If polls are to be believed, on July 4 the Labour Party will take control of the government of the (still!) United Kingdom of Great Britain and Northern Ireland. Professor Robert Barrington (Centre for the Study of Corruption) was one of the architects of the Cameron government’s Anti-Corruption Summit in 2016. Below he reviews a recent speech from Labour MP David Lammy, almost certain to be Foreign Secretary in a Labour government. Given the UK’s role in the international fight against corruption, Lammy’s remarks will be of interest to more than just UK voters.

Somewhat lost in the noise of the UK’s general election announcement was a major speech by Shadow Foreign Secretary David Lammy at the think-tank IPPR.  It was reported here in the Financial Times, but hardly anywhere else.  As Mr Lammy is likely to be the UK’s new Foreign Secretary on July 5th, anti-corruption experts should be paying close attention to what he said.  Moreover, this is the most significant speech made to date by a senior politician in the opposition party, and so gives the best clue as to what might happen should they win the election.  This analysis contains lengthy quotations, as the speech does not seem yet to be easily accessible.

What Lammy Said

Mr Lammy’s analysis of kleptocracy was spot-on – well-informed and astute, pinpointing the danger of kleptocracy and grand corruption as threats both to national security and the UK’s trustworthiness in the eyes of allies.  Kudos to whoever wrote his speech.  As the U.S. had earlier done in its own countering corruption strategy, he emphasized the role of ‘professional enablers’ – describing them as the ‘men in suits’ and ‘hired help’ who should face a ‘crackdown’, and implying that this problem was a particular feature of the UK and its Overseas Territories.

There were some powerful phrases: ‘Our country has become a money laundering superpower. The UK stood firm in the Cold War to keep the KGB out. But under the Conservatives it not only invited their FSB heirs in but offered them professional services. The finest bankers, lawyers, estate agents and accountants that money could buy. In the full knowledge they were being used as corruption services. Often the clients were directly visibly connected to the world’s most despicable authoritarian crooks.’

He was falling over himself to reassure the City that he meant it no harm, while saying that the ‘dark corners’ need a clean-up – and that without doing so, the City faced a loss of competitiveness: ‘Labour supports the City and wants it to thrive. Labour is utterly committed to the competitiveness of the City. But our competitiveness depends on our reputation for the highest standards. And when we fail to uphold them, this has enormous consequences.’

Despite his reassurances to the City, he did not hold back in describing Britain as a ‘corruption services centre’ – a phrase that seems to have been first applied to London by Transparency International around 2013, for which it received very strong pushback from both the government of the day and the City itself as being unreasonable and unjustifiable.  Mr Lammy was clearly trying to tread a fine line between saying there is a big problem, and maintaining that not everyone is part of that big problem.  For years, the Conservative government has tried to tread the same fine line – but almost always came down on the don’t rock the boat side with the Overseas Territories, the City, or the large law and accounting firms who provide many such services.

Six Big Commitments

The speech contained six big commitments, along with general comments on the need for coordination, transparency and being joined up with other parts of government:

1. International Anti-Corruption Court (IACC): ‘We will use Britain’s diplomatic leverage to push for the creation of an international anti-corruption court. To prosecute the most egregious acts of international corruption.’  Many – probably the majority of – anti-corruption experts are very sceptical about this idea.  But it is a simple idea backed by a well-run and politically savvy campaign, and so merely supporting it sounds like the government is actually doing something.  This would be the first time that the British government has officially supported the campaign for the IACC.  But there is wiggle room in Mr Lammy’s statement to be a follower rather than a leader on this particular issue, and UK civil society will be hoping that resources and diplomatic capital are not diverted to this cause rather than other higher anti-corruption priorities (many of which are elsewhere in the Lammy speech).

2. Professional Enablers: ‘An incorporation agent, a banker, a lawyer, an accountant. These are the enablers.  They must face the full force of the law. Friends, this is not an attack on those working hard in professional services for whom I have nothing but admiration. I believe in our professions. I believe not just the vast majority of them do honest work I believe almost all of them do.  I just don’t believe in crime. I believe in the rule of law.’  This sounds like a reasonably good (though not comprehensive) identification of the problem, but solutions are much harder – though others are working on them and will provide some material to draw on.  Most notably, it would be a mistake to focus solely on the genuinely small minority of law-breakers.  The problem with enablers is that they provide services to individuals who are highly corrupt but who still manage to pass AML due diligence checks.  Mr Lammy will need a solution to those professionals who enable kleptocracy but have not provably been involved with criminality.

3. Dirty Money Summit: ‘We will start internationally by hosting a summit of allies and international financial centres to launch a sustained initiative to tackle dirty money. Driving a powerful agenda on tackling corruption and money laundering… And striving to close down the architecture managed by financial centres that facilitates enablers and kleptocrats.’  These are high aspirations.  Summits on corruption are few and far between, and so it’s important they are successful.  The 2016 Anti-Corruption Summit hosted by David Cameron was widely lauded as a success – though a few weeks later Cameron had resigned and many of the ground-breaking agreements lost momentum.  By contrast, the Biden administration’s Summit for Democracy left many disappointed.  The Lammy team will be hoping to match the Cameron summit rather than replicate Biden’s.

4. Ownership data transparency: ‘In today’s world almost all public policy problems are data problems. That is why we will seek to establish a live-streamed global data exchange on beneficial ownership of corporate structures including trusts and trust like arrangements to ensure frictionless investigations. Finally bringing in effective information sharing on dirty money.’  This is two announcements in one.  First, bringing trusts into the fold of beneficial ownership transparency; and secondly, establishing a global data exchange.  These are technically sophisticated to do, but groups like Open Ownership and the Open Contracting Partnership have done excellent work on how they can become a practical reality. Later in the speech, he doubled down on the trusts, rightly identifying a loophole left in the current government’s legislation: ‘We will move to stop UK trusts from being used for illicit activity by widening registration requirements. Part of an action-plan to bring in crucially needed fuller transparency around trust ownership of UK property.’

5. Whistleblowers: ‘We will launch a new whistleblower reward scheme to incentivise and encourage sources to step forward.  This builds on the success of such policies in the United States.’  Like the IACC, this is an off-the-peg idea which has been around for a while, waiting for a government in search of new things to do.  And like the IACC, civil society campaigners have had mixed feelings about it.  However, given the importance of whistleblowers in bringing corruption to light, and their history of mistreatment, campaigners are likely to give this idea a cautious welcome.

6. Overseas Territories: ‘It remains the case that three out of four of the offshore jurisdictions with the highest risk of involvement with international corruption are UK Overseas Territories. This is a contradiction that cuts into our credibility. We must be honest about this. And we must solve it.’ Britain’s OTs have been such a nexus for global corruption for so long it is truly astonishing that so little has been done to sort out the problem. There has been rhetoric before, but the government has tended to back off when accused of neocolonialist interference or undermining the OTs’ economic independence – or when lobbied by special interest groups that rather like the current arrangements.  Some political steel is needed.

What did he miss out?

This was a good speech as far as it went.  But it also had some gaps.  Here are one big gap and a couple of smaller ones:

1.Domestic corruption – the biggest gap in the speech

In common with Labour policy last time the party was in government, Mr Lammy did not join the dots between foreign and domestic policy with regards to corruption, despite saying he would do so.  This is important.  For the UK to have credibility in acting on the international stage, it needs to be seen to have its own house in order – not just tackling the enablers in the City, but addressing the other reasons for the UK’s slide in international transparency and corruption rankings like the Corruption Perceptions Index.

You might fairly say that as the Shadow Foreign Secretary, it is not his remit to cover domestic corruption.  But he did say he would be ‘Joining up the dots between the foreign and the domestic and demonstrating what a government of team players working across departments…can achieve.’  However, there was no evidence or plan about how the joining up would be done.  And given how rarely senior British politicians make speeches on corruption, there is not much likelihood of anyone else making a speech to join the dots.

In order to give Mr Lammy’s own anti-corruption plans some credibility, we need to know whether – and how – a Labour government would address domestic corruption, and in particular political corruption.  The same unflattering lens that Mr Lammy has applied to the UK as a corruption services centre could be applied to UK politics.  And what about corruption in the police, borders, prisons, the military, local government, social housing, public procurement, the NHS, etc?  The recent events at the Teesside freeport give a glimpse into why domestic corruption needs to be addressed more effectively.

The Labour party has already promised an Integrity & Ethics Commission to look at political integrity, but with no further detail.  Likewise, it has promised a Covid Corruption Commissioner.  How will those initiatives dovetail with the existing work of the Home Office’s Joint Anti-Corruption Unit (JACU)? Will there be a new national Anti-Corruption Strategy – noting that the previous strategy expired in 2022 and JACU have been patiently sitting on a near-finalised replacement pending ministerial approval for many months?  Will there be a revival of the position of Anti-Corruption Champion, introduced by Tony Blair but left unfilled by Rishi Sunak?  What is the Labour view of the proposal to join all of these initiatives into a permanent independent anti-corruption commission or even a full-service anti-corruption agency?

2. What is the plan for state capture?

One of the great problems of dealing with kleptocracy is that the ‘dirty money’ that is generated is very seldom caught by existing AML regulations or legislation.  For the AML laws to kick in, the funds need to be of criminal origin.  The problem is, in situations of state capture, the laws, the judiciary and law enforcement are all in the hands of the kleptocratic government.  Misappropriated funds are not therefore considered to be the proceeds of crime, allowing the ‘professional enablers’ to deal with them.  Mr Lammy’s team will need a plan to deal with this reality.  AML laws only take you so far in addressing funds accumulated under state capture.  There will need to be creative solutions such as placing key individuals and their enablers on corruption-related sanctions lists.

Unexplained Wealth Orders (UWOs) – introduced in 2017 after being announced at the 2016 Summit – were intended to help solve this.  But the UK authorities have been timid in using them, with the judiciary giving a surprisingly large benefit of the doubt to the kleptocrats.  UWOs remain a sensible and powerful tool – but must be used with the kind of aggression that US law enforcement agencies achieve.

3. Role of Crown Dependencies

There was rightly a big focus in Mr Lammy’s speech on Overseas Territories, but campaigners are also concerned about the UK’s Crown Dependencies – not least after the Paradise Papers shone a spotlight on the role of the Isle of Man.  Moreover, the long-term opposition of Jersey to a public register of beneficial ownership did not inspire confidence that it was open to scrutiny or accountability.  The Crown Dependencies may be a tier of priority below the shockingly poor behaviour of the Overseas Territories (most recently Gibraltar, but historically the British Virgin Islands and Turks & Caicos) – but on no account should they be let off the hook.

Other points of interest

There was a lot in this thoughtful speech, and here are some other points of interest.

1. Use of data.  The evidence base for much of this speech has been built patiently over recent years by civil society, think tanks and the small number of academic who research UK corruption.  It was good to see such data being used, and a vindication of those sometimes low-key strategies which have promoted the importance of evidence-led policy-making.  At the same time, resources have been slim for such research.  The Foreign, Commonwealth & Development Office (FCDO) which Mr Lammy hopes to lead has an Anti-Corruption Evidence (ACE) programme, funding research into issues like kleptocracy and professional enablers.  A similar programme could usefully be set up by the Home Office to cover domestic corruption.

2. Private sector partnership. Mr Lammy placed an unusually strong emphasis on working with the private sector, perhaps to head off the concern that an anti-corruption drive would inevitably clip the wings of the private sector.  But this promise of working in partnership will ring some alarm bells in civil society.   Those with memories of the Bribery Act campaign will recall that when private sector was on board it could be a great ally.  But private sector lobbying very nearly scuppered the Bribery Act and it took resolute campaigning, international pressure and political will before the private sector came on board.  Why was the Economic Crime Act passed by the Conservative government only ‘the mildest of measures’ (in Mr Lammy’s own words)?  We should not neglect the role played by private sector interests and lobbying in weakening such legislative efforts.  Again, this will be a fine line for Mr Lammy to tread.

Conclusions

Two and three-quarter cheers.  This was a generally heartening speech from a politician who is likely to hold one of the three great offices of state within the next few weeks.  The proof of the pudding will be in how well the important gaps are filled, and how well the rest is implemented.  As might be expected from the Opposition, this was broadly a speech of aspirations, with important detail to be filled in. But the Opposition is likely to be the Government within a few weeks.  UK civil society has been waiting for such a moment – and smart move by a new Labour government would be to draw on that expertise.

David Cameron’s 2016 Summit marked the high water mark for Britain’s anti-corruption efforts, both internationally and domestically.  Since then, a gradual but inexorable cooling of political will has gone hand in hand with a decline in national reputation and an uncomfortably close flirtation with out-and-out political corruption.  Given the state of the world today, a government does not have to be doing much to be an anti-corruption leader.  Mr Lammy’s speech laid out a worthwhile but incomplete pathway to doing this.