(2 years, 3 months ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts
Madam Deputy Speaker (Dame Rosie Winterton)
With the permission of the House, motions 3 to 6 will be debated together. I will call the Minister to move motion 3 and to speak to motions 3 to 6. At the end of the debate, I will put the Question on motion 3 and ask the Minister to move motions 4 to 6.
The Minister of State, Foreign, Commonwealth and Development Office (Jesse Norman)
I beg to move,
That the Russia (Sanctions) (EU Exit) (Amendment) (No. 11) Regulations 2022 (SI, 2022, No. 792), a copy of which was laid before this House on 14 July, be approved.
Madam Deputy Speaker
With this we shall consider the following motions:
That the Russia (Sanctions) (EU Exit) (Amendment) (No. 12) Regulations 2022 (SI, 2022, No. 801), dated 14 July 2022, a copy of which was laid before this House on 18 July, be approved.
That the Russia (Sanctions) (EU Exit) (Amendment) (No. 13) Regulations 2022 (SI, 2022, No. 814), dated 14 July 2022, a copy of which was laid before this House on 18 July, be approved.
That the Russia (Sanctions) (EU Exit) (Amendment) (No. 14) Regulations 2022 (SI, 2022, No. 850), dated 18 July 2022, a copy of which was laid before this House on 20 July, be approved.
Jesse Norman
The instruments before us were laid between 14 and 20 July under powers provided by the Sanctions and Anti-Money Laundering Act 2018. They make amendments to the Russia (Sanctions) (EU Exit) Regulations 2019.
As the last debate demonstrated, this House stands absolutely resolute in its opposition to the illegal and aggressive invasion of Ukraine by Russia. In co-ordination with our allies, the United Kingdom continues to play a leading role in introducing the largest and most severe economic sanctions package that Russia has ever faced. The measures that we are debating are designed to isolate Russia’s economy still further and target key industries that support President Putin’s illegal war in Ukraine. The measures are somewhat technical, so I hope that the House will forgive me if I go through them in a little detail.
The No. 11 regulations ban the export of goods and technologies related to the defence, security and maritime sectors. They also prohibit the export of jet fuel, maritime goods and technologies, certain energy-related goods, and sterling and European Union banknotes. In addition, they ban the import of goods such as fertiliser, metals, chemicals and wood, depriving Russia of a key export market. Together, those markets were worth some £585 million last year.
The Joint Committee on Statutory Instruments concluded that three provisions in the Russia (Sanctions) (EU Exit) (Amendment) (No. 10) Regulations 2022 would not be inside the powers conferred by the Sanctions Act. His Majesty’s Government have resolved that by revoking the 10th amendment and replacing it with the 11th. I thank the Joint Committee on Statutory Instruments for its continued engagement as we introduce further secondary legislation rapidly in response to this abhorrent war.
The No. 12 regulations place fresh restrictions on investments and services in Russia. They are designed to hit revenue streams of critical important to the Russian economy. The new measures prohibit persons from being involved directly or indirectly in acquiring land and entities with a place of business in Russia, in establishing joint ventures with persons and entities connected with Russia, and in opening representative offices or establishing branches or subsidiaries in Russia. The measures also restrict the provision of investment services related to these activities. There are some exceptions to the provisions to prevent overlap with existing regulations as well as licensing and enforcement powers.
Bob Seely (Isle of Wight) (Con)
My right hon. Friend is talking about services. Will His Majesty’s Government take further action to prevent Russian state entities such as Gazprom and VTB Bank, and the legal firms that support them in this country, from continuing to use the UK courts? I have written to the Secretary of State for Justice about the matter, because there is a long list of cases that the Russian state and Russian proxy entities are taking in the UK courts, and that money ends up back in the coffers of the Russian Government.
Jesse Norman
I am extremely grateful to my hon. Friend for his question, and the House recognises his great expertise in this area. He will understand that I am not going to comment on the future sanctions policy of this Government, but he can take it as read that we are looking extremely closely not just at ways of further extending this escalating programme of sanctions that has elaborated itself over the last few months, but at closing some of the loopholes. If he wishes, I will make certain that my officials have sight of the letter he has written and will write to him on the matter specifically.
I turn to the No. 13 regulations, which widen the definition of scope of activities for which a person can be designated. His Majesty’s Government have expanded the definition of destabilising, undermining or threatening Ukraine and supporting or obtaining a benefit from the Russian regime. This brings into scope many individuals and entities in the Russian Government, its agencies and its armed forces. The regulations make minor amendments to the definitions of being involved in, obtaining a benefit from or supporting the Government of Russia. These have the effect of broadening the interpretation of being associated with a designated person to include immediate family members who may, and often do, hold assets on their behalf. The regulations also provide an exception from trade sanctions for humanitarian assistance actively delivered in non-Government controlled areas of the Donetsk and Luhansk oblasts. Finally, they expand the definition of ownership in relation to ships and aircraft, and they correct errors and omissions in previous regulations.
Kevin Hollinrake (Thirsk and Malton) (Con)
I welcome my right hon. Friend to his place. He mentions family members who are associated with sanctioned individuals. He will probably be aware of, but unable to comment on, the case of Alisher Usmanov, who is sanctioned by the UK, the EU and the US but has passed on some of his wealth—£2.1 billion, I think—to his sister, who is outside the scope of our current sanctions regimes. Will my right hon. Friend’s tightening up of sanctions, which I welcome, mean that we can go after people such as Alisher Usmanov’s sister and the assets she holds on his behalf?
Jesse Norman
As my hon. Friend has brilliantly anticipated, I am not in a position to comment on any individual case, but I can say that these powers of designation as to travel bans and asset freezes now have a significantly wider scope to include family members. I take the point he has made in relation to that specific individual—I am sure my officials will have noted it—and I thank him for his intervention.
The fourth and final set of regulations are the No. 14 regulations, which introduce further trade sanctions. The regulations prohibit the export, supply, delivery and making available of a comprehensive list of critical goods, energy-related goods and related ancillary services—services that Russia had relied on G7 nations to supply. These goods had a combined market value to Russia of £365 million last year. The instrument also bans the import, acquisition, supply and delivery of Russian coal; that measure entered into force on 10 August.
That is on top of prohibitions on the import, acquisition, supply and delivery of Russian oil, which will come into force before the end of this year; and on the import of gold that directly or indirectly originates in Russia, which entered into force on 21 July. Ancillary products and services on coal, oil and gold exported from Russia are also prohibited. A further ban covers the provision of business and management consulting services, public relations and accounting services to persons connected with Russia.
These hard-hitting new measures continue the Government’s project of ratcheting up the pressure on Russia. We will continue to do this in close concert with our allies until Putin ends his illegal invasion of Ukraine. I commend these regulations to the House.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
I welcome the new Minister to his place. I look forward to working with him on sanctions, as I have with his many predecessors. I welcome the opportunity to discuss sanctions on Russia again and I am pleased to see such a wide range of issues being covered in today’s measures, which are mainly amendments.
My first question is why so many amendments are needed. The Minister has answered some of that, as do the explanatory notes, but—I do not want this to be seen as a criticism of the officials, who work incredibly hard to put such regulations together—an extraordinary number of errors and omissions appear to have been made, as he just confirmed. That underlines the point that I have made in many previous sanctions debates about the resourcing and assistance that is being given to critical units in the Foreign, Commonwealth and Development Office and elsewhere, and whether that is enough. I know that it has been expanded and there are more officials, but we need to have the support in the system to ensure that we get such things right first time. Putin and his cronies will be—we know that they are—seeking every single loophole, omission and error to try to circumvent them. We must not allow them to do that. I will come to further comments about that in due course; I hope that the Minister will explain that in his closing remarks.
Obviously, in the last few weeks, we have seen remarkable progress by Ukrainian forces in the east and south of the country in an incredible counter-offensive. Indeed, Ukrainians have shown extraordinary courage, strength and ingenuity in the face of Russian aggression. Those efforts, thanks to our support and that of others, are thankfully bearing fruit. As we enter a new phase of the conflict, it is more important than ever to show our firm resolve to stand behind Ukraine in every way, not only in the military domain but politically, economically and diplomatically as well as, crucially, in the consequences that Putin and his cronies must face for their illegal and barbarous actions.
As I mentioned in the previous debate, I have just returned from a trip to Kyiv and the surrounding area. I refer again to my impending entry in the Register of Members’ Financial Interests as a guest of Yalta European Strategy. I was deeply moved by the spirit, courage and bravery shown by not only President Zelensky but all the Ministers, officials, Members of Parliament, members of civil society and Ukrainian citizens. I returned with a deep sense of urgency, a personal commitment and a solemn duty to do everything that we can to end President Putin’s egregious display of aggression, violence and cruelty, which we have sadly seen so brutally in the scenes from Izyum—the mass graves, the torture and the stories coming out of there. We heard in the previous debate about sexual violence. On our visit, we heard some truly horrific things and we saw with our own eyes the destruction of civilian infrastructure.
The former Minister, now Foreign Secretary, informed me in May that 150 individuals were working full time in the sanctions taskforce in the FCDO and that the Office of Financial Sanctions Implementation had at least doubled in size, but I have tried to get further clarity about the resourcing going in. I asked about that in the last two debates and I was promised a letter by the Minister. I have not had that and I hope that the new Minister can chase that up and get some answers. We support these sanctions and the measures, but it is only right that the Opposition can scrutinise and understand whether the Government are properly resourcing them. What extra financial resources have been given to those bodies? What conversations has the Minister had with the National Crime Agency to ensure the proper enforcement against those who breach the sanctions regime?
In the previous debate, I asked about the potential circumvention of sanctions. Numerous allegations have been put to me about a range of industries, such as the steel industry—we have discussed measures on those sorts of products and there are measures in these regulations—where Russia is attempting to use third countries potentially to export steel and other key products, some of which are ending up in the UK and countries across the west that are imposing sanctions. That is an absurd situation and I hope the Minister can provide more information about that and about what we are doing to close the loopholes that Russia is attempting to use. We can have the toughest regime on paper, but if Russia is in practice finding ways around it, that is not acceptable.
I was struck on the visit to Kyiv by the importance of ratcheting up the sanctions. Indeed, many of the measures proposed in these regulations are about expanding the sanctions, and that is a good thing. However, it is crucial that we work with some of the best minds around the world to look at other areas where we can bring pressure to bear. Indeed, McFaul, the former US ambassador to Russia, and others, including from the Ukrainian Government, have a working group looking at additional ways in which they can expand these sanctions and make them tougher. I was concerned to be told that there is apparently no UK representative on that group. Can the Minister clarify why that is the case? We need to have somebody on that group, because we need to be leading, with the United States and others, including our friends and allies in the European Union, to ensure that we have the toughest, broadest and deepest regime, and that we think about innovative ways in which we can really hit those people around Putin who are providing the backing financially and otherwise for his actions in Ukraine.
In the detail of the sanctions packages being announced today there are many welcome things—prohibiting the import of oil, coal and gold and the export to Russia of maritime equipment, oil refining technology, jet fuel and other materials. Those are absolutely critical and the Labour party obviously welcomes the Government’s movement on them. However, one area that did raise some concern for me was the prohibition of the export of goods which have
“potential use for internal oppression”.
Obviously, it is a good thing that that is included in this package, but I have to ask why there was any possibility that UK public or private bodies were ever providing Russia with materials that might be used for internal oppression in the first place. I hope that the Minister can explain to us what kind of exports have been going on. This matters, because this war did not start just seven months ago; it started in 2014 or far before that. We have known of Putin’s internal repression against democratic opposition and others for years, so I seriously hope that we have not been providing support to him that could have been used to quash internal opposition in Russia.
The explanatory note refers to micro-organisms and toxins. Again, I want to understand what assessment has been made of the volumes of any such materials that have made their way from the UK to Russia, and why that change had not been brought to the House sooner. These are very serious matters and—particularly given Russia’s record of using weapons of mass destruction, including in this country—I seriously hope that no UK company has been exporting any materials that have got to Russia in this way. The designations in SI No. 792 are welcome, but I come back to the issue of swiftness and responsiveness, and why—seven months into this phase of the war—we are only debating such a designation today.
I ask the Minister, and I have asked this in all the previous debates on sanctions, whether he has any further specific proposals not only to freeze assets, but to confiscate and sequester those assets—not least because of the huge costs involved in continuing to support Ukraine, which we absolutely must do, but also because of the clear costs there will be in reconstruction and making sure that Ukraine can develop and survive after this war is over. Indeed, this request was made to us by many of those in the Ukrainian Government, other officials and Members of Parliament from many parties while we were in Kyiv just weeks ago. They want to see that done. It has been done in a number of countries, and other countries are looking at how they can sequester and use assets. I know that it is not straightforward and that it might require further legislative change, but can the Minister provide some clarification?
We have had the issue raised of travel by individuals designated under these sanctions regimes, whether the issuing of tourist visas to Russians should be allowed—I certainly do not think it should be—and of designating Putin’s United Russia party as a state sponsor of terrorism or as a terrorist organisation, just as we have Hezbollah, Hamas and other parties in other locations that are sponsoring terrible and heinous acts of aggression and crimes against humanity. What are the Government’s thoughts on those proposals?
The scope of these sanctions measures is of course wide, and I think it shows the resolve we have to tackle those who are backing Putin, but we must deal with the wider ecosystem around those who are backing him. I know that the Economic Crime and Corporate Transparency Bill has been published today, but we have to tackle the whole ecosystem of the London laundromat and all those individuals who have been backing and sustaining his regime. I certainly hope that in debates to come we will see tough action taken in that regard.
Overall, Labour wholeheartedly supports the measures outlined today, and I hope the Minister will answer some of my detailed questions. Our sanctions regime is integral to Britain’s role in supporting Ukraine and holding Putin’s regime accountable for the acts of violence that it continues to perpetrate against civilians across Ukraine. This winter, the people of Ukraine will weather the even more difficult storm of the brutal, egregious and unconscionable war of aggression that they face, and we must back their bravery by being brave and bold with sanctions, and by not providing succour for any of those who are supporting such aggression.
Mark Eastwood (Dewsbury) (Con)
I join my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) in welcoming the Minister to his place, and I also find myself in the strange position of thanking the shadow Minister for raising the issue of loopholes. This is an issue specific to my constituency, and relates to a business that has potentially been affected by such loopholes. I speak on behalf of JD UK/Alunet Systems, but I clarify that I will be supporting the sanctions and will not press the House to a Division—I am sure there will be a sigh of relief all round.
Alunet Systems is a group of companies based in Dewsbury that sells a wide variety of metal-based products, including aluminium, steel, and iron-based garage doors. Before the invasion its revenue was £30 million per annum, but that has now reduced to £20 million. It employed 100 people, but that has now reduced to 70. That could be down to a potential loophole in the Russia (Sanctions) (EU Exit) (Amendment) (No. 11) Regulations 2022, which should be on an equal level to the amendments to schedule 2B under the Republic of Belarus (Sanctions) (EU Exit) (Amendment) Regulations 2022—I am not trying to confuse Members.
The company’s previous Belarusian supplier, Alutech, which supplied aluminium and sectional garage doors, has found a potential loophole to avoid the impact of sanctions on the import of products containing steel and iron from Belarus and Russia. The Belarusian company entered the UK market directly after JD UK ceased trading with it. Belarusians have claimed about 30% of JD UK’s iron and steel customers, and about 15% of its aluminium customers through price dumping. That is a loss of about £10 million in revenue from a British business based in my constituency.
Amendments to schedule 2B under the Republic of Belarus (Sanctions) (EU Exit) (Amendment) Regulations 2022 banned the import of iron and steel consigned from or originating in Belarus, and they applied to all commodity codes starting 72 or 73. Chapter 7 of the Russia (Sanctions) (EU Exit) (Amendment) (No. 11) Regulations 2022 covers iron and steel imports and acquisitions under schedule 3B. However, that does not seem to extend to the same range as stated for Belarus, and includes only some elements of the 72 and 73 codes, but not all. One of JD UK’s products—sectional garage doors—contains steel and has a commodity code starting 7308. It is banned under the Belarus amendment, yet is still available to import if the components are Russian. I am sure the Minister would agree that the difference in sanctioned goods has a significant potential to threaten JD UK’s business sales, and encourages Alutech to export via Russian subsidiaries instead of Belarus. That is an unintended consequence of the sanctions.
Currently, no sanctions are in place regarding exports of aluminium from Belarus. Again, the Belarusian company contacted several of my constituent’s major customers, offering to supply them aluminium profile directly from its Belarus factory. The lack of sanctions and/or high enough tariffs on aluminium exports could allow the Belarusians to threaten my constituent’s business sales in the UK. The current 35% tariff regime for aluminium products has made it unviable for my constituent to continue conducting business with Belarus. However, Alutech in Belarus is diverting material through Russia and continuing to sell at very attractive prices, making more profit than selling through my constituent. Alunet suggests that, unless the loophole closes, its revenue from aluminium is likely to fall by another £10 million, which would make the business unviable. It also suggests—I would like the Minister to consider this—that the tariff against Russia and Belarus be increased to 100% to make it more consistent.
I have some questions for the Minister, which I hope he can respond to. First, how will the Government make the position unviable for Russian and Belarussian companies that exploit these anomalies, loopholes or whatever we want to call them? To support British businesses, please will he clarify why there are such differences between the Belarusian and Russian sanctions, and also outline what will be done to protect our UK markets? In summary, will he reassure Alunet that he will take these matters into consideration so that we can protect a Dewsbury business that employs so many people in my constituency?
Alyn Smith (Stirling) (SNP)
I always remember that nobody criticises a speech for being too short, but I think I can excel myself today on this one.
We support these measures and have called for many of them ourselves. If they came to a vote, which I trust they will not, we would support three and abstain on the fourth. I was very glad that the Minister outlined the detail. To make a couple of general comments, we warmly welcome the expansion of the definition of “associated with”, which has been abused. We are dealing with some of the slipperiest and best-advised people, and this is an evolving situation, so we are glad to see that evolve, too. We are also glad to see the further restriction on land interests, which is of key relevance to Scotland. The tightening of energy sanctions is also significant for us, given our energy footprint. We warmly welcome the tightening of those sanctions.
I would, though, also raise my concern, as a more general point, about the use of third countries and brokers in, effectively, laundering Russian energy assets, which we have seen. We have seen reports of India in particular refining various products and their being sold on, so that needs further attention. I would also welcome a reassurance, which I have asked for before, that all these measures will be properly tracked through the overseas territories, because all of us are, as I say, tackling deeply slippery people who are good at exploiting loopholes. We need to ensure that what we do does not accidentally create loopholes, and the overseas territories should be part of that.
We support these measures, but I am conscious of the hurt to the UK economy as well. Under the impact assessments, we are looking at the best part of half a billion pounds-worth of hurt to the UK economy. A number of UK companies that have acted in good faith are suffering from these measures through no fault of their own, so there should be greater consideration to making UK Government support available for those companies on a case-by-case basis. Several companies are suffering through this and need more support than they have received.
More generally, we will come back to this—these are not the last SIs that we have seen on this subject—but I would also like a discussion about what we will do with the assets so seized and the money so sequestered. We have previously heard calls for a Marshall plan to aid the reconstruction of Ukraine. That is not legally easy—I acknowledge that fully—and it is outwith the scope of these sanctions, but having a purpose to which we will put these funds would give urgency and legitimacy to these sanctions, and also a bit of urgency to reaching the destination point, which is the reconstruction of a whole and sovereign Ukraine. We support these measures.
Bob Seely (Isle of Wight) (Con)
I will make a few brief points to the Minister and raise some specifics, as my hon. Friend the Member for Dewsbury (Mark Eastwood) did. It is quite clear that Russia is now actively trying to get round sanctions on an industrial scale. We are seeing that in its use of tech and microchips, in the potential sale of raw steel products to third parties, which then get re-exported back into Europe, and, as I am sure the Minister will know, in the passing of assets to wives, kids, families and in-laws of various types.
Along with the hon. Member for Cardiff South and Penarth (Stephen Doughty), I was also in Kyiv as part of that delegation and was likewise a guest of Yalta European Strategy—obviously I will declare that in due course. When we met folks in Kyiv there was a sense of urgency that, as well as all the great stuff we are doing, we need to be helping them to shut down Russia’s ability to maintain a multibillion-dollar monthly war effort. Therefore, the sanctions regime is absolutely vital in achieving that. When it comes to the specifics of the oligarchs, what they wanted was that money going back to Ukraine in war reparations.
On specific elements, I mentioned this point in my intervention, but I would just like to build on it for a couple of minutes. In UK courts, Russian state parties are still bringing cases. Is that right? If successful, the winnings from those cases go back via Russian proxies to the Russian state, where they are used to continue to fund the illegal invasion of Ukraine. As I said, I wrote to the Secretary of State for Justice, and another 10 Members of Parliament from both sides of the House have co-signed the letter. The 12th amendment to the Russia (Sanctions) (EU Exit) Regulations 2019 has already established that it is a criminal offence to knowingly provide the Russian state and other entities with funds or economic resources. I am asking for the Government to consider whether that provision can be applied to the legal winnings from ongoing litigation in UK courts.
Along with the 10 other signatories, I am asking the Government to prevent Russian state entities, such as Gazprom and VTB Bank, from using the legal system to effectively conduct a form of lawfare against Ukraine. As people may know, tackling the amoral offering of services to highly dubious characters has been quite close to my heart. It is less revolting than some of the intimidation of journalists and campaigners, but now, because of the situation with the war, it should come under the scope of Government action.
We are asking specifically for the following: the introduction of further sanctions against British law firms and banks which do not comply with existing sanctions regimes, and an amendment to hold managing partners accountable for their work should they be violating sanctions; the direct prohibition for UK-based law firms to represent entities controlled by the Government of the Russian Federation, including the Bank of Russia and entities in which the Russian state has a significant or controlling interest; and, thirdly, for His Majesty’s Treasury and the Ministry of Justice to address and tell us what they are going to do about ongoing litigation cases, of which there are at least half a dozen in English and Welsh courts, to ensure the Russian Federation is not evading the sanctions regime and is not profiting from winning those court cases. I have a list of about eight big law firms, including Freshfields Bruckhaus Deringer, VTB Bank Europe, PCB Byrne, Steptoe & Johnson and a number of Russian state entities. They are in the letter that, in the last few minutes, I have pinged to the Minister. I would be most grateful if the Government could give a considered response to those three points, but also to the current litigations as they go through the UK courts.
Richard Foord (Tiverton and Honiton) (LD)
The Liberal Democrats support the statutory instruments, so my comments will be brief.
First, I heard the proposal that members of the United Russia party be subject to sanctions. That was, I think, proposed back in spring by the President of the European Parliament and should be considered for future statutory instruments.
Secondly, the Minister will know, through his involvement with the Higher Education (Freedom of Speech) Bill, that the research collaboration advice team in the Department for Business, Energy and Industrial Strategy has been very useful to the higher education sector in enabling universities to support enforcement on sanctions and export control. I hope that in any slimming of the civil service in future months—we hear about the purported cuts of 91,000—the research collaboration advice team in BEIS is not hacked back, because it is doing crucial work on the enforcement of these sanctions.
Kevin Hollinrake (Thirsk and Malton) (Con)
I will not detain the House for long. I very much welcome the measures and the reasons for them. As the briefing states, the current measures we have imposed through sanctions are insufficient and we need to go further. The sanctions are effective, however, as evidence given to the Treasury Committee has shown. They are putting further pressure on Putin, who is clearly now under huge pressure anyway. However, they are a dimmer switch rather than a traditional light switch, so it is important that we improve the dimmer switch’s efficacy.
I raised the case of Alisher Usmanov earlier because it is a case in point and not because I wanted a direct answer on it. These are clever people, with very large resources, and they can employ the best people to help them to try to evade sanctions. They look to do that in two principal ways. They either use associates, relatives and the rest—it is good to hear that the provisions will tighten up on family members, and I will follow with interest whether that works with Mr Usmanov—or they use very complex corporate vehicles. Again, the Government intend to legislate in that area to improve the transparency around companies. Mr Usmanov has a £600 million yacht—that is some yacht—which is currently moored in Hamburg. Even though the German authorities know that it is his, they cannot identify his direct linkage to the ownership of the yacht, so they cannot impound it, which is disappointing. The Italians have taken his villa in the Italian riviera away from him, but we cannot identify his direct connection with that yacht, so we need to tighten things up in various areas to make this easier.
I will suggest a couple of measures to the Minister and his officials, who are hopefully listening. There was a suggestion from Bill Browder—his name will be familiar to many of us in this debate—who has been a fantastic champion for tackling dirty money around the world. Clearly, following the money is so difficult because these people are very clever and use very clever advisers to hide the money. If we introduced legislation so that all UK professional advisers who had dealt with a sanctioned individual had to open their books to the authorities, that would make it much easier to track that money through very complex shell companies and the like—so we could follow the money and properly sanction people. It would also potentially deter some of our professional advisers in this country from dealing with these highly suspect characters in the first place. Hopefully, the Minister will consider that.
In terms of following the money, I am also very concerned by the push from the Treasury to make the UK an international, world-leading crypto hub. One thing we know about crypto is that it is designed not to be regulated. Although people will say that there is a log, so there is an audit trail for all the money, the regulators cannot see it and that is how it is designed. In my view, our regulators will therefore never be able to track the stuff through crypto, yet we seem to be saying that we want the UK to be a leading crypto finance centre. We should reconsider that.
Another measure is the Magnitsky Act, which the EU and the UK have, although we do not call it that. That currently only covers human rights, but the EU is adding corruption to it, so asset freezes and travel restrictions could then be used for somebody who is guilty of—or even suspected of—corruption.
The shadow Minister, the hon. Member for Cardiff South and Penarth (Stephen Doughty), and my hon. Friend the Member for Isle of Wight (Bob Seely) mentioned sequestering, confiscating and redistributing assets. That is a really interesting point. Most of us in the House absolutely believe in property rights, so taking assets off people and giving them to somebody else is pretty tricky stuff. We cannot undermine our values in attempting, rightly, to use some of that money to pay reparations to Ukraine. There is one thing that we could do much more easily. We hold about £30 billion of Russian foreign currency reserves, which is currently seized. That is protected by sovereign immunity, but we could change those rules pretty quickly. It would not be difficult for us to establish criteria around which we can set aside such measures. Clearly, Russia is guilty under international law with its illegal invasion of Ukraine. It cannot be difficult for us to say, “On that basis, the £30 billion of assets can go to help Ukraine, instead of British taxpayers having to fund the help that we are providing to Ukraine.”
Finally, the Economic Crime and Corporate Transparency Bill, which is to have a Second Reading on 13 October, is missing some measures that would have a profound effect. All the money that came out of Russia and flowed into oligarchs’ back pockets went through some major banks around the world, not least Danske Bank. Some £200 billion of laundered money went through the bank’s division in Estonia. The people who run the bank must have known, because a bank’s normal return on capital employed is approximately 20%, whereas the return on capital employed in that branch in Estonia was 426%. That must have stood out pretty clearly to the people who run those banks.
If we introduced measures in the Bill to say “If you fail to prevent money laundering, fraud or false accounting, you could be held to account not only as a corporation but as an individual,” it would have a profound effect on the people facilitating this stuff. It would allow us to clamp down on it and stop it happening. I know that that is not a matter for the Minister on duty today, but I will certainly be mentioning it on 13 October. Thank you for giving me time to speak, Madam Deputy Speaker.
Jesse Norman
I thank all hon. Members who have spoken in this very interesting debate. It is a testament to the intense interest and passion that the Russian invasion of Ukraine has raised in this House that, even on topics as apparently technical as this one, we could have such a vigorous and energetic debate.
Let me pick up as many as I can of the points that have been raised. My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) spoke truly about how highly effective sanctions have been so far, as evidenced by the Treasury Committee. I would say that it is more like turning off a light, but the danger is that the dimmer switch may be activated the other way. That is one thing that we are constantly dealing with. I will say a little about it more generally, partly in response to the shadow Minister, the hon. Member for Cardiff South and Penarth (Stephen Doughty), because this is an evolving situation.
My hon. Friend the Member for Thirsk and Malton mentioned Bill Browder, a very interesting and brilliant man whom I have met. The idea about opening books is a very interesting one. We have a lot of interesting ideas in this House; one of the strengths of the open parliamentary debate that makes our system so much stronger than the Russian alternative is that we are willing rapidly to evolve our response to public opinion and to such suggestions, for which I thank my hon. Friend.
My hon. Friend also made a point about crypto that I think was right. It is important to say that crypto-assets are treated in exactly the same way as any financial asset. We therefore expect these measures to be as widely respected by entities, even if enforcement proves to require further work.
Stephen Doughty
I have just received notice that on 11 October we will be debating another set of amending regulations on sanctions—not only against Russia, but against a whole bunch of regimes—to deal with the very fact that crypto-assets are not treated in the same way as other financial assets for the purposes of sanctions. In fact, there appear to be a whole series of loopholes that the Government are only getting around to dealing with on 11 October. We really need to move a lot faster. We need to be up to speed with what is actually happening and with how people are using these markets.
Jesse Norman
If I may say so, I do not think that it is possible to move faster than having a debate within two days—in fact, a day and a half—of Parliament’s resumption after the interval following the unfortunate passing of Her late Majesty the Queen. The rules apply. As a further rebuttal to the shadow Minister’s point, my reply to the suggestion that something can somehow be made perfect, as though it were set in stone forever, is “Of course not.” This is a rapidly evolving situation.
My hon. Friend the Member for Isle of Wight (Bob Seely) talked about lawfare. He is exactly right that some very well-heeled and well-resourced individuals are using all their resources, as corporates and as individuals, to try to thwart us. That is why the response must continue to evolve, and it will.
On the point raised by the hon. Member for Tiverton and Honiton (Richard Foord), the Office of Financial Sanctions Implementation in the Treasury has more than doubled in this financial year. The response that is being made is being taken very seriously, and there is a continuous effort to build sanctions capability across Government.
I take the point that the hon. Gentleman made about advice for the higher education sector. I can also tell him that a very effective team in the Department for International Trade is helping businesses in this country to deal with this issue, which, again, we take extremely seriously.
My hon. Friend the Member for Isle of Wight, when referring to lawfare, mentioned Freshfields. I was sorry to hear the name mentioned, given the respect in which that firm is held across the country. I wish it were not true, if it is—I hope it is not—but it was interesting that my hon. Friend mentioned it.
Jesse Norman
I would rather not, because I have not much time, but let me just say this. My hon. Friend talked about the extension of designation, and this makes the point about the evolving nature of the threat. It is important to get the sanctions in quickly, but as the response evolves, so we must evolve it, and that is what we have done. Being associated with a designated person now includes obtaining financial benefit or other material benefit, or being an immediate family member, which means a wife, a husband, a civil partner, a parent or step-parent, a child or stepchild, a sibling or step-sibling, a niece or nephew, an aunt or uncle, or a grandparent or a grandchild. That is an example of the response evolving as my hon. Friend would have wished.
The hon. Member for Stirling (Alyn Smith) rightly drew attention to the slippery nature of what we are dealing with. I have been highlighting that in my speech. He talked about the danger of laundering energy. There are technically difficult questions to address about how that is to be characterised, especially when, as it were, forms of energy are changed.
The hon. Gentleman talked about proper tracking through the overseas territories. He will be aware that these rules apply in the overseas territories by Order in Council, in the same way that we would apply them here. I think he erred slightly in talking about the legitimacy of sanctions in part depending on the assets seized; the legitimacy of sanctions lies in the fact that we are fighting an aggressive nation that is seeking to overturn our way of life and the foundations of liberal democracy, and I do not think any further legitimacy is required for that to be a worthwhile thing for us to do.
My hon. Friend the Member for Dewsbury (Mark Eastwood) raised the important issue of Alunet, in his constituency. I thank him for doing so, and I thank him for writing to me in advance with the details. I understand the sense of those at Alunet of the loss that they appear to have incurred, and also the concern that they are feeling. I will be writing to my hon. Friend specifically about that issue.
Let me now come to the questions raised by the hon. Member for Cardiff South and Penarth. He asked why so many changes and amendments were needed. It is, of course, because the first instinct in a war situation is to get sanctions on the books as quickly as possible. We know that they have been effective because the Treasury Committee has reminded us of that, and we have plenty of other evidence that it is the case. As I have said, however, as the situation evolves so we need to evolve the response, and as the concerns about the humanitarian impact and unfairness evolve, the sanctions picture inevitably becomes not merely more widespread and more expensive, but more complex—and it is right that that should be so.
The hon. Gentleman mentioned a letter that he had written. Obviously the process has been disturbed by the abeyance of Government and the funeral of Her Majesty, but I will ensure that that letter is sent. He also talked about resourcing. I have referred to the increase in the size of OFSI, and that is matched by the seriousness with which this issue is taken across Government. The hon. Gentleman raised a series of other, more technical issues, and I shall be happy to write to him about those in more detail.
I invite the House to support these motions.
Question put and agreed to.
Resolved,
That the Russia (Sanctions) (EU Exit) (Amendment) (No. 11) Regulations 2022 (SI, 2022, No. 792), a copy of which was laid before this House on 14 July, be approved.
Resolved,
That the Russia (Sanctions) (EU Exit) (Amendment) (No. 12) Regulations 2022 (SI, 2022, No. 801), dated 14 July 2022, a copy of which was laid before this House on 18 July, be approved.—(Jesse Norman.)
That the Russia (Sanctions) (EU Exit) (Amendment) (No. 13) Regulations 2022 (SI, 2022, No. 814), dated 14 July 2022, a copy of which was laid before this House on 18 July, be approved.— (Jesse Norman.)
Exiting the European Union (Sanctions)
Resolved,
That the Russia (Sanctions) (EU Exit) (Amendment) (No. 14) Regulations 2022 (SI, 2022, No. 850), dated 18 July 2022, a copy of which was laid before this House on 20 July, be approved.— (Jesse Norman.)