Theresa May has been forced into a humiliating climbdown on tax havens and money laundering because she was facing defeat in a Commons vote.
Former ministers Dame Margaret Hodge and Andrew Mitchell teamed up to propose that offshore tax havens publish public registers revealing the true owners of companies.
The Government initially planned to oppose the move, as MPs debated the Sanctions and Anti-Money-Landering Bill, and had tabled a series of last-ditch amendments.
But in a move which infuriated ministers, Speaker John Bercow selected the Hodge-Mitchell new clause for debate and not the Government’s, which prompted the Foreign Office minister Sir Alan Duncan to raise the white flag.
With up to 20 Conservative MPs poised to rebel, he said the Government would “respect the will of the House” and not vote against the new clause proposed by Dame Margaret and Mr Mitchell.
The Hodge-Mitchell proposal requires the Government to take steps to ensure that British overseas territories establish publicly accessible registers of the beneficial ownership of companies.
Supporters claim this will make it easier to uncover money laundering, corruption and tax dodging.
The move’s Tory backers included former Conservative Cabinet ministers Nicky Morgan and Ken Clarke.
Moving her new clause, Dame Margaret – former chair of the Public Accounts Committee of MPs – said the simple measure would “transform the landscape.”
She said £68bn of Russian cash had been moved to such tax havens in a decade and 85,000 UK properties were owned by companies based there.
She told MPs: “That (landscape) allows, whether it’s a tax avoider or a tax evader, a kleptocrat, a criminal, gangs involved in organised crime, money launderers, or those wanting to fund terrorism.
“It will stop them exploiting our secret regime, hiding their toxic wealth and laundering money into the legitimate system, often for nefarious purposes.
“Transparency is a very powerful tool. With open registers we will then know who knows what and where, and we will be able to see where the money flows.”
Mr Mitchell, a former International Development Secretary and Tory Chief Whip, said: “Sunlight is the best disinfectant.
“We are talking about illicit money from modern day slavery, money from the sex trade, laundered in this way.
“Money that is the proceeds of crime, terrorism and corruption.
“Money stolen from Africa and from Africans by bent politicians, dictators and warlords.”
Speaking after the Government climbdown, Dame Margaret said: “It will stop [criminals] exploiting our secret regime, hiding their toxic wealth and laundering money into the legitimate system, often for nefarious purposes.”
Earlier, Sir Alan confirmed changes to ensure the Bill would impose sanctions for gross human rights violations, known as the so-called “Magnitsky rules” after Russian lawyer Sergei Magnitsky, who died in prison after testifying against corrupt officials.
He told the Commons: “The Prime Minister in her speech to the House on March 14 made clear this Government’s intention to bring forward a Magnitsky amendment to the Bill – and as the House can see, we have fulfilled that obligation and are doing so for discussion before the House today.”