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Please note that this briefing paper is no longer being updated but is kept here for readers seeking further detail. The most recent relevant briefing is Economic crime: The UK’s multi-billion pound problem.

This briefing paper examines

  • what the summit was about
  • what has so far emerged from it
  • the Panama papers and what has been revealed since their publication on 9 May 2016
  • potential components of an anti-corruption strategy
  • Government policy
  • comment and opinion on whether the UK’s approach will work
  • what’s happening globally? and
  • further perspectives from international organisations and other bodies

The international anti-corruption summit, London, May 2016

The UK Government hosted an international anti-corruption summit on 12 May.  The UK was represented by the Prime Minister, David Cameron.

Background and context for the summit

Defining what is (or is not) corruption is by no means straightforward. There is, though, a degree of consensus in the current and ongoing debate about corruption that it includes (at the least):

  • Tax evasion and aggressive tax avoidance
  • Corporate secrecy and transparency
  • Beneficial ownership in the UK and overseas and
  • Corporate and individual financial crime, such as bribery and money laundering.

What was the summit about?

The stated aims of the summit were wide-ranging and far-reaching:

  1. The summit will seek to galvanise a global response to tackle corruption. As well as agreeing a package of actions to tackle corruption across the board, it will deal with issues including corporate secrecy, government transparency, the enforcement of international anti-corruption laws, and the strengthening of international institutions.
  2. It will be the first summit of its kind, bringing together world leaders, business and civil society to agree a package of practical steps to:
  • expose corruption so there is nowhere to hide
  • punish the perpetrators and support those affected by corruption
  • drive out the culture of corruption wherever it exists

A more detailed agenda for the summit was not published.

What has emerged from the summit?

The summit saw the release of the Global Declaration against Corruption and the summit communiqué. Various other UK government and other announcements were timed to coincide with the summit.

In the Global Declaration against Corruption, governments and others at the summit reiterated their commitment to stamping out corruption. Existing international agreements would be developed and implemented, leaving “nowhere to hide”.  Action would be focussed in three main areas –

  • exposing corruption
  • pursuing and punishing the corrupt and
  • driving out corruption.

The summit communiqué elaborated on how governments and others would work to tackle corruption.   It covered a broad range of issues, including

  • Tax evasion and aggressive tax avoidance
  • Beneficial ownership
  • Corporate and individual financial crime
  • Money laundering
  • Corporate secrecy and transparency
  • Enforcement of anti-corruption laws
  • Establishing an International Anti-Corruption Coordination Centre
  • Strengthening international cooperation and
  • Corruption in sport

In his closing remarks to the summit, the Prime Minister suggested that there was now political will to address these longstanding problems. Fighting corruption was an idea whose time (he argued) had come.

After the summit, many governments, regional and international organisations and other bodies issued statements of support or set out the actions they would be taking.  These included the UK government, the United States government, the OECD and the World Bank.

Senior figures from law, accountancy, property and professional services firms also issued a statement lending support. On the eve of the summit, the Law Society also published a statement on behalf of professional bodies concerned with law, tax and accountancy in the UK.  This stated that the professions stood united in the fight against corruption.

The Panama papers

The debate on corruption was given enormous impetus by the publication by the International Consortium of Investigative Journalists of a searchable database of offshore companies on 9 May 2016.  These are commonly called the Panama papers.

The Guardian has published a useful summary of the release of the Panama papers and their origins.

Government policy: Prime Minister’s statement to the Commons, 11 April 2016

In a statement to the House on 11 April 2016, in response to the publication of the Panama papers, the Prime Minister said that the Government would continue to lead the international agenda to “crack down on tax evasion and aggressive tax avoidance”.

The Prime Minister focused on three areas for action:

  • Crown dependencies and overseas territories: They will provide UK law enforcement and tax agencies with full access to information on the beneficial ownership of companies.
  • New tax evasion offence: A new criminal offence will be created this year to apply to corporations that fail to prevent their representatives criminally facilitating tax evasion.
  • Cross-agency taskforce to examine the Panama papers: The Government would provide up to £10 million to establish a new cross-agency taskforce to analyse the Panama papers and take rapid action. That taskforce would include analysts, compliance specialists, and investigators from across HM Revenue and Customs (HMRC), the National Crime Agency, the Serious Fraud Office and the Financial Conduct Authority.

Potential components of an anti-corruption strategy

Tax evasion and aggressive tax avoidance

There was an Opposition Day debate on tax evasion and avoidance on 13 April 2016. Responding to the debate, the Economic Secretary to the Treasury, Harriet Baldwin, said that no government had done more to crack down on those who do not pay the tax that they owe.  The motion was defeated by 300 votes to 266.

Further to the Prime Minister’s statement, HMRC published a consultation document on 17 April 2016. The consultation closes on 10 July 2016. 

The Guardian has published its own survey of commentators’ views on whether tax avoidance might become more or less difficult if the UK were to leave the EU.

Beneficial ownership

Some campaigners have argued that the UK should compel the overseas territories to disclose information about beneficial ownership.  On the UK Constitutional Law Association blog, Graham Wheeler has commented on the constitutional position of the territories in this context, in particular the issues that arise of self-determination and (qualified) constitutional autonomy.

In April 2014, the Prime Minister wrote to these jurisdictions to encourage them to follow the UK’s example. 

The Cabinet Office and Foreign and Commonwealth Office (FCO) have published a compendium of the arrangements between the UK and Crown Dependencies and British Overseas Territories for the sharing of information about beneficial ownership.

Corporate and individual financial crime: bribery and money laundering

A commonly held view is that too few people are prosecuted for corporate failings.

The focus of the Bribery Act 2010 was essentially corporate bribery to gain contracts etc. 

Section 7 of the Bribery Act 2010 created the offence of a commercial organisation “failing to prevent” bribery by its employees.  It statutorily requires companies to prove they have carried out “adequate procedures” to prevent it.  This general requirement, which some have argued should be extended to a broader range of offences, was part of a broad Anti-Corruption Plan.

The Queen’s Speech: Criminal Finances Bill

It was announced in the Queen’s Speech on 18 May 2016 (under the heading of ‘increasing our national security’) that legislation would be brought forward on corruption, money laundering and tax evasion.  The executive summary to the background briefing notes on the Speech offers a brief overview of what the Bill will include:

This Bill will cement the UK’s leading role in the fight against international corruption, crack down on money laundering and people profiting from crime, so that we root out corruption. It will include:

  • Measures to reform proceeds of crime legislation to allow the Government to recoup more illicit income.
  • A new criminal offence for corporations that fail to stop staff facilitating tax evasion.
  • New rules to toughen the UK’s anti-money laundering regime.

Corporate fraud

The Ministry of Justice (MoJ) announced on 12 May 2016 that it would consult on extending the criminal law around failure to prevent economic crime, to encompass other forms of crime beyond bribery and tax evasion.

Justice Minister Dominic Raab said that the Government would adopt a vigorous and robust approach to holding large corporations to account. Commentary from the industry, though, has suggested that this may not be straightforward.  The Chartered Institute of Taxation (CioT), for example, has argued that there is already enough relevant law and holding a company responsible for an individual’s actions could be problematic. The new law (it went on) must not place an unreasonable burden on business.

Beneficial ownership of land and real property in the UK

The UK country statement released after the summit said that the UK would create a public register of beneficial ownership of foreign companies owning or buying property in the UK:

The UK will also establish a public register of company beneficial ownership information for foreign companies who already own or buy property in the UK, or who bid on UK central government contracts.

In the foreword to the volume of essays accompanying the summit, though, the Prime Minister indicated that this was still a matter for consultation:

So we are consulting on ways to make property ownership by foreign companies much more transparent – and considering whether to insist that any non-UK company wishing to bid on a contract with the UK government should publically state who really owns it.

The consultation paper – Beneficial ownership transparency: Enhancing transparency of beneficial ownership information of foreign companies undertaking certain economic activities in the UK – was published by the Department of Business, Innovation and Skills (BIS) in March 2016. The paper’s proposals concerning provision of information to the Land Registry (and publication of that information) would apply to England and Wales, but the paper also seeks views on whether the Government should work with the devolved administrations to ensure a UK-wide approach.  The closing date for responses was 4 April 2016.  BIS is currently analysing the feedback received.

Other Commons Library briefings on related topics are available on Parliament’s topic pages for financial services and financial institutions, in particular:

Transparency, corruption and bribery (SN 03806 19 December 2013)

Tax avoidance: a General Anti-Abuse Rule (SN06265, 19 April 2016)

Evolution of UK money laundering law (SN02592, 21 April 2016)

Corporate Economic Crime. (CBP 07359, 2 November 2015) and

Banking services: reform and issues (CBP 07234, 20 April 2016)

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