Welcome to today’s session of the Business and Trade Committee as we wrap up our inquiry into small business. Thank you very much indeed to our witnesses for joining us. We are having this session ahead of our session with Ministers because of the Committee’s real concern about the organised crime wave that is taking hold of our streets. Sal, perhaps you could kick off for us. We have heard the most appalling evidence from around the country. We can see it in our own constituencies. What it looks like to us is that there is an organised crime wave that is taking hold of the British high street. Can you, from the National Crime Agency, just give us a sense of what on earth is going on?

Yes. The challenge is best described as a pyramid. At the bottom of the pyramid, we are seeing thousands of shops engaged in so-called lower-level criminality.

There are thousands.

That is right.

There are thousands of shops engaged in low-level criminal activity.

That is correct. This is most visible in terms of the small-scale sale of illicit vapes and tobacco. That is also linked to illegal working and illegal renting, such as renting mattresses at the back of shops and that type of thing, and the small-scale money laundering that comes along with it. That is not to minimise it, but, in terms of criminality, relatively speaking, the volumes are small.

For the benefit of our education, what is “small-scale” when it comes to money laundering?

You have to put it in context. Over £100 billion is laundered in or through the UK, with a UK footprint, each year. That is the National Crime Agency’s estimate. A lot of these shops will be doing in the low thousands of pounds a month, for example. That might seem like a lot to the average person.

It seems like an extraordinary amount.

In the context of the extent of money laundering, it is relatively small. The aggregate effect, however, of thousands of shops is what is quite pernicious and quite challenging. If there were 100 shops trading in relatively low volumes, that would be something that you could get your teeth stuck into. Because there are thousands up and down the country, the aggregate effect is huge. The last thing to say, in terms of the serious organised crime element of it, so at the top of the pyramid, we are seeing hundreds of shops, rather than thousands of shops, where you would describe the level of criminality as organised. They may be selling thousands of fraudulent goods; they may be involved in the distribution of drugs; they may be involved in laundering millions of pounds. That is a much smaller number. When we talk about it in terms of organised crime, what we are not seeing at the bottom of the pyramid is the shopkeeper, for example, feeling like or knowing that they are part of a broader organised crime ecosystem. If you are selling illicit vapes or illicit tobacco, they have not necessarily been smuggled into the country by the person working at the shop. It is part of a broader criminal supply chain to get those goods into the country.

I am enormously in debt to West Midlands police and in particular Sergeant Neal Marsh in my constituency for taking me through the realities that they see in Birmingham East. What has been described to me is that you now have general crime stores on the high street, which are running money laundering and selling contraband goods. They may be fronts for human trafficking or prostitution. They are part of networks that may be in competition with other networks, but there may be in fact just a small number of organised crime groups that are using these networks to launder money, which then goes back to Iraq, Afghanistan or elsewhere. Is that a picture that you recognise?

Yes, there is certainly some of that, and it is recognised. It is recognised as a smaller proportion of the overall challenge that we are facing, but it certainly does exist and is something that we are seeing.

Does the National Crime Agency have a sense of the total amount of money that is being laundered through what you have just told the Committee is a network of thousands of stores?

Unfortunately, that is work in progress at the moment. If we think about the Operation Machinize lifecycle, we began this, from the National Crime Agency perspective, in March this year and then ran our largest intensification, with over 2,700 shops either visited or raided, in October. We are now going through a period of sort of taking all of that information, consolidating it and trying to get our heads around what that tells us about scale. We will be producing some assessments and a view in terms of scale, in terms of the number of shops and the volume of cash being put through them. Unfortunately, I do not have that figure with me.

What is your gut feel? If £100 billion is being laundered in the UK, which is a large number, do you have a sense of what kind of fraction of the £100 billion is going through these networks?

Probably the best thing to say is that at the moment our assessment is that there are thousands of these shops up and down the country. The model is poly-criminal, as you suggest. They are conducting a whole host of different types of crime using either networks of shops or individual shops. Because there are thousands of them, we can safely assess that it will be a large figure, but I would not want to give the Committee a figure prematurely today.

Will it be in the billions?

It will certainly be counted in millions, and a high number of millions. Like I said, I do not want to give a figure today.

As we sit here today, we know thousands of people are involved, but we have absolutely no idea how much money is going through them.

We will.

But not today.

Not today, no. We concluded the intensification recently. We need to do that work to be able to come up with a figure that we know can stand up to scrutiny.

How long has this problem been evolving?

It is difficult to say. When you look at a problem, you tend to find more of it. The National Crime Agency, with our partners in policing, trading standards, immigration enforcement and HMRC, has shone a spotlight on it over the last several months. We are finding more because we are looking at it. Our sense is that this problem has been growing over the years, but once again we are becoming more and more aware of the scale of it as we do more activity, more work and have more operational effect. We are becoming more aware of the problem than we ever have been previously.

Is it getting worse? Is it getting better? Is it static?

We are seeing more. Like I said, it is difficult to say whether that is because it is getting worse or because we are exploring it. We are confident that the work of Operation Machinize is having a positive effect in terms of deterrent and driving some of these people away from the high street. It is too early to tell what type of impact we have had. Like I said, we only recently concluded the operation, or at least a phase of the operation, at the end of October. We will need a bit of time to understand the impact.

Wendy Martin, what do your colleagues tell you about the evolution of this problem, how big it is and the different lines of criminal business that are running through these general crime stores?

I do not have actual data because this is a mixture of 170-odd local authorities in England and Wales. Anecdotally, from people who have fed back to us from supporting Op Machinize and other things, the view is, yes, it is growing. Anecdotally, with the mix of lots more online shopping for a lot of products over the last period plus the impact of the cost of living, the suggestion is that even legitimate or semi-legitimate landlords, if you can call them that, will ask fewer questions because they need income.

I do not know what a semi-legitimate landlord is. It is like being pregnant. You are either pregnant or you are not.

Yes, okay. There are some people who do not care. It is a spectrum. There are people who have never cared about who they rent shops to and what they are doing. There are other people who perhaps care less than they might have done. The whole high street market has changed. Almost all the new premises that are going into vacant shops on high streets are, as we saw through Op Machinize, takeaways, mini-markets and poly-criminal stores that sell all sorts of things. There has been a huge focus on tobacco and vapes, understandably, but there are also things such as illegal foodstuffs, cheap and unsafe products, counterfeit products and everything else.

There is laughing gas as well.

From a recent survey that was done by the Chartered Trading Standards Institute, this worry around organised crime and the illicit high street was the major concern for trading standards professionals.

You have been working in this field for a long time. When did you first really get a sense that organised crime was taking a grip of the high street?

I do not have specific information on that. It has definitely—

What is your own sense as a professional? When did you start worrying about it for the first time?

As a professional you have always worried, but it has become significantly more of a worry in the last five years. It is as Sal said. The more funding that is provided to look at a problem, the more problems you find. Councils have focused a lot more on illicit tobacco and illicit vapes. More resources have been provided. It is a big priority for most local authorities because of child and health protection. The more you look, the more you find.

Just on that, Wendy, you said five years. Many of us, I am sure, have been sensing that this has been going on for quite a long time. There has been a lot in the media about this particular topic, which has raised its public profile and concern about it. Sal, when did it really hit your radar? As you said, Machinize happened in the spring of this year. What action was taking place before then?

From a National Crime Agency perspective, this is not our traditional area of focus.

Whose area of focus is it?

This is a hyper-local problem, in terms of the impact that it has, because it is affecting a local high street or a community. The National Crime Agency is a national organisation with a limited local footprint. We work with our partners in policing, trading standards and HMRC, the agencies with a local footprint. This was a case of our partner organisations with local footprints talking to us and saying, “We feel like this is a big problem”. We started to do some of our own national research, using things such as national financial intelligence, to start pulling at that thread and seeing the potential scale of this issue.

Do you not think it was quite evident that this was international crime gangs several years ago? Was there just no interest or no priority for this?

I would not say there was no interest. This is one of those ones that probably has existed for a while, but these are complex investigations when thinking about the transnational element. We also have to understand that, as part of the broader problem, what we are seeing is a small fraction. The overwhelming majority of the issues that we are seeing are not what we would consider a high-level serious and organised crime threat. It is the aggregation, as I said. When you add up all this so-called lower-level criminality, it became a problem that hit the National Crime Agency’s radar, which was why we decided to set up the Machinize partnership alongside our partners here today, but also policing, HMRC and others.

When was that decision taken? When was the Machinize partnership established?

It was established in March this year.

That is quite staggering, really. I remember witnessing a young woman being coerced into a nail bar several years ago in one of my towns, which I was really worried by. If you look at any high street, certainly the streets in my towns, you will see nail bars on nearly every corner. You will see Turkish barbers on every street. Surely, when we had cases such as those Vietnamese who sadly lost their lives in the back of a trailer—I do not know how many years ago that was—we must have realised something was going on.

Modern slavery and human trafficking has been a core priority threat for the National Crime Agency for the last 10 years and for our partners in policing. Certainly, at that level of the threat, that has had an enduring operational and investigative response. I want to urge the Committee away from thinking that all shops such as nail bars and things like that have a criminal footprint. That is certainly not what we are seeing. Our assessment is that the overwhelming majority of shops on the high street remain not suspicious or criminal. However, there are so many shops on our high street, and it only takes a very small fraction of those to be linked to either suspicious activity or criminal behaviour for there to be thousands of shops that need to be looked at both from an enforcement point of view and more broadly. I certainly do not want to give the Committee the impression that every nail bar in the UK has a criminal footprint attached to it. That is certainly not what we are seeing. When we are seeing serious transnational threats, the National Crime Agency and our partners in policing are looking at those.

I understand that. When you speak to the national associations for hairdressers or beauticians, whatever they are called, they say it is pretty obvious what has been going on for quite some time. Wendy, are the agencies are working well? Where particularly do you have evidence of them working well locally?

We have found that partnership working is really crucial. From a trading standards perspective, we are almost in a support role with this. For some of the higher-level things around labour abuse and exploitation and modern slavery, we report in and share intelligence if we find it, but it is not something for us to take forward. It does vary local area to local area, because it does depend on the resources available to trading standards and the local police. A lot of the time, trading standards cannot act without police support in certain of these areas because of the risks associated, both to officers going in and to the people inside the premises.

Has that been a challenge over recent years?

It has been a challenge in pockets. It is not everywhere, but it has been a challenge in particular areas. It is not just the high street, to be honest. That is something trading standards has experienced before. There are certain sites that you would not go on because there are known to be weapons or whatever.

In your estimation, how many more trading standards staff do you need compared to what we have currently, as a percentage?

Trading standards has lost about 40% of its people since about 2011-12. That data is out there. If you wanted to reinstate the service to where it was in 2010, that is what you are talking about. The current budget for trading standards across England and Wales is about £120 million in total. There are about 2,200 full-time equivalent trading standards staff across England and Wales. They are quite small services. Investing in trading standards, although it would be very welcome and would assist, will only assist in tackling this problem if it is mirrored with resources being made available to the police, HMRC, the Gangmasters and Labour Abuse Authority and immigration. It is that partnership that enables you to tackle these supply chains, as it were. It is not just what is going on in the shop itself. It is how the workers and the product are getting in and how the money is getting out.

Would you argue that the investment of resources in these teams more than pays for itself against the revenue that we are losing against illegal sales?

Intuitively I would say yes, but I have to say to the Committee that I do not have data. I am sure HMRC would be able to provide that kind of data around legitimate tobacco revenue and what is lost and what is not lost.

What is your take on the scale question? Sal has just told the Committee that there are thousands of these organisations. There are 7,000 high streets in Britain. That is potentially one of these general crime stores on every high street. What is your sense of the scale? Do you have a different take on how big this problem is?

I do not have a different take, no. The NCA is better placed because it also has the data coming up from what trading standards found in Machinize.

Just for the record and to get us all to the same place in terms of understanding and knowledge, Wendy and Sal, you have both been talking about what takes place on the high streets. As someone who is not familiar with this world, what is the business model, as you see it, on the high street and what is the underpinning criminality? Are there things that we should be looking out for? If you could educate me on a basic level to start with, that would be really helpful.

I will start on the basic high street and then Sal can pick up what happens further up the chain with that. We might be talking about a convenience store that has been found to be selling illicit tobacco or illicit vapes. I am sure that colleagues on the Committee have seen things such as American candy stores. They could be selling products with a lot of illegal food additives. There are all sorts of things. They could be selling cheap electrical goods that might be unsafe, and all that kind of stuff. The big focus has been tobacco and vapes. It is changing. This is something that we have seen over the last 12 months. Before, you would go in and there would be a shopful or half a shopful of tobacco and vapes. The officers would pull it off the shelves into the crates, seize it and take it away. There were then more and more sophisticated hides. There were things that look like dumb waiters hidden in the back of walls and stuff going down into cellars, which is why we use sniffer dogs a lot. What colleagues are seeing now is smaller and smaller quantities on the shelves in the shop, because you risk losing less if you only have a couple of bagfuls in your shop as opposed to a whole shopful. From the information that we have, it has been suggested that the shopkeeper will then phone someone who will turn up on a moped or in something called a stash vehicle, which HMRC is very familiar with. There are vanloads of these things. They are parked somewhere. When a shop has been cleared, a new set of supply comes in. This is for tobacco and vapes in particular, maybe less so with other products. That is what is being seen. It can feel a little bit like you seize, go back, seize and go back. It is important because it does disrupt and it takes money out, but it is the supply chain—

We are going to get into how you close these things for good, rather than just for 15 minutes before they reopen again.

When it comes to the individuals, that is very much a police role in terms of the supply chain and further up.

You are also seeing nitrous oxide and money laundering, as we have discussed. We are seeing the use of ATMs to launder money as well.

I am not directly aware of that side of it, but I would not be at all surprised. Sal, do you want to round out the picture?

I cannot comment about the ATMs. That is not something that I am personally aware of. The other thing that we are seeing at the volume level is immigration offending. People are working in these shops with improper paperwork. That is why immigration enforcement has been such a key partner throughout Machinize. At the top of the chain, which is a much smaller proportion, it is similar offences but at larger scale. Instead of seeing tens of thousands of pounds being laundered, our inference is that it is more in the hundreds of thousands and in fact millions in some cases. Tax evasion is another.

I was going to say that I would hazard a guess they are not fully paying their taxes.

No, certainly not. In terms of volume, if you think about it as a poly-criminal model, every offence is happening at a small scale, but, because no one offence requires a really robust enforcement response, every offence is at a low enough scale not to lead to a criminal justice outcome, a heavy fine or something along those lines. In those cases, it is a lot of small-scale money laundering and tax evasion.

Are they entirely cash-only operations?

No. We call them cash-intensive businesses. It is a bit of a misnomer. A lot of them accept credit card or bank transfer.

I am very aware, in my high streets in Weston-super-Mare and Worle, of the impact of cuts to public services in these areas. One of the things that I see all the time is a kind of whack-a-mole. Whenever a new priority comes in, something else will go. We talk about these local enforcement multi-agency initiatives. Are they fit for purpose? Wendy, are you seeing any local authorities that are doing this well?

Yes, there definitely are some. You are right. Like most public services, as you have said, the priorities will change over a period of time. At the moment, from what we see in our intelligence assessments, there are very few local authorities that do not have illicit tobacco and vapes pretty high up on their priority agenda. There are pockets of this. Even in big rural areas, you have certain town centres that may be particularly affected by this. You might think of this being an urban authority, city centre or London problem. One of the concerns has been that the police are very supportive especially in these intensification programmes such as Op Machinize, but it tends to be the neighbourhood policing colleagues that do it because they are there on the high street. They are very supportive and very helpful, but they will also get moved on to other priorities in the same way as the local authorities. Intensification programmes work very well. The NCA has done a really good job in leading Op Machinize, but it is a different question if you want ongoing focus on this all the time.

It is nobody’s day job, basically.

Yes.

Coming back to you, Sal, you said that there are thousands of businesses up and down the country that are trading illegally. Where is this in your priority list? If I were to do a pie chart, where would high street crime be on that pie chart?

From an NCA perspective, cash-based money laundering is a really high priority for us. It sits on our strategic action plan. It is something that we have been looking at for a long period of time. The National Crime Agency is a relatively small organisation. Like I said, we have no local footprint. There are about 5,600 or 5,700 of us. We work with a coalition of organisations to deliver effect locally. We have worked with over 50 organisations for Operation Machinize. I cannot speak about where it sits in their priorities.

Where would it be in terms of your priorities?

It sits within our cash-based money laundering priority. We have a small number of illicit finance or economic crime priority threats. It is one of them. I would describe it as a high priority for us.

How many other high priorities do you have, Sal?

In the National Crime Agency, we work across all serious organised crime threats as well.

I am trying to work out whether this is one of 100 high priorities or one of three.

In economic crime, illicit finance is one of three. We prioritise high-end money laundering, cash-based money laundering and technological enablers.

It is a top three priority for one of your divisions.

That is correct, yes. That is for the money laundering aspect of it as well. We work with trading standards and other partners, because the National Crime Agency has no role in terms of contraband goods on the high street. We work through the partnership to deliver effect in that way. In terms of the other organisations, all I can say is that, from our perspective, all the partners of Machinize have been fully committed and really tenacious in their approach. When we set it up, we did not have to convince anybody to join the partnership. From our perspective, our partners have prioritised it, but I cannot answer on where it sits in the pantheon of their priorities.

Who leads on this? So many constituents of mine say to me, “Crime is a big problem on the high street”, but they are not sure who they should be reporting it to. Which body is the main body for reporting this? I know that it is multi-agency and multiple people need to come into it, but who is overseeing this? Secondly, how do you go about enforcing? Do you have to enforce several times? Having a raid once in a blue moon is not going to be as successful as having regular intelligence with someone looking after it and going in again and again.

To answer in reverse order, there have been over 2,700 strikes in this phase of the operation. Over 920 people were arrested and over £10 million was seized. That will have an impact. We want to demonstrate to the public that these are not small figures. A lot of people are now in either the criminal justice process or immigration enforcement processes as a result. We have taken a lot of criminal value off the streets. I think we took 4.5 million illicit cigarettes and hundreds of thousands of vapes. It has had an impact. It is one of the largest concentrated law enforcement operations of this of this kind ever. It will have an impact. Where should people go if they suspect crime on their high street? It is their local police force. It is not the National Crime Agency. We set up Operation Machinize to be a joint co-ordination cell for this work and to provide some sort of central top-down national impetus and momentum to get the whole system around the country—national, regional and local—to start looking at this issue. If your constituents suspect criminality on the high street, Operation Machinize is not a reporting body or an entity. It is something that we stand up within the organisation and build a partnership around. It is still the local police who would be the port of call for that.

The City of London police, who are taking a lead on this across the constabularies of our country, said this issue barely scraped into the top 10 priorities for most police forces. That must be a real problem for you, if you are trying to mobilise people on the ground to take this problem apart.

Like all law enforcement agencies, the police are grappling with multiple priorities. They certainly have violence against women and girls agendas and various other things. We have 43 forces that all have individual chiefs and PCCs, who set a range of priorities. All I can say is, as I stated before to the Committee, we have not found it difficult to get people to sign up to this partnership. Almost every police force in the country had a physical presence on the high street throughout this period.

Who is in charge of pulling these operations together? Who takes the initiative in saying, “I know what we are going to do this week. We are going to close down the thousands of stores that are money laundering and ruining the high street”? Who presses the button, “Go”?

Like I said, Machinize is an ongoing endeavour. It is not that we have done it and it has ended. It is still continuing. The first two phases were led out of the National Economic Crime Centre in the National Crime Agency with the National Police Chiefs’ Council as our principal partner. Effectively, we run it with them as a joint operation. We make that decision.

If I am a PCSO in Ward End and I see all kinds of bad behaviour going on on the high street, and I think, “Hang on a minute. It is time that we did something about this”, what do I do, as a new PCSO who wants to get a grip?

My advice to that PCSO would be not to wait for the NCA to give them a tap on the shoulder. If you are in a community team, this is part of community policing. What we can do through Machinize is provide enhanced co-ordination. For example, this time we ran a joint operational cell. All the agencies came together. They could share intelligence and de-conflict.

Hang on a second. If I go along to my daily operational meeting and talk to my sergeant about the great idea that I have had to close down illegal businesses on Washwood Heath Road, presumably I am going to run into an immediate problem, which is the sergeant saying, “Actually, our three priorities for this week are A, B and C”.

I cannot speak on behalf of neighbourhood policing teams, but I know they take the concerns of their neighbourhoods really seriously. If it is something that the community is asking for, they will find a way to look into it. Through the Machinize construct, we have been able to provide some catalyst and some momentum with national co-ordination, the sharing of intelligence and the connecting of agencies. The alchemy of it has been that it is not a neighbourhood team working in isolation; it is also trading standards, HMRC and others.

What you are describing is quite a big operation that involves at least two or three different agencies.

Do you mean nationally or at community level?

At community level, if I am a humble PCSO trying to get a grip of Washwood Heath Road, how am I going to pull together HMRC, the UK’s border agency, trading standards and whoever else I need to get involved?

Those contacts are in place. That might be through joint shared services, for example. Some councils will have these constructs in place already. They will have a multi-agency forum.

Is it only some of them, or all?

I would be confident in saying that all of them have a version of a multi-agency forum where they can catalyse this type of activity. That may look different with regional and local variances, but I would be confident in saying that they all have a multi-agency forum.

Sal, did you say how many illicit cigarettes were seized?

I think it was 4.5 million. Let me just double-check.

It was roughly 4.5 million. In 2024, 13 billion cigarettes were sold in the UK, according to HMRC. HMRC thinks that 10% of the cigarettes sold in the UK are illicit cigarettes. It says that, though, having had a 44% decline in the number of duty-paid cigarettes sold between 2021 and 2024. The real number may or may not be 10%. In reality, you have not seized that many in comparison to the number of illicit cigarettes on the market, have you?

No, not as a fraction. We have been clear from the beginning and from the results of Operation Machinize that this is not a problem that we are going to solve overnight.

It is 4.5 million as opposed to 1.3 billion. That is not, “We are not going to solve it overnight”. It is, “We do not really have a grip on it”.

Once again, the lead agency on illicit tobacco is HMRC. I know that it is something that it prioritises, takes seriously and is working on, but I would not want to speak on its behalf in terms of cigarettes.

We are going to move on to how we solve this problem with Mr Madders.

If it is okay with the Committee, I will pick that up. We have some suggestions around closure orders. There are a number of different elements to this. First, the areas that have two tiers of local government, where you have counties and districts, trading standards sits at county council level, but county councils cannot apply for closure orders directly. This has always been an issue. They have to go through the police or district councils. For something like Machinize it is not a problem, but it is if you are trying to do routine closure orders. We would very much like to see those powers be given to county councils. There are also problems over time limits. They have to be into court, as I understand, between 24 and 48 hours from when you go into the shop. A colleague in Swansea gave us an example. They did a lot of raids on a Friday evening in a high street in Swansea because they knew that the shops only opened on a Friday evening and only sold to people who they knew. They went in with police and other partners on a Friday evening. They phoned the magistrates court out-of-hours service to get nine closure orders on a Sunday. That was not ideal, and it caused problems for the courts. There is something about having a longer period of time to seek court approval. Initial closure orders are only for three months. As you have said, the shops reopen. We would like an extension of the time. There could be thresholds for that to ensure it is not misused if it is a repeat offence. There is a big question that has come up, which we are starting to see more. When the officers go in, they are not at all confident, in some shops, that the person on site is anything other than potentially an exploited person in their own right. They say they own the shop, but there is no confidence that they do. One of the suggestions has been that there ought to be provision to have a closure order that is indefinite until a company director—I do not know whether Martin has any comments on that—or the business owner comes and proves to the court or the local authority, however it is set up, that they are the business owner. Until then, it has to stay shut. Those were our suggestions.

Martin, we are going to get into Companies House. Do not worry.

That was the other point. There are two approaches. One is the premises and one is the person. You could take out a criminal behaviour order or something similar to that against the individual, which could be linked to this requirement to prove that you really are the owner of the business. Yes, there is a question about landlords. I do not have the knowledge to say how one would do that.

We would agree with that.

We have been growing our number of prosecutions, but that is not to a high level because we have found that the behaviour on the register has predominantly been around address hijack and identity hijack. In the majority of cases, that is from people outside the UK. This is organised criminality from overseas creating hundreds if not thousands of shell companies or mini umbrella companies. Prosecutions, and indeed financial penalties, are not going to be the appropriate sanction because they are outside the country. What we have aimed to do, and done quickly, is to shut those companies down and take them off the register. I would offer that comment in this conversation because we were really pleased to support the Machinize operations. We have different powers now to use our back office data in particular. We are able to identify networks of companies that our partners perhaps cannot see because we are able to track those on the register. We have been feeding intelligence into the NCA. We have an officer who is embedded in the NCA.

Before Mr Madders proceeds, I want to clarify this. We have foreign nationals, based overseas, setting up shell companies in Britain, which are then running companies in properties where we cannot find the landlord. They are operating general crime emporia and we are struggling to shut them down. Even when we do, they just reopen again.

Essentially, yes.

We are in stunned silence on the Committee. That is definitely a stunning conclusion. I am sorry; do proceed, Mr Madders.

In the second phase of the operation, 716 civil penalty referral notices, with fines up to £60,000, have been issued. It will take time to understand how many of those get paid and how many of those arrests turn into charges and prosecutions. It is just too early to say.

No, you are never confident in terms of whether they have the financial means to pay them. Those who do pay them are interesting, from an intelligence point of view. If somebody is paying fines of £50,000 or £60,000 for illegal working, for example, that could be a red flag and lead to further intelligence development and investigation. When any fines, confiscations or anything like that go through the British system, to realise that value they need to have the means to be able to pay them. You cannot say with 100% certainty that you will get that money.

What I would really stress to the Committee is that enforcement has to be seen as one component of a broader issue. We certainly cannot enforce our way out of this issue, given the scale. As I have already said, there are thousands of these shops. Some are low-level; some are very complicated. It needs to be seen as a subset of a broader economic rejuvenation or another type of policy work. From an enforcement point of view, enhanced non-conviction-based powers for law enforcement could be beneficial and could be used as a deterrent. We have spoken about closure orders. They are quite difficult to obtain. The police do not have that many powers. Under the Licensing Act, they have various other powers to get a shop closed. If we made it easier for the police to close suspicious businesses and shifted the burden of proof on to the business owner—if you are a legitimate business owner, it should be easy to prove that you are a legitimate business owner—that would help. We spoke about competing priorities earlier, but shifting the burden of proof on to the business owner would help stretch investigative resources. Going back to the example of the PCSO in your community, Mr Byrne, ensuring that those individuals have access to things such as financial investigators is really important. They can deal with the thing in front of them, but the investigation in the background takes time and is granular.

It is in the eye of the beholder, but we would say that the threat of imprisonment is a credible deterrent. However, at the levels that are being transacted and can be proved in terms of criminal benefit, if you are able to prove somebody laundered a small sum of money, it would be very unusual to get a custodial sentence for that.

I have one further question before we run out of time. What has been put to me from Birmingham is that, even when you get directors struck off at Companies House, a new company is very quickly set back up with a cousin or a relative as the director, and it reopens in either the same premises or, as Mr Madders described, the shop next door. Mr Swain, how do we equip you with more power or resource to fix that problem?

One of the key measures that has come in last week is ID verification. We are now requiring any new company to go through verification. Everybody on the register in the next 12 months will have to verify their identity. It is interesting. Even in the week since we launched it, you are seeing a different trend in incorporation. I mentioned the overseas issue. We are seeing a decrease in the last week, for example. I am not saying that is going to be sustained, but we might see that in the longer term. That is where our own intelligence capability comes in. We have the ability to link either addresses or non-public data such as payment details. Sometimes people are not really that clever and they use the same payment card. A disqualified director will use the same payment card to appoint a family member. We are able to see that. If we know it is the payment card or the IP address of a disqualified director, we can take action.

What action can you take?

We can expedite the strike-off of that company within 28 days.

On what grounds?

On the grounds that they have made a false statement on incorporation.

That is because the person of significant control is actually not—

It can be any false statement on incorporation. This is the beauty of the law change for us. In the past it took us three months to take a company down the strike-off path. If they make a false statement on incorporation and we can prove it, we can strike that company off within 28 days. It is a very swift power.

Wendy, from your experience, is there any further power or resourcing that is needed in Companies House to take out the dynamics of this problem?

As Martin said, ID is perceived to be a really important one. The other concern—I do not know whether this changes in the changed regulation—is the ability for company directors to backdate resignations. They could backdate their resignation from a company board to prior to when offending took place. To be fair, that was not in relation to illicit high streets. This was a problem in relation to doorstep crime, but I am sure it is across the piece. That was a concern. I do not know whether that has been addressed.

Sal, are there any other powers or resourcing gaps in Companies House that you want to bring to our attention based on your experience of Op Machinize?

Companies House, like local authorities, can be a really strong preventative tool. I would not highlight any gaps. We have a Companies House member embedded in the Department. By working through them, we can get somebody struck off and follow that trail and we can work with our partners in the banking sector, for example, to deny them access to the legitimate financial system. That chain of disruption is very effective. I would not ask for more powers; I would just say thank you for their continued support.

Mr Swain, based on the new powers and resources and the new legislation that you have now coming into place, can you foresee at this stage any gaps in powers or resources when it comes to solving this problem of shutting down illegal businesses on the high street?

The only change in the law that I would look for would be to go beyond incorporation. If we have evidence that an existing company is engaged in some kind of criminality that goes against the spirit of the new legislation, I would like the ability to strike off an existing company as quickly as a newly formed company, rather than taking three months. Whenever we leave a company, my worry is that they are still engaging in that criminality. The only other point that I would make to the Committee in this regard is that a lot of the businesses that we are dealing with are not companies. They are just sole trader pop-up businesses. We are interested in whether there is a company behind that. That is where we work with partners to gain the intelligence to say, “On this street, four of the shops are linked to this company”. We can then do that added linking: “This company is linked”—this is what we did in Machinize— “to a number of other companies, which are linked to other businesses”. We are able to feed that in.

That has been incredibly helpful. Thank you very much indeed for your evidence and thank you very much indeed for what you are doing. We are incredibly grateful for your evidence and indeed for your work. That concludes this panel.