19 May to say that paragraph 115 should refer to amendment 77L instead of amendment 77B.

The bill is the second part of a UK-wide legislative package to prevent the abuse of UK corporate structures and to tackle economic crime. The Scottish Government fully supports the bill’s policy intention, and the bill itself follows on from the Economic Crime (Transparency and Enforcement) Act 2022, which received royal assent on 15 March 2022.

The Scottish Government welcomes the constructive engagement that it has had with UK Government ministers and officials on aspects of the bill and subsequent UK Government amendments that impact on devolved areas. The legislative consent motion recommends giving consent for the majority of the bill but withholding it from some provisions in the meantime, in the hope that issues can be resolved through engagement with the UK Government. Such an approach is recommended, because the provisions of amendment 77L, which would introduce proposed new schedule 6 to the 2022 act, and proposed new section 303Z42 of the Proceeds of Crime Act 2002, as inserted by schedule 7 to the bill, fall within the Scottish Parliament’s legislative competence and provide for the power to make regulations without consent.

The Scottish Government remains acutely aware of the Scottish Parliament’s consistent view on delegated powers that relate to devolved matters. There has been progress on that in the bill’s provisions on the register of overseas entities and Scottish limited partnerships, and we continue to explore the issue with the UK Government.

The policy objective of the register of overseas entities is to tackle money laundering by shedding light on who benefits from that property. The register itself is UK-wide. The Scottish Government is committed to improving transparency of those who own and control land in Scotland; we fully supported UK-wide emergency legislation that was introduced following the invasion of Ukraine last year and which established the register, and the bill includes provision to address gaps and loopholes that have been identified since the register’s introduction. Most of the amendments are technical and procedural, and a number are designed specifically as anti-avoidance measures to close loopholes that have been identified in relation to trusts. Those are exactly the kind of measures that we support to ensure that the register of overseas entities captures the most opaque of entities.

Elements of the register fall within the Scottish Parliament’s legislative competence and therefore require consent. We fully support the policy and issues that the provisions address, but at this stage the draft legislative consent motion recommends withholding consent from one of the provisions that was introduced at the Lords Grand Committee by amendment 77L. That is because it contains the power for the secretary of state to make regulations without any requirement to seek the consent of Scottish ministers, and without any restrictions being placed around the use of that power.

Although limited partnerships, including Scottish limited partnerships, are used for a range of legitimate business purposes, they have also been exploited by criminals for illegitimate purposes such as money laundering. The changes made by the bill include the introduction of a power for the courts to wind up limited partnerships in the public interest when such a move is just and equitable. For Scottish limited partnerships, such action by a court would come about following a petition by the secretary of state with the consent of Scottish ministers or following a petition by Scottish ministers. That is a welcome addition to the arsenal of weapons for tackling the abuse of limited partnerships.

There will be a regulation-making power that enables the secretary of state, with the consent of Scottish ministers, to make provisions governing the process of winding up Scottish limited partnerships in the public interest. The bill also includes provisions relating to the winding up of dissolved partnerships, notification requirements where there are concurrent proceedings and regulation-making powers to amend such notification requirements. The Scottish Government supports strengthening transparency requirements and action to tackle the abuse of limited partnerships, including Scottish limited partnerships, by expanding the winding-up provisions.

I now turn to the bill’s justice-related provisions. They are principally intended to strengthen powers to tackle economic crime and illicit finance, policy goals that the Scottish Government shares. The bill amends the Solicitors (Scotland) Act 1980 to remove the existing statutory limit on financial penalties that can be imposed by the Scottish Solicitors Discipline Tribunal for disciplinary matters relating to economic crime offences as defined by the bill. That change provides for a greater deterrent against money laundering and economic crime in respect of legal services in Scotland, while also providing for parity with England and Wales.

The bill includes provisions to strengthen the Proceeds of Crime Act 2002—POCA—to tackle the unlawful use of crypto assets. It also aims to make it easier for relevant businesses to share customer information with each other for the purposes of preventing, investigating and detecting economic crime by disapplying civil liability for breaches of confidentiality when information is shared for that purpose. It also aims to reduce unnecessary reporting by business and includes new powers for law enforcement to obtain further information to tackle money laundering and terrorism financing. It provides law enforcement agencies with additional powers so that they can seize, freeze and, ultimately, recover crypto assets that are the proceeds of crime or which are associated with illicit activity. That includes money laundering, fraud, ransomware attacks or terrorist financing.

The bill updates the criminal confiscation and civil recovery regimes under parts 3 and 5 of the Proceeds of Crime Act 2002 to ensure that they can be used effectively in tackling serious organised crime in relation to crypto assets and crypto asset-related items. Clause 167 of the bill introduces schedule 6, which amends POCA to make provision in connection with crypto assets and criminal confiscation orders following a criminal conviction in relation to persons who benefit from criminal conduct.

Clause 168 of the bill introduces proposed new schedule 7, which would amend POCA to create a new regime for the civil recovery of crypto assets and crypto asset-related items that have been obtained through unlawful conduct. Importantly, the provisions include the power to seize exempt property, with senior officer approval, if there are reasonable grounds to suspect that it includes crypto asset-related items such as laptops, wallet keys or codes that would assist law enforcement agencies in accessing the crypto assets. The initial detention period would be 48 hours, and that would be subject to further detention periods of 14 days at a time with court approval.

POCA is a UK-wide regime that relates to reserved and devolved matters. For example, powers on money laundering and drug trafficking are reserved to the UK Parliament, but the power on fraud matters is devolved. As the general approach of POCA is to keep a consistent regime across the UK jurisdictions, the Scottish Government believes that it is sensible for the proposed amendments to POCA to be made by the UK Parliament.

Separate from the POCA provisions, there is a new offence of failure to prevent fraud. The Scottish Government is keen for the new protections for victims to be realised in Scotland. Many of the relevant organisations operate across the whole of the UK, and the Scottish Government considers that the proposed UK legislation is proportionate.

I will conclude on that note, convener. I hope that the committee will support the legislative consent motion.

I recognise the point that you make, Mr Findlay. We are having to operate to a challenging timetable, but, broadly, there are three elements. The first is just the complexity due to the nature of the bill itself—it is a very long bill. The second is the multilateral nature of engagement that has taken place with the Scottish Government at ministerial and official level. The third is that the bill has been subject to a significant number of amendments, up to and including the end of April. That has meant that it has been challenging to achieve clarity and to get to a position where we can consider the LCM, as we are doing today. Indeed, the LCM highlights specific areas where we are still seeking to reach the desired outcome with the UK Government.

I add that the situation that we are in reflects the fact we are dealing with a very complex piece of legislation that has been subject to a significant number of amendments. The bill does, of course, impinge on devolved competence, so the Scottish Parliament and the Scottish Government have had a role to play in that regard. The fact that we find ourselves in this situation is a reflection of that complexity, the volume of amendments to the bill and the amount of engagement—constructive engagement—that has taken place.

I would accept that there are broader lessons that we can reflect on as regards the process between the UK Parliament and the Scottish Parliament and between the UK and Scottish Governments, but with a piece of legislation of such complexity, it is perhaps unavoidable that we will encounter such issues.

You draw attention to the fact that, although there is the general reservation on business associations, beyond that, the bill strays into devolved competency, which is what has triggered the legislative consent process. George Dickson might want to add something to that.

As I said, the provision is about setting the fines, but it is also aimed at strengthening the measures that are in place to act as a deterrent for the behaviour that we are trying to reduce.

We are continuing to engage with the UK Government on the outstanding issues that I highlighted earlier. Of course, the timetable for the bill will be determined at Westminster. That is the context in which we must operate.

George Burgess might want to comment more broadly on where we are with the process and the timetabling, and when the bill will reach its next stage in the Lords and the Commons.

As I said in my opening remarks, the position reflects the fact that the bill covers a number of areas that involve reserved and devolved competencies. We also want to take a proportionate approach.

You will be well aware and fully cognisant of the Scottish Government’s position on the UK Government’s approach to a range of devolution issues, but we have had constructive engagement on the bill. Following engagement by officials and ministers, the UK Government brought forward amendments. The legislative consent motion does not propose consent to the entire bill, but we hope that further discussion will provide the opportunity to remedy our outstanding concerns. Scottish ministers will meet their UK counterparts to engage later this week.

I recognise that timescales are tight now, but a constructive approach has been taken to ensure that we respect the devolution settlement and recognise that, in a bill that is as complex, substantial and long as this, issues might arise as a result of discrepancies or inconsistencies with the principles that we want to be upheld. Through a constructive process of engagement with the UK Government, we have remedied a number of issues. I hope that we will be able to do that with the outstanding items.

I recognise the point that you make. The bill will strengthen deterrence, as I said in my initial remarks. It will also create parity with the equivalent regime in England, and safeguards will be in place. George Burgess or Kirsty Anderson might want to add to that.

I am not sure whether George Burgess wants to come in on that.