Lord Ahmad of Wimbledon

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That the Bill be now read a second time.

The Minister of State, Foreign and Commonwealth Office (Lord Ahmad of Wimbledon) (Con)

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My Lords, I thank all noble Lords for attending the debate and for the useful comments already shared with me and my noble friend Lady Goldie during the meetings we have held since the Bill was introduced. This is an important piece of legislation and we need to get it right.

The United Kingdom has long played a leading role on the global stage in tackling threats to international peace and security. One method of influence increasingly used by the international community is the imposition of sanctions. Sanctions encompass a range of measures, such as travel bans, asset freezes, trade restrictions and broader economic measures. In recent years they have been employed in relation to Russia’s invasion of Ukraine and the conflict in Syria, and to put pressure on Iran to come to the negotiating table. Anti-money laundering regulations are also increasingly important in this globalised world and vital if the international community is to continue to protect itself from financial crime. The effectiveness of these measures depends on the consistent enforcement of technical and procedural controls mandated by the Financial Action Task Force, an international organisation of which the United Kingdom is a founder member.

I shall briefly set the scene as to where we are. The UK currently implements 35 sanctions regimes. These include country-specific regimes, such as those on North Korea, Syria and Iran, and regimes targeting terrorist organisations such as al-Qaeda and Daesh. Within these regimes there are currently around 2,000 individuals, groups and businesses subject to restrictive measures.

In broad terms, the UK implements four main types of sanction regime. The first is based entirely on UN Security Council resolutions. As a member of the UN, the UK is obliged to implement them. Indeed, our position as a permanent member of the Security Council means that we have agreed to those regimes in that forum before they become international law under the UN charter.

The second type of regime is where the EU has acted alone or with allies such as the US, generally where it has not been possible to reach agreement at the United Nations. I shall give an example of the former: after the annexation of Crimea, the UN was unable to impose sanctions on Russia because of Russia’s veto in the Security Council, so the EU decided to act in concert with the United States and other like-minded countries. The third type is hybrid regimes. These are where the EU has adopted UN sanctions but has decided to top up the provisions within those regimes with additional measures. An example of this occurred recently on North Korea. Finally, the UK has some domestic powers to impose sanctions—for example, under the Terrorist Asset-Freezing etc. Act 2010.

This is a technical Bill which ensures that the UK can continue to meet its international obligations and to implement UK sanctions and anti-money laundering measures after we leave the European Union. New domestic legislation is necessary because most of the UK’s powers to implement sanctions and anti-money laundering measures currently come from the European Communities Act 1972. When the EU withdrawal Act, as the Bill going through the other place will become, repeals the European Communities Act, it will freeze any sanctions regimes which are in force on the day on which the withdrawal Act commences, but we do not possess sufficient powers under current domestic legislation fully to impose, amend and lift existing or new EU UK autonomous sanctions regimes. Similarly, we do not currently possess sufficient domestic legal powers to update anti-money laundering and counterterrorist financing legislation after the UK ceases to be a member of the EU. This means that, without this Bill, the UK would quickly be in breach of international law.

Before I go into detail about the content of the Bill, I reassure noble Lords that there has been significant government engagement with individuals and businesses on this domestic framework. In April, the Foreign and Commonwealth Office, Her Majesty’s Treasury and the Department for International Trade published a White Paper and launched a public consultation on the UK’s future legal framework for imposing and implementing sanctions. My officials held round tables with a number of sectors including financial services, NGOs and the legal profession, as well as international partners. My right honourable friend Sir Alan Duncan, the Minister for Europe and the Americas, took part in a debate on sanctions in the other place on 19 July. On 2 August, the Government published their response to the consultation. This process had been transparent over the previous six months, and I intend to continue the same level of transparency with noble Lords as the Bill passes through this House.

Turning to the content of the Bill, I emphasise that it is about powers and not policy—it is a technical Bill which creates the legal framework for the UK to be able to continue to impose sanctions where appropriate. Part 1 allows the Government to impose a number of sanctions: financial, trade, transport and immigration. This will allow the UK to maintain the full range of sanctions available at the moment. Part 2 deals with anti-money laundering and counterterrorist financing regimes, and Part 3 deals with general matters such as supplementary provisions and definitions. For each new UK sanctions regime, the Government intend to bring forward a statutory instrument which contains details for that regime.

I know how important it is that we have robust parliamentary scrutiny of these new powers. I also know that the noble Lord, Lord Collins, in particular shares this view. This Bill allows for such scrutiny. Regulations which deal with UN regimes will be made under the negative procedure. Once agreed at the UN Security Council, the UK has an obligation to implement these sanctions under the UN charter. Not doing so would leave the UK in breach of international law. Regimes which both deal with UN obligations and include additional sanctions or hybrid regimes will also be made under the negative procedure. Regulations which do not deal with the UN regimes will be made under the made affirmative procedure. This will allow regimes to come into force immediately, thereby negating the risk that assets are removed before restrictions take effect, while allowing Parliament to debate the regulations.

The vast majority of anti-money laundering regulations will be made using draft affirmative procedures. The one exception to this will be where the UK makes updates to the current EU regulation. This requires enhanced due diligence measures to be applied to persons in countries with strategic deficiencies in their anti-money laundering regimes. Such updates need to be made quickly, and will be made by using the affirmative procedure. At present, anti-money laundering regulations are transposed into UK law through the negative procedure, so the Bill will increase parliamentary scrutiny.

Risks arising from money laundering and financial crime evolve quickly, as reflected by the Government’s active agenda to address these threats. The Bill therefore provides for the Government to take a sufficiently broad power to ensure that the UK’s anti-money laundering regime remains fit for purpose and is able to respond swiftly to emerging risks. The content of the current money laundering regulations is sufficiently technical that it is better suited for secondary legislation, rather than primary. This is in keeping with the approach typically taken in the UK and elsewhere to establish detailed obligations on the regulated sector.

In some of the meetings that we have held, engagement with noble Lords suggested that the current requirements of the fourth EU money laundering directive should be included in the Bill, and therefore capable of being amended only through primary legislation. I have listened to the discussions we had very carefully but it remains our view that this would dramatically increase the size of the Bill, adding more than 100 new clauses, and would not reflect the rapidly evolving nature of anti-money laundering policy. As many noble Lords will know, the EU is already in the process of amending the fourth money laundering directive, in spite of it being transposed only earlier this year. This demonstrates again the need to act swiftly. Similarly, when a Government of the future need to anticipate or react to new threats, they may wish to create new types of sanctions. It would be remiss of us not to ensure that the Bill was future-proofed so that it remained useful. Regulations which create new sanctions will be exercised through the draft affirmative procedure, thereby allowing Parliament to have a full say.

An important element of the Bill is the threshold for designations. The Bill proposes that, to impose restrictive measures on an individual, a Minister must have “reasonable grounds to suspect” that they are involved in an activity we want to change or prevent. This is the same standard that we currently use when considering designations at the United Nations and the EU. It is broadly equivalent to the “sufficiently solid factual basis” applied by EU courts. The application of this threshold was considered and endorsed by the Supreme Court in the case against Youssef in 2016; it was also considered acceptable by the EU General Court in the case against Mohammed Al-Ghabra, again in 2016, where the court emphasised the need for the threshold to be supported by sufficient evidence.

The importance of a clear threshold of this kind was also underlined by colleagues involved in the European Union Committee’s 11th report of the 2016-17 Session, The Legality of EU Sanctions, an inquiry conducted by its Justice Sub-Committee. Having the same threshold that we currently use when considering designations at the UN and EU will allow us to align with our international partners where our political objectives converge. Sanctions are always best applied by a broad coalition of countries. Working with partners increases the impact of the agreed measures and reduces the compliance burdens on business. I will return to this later.

As set out in our consultation response, the Bill also aligns the threshold for domestic counter-terrorism sanctions to this test of “reasonable grounds to suspect”. This is a change to the current approach under the Terrorist Asset-Freezing etc. Act 2010, where Treasury Ministers must have “reasonable grounds to believe” that an individual is involved in prohibited activity and that the measure is necessary for the protection of the public. No new designations under the TAFA threshold have been made for two years and a reduced threshold will have a number of benefits. It will bring counterterrorism sanctions in line with other UK financial sanctions regimes, improving the coherence and clarity of our sanctions framework as a whole. It will allow the Government to impose sanctions based on similar levels of evidence to those required by our international partners, ensuring that we can maintain productive international co-operation on this issue. It will also give the Government more flexibility in using asset-freezing tools domestically, and thereby help to mitigate the threat from terrorism.

Noble Lords will be aware of how this threat has changed even in the short time since TAFA was passed. I need not dwell on this matter too long, but terrorists and others who wish us harm can cause significant damage without significant resources. Therefore it is an important point, especially in the light of the foreign fighters flooding back to their own countries, including the United Kingdom, as Daesh is dismantled in Iraq and Syria.

That said, a fine balance must also be struck between keeping our citizens safe—a priority for any Government is the security of their citizens—at the same time as protecting the fundamental rights of individuals. While the threshold for designating individuals for counterterrorism asset freezes may have been lowered by the Bill, the protections and procedural safeguards offered elsewhere are robust and in line with international best practice. Let me highlight two areas.

Lord Ahmad of Wimbledon

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I shall repeat what I said for my noble friend. I said terrorists are flooding back to their places of origin, and of course there are people who may seek to return to the United Kingdom from Iraq and Syria. With the defeat of Daesh, that is a real possibility, so we need to ensure that there are measures both to keep them where they are in terms of prosecution and, if they do return, to ensure that any sanctions that we need are readily available.

I was about to provide practical examples of, first, challenges to designations allowing a route for redress for sanctioned individuals and entities; and, secondly, of reviews of regimes to ensure that the Government conduct due diligence on the restrictive measures they impose. In the Bill, there are two methods by which an individual can challenge their designation. The first allows them to request a reassessment of their listing by the Secretary of State. This is designed to offer quick redress to individuals, enabling those who are incorrectly designated or who can provide evidence which refutes the reason for their designation to be removed from a listing by the Secretary of State with the minimum of delay. If the designation is upheld following the administrative reassessment, individuals can challenge that designation before the High Court on the principles of judicial review. This is the second means of challenge. Provision is included in the Bill to allow for classified evidence to be shared with the court where appropriate. For UN sanctions, which the UK has an obligation to implement under international law, an individual can make a request that the Secretary of State uses his best endeavours to remove that person’s name from the UN list. Were the Secretary of State to decide not to seek a delisting at the UN, the individual can challenge that decision before the High Court.

It is important that the Government review sanction regimes and listings to make sure they remain fit for purpose and up to date. Sanctions are not designed to be punitive or permanent. They are always intended as a temporary measure designed to prevent or change behaviour. Regimes must have a clear purpose. A regular review will ensure that remains the case. The Government will conduct an annual political review of each regime to check that it remains appropriate for its purpose. Every three years the Government will review all the designations under the regime to make sure they remain necessary and continue to meet the evidential threshold. As now, the Government will continue to be able to grant licences to allow activities that would otherwise be prohibited—for example, to allow individuals subject to an asset freeze to pay for their essential needs, such as food or legal fees.

We recognise that there have been criticisms of the current EU licensing system. This was highlighted to me last year when we had to ask the EU to amend the Syrian regime so that general licences could be granted permitting NGOs to provide humanitarian aid and associated support activities. This Bill will give the Government more flexibility to issue such general licences, which will provide more clarity to humanitarian organisations and reduce unnecessary bureaucracy.

I know that many noble Lords will be interested in what impact the new regime will have on business. We recognise that multiple divergent sanction regimes can raise compliance costs for business. This is already an issue on Iran, for example, where the EU and US apply different sanctions. As our impact assessment sets out, we expect the aggregate impact of the Bill on UK businesses to be less than £1 million. Most of these costs will relate to compliance as companies familiarise themselves with the UK regime and related guidance.

In designing and implementing future UK sanctions, we will, wherever possible, work closely with the EU, the United States and other international partners to ensure maximum alignment and to reduce the impact on business. We want to maintain close co-operation on sanctions with European and other international partners because, as I said earlier, they are most effective when delivered by a number of countries together. UN sanctions have global reach and are always our preferred option. Outside the UN, we expect to remain aligned with like-minded partners such as the EU and the US on many of the policy goals that drive sanctions.

For example, we continue to believe that sanctions on Russia must remain until the Minsk agreement has been fully implemented. It is too early to speculate on exactly what future co-operation with the EU will look like, and decisions in this regard will be taken at the appropriate time. As the Prime Minister has said, we are leaving the EU, not Europe. Our aspiration is to remain close to partners on foreign policy issues, as proposed in Foreign Policy, Defence and Development: A Future Partnership Paper, which was published by the Department for Exiting the European Union on 12 September. For now, we remain active in shaping and implementing sanctions within the EU.

In conclusion, this is an important Bill to ensure that a legislative framework is available to the Government to maintain and adjust sanctions and anti-money laundering measures once we have left the European Union. It will allow us to continue to fulfil our international obligations and to work with allies to protect and promote our shared values. I beg to move.

Lord Ahmad of Wimbledon

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My Lords, first, I thank all noble Lords for their very thoughtful speeches today. Again, they reflect the experience and expertise in your Lordships’ House not only in the matter before us, but in all discussions and debates we have. I cannot agree more with the final point made by the noble Lord, Lord Collins, on the issue of co-operation and working constructively. I hope that I have done so thus far, in terms of engagement and taking on the chin, as a Minister often does, the criticisms levelled at the Government. That will certainly be the basis on which I hope to continue the engagement we have had so far, and as we go forward.

Getting this Bill right, as I said at the start, is very important and our ability to impose sanctions and anti-money laundering measures is central to our vision of a rules-based international system. While, shall we say, differing opinions were expressed during the debate, the principle that I have just articulated is something that we all very much subscribe to. I thank the noble Lord, Lord Collins, the noble Baroness, Lady Northover, and the noble and learned Lord, Lord Hope, for the constructive discussions we have had with the respective Front Benches, and that will continue to be the case.

Again, all noble Lords have agreed on the importance of flexibility and the ability to impose sanctions against the most undesirable regimes—and not just the most undesirable. We find regimes across the world that commit inexplicable horrors against their own populations. When we leave the EU—I say “when”, correcting the noble Baroness, Lady Northover; I am sure that it was a mistake when she used the word “if”—it is right that we have the same ability to continue not to have any flights of assets.

At this juncture, I acknowledge the contribution of my noble friend Lady Anelay, who so aptly spoke of the principles, but also the sentiments and emotions of why we are doing this. This is about human beings, after all; it is about the human element that sanctions are imposed for. If we were living in a perfect world, we would not be having this debate but, unfortunately, that is not the case.

As I said in the opening speech—I hesitate to use the word “technical”, after listening to the noble Lord, Lord McNally—it is a Bill based on principle. Perhaps that is a better way to put it. Of course, I worked very closely with the noble Lord, Lord McNally, and we have had many discussions on this, although those discussions remain as part of the coalition agreement of that time. I listened carefully to his contribution and, in particular, to that of the noble and learned Lord, Lord Judge. I heard what he said about the powers of the Executive through secondary legislation. I was aware of his previous articles and the speeches that he has given, particularly on the Henry VIII powers. But let me assure all noble Lords that our intent here is not to take powers for the sake of the Executive; it is about ensuring that we have flexibility and sustainability in a sanctions regime.

As I am sure the noble and learned Lord will acknowledge, there are precedents for the use of secondary legislation, although I am sure that it will not change his opinion in any way. One example, of course, is the export control orders under the Export Control Act 2002. I fully acknowledge the difference in the views of noble Lords in this regard, but the Government are certainly of the view that we must balance the need to act swiftly with the importance of parliamentary oversight, which I alluded to earlier.

While the principle is clear, we must, as noble Lords have acknowledged, get the detail right, and the expertise of noble Lords in this Chamber will be vital to ensure that we get progress in this regard. While there are differences, as we have said already, I believe that we can agree on the broad principles of why this Bill is necessary.

I am conscious of limits on time, and I shall seek to get through as many of the issues raised as I can, with the caveat that, if I am unable to answer specific questions that noble Lords have raised, I shall write to them. To take an issue on process, I should say that the Delegated Powers Committee was supposed to meet earlier, but I believe that the revised date is 15 November. I look over to the Box and get a thumbs up, which is always good; it happens rarely from the Box, but I got that one right. Working through the usual channels, we will ensure that the Committee sittings reflect the ability to have that detailed scrutiny.

I turn to some of the questions asked, first by the noble Baroness, Lady Bowles. I welcome her expertise in this area—and I look forward to working with her, particularly on the aspects of money laundering that she raised. The noble and learned Lord, Lord Hope, spoke about the definition and powers being too broad. The definition of money laundering in the Bill replicates that currently used in UK law. It is necessarily broad to ensure that the full range of illicit activity criminalised through the Proceeds of Crime Act 2002 is similarly captured by the Bill. Where a person’s rights under the European Convention on Human Rights are affected by any regulations made under Clause 41, the Minister responsible will still be under the existing legal obligation to act with proportionality, as per Section 6 of the Human Rights Act.

The noble Baroness raised the issue of failure to prevent offences, and the noble Lord, Lord Hain, mentioned that in his contribution. When bringing forward secondary legislation of this type, we will consult and act in view of the responses, ensuring that there is a proportionate approach taken in this regard.

The noble Lord, along with the noble Baroness, Lady Ludford, and my noble friend Lord Freeman also raised the issue of beneficial ownership information and overseas territories. As the Minister responsible for OTs—it has been a rather busy brief in recent times—I can assure them that this issue is not lost on the Government. On the contrary, Crown dependencies and overseas territories have agreed to hold company beneficial ownership information in a central register and to share it with UK law enforcement on request. As noble Lords know, we have legislated through the Criminal Finances Act 2017 to review the effectiveness of the first 18 months of these arrangements, which will be before us on 1 July 2019. The Government’s focus right now is also on supporting the Crown dependencies and OTs in fully meeting their obligations in this regard.

The noble Baroness, Lady Bowles, referred to her regret Motion regarding the 2017 regulations. This is a happy place, and when we hear the word “regret”, that is always regrettable. As the noble Baroness notes, it will be debated on 6 November and the Government will respond more fully at that time. The transposition deadline by which the UK was legally required to implement the directive was 26 June 2017. This allowed very little time for the Government to publish the regulations after the general election, due to purdah restrictions. We regret that, as she acknowledged, there was a breach of the 21-day rule connected with the transposition of this directive. However, we had consulted extensively with stakeholders on our policy intention. That is all I will say right now; I am sure we will return to this issue when we debate the regret Motion.

The noble Baroness and the noble Lord, Lord Hain, raised the issue of the Government’s approach to criminal offences in secondary legislation. The 2017 money laundering regulations deal with both civil and criminal penalties, and the primary money laundering criminal offences are set out in the Proceeds of Crime Act 2002. The offences established through the money laundering regulations provide a necessary backstop to penalise the most serious sustained breaches of the regulations. Criminal sentences for sanction offences are set out in Clause 16(4), which refers to a statutory maximum of 10 years. I will write to the noble Baroness and the noble Lord about the other details.

The noble and learned Lord, Lord Hope, and the noble Lord, Lord Pannick, raised the exercise of power with appropriate safeguards. Yes, in our view there are sufficient safeguards. First, Parliament must authorise every type of sanction that can be imposed. Secondly, all designations are supported by evidence. Thirdly, those affected can ask for a reassessment and challenge through the courts. Fourthly, the Minister must act in accordance with human rights, as per Section 6 of the Human Rights Act 1998. Let me assure noble Lords that we intend to write this week to the newly constituted Joint Committee on Human Rights, setting out the detailed analysis of what I have just described.

The noble and learned Lord, Lord Hope, also talked about explicit authority for Parliament for non-UN sanctions. The Bill sets out in detail in Clauses 2 to 6 what Parliament is authorising. As I said in my opening remarks, any new sanction can take effect only after a vote in both Houses authorising that regulation.

The noble and learned Lord also raised the issue of appeals to the Supreme Court being available for the Court of Session in Scotland. Yes, the intention is very much that appeals to both the High Court and the Court of Session will be available.

The noble Lord, Lord Pannick, among others, raised proportionality, seeking assurance that it will always be part of the decision regarding non-UN sanctions. Yes, I can assure noble Lords that where human rights are affected, a Minister will always need to comply with the European Convention on Human Rights and Strasbourg case law, and that will include an assessment of proportionality.

Concern was expressed by several noble Lords about taking powers to prevent money laundering. The UK’s appeal as a financial centre makes it necessary that we prevent money laundering effectively—a point acknowledged by several noble Lords. The 2017 regulations and the EU funds transfer regulation both require that the transfer of funds be accompanied by specified information, enabling effective monitoring and transfer of funds. This will be vital in enabling enforcement authorities to understand and disrupt illicit financial flows.

The noble Lord, Lord Pannick, also raised designation by personal description. We anticipate that we will have sufficient information to identify a person and, where it is the case, we will do so by name. Designation of persons by description is necessary to deal with members of proscribed terrorist organisations who, for example, conceal their identities. We will also provide as much detail as we can so that businesses and banks can carry on their business.

The noble Lord went further and asked about the imposition of financial sanctions on persons connected with a prescribed country. This is necessary to ensure that broad sectoral measures can be imposed which restrict general access to financial persons and markets. There are other elements within this and exemptions that may be applied, so I will write to the noble Lord and place the letter in the Library as well.

The issue of thresholds was also raised by the noble Lord. Where relevant convention rights are engaged, proportionality will, as I have said, be part of the decision-making. Under Section 6 of the Human Rights Act 1998, the appropriate Minister must act in compliance with those convention rights and Strasbourg case law. We accept that this includes the need for the Minister to satisfy himself or herself that the designation is proportionate and includes consideration of the impact of the individual.

The noble Lord also raised issues of procedural fairness and several other matters. In the interests of time and covering other aspects, I will, with his kind permission, write to him and copy other noble Lords into that response.

The noble Baroness, Lady Ludford, who speaks from great experience of the European Parliament, talked about resourcing enforcement of sanctions. We have increased the maximum criminal sentences for breaches of financial sanctions in the Policing and Crime Act to seven years, which we are enabling in this Bill. This means that a breach of financial sanctions is a serious crime, which allows the National Crime Agency to dedicate significant resources to investigations and prosecutions.

She also asked about our having no influence on sanctions as we leave the EU. A question on our relationship was also asked by the noble Lord, Lord Collins. It would be great if I could say, “Right, here’s the page and here’s the answer”, but all this is under negotiation and the exact nature of our future relationship with the EU on sanctions, like much else, still needs to be determined. However, we need to look at this from a global context, with our relationship, our permanent seat on the Security Council at the UN and our other international engagement. The UK has led on many issues within the European Union and I certainly believe, reflecting the optimism across government, that pragmatism will prevail in many areas. I am sure we will see greater detail emerge on this relationship.

Periodic reviews were raised by the noble Lord, Lord Pannick, and my noble friend Lord Gold. These provisions are to ensure that designations are kept under regular review and do not simply lie on the shelf. It is important to remember that a number of things can happen within the period that we have set. First, the designated person can request a review and have the decision looked at again; secondly, they can challenge in court; thirdly, if new evidence arises or there is a new matter that has not been considered, they can request a further review; fourthly, the appropriate Minister can instigate a review on their own initiative in response to changing events; and fifthly, the appropriate Minister can bring the deadline forward and complete the review before the end of the three-year period. Given all this, and that the matter of designation is clearly a live matter throughout the period, we do not consider the period to be excessive.

Turning to other questions from several noble Lords, the issue of transparency associated with Scottish limited partnerships was raised by the noble Baroness, Lady Bowles. As of June this year, Scottish limited partnerships have been brought into the scope of the public register of beneficial ownership maintained by Companies House. They are also required to submit an annual confirmation statement that the information held on this register is accurate and to keep the information up to date.

My noble friend Lord Freeman asked whether the UK would remain a member of the Financial Action Task Force. The short answer is yes; the UK is the leading member of the Financial Action Task Force and has been since its establishment. We will continue to fulfil this leadership role after leaving the European Union, so as to continue to influence international standards.

The noble Baroness, Lady Bowles, raised the FATF. Given her expertise and experience, she will be aware that the standards set by the Financial Action Task Force form the basis for both the fourth money laundering directive and anti-money laundering legislation in FATF member states outside the EU. This reflects the international nature of how financial crime can be targeted and dealt with.

Beneficial ownership of property was raised by the noble Baroness and my noble friend Lord Freeman. We sought views earlier this year on the proposed ownership register of overseas companies that own UK property. The responses are being reviewed by the Department for Business, Energy and Industrial Strategy, which will make an announcement in due course.

Among other things in his contribution, my noble friend Lord James gave some practical examples of the Bill’s operation and asked whether it would stop money laundering in Libya. The short answer is yes; the powers in the Bill will enable us to locate and prohibit that type of criminal activity. We can also put sanctions in place against terrorist groups.

I turn to some of the other questions, to demonstrate that we were listening. The noble Lord, Lord Hain, raised a specific issue in relation to Dubai and Hong Kong having ties with the Gupta family. I am grateful to the noble Lord for bringing this information to our attention. As he acknowledged, he has already written to my right honourable friend the Chancellor of the Exchequer, and I will, of course, bring his contribution to my right honourable friend’s attention.

The noble Viscount, Lord Waverley, referred to international collaboration. I thank him for his wise words on the importance of linking sanctions to strategy agreed with international allies. The global impact of sanctions can work only if there is consensus across like-minded states.

My noble friend Lord Gold referred to anti-money laundering regulations being risk-based and proportionate. I agree with him. He is right to highlight the importance of firms taking a proportionate approach to implementing anti-money laundering systems and controls, and ensuring that they properly target the highest risks in this regard.

The noble Baroness, Lady Sheehan, asked about the Bill’s provision for general licences for humanitarian needs. I suggest to her that there are specific clauses on this issue. I will write to her in this respect but Clause 14(3)(a) allows the Government to issue specific and general licences. However, I am keen to hear her views on that, and those of the noble Baroness, Lady Northover, who was formerly a Minister with responsibility for this area, so it would be useful to hear from her. The noble Baroness, Lady Northover, asked whether we were talking. Yes, we are. My noble friend was sitting right next to me and we are working very closely with the Department for International Development in this regard.

The noble Baroness, Lady Northover, also referred to the anti-money laundering clause that was included at the last minute. That was always the plan, and she will have noticed that we have been transparent about this since the start. Our plans were set out in the FCO, HMT and DIT joint consultation, which was published in April, and confirmed in the government responses.

I apologise to the noble Lord, Lord Paddick: I will write to him on his specific questions as I had to leave the Chamber momentarily during his intervention. However, I thank him for it as we have talked about some of his concerns outside the Chamber. I hope that they have been addressed.

The noble Lord, Lord Collins, referred to licences for NGOs and said that they should be open-ended and last the duration of the regime. The Bill, as drafted, can deliver this.

I will write to noble Lords on any issues that I have not had time to cover today. Once again, I emphasise that the Bill is about powers rather than policy. It is not about punishing specific individuals, groups or Governments, but about enabling this Government, and every future UK Government, to act to keep this country safe and continue to play a responsible role in international peace and security once we leave the European Union.

It would be remiss of me not to conclude, entirely appropriately, by putting on record, if I may, the thanks of the whole House to my noble friend Lady Anelay. I embarrass her somewhat, but that is not my purpose. She has served both government and this House—and, indeed, our country—in an exemplary fashion. On a personal level, she was my first boss in government. She was the guiding hand of the Chief Whip when I first joined the Front Bench and acted not only as a guide, a mentor and a colleague but, most importantly, as a friend. She leaves the Front Bench with many fond memories, as she herself acknowledged in her contribution. Equally, however, the Front Bench has lost a great exponent of government policy who carries the full respect of this House. If I can emulate perhaps a portion of what my noble friend has achieved in her career, I will be a happy Peer. On that positive note, I thank all noble Lords again for their extremely valuable contributions and look forward to working with all across the Chamber on this important Bill.

The Minister of State, Foreign and Commonwealth Office (Lord Ahmad of Wimbledon) (Con)

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My Lords, first, I thank all noble Lords who have spoken in the debate. A small point was made about what I said in my opening remarks at Second Reading about the Bill being technical. Maybe I should defend that by saying that every Bill is technical in some way and perhaps that was what I was alluding to. But I thank the noble Lord, Lord McNally, for whom I have great affection, for highlighting that point, and we live and learn through our experiences at the Dispatch Box and in the House.

As I said at Second Reading, this is a Bill that we need to get right—a point that was acknowledged by all noble Lords who have spoken. I stated that right from the outset, as I do again today, at the start of Committee. That is why I will put on record my immense thanks to noble Lords from all sides of the House who have engaged very constructively on this important Bill. I assure noble Lords that that will continue to be the case as the Bill progresses through your Lordships’ House. I thank all noble Lords—in particular the noble Lord, Lord Lennie—for recognising why we require this legislation.

After we leave the European Union we will need the Bill to ensure that we can continue to impose, amend and lift sanctions, and change our anti-money laundering framework. As noble Lords know, sanctions form part of the range of foreign policy tools that we can use in response to threats such as terrorism to the UK and UK interests. The Government fully recognise that sanctions are not to be used lightly—I assure noble Lords of that fact—and impose significant restrictions on individuals and entities. They should be imposed only after careful consideration of the political context, the desired impact and, of course, the potential risks. The Government also believe strongly that sanctions are a tool for changing unacceptable or threatening behaviour. They should not be used punitively as a substitute for criminal justice measures. A good recent example of the value of sanctions is the way that they encouraged Iran to accept constraints on its nuclear programme.

Lord Ahmad of Wimbledon

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As the noble Baroness will know, I have stated the position as it is. Of course it is within the powers of both Houses to vote against—that is the whole point of having statutory instruments that are presented to both Houses. This is not just about the House of Lords; I mentioned the House of Commons as well.

Lord Ahmad of Wimbledon

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I have stated that the position is as it is now. I know the noble Baroness is seeking to develop arguments that we have had on a previous occasion, but what I have stated is the position as it exists. The noble Baroness talked about it being enshrined in law. Currently, that is how affirmative instruments and statutory instruments work. I am sure she is fully cognisant of that fact.

The noble Lord, Lord Lennie, said that the amendment would not inhibit the Government in any way. But as I was saying—to give further explanation and clarity, if I may—changing “appropriate” to “necessary” would effectively force the Government to use sanctions only as a last resort. Let me assure noble Lords that by saying that I do not mean that sanctions are never our first option. It is important that the Government of the day have some flexibility in deciding when and how sanctions should be deployed. We would not want to find ourselves in a situation where we could not use sanctions in the early stages of a crisis and instead had to allow it to escalate until the necessity of sanctions could be demonstrated.

Moreover, sanctions work best when agreed multilaterally. To be required to demonstrate that other options have been exhausted and sanctions are therefore necessary would leave the UK more constrained than our allies and international partners in our ability to agree and deploy sanctions. It would be a high bar to meet, especially in cases where we may wish to impose sanctions as part of a multilateral agreement with allies in areas where there is no direct risk to UK citizens or direct impact on UK interests. Too high a bar could prevent the UK acting in these areas. This could not only reduce the ability of the UK to continue to play a central role in international affairs but reduce the effectiveness of the sanctions measures themselves. For example, financial sanctions against Russia—

Lord Ahmad of Wimbledon

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The point I was making was about the implication in the current wording of “appropriate”. This is not an open invitation for a Minister to impose sanctions, and the appropriateness of imposing sanctions is qualified in the context in which they must be applied. That was why I referred to the specific section that I did.

I think I have made the point already that the concern would remain. Several noble Lords have referred to the Constitution Committee and the Delegated Powers Committee. We have received those reports as well, and I assure noble Lords that I am not dismissing them. We are reflecting very carefully on the representations made by both committees because it is important that we respond carefully and after detailed consideration of what is being put forward. As I said right at the start of my remarks, I will reflect very carefully and will very much bear in mind the voices and experience of those who have tabled these amendments. We certainly remain of the thinking that the current wording, with the balances and the qualifications in the context of the legislation as presented, means that this is not an open invitation for a Minister to apply a sanction. However, in the context of the two reports, I will of course look again at the basis on which perhaps we can look to qualify, and provide greater certainty in respect of, the language used.

Amendment 1A, tabled by the noble Baronesses, Lady Sheehan and Lady Northover, would require there to be a “compelling” reason why sanctions are appropriate for the purposes set out under subsection (2), which relates to non-UN sanctions. I agree with the sentiment behind this amendment and note that it reflects a specific recommendation of the Delegated Powers Committee. However, adding the requirement for a “compelling” reason might also give rise to some of the difficulties I have already highlighted in respect of the previous amendment.

As I said, we think that in matters of foreign affairs and security policy the Government should have discretion about when it is appropriate to act. This amendment would effectively remove some of that discretion. We also believe that it could restrict our ability to work with international partners to ensure that sanctions are effective. In some cases, sanctions may be more compelling for our international partners than for the UK, but it would undermine the effect of sanctions if we were not able to participate or agree to them being applied multilaterally. I am sure that all noble Lords will recognise that perspective. If the UK was unable to act, this could in turn undermine the UK’s relationships with our international partners.

Amendment 23 deals with a similar issue, but in relation to UN sanctions only. I think there is agreement on all sides of the Committee that it is appropriate that the UK can continue to comply with its international obligations, so I doubt there is much between us on this issue. We think “necessary” would in many cases be acceptable in that place in the Bill. However, we also think it is important that where the UN provides some flexibility about how to implement obligations, the Government should have the flexibility to decide how best to do so. The word “appropriate” provides that flexibility.

It should be noted that the power here is broadly consistent with the equivalent provision in Section 1 of the United Nations Act 1946, which enables Ministers to,

“make such provision as appears to”,

them,

“necessary or expedient for enabling”,

measures in UN Security Council resolutions “to be effectively applied”. It should also be noted that the word “appropriate” does not enable Ministers to do whatever they want. The noble and learned Lord, Lord Hope, referred to the Ahmed case, which I know he knows well. That demonstrated that the courts will take a robust approach to scrutinising the exercise of the Executive’s powers.

I have already alluded to the fact that we have received the reports of both the Constitution Committee and the Delegated Powers Committee. I put it on record that we will consider both committees’ recommendations very carefully. I have also listened carefully to the contributions during the course of this short debate, and I am sure we will explore the issues further as we scrutinise the Bill in Committee.

It says here, “I hope I have been able to convince noble Lords”, but, from looking around the Chamber, I think that would be a rather hopeful word to use at this juncture. Perhaps I have provided noble Lords with a degree of reassurance with some of the explanations that I have given about the context in which the sanctions would apply, but I respect and understand that there would be a need for continued parliamentary scrutiny and for ensuring, as I am sure all noble Lords appreciate, that the UK continues to comply with international law and maintains a leading role in international affairs after the UK’s exit from the EU.

As I said, we will continue to consider very carefully the recommendations of the two committees, and I am sure we will return to this issue in discussion with noble Lords. Again, there are important issues of discussion here. Both in the course of the Committee stage of the Bill and in the meetings that we are having beyond the Chamber, I am sure we will reach a means of moving forward constructively on this basis. The ultimate purpose and objectives of the sanctions regime are something that I know all noble Lords respect. Based on that, I hope the noble Lords will be minded at this juncture to withdraw the amendment.

Lord Ahmad of Wimbledon

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I thank the noble Lord for his late but important contribution. As I said to the noble Baroness, Lady Kramer, I was stating the position as is, regarding the context in which both Houses of Parliament can vote on statutory instruments. In the case of your Lordships’ House, it is clearly laid out in the Companion as well. Let us also put this into context: if a sanctions regime were being proposed and it were voted down in both Houses, the sanction itself would fall and would not apply. The context is not something that can be ignored. In the context of the second question, the noble Lord—

Lord Ahmad of Wimbledon

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Perhaps I can read into what the noble Baroness seeks on this occasion. This is not an issue about both Houses or affirmative instruments. The position I have given is not the Government’s position; it is the position as it stands now. If she needs further elaboration, I respectfully refer her to the House of Lords Companion.

To return to the noble Lord’s final question, if I may, I will write on the specific issue that he raised for the purpose of clarity for all Members of your Lordships’ House.

Lord Ahmad of Wimbledon

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As ever, as I said, we live and learn. The noble Lord is of course right in this context: during Committee, any noble Lord can speak and intervene as appropriate.

Lord Ahmad of Wimbledon

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My Lords, in response to the noble Lord, Lord Collins, I was allowing for any noble Lords to speak, but of course we will continue to debate these issues. To pick up on the point made by the noble Lord, Lord Judd, to whom I listened carefully, it is fair to say that sometimes we can be critical within the Chamber, whoever is in power or in opposition. One thing I have seen in my short time as a Foreign Office Minister but also as a Minister for Human Rights, whether at the UN, in Geneva or travelling around the world—irrespective of which Government of whatever colour has led our great country—is that not only do we see respect for human rights as being at the heart and centre of what we do but many around the world respect the UK for it and hold it up as a beacon. I assure the Committee that the Government do not take their human rights responsibilities lightly. My noble friend Lord Faulks alluded to the fact that not just here but in other places, in different parts of legislation, we ensure adherence to that. In this regard I am proud that, whether at the Human Rights Council, as we have recently seen, through various universal periodical reviews that are taking place with countries, or on quite specific issues, whether human rights on freedom of religion or belief, the protection of LGBT communities, or on gender equality and ensuring that women’s rights are represented, throughout my life the UK has been a bastion and a beacon for human rights. That should and will remain a cornerstone of British foreign policy in years to come.

I thank noble Lords for their amendments. It is right that we again emphasise that we should look carefully at the purposes for which sanction regulations may be created. It may be helpful if I say something about the purposes set out in Clause 1(2). These are designed to cover situations and purposes where the UK is not implementing a UN or other international obligation. The list of purposes has been designed to ensure that we can continue to implement sanctions for the full range of purposes for which we use them now as part of the European Union. The EU is able to adopt sanctions for any purposes of its common foreign and security policy. The reference to “foreign policy objectives” in Clause 1(2) seeks to provide the same type of scope when the UK has left the European Union. This is why the amendment tabled by the noble Baronesses, Lady Northover and Lady Sheehan, would, as my noble friend Lord Faulks highlighted, potentially restrict our options. It seeks to remove the ability to impose sanctions to,

“further a foreign policy objective of”,

the UK.

I appreciate and accept that Amendments 3, 4, 5 and 6 aim to define UK national security and foreign policy objectives in more specific terms. I have little difficulty with the language as such. However, we may risk missing important objectives of UK national and foreign policy that might justify the use of sanctions in the future. For example, this may limit our ability to act with our international partners in the future to tackle serious threats to the national interest.

Noble Lords may recall that in 2015 the Government published a national security strategy, which provides a clear overview of Her Majesty’s Government’s objectives in the national security sphere. The practice has been to update this strategy every five years, as this can act as an indication of some of the purposes of sanctions as set out in the Bill. I assure noble Lords that the Government will not have unlimited discretion. As I set out in the previous debate, the Bill contains a number of checks and balances on the Government’s action, including scrutiny by Parliament and court challenges.

On the additional purposes that have been suggested, I note that these reflect our current practice. For example, preventing grave breaches of human rights and international humanitarian law are already among the purposes of UN sanctions against the Democratic Republic of the Congo and EU sanctions against Iran. I am satisfied that we would continue to impose such sanctions based on the purposes of the Bill as drafted, and that is certainly our intention.

Lord Ahmad of Wimbledon

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I suggest to the noble Baroness that foreign policy and security are the primary responsibility of any Government. Of course, security is a key feature of foreign policy, and I also referred to the Government’s national security strategy.

Lord Ahmad of Wimbledon

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My Lords, I thank all noble Lords who have spoken on this group of amendments. The noble Lord, Lord McNally, talked about Rhodesia, and historical context is one of the great values of your Lordships’ House—it always puts things into context.

The specific issue of banks and sanctions against Iraq in 1991 came up. As someone who spent 20 years in that sector and started his career at that time, I remember being acutely aware of those who were opposing the Saddam Hussein regime. It was perhaps used to having more liberal purses and was suddenly subjected to stringent rules based on those that were being applied in-country. Noble Lords have spoken quite rightly about the unintended consequences that lie behind sanctions. However, there are necessary occasions for them in the banking sector. As we have seen, certain banks in certain parts of the world will take a de-risking attitude, which then prevents essential services being performed. However, I will turn to the issue in front of us.

Amendments 8 and 9 make substantially the same points so I will address them together, if I may. First, let me stress again on record that I fully understand the reasoning behind these amendments. As the noble Baroness, Lady Northover, said, we have spoken about this during Second Reading and outside your Lordships’ Chamber.

It is important that, in imposing and maintaining sanctions, the Government do so with a clear understanding of what the impacts may be, and that there is a focus on minimising potential humanitarian impacts and other unintended consequences. I assure noble Lords that the Government work closely with humanitarian actors and NGOs and take their concerns into account when designing and implementing sanctions.

Last year, it was the United Kingdom that secured amendments to the EU’s Syria sanctions regime to provide an exemption for fuel purchases made in Syria by humanitarian organisations, which is exactly what the noble Lord, Lord Collins, talked about. Noble Lords may also be aware that, in October, after listening to NGOs, Her Majesty’s Treasury’s Office of Financial Sanctions Implementation published specific guidance for the charitable sector on sanctions compliance.

I assure noble Lords that the Bill provides the Government with relevant powers, such as issuing licences to help mitigate any potential impact on the operations of humanitarian organisations. EU case law currently restricts our ability to issue so-called general licences for the humanitarian sector, but the Bill would give us greater flexibility after our exit from the EU. When making and amending future sanctions regulations, the Government would incorporate humanitarian exemptions where appropriate, and these would be subject to parliamentary scrutiny.

As the amendment makes clear, there are already methodologies for assessing the humanitarian impact of sanctions, which are agreed internationally. These would continue to be applied. To require a humanitarian impact assessment to be published at the domestic level each time sanctions were imposed is something that I remain to be convinced about. It would duplicate the work already done at an international level before sanctions are agreed. It also carries the risk of causing delay, potentially undermining the effectiveness of sanctions.

The amendment tabled by the noble Baronesses, Lady Northover and Lady Sheehan, would require the impact assessment to be worked up in consultation with stakeholders each time. I fear that that might risk tipping off potential sanctions targets, who could then take evasive action. Again, this could undermine the effectiveness of sanctions.

I assure noble Lords that we will continue to work closely with our NGO partners. The noble Lord, Lord McNally, asked how we were taking that further. We are already working closely with colleagues in DfID on working with NGOs on how we can take the matter forward. The noble Lords, Lord Collins and Lord McNally, and the noble Baroness, Lady Northover, talked also about the NGOs themselves. I think it might be appropriate if, during the course of Committee and before Report, I make myself available to meet the NGOs to see how we may be able to further tighten up the language in this regard. I hope that following what I have presented to the House about the measures already in place, the noble Lord will be minded to withdraw his amendment.

Lord Ahmad of Wimbledon

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My Lords, these amendments seek to remove the ability of the Government to create sectoral financial sanctions measures by removing the power to apply certain sanction measures to, as we have heard,

“persons connected with a prescribed country”.

Amendments 10 to 14, 16 and 17 would make this change in Clause 2 while Amendment 19 speaks to Clause 5, Amendment 22 to Clause 6 and Amendment 81 to Clause 50. Amendment 30 to Clause 10 would make a slightly different change in that it would restrict the Government from being able to designate a person on the basis of their involvement with other designated persons. However, the amendments all have a common theme as they deal with the application of sanctions to persons other than those directly designated.

The Government are clear that sectoral financial sanctions remain a vital foreign policy and national security tool to enable us to meet our UN obligations. It is worth emphasising that we already implement these sanctions under both the United Nations and the European Union regimes. For example, sanctions against North Korea restrict that country’s access to certain financial markets in order to restrict its ability to generate funds for its nuclear and ballistic missile programmes. To do this and to make it work, we have had to impose sanctions on groups of persons—or in extreme cases, on all people—connected in a specified way with the prescribed country. This ensures that the sanctions measures are robust and effective.

We accept that this creates the potential for far-reaching sanctions that bite upon people who themselves have done no wrong, but it remains the case that it is a necessary part of some sanctions regimes. The more broadly sanctions can be drawn, the greater the impact they will have. I accept that it is a sad but necessary side-effect that at times this can affect persons who may not be directly involved with the activities of the target regime. For example, the current restrictions on the transfer of funds to and from North Korea—noble Lords will be aware that there have previously been restrictions on the transfer of funds to and from Iran—will affect people who do not directly support Kim Jong-un’s regime.

The UK, EU and Strasbourg courts have all considered and accepted that the harsh effects on individuals are justified due to the importance of sanctions and the need for them to have broad and deep effects. It was summarised by the European Court of Justice, which stated that,

“any measure imposing sanctions has, by definition, consequences which affect the right to property and the freedom to pursue a trade or business, thereby causing harm to persons who are in no way responsible for the situation which led to the adoption of the sanctions. Moreover, the importance of the aims pursued by the regulation at issue is such as to justify negative consequences, even of a substantial nature, for some operators”.

This was the Bosphorus case decided in 1996 in relation to sanctions that were placed on the former Federal Republic of Yugoslavia. It has been a settled principle of law for more than 20 years.

If the amendments were accepted, we would be unable to impose these measures. In some cases, they are mandated by resolutions of the UN Security Council, such as the obligations imposed in 2013 to cease business with North Korean banks and financial institutions. We would then be in breach of international law. Another example of a sanctions regime that we would be unable to maintain is the Ukraine sovereignty regime, which aims to restrict Russia from accessing certain financial services. Similar to the North Korea examples I have already given, we would be unable to maintain those financial sanctions if we were unable to impose sanctions on persons connected with Russia, or with persons of a certain description connected with Russia, such as state-owned banks. The clauses must remain if we are to be able to meet our international obligations and work with allies to use sanctions as an effective foreign policy and national security tool.

Clause 10 currently permits us to determine that a person is an “involved person” on the basis of their relationships with other “involved persons”. The noble and learned Lord, Lord Judge, raised this issue; I hope I can briefly explain the significance of it. A person can be designated only when the appropriate Minister has sufficient evidence to have reasonable grounds to suspect that they are involved in the activities targeted by sanctions. For example, if a senior member of a regime is controlling a public body that is developing weapons of mass destruction, they are involved in that activity and can be classified as an “involved person”. Assuming that the appropriate Minister deems it appropriate—and proportionate—to designate them, they can do so.

Clause 10 also enables a person to be an “involved person” if they are owned or controlled by, or acting on behalf of, an “involved person”—for example, as an agent. It goes further and enables a person to be an “involved person” on the basis of their association with other involved people. The key point is that this is often required of us by our international obligations. It is common for a UNSCR to require states to designate not just those involved in a particular activity, but those acting on their behalf or at their direction. Accordingly, we must be able to do that to meet our UN obligations, but it also has three other advantages. First, it enables us to apply sanctions more widely to affect the people around those directly involved, which would further restrict the regime’s ability to act and place further pressure on the regime to change its ways. Secondly, it allows us to designate those people who enable these activities by providing funds and financial services to the regime without direct involvement in the targeted activities. Thirdly, it enables us to apply sanctions across a whole group who share the same aims but are using different methods to achieve them. For example, it would enable us to designate all members of a terrorist group: not only those who are engaging directly in terrorist activity, but those providing funds and logistical support.

A current example of that would be the EU designation of Bashar al-Assad under the EU’s Syria sanctions regime, which has frozen the assets of Assad in the EU —including the UK—and banned him from entering the EU. However, people associated with him are also designated: leading businesspersons operating in Syria; members of the Syrian armed forces of the rank of colonel, or the equivalent or higher, in post after May 2011; members of the Syrian security and intelligence services in post after May 2011; and members of the regime-affiliated militias. Removing the ability to designate these as “associated persons”, as proposed in Amendment 30, would remove the ability to designate those who have a significant role in threats to peace and security.

The noble and learned Lord, Lord Judge, gave a personal example of being connected and made the pertinent point of the definition being very wide: it encompasses many people, even those whose connections are arguably tenuous. As I have already explained, it is necessary to ensure that sanctions are broad and effective. To say that somebody is connected because of a remote family relationship is tenuous. I doubt it would be lawful or stand up to scrutiny in a court, nor would it advance the purpose of the sanctions. However, it is almost impossible to foresee what type of connections will be required in future sanctions regimes, but I do not believe that this one, in terms of the detailed nature of what the noble and learned Lord expressed, would apply.

I have heard and listened very carefully to the concerns, but at the same time I have stated that there are good reasons for casting these powers in the way we have. There will be real difficulties in applying sanctions if they are too restricted. We believe that we have the balance right. With the practical examples I have given, and my interpretation of the Bosphorus case—especially when we bear in mind that power can be exercised only when proportionate and compliant with human rights; any other use would be forbidden by Section 6 of the Human Rights Act 1998—I hope that the noble and learned Lord will be minded to withdraw the amendment.

Lord Ahmad of Wimbledon

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My Lords, I am grateful for noble Lords seeking to strengthen the hand of the Minister at the Dispatch Box. I made specific note of that. I understand the reasons for wanting to go down the route of closing down designated companies and companies belonging to a designated person. However, the proposal contained in Amendments 15 and 46, and the supporting proposals in Amendments 78, 79 and 80, raise some concerns and illustrate why it may not be appropriate to accept them.

I remind noble Lords that the Bill aims to put in place the necessary powers to replicate the sanctions regimes that we currently implement as a member state of the European Union and, of course, those we are obligated to implement internationally through the UN. These amendments would go over and above the regimes and the type of sanction that the EU has put in place. It is essentially a new type of sanction and, as such, I urge a degree of caution in approaching this.

Clause 2 is about freezing assets of designated persons and preventing access to the UK’s financial markets. It is not about causing companies to cease to exist. Sanctions are intended to be temporary. That is why we have various reviews of sanction regimes set up and why they are reviewed periodically: their whole essence is to ensure that the target has changed behaviour in the desired manner. Once this change in behaviour has been achieved, sanctions may well be lifted. We do not intend to impose permanent measures that cannot be reversed. I suggest that shutting down a company is pretty irreversible.

This would be a unique power that does not exist at the United Nations or with EU sanctions. Sanctions have always been and will continue to be most effective when implemented multilaterally and with maximum consistency. Before implementing a new type of sanction, we would usually discuss with our partners whether it is effective and whether there is any appetite for it to be taken forward multilaterally. Only in very rare cases would we unilaterally introduce a new type of sanction that has effect within the UK’s jurisdiction only. Unilateral sanctions provisions such as this could also have an uncertain effect and could create difficulties for industry in general.

Dissolving a corporate entity is a permanent measure with far-reaching effects. It would also have an impact on the human rights of the people involved. Dissolving a company owned by a designated person would remove their property. Doing so without compensation would leave the Government open to a potential action for damages by a person alleging breach of their human right to ownership of their property. It is also uncertain where the property owned by the company would go and what effect this would have on the property rights of anybody involved. Accordingly, to do so may be in breach of the human rights convention.

When a company is designated under financial sanctions they will not be able to trade—that is clear—with any person connected to the UK or to any other countries that have joined us in the multilateral sanctions. We therefore feel that these measures are sufficient to ensure that the effects of the financial sanctions are maximised.

The noble Baroness, Lady Sheehan, gave a specific example about actions we can take against shell companies that, in her words, may be involved in illicit arms trading. If the arms trade is a breach of trade sanctions we will of course prosecute these companies and their directors for criminal offences using powers in the Bill and the export control order 2000, which she referred to previously.

Given my explanation, the importance of the intent, the fact that we would be creating a totally new type of sanction here and in the context of this not being something that either the UN or the EU currently designate, I hope the noble Baroness will be minded to withdraw the amendment.

Lord Ahmad of Wimbledon

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Am I to take it that the Liberal Benches are now suggesting that that is exactly what the Government should be doing?

Lord Ahmad of Wimbledon

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My Lords, I thank the noble Baroness for raising this important issue. As we discussed earlier, the Government take seriously the impact that sanctions can have on the civilian population of a country and acknowledge the important work of NGOs and other humanitarian organisations in difficult situations.

The amendments would exempt ships or aeroplanes from sanctions if they are being used to transport refugees. While I agree with the principle of the amendments, which I know are well intentioned and seek to assist those who require international protection, in my opinion this is not the right way to achieve the desired effect.

I cited earlier the example of NGOs operating in Syria, where exemptions were granted on fuel access. We need to ensure that NGOs can operate in countries that are subject to sanctions by providing licences and exceptions. The Bill makes it easier—it is not just about having wide powers—by allowing government to draft exceptions and grant general licences aimed specifically at assisting humanitarian activities, including those assisting refugees or displaced persons, which is the intent behind the noble Baroness’s amendment. Of course, these are currently not permitted by EU law.

There are good reasons why broad prohibitions are applied to a country with licences, then used to provide targeted exceptions. That is the right way to move forward on this. If we were to provide a general exception for ships and aeroplanes in these circumstances, it could be subject to abuse and would be impossible to enforce. In extremis, it could help organisations circumvent sanctions. It would also be very difficult to apply in practice. If a person on a ship or aircraft claimed to be a refugee, such a circumstance would seem to engage the exemption proposed by the amendment. However, if it was later determined by the proper authorities and the courts that they were not a refugee, the ship or aircraft would have breached sanctions, as well as that person having circumvented immigration controls.

In many cases, it is impossible to tell whether a person is a refugee until after their claim has been examined and determined. I totally understand the intent behind the amendment, but I am sure the noble Baroness can also understand the difficulty it would pose in respect of a person on a ship or aircraft making such a claim.

I assure the noble Baroness and the Committee that the system of licences and exceptions currently in the Bill offers the best way to maintain the integrity of sanctions while ensuring that NGOs can provide humanitarian support to refugees and displaced persons. I committed during a previous debate to join the noble Baroness and the noble Lord, Lord Collins, in meeting NGOs perhaps to strengthen the narrative behind the exceptions—on how they work and how the current rules would be applied—but I am still minded to ask the noble Baroness to withdraw her amendment. I feel that looking to strengthen the communication and availability of current processes to NGOs, as well as their knowledge of them, would be a better way forward.

Lord Ahmad of Wimbledon

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My Lords, I thank all noble Lords who have spoken in this very brief debate thus far. This clause introduces the power to include designated persons under sanctions regulations and defines the meaning of this term as used in the Bill. It sets out the designated persons, which can include individuals, companies and other entities which have a legal personality, as well as groups and associations. The noble Baroness, Lady Sheehan, said that it is so wide that anyone in a particular country who was not designated would be a refugee. That is not the case. In conflict situations—Syria is a prime example—there are members of the opposition, for example. When I was qualifying the status of those who may or may not be “influenced by” or “under the control or direction of”, in a previous debate, that point was made quite clear. The clause will ensure that Governments can, for example, designate particular organisations, and terrorist organisations come to mind in this respect.

The decision to designate an individual or organisation would be made by an appropriate Minister and the Minister would be informed by strategic, tactical and evidentiary advice; so the evidence would need to be there. A decision to designate would also be made where a designation advanced the purposes of a specific sanctions regime, taking into account the political picture and the evidence available. This approach is consistent with EU practice and the practices of our key sanctions partners-for example, the United States and Canada, where the power to designate rests with the Executive. It is for the Executive to use the powers then provided by Parliament as the situation demands.

I fully accept the point that there is a need for appropriate safeguards, and the Bill gives designated persons the right to ask for an administrative reassessment and then bring a challenge in the courts. It also requires annual political and triennial evidentiary reviews. These are, of course, in addition to the Government’s day-to-day accountability to Parliament.

Amendment 33 in the names of the noble Lords, Lord Collins and Lord Lennie, would make it necessary to set out what was meant by being,

“owned or controlled directly or indirectly”,

by another person and of being “associated with” another person. I agree that there should be restrictions on designation powers. That is why the Bill allows designation only where there are reasonable grounds to suspect that a person is involved with or connected to an activity set out in the regulations, and that it is appropriate to designate them on that basis. I hope that, with the explanation I have given, the noble Baroness will feel able to withdraw her opposition to Clause 8 standing part of the Bill.

Lord Ahmad of Wimbledon

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My Lords, I thank the noble and learned Lord for moving his amendment. I know that he has spoken before about the powers that are being given to Ministers in this respect. The amendment seeks to remove the ability of the Government to make designations by description which cover groups of people. It would mean that we could designate individual persons only when we knew their names.

Picking up a point made by the noble and learned Lord, Lord Falconer—I hear what he said—I assure the Committee that we will always seek to designate by name wherever possible. We anticipate that the power to designate by description will be rarely used, for reasons that I will set out shortly. But, as I hope to explain to the Committee, it remains a useful tool for the imposition of sanctions. The noble Lord, Lord Lennie, commented just now that some exceptions might apply. That is exactly the kind of exception for which we want to ensure these powers will allow us to apply sanctions.

It is important that this proposal is seen in its proper context. Sectoral sanctions—those aimed at groups or sectors rather than individuals—remain a vital foreign policy and national security tool. The ability to designate by description also enables us to refer to lists of designated persons produced by others, such as the United Nations. To have a single list to look at will reduce the administrative burden upon business. It will also enable us to target particular entities within a given sector: for example, state-owned banks operating in a particular market. Finally, it will enable us to target groups of persons, such as members of a terrorist group—for example, the Hezbollah military wing.

In some cases—they may be few but there will be exceptions—we will not be able to identify all members of a group by name. But it remains important that those members are subjected to sanctions, to prevent them using their funds and assets to commit terrorist crimes. We are also cognisant of the difficulties that this might cause to banks; the noble and learned Lord, Lord Judge, raised this issue. We accept that a designation by description will be harder for them to implement, but I hope that I can offer a few reasons why this power should be retained despite the difficulties that have been highlighted.

First, as I have said, we will always seek to designate by name where we can and this power will be used very rarely. Secondly, when we use this power we will provide as much information as possible to assist institutions, such as banks and other businesses, to carry out their obligations under the sanctions. Thirdly, it may sometimes be necessary to impose these types of sanctions to cover groups of persons where, as I have said, not all the names of members are not known. Fourthly, banks and businesses carry out their own customer assessments and are well placed to carry out their obligations under sanctions. They also have their own compliance procedures, which enable them to identify persons subject to sanctions and can be used to assist them to identify members of a group. For example, if we designate a group of persons acting in a geographical area, the compliance systems can then be used to pick up economic activity in that area and trigger a deeper investigation into the relevant account holders.

If this amendment were to be accepted, we would be unable to impose these kinds of measures in the cases that I have illustrated. This provision needs to remain to ensure that sanctions can be used as an effective tool for not just foreign policy but, importantly, national security. Noble Lords have alluded to the difficulties, which I fully acknowledge, but I hope that I have offered some degree of reassurance in the context of how they might be overcome.

The noble and learned Lord, Lord Judge, also mentioned the phrase “connected to” and designation by description in primary legislation. The issue remains that the connections and descriptions can be context-specific. For example, what is applied under counterterrorism sanctions may not be applied under Russian sanctions, hence the proposal to include these definitions as regulations. That said, he also referred again to the reports by the two committees. As I alluded to earlier, we are reflecting on the specific points that they have raised, including the one that the noble and learned Lord raised in the context of this debate. I will return to those points and reflect—

Lord Ahmad of Wimbledon

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I thank my noble friend for his intervention. He speaks from experience and, as someone who spent 20 years in the financial services sector, I am acutely aware of the challenges presented by the issue of designations. I will of course take his suggestion and reflect upon it. To address particularly the point raised by the noble and learned Lord, Lord Falconer, this would be the exception. It would not be the norm but would be to cover situations that do occur and have occurred. I have sought in my response to illustrate the circumstances in which that would occur and, based on that, I hope that at this time the noble and learned Lord will be minded to withdraw his amendment.

Lord Ahmad of Wimbledon

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I suggest to the noble Lord that if there is a person who is not named but is connected to a group on which that sanction is being observed, that would stop them carrying out particular actions. It would ensure that that sanction was effective.

Lord Ahmad of Wimbledon

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My Lords, I agree with the underlying principle of these amendments, which aim to ensure that designated persons are told the reasons why they have been designated and given sight of the evidence on which this designation is based as soon as is practically possible. I reassure noble Lords that I do not believe that these amendments are necessary. As is the case currently, the Government fully intend to inform all designated parties after their designation either directly in writing or, if we do not have an address for them, through the government website. This notification will set out clearly why they have been designated and the clear and transparent channels through which they can challenge their designation via a request for a reassessment of their designation or a legal challenge in the courts. While we intend to inform designated persons of the reason for their designation, as we have heard from the noble and learned Lord, Amendment 60 rightly highlights that some evidence may not be suitable for disclosure for national security reasons. In these cases, we would provide a summary of the information.

In short, this amendment would simply codify standards to which the Government are already committed and would in any case be expected to meet by the courts. The courts have already made several findings on the need for disclosure of reasons and evidence in cases of designations, which we think would continue to apply, and the Bill makes no effort to disturb these standards.

However, I have listened very carefully to this short but important debate and in the light of the powerful points put forward and the Constitution Committee’s comments, which the noble and learned Lord did not read out, I will consider further and come back to the House.

Lord Ahmad of Wimbledon

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My Lords, I agree with the spirit behind the amendments. Targeted sanctions inevitably involve significant impacts on the people affected by them. That reflects the purpose of sanctions, which are about changing behaviour. I shall repeat, as was mentioned by the noble and learned Lord, Lord Judge, and the noble Lord, Lord Collins, what I said at Second Reading: I reassure noble Lords that where relevant rights under the European Convention on Human Rights are engaged, we consider that proportionality and the impact on the individual will be part of the decision-making. Under Section 6 of the Human Rights Act 1998, the appropriate Minister must act in compliance with those convention rights as informed by the Strasbourg case law. We consider that that includes satisfying themselves that the designation is proportionate.

In the response to our consultation published in August, we made clear that our approach to sanctions would be compatible with UK and international law and we would continue to ensure that the UK’s obligations under the European Convention on Human Rights, particularly Article 6(8) and Article 1 of Protocol 1, are upheld when imposing and maintaining human rights and maintaining designation. However, as a result of the Human Rights Act 1998, the requirement to act proportionately applies across a wide range of legislation regardless of whether it is stated explicitly in the legislation. It is also relevant that the Bill contains a range of protections to ensure that designations are used appropriately.

In cases where the UK has chosen to act in an area where the UN is not acting, the affirmative procedure will apply, ensuring that Parliament has a vote. This will provide an opportunity for Parliament also to consider whether the designation powers being taken by the Government are appropriate. Parliament will also have the opportunity to consider the exceptions and licensing arrangements that will apply to a regime, which can allow, for example, the release of frozen funds to meet basic expenses or travel to be authorised for humanitarian reasons. The Bill further provides for an annual review of each sanctions regime against the purpose that it was put in place to achieve, which will involve looking at the current global picture. The Bill also provides opportunities for reassessments and court challenges.

I state all that because it is important for the record. I hope I have been able to provide noble Lords with reassurance. Nevertheless, while this debate has been extremely short, it is a pertinent one based on a word. I will therefore consider with my officials what further reassurances we can give and, as the noble Lord, Lord Collins, said, reflect on the committee reports. For now, though, I am minded to ask the noble and learned Lord to withdraw his amendment.

Lord Ahmad of Wimbledon

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My Lords, I shall speak to both amendments in this group, because although referring to different areas—UN lists and International Maritime Organization numbers—I believe that they have some similarities.

For sanctions to be effective, we believe that it is important that the Government act quickly and that the targets of sanctions are easily identifiable. This enables those who are affected by sanctions, including businesses, quickly to work out what they need to do to comply with whatever restrictive measures are put in place.

When a Minister is specifying a ship, they must be confident that they have identified the correct one. There are a variety of ways in which a ship can be identified—using the ship’s name, tonnage, or the country whose flag it flies. I am sure that noble Lords accept that all those details are important. However, they are also changeable. The most reliable way to identify a vessel is by referring to its International Maritime Organization number, which remains with the vessel throughout its lifetime. This is the method used by the UN to specify ships and one that the Government recommend.

The names of those who are on UN lists can be subject to regular changes. As an example, the UN list relating to North Korea has changed five times in the past year. The ability to refer to a UN list, without having to change regulations each time the UN list is amended, would not only be less bureaucratic but would result in less risk of mistakes. I hope that I have underlined the importance of referring to the UN and IMO lists when designating people and specifying ships and that, in the light of that, having provided that clarification, the noble Baroness will be minded to withdraw her amendment.

Lord Ahmad of Wimbledon

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My Lords, Amendment 39 seeks to enable the procedure by which individuals or entities could apply for licences and exceptions to be included in the regulations. Amendment 40 would require the Government to establish a fast-track process for dealing with requests in respect of exceptions and licences for humanitarian purposes, as the noble Lord, Lord Collins, just highlighted.

I would like to make it clear that the consultation on the White Paper raised the need for clear guidance and swift and robust licensing processes. I assure my noble friend Lord Dundee that the Government are committed to a positive reply on both issues. I hope the Committee will be reassured that, given the number of departments involved and the many different derogations, exemptions and grounds for licensing that exist, the relevant application procedures in each sanctions regulation are all contained in guidance. This guidance is publicly accessible to all via various departmental websites. To reproduce them in the regulations themselves would certainly create a substantial administrative burden and greatly lengthen the instruments, so we do not think it is necessary to do that.

On Amendment 40, the variety and complexity of exemptions and licensing arrangements in place means it could also be difficult to establish a single fast-track process that would be straightforward to operate. The Government believe that the criteria for considering the prioritisation for granting licences and exemptions should remain as flexible as possible. We have already committed to dealing with licences as swiftly as possible and we will of course prioritise urgent requests. The fact that a licence is required for humanitarian reasons is something that we already factor into, and will continue to factor into, the time we take to respond to the request. However, I am sure that noble Lords will also acknowledge that humanitarian licences are not the only ones that might require an urgent response. For example, a legal fees licence might be needed to enable an imminent court deadline to be met. To have a fast-track procedure confined to humanitarian licences alone might put these at additional risk by giving priority to a humanitarian needs licence that is not urgent over another request that is. For all these reasons, we do not consider that new requirements need to be added to the sanctions regulations.

I appreciate the sentiment behind Amendment 41, which proposes that a consultation be undertaken for an overarching framework for exceptions and licences. The White Paper consultation on exceptions and licences highlighted the need for good systems and clear guidance when applying exceptions and licensing. We have taken on board the comments of all respondents and replied to them and, as we said in our reply, we intend to design the post-Brexit licensing framework based on these representations. We also intend to consult industry from now until the day we leave the European Union and thereafter, to ensure that the framework allows us to be flexible and has the minimum possible effect on industry while having the maximum effect on the intended targets.

It is also true that an overarching framework for licences might not allow us to take advantage of the flexibility that we currently have for each regime. For example, the licensing grounds for a proliferation regime should be different from those of a misappropriation regime. Different types of sanctions also require different approaches. We currently have centres of expertise on the different types of sanctions, and any move to an overarching framework might put these at risk.

Finally, the Committee will be aware that the moment of leaving the EU is approaching. In that time, after the Bill is enacted, we will need to design the replacement UK regimes. To undertake a consultation exercise on top of that will make it harder to prepare in time. Given that the purpose of this amendment is to ensure good licensing and clear guidance, I hope I have been able to reassure the Committee that we are committed to both.

On the humanitarian exceptions, I have great sympathy with the intention behind Amendment 42; humanitarian, development, reconstruction and peacebuilding agencies need to continue the important work they conduct, often in very difficult circumstances, without fear of unintentionally falling in breach of sanctions. The Government should have the necessary discretion to enable this. The intended effect of this amendment is to make it explicit in the Bill that the types of exceptions that can be granted include,

“humanitarian, development, reconstruction and peace-building agencies”.

However, the addition is unnecessary, as Clause 14(2) as currently drafted allows the Government to create exceptions and issue licenses for activities that are not explicitly listed in Clause 14(2). It is the Government’s intention to use this drafting to create exceptions for a wide range of activities. Humanitarian activities are currently included under existing exceptions and licensing provisions in the sanctions regimes in place, and I assure noble Lords that we intend to continue to include them. Clause 14(6) is an additional clarification of purposes for which exceptions can be created, not an exclusive list. For this reason, accepting the amendment would have no effect on the powers, as they are already contained there and therefore unnecessary.

Clause 14(2)(b) also gives a power to issue general licences. This goes further than the position we currently have under EU law, giving the Government the ability to put in place licensing arrangements for humanitarian purposes, which would enable multiple parties to undertake specified activity without the need for a specific tailored licence. Given that this provision is unnecessary as we already have this power, I hope noble Lords will not press the amendment.

I entirely agree with the intent—although the drafting may need to be looked at—of Amendments 50 and 51, which we understand require the Government to provide guidance about enforcement procedures for sanctions breaches. The need for clear and accessible guidance was highlighted throughout the Government’s consultation on the White Paper. In our response, we said:

“We recognise the call for clear and consistent guidance. Accordingly, the bill would provide for the government to issue guidance on the content and implementation of sanctions. The government is committed to ensuring that this guidance would be of a high standard”.


I am happy to say that the Government have delivered on that promise and have included a provision in the Bill—Clause 36—requiring Ministers to issue guidance about any prohibitions and requirements imposed by sanctions regulations. There will be a mandatory requirement to provide comprehensive guidance for all those affected by sanctions implementation. One strand of the guidance requirement set out in Bill—in Clause 36(2)(b)—explicitly specifies that the guidance may cover,

“the enforcement of the prohibitions and requirements”.

In line with this, we intend to continue to publish guidance on sanctions enforcement.

Clause 36, which we will debate at a later stage, provides for a more comprehensive duty than that specified in the amendment. It has been drafted to allow guidance to be given to all persons in the UK and it enables consultation with sources of expertise as appropriate. For example, we do not expect that the CPS will need to feed into any guidance about how civil monetary penalties are issued in respect of breaches of financial sanctions.

My noble friend Lord Dundee asked specific questions about help for NGOs. I am not sure whether he was in your Lordships’ House when I discussed that matter with the noble Lord, Lord Collins, and the noble Baroness, Lady Northover. We will be meeting NGOs before the next stage of the Bill to discuss how we can better understand and address some of their concerns, but we will continue to issue clear guidance to them. I also assure my noble friend that we will provide speedy and efficient responses to requests for licences. As I have already indicated, under the Bill we can issue general licences, which offer more comfort to banks—which I believe my noble friend specifically mentioned—and give them a greater appetite to assist in these areas.

With that somewhat detailed explanation of where we currently stand on Clause 36, I hope the noble Baroness will be minded to withdraw her amendment.

Lord Ahmad of Wimbledon

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My Lords, the provision for sharing information is vital to ensure that a sanctions regime works in practice. For example, the provision of information by the private sector is essential in monitoring the financial transactions of sanctioned persons. We need this information to ensure effective implementation and compliance with our obligations under the various sanctions regimes, and to ensure robust enforcement when the law is broken.

The information powers contained in the Bill will ensure that sanctions regimes continue to work effectively by requiring people to report relevant information and by authorising the sharing of information. It may be helpful for me to specify those powers. They provide the basis for the Government to monitor compliance with the regulations; to investigate and obtain evidence if they believe that the regulations have been contravened or circumvented; and to share information with third parties to enable co-operation on the development of sanctions and enforcement efforts.

There is already a duty in EU law on all persons in the UK to supply information to the relevant competent authorities. We currently make failure to comply with this duty an offence only in relation to “relevant institutions” in the regulated financial services sector and “relevant businesses or professions”. We could, if we chose, apply this duty more widely. Clause 15 has been drafted widely to enable the duty to be placed on, and the offence of not supplying information on financial sanctions breaches to apply to, all persons in the UK. The extension of this offence to cover everyone who obtains such information in the course of their business would equalise the scope of the offence with the scope of the related duty. This will give the Government the ability to compel production of information to aid the investigation of reported breaches and ensure there is effective redress for not complying with legal obligations. The regulations will safeguard how the information is used, stored and shared. This will be consistent with the Government’s data protection, commercial and banking confidentiality obligations.

These powers provide the basis for the Government to continue monitoring compliance with the regulations and to obtain evidence if they believe that the regulations have been contravened or circumvented. They will also enable the Government to share information with partners to aid their enforcement efforts.

The deletion of two key paragraphs as suggested in Amendment 43 would have a serious impact on the enforcement of UK sanctions. Let me illustrate how. First, powers of entry set out in paragraph (d) are essential for compliance inspectors to check that the terms of general licences have been upheld and that there has been no circumvention of sanctions. These powers are in line with those in the Export Control Order 2008, which were reviewed in 2014 and considered necessary for ensuring compliance with the terms of licences. Without them, authorities would be unable to check that exporters were complying with the terms and conditions of their licences if they were unco-operative.

Secondly, deleting paragraph (e) would completely remove our ability to authorise the sharing of information relating to designated persons. This is essential both for law enforcement purposes and for liaising with international bodies and our foreign partners on compliance and enforcement in individual sanctions cases. It would also have unwanted effects as we would be unable to communicate information to designated persons, them affected by sanctions and the wider UK. We maintain that the powers in paragraphs (d) and (e) ensure continuity with the existing legislation. Both will continue to be needed for sanctions when we leave the EU.

Amendment 44 seeks to ensure that legal professional privilege, or in Scotland the obligation of confidentiality, is upheld. I would like to say first and without any reservation that of course we do, and intend to continue to, respect legal professional privilege, a point made by the noble Lord. This is the position we currently take in all sanctions regulations and we intend to continue to do so. As the Bill does not explicitly authorise the Government to make regulations that remove this privilege, we do not think we would be able to do so if we so desired. Any such cavalier use of the power would surely be struck down by the courts. I hope that I have reassured noble Lords of the Government’s intentions towards legal professional privilege and that any departures from it can and undoubtedly will be the subject of a judicial decision.

Finally, I turn to Amendment 45. I think I understand the intent of this amendment. It is to ensure that persons who do not have ministerial accountability cannot request information from sanctioned persons or use that information. However, the amendment unnecessarily limits the Government’s ability to request information which is vital for ensuring that sanctions can be enforced and implemented in a robust manner. It will increase the workload of Ministers significantly and unnecessarily if they are required to approve every single information request relating to sanctions. It would also cause difficulty where the Minister is not the appropriate authority. For example, shipping and aircraft sanctions will be implemented by bodies outside Whitehall such as the Civil Aviation Authority, harbour authorities, and the Registrar General of Shipping and Seamen. Depriving them of the ability to seek and use information will make it harder to implement sanctions and will only assist those who avoid or breach them. This clause allows us to work with industry to ensure that sanctions are effective and that we have all the necessary information and evidence available.

The restriction on who can use the information requested would create difficulties in the use of powers to impose civil monetary penalties for breaches of financial sanctions given to HM Treasury in the Policing and Crime Act 2017. In that law, the relevant Minister is required to personally review penalty decisions imposed by the Treasury; the Minister’s view is independent of Treasury officials. The amendment would place the Minister in the investigatory and decision-making process, and then the review process. This would not be appropriate and would give rise to challenge on appeal on process grounds.

I understand the concerns that the Committee might have about these powers being more widely available, as the noble Baroness mentioned, but I hope I have reassured the Committee that we believe that they are necessary for the effective implementation of sanctions. Moreover, I hope the Committee will also be reassured by the fact that the appropriate Minister cannot make regulations delegating powers which are incompatible with the basic and fundamental rights of people in the UK. Indeed, as noble Lords will know, Section 6 of the Human Rights Act 1998 forbids it. I hope that, with this detailed explanation, the noble Baroness is reassured and will withdraw her amendment.

Lord Ahmad of Wimbledon

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My Lords, obviously I have noted the opinions that have been expressed, as the noble Lord, Lord Collins, said. I see that your Lordships’ Committee is concerned about the new criminal offences. To be clear: these types of offences already exist. People who breach financial, trade, immigration and transport-related sanctions can be convicted for those breaches in the criminal courts. We will continue to legislate on this basis so that breaches of sanctions can continue to be an offence.

We have set safeguards. We have set a cap of 10 years on maximum sentences for breaches of trade sanctions, which is consistent with the Export Control Act; for breaches of financial sanctions the cap is set at seven years, which is consistent with recent changes introduced by the Policing and Crime Act 2017. Coming back to the point made by the noble Lord, Lord Thomas, about differentiation between the types of offence, we have lower sentences in respect of information provisions and money laundering regulations.

I hear what noble Lords have said. The purpose behind the sanctions is to replicate the existing legal frameworks for enforcement across the various forms of UK sanctions that will be created by the Bill. For all types of sanctions, Clause 16 includes provision for creating offences and dealing with offences, including defences and the treatment of evidence. It also provides for powers and duties to be vested in persons who assist in the enforcement of any prohibitions. For example, for trade sanctions, Clause 16 enables regulations to apply any provision of the Customs and Excise Management Act 1979, which provides a full suite of powers for the enforcement of these measures. The clause also enables civil monetary penalties, introduced in the 2017 Act, to continue to be issued for breaches of financial sanctions. It does not extend these to other types of sanctions. It also enables regulations made under the Bill to replicate the current position on maximum terms of imprisonment. I have already referred to that. It contains further powers for deferred prosecution agreements and serious crime prevention orders for all measures in the Bill.

Clause 16 also makes a provision that would enable the UK to extend the existing offence of failing to supply information on financial sanctions breaches. As noble Lords know, there is an existing duty on everyone to supply such information, which will be transposed by the Bill. However, the associated criminal offence for not doing so applies only to relevant institutions in the regulated financial services sector and relevant businesses or professions. The Bill enables the UK to equalise the scope of that duty and offence, as I said earlier, by making it a general offence applicable to everyone.

I assure the Committee that I am listening carefully to the representations being made, in particular those made by the noble and learned Lord, Lord Judge. However, we believe that the sanctions enforcement provisions, including criminal and civil penalties, remain proportionate to the scale and nature of sanctions breaches and that they will continue to act as a deterrent. That is the ultimate objective. Although I am sure I will not get a ringing endorsement for—or agreement with—everything I have said, I hope I have outlined where the Government are coming from in drafting Clause 16. Based on my explanation, I hope the noble and learned Lord will be minded to withdraw his amendment.

Lord Ahmad of Wimbledon

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I am sorry.

The Minister of State, Foreign and Commonwealth Office (Lord Ahmad of Wimbledon) (Con)

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My Lords, I thank the noble Lord for tabling this amendment. The noble Baroness, Lady Northover, talked about the Joint Ministerial Council; as a Minister for the Overseas Territories, today has been one of those days when I find myself shuttling between the Joint Ministerial Council and your Lordships’ House. I can confirm to the noble Baroness that this issue—and other elements that relate to the departure of the UK from the European Union—is very much on the agenda of our discussions with the overseas territories. Indeed, as we speak, my honourable friend Minister Walker is hosting a session with them on the implications of the United Kingdom leaving the European Union. The noble Baroness raised issues on guidance and I will certainly take back the issue of where we can clarify certain elements.

I will pick up on a couple of points so I can clear them at the start. In his intervention, my noble friend Lord Faulks—

Lord Ahmad of Wimbledon

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I am fully cognisant of that. I meant no discourtesy to noble Lords on the Opposition Front Bench; I thought it appropriate to give the context of what I was going to say. The clarification that my noble friend provided from the outset is exactly why the particular clauses have been framed as such.

I will now take up what the noble Lord, Lord Collins, has just pointed out. The amendment is in the names of the noble Lords on the Opposition Front Bench. I thank them, as I did at the start. I believe that I came to the noble Lord, Lord Lennie, first—we will have to check Hansard on that—to thank him for tabling the amendment.

Clause 17 sets out which persons can be bound by sanctions regulations, in the UK and elsewhere. It also confirms that prohibitions or requirements can be imposed on any conduct in the UK, including UK territorial waters, or on any UK person anywhere in the world. This clause is consistent with the way the UK currently implements sanctions as part of the European Union. If noble Lords are interested, further detail is provided in the White Paper we published in April.

Clause 17 also allows for Her Majesty, by an Order in Council, to extend the effect of sanctions to bodies incorporated or constituted under the law of any of the Channel Islands, the Isle of Man and any of the British Overseas Territories. This amendment would remove the ability of Her Majesty to make an Order in Council in respect of corporate bodies registered in the overseas territories and Crown dependencies. Instead, it would require that, when UK Ministers legislate to create sanctions in regulations, these bodies would automatically be caught.

When introducing this particular amendment, the noble Lord referred to the overseas territories in a very generic way. I have had the good fortune of visiting one or two of them—somewhat tragically in the aftermath of the hurricanes that hit—and generalising all our overseas territories in a particular way is not something I would subscribe to. They provide some incredible potential. For example, I am not sure how many Ministers partake of lobster, but apparently Tristan da Cunha has the best lobster in the world. On a more practical note, we have done some incredible work with them on marine protection and building sustainable economies.

I make that point because it is important to recognise the role that our overseas territories play. However, I agree with the point the noble Lord raised that the overseas territories and Crown dependencies must follow the UK Government’s foreign policy, including the sanctions we apply, and that bodies incorporated or constituted in these jurisdictions must also be bound by sanctions. The Foreign Office—to confirm what I said at the start to the noble Baroness, Lady Northover—has discussed the Bill with the overseas territories and Crown dependencies, and they also accept this point of principle.

However, there are constitutional considerations that affect the way sanctions are implemented by the overseas territories and Crown dependencies. As my noble friend Lord Faulks pointed out, at the moment all Crown dependencies—Jersey, Guernsey and the Isle of Man—legislate on their own behalf, as do Gibraltar and Bermuda. We anticipate that these jurisdictions will seek to continue to do so—save, possibly, for a transitional period. We legislate for some of these jurisdictions directly through Orders in Council. However, as I have said, other jurisdictions legislate for themselves.

The Bill is drafted in a way that reflects this reality. It is consistent with the current implementation model for UN and EU sanctions, as well as measures under the Terrorist Asset-Freezing etc. Act 2010. To change this model would depart from current practice and we do not see a compelling case for this. With that explanation—and the assurance I have given to the noble Baroness on the valid point she raised about the Law Society, which I will certainly look at again—I hope that the noble Lord will be minded to withdraw this amendment.

Lord Ahmad of Wimbledon

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My Lords, I thank the noble Lord, Lord Pannick, and the noble and learned Lord, Lord Judge, for tabling this amendment, and I thank other noble Lords for their contributions. Perhaps I will disappoint the noble Lord, Lord Pannick, somewhat by saying that I agree with the substance and constructive nature of the proposal before us. When the noble Baroness, Lady Northover, started talking about “shortly” and so on, I was reminded of my time as the Aviation Minister and the occasion when an announcement on Heathrow Airport was pending—but we got there.

In that mood, let me outline the Government’s position on this amendment. When a request is received from a designated person to vary or revoke their designation, the appropriate Minister should ensure that they make their decision as soon as is reasonably practicable. As sanctions are applied without giving those sanctioned the opportunity to make representations, and because they have serious consequences on the individuals concerned, it is important to ensure that mistakes are rectified swiftly.

As sanctions are intended to change behaviour, it is also important that people should be able to have their designation revoked if they change their behaviour. Clause 19 therefore provides a quicker and less costly option than going to court. It will also have the advantage of keeping unnecessary pressure off the courts and potentially reducing costs to the taxpayer. The reassessment process exists to allow designated persons to seek swift redress when wrongly designated—and I can assure noble Lords that the Government fully intend to act promptly to requests for reassessments.

I shall certainly reflect on the amendment. I have listened carefully to noble Lords, who have made a compelling case for us to look at our position. With the assurance today that we will look at the amendment again—although it is only an assurance at this juncture—I ask the noble Lord, Lord Pannick, to withdraw his amendment.

Lord Ahmad of Wimbledon

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My Lords, I thank the noble Lord for tabling this amendment. The noble and learned Lord, Lord Judge, sat down before making a further point. I was reminded not of Richard III but of Oliver Twist, who wanted “more”.

On this particular point, Clause 20 is one of a number of safeguards, as I am sure noble Lords have seen, within the Bill that provides for designated persons and requires the Government regularly to conduct a thorough re-examination of designated decisions. The Government must, as we have heard from noble Lords who have spoken through this short debate, conduct this review at least every three years. The noble Lord, Lord Pannick, has rightly raised the issue, and I accept the point, that the EU carries out reviews more frequently. However, Clause 20 should be considered as part of a system of safeguards that the Government have built into this Bill which I believe will provide at least an equivalent, and in some respects greater, level of protection to that afforded to individuals designated by the European Union.

Lord Ahmad of Wimbledon

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I am not quite sure what the noble Baroness’s question is.

Lord Ahmad of Wimbledon

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I think I understand the noble Baroness’s question, but, notwithstanding the issue of numbers alone, Clause 20 lays out a process which the Government perceive to be more efficient than that currently adopted by the EU.

Lord Ahmad of Wimbledon

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My Lords, they say that generosity defines the spirit of a person, so perhaps I can be slightly more generous than noble Lords may perceive. The noble Lord, Lord Collins, is quite correct: we have talked about this issue, and sanctions, we all accept, can be an effective tool of foreign policy and national security, but I also accept that they can have serious implications, not only for those directly designated but also for businesses and charities operating in particular areas.

Foreign policy priorities can change frequently. It is therefore important that Ministers regularly revisit the decision to apply sanctions regimes to political problems and security challenges, and also consider carefully whether the sanctions are having the intended purpose, whether there are unintended consequences and what adjustments might be needed to achieve the desired effect.

Clause 26 therefore requires the Government to carry out a political review of its sanctions every year. The EU also carries out annual reviews of its sanctions regimes. The purpose here is to consider whether the sanctions should continue unchanged or be amended. If there is a published outcome, it is simply confirmation that the legal Acts have been renewed or amended. We have in mind a similar model for the UK; the annual review would be mainly an internal policy exercise, rather than a report for external publication. If the Government decided as a result to amend the sanctions regulations, this would involve a process of parliamentary scrutiny through which we would set out the rationale. Of course, the Government would always respond to Parliamentary Questions about specific areas of policy through the usual channels.

That said, I have listened very carefully to the noble Lord, Lord Collins, and we are looking at the amendment specifically. I will reflect on the proposal in that regard. He made the helpful suggestion that, between Committee and Report, we meet again to work out some of the perhaps necessary parameters. I know he appreciates national security issues and other such issues. I hope, with the assurance that we will reflect on his proposal, the noble Lord is minded to withdraw his amendment.

Lord Ahmad of Wimbledon

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My Lords, I thank the noble Lord for tabling the amendment and all noble Lords for their contributions.

I agree that appropriate remedies for designated persons are vital, but the Bill achieves this. However, since some noble Lords have mentioned comparisons with other systems of challenges—there was reference to the EU—it is worth emphasising how this Bill has been designed to reflect the current procedural protections for designated persons that exist in the European Union.

As the noble Lord acknowledged, I stated at Second Reading that the proposed threshold of “reasonable grounds to suspect” for designations is the same standard that the UK currently uses when considering designations at the EU and the United Nations. It is broadly equivalent to the threshold applied by EU courts. The Bill then provides a system for reviews and reassessments. Where those lead the appropriate Minister to decide that designation is not appropriate, they must take remedial actions. As I indicated in a previous debate, these provisions provide at least an equivalent level of protection to that afforded to individuals designated by the EU.

I agree with the noble Lords that designations should be put in place and maintained by the United Nations only if there is a sound basis to do so. I can assure all noble Lords—the noble Lord, Lord Pannick, in particular—that, as a permanent member of the UN Security Council, the UK makes this point consistently. The Bill provides a route for persons designated by the UN to bring a challenge in UK courts. As the noble Lord stated, if the court finds that the decision of the Secretary of State not to use best endeavours to secure an individual’s delisting at the UN is unlawful, the court may order the Secretary of State to do so.

However, as the noble and learned Lord, Lord Brown, also pointed out, this matter is slightly more complex. As a member state of the UN, we are legally bound to implement decisions of the United Nations Security Council taken under Chapter VII of the charter. If a person has been designated by the UN, the UK is bound by international law to maintain sanctions against the person unless and until the UN Security Council agrees to remove this designation. Again, as the noble and learned Lord pointed out, as set out in Article 103 of the UN charter, these UN obligations take precedence over obligations under any other international agreement, such as those in the European Convention on Human Rights.

I recognise that in the past—as the noble Lord, Lord Pannick, referred to—the EU court has occasionally made rulings striking down EU designations in place to implement UN sanctions. The UK’s position has consistently been firmly that it should not do so and the UK has made this point in submissions to the EU courts in the Kadi case. The EU courts adopting this approach does not change our analysis of the position. The EU is not a signatory to the UN charter and is therefore not bound by its terms—we are. It is not correct to say that this will leave a person in the UK in a worse-off position than a person in another EU member state. All the other member states of the European Union are also signatories to the UN charter, and are bound by it. If there is no EU law in place to implement a UN designation, those countries would need to take alternative steps, for example under their own domestic law, to remain in compliance with their UN obligations. The noble and learned Lord, Lord Brown, has just reflected that we have done this in the UK in the past. When, in 2010, the Supreme Court in the case of Ahmed ruled that an order putting UN counterterrorist sanctions in place was ultra vires, we created domestic legislation—the Terrorist Asset- Freezing etc. Act 2010 to ensure that the UN sanctions remained in place.

Lord Ahmad of Wimbledon

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The noble and learned Lord made me imagine Henry VIII’s boots for a moment.

As regards thinking, I am forever thinking; I think it is a good thing to do. The Government are reflecting very carefully on all elements of the arguments noble Lords are putting forward on these amendments. I will say at the outset that I can see that a number of these amendments gather around a central theme—namely, the appropriate roles of Parliament and the Government when creating and implementing future policy on sanctions. I assure noble Lords that I recognise that this is a difficult balance to strike. As power flows back to the United Kingdom from the European Union —I say to the noble Baroness, Lady Northover, that it is a case of “when” we leave the EU—it will not be appropriate to simply follow the model in the European Communities Act 1972, where decisions of the EU either apply directly in UK law or are implemented through statutory instruments following the negative procedure.

I assure noble Lords that we have tried hard to strike the balance correctly in this Bill and ensure that Parliament has the right level of oversight of the Government’s exercise of sanctions policy. For example, we have ensured that the UK autonomous sanctions regulations must be approved by Parliament before they are put in place. I continue to listen very carefully to the points that have been made about the need for proper parliamentary scrutiny. I assure noble Lords that I will continue to reflect on those points—and not just in respect of these amendments.

It is perhaps worth remembering that sanctions are, in essence, as I have said repeatedly, a matter of foreign policy and national security, which fall more to the Government than Parliament. This was recognised by the great constitutional lawyer A V Dicey, who wrote that the “right of making treaties” was,

“left by law in the hands of the Crown, and are exercised in fact by the executive government”.

That is also the practice in other western countries with national sanctions regimes and legislation, such as Canada and Australia.

On the amendment we are discussing, it is important to recognise that the imposition of sanctions is not a punishment but an attempt to change the behaviour of those who are acting in a threatening or unacceptable manner. That is why the provisions provide ways of suspending, amending and revoking sanctions. Iran is an example of where sanctions have been suspended. Under the 2016 nuclear deal, Iran sanctions can be “snapped back” by the EU if there is a breach of the international commitments made by Iran in relation to nuclear development. Noble Lords will be aware that those suspension arrangements were part of a delicate political balancing act, which the UK is working hard with the EU and other partners to preserve.

Lord Ahmad of Wimbledon

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My understanding is that the regulations would apply only to the sanctions themselves, but I shall clarify that legally as well in answer to the noble and learned Lord and return to the specific issue on Report.

Lord Ahmad of Wimbledon

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Perhaps I was not clear: that was exactly my intention. I do not want to say something from the Dispatch Box that is not accurate, so I will write to the noble and learned Lord on that particular point.

Lord Ahmad of Wimbledon

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To pick up on that final point, of course we will. I confirm that I used “necessary”. As regards the intervention from the noble Baroness, perhaps I did not quite follow her whole argument—various rules were in play—but I got the general principle that she was in support of the powers that are being conferred. As I said right at the beginning, laying it out in quite a lot of detail, I totally accept the point about the Henry VIII powers—the use of secondary legislation rather than primary legislation—which we have debated several times. Certainly, from our perspective as the Government—that is true not only of ourselves but of previous Governments as well—there is a point in principle that we try to strike a balance. Therefore I am listening carefully. On the specific point that the noble Lord made at the end, I will take that back and see how it can be adapted.

I am in reflective mode, as several noble Lords have noted during some of the earlier debates in Committee. However, on this group of amendments, I hope that after the explanation I have given the noble Lord will be minded to withdraw his amendment.

Lord Ahmad of Wimbledon

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It is certainly not a gentle nudge. What I was alluding to is that the ultimate purpose behind sanctions is that they should not exist for an indefinite period of time. It is about changing behaviour. As I noted in the example that I gave of Iraq, there are times when we could use these to very good effect to ensure, with people’s behaviour—be they individuals, corporations or, indeed, countries—that sanctions act as an effective, and deterrent, tool.

Lord Ahmad of Wimbledon

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My Lords, it is important to recognise that the imposition of sanctions is not just a punishment but rather an attempt—as I have articulated in relation to an earlier comment by the noble Baroness—to change the behaviour of those who are acting in a threatening or unacceptable manner.

I state clearly that Clause 35 on suspensions is important. It gives Ministers the ability to provide relief from sanctions to countries, organisations and, yes, individuals where there is evidence of positive steps towards the desired change of behaviour. The ability to suspend sanction measures, rather than fully lifting them, allows Ministers to recognise moves in the right direction while maintaining a credible threat that sanctions can be easily reimposed. We know from past experience that this is an option worth having; thus I believe this clause should stand part of the Bill. I hope the noble Baroness will accept the response I have given, which makes the point that the Bill, at its essence, through Clause 35 provides for the suspension of particular sanctions to ensure that those seeking to improve their behaviour are given an opportunity to prove it. This should be without having the immediate comfort of knowing that their sanction has been not only suspended but lifted altogether. Not having Clause 35 would prevent Ministers from having this very important tool available to impose that kind of suspension.

Lord Ahmad of Wimbledon

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My Lords, I thank the noble Lord, Lord Collins, for tabling this amendment. I agree that sanctions are not the first port of call, a point I have made in previous debates in Committee. The amendment specifically deals with the decision to lift sanctions, and it merits close scrutiny based on a careful assessment of whether the sanctions have achieved their political objectives, as the noble Lord said.

The amendment seeks to oblige the Government to issue a written memorandum alongside any regulation revoking sanctions which would set out the rationale in terms of the original purposes of the sanctions as outlined in Clause 1. While I agree with the important principle of parliamentary scrutiny, I believe that the Bill as drafted provides an appropriate level of scrutiny.

Let me elaborate, if I may. In the case of UN sanctions, revocation would be an automatic response to a decision of the UN Security Council. We can assume that the reasons for the lifting of sanctions would be clearly understood, making a report unnecessary. In the case of UK autonomous sanctions, the regulations could only be revoked using the made-affirmative procedure. The Government would also need to explain the rationale for lifting sanctions and would do this when presenting the said regulations. The explanations provided by the Government would cover the areas proposed in the amendment. However, the Government would need to be careful about putting the full details of the UK’s strategy in the public domain. I know the noble Lord appreciates that point.

This means that, although we support the principle of transparency, obliging the Government to issue a full written memorandum, as proposed by the noble Lord, would be inappropriate. With that explanation, I hope the noble Lord is minded to withdraw his amendment.

Lord Ahmad of Wimbledon

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My Lords, I thank all noble Lords for their contributions on this clause. I am hearing the message loud and clear, but in doing so I need to pick up on a few points as to the motive and the intent behind the clause. I appreciate the clarification by the noble and learned Lord, Lord Falconer, of the Government’s motives. I will not comment on his description of lawyers; it would be entirely inappropriate for me to do so. However, he makes a valid point about the explanation and it is appropriate to explain the Government’s intention behind the clause.

The clause will allow the UK to make amendments to the Bill, as noble Lords have mentioned, to allow for the imposition of new and unforeseen sanction measures, a point well made by my noble friend Lord Faulks. The power is confined to new types of sanctions and cannot be used to alter the purposes for which sanctions can be imposed. I should explain what I mean by new types of sanctions. Common types of sanction include asset freezes, travel bans, arms embargos and prohibitions on aviation and maritime transport. These are included in the Bill. However, the international community sometimes finds it necessary to develop and deploy new types of sanctions. Indeed, a recent example is the UN sanctions imposed in respect of North Korea. That resolution requires that UN member states do not grant work permits to North Koreans save where the UN agrees, in advance, on a case-by-case basis. Prior to the UN’s putting in place that sanction, such a sanction did not exist. There may be times in the future when a currently unforeseen type of sanction would again be appropriate.

Lord Ahmad of Wimbledon

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I think I mentioned Clause 7 in the preamble, but the noble Lord is correct. I was going on to say that, while Clause 7 would allow the UK to adopt new types of sanction when mandated by the UN, there may be times in the future when the UK needs to act outside the direct auspices of the UN.

Without the power provided by Clause 39, the UK will not be able to deploy these types of sanction without first passing new primary legislation. I have heard that point very clearly from noble Lords. That could significantly hinder our ability to co-ordinate sanctions with allies at times when UN action is not possible for political reasons. I alluded to the circumstances in earlier debates. This would risk the UK becoming the weak link in co-ordinated international responses to international crises of the kind we have seen in the Syrian civil war and Russia’s annexation of Crimea.

I also agree that it is important to give Parliament its assent when new powers are bestowed on government. That is why this clause provides that the draft affirmative procedure be used in these circumstances. In proposing that this procedure be followed—I come back to a point I made in earlier debates—the Government have sought to balance the twin demands of ensuring parliamentary scrutiny and ensuring rapid international responses.

That said, I will make two points, first on the substantive issue. I have again indicated the Government’s willingness to listen. The noble Baroness, Lady Northover, among others, rightly made the point about the reports that have been produced by both the Constitution Committee and the Delegated Powers and Regulatory Reform Committee. Indeed, they have made a similar point to that which has been debated in this House and we will be responding to those reports shortly. Therefore, I will take this back and look at the sentiment and the strength of opinion that has been expressed in this House.

On the point made by the noble Lord, Lord Pannick, and the noble and learned Lord, Lord Hope, on the drafting of Clause 39(2), while I am not a lawyer, I was looking specifically at the drafting as the noble Lord spoke. It is extremely important that we look at that again and I will take that back to ensure the drafting reflects the intent behind Clause 39. With that proposal, I hope the noble Lord will be minded to agree to the clause standing part of the Bill.

Lord Ahmad of Wimbledon

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My Lords, perhaps I might intervene in this debate and save the Committee some time. First, they say that sorry seems to be the hardest word but it is not for me. I apologise to the noble Lord, Lord Paddick, since after Second Reading, as he said, I wrote to him and said that the Government intended to bring forward a draft instrument and would put on record during Committee the Government’s intended policy in regard to this clause. I regret to say that we have not fulfilled the first part of that intention—I will come to it in a moment—but I hope that, through what I say, I can fulfil the second part of it now.

Let me assure the noble Lord, Lord Paddick, and the Committee more generally that much work has been, and continues to be, done between officials in various departments on refining this important policy area. As the noble Lord acknowledged, the issue is complex and involves not only the specialist tribunal but how this relates to other aspects of the Bill. This has meant that, despite best efforts by officials, the draft statutory instrument was not ready to be published. It was my view and that of the Government that, rather than publish a statutory instrument that is not yet fully ready, Parliament would be better assisted by seeing a more mature version of that instrument. To that end, my officials and others across Whitehall will continue this work apace. We will endeavour to publish a version of the statutory instrument ahead of Report. I would be happy to meet the noble Lord in the interim to discuss this specific issue. I would also like to put on record for the Committee the intention behind this clause and address some of the points that he made.

Clause 40 concerns how appeals against the immigration consequences of UK autonomous sanctions are handled. I would like to give the Committee some background as to the current arrangements before I go on to speak about the clause. Under the current arrangements, UN or EU travel bans are, in the vast majority of cases, imposed on individuals who are outside the UK and have no connection to the UK. The Immigration Act 1971 already makes provision for persons subject to UN travel bans. Clause 40 allows us to ensure that the persons subject to UK autonomous travel bans can benefit from a similar provision.

In the unlikely event that a UK autonomous travel ban were to be imposed on a person in the UK, this would, as a matter of domestic law, have consequences for their immigration status in the UK—a point I know concerned the noble Lord, Lord Paddick. Whereas a person who is outside the UK will be refused entry, those who are in the UK will lose the right to remain here and may be subject to removal. A person affected in this way might argue that any removal from the UK would interfere with their rights under the European Convention on Human Rights, or be contrary to our obligations under the refugee convention. As a result, they may wish to make a human rights or humanitarian protection claim to prevent their removal. These immigration claims are usually decided by the Home Secretary, and a very developed machinery has grown up around the decision-making process to ensure that it is fair and effective and, importantly, complies with our international obligations. Such decisions, once made, can also give rise to a right of appeal before the immigration and asylum chamber of the First-tier Tribunal, a specialist tribunal with expertise in deciding such claims.

I turn to the Bill. Such immigration claims may also be made against the immigration consequences of a UK autonomous travel ban imposed under the Bill. Again, immigration claims are most likely to arise where an individual in the UK would lose their right to remain here. Noble Lords might ask why we need Clause 40, given that this situation can already arise in the context of a UN or EU travel ban. I wish to explain the point here. The Bill establishes a new administrative reassessment process for designations and a court review process in the High Court or, in Scotland, the Court of Session. No such equivalent administrative and court mechanisms are currently applied in domestic law for UN or EU travel bans. The mechanisms in place are different, so we will need to adapt the existing decision-making and appellate structures that I described earlier in order to accommodate the Bill. That is why we need Clause 40.

I turn back to the practicalities. Cases of this kind are likely to be limited in number, but it is vital that we get this right—a point made by the noble Lord himself. The Government consider it important to ensure that such claims are handled appropriately. We want to ensure that domestic sanctions do not unjustifiably interfere with fundamental rights or run contrary to our obligations under the refugee convention. It is also important that the effectiveness of our domestic sanctions regime is not compromised because our domestic legislation no longer enables us to manage effectively such immigration claims as may be made. The Government have therefore considered how these immigration claims should be treated in the context of the new administrative reassessment and court review processes.

Our conclusion is that, as a starting point, we should seek to maintain the status quo. The Home Secretary and the Immigration and Asylum Tribunal should remain the appropriate decision-makers, as they are now. Both the Home Office and the tribunal are vastly experienced in this area, having dealt with 38,681 human rights and asylum claims and appeals in 2016 alone. However, some changes will be necessary in order to ensure that domestic legislation enables us to manage situations where, for example, there would otherwise be the possibility of both the High Court and the tribunal considering the same issues, or the High Court being required to determine a protection claim that the Home Office had not had the opportunity to consider.

To illustrate the point, whereas the tribunal would be best placed to determine an appeal against an immigration decision, determining the lawfulness of a decision to freeze an individual’s assets is a decision that would be better suited to the High Court. The clause provides the powers necessary to make these changes, which will ensure that we continue to comply with our international obligations and that the effectiveness of our domestic sanctions regime is not compromised. To provide appropriate scrutiny, regulations made under this power will use the draft affirmative procedure.

I give this very detailed explanation along with, once again, an apology to the noble Lord, Lord Paddick. I believe that at Second Reading when he raised this issue I had momentarily left the Chamber or I was near the Box to clarify something, so I did not fully hear his contribution and read it only later in Hansard. As I said, I put on record that we would look to return to this in Committee, which clearly we have not been able to do. I am much minded that the instrument put forward is one that we have looked at extensively and reflects the detail of what I have just submitted to your Lordships’ House. I therefore hope that with that somewhat detailed explanation, which I briefly mentioned to the respective Front Benches out of courtesy to your Lordships’ House, the noble Lord will be minded to withdraw his amendment, with the assurance that I look forward to working with him specifically on that SI before Report.

Lord Ahmad of Wimbledon

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The noble and learned Lord makes an important point about ensuring appropriate time before Report. He is correct to say that we are looking at Report taking place towards the middle of January in the new year, and correct to say that we must allow sufficient time to accommodate it. I cannot give him chapter and verse on the exact date but he makes his point well. I also subscribe to his view that it is important to allow noble Lords sufficient time.

Lord Ahmad of Wimbledon

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As I said, there are already, as the noble and learned Lord will acknowledge, various issues. We will do this in good order. Perhaps I may take this matter back—because various departments are working on this—and clarify appropriately. I will write to noble Lords on the specific date by the end of the week, which will then provide the detail. I fully acknowledge what the noble and learned Lord said about the importance of allowing effective scrutiny before Report. I say to the noble Lord, Lord Pannick—I am sorry, I meant the noble Lord, Lord Paddick; the noble Lord, Lord Pannick, has left but he clearly left an impression on me—that I look forward to working with him once the draft instrument has been circulated. For good order—I look over to the Box and my private office—once the draft has been published, we will seek to circulate it and lay a copy in the Library, as appropriate.

Lord Ahmad of Wimbledon

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I think that I am being corrected by my rather forceful Whip on my left. I am sure that this matter will be clarified through the usual channels.

The Minister of State, Foreign and Commonwealth Office (Lord Ahmad of Wimbledon) (Con)

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My Lords, I thank noble Lords for introducing their respective amendments. I recognise, as I did at Second Reading, that there has been a good deal of interest in the anti-money laundering provisions of the Bill. In that regard, noble Lords may have noticed—and I am delighted—that I have been joined by my noble friend Lord Bates beside me on the Government Front Bench. I shall defer to him for some of the groups that we will discuss today.

Importantly, I hope this emphasises three things to the Committee: first; the Government’s cross-Whitehall and collaborative approach to the Bill; secondly, the Government’s recognition, as I said, that this is an important Bill and our desire is to get it right; and thirdly, as I hope noble Lords acknowledge—I know I speak for myself and my noble friend—that the Government deeply value what this House brings to discussions and scrutiny and equally respect its role in this regard. That is also true of today’s Committee. We have therefore ensured that appropriate Ministers are present to listen to the points raised by noble Lords.

The description of a wolf in sheep’s clothing took me back to reading the story of the Big Bad Wolf to my three and five year-old children. I assure noble Lords that there are no surprises in the Bill. The intent is very clear. I shall also provide greater detail in laying out the context behind the Government’s response to the amendments before us because that is important to your Lordships’ Committee.

Amendments 68ZA, 68ZB and 68ZC propose that regulations made under Clause 41 may be made only for the purposes of improving the detection, investigation or prevention of money laundering or terrorist financing, or for improving the implementation of international standards published by the Financial Action Task Force. I agree with the intention behind these amendments. This Government and our predecessor have, since 2015, led the way in combating money laundering and terrorist financing. Earlier this year, we brought the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 into force, ensuring that our anti-money laundering and counterterrorist financing regime met the global standards set by the Financial Action Task Force. We are the only G20 country with a public register of company beneficial ownership and, through the Criminal Finances Act 2017, we are taking further action to permit banks to share information relevant to identifying financial crime.

The United Kingdom plays an active role in shaping the international standards set by the Financial Action Task Force, and has done so since it was first established in 1989. In view of the UK’s clear intentions and long record in leading the way in this area, and taking particular account of the commitment shown by this Government and our predecessor, I do not think these amendments are required to take us any further forward. I am sure that the noble and learned Lord, Lord Davidson, and the noble Lord, Lord Collins, would agree that, realistically, no Government would bring forward regulations under Clause 41 to weaken our abilities to detect, investigate or prevent money laundering or terrorist financing, or worsen our compliance with international standards. Therefore, I hope the noble and learned Lord may be minded to withdraw his amendment.

Turning to Clause 41 in more detail and Amendment 68A, I understand that Amendments 68A, 69A and 69E—tabled by the noble Baroness—seek to protect the current anti-money laundering regime. That is set out in the 2017 money laundering regulations—I set out the full title earlier and will not burden the Committee with it again—which implement the EU’s fourth money laundering directive. Although I sympathise with that intention, I hope I can reassure the Committee that the level of protection afforded by these amendments is excessive and may have unwelcome effects.

Current regulations on money laundering and terrorist financing follow the internationally agreed standards set by the FATF and impose granular obligations on regulated firms. The UK has chosen to follow the FATF standards as anti-money laundering regimes are more effective where they are aligned internationally. That is a general principle accepted by noble Lords. As a general point, the precise nature of the obligations contained in regulations, such as detail of how firms should approach conducting due diligence on their customers and the factors they should take into account in assessing risk, is better suited to secondary legislation than primary.

That follows the approach typically taken in the UK and elsewhere to establishing detailed obligations on regulated firms. For example, the UK transposition of the fourth EU money laundering directive was given effect through primary legislation, for matters of a general nature—including existing provisions of the Proceeds of Crime Act 2002, the Terrorism Act 2000 and the Anti-Terrorism, Crime and Security Act 2001—with more detailed requirements on firms relating to, for example, their approach to due diligence and identifying beneficial owners being made in the 2017 money laundering regulations. A similar approach to transposition was taken by other EU member states.

To provide more detail on the UK legislation relating to the prevention of money laundering, the Proceeds of Crime Act 2002 establishes the general obligations on the regulated sector to report details of transactions that give rise to suspicion of money laundering or terrorist financing. Part 7 of that legislation additionally establishes the substantive money laundering offences relating to the concealment, acquisition, use and possession of criminal property. The 2017 money laundering regulations establish further and more detailed obligations, such as how firms should conduct due diligence on customers, establish and maintain group-wide policies and procedures, and assess risk connected with different customers. Unlike the provisions contained in POCA, those obligations are better suited to secondary legislation, given the detailed requirements that they impose on firms and the need to keep the detail of such obligations updated, to address emerging risks.

An example of the need to address emerging risks can be found through the rapidly evolving policy framework at EU and international level. As noble Lords will be aware, the EU’s fourth money laundering directive was largely transposed into UK law in June via secondary legislation, through the money laundering regulations, as I have said. Yet noble Lords will also be aware that amendments to the fourth money laundering directive were being negotiated even before EU member states had transposed the original directive, demonstrating that anti-money laundering and counterterrorist financing standards can evolve at a rapid pace. The noble Baroness, Lady Kramer, made the point about the justification that the Government are giving and continue to give in this regard: to quickly and effectively address emerging risks and ensure that the UK is a hostile environment for illicit finance, it is right that we use secondary legislation to implement future policy changes. That will ensure that the UK stays aligned with the evolving international standards in this area.

Lord Ahmad of Wimbledon

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As I have already indicated—and I will perhaps challenge the noble Baroness—when we take the legislation in a wider sense, whatever the legislation, there is primary and secondary legislation. As I have said before on secondary legislation, the procedure being put forward by the Government would allow that policy to be stated and debated in both Houses of Parliament.

I shall finish the point. In terms of existing money laundering, I have already alluded to the fact that with the previous directive the money laundering regulations laid out the detail to which the noble Baroness refers.

Lord Ahmad of Wimbledon

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My Lords, once we leave the European Union—and I notice the change in tack from the noble Baroness who said “when” and not “if” any more—

Lord Ahmad of Wimbledon

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The noble Baroness knows how much I care for the accuracy of Hansard. She has clarified that.

In this case, the Government’s view is that there will be scrutiny of all future legislation once we have left the European Union. The Government will decide what element of policy that is subsequently translated into legislation will appear as primary legislation or as secondary legislation. However, for the purposes of this Bill, which I will come on to in a moment, there are certain elements that we are laying out in primary legislation and in secondary legislation. In both cases, after we leave the EU it will not be scrutiny in the European Parliament but scrutiny in this Parliament, and the Government will ensure it. I ask the noble Baroness to reflect on this point. When I come to the more substantive comment, if she will allow me, there are mechanisms within secondary legislation to allow for the effective debate to which I alluded at Second Reading.

To get back to the point that I was making—perhaps we differ on this and I acknowledge what the noble Baroness says—we believe that in order to address emerging risks quickly and effectively it is important to ensure that the UK is a hostile environment for illicit finance. This is consistent with the broader regulatory regime relating to financial services, for example, which also requires swifter tools that can be more readily updated to address emerging risks than primary legislation. A similar approach to implementing the standards set by the FATF is applied outside the UK in countries such as the United States. There, the Currency and Foreign Transactions Reporting Act 1970 imposes requirements relating to the reporting of suspicious transactions and so is broadly analogous to the Proceeds of Crime Act 2002. The detailed requirements of the international standards relating to areas such as due diligence and record keeping are then established through regulations promulgated by the Financial Crimes Enforcement Network, housed within the Department of the Treasury.

The Government are committed to parliamentary scrutiny of legislation made through delegated powers as we leave the European Union. This is the point I wish to make to the noble Baroness. I have made it before, but I hope it will reassure some, if not all, noble Lords that regulations made under Clause 41 will be subject to the draft affirmative procedure, unless they update the list of high-risk third countries, in which case they will be subject to the made-affirmative procedure. I made this point previously. I emphasise that updates to the list of high-risk countries will still require parliamentary approval, but they need to be put in place swiftly, as I am sure many noble Lords accept, so that banks and businesses can start to apply the enhanced due diligence measures which are appropriate for these high-risk areas.

The use of secondary legislation to amend anti-money laundering and counterterrorist financing regulations is consistent with our legislative approach in the past. The noble Baroness, Lady Bowles, raised the use of secondary legislation with certain Acts, but in general that is not new. I believe I have already made this point, but it was used, for example, to put the money laundering regulations 2017 in place following the fourth money laundering directive. It also provides consistency with our approach to regulations related to financial services and ensures that our anti-money laundering and counterterrorist financing regime remains consistent with internationally agreed standards. It also avoids the unusual position whereby secondary legislation made by a Minister cannot be changed without primary legislation made by Parliament. I hope that I have convinced the House that Amendment 68A is unnecessary and would place an excessive burden on legislation that needs to be flexible and capable of rapid change.

Lord Ahmad of Wimbledon

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I understand the point the noble Baroness makes, but it is not about—to use her term—the excruciating detail. Secondary legislation—with parliamentary scrutiny—provides the Government with the ability to react to rapidly changing circumstances. Relying on primary legislation would not allow the Government to do that. We have a difference of opinion in that regard—but, on the point she made, guidance to financial institutions would follow whatever legislation and whatever rules and laws prevail at that given time.

I turn to Amendment 69A. After the EU (Withdrawal) Bill receives Royal Assent, the powers under the Bill as they are drafted will allow changes to the money laundering regulations 2017 and to the funds transfer regulation which are appropriate to prevent deficiencies that arise as a result of the UK ceasing to be a member of the European Union. It will not enable any other changes to be made. I note that the noble Baronesses, Lady Bowles and Lady Kramer, are aware of the need to make such changes to the money laundering regulations 2017, as demonstrated by Amendment 69D, which we will discuss later today. However, the Government’s approach in this area is to ensure continuity for regulated firms, and certainty for businesses as to the nature of the obligations with which they need to comply.

In order to ensure that our anti-money laundering regime makes legal sense on withdrawal from the EU, we anticipate laying brief regulations made under the power in Clause 7 of the EU (Withdrawal) Bill so as to fix a limited number of deficiencies within the money laundering regulations and the funds transfer regulation. Our approach will make amendments such as—for example—removing references to the Government needing to have regard to reports published by the European Commission and to the Government having to file notifications of risk assessments with EU institutions. It would not be appropriate to keep these obligations, as I am sure noble Lords acknowledge, once the UK ceases to be a member of the European Union.

Given the necessity for such changes in order to have functioning UK law, I do not agree with Amendment 69A, which would remove the ability to make these necessary fixes to our existing laws. Being unable to make necessary changes of the type that I describe would not take account of the fact—the basic fact—that the UK will have ceased to be a member of the European Union.

Legislative reform orders that derive from the 2006 Act are designed to reduce the regulatory burden rather than achieve any policy changes. They must meet a number of preconditions before they can be used to reduce regulatory burdens. Most importantly, they are not allowed to remove any necessary protection, and are therefore not a risk to regulatory safeguards within the money laundering regulations 2017.

I do not agree with the proposed exclusion of a useful tool to ensure that the UK’s anti-money laundering regimes can be simpler, easier to understand and easier to comply with, while ensuring—a point well made by the noble Baronesses in speaking to their amendments—that standards are not driven down, which I agree with, and the strength of the system is maintained. That is another point of principle I agree with.

I hope the Committee will also consider how legislative reform orders are used. There is no convention to use them to make controversial changes, and the preconditions in the 2006 Act will always apply. I believe that the preconditions of the 2006 Act are the appropriate way of constraining the use of its powers. Further, disapplying legislative reform orders in a single case might suggest that it would be appropriate to use them in other similar contexts.

I turn now to the proposed new clause contained in Amendment 69E that would limit amendments to the money laundering regulations 2017 to only those which implement standards published by the Financial Action Task Force, or that identify or revoke a designation of a high-risk third country. I should add that I am again grateful that within the clause both noble Baronesses recognise that new powers are required to update the UK’s money laundering regime after we leave the EU.

The Government are committed to playing a leading role in shaping global anti-money laundering standards through our membership of the Financial Action Task Force. Noble Lords will be aware that we led a successful campaign through the FATF to clarify that only some charitable organisations, such as those working in conflict zones, are vulnerable to terrorist financing, and in doing so improved the ability of civil society organisations to function and receive funding. We have also actively worked to clarify the obligations on the private sector to share financial intelligence. In doing so, we are addressing a key priority for the private sector, which consistently delivers the message that we will be better able to manage financial crime risk if it is able to share more information regarding suspicious customers.

It is right that the Government have the power to update the UK regime when such standards change. There are, however, several areas where the UK’s anti-money laundering regime already goes beyond these standards. Our recently established register of trusts generating tax consequences, for example, goes beyond the standards set by the Financial Action Task Force. Similarly, the decision at Budget 2015 to regulate virtual currency exchanges for the purposes of anti-money laundering and counterterrorist financing did not reflect an expectation of the Financial Action Task Force—it went beyond and it was a policy decision to which we expect to give effect through transposing amendments to the fourth EU anti-money laundering directive.

Although we will remain aligned with Financial Action Task Force standards after the UK ceases to be a member of the EU, our anti-money laundering regime already exceeds its standards in certain areas and we will wish to ensure that our defences against misuse of the financial system remain ahead of global standards, rather than solely reflecting them. Ensuring that we can make regulations so as to detect, investigate and prevent money laundering or terrorist financing, as well as to implement the standards of the Financial Action Task Force, is the most certain method of placing future changes to our anti-money laundering system on a sound legal basis. Adopting the amendment would limit our ability to do so in future.

Lord Ahmad of Wimbledon

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I thank the noble Baroness for acknowledging the actions that this Government have taken and—I am sure I speak for the Front Benches—for the faith that she has in both Front Benches. I have listened carefully to her point. The point that I am making is that the UK has already shown that through our commitment to the FATF, which we will continue to be part of. Not only are we complying but we are leading, and that role will continue and indeed be strengthened by the UK’s membership of the FATF. The objectives and obligations that it asks member states to adhere to will continue after we leave the EU.

I turn to Amendment 72A. The definition of terrorist financing contained in Clause 41 of the Bill is identical to that which already exists in the 2017 money laundering regulations. This definition provides that “terrorist financing” means an act that constitutes an offence under various legislative provisions, being sections of the Terrorism Act 2000; the Anti-Terrorism, Crime and Security Act 2001, the ISIL (Da’esh) and Al-Qaida (Asset-Freezing) Regulations 2011 and the Terrorist Asset-Freezing etc. Act 2010.

As noble Lords will note, elements of the definition of terrorist financing within Clause 41 cross-refer to secondary legislation that creates a criminal offence; namely regulation 10 of the ISIL (Da’esh) and Al-Qaida (Asset-Freezing) Regulations 2011. This provides that any person who contravenes prohibitions contained elsewhere in those regulations commits an offence relating to the financing of terrorism. The offences created through those regulations play an important role in deterring the financing of terrorist organisations. Regulation 14 of those regulations further provides that a person guilty of the relevant offence is liable, on conviction on indictment, to imprisonment for a term not exceeding two years’ imprisonment or to a fine or indeed both.

Clause 1 of the Bill provides that an appropriate Minister may make sanctions regulations where doing so would further the prevention of terrorism, whether in the UK or elsewhere. It is possible that such regulations made under the powers conferred by Clause 1 could impose targeted sanctions and penalties similar to those that are established through the ISIL (Da’esh) and Al-Qaida (Asset-Freezing) Regulations 2011, and which are already captured within the definition of terrorist financing within the 2017 money laundering regulations. If such regulations are made, they will effectively update the UK’s regime for counterterrorist financing. I am sure noble Lords will also note that the reference in the definition to the Terrorist Asset Freezing Act etc. 2010 will become obsolete when Part 1 of that Act is repealed.

In these circumstances, it is right that the definition of terrorist financing within Clause 41 of this Bill can be updated so that the UK’s counterterrorist financing framework can be applied consistently, working off a single definition of terrorist financing. Clause 45(5) of the Bill provides that any regulations updating this definition would rightly be made through the draft affirmative procedure, providing Parliament with an opportunity for fully scrutinising any such changes. In the absence of such a power, the Government would otherwise be obliged to maintain a definition of terrorist financing within this legislation that could quickly go out of date and so limit the effectiveness of our response to the financing of terrorist groups.

Lord Ahmad of Wimbledon

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My Lords, I am sure that the noble Baroness will accept that there are times when it makes sense to discuss certain regulations together in a group. At other times, they will be discussed individually. We will certainly look at the context of each regulation and introduce it in the appropriate manner. The key point I would make in all this is that, under the procedure we have adopted, we want to ensure that there is effective scrutiny.

I totally accept the point of principle and have noted our difference of opinion on the point made by both noble Baronesses and others on primary and secondary legislation. However, I have explained why the Government believe their approach is the right one. I also appreciate the patience of Members of the Committee in our detailed discussions setting the context, which I am sure will be reflected in our discussions today. I thank noble Lords for their patience and indulgence, and hope that they are minded to withdraw or not move their amendments.

The Minister of State, Department for International Development (Lord Bates) (Con)

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My Lords, my noble friend Lord Hodgson began his remarks by welcoming me as a fresh face to this topic. That will probably turn out to be classic understatement, but I am delighted to be here on a very important topic.

I first pay tribute to all noble Lords—in particular to the noble Lord, Lord Hodgson, for standing in for the noble Lord, Lord Faulks, and for the energy and commitment they have both shown on this topic over some time. I guess noble Lords will want to hear about the current position so let me get straight to it.

This amendment would set down in legislation a commitment made at the 2016 Anti-Corruption Summit, which the UK convened, to establish a public register of company beneficial ownership information for foreign companies which already own or buy property in the UK, or which bid on UK central government contracts. This was a point referred to by the noble Lord, Lord Rooker.

The Government remain committed to this policy and our intention is to act in this space; that intention has not faltered since the noble Baroness, Lady Williams, gave a commitment earlier this year. My noble friend Lord Hodgson is right to table this amendment—just as my noble friend Lord Faulks and other noble Lords are right to support it—to remind the Government of this commitment. I welcome him doing so.

The UK is a world leader in promoting corporate transparency. We legislated in 2015 to establish a public register of company beneficial ownership—that was how we described it, and it was actually done. We remain the only country in the G20 to have established such a register. The noble Baroness, Lady Bowles, said that the eyes of the EU are on us. I hope they are because we are leading on this; we are not following. We have recently expanded the register to include other forms of legal entity established in the UK, and we remain committed to this agenda.

Earlier this year, the Department for Business, Energy and Industrial Strategy published a call for evidence on the design and implementation of the register of overseas companies that own UK property. As that call for evidence noted, this register will be the first of its type in the world, reflecting the Government’s continued commitment to being a world leader in this area.

The innovative nature of the register does, however, bring with it issues of legal complexity. The Department for Business, Energy and Industrial Strategy has identified that it will require complex amendments to the existing company law framework in the UK, with new functions being delegated to the Registrar of Companies, as well as the three land registries in England and Wales, Scotland and Northern Ireland. I will ensure that the comments about downloads are relayed to the Land Registry. Consideration will also need to be given to the acquisition, use and processing of information.

In addition, a robust enforcement mechanism will be essential, and the Government propose to implement this via the land registration system. Careful consideration will be needed as to how this will be applied to new and existing landowners, while ensuring appropriate protection for third parties. It will also require consideration of the appropriate penalty regime to be applied to persons who fail to comply with the obligation to include the necessary details on the register. These and other issues relating to the operation of the register were raised by respondents to the Government’s call for evidence earlier this year. We have been considering these so as to inform the design of the register.

I make it clear that the Government remain committed to establishing this register and to fulfilling our commitment at the 2016 Anti-Corruption Summit. My noble friend Lady Williams reiterated this commitment yesterday, speaking at the inaugural Global Forum on Asset Recovery in Washington DC. The Department for Business, Energy and Industrial Strategy expects to respond formally to the call for evidence early in the new year. That response will focus, as did the call for evidence, on how the register will be established and not on whether it will be established.

So as to fully take account of the extensive work that the Government, private sector and civil society have already conducted, and continue to conduct, on the design of this register, it is right that we allow the Department for Business, Energy and Industrial Strategy to conclude the process that is already well advanced and to publish its response to the call for evidence early in the new year. This will ensure that the register is well designed, takes full account of the representations received and provides a legally robust mechanism for registering the beneficial owners of overseas companies that own UK property. So as to further inform the response from the Department for Business, Energy and Industrial Strategy, I will ensure that it is fully aware of the points made by noble Lords today in support of establishing the register.

I should add that earlier my noble friend Lord Ahmad gave a commitment to meet my noble friends Lord Hodgson and Lord Freeman and other noble Lords who are interested in this area to update them on matters and to get further information on what they would like to see.

I hope that I have given the Committee some reassurance on our intention to act and on the next steps that we have planned, and that noble Lords can have confidence that no provision is required in this Bill to secure the progress that my noble friends Lord Faulks and Lord Hodgson seek. Therefore, I ask my noble friend to withdraw the amendment.

Lord Bates

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That is right. We are certainly not going to shrink from the commitment from the previous Prime Minister, with which the current Prime Minister is in agreement. We want to see that happen. We have also, of course, taken certain actions in relation to this area. For example, the annual tax on enveloped dwellings, known as ATED, was introduced in April 2013 to ensure that those who place UK residential property in a company pay a fair share of tax.

My noble friend Lord Hodgson asked whether the number of purchasers was increasing. The anecdotal evidence and the facts suggest that. The ATED receipts in 2015-16 were £178 million, a 53% increase on the previous year. It is at least an indicator of the scale of the undoubted challenge. We stand by the commitment made earlier this year. However, because we lead the world in seeking to be the first major economy to have such a register, there are legal consequences. The same lawyers who do the conveyancing will be reading through the fine print of any legislation that comes forward. We have to make sure that it is watertight to ensure that the right people are affected by it and, as the noble Lord, Lord Collins, said, that other people are dissuaded from making those investments here.

With those reassurances and the commitment to meet again, I hope that my noble friend will withdraw his amendment.

Lord Bates

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My Lords, I thank the noble Baroness, Lady Bowles, for introducing this amendment; she brings her own expertise in this area from her role in the European Parliament. That was evident in the way she went through a very complex issue, and I will come to the response on that.

These amendments propose creating a new corporate criminal offence for the failure to prevent money laundering, and launching a public consultation within six months of this Bill receiving Royal Assent regarding possible further reform of the law relating to corporate liability for money laundering, terrorist financing and offences which pose a threat to the integrity of the international financial system.

I understand and sympathise with the need to ensure that policies are in place which effectively prevent money laundering. However, I hope that the Committee will agree that it is of paramount importance to consider the evidence and current context before creating a new corporate offence, as the noble and learned Lord, Lord Davidson, invited us to do before introducing this element. He referred to the Ministry of Justice call for evidence earlier this year on potential reforms of the law relating to corporate liability for economic crime. Indeed, one of the options considered within that call for evidence was the potential for creating a corporate criminal offence of failure to prevent economic crime. I am sure the Committee can see the overlap with the new offence proposed by Amendment 69B and the provisions of Amendment 69C. The Ministry of Justice is considering the responses to its call for evidence, and will publish a response in the new year.

I should say that the responses to these consultations are like buses: you wait for a few months and then three of them come along together. The other one is of course on our anti-corruption strategy, which the noble Lord, Lord Collins, referred to. I mention it in this context to say that my noble friend Lord Ahmad and I have just been discussing it, and we will seek to provide a substantive update on progress towards the strategy by Report in the new year. Of course, because some of the consultations are outstanding, some of the elements of that strategy may need to wait until they are clarified.

Lord Bates

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I did say the new year, but I was talking about two different things. That is my fault. The MoJ consultation response will be published in the new year—that is what we have said. Earlier the noble Lord, Lord Collins, asked what had happened to the anti-corruption strategy, which is an overarching approach by the Government. I was saying that after discussing that with my noble friend Lord Ahmad, who leads on these matters—

Lord Bates

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The new year is the new year. I do not want to prejudge when that response might be. I have said enough, basically; obviously we are trying to respond to noble Lords’ questions on these matters as fully as we can, but that is as far as I am able to go at this point. What I was saying about the anti-corruption strategy was that we will seek to provide a substantive update by Report.

I hope the Committee can agree that it would be precipitous to introduce a further “failure to prevent” offence before we properly review this evidence. Similarly, this call for evidence substantively overlaps with Amendment 69F, proposing a new consultation relating to corporate liability for offences of the type referred to in Clause 41. It is right that we wait for the Ministry of Justice to respond to this call for evidence before undertaking a further public consultation that covers the same ground.

Further, the Government introduced corporate criminal offences of failure to prevent bribery, which the noble Baroness, Lady Bowles, referred to, through the Bribery Act 2010, and failure to prevent the facilitation of UK and foreign tax evasion in September through the Criminal Finances Act 2017. Consideration of the introduction of future “failure to prevent” offences should be informed by how those policies operate in practice. While the Bribery Act 2010 has been in force for a number of years, the relevant provisions of the Criminal Finances Act 2017 were commenced only in September of this year, meaning that as yet there is little evidence on how the offences established through that legislation are operating in practice.

I further note that many instances of corporate failures related to anti-money laundering are already captured by existing anti-money laundering legislation. The 2017 money laundering regulations, for example, already impose requirements to prevent money laundering on companies in the regulated sector, such as banks, lawyers and accountancy firms. Breaches of any of those duties by the company are subject to civil or criminal penalties, including fines. For example, firms are required to put and keep in place specific policies, controls and procedures to manage and mitigate effectively the risks of money laundering to their business, including by their clients or customers.

Those regulations, the previous regulations and related rules are well enforced. For example, the Financial Conduct Authority fined Deutsche Bank £163 million in January this year for failing to maintain an adequate anti-money laundering framework, after its investigations revealed that a UK division of the bank had failed to take reasonable care to establish and maintain an effective anti-money laundering control framework. Further, in 2015 the Financial Conduct Authority fined Barclays Bank £72 million for similar failures in guarding against financial crime, noting that Barclays,

“did not exercise due skill, care and diligence”,

and,

“failed to assess, manage and monitor those risks appropriately”.

These financial penalties substantively demonstrate that effective and proportionate penalties are already applied to UK-regulated firms that fail to put in place proper systems and controls to prevent money laundering.

Lord Bates

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The noble Lord, as an experienced Member, will know that when there is an ongoing investigation, to which he referred, it is often dangerous for Ministers, who are supposed to be detached from the process, to comment. However, I recognise the seriousness of the allegations—as does the Chancellor—and they have been passed to the appropriate authorities. I am pleased that they are being investigated.

Lord Bates

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I am happy to undertake to write to the noble Lord in response.

Lord Bates

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My Lords, I thank the noble Baroness, Lady Bowles, for doing this. I have to say that I am growing in awe of the noble Baroness and her drafting skills. Should there be any vacancy among the clerks in the Public Bill Office, they will be quite impressed by the notion that the noble Baroness can draw up this technical amendment in one hour—it is very impressive indeed.

My noble friend Lord Patten perhaps did the noble Baroness a disservice by saying that it was a “probing probing amendment”; I think it was a “very probing probing amendment”, which the record should capture. Having read through her handiwork in the drafting, I think she did not do herself justice. The amendment certainly provides a welcome opportunity—which is, I know, its purpose—for us to put on the record some further remarks about how we see this particular issue being addressed.

Lord Bates

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My noble friend is right, and I am sorry if I have not been very clear on this. The key point was that the stylistic terms “grey list” and “blacklist”, which may be for general convenience, were not reflected in what we were saying—rather, it is a demonstration of commitments by the 30 jurisdictions named to address the concerns of the EU Code of Conduct Group. So we are more discussing the semantics of the terms that might be used to describe a jurisdiction which is complying or not complying, or progressing or not progressing, towards addressing concerns of the Code of Conduct Group.

Lord Bates

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That is a good point.

Lord Bates

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That may indeed be a very helpful intervention from the noble Baroness, Lady Kramer. However, for the record, because this is a serious point, the note that I read out may not fully reflect the announcement to which my noble friend has referred. To make sure, I shall seek some additional clarification. The next group is very germane to the issue that he raises in relation to overseas territories. Therefore, perhaps without presuming on my noble friend too much, we may have some further information that will better answer that particular point.

In fact, a note has arrived, and I can say that the list published yesterday relates to tax. The EU maintains a separate list of countries which represent a high risk of money laundering and terrorist financing, to which UK firms must have regard. That may be part of the answer; more will come in the next group, if my noble friend can bear with us.

On the EU withdrawal Bill, which the noble Baronesses, Lady Bowles and Lady Kramer, asked about, Clause 7 is very clear—it is a power to remedy deficiencies in law that arise as a result of the UK leaving the EU, no more and no less. That is a level of certainty which I hope will offer some reassurance to the noble Baroness. We do not intend to make changes to the 2017 regulations other than to make those fixes. The 2017 regulations refer to guidelines issued by the European supervisory authorities. Amendment 69D enables those references to be removed only if they are replaced by references to those issued by the UK supervisory authorities. Those would cause additional work and a risk of duplication with other guidance. So, in response to that, and after what I am sure has been a very helpful debate, if not fully illuminating at this stage, I invite the noble Baroness to withdraw her amendment.

Lord Ahmad of Wimbledon

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My Lords, I thank all noble Lords who have taken part in this debate. In particular I thank the noble Baroness, Lady Stern, for tabling this amendment. It would require the Secretary of State to provide all reasonable assistance to the Governments of certain of the British Overseas Territories with significant financial centres to enable each of those named overseas territories to establish a public register of company beneficial ownership. It further provides that if, by 1 January 2019, such overseas territories have not established such a register, the Secretary of State should take all reasonable steps to ensure that the Privy Council legislates to require each relevant overseas territory to do so. With your Lordships’ indulgence, I shall refer to the overseas territories as the OTs to save a degree of time.

I also appreciate that, as the noble Baroness articulated in moving the amendment, it was a probing amendment. That allows me to outline what steps have been taken. The OTs, as you know, are separate jurisdictions with their own democratically elected governments. They are not represented in this Parliament and so it has only been in exceptional circumstances that we have legislated for the OTs without their consent.

Financial services are the domestic responsibility of territory Governments. This creates an entirely different relationship from examples where we have had to legislate. For example, we have acted over international human rights obligations and, indeed, on decriminalising homosexuality. On the governance structures in which these territories work, as the noble Earl and my noble friend Lord Naseby have indicated, and as the territories and the House will recognise, legislating for the OTs without their consent would effectively disfranchise their own elected representatives. It would create considerable ill-feeling, which the Government do not wish to do.

Legislating to require certain OTs to establish public registers of company beneficial ownership when they do not wish to do so of their own volition would also mean that the territories would be less keen to maintain their current level of co-operation. This would jeopardise the progress—which I shall come to in a moment—that has already been made in this area and the spirit of working in partnership that we have fostered with them. The noble Lord, Lord Collins, said that I was running off to the joint ministerial council—I think I ran from it. We covered this subject; indeed, it was also covered by my right honourable friend the Prime Minister in her meeting with the overseas territories. Jeopardising progress in this respect is not something any of us want to do. Given the necessary lead-in period for establishing any new register of beneficial ownership, this would set back UK law enforcement’s ability to access information relating to the beneficial ownership of companies in the OTs.

Let me assure noble Lords that this does not mean we are content for no action to be taken in this space. It simply means that we wish to take action within the existing framework of friendly co-operation, building on the progress already made. The noble Baroness, Lady Stern, made the point that I am the Minister for Overseas Territories. I have been dealing quite extensively with them, as noble Lords will understand, particularly certain territories, because of the tragic hurricanes that struck. We raised these issues directly, and we have seen good progress.

As noble Lords will know, the UK is a global leader in the cause of corporate transparency. We are the only country among the G20 to have a fully established public register of company beneficial ownership, and we continue to push for this to become a global standard. The international standards set by the Financial Action Task Force do not require it, however, reflecting the lack of international consensus in this area. These standards require only that:

“Countries should ensure that there is adequate, accurate and timely information on the beneficial ownership and control of legal persons that can be obtained or accessed in a timely fashion by competent authorities”.


Nevertheless, should public registers become the global standard, we would expect the OTs to meet it. The UK is far ahead of other countries in this area. The current EU framework does not require all member states to establish public registers of company beneficial ownership, so many have chosen not to do so. There is already progress in this area and we need to build on it within the existing framework of friendly co-operation, to which I have alluded. Under the arrangements that we concluded with the OTs in 2016, overseas territories with significant financial centres committed to hold beneficial ownership information in central registers or similarly effective systems, and to provide UK law enforcement authorities with automatic access to such information within 24 hours of a request being made, or within one hour in urgent cases.

These arrangements—also known as the “exchange of notes”—came into effect on 30 June this year and are in the process of being fully implemented by the OTs. An important point is that effective implementation of these arrangements will put the OTs ahead of many G20 members and many individual states of the United States—a point made well by my noble friend Lord Naseby.

I am pleased to report that Bermuda, the British Virgin Islands, the Cayman Islands and Gibraltar have central registers of beneficial ownership information or similarly effective systems in place, and they are taking forward population of their systems with beneficial ownership data.

We are also providing support to the Government of Anguilla to establish an electronic search platform providing access to beneficial ownership information, as well as support in drafting underpinning legislation. We are now working with Anguilla to finalise a memorandum of understanding on the terms for provision of our support, and we expect its beneficial ownership system to be established in the spring of 2018, notwithstanding the current rebuilding challenges it is facing following the hurricane. Work on establishing a central register in the Turks and Caicos Islands has been delayed owing to the impact of Hurricane Irma, but we expect this to be in place soon.

We did not seek a bilateral arrangement with Montserrat, as we had with the other OTs with financial centres, because Montserrat had already committed in November 2015 to include beneficial ownership information in its existing public companies register. A Bill requiring the inclusion of beneficial ownership information in the existing register will be introduced to Montserrat’s Legislative Assembly this month. The target date for the addition of that information to the register is 1 April 2018.

Having heard that detail, I hope your Lordships will agree that it demonstrates what can be achieved by working consensually with the OTs. It is right, therefore, that we focus on the implementation of the existing arrangements and that future work in this area be carried out within the existing framework of friendly co-operation, rather than generating ill will by imposing upon the OTs without their consent.

We are committed to following up on these arrangements to ensure that they deliver in practice, are implemented effectively and meet our law enforcement objectives. There is explicit provision in the exchange of notes for the operation of the arrangements to be reviewed six months after they came into force—that is, at the end of this year—and subsequently on an annual basis. These formal review processes are in addition to ongoing monitoring of the practical application of the exchange of notes by the UK and each relevant OT.

In addition, noble Lords will recall that Section 9 of the Criminal Finances Act 2017 amended Part 11 of the Proceeds of Crime Act 2002 to establish a statutory review process for the implementation of the exchange of notes. This report must be prepared before 1 July 2019 and relate to the implementation of the exchange of notes from 1 July 2017 to the end of December 2018. Once prepared, it will be published and laid before Parliament. The Government are clear that OTs with significant financial centres must fully implement the exchange of notes to which they have each agreed. The noble Baroness, among others, asked whether this matter had been raised. I have already said that it was raised at the JMC, and the Prime Minister reiterated this at her meeting with the leaders of the OTs last week. These arrangements have been made and must be honoured.

A key feature of the Government’s approach has been to maintain a level playing field between the OTs with financial centres and the Crown dependencies. As I am sure noble Lords reflecting on my contribution will see, we have robust review processes for the implementation of these arrangements, both on an ongoing basis with the Crown dependencies and the OTs and through the Criminal Finances Act. If these review processes demonstrated that full implementation of the exchange of notes was not taking place in any individual jurisdiction, it would be right for us to consider the issue further.

My noble friend Lord Patten, who I see in his place, raised the EU blacklist. Perhaps I may, first, give some factual information. I will check Hansard but I believe that he mentioned that Bermuda was on the blacklist. Bermuda is not on it; nor are the Cayman Islands or the Crown dependencies. Bermuda, the Cayman Islands and the Crown dependencies are on a separate list—I am quoting here—of co-operative jurisdictions which have been assessed by the EU as being unsuitable for the blacklist. They have also further committed to address any remaining concerns by the end of 2018. I can be quite specific in saying that this is not a grey list; on the contrary, it is a demonstration of the progress and positive commitments that have been made and are being achieved.

The Minister of State, Department for International Development (Lord Bates) (Con)

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My Lords, I thank the noble Baroness, Lady Kramer, for leading a short but interesting debate on these matters. I shall put some remarks on the record to see whether they satisfy her and my noble friend.

Amendments 69H and 69J would prohibit trust or company service providers, known as TCSPs, that do not carry on business in the UK from incorporating UK companies, unless overseen by a UK anti-money laundering supervisor. The amendments would also require UK companies to establish a UK bank account and evidence this to Companies House. The money laundering regulations 2017 require TCSPs carrying on business in the UK to be fit and proper. We will also shortly formally establish the office for professional body anti-money laundering supervision, or OPBAS, which will work to ensure consistently high standards of anti-money laundering supervision by professional bodies, including TCSPs.

If there are factors that make it unclear whether a trust or company service provider could be regarded as acting by way of business in the UK—in which case it would fall within the jurisdiction of a UK anti-money laundering supervisor—HMRC considers on a case-by-case basis whether registration for supervision is necessary in order to combat attempted evasion of supervisory requirements. I therefore agree with the intention behind the amendment. However, given the pending establishment of the office for professional body anti-money laundering supervision, it is right that we establish this body first and then take proper account of its conclusions around TCSP supervision before taking further action in this space.

Additionally, the problem that the noble Baroness, Lady Kramer, and my noble friend Lord Naseby correctly identified ultimately results from trust or company service providers exploiting the comparative weakness of anti-money laundering supervision in certain overseas jurisdictions. In order to comprehensively address this, our emphasis should not be solely on expanding the scope of our anti-money laundering regime, particularly given the practical difficulties that would arise from UK supervisors seeking to exercise effective oversight over trust or company service providers established outside the UK and with no physical presence within the UK.

Such circumstances would present significant challenges for effective supervision, which typically includes measures such as on-site visits to firms that present higher risks of money laundering. The most effective way of addressing the problem which the proposers of the amendment have highlighted is through effective international co-ordination to drive up standards of supervision in jurisdictions with weaker anti-money laundering regimes than we have here in the UK. This is the agenda which we promote with international partners through the Financial Action Task Force, and it is this agenda which will offer a durable, long-term solution to the problem of weak overseas supervision of trust or company service providers.

Amendment 69J would amend the Companies Act 2006 to require UK companies to establish a UK bank account and evidence this to Companies House on an annual basis, or otherwise pay a fee or financial penalty. The wider purpose behind this part of the Companies Act is to provide a simple mechanism for companies to confirm that corporate information registered with Companies House as required under other obligations is accurate and up to date. The amendment would significantly change the purpose of the annual confirmation statement. As drafted, it would additionally require all UK companies to demonstrate annually that they hold a UK bank account; otherwise, they would have to pay a financial penalty. This would mark a significant increase in the reporting burden on the 3.9 million entities registered with Companies House, the majority of which are small, local businesses which would have to provide evidence of a UK bank account every year.

Amendment 69K would require company formation agents—defined for these purposes as including the UK registrar of companies at Companies House—to conduct customer due diligence. I appreciate my noble friend’s remarks about the consultation which has taken place, led by my noble friend Lord Ahmad, with colleagues and officials. I understand and sympathise with my noble friend’s intention; it is quite correct that we should take steps to avoid corporate vehicles being used for money laundering. However, I hope I can convince him that his amendment is not the best way to do that—although he prefaced his remarks by saying that it was a probing amendment. He will probably want to reflect on my remarks in response to it.

The amendment would represent a fundamental change in the principles under which the UK’s company law system has long operated. The UK registrar of companies has a statutory duty to incorporate and dissolve limited companies. This is carried out by Companies House, which registers company information and makes it available to the public. Companies House is not—unlike trust or company service providers, which are already supervised for anti-money laundering purposes under the money laundering regulations—a private-sector profit-making business. The registrar has no discretion in law to refuse or decline a request to incorporate a company. Companies House therefore cannot decline to establish a business relationship in the way that firms regulated for anti-money laundering purposes must when they cannot discharge their customer due diligence obligations. Because of the registrar’s statutory obligations, Companies House is not considered to be a company formation agent. If approved, the amendment would require further substantial revision to UK company law to allow Companies House to operate in the same fashion as company formation agents.

Approximately 600,000 new companies are registered each year at Companies House. The customer due diligence measures required under the money laundering regulations are significant, and are required to be applied by regulated firms on an ongoing, risk-sensitive basis to prevent illicit actors making use of the financial system. They are not intended—either by international standards, EU law or UK law—to be applied by a public body to all companies that are incorporated within the UK. Were these measures to be adopted, they would be a significant, unfunded burden upon Companies House and would fundamentally alter its relationship with the company formation process. They would also unnecessarily delay the process of company formation. The overwhelming majority of UK companies are set up for legitimate commercial purposes. Applying this amendment as drafted would not address or identify higher risks of money laundering or terrorist financing, but would instead impose an across-the-board administrative burden on Companies House and individual companies.

Lord Bates

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I do not accept that all we are doing is describing a problem. We are of course doing that, but we are also highlighting that we are about to formally establish the office for professional body anti-money laundering supervision, which will be responsible for supervising the very professional body of trust companies to which my noble friend was referring. We will have to keep an eye on and watch out for this issue, but we are certainly not complacent about it; we are aware of it and watching it carefully.

The Minister of State, Foreign and Commonwealth Office (Lord Ahmad of Wimbledon) (Con)

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My Lords, we are coming to the end—this is the last group. The noble Baroness has given a detailed exposition of the reasons behind the proposed amendments. I can say quite clearly that the Government do not agree with her position. She used phrases such as “the Government going it alone”. Throughout the Committee stage—and today with my noble friend—I have articulated the fact that with the FATF we have led the way. These are areas where Britain is ahead of the curve, not behind it. Perhaps I can answer some of her questions directly, and I will also look carefully at her contribution in Hansard.

Schedule 2 provides further detail on the scope of the anti-money laundering and counterterrorist financing regulations that can be made under Clause 41. Paragraphs 1 to 17 of this schedule confirm that regulations made under Clause 41 can cover the topics already addressed in the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

The noble Baroness quoted a few paragraphs. I will quote a few in return. For example, paragraph 4 confirms that regulations made under Clause 41, which she referred to, can require prescribed persons to take specified actions in relation to customers in prescribed circumstances.

The money laundering regulations 2017 currently give effect to the international standards set by the Financial Action Task Force and EU law, by including provisions of this type which require regulated firms to conduct varying levels of due diligence on their customers on a risk-sensitive basis. Further, and for example, paragraph 7, which I think the noble Baroness also mentioned, confirms that regulations under Clause 41 can confer supervisory functions—and corresponding powers—on supervisory authorities, such as the FCA. Other paragraphs within the schedule similarly clarify or supplement other aspects of regulations under Clause 41. For example, paragraph 18 provides that regulations made under Clause 41 cannot provide for criminal sentences that exceed the statutory maximums already established through the money laundering regulations 2017. Section 7 of the Proceeds of Crime Act 2002 provides for longer prison sentences of up to 14 years; these provisions should be seen in that wider context.

Finally, the noble Baroness mentioned paragraph 20 on a few occasions. This paragraph confirms that regulations made under Clause 41 may make provision corresponding or similar to the money laundering regulations. Sub-paragraph (2) also confirms that regulations made under Clause 41 can be used to amend or revoke the money laundering regulations. Indeed, this is exactly what was done when the money laundering regulations came in to replace the 2007 regulations. This is not something new that has been created.

Lord Ahmad of Wimbledon

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The noble Baroness says “everyone”. I know that she and the noble Baroness, Lady Bowles, made that point but I do not agree. She has made her point and I have listened; perhaps she should listen to the point that I am making in response.

As the noble Baroness says, Schedule 2 ignores the cascade of information. The power in Clause 41 will enable us to update and amend existing legislation that does this, as we did when the regulations were replaced this year, as I have already mentioned. This should not be viewed in isolation, which I fear is what the noble Baroness is doing. When new categories of risk manifest—the noble Baroness, Lady Bowles, talked about virtual currency exchanges—new legislation will be needed, and this power helps to fill that gap.

In sum, Schedule 2 sets out examples of the scope of the anti-money laundering and counterterrorist financing power contained in Clause 41, and it defines the limits of this power in relation to criminal penalties. The noble Baroness, Lady Bowles, ignores proportionality. However, this issue must be looked at in the wider context, not in isolation. Ministers are bound to use these powers proportionately, taking account of people’s human rights, and they are bound by Section 6 of the Human Rights Act 1998. I therefore contend that Schedule 2 should stand part of the Bill.

Perhaps I may briefly mention Amendment 71A, which I understand is related to the opposition of the noble Baronesses, Lady Kramer and Lady Bowles, to Schedule 2. To give an example, the reference in paragraph 2 of Schedule 2 to regulations, mentioned by the noble Baroness, being capable of requiring,

“prescribed persons to identify and assess risks relating to money laundering, terrorist financing and other threats to the integrity of the international financial system”,

corresponds with regulations 16 to 18 of the money laundering regulations 2017. These require the Government, supervisors and regulated firms to assess the risks of money laundering and terrorist financing at a national, sectoral and business level as appropriate so as to inform the nature and extent of any due diligence measures applied by regulated firms.

Perhaps I may give a further example. The reference to “prescribed persons” in paragraph 4 of Schedule 2, which again the noble Baroness quoted, corresponds to Part 3 of the money laundering regulations 2017. This establishes a framework giving effect to the standards of the Financial Action Task Force relating to simplified and enhanced customer due diligence, which I am sure we all welcome. Again, this is not about the UK going it alone; it is about how we are part and parcel of the FATF.

Therefore, the amendment would not remove the Government’s ability to designate categories of business as regulated for anti-money laundering purposes, or designate supervisors. These purposes are already permitted under Clause 41 and are referred to in Schedule 2.

There may also be a number of areas where we want to confer functions upon persons to assist with the implementation and enforcement of sanctions. I think that the noble Baroness, Lady Bowles, startled the doorkeepers when she quoted various examples. Captains of ships and harbour masters, for example, might need to exercise functions in order to comply with shipping sanctions. We might also need to confer functions to help enforce sanctions on border officials, agents of Her Majesty’s Revenue and Customs, or law enforcement agencies, such as the National Crime Agency.

I know the noble Baroness. She is well versed in the money laundering issue, and I respect that. That is why I said at the outset that I will listen again, or read, I should say—listening to Hansard may be stretching it a bit—her contribution very carefully and see if there are aspects that need further amplification and explanation from the Government. I hope that through my practical examples I have addressed some, if not all, of her concerns and that at this point, she will be minded to withdraw her amendment.

Lord Ahmad of Wimbledon

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I was merely giving a few illustrative examples. Like the noble Baroness mentioned, I think she and I would be the only ones here if we carried on in this respect. What I was doing was merely illustrating, but it is dealt with comprehensively.

Lord Ahmad of Wimbledon

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To clarify, I said that we need to look at this in the wider context. That is why I referred to the obligations that Ministers are bound by in the Human Rights Act. That is part of our statute, so we are obliged to follow that.

The Minister of State, Foreign and Commonwealth Office (Lord Ahmad of Wimbledon) (Con)

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My Lords, I thank the noble Lord, Lord Collins, and other noble Lords who spoke in this brief debate. In addition—to depart from my notes—for the first time I welcome the new Deputy Chairman of Committees to his position. It is certainly the first time for me stand at the Dispatch Box with him in his place.

From the outset I agree—I made this point clear in various debates at both Second Reading and in Committee—on the need for proper parliamentary oversight of sanctions regimes and I recognise the importance that noble Lords attach to this. That has been made very clear to me during Committee. Amendments 73 and 74 would require the draft affirmative procedure to be used for any non-UN sanctions regimes. As noble Lords know, the UK, through the European Union, imposes a number of sanctions regimes and measures that do not derive from the United Nations. These include, for example, sanctions against Russia over its illegal annexation of Crimea, and sanctions against the Assad regime in Syria.

In the future, it is likely—indeed, highly probable—that the UK would want to join its allies in imposing sanctions in circumstances where UN agreement is not possible. The noble Baroness, Lady Northover, talked about Ministers deciding. No, it would be Parliament deciding, requiring that these sanctions regimes come into effect only after the approval of both Houses of Parliament. In that way it would significantly undermine their effectiveness and make it harder for the UK to impose sanctions at the same time as international partners. Future targets of sanctions would be given forewarning of their designation, which would enable them to move their assets out of the UK and take other steps to nullify the effect of sanctions. This would undermine the credibility of sanctions as a foreign policy tool.

The Bill provides instead that the made-affirmative procedure, as the noble Lord, Lord Collins, acknowledged, should be used for non-UN sanctions to ensure that measures have immediate effect, while still requiring the approval of both Houses within 28 days. This strikes the right balance between enabling the Government to act decisively and ensuring accountability to Parliament.

Amendment 75 would require the draft affirmative procedure for any regulations that suspend, revoke or amend existing sanctions. As the Bill stands, regulations that suspend sanctions are subject to the negative procedure. This is to ensure that they can be used flexibly to recognise an improvement in behaviour while maintaining a credible threat that sanctions would immediately be re-imposed in the event of backsliding. This approach has been used to good effect as part of international diplomacy—for example, in the context of the Iran nuclear deal. If the Government were unable to suspend sanctions without waiting for the express approval of Parliament, it would reduce our ability to swiftly deploy these options in support of foreign policy goals.

In addition, as suspension of sanctions has the effect of reducing restrictions on individuals, we do not consider that it requires the higher level of scrutiny required to introduce such restrictions by imposing non-UN sanctions.

As regards regulations to revoke or amend sanctions, the Bill provides that this may be done using the same procedure as was used to create the regulations in the first place. Regimes containing UN-mandated sanctions would be revoked or amended by the negative procedure, and UK-autonomous sanctions by the made-affirmative procedure. I do not see a reason why the revocation or amendment of sanctions regimes should require greater scrutiny than their creation.

Amendment 75A intends to require the draft affirmative procedure for all sanctions regulations that contain enforcement provisions as set out in Clause 16. I acknowledge that we debated Clause 16 on the first day in Committee. I listened carefully to the concerns expressed about the creation of criminal offences through secondary legislation. We are looking at and reflecting on these concerns.

Let me may say a word or two about the process we currently follow as an EU member state and what we envisage following the enactment of the Bill. For each of the current UN and EU sanctions regimes we currently implement through EU law, the UK has created the relevant criminal penalties through statutory instruments made under the negative procedure. Similarly, we expect that all the sanctions regulations created under this Bill will include enforcement provisions of some kind. We envisage one regulation for each country, setting out the purpose of the sanctions, the specific measures being imposed, and the corresponding prohibitions and offences.

This approach allows a degree of nuance when determining penalties. For example, a breach of sanctions that results in nuclear material being made available to North Korea is obviously very serious, whereas failing to supply information to the relevant authority might attract a less severe penalty. Each regime is different, meaning different offences and penalties might be appropriate. This principle was accepted by the Delegated Powers and Regulatory Reform Committee.

Given that all sanctions regulations will include enforcement provisions, this amendment would require the use of the draft affirmative procedure in all cases, both UN and non-UN. For the reasons I have set out, we believe the correct approach is negative procedures for regulations containing UN sanctions and made-affirmative for UK-autonomous sanctions.

The use of the draft affirmative procedure for UN sanctions regulations would mean that we would routinely breach our obligation to implement the relevant asset freezes “without delay”. Noble Lords may be aware that Part 8 of the Policing and Crime Act 2017—approved by this House—contains specific powers designed to bridge the sometimes lengthy gap between the adoption of measures by the UN Security Council and the entry into force of the corresponding EU legal Acts. The amendment would undo our recent efforts to accelerate our domestic implementation of UN sanctions. Given my explanation to the Committee, I hope that the noble Lord, Lord Collins, is minded to withdraw his amendment.

Lord Ahmad of Wimbledon

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My Lords, I am very grateful to the noble Lord, Lord Collins, for again raising the issue of parliamentary oversight, and to all noble Lords who have spoken in this debate. I start with a confession: unlike the noble Baroness, Lady Bowles, I did not go to bed last night thinking about the Sanctions and Anti-Money Laundering Bill. I had a three year-old to contend with at that time, so I did not share that experience, nor did I dream about the Bill. Nevertheless, let me say at the outset that I accept the importance of scrutiny, as I have said, and before I come to the amendments in the name of the noble Lord, Lord Collins, I shall address the point just made by the noble Lord, Lord McNally, who spoke about his ministerial responsibilities when he was Minister for the Crown dependencies. His advice is something that I have continued to say to our overseas territories. I was his Whip at that time and I recall those conversations well. Equally, although the noble Lord, Lord Hain, is not in his place, in addressing these amendments I totally acknowledge the important points made in Committee about anti-money laundering and raised again in relation to the previous groups.

I shall address Amendments 75B, 76A and 76B together, as they have a single effect of changing the procedure for regulations made under Clause 41 of the Bill, which concerns anti-money laundering, to the so-called super-affirmative procedure. As we have discussed previously, the Government are committed to ensuring robust scrutiny of regulations made under the Bill. Any regulations made under this clause already have to be made under the draft affirmative procedure and require Parliament’s consent before they take effect. The sole exception to this is when regulations are made to add or remove countries from a list of high-risk jurisdictions in connection to which enhanced due diligence measures must be undertaken. Both the Financial Action Task Force and the European Union currently publish such lists. After the United Kingdom ceases to be a member of the EU, we will seek to align our list of high-risk jurisdictions with that published by the FATF. Part 3 of the Bill provides that regulations updating this list will be made through the made affirmative procedure. This will ensure effective parliamentary scrutiny of such changes, while ensuring that we can align promptly with international standards around which jurisdictions present high risks of money laundering or terrorist financing.

However, this amendment would go further. It seeks to impose the so-called super-affirmative procedure. This would require the Government to publish a draft statutory instrument, with a detailed explanation of its contents, and have due regard to any representations made within a 40-day or 60-day period, including any resolutions of Parliament, before seeking the consent of Parliament to the original or an amended version. I totally appreciate the need for parliamentary oversight, but I believe that this amendment is unnecessary. I assure noble Lords that the Government take parliamentary scrutiny seriously, reflected in the fact that regulations under this clause are already under the draft affirmative procedure.

The Bill will already increase levels of parliamentary scrutiny above and beyond the status quo. We—and other Governments, regardless of party—typically make anti-money laundering regulations through the negative procedure. The Labour Government did this when transposing the third EU money laundering directive through the Money Laundering Regulations 2007. A similar approach was taken earlier this year when we transposed the fourth EU money laundering directive through the money laundering regulations 2017. As noble Lords will be aware, the implementation of the 2017 regulations followed a 12-week policy consultation, followed by a four-week consultation on the draft regulations. Consultations of this type are usual practice for significant changes to regulatory regimes, such as those relating to anti-money laundering.

The Government always pay close attention to the views of parliamentarians, and of noble Lords in particular, on anti-money laundering. In last week’s debate on the Bill we talked about the anti-corruption strategy, which, as the noble Lord, Lord Collins, acknowledged, we published yesterday. In it we reaffirmed our commitment to establishing a public register of the beneficial ownership of overseas companies which own UK property. The Government will publish a draft Bill to this effect in this parliamentary Session, allowing an opportunity for pre-legislative scrutiny. The noble Lord, Lord Collins, asked about the strategy. I assure him that the Home Secretary, as a senior member of the Cabinet, will personally chair a new economic crime strategic board to drive forward action in this regard.

When changing the UK’s anti-money laundering framework after leaving the EU, the laying of regulations through the draft affirmative procedure will allow Parliament and the relevant committees sufficient time to look at the draft before it is debated or comes into effect. I also remind noble Lords that the regulations will be subject to an affirmative resolution in both Houses before they come into force. These measures, along with changes to the Government’s processes for bringing forward secondary legislation, will go further to addressing the issues that the noble Lord, Lord Tunnicliffe, raised earlier this year in relation to the process by which the money laundering regulations 2017 were brought into force.

On the point of broader consultation, I reassure noble Lords that the Government regularly speak to interested stakeholders when considering changes to policy or process. I am confident that this will remain the standard practice in matters of this kind, where the Government are dependent on banks, businesses and other stakeholders to ensure effective compliance. With that explanation, I hope the noble Lord is minded to withdraw his amendment.

Lord Ahmad of Wimbledon

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I assure the noble Lord that I am listening very carefully. I did the noble Baroness, Lady Kramer, an injustice when flicking through my notes. As noble Lords can probably hear, my voice is deeper. That is the result of telling your children to wrap up warmly on Wimbledon Common but not following that advice yourself. Nevertheless, I listened to the points made by the noble Lord and the noble Baroness, Lady Kramer, very carefully. I will consider carefully the points the noble Baroness has raised in Committee, particularly on having a framework, and I recognise the importance of the points raised by the noble Lord—I hear his strength of feeling. I will respond to these issues, as I have said. Some of these concerns have been raised in the Delegated Powers Committee’s report, which we will respond to shortly as well.

Lord Ahmad of Wimbledon

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My Lords, the Bill provides powers to be used in pursuit of the UK’s foreign policy and to ensure our national security. Under the UK’s constitutional settlement, these matters are reserved to Westminster. This Bill is accordingly one that is so reserved.

The amendment would, in effect, give the devolved Administrations the right to veto legislation related to UK foreign and security policy. This is contrary to the devolution settlement between Westminster and the devolved legislatures. Devolved legislatures do not have any right to veto measures where they relate to matters of foreign and security policy, including decisions of the UN Security Council. Any such amendments can arise only as the consequence of the sanctions themselves. Their primary purposes will always be a reserved matter.

I reassure noble Lords that during the preparation of the Bill the devolved Administrations were fully consulted on this point and they have not disagreed with our assessment that the Bill is reserved. The amendment would rewrite the devolution settlement, and I am sure that was not the intention behind it.

On the observation and implementation of international obligations within the competence of the devolved Administrations, while they have the power to legislate to implement measures required as a result of international obligations entered into by the UK, that does not provide them with any right to veto UK measures for the purposes of foreign and security policy, including measures negotiated and agreed by the UK in the UN. As I have already said, we have consulted extensively with the devolved Administrations on this very point and they have not disagreed with the Government’s assessment.

Lord Ahmad of Wimbledon

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My Lords, I draw noble Lords’ attention to the White Paper that preceded the Bill, in which we noted that the terrorist threat has evolved since the enactment in 2010 of the Terrorist Asset-Freezing etc Act—TAFA—which the noble Baroness, Lady Kramer, just referred to. We need to ensure that UK counterterrorist sanctions powers remain a useful tool for law enforcement and intelligence agencies. We therefore propose to use the Bill to establish a common approach to designations under counter- terrorism and country sanctions regimes, including the asset-freezing powers set out in Clause 2.

Lord Ahmad of Wimbledon

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I thank all noble Lords who have taken part in this important debate. As we have heard, the UK is responsible for the foreign affairs and security of both the Crown dependencies and overseas territories. That is the constitutional position. Our long-standing practice is that we do not generally legislate for these jurisdictions without their consent. This point was well made, in the context of the Crown dependencies, by the noble Lord, Lord Beith. Sanctions are tools of foreign policy, or are used to protect our national security. It is clear that the overseas territories and Crown dependencies must follow the UK Government’s foreign policy, including the sanctions we apply. I assure noble Lords that the Foreign Office has discussed this with the overseas territories and Crown dependencies and they also accept this central point of principle.

There are currently two ways in which sanctions are implemented by the overseas territories and Crown dependencies. The UK legislates directly for the majority of these jurisdictions through Orders in Council. Other jurisdictions legislate for themselves, but follow precisely the sanctions implemented in the UK. This model is well established and respects the rights of these jurisdictions.

The Bill is drafted in a way that reflects this reality. It is consistent with the current implementation model for UN and EU sanctions as well as measures under the Terrorist Asset-Freezing etc. Act 2010. It allows those jurisdictions that wish to follow UK sanctions through their own legislation to continue to do so. It also allows the UK to legislate directly for certain overseas territories as appropriate.

With regard to anti-money laundering laws, all the Crown dependencies, and each of the overseas territories with a significant financial centre, subscribe to the international standards for anti-money laundering and counterterrorist financing set by the Financial Action Task Force. They are assessed in their own right for compliance with these standards and have responsibility for implementing them within their own domestic frameworks.

The Government, of course, retain an interest in ensuring that the Crown dependencies and overseas territories have robust anti-money laundering regimes. As noble Lords are aware, and as I stated in a previous debate—this point was raised with the overseas territories at the recent joint ministerial council—we are already working very closely with those jurisdictions which do not already have national company beneficial ownership registers on establishing such registers or similarly effective mechanisms, and ensuring that information held on these can be shared in near real time with UK law enforcement authorities.

I remind noble Lords that we legislated earlier this year, through the Criminal Finances Act, to establish a statutory review of how these arrangements have been implemented. This will take place before 1 July 2019 and will inform any further debate about the effectiveness of measures relating to beneficial ownership in place in individual Crown dependencies or overseas territories. We should also recall that full implementation of these arrangements will put these jurisdictions ahead of the international standards in this area, and ahead of the approach taken by many G20 countries and individual states of the United States.

This demonstrates the benefits of the co-operative relationship that we have established with the Crown dependencies and overseas territories in combating money laundering and terrorist financing. These jurisdictions are self-governing and take their compliance with the FATF standards very seriously. The anti-money laundering regimes of each of the Crown dependencies have been evaluated since 2015, with overseas territories, including the Cayman Islands and the British Virgin Islands, both scheduled to be evaluated in the coming year. The commitment of these jurisdictions to international standards in this area is the best way to ensure that they continue to have robust anti-money laundering and counterterrorist financing regimes. As I said in the previous debate in Committee, this is a point we have once again emphasised in all our communications, and it was emphasised by my right honourable friend the Prime Minister in her recent meeting with the overseas territories. These are long-standing arrangements.

The noble Baroness and the noble Lord, Lord Collins, talked about progress and moving forward. We are moving forward positively and I have already talked about the results. In this regard, I do not believe that these amendments are needed. I am sure noble Lords would not wish to jeopardise the achievements that we have seen thus far, which have come from direct co-operation and working with these jurisdictions, and the progress that has already been made. With that, I ask the noble Lord to withdraw his amendment.

Lord Ahmad of Wimbledon

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My Lords, I do not think I apologised in any sense, and nor should we—I agree with the noble Lord. We are leading the way and we are proud of that. We have to put this into context. The noble Lord, Lord Beith, talked about the important relationship with Crown dependencies. I have talked about the relationship with our overseas territories. They legislate in many areas. The relationship does not just work; the strength of relationship allows us to make the progress we are making. Britain is leading the way and our overseas territories and Crown dependencies have shown substantial progress in this respect. Perhaps other G20 countries have a lot of catching up to do. We are leading in this respect.

Lord Ahmad of Wimbledon

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My Lords, I thank all noble Lords—indeed, noble and learned Lords—who have taken part in the debate. I acknowledge the points that have been raised on this amendment.

Turning to Amendment 85, it will not surprise the noble Lord that we do not believe that there should be a sunset clause in the Bill. Whatever the nature of our future relationship with the EU—I am sure that the noble Lord, Lord Collins, meant when, not if, we leave the EU; he may choose to clarify otherwise—the powers in the Bill will be necessary. We will need them to comply with UN obligations and we will need autonomous powers to be able to create, amend or lift sanctions to address a wide variety of national security and foreign policy challenges. It is true that the design and scope of sanctions has changed over the years, but we need the power to implement sanctions as part of our diplomatic toolkit, which will not go away.

I also acknowledge and appreciate the point of the noble and learned Lord, Lord Falconer, that all noble Lords, irrespective of the approach and mechanisms, agree with the principle that this Bill is required. I also acknowledge, as I have done in Committee, the important role of this House in the scrutiny of legislation. In the responses I have given on which we are not agreed, I hope it is clear that there are areas that the Government will reflect on and return to. In that respect, I hope to meet with noble Lords in the intervening period before Report to see how we can bridge some of the challenges and differences that have been raised.

Further, I assure noble Lords that we are committed as a Government to getting this legislation right. The Bill is designed to ensure that we can continue to use sanctions appropriately—I know that is a principle accepted by all noble Lords—in response to future global developments and challenges, and to provide that the right safeguards are in place for the use of those powers, which I also respect. I am immensely grateful for the active contributions of noble Lords in helping us to do this.

The Minister of State, Foreign and Commonwealth Office (Lord Ahmad of Wimbledon) (Con)

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My Lords, first, before I go any further, as I said in Committee on the Bill—and I shall come on to the specific question from my noble friend in a moment—I am genuinely grateful for the constructive engagement that we have had on all sides of the House on this very important Bill. The set of government amendments that I tabled last week reflects proposals through discussions and meetings that we have had with Peers and representatives from across the House, from the Opposition Benches and, indeed, from the Cross-Bench Peers. I am also pleased that the noble and learned Lord, Lord Judge, and the noble Lord, Lord Pannick, also felt able, after our constructive discussions, to put their names to some of the government amendments, including the one that I shall present in a moment. It also reflects very strongly that, at a time of great challenge internationally, we reflect the finest traditions of your Lordships’ House, in that we are able to practically demonstrate co-operation across the House in ways to improve legislation.

I fully recognise that sanctions involve significant restrictions and should not be imposed lightly. The standard to be applied by a Minister when introducing sanctions regulations is therefore one of the most important parts of this Bill. I assure noble Lords that I have listened very carefully to the range of views on exactly what that standard should be, with a view to finding the right balance between the Government’s ability to impose sanctions when the relevant conditions are met and the need to guard against excessive use of these powers. I have therefore tabled Amendment 9, which introduces three additional requirements when a Minister is considering making sanctions regulations for a purpose beyond compliance with a UN or international obligation. First, the Minister must have good reasons to pursue that purpose; secondly, the Minister must be satisfied that the imposition of sanctions is a “reasonable course of action” for that purpose; and finally, when making regulations, the Minister must lay a report to Parliament explaining how the above two tests have been met.

These requirements are picked up again in Amendment 6, which is a technical drafting point consequential on Amendment 9. The requirement for the Minister to lay a written report before Parliament when making sanctions regulations reflects Amendment 7, proposed by the noble Lord, Lord Collins, and I am grateful for his suggestion. The principle that unites us here is that sanctions need to form part of a wider political strategy that is properly articulated to Parliament and the wider public. Amendment 9 aims to provide the House with the requested reassurance that sanctions will not be imposed lightly, while at the same time ensuring that the UK can continue to play an active and constructive role in international affairs. On that basis, I hope that noble Lords will be persuaded not to press Amendments 1 and 7.

Amendments 2 to 5 refer to the purposes for which sanctions regulations may be created. The current list of purposes in the Bill is designed to ensure that we can continue to implement sanctions across the full range of purposes currently pursued by EU sanctions. The EU can adopt sanctions for any of the purposes of its common foreign and security policy. The reference to “foreign policy objectives” in subsection (2) seeks to maintain this same scope for the UK when we have left the EU.

In Amendment 2, the noble Baronesses, Lady Northover and Lady Sheehan, propose to remove the ability to impose sanctions for the purpose of advancing a UK foreign policy objective. The amendment would restrict the flexibility of future UK Governments, potentially preventing them from using sanctions, and putting the UK out of step with our international partners, including the European Union. That was a point made well by my noble friend Lord Howell—and again, I appreciate his international experience in this regard. As I have said previously, and noble Lords have acknowledged, sanctions are at their best when they are acting in unison and in co-operation and co-ordination with partners.

Lord Ahmad of Wimbledon

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My Lords, the Government are well aware of the concerns in this House about the humanitarian impact of sanctions, and we are committed to finding constructive solutions through close engagement with NGOs and other humanitarian actors. Indeed, I would like to thank the noble Lord, Lord Collins, and the noble Baroness, Lady Northover, for the engagement we have had directly with representatives from NGOs between the Committee and Report stages.

As noble Lords will be aware, in 2016 the UK secured amendments to the EU’s Syria sanctions regime to provide a specific exemption for fuel purchases by humanitarian organisations. This assisted such organisations to carry out their operations in Syria while ensuring that they were still sanctions compliant. Provisions in the Bill as it is currently drafted enable the Government to include humanitarian exemptions in sanctions regulations and to issue licences for legitimate activity that might otherwise be prohibited by sanctions. Currently, EU case law limits our ability to issue so-called general licences for the humanitarian sector, but, as I have said before, the Bill has been drafted to enable us to issue these licences and thus provide greater flexibility. We will also publish additional guidance and ensure, through continued engagement with the humanitarian sector, that any additional sector-specific guidance addresses its concerns.

The process of issuing licences is best handled administratively on a case-by-case basis to respond efficiently to fast-moving events. That means we are cautious about putting too much detail in the Bill. However, I can assure noble Lords that the Government make every effort to prioritise urgent and humanitarian licence application cases where there is a risk of harm or a threat to life, and we will continue to do so going forward. Once sanctions are in place, the Government will remain alert to any unintended consequences for humanitarian operations and make adjustments where appropriate, as we did for Syria.

I turn briefly to the amendments in this group. Amendment 8, proposed by the noble Lord, Lord Collins, would require the Government to publish a detailed, stand-alone humanitarian impact assessment both in advance of sanctions regulations being made and at subsequent points thereafter. There is no precedent for this approach in the EU or among other western countries with national sanctions legislation. It could hamper the UK’s ability to deploy sanctions quickly and make multilateral co-ordination more challenging. It may also have the unfortunate effect of facilitating sanctions avoidance—if we give advance warning that we are considering sanctions, we create the ability for sanctions targets to remove their assets from the UK before sanctions bite. That having been said, I can assure noble Lords that the report that the Government would lay before Parliament when making or amending sanctions regulations, and the guidance issued in respect of those regulations, would explain the approach to mitigating humanitarian impacts, including through exemptions and licensing, which was a concern expressed by NGOs and noble Lords.

Amendment 39 proposes a system whereby licences from other jurisdictions would be recognised in the UK where more than one jurisdiction is involved. While I have sympathy with the desire to simplify compliance procedures for those operating across borders, I am afraid that this amendment poses real difficulties. Licences issued by our international partners may not necessarily align with UK policy objectives or work within UK systems. This is simply because other licensing authorities will not need to consider UK policy, UK law or practicalities before they issue such a licence.

Further, the amendment risks creating legal uncertainty. It is not clear what other jurisdictions may be within scope or which jurisdiction would enforce the sanctions when a licence is breached. Nor is it clear whether a licence issued by an overseas jurisdiction would be recognised by financial and other institutions in the UK without some form of validation by the UK licensing authority. The Government believe that the UK authorities remain best placed to interpret UK sanctions regulations and to determine when and in what circumstances activities or transactions may be licensed.

Amendment 40 calls for the Government to establish a fast-track process for dealing with requests for exceptions and licences for humanitarian purposes. As I have just said, the Government make every effort to prioritise urgent and humanitarian licence application cases and will continue to do so. However, establishing a specific fast-track process could have unwelcome effects in relation to other types of licences. Some other categories of licences, such as those aimed at meeting “basic needs”, may not be strictly humanitarian by definition but may have very serious consequences if not prioritised. The amendment could result in certain humanitarian applications that are not urgent being prioritised over non-humanitarian applications that do require an urgent response.

Amendment 41 would require a consultation to be undertaken on an overarching framework for exceptions and licences. As noble Lords will know, the White Paper consultation that preceded this Bill sought specific feedback on exceptions and licences, and we have considered all the comments very carefully. We will publish an initial framework for exceptions and licences in the near future and will continue to consult interested parties before the Bill enters into force. This will inform the approach that we take to exemptions and licensing provisions in the regulations that set up each individual sanctions regime. I am not convinced of the need to undertake a further consultation after the commencement of the Bill. By then, the relevant sanctions regulations, with the appropriate exceptions and licensing provisions, will have already been made and scrutinised by Parliament.

Lord Ahmad of Wimbledon

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My Lords, once again I thank the noble and learned Lord, Lord Judge, and the noble Lord, Lord Pannick, for their constructive engagement on understanding and then coming forward with appropriate amendments in this regard.

The group of amendments in front of us focuses upon the description of persons who can be subject to sanctions by way of sectoral sanctions and individual designations. Before I come to the main thrust of the amendments—and I use this term advisedly, notwithstanding the contribution of the noble Baroness, Lady Northover—there are two technical government amendments to Clause 2. These amendments will ensure that sanctions regulations can prevent the procurement of funds or economic resources, as well as receiving such funds or economic resources. This will help prevent sanctions being evaded and thus improve their overall effectiveness, which I know is the intent of all noble Lords in respect of the Bill. I hope that this small and technical change will be deemed non-controversial, and would be grateful if your Lordships would support the amendments and enable us to further enhance the Bill’s provisions.

I turn to the amendments tabled by noble Lords, which seek to stop the Government from being able to impose sanctions on persons “connected with” a prescribed country. As I have assured your Lordships during previous stages of the Bill, while I understand the concerns in this respect, I believe the Government have acted to address them where we can and there are good reasons why these provisions are needed. I totally understand the concern raised by the noble and learned Lord, Lord Judge, in Committee that a Minister would be able to define the connection to a country by regulations, and do so in ways that were unacceptable. I assure him that there are safeguards to prevent this power being misused.

As set out in the Bill, sanctions measures can be made in line only with the purposes for regulations set out in Clause 1. The definition of “connected with” must therefore be appropriate for the pursuit of the said purpose. It would not be reasonable or appropriate to create sanctions measures relating to persons that have only a very loose connection with a sanctioned country.

The noble and learned Lord, Lord Judge, said in Committee that it surely makes sense for the Government to define connection now, in primary legislation, rather than at some point in the future. We have considered this suggestion carefully and looked at a couple of types of possible approaches in this respect. The first approach would be to list the connections that sanctions currently impose, but this poses two problems. First, the list would be very long, as there are a great deal of different types of connections. Secondly, an exclusive list would not give us the flexibility that we will need in future when new types of connections need to be made. It is worth remembering that the context of international policy is changing rapidly. This is perhaps best typified by the sanctions regime on North Korea, which has changed three times in the last six months alone. We do not know how much further we will be obliged to act on North Korea; unpredictable world events could make it necessary to have new regimes with measures of increasing complexity.

We also considered whether it might be possible to restrict the power by making sure that certain types of loose connections could not be specified. Again, the vast number and shifting type of these connections make drafting such provisions prohibitively difficult. The situation also changes in each case. I agree with the noble and learned Lord, Lord Judge, that a connection based on familial connection might be very loose and unjustifiable in many circumstances, but in the context of misappropriated wealth spread through the close family of a former head of state, such a connection might be required. I therefore request noble Lords not to press their amendments in relation to connected persons for the reasons that I have given.

On designation by description, I have listened closely to the concerns of noble Lords who spoke in Committee, including those about the practical difficulty that this would present for banks and others responsible for complying with such sanctions. I noted in Committee that it is important for the Government to have the power to designate by description in some circumstances, such as where we do not have the names of members of a terrorist group. I have accordingly sought to strike a balance here by placing restrictions on the use of this power to ensure that it can be used only in limited circumstances.

Based on the debate in Committee, I have tabled government Amendments 33 to 35 to ensure that the use of this power is tightly constrained, as the noble Lord, Lord Pannick, acknowledged. With this amendment in place, the Government must impose sanctions on an individual by name if we have access to their name, as the power to designate by description cannot be used when we do. The description must also be sufficiently detailed that a person can apply it to themselves and decide whether they are subject to sanctions. For example, if we wished to sanction all Ministers of a certain state, we would designate as many as possible by name and would then be able to designate any others of unknown name by the description “Ministers of that state”. A Minister of that state will clearly know that the sanction applies to them, and UK persons, such as banks, will be able to ascertain the position in relation to their own business dealings. This enshrines the Government’s commitment to use this power only when it is not practicable to designate by name, thus easing the compliance burden on industry. I thank the noble Lord, Lord Pannick, for his acknowledgement of the government amendments in this respect.

The noble Lord, Lord Hain, raised a specific issue relating to the work of Hogan Lovells for the South African Revenue Service. The noble Lord has raised various matters during the passage of the Bill, and I am grateful to him for bringing this information to our attention. I assure the noble Lord that, on this matter and the matters he has raised previously, the Government continue to be concerned about the allegations of corruption in South Africa. I further assure him that the British high commission continues to monitor this issue very closely. As the noble Lord said, he has already brought this issue to the attention of the Solicitors Regulation Authority and awaits its reply. Once he has heard from it on that subject, any correspondence could be copied to the Government, although I am sure we will already be informed. It has been helpful to have his interventions in this respect.

We have listened very carefully to the various elements and concerns raised in Committee. I once again thank noble Lords for their engagement in reaching the position that we have on these amendments. As I said at the start of Report, and during Committee and Second Reading, the guiding principle that I have adopted in this regard is that I believe very passionately that legislation is not just made more effective and more practical but enhanced in your Lordships’ House. Through the co-operation we have had on this group of amendments, we have seen that level of constructive engagement.

On the basis of that explanation, I hope I have been able to persuade all noble Lords to support the government amendments and would ask them to withdraw or not move their amendments.