Lord Ahmad of Wimbledon contributions to the Sanctions and Anti-Money Laundering Act 2018


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Sanctions and Anti-Money Laundering Bill [HL] Debate

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Department: Foreign and Commonwealth Office

Sanctions and Anti-Money Laundering Bill [HL]

(Ping Pong (Hansard): House of Lords)
Lord Ahmad of Wimbledon Excerpts
Monday 21st May 2018

(2 years, 4 months ago)

Lords Chamber
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Foreign and Commonwealth Office

Moved by

Lord Ahmad of Wimbledon - Hansard

That this House do agree with the Commons in their Amendments 1 to 3.

1: Clause 1, page 2, line 10, at end insert—

“(ea) provide accountability for or be a deterrent to gross violations of human rights, or otherwise promote—

(i) compliance with international human rights law, or

(ii) respect for human rights,”

Break in Debate

3: Clause 1, page 2, line 15, leave out “human rights,”

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

My Lords, the abuse of human rights was an issue of significant concern to both your Lordships’ House and the other place, as was made clear by many people who spoke at various stages of the Bill. The Government fully recognise why noble Lords and Members of the other place wished to reference gross human rights abuses explicitly, particularly in reference to the abhorrent case of Sergei Magnitsky. In her speech to the other House on 14 March, the Prime Minister made clear the Government’s intention to bring forward a “Magnitsky amendment” to the Bill. As a result, the Government worked closely and constructively with all sides of the other House to table these amendments, which have captured the maximum possible consensus in this area.

Commons Amendment 1 puts gross human rights abuses in the Bill as a purpose for which sanctions may be imposed. Commons Amendment 5 links the existing definition of a,

“gross violation of human rights”,

to the definition in the Proceeds of Crime Act 2002, and so ensures that it includes the torture of a person,

“by a public official, or a person acting in an official capacity”,

where the tortured person has sought to,

“expose illegal activity carried out by a public official”,

or to defend,

“human rights and fundamental freedoms”.

This makes it clear that all gross human rights abuses or violations are explicitly captured within the Bill. Commons Amendments 2, 3, 6, 7, 8, 14, 15, 19 and 20 are consequential on the changes to Clause 1.

Amendment 17 requires reports to be made about the use of the power to make sanctions regulations. Reports must identify regulations that have been made for human rights purposes. They must also specify any recommendations made by a parliamentary committee about the use of that power in relation to gross human rights violations, and include the Government’s response to any recommendations. It is right and proper that scrutiny of the regulations is carried out by Parliament.

Commons Amendment 16 was tabled in recognition of the concerns, raised by both the Independent Reviewer of Terrorism Legislation and the Joint Committee on Human Rights, that the repeal of Part 1 of the Terrorist Asset-Freezing etc. Act 2010—TAFA—would remove the independent reviewer’s oversight of the UK’s counter-terrorism asset freezes. I can assure all noble Lords that there was never any intention by the Government to remove independent oversight of the UK’s counter- terrorism asset-freezing regulations made under this Bill. That is why a carefully drafted government amendment was tabled in the other place to replicate effectively the scope of the independent oversight currently provided under TAFA. This ensures that there will be no removal or narrowing of the oversight of counterterrorism asset freezes as a result of the Bill.

The amendment also makes the Government’s commitment to this clear by imposing a duty to appoint an independent reviewer. The duty applies to any part of sanctions regulations that imposes asset freezes that are not made for a purpose that implements international obligations in this area but would further the prevention of terrorism. This is consistent with the scope of the independent oversight provided for under TAFA, thereby ensuring there is no removal or narrowing of the oversight of counterterrorism asset freezes as a result of the Bill.

I put it on record again that the Government are committed to promoting and strengthening universal human rights, and holding to account states and individuals responsible for the most serious violations. We will continue to do this after we leave the European Union and we intend that the powers in the Bill should allow us to be part of a global network of like-minded jurisdictions, working together to tackle those who commit gross human rights violations. We will continue to work with international partners to this end. I beg to move.

Lord Anderson of Swansea Portrait Lord Anderson of Swansea (Lab) - Hansard

My Lords, it is good to turn to a period of calm after the clash and clamour of Brexit. I congratulate the Government on responding to the pressures in this House and the other place, and on taking a stand that I hope will be followed by other countries where appropriate. The current amendments relate to sanctions on the perpetrators of human rights abuses, wherever committed, and against individuals rather than states. They are therefore smart sanctions and I congratulate Sir Alan Duncan in the other place and those who have worked together. The Minister stressed that it was an all-party group and I believe the amendments in the other place were signed by all parties. This is therefore very important.

I congratulate also Bill Browder, who has worked tirelessly following the murder in custody of Sergei Magnitsky. These amendments are made in the context of the poisoning of Sergei and Yulia Skripal in Salisbury and the murder of Magnitsky in Russia in 2009, but they are clearly not limited to Russia. They are much broader and universal, just as the Magnitsky Act of 2012 in the US was, in 2016, broadened to include perpetrators of gross human rights abuses wherever committed. As the Prime Minister has said:

“There is no place for these people—or their money—in our country”.

Break in Debate

Lord Collins of Highbury Portrait Lord Collins of Highbury (Lab) - Hansard

My Lords, I will be very brief. The noble Lord, Lord Anderson, asked the questions that I considered appropriate. I will not delay the House, but will repeat what the noble Lord, Lord Pannick, said in terms of an amendment we jointly agreed to, ensuring that fair process is considered in relation to this aspect of the Bill.

I very much join other noble Lords in welcoming the Government’s change of heart. There was opposition from the Government on these principles, and we had a successful amendment on human rights being the centre of foreign policy.

I welcome completely the noble Lord’s commitment. My honourable friend Helen Goodman also took the rather unusual step of signing the Government’s Magnitsky amendments, despite the fact that, in Committee, the Government had opposed her own amendments. I welcome very much the new consensus and hope that it is a sign that we can move forward with greater clarity in terms of foreign policy and human rights.

Lord Ahmad of Wimbledon - Hansard

My Lords, I am grateful to all noble Lords who have taken part in this short debate. From the outset, I thank Members for their engagement during this Bill, both in your Lordships’ House or in the other place. I commend the efforts of the noble Lord, Lord Pannick, my noble friend Lord Faulks and others who over a lengthy period of time, from all sides of the Chamber, have talked on the importance of such a clause. I am mindful that I do not see the noble Baroness, Lady Kennedy, in her place, but I know that she has a Private Member’s Bill in this respect as well, and I acknowledge her efforts in that regard.

I shall pick up on the specific points. The noble Lord, Lord Anderson, asked when the Bill was likely to be implemented in relation to all things considered around Brexit. As he acknowledges, the Bill provides the framework to impose sanctions, and under the Bill will sit a series of regulations that will put specific sanctions regimes into place. This will be done in accordance with the timetable of Brexit. He also asked about the implementation period, which we will have to take into account. As some of the specifics come on board on this, I shall share them with your Lordships’ House. He also asked about the procedure for listing individuals. The sanctions regulations will be set out, and the activities targeted by sanctions. If the Minister concerned has sufficient evidence to meet the thresholds in the Bill, they can place a person on an administrative list of designated persons to whom sanctions apply. That list will also be made public.

The noble Lord, Lord Anderson, and my noble friend Lord Faulks asked about encouraging others. As I have said during the Bill, when it comes to sanctions generally—and specifically on this clause—I can assure them that the UK will continue to play a leading and constructive role. As such, we will continue to work with all our international partners to achieve the maximum consensus possible on issues of concern to the UK, including those in these clauses.

I thank the noble Baroness, Lady Northover, and her team for her engagement on this Bill. She asked specifically about the reports and their frequency. They will be made annually, and the report to Parliament will also be laid before Parliament as well.

The noble Lord, Lord Hain, raised important issues around South Africa and the SRA’s withdrawal of the registration around Hogan Lovells. I have listened, as I always do, to his various contributions very carefully, and shall ensure that his concerns are relayed to the relevant departments and authorities.

The noble Lord, Lord Pannick, asked whether the Minister can confirm whether safeguards could apply on HR sanctions. I am always mindful when he asks questions because he knows the answer already, and I am pleased to answer very shortly and succinctly—yes, they will.

Motion agreed.

Motion on Amendment 4

Lord Ahmad of Wimbledon - Hansard

Moved by

That this House do agree with the Commons in their Amendment 4.

4: Clause 1, page 2, line 37, after “to” insert “17, (Enforcement: goods etc on ships), (Goods etc on ships: non-UK conduct) and”

Lord Ahmad of Wimbledon - Hansard

My Lords, this amendment relates to the important area of enforcing trade sanctions on board ships outside of UK territorial waters. I know that the noble Lord, Lord Collins, has an amendment in this respect, and I am cognisant that the Delegated Powers and Regulatory Reform Committee has expressed some concerns. I assure him and your Lordships’ House that I commit to respond to the committee in writing. In the meantime, I hope that I can reassure noble Lords about the necessity and appropriateness of these powers.

In a moment, I will turn to the specific issues which the committee has raised. I want to make it clear from the outset that these powers are needed to address exceptional and potentially dangerous situations in which goods sanctioned by the UK are being transported to or from a sanctioned country in international and foreign waters; to ensure adherence to the standards set out in the relevant UN Security Council resolutions; and to provide protection against the transportation of dangerous and harmful goods in international waters—strengthening our ability to counter foreign policy and national security threats via the enforcement of sanctions regimes. Especially in light of recent events, noble Lords will appreciate that it is both necessary and important for the UK to have such powers and that is why we have sought to include these clauses.

Amendment 11 would enable UK officials to board and search ships where there are reasonable grounds to suspect that the ship is carrying sanctioned goods or technology. Amendment 12 also allows these powers to be exercised in circumstances where Amendment 11 does not apply but where there are reasonable grounds to suspect that the ship is carrying goods that would be sanctioned if there were a UK link. The powers could be exercised against British ships in both foreign and international waters, and against foreign and stateless ships in international waters. These clauses would also allow officials to seize goods that are being dealt with in contravention, or deemed contravention, of sanctions regulations.

Amendment 18 would allow the procedures for dealing with goods once seized to be set out in regulations. We expect these powers to be exercised, for example, in circumstances where the UK is aware that a ship is carrying goods such as components of chemical weapons, military materials heading towards a conflict zone in breach of an arms embargo, or even illicit nuclear materials heading towards a sanctioned state.

The clauses contain important safeguards limiting the use of these powers. The Bill makes it clear that there must be reasonable grounds to suspect that the ship in question is carrying sanctioned goods before any action can be taken. Further, consent from a foreign state is required before these powers can be exercised in relation to a British ship in foreign waters. The powers may be exercised in relation to a foreign ship in international waters only with the authorisation of the Secretary of State, which may be given only in certain limited circumstances, thereby ensuring that these powers will be used only on foreign ships with either flag-state consent or under the authority of international law. Where there is no flag state, as in the case of a stateless ship, such safeguards are not required as the ship is not subject to the jurisdiction of, and protection from, any other state.

These powers are analogous to those contained in other provisions of domestic legislation. For example, Chapter 5 of the Policing and Crime Act 2017 allows for these same powers to be exercised in circumstances where there are reasonable grounds to suspect that an offence under the law of England and Wales is being committed on board a ship in international waters. We intend to confer these new powers on the same UK authorities which are already capable of exercising those existing powers, namely constables, NCA officers and customs officials. In addition, we intend to add commissioned officers of Her Majesty’s ships to that list, as we expect that the Navy is likely to be the authority best placed to exercise these powers in respect of ships in international waters. This is not a novel approach as such officers are, for example, already designated maritime enforcement officers under the Criminal Justice (International Co-operation) Act 1990.

I draw noble Lords’ attention to the fact that the various maritime enforcement powers contained in existing legislation go further in some respects. For example, they allow for the arrest and detention of persons on board the ship. The purpose of these powers is not to target individuals, but to ensure that we can prevent the improper transportation of goods to or from a sanctioned country. These maritime powers are both necessary and important because the UK has legal obligations to enforce sanctions regimes on board British ships whether these ships are in domestic waters or not, which these powers will allow us to do. The UK also has legal obligations to seize and dispose of UN-sanctioned goods; we will be able to meet those under these powers. The UN Security Council also calls on the UK to search foreign ships for such goods, and expects the same approach to be taken in relation to stateless ships. The powers contained in this clause will allow us to do this as well.

On the concerns raised by the Delegated Powers and Regulatory Reform Committee in particular, I will explain why these amendments provide for the powers to be set out in regulations. This mirrors the approach that has been taken to the sanctions Bill as a whole. The Bill sets out the framework to be applied in sanctions regulations. The purpose of these maritime powers is to enforce UK trade sanctions, and so they should be exercisable in relation to any country on which trade sanctions have been imposed by the United Kingdom. For the sake of clarity and accessibility, it makes sense for there to be one regulation per sanctions regime which sets out all the detail pertaining to that regime, and that includes these powers.

However, it must be remembered that almost all the detail around these powers has been set out in the primary legislation already: the nature of the coercive powers that may be exercised, the circumstances in which these powers must be exercised, and the nature of the procedure that is to be followed when goods have been seized under these powers. Ministers therefore have very little discretion about what can be set out in the regulations in relation to these powers. For this reason, we consider this approach to be appropriate. For the same reasons, we consider that there is no reason for any additional parliamentary scrutiny of sanctions regulations based on the inclusion of these powers in those regulations, beyond the parliamentary scrutiny already provided for in the Bill in relation to those regulations.

The Delegated Powers Committee has also raised concerns about the particular wording of Amendments 11 and 12 and about whether the powers set out there are a non-exhaustive list. I reassure noble Lords that there is no intention to exercise any coercive powers that are not explicitly set out in Amendments 11 and 12. Indeed, if the intention was to have additional powers to take any other coercive action of the sort provided for in these amendments, one would expect the primary legislation to set out those additional powers, and it does not do so.

Turning briefly to the other amendments in this group, Amendments 4, 13, 23 and 30 are consequential on these clauses. Amendment 4 would ensure that the reference to supplemental provision, in Clause 1, includes these clauses. Amendment 13 ensures that the exercise of these powers in international and foreign waters is not limited by Clause 19 on extraterritorial application. Amendment 23 would ensure that the Bill does not affect powers exercised by the royal prerogative in relation to ships, and Amendment 30 would allow amendments to be made to the Customs and Excise Management Act to be able to properly enforce UK sanctions.

These maritime powers are necessary and important to ensure that we can take steps against the transportation of dangerous and harmful goods in international waters. Their inclusion in the Bill is an important step in enhancing the integrity and impact of sanctions regimes. I beg to move.

Lord Collins of Highbury Portrait Lord Collins of Highbury - Hansard

My Lords, I read the report of the Delegated Powers Committee on Friday and thought that I needed to act immediately, because I wanted to ensure that this House had the opportunity to fully debate its implications. I welcome what the Minister said and his commitment to respond fully to the committee’s report.

With regard to the powers, one of the biggest concerns at Second Reading in this House, through to Committee, has been the power grab—the concept of legislation being made by regulation, which seems to be expanding the whole time. I was particularly concerned about Clause 4 and how its powers appear not to be limited. I know that we have safeguards in the Bill, and I thank the noble Lord, Lord Pannick, and the noble and learned Lord, Lord Judge, who is not in his place, for moving substantial amendments, which the Government listened to, on how you can confine and constrain the powers that are needed. We know that at some time in the future, a Government will simply look at what the law gives them power to do and use it, because it could apply in different circumstances. Therefore I was responding in particular to Clause 4 and the committee’s report. I hear what the Minister said about the safeguards and the constraints on Ministers in making regulations, and I hope that other noble Lords will be satisfied with the response. At this stage, I am.

Break in Debate

Lord Pannick - Hansard

I am very disappointed—at other noble Lords are—at the approach of the Government. All these points were fully debated at Second Reading, in Committee and on Report, and the constant theme across the House was that it was vital to constrain the powers that Ministers were giving themselves in relation to the Bill. The Minister was very receptive to those concerns and accepted a number of amendments, and it is therefore very disappointing that at this very late stage we see again the same vice. So I share the disappointment and regret that, given the stage we are at, it is too late to do anything about it. But I hope that the Minister will take back to his department our concern and the promise—it is not a threat—that, if similar powers are put before us in another Bill, no doubt noble Lords will have more to say about it.

Lord Ahmad of Wimbledon - Hansard

My Lords, I thank noble Lords for their comments on this amendment and, of course, I have noted what all noble Lords said and the concerns they expressed. Let me assure them once again—I mention in particular the noble Baroness, who mentioned Amendments 11 and 12—that I will address specifically the powers of the Minister, and give the assurance once again that a detailed response will be provided to the Delegated Powers Committee. I am seeking to ensure that this response will be provided before the Recess.

Motion on Amendment 4 agreed.

Break in Debate

Moved by

Lord Ahmad of Wimbledon - Hansard

That this House do agree with the Commons in their Amendments 5 to 8.

5: Clause 1, page 2, line 37, at end insert—

“(6A) In this Act any reference to a gross violation of human rights is to conduct which—

(a) constitutes, or

(b) is connected with,

the commission of a gross human rights abuse or violation; and whether conduct constitutes or is connected with the commission of such an abuse or violation is to be determined in accordance with section 241A of the Proceeds of Crime Act 2002.”

Break in Debate

Moved by

Lord Ahmad of Wimbledon - Hansard

That this House do agree with the Commons in their Amendments 9 and 10.

9: Clause 17, page 16, line 12, at end insert—

“( ) Regulations—

(a) may create criminal offences for the purposes of the enforcement of prohibitions or requirements mentioned in subsection (2)(a) or (b) or for the purposes of preventing such prohibitions or requirements from being circumvented, and

(b) may include provision dealing with matters relating to any offences created for such purposes by regulations (including provision that creates defences).

( ) Regulations may not provide for an offence under regulations to be punishable with imprisonment for a period exceeding—

(a) in the case of conviction on indictment, 10 years;

(b) in the case of summary conviction—

(i) in relation to England and Wales, 12 months or, in relation to offences committed before section 154(1) of the Criminal Justice Act 2003 comes into force, 6 months;

(ii) in relation to Scotland, 12 months;

(iii) in relation to Northern Ireland, 6 months.”

10: After Clause 17, insert the following new Clause—

“Report in respect of offences in regulations

(1) In this section “relevant regulations” means regulations under section 1 which create any offence for the purposes of—

(a) the enforcement of any prohibitions or requirements imposed by or under regulations under section 1, or

(b) preventing any such prohibitions or requirements from being circumvented.

(2) The appropriate Minister making any relevant regulations (“the Minister”) must at the required time lay before Parliament a report which—

(a) specifies the offences created by the regulations, indicating the prohibitions or requirements to which those offences relate,

(b) states that the Minister considers that there are good reasons for those prohibitions or requirements to be enforceable by criminal proceedings and explains why the Minister is of that opinion, and

(c) in the case of any of those offences which are punishable with imprisonment—

(i) states the maximum terms of imprisonment that apply to those offences,

(ii) states that the Minister considers that there are good reasons for those maximum terms, and

(iii) explains why the Minister is of that opinion.

(3) Subsection (4) applies where an offence created by the regulations relates to a particular prohibition or requirement and the Minister considers that a good reason—

(a) for that prohibition or requirement to be enforceable by criminal proceedings, or

(b) for a particular maximum term of imprisonment to apply to that offence,

is consistency with another enactment relating to the enforcement of a similar prohibition or requirement.

(4) The report must identify that other enactment.

(5) In subsection (3) “another enactment” means any provision of or made under an Act, other than a provision of the regulations to which the report relates.

(6) In subsection (2) “the required time” means—

(a) in the case of regulations contained in a statutory instrument which is laid before Parliament after being made, the same time as the instrument is laid before Parliament;

(b) in the case of regulations contained in a statutory instrument a draft of which is laid before Parliament, the same time as the draft is laid.

(7) This section applies to regulations which amend other regulations under section 1 so as to create an offence as it applies to regulations which otherwise create an offence.”

Lord Ahmad of Wimbledon - Hansard

My Lords, we now come to the important issue of criminal offences. This group of amendments would allow powers in the Bill to be used to create criminal offences and penalties in regulations for both sanctions and money laundering breaches, subject to new safeguards.

I say at the outset that I recognise that your Lordships’ House had serious concerns about the inclusion of these powers, and the noble and learned Lord, Lord Judge, in particular, remains very concerned. I assure all noble Lords that once the Bill left your Lordships’ House we continued to listen to those concerns and have sought to address them. That is why these amendments also include an important new procedural safeguard of a requirement to report to Parliament, meaning that the Government have to inform Parliament specifically about the use of the powers to create criminal offences in secondary legislation. This is intended to enable Parliament to be better informed about the use of these powers and to be able to properly hold the Minister to account.

I shall go through each of the amendments in more detail. Amendments 9 and 21 restore the ability to provide for criminal offences and penalties in sanctions and money laundering regulations. In tabling these amendments, I acknowledge your Lordships’ recognition of the importance of rigorous anti-money laundering and sanctions regimes. In order to ensure the robustness of future sanctions and anti-money laundering regulations, corresponding powers to create criminal offences for breaches of those future regimes are necessary so as to preserve the ability of future Governments to impose effective and dissuasive sanctions for breaches of regulations.

I recognise that some in your Lordships’ House had concerns about the scope of these powers when the Bill was first introduced. These amendments address those concerns through additional safeguards, which must be met before the powers can be used. When I come to Amendments 31, 32 and 34, I shall elaborate upon the safeguards, which the Government have discussed with noble Lords since the Bill’s passage through this House.

The amendments restore our ability to enforce sanctions. As noble Lords are aware, sanctions are used to prevent serious threats to national and international peace and security. It is therefore right that breach of them is a criminal offence, and it is also right that penalties should be set at a level that acts as a proper deterrent for these serious crimes. The Bill gives us the ability to set penalties at up to 10 years’ imprisonment, but that does not mean that we will set them at the maximum in every case.

In respect of trade sanctions, offences for breaches of prohibitions made under the Export Control Act 2002 all have maximum penalties of 10 years’ imprisonment. That does not apply to the trade sanction prohibitions created under the European Communities Act 1972, which are capped at two years’ imprisonment, despite the breaches being just as serious a matter. This Bill will enable us to remedy that disparity by harmonising maximum penalties for breaches of all trade sanctions at 10 years.

Currently, breaches of financial sanctions can be punished by up to seven years’ imprisonment, and we plan to continue to set penalties at this level for financial sanctions. We also plan for breaches of other sanctions, such as transport sanctions, to have penalties set to match this level. There will also be offences, such as the failure to provide information when required to do so by law, that require lesser penalties, such as up to two years’ imprisonment, and we do not plan to increase penalties in those areas either.

I have set out in previous debates how the enforceability of new regulations would be seriously weakened without the power to create criminal offences, and how it is not unusual for requirements in delegated legislation to be enforced using criminal penalties. I now turn to the procedural safeguards we have introduced, which I hope will constitute sufficient reassurance to noble Lords who have expressed concerns.

Amendments 10, 25 and 32 introduce the important safeguard of requiring the Government to lay a report before Parliament whenever criminal offences are created or amended in sanctions regulations made under Clause 1 or in anti-money laundering regulations made under Clause 43. The amendments require the report to be laid at the same time as the regulations are laid or when the draft statutory instrument containing the relevant regulations is laid, depending on which parliamentary procedure is used. The report will facilitate effective parliamentary scrutiny of future use of criminal offences in sanctions regulations and goes further than the status quo in enabling Parliament to scrutinise the creation of criminal offences through sanctions or money laundering regulations.

The amendment specifies what elements should be included in these reports. Specifically, this will include: first, the details of the offences that have been created and the requirements to which they refer; secondly, the good reasons why a breach of these requirements should be enforced via criminal offences; thirdly, the maximum prison terms for any offences created which are punishable by imprisonment; and, fourthly, the reasons why those maximum terms have been set at the level they have. I trust noble Lords will agree that these reports will provide increased transparency as to the reasons for creating future criminal offences, and so give both Houses of Parliament a new and solid basis for holding the Government to account on the use of these powers when debating regulations made under the Bill. Nevertheless, the Government remain very aware that creating criminal offences and setting penalties in regulations is a serious matter and not one to be undertaken lightly. We hope that these amendments address that.

I would also like to take this opportunity to assure your Lordships’ House that the requirement contained in Amendment 25—for a Minister, when for whatever reason a report is not laid on time, to make a statement about that failure to the House—does not in any way circumvent the obligation to make the statement. It is an additional requirement, meant to create a further obligation to Parliament that if, for example, there has been some administrative error in publishing a statement, Ministers must provide an explanation to Parliament for that failure.

Amendment 31 is consequential to new paragraph 20A inserted by Amendment 32. The envisaged paragraph 20A(1) of Schedule 2 clarifies the scope of potential offences created for the purposes of the enforcement of requirements imposed by or under regulations under Clause 43.

Amendment 32 also makes the power to create criminal offences in money laundering regulations subject to the requirement for a report to Parliament along the same lines as the amendments for Part 1 of the Bill. This amendment clarifies that the scope of the power for creating future offences is restricted to offences for the purposes of enforcing future anti-money laundering regulations. It is both necessary and, importantly, proportionate.

Amendment 34 ensures that references made to regulations made under Clause 43, with respect to paragraph 15 of Schedule 2, and requirements imposed by regulations made under Clause 43, with respect to paragraph 20A of Schedule 2, also include reference to or requirements imposed by the Money Laundering Regulations 2017. This amendment ensures that new money laundering offences can be created by amending the Money Laundering Regulations 2017. It will therefore enable the Government to create new offences in order to respond, for example, to emerging risks identified by the national risk assessment of money laundering and terrorist financing, which was published in October of last year, or in response to the ongoing review by the Financial Action Task Force of the UK’s anti-money laundering and counterterrorist finance regime. I beg to move.

Lord Pannick - Hansard

My Lords, in the early stages of this Bill, my noble and learned friend Lord Judge, who is not in his place, expressed the concerns that many of us felt about Ministers being given a power to create new criminal offences and, indeed, to specify maximum sentences. I am very pleased that the Government have recognised a need for safeguards in this context. This is an exceptional circumstance, and I very much hope that the Government will not see this as a precedent to be used in other contexts.

Baroness Northover Portrait Baroness Northover - Hansard

My Lords, the potential creation of new criminal offences by Ministers was of course the subject of major debate in the Lords, and the Government were defeated. It is the Government’s compromise that we are considering here. I know that the Government and the noble and learned Lord, Lord Judge, spent a great deal of time on this, as did my noble friend Lady Bowles. Noble Lords did not quite get to where they would have liked, but I know that they thought progress had been made. We are therefore content to accept the position that we have reached. However, the noble Lord, Lord Pannick, makes an important point about this not being a precedent.

Lord Ahmad of Wimbledon - Hansard

I thank the noble Lord and the noble Baroness who have spoken. When this issue left your Lordships’ House, I emphasised and assured noble Lords that we would continue to work, particularly, with the noble and learned Lord, Lord Judge, and officials continue to do so. Every time I saw him in a Division Lobby or outside it—often he was going in the opposite direction, but we will park that for a moment—he reassured me that progress was being made, and this is the culmination of that. I thank noble Lords for their support.

Motion on Amendments 9 and 10 agreed.

Break in Debate

Moved by

Lord Ahmad of Wimbledon - Hansard

That this House do agree with the Commons in their Amendment 11.

11: Insert the following new Clause—

“Enforcement: goods etc on ships

(1) The provision that may be made by virtue of section 17(2) (enforcement of prohibitions or requirements) includes provision as to the powers and duties of prescribed persons in relation to—

(a) British ships in foreign waters or international waters,

(b) ships without nationality in international waters, and

(c) foreign ships in international waters.

(2) Regulations may make provision by virtue of this section only for the purpose of enforcing relevant prohibitions or requirements.

(3) A prohibition or requirement is a “relevant prohibition or requirement” for the purposes of this section if it is—

(a) a prohibition or requirement specified by the regulations which is imposed by regulations for a purpose mentioned in any of paragraphs 2 to 7, 15(a), (b) or (c) or 16(a) of Schedule 1, or

(b) a prohibition or requirement imposed by a condition of a licence or direction issued by virtue of section 15 in relation to a prohibition or requirement mentioned in paragraph (a).

(4) The powers that may be conferred by virtue of this section include powers to—

(a) stop a ship;

(b) board a ship;

(c) require any person found on a ship boarded by virtue of this section to provide information or produce documents;

(d) inspect and copy such documents or information;

(e) stop any person found on such a ship and search that person for—

(i) prohibited goods, or

(ii) any thing that might be used to cause physical injury or damage to property or to endanger the safety of any ship;

(f) search a ship boarded by virtue of this section, or any thing found on such a ship (including cargo), for prohibited goods;

(g) seize goods found on a ship, in any thing found on a ship, or on any person found on a ship (but see subsection (8));

(h) for the purpose of exercising a power mentioned in paragraph (e), (f) or (g), require a ship to be taken to, and remain in, a port or anchorage in the United Kingdom or any other country willing to receive it.

(5) Regulations that confer a power mentioned in subsection (4)(a) to (f) or (h) must provide that a person may not exercise the power in relation to a ship unless the person has reasonable grounds to suspect that the ship is carrying prohibited goods (and the regulations need not require the person to have reasonable grounds to suspect that an offence is being or has been committed).

(6) Regulations that confer a power mentioned in subsection (4)(e)(i) or (f) must provide that the power may be exercised only to the extent reasonably required for the purpose of discovering prohibited goods.

(7) Regulations that confer a power mentioned in subsection (4)(e)(ii) on a person (“the officer”) may permit the search of a person only where the officer has reasonable grounds to believe that that person might use a thing in a way mentioned in subsection (4)(e)(ii).

(8) Regulations that confer a power mentioned in subsection (4)(g) on a person—

(a) must provide for the power to be exercisable on a ship only where that person is lawfully on the ship (whether in exercise of powers conferred by virtue of this section or otherwise), and

(b) may permit the seizure only of—

(i) goods which that person has reasonable grounds to suspect are prohibited goods, or

(ii) things within subsection (4)(e)(ii).

(9) Regulations that confer a power on a person by virtue of this section may authorise that person to use reasonable force, if necessary, in the exercise of the power.

(10) Regulations that confer a power by virtue of this section must provide that—

(a) the power may be exercised in relation to a British ship in foreign waters only with the authority of the Secretary of State, and

(b) in relation to foreign waters other than the sea and other waters within the seaward limits of the territorial sea adjacent to any relevant British possession, the Secretary of State may give authority only if the State in whose waters the power would be exercised consents to the exercise of the power.

(11) Regulations that confer a power by virtue of this section must provide that—

(a) the power may be exercised in relation to a foreign ship only with the authority of the Secretary of State, and

(b) the Secretary of State may give authority only if—

(i) the home state has requested the assistance of the United Kingdom for the purpose of enforcing relevant prohibitions or requirements,

(ii) the home state has authorised the United Kingdom to act for that purpose, or

(iii) the United Nations Convention on the Law of the Sea 1982 (Cmnd 8941) or a UN Security Council Resolution otherwise permits the exercise of the powers in relation to the ship.

(12) The reference in subsection (11) to the United Nations Convention on the Law of the Sea includes a reference to any modifications of that Convention agreed after the passing of this Act that have entered into force in relation to the United Kingdom.

(13) In this section—

“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

“British ship” means a ship falling within paragraph (a), (c), (d) or (e) of section 7(12);

“foreign ship” means a ship which—

(a) is registered in a State other than the United Kingdom, or

(b) is not so registered but is entitled to fly the flag of a State other than the United Kingdom;

“foreign waters” means the sea and other waters within the seaward limits of the territorial sea adjacent to any relevant British possession or State other than the United Kingdom;

“goods” includes technology within the meaning of Schedule 1 (see paragraph 36 of that Schedule);

“home state”, in relation to a foreign ship, means—

(a) the State in which the ship is registered, or

(b) the State whose flag the ship is otherwise entitled to fly; “international waters” means waters beyond the territorial sea of the

United Kingdom or of any other State or relevant British possession;

“prohibited goods” means goods which have been, or are being, dealt with in contravention of a relevant prohibition or requirement (see subsection (3));

“regulations” means regulations under section 1;

“relevant British possession” has the same meaning as in section 7 (see subsection (14) of that section);

“ship” has the same meaning as in section 7 (see subsection (14) of that section);

“ship without nationality” means a ship which—

(a) is not registered in, or otherwise entitled to fly the flag of, any State or relevant British possession, or

(b) sails under the flags of two or more States or relevant British possessions, or under the flags of a State and relevant British possession, using them according to convenience.

(14) In the definition of “prohibited goods” in subsection (13), the reference to goods dealt with in contravention of a relevant prohibition or requirement includes a reference to a case where—

(a) arrangements relating to goods have been entered into that have not been fully implemented, and

(b) if those arrangements were to be fully implemented, the goods would be dealt with in contravention of that prohibition or requirement.”

Break in Debate

Moved by

Lord Ahmad of Wimbledon - Hansard

That this House do agree with the Commons in their Amendment 12.

12: Insert the following new Clause—

“Goods etc on ships: non-UK conduct

(1) Regulations may make provision conferring on prescribed persons powers exercisable—

(a) in relation to—

(i) British ships in foreign waters or international waters,

(ii) ships without nationality in international waters, and

(iii) foreign ships in international waters,

(b) for the purpose of—

(i) investigating the suspected carriage of relevant goods on such ships, or

(ii) preventing the continued carriage on such ships of goods suspected to be relevant goods.

(2) The powers that may be conferred by virtue of this section include powers to—

(a) stop a ship;

(b) board a ship;

(c) require any person found on a ship boarded by virtue of this section to provide information or produce documents;

(d) inspect and copy such documents or information;

(e) stop any person found on such a ship and search that person for—

(i) relevant goods, or

(ii) any thing that might be used to cause physical injury or damage to property or to endanger the safety of any ship;

(f) search a ship boarded by virtue of this section, or any thing found on such a ship (including cargo), for relevant goods;

(g) seize goods found on a ship, in any thing found on a ship, or on any person found on a ship (but see subsection (6));

(h) for the purpose of exercising a power mentioned in paragraph (e), (f) or (g), require a ship to be taken to, and remain in, a port or anchorage in the United Kingdom or any other country willing to receive it.

(3) Regulations that confer a power mentioned in subsection (2)(a) to (f) or (h) must provide that a person may not exercise the power in relation to a ship unless the person has reasonable grounds to suspect that the ship is carrying relevant goods.

(4) Regulations that confer a power mentioned in subsection (2)(e)(i) or (f) must provide that the power may be exercised only to the extent reasonably required for the purpose of discovering relevant goods.

(5) Regulations that confer a power mentioned in subsection (2)(e)(ii) on a person (“the officer”) may permit the search of a person only where the officer has reasonable grounds to believe that that person might use a thing in a way mentioned in subsection (2)(e)(ii).

(6) Regulations that confer a power mentioned in subsection (2)(g) on a person—

(a) must provide for the power to be exercisable on a ship only where that person is lawfully on the ship (whether in exercise of powers conferred by virtue of this section or otherwise), and

(b) may permit the seizure only of—

(i) goods which that person has reasonable grounds to suspect are relevant goods, or

(ii) things within subsection (2)(e)(ii).

(7) Regulations that confer a power on a person by virtue of this section may authorise that person to use reasonable force, if necessary, in the exercise of the power.

(8) Regulations that confer a power by virtue of this section must provide that—

(a) the power may be exercised in relation to a British ship in foreign waters only with the authority of the Secretary of State, and

(b) in relation to foreign waters other than the sea and other waters within the seaward limits of the territorial sea adjacent to any relevant British possession, the Secretary of State may give authority only if the State in whose waters the power would be exercised consents to the exercise of the power.

(9) Regulations that confer a power by virtue of this section must provide that—

(a) the power may be exercised in relation to a foreign ship only with the authority of the Secretary of State, and

(b) the Secretary of State may give authority only if—

(i) the home state has requested the assistance of the United Kingdom for a purpose mentioned in subsection (1)(b),

(ii) the home state has authorised the United Kingdom to act for such a purpose, or

(iii) the United Nations Convention on the Law of the Sea 1982 (Cmnd 8941) or a UN Security Council Resolution otherwise permits the exercise of the powers in relation to the ship.

(10) The reference in subsection (9) to the United Nations Convention on the Law of the Sea includes a reference to any modifications of that Convention agreed after the passing of this Act that have entered into force in relation to the United Kingdom.

(11) In this section—

“regulations” means regulations under section 1;

“relevant goods” means goods in relation to which relevant non-UK conduct is occurring or has occurred;

“relevant non-UK conduct” means conduct outside the United Kingdom by a person other than a United Kingdom person that would constitute a contravention of a relevant prohibition or requirement if the conduct had been—

(a) in the United Kingdom, or

(b) by a United Kingdom person;

“relevant prohibition or requirement” has the same meaning as in section (Enforcement: goods etc on ships) (see subsection (3) of that section);

“United Kingdom person” has the same meaning as in section 18 (see subsection (2) of that section).

(12) In the definition of “relevant non-UK conduct” in subsection (11), the reference to conduct that would constitute a contravention of a relevant prohibition or requirement if the conduct had been in the United Kingdom or by a United Kingdom person includes a reference to a case where—

(a) arrangements relating to goods have been entered into that have not been fully implemented, and

(b) if those arrangements were to be fully implemented (and if the conduct had been in the United Kingdom or by a United Kingdom person) the goods would be dealt with in contravention of that prohibition or requirement.

(13) In this section, the following expressions have the same meaning as in section (Enforcement: goods etc on ships)—

“arrangements”,

“British ship”,

“foreign ship”,

“foreign waters”,

“goods”,

“home state”,

“international waters”,

“relevant British possession”,

“ship”, and

“ship without nationality”.”

Break in Debate

Moved by

Lord Ahmad of Wimbledon - Hansard

That this House do agree with the Commons in their Amendments 13 to 21.

13: Clause 18, page 17, line 13, at end insert—

“( ) Nothing in this section limits the provision that may be made in regulations under section 1 by virtue of section (Enforcement: goods etc on ships) or (Goods etc on ships: non-UK conduct).”

Break in Debate

Moved by

Lord Ahmad of Wimbledon - Hansard

That this House do agree with the Commons in their Amendment 22.

22: After Clause 44, insert the following new Clause—

“Public registers of beneficial ownership of companies registered in British Overseas Territories

(1) For the purposes of the detection, investigation or prevention of money laundering, the Secretary of State must provide all reasonable assistance to the governments of the British Overseas Territories to enable each of those governments to establish a publicly accessible register of the beneficial ownership of companies registered in each government’s jurisdiction.

(2) The Secretary of State must, no later than 31 December 2020, prepare a draft Order in Council requiring the government of any British Overseas Territory that has not introduced a publicly accessible register of the beneficial ownership of companies within its jurisdiction to do so.

(3) The draft Order in Council under subsection (2) must set out the form that the register must take.

(4) If an Order in Council contains requirements of a kind mentioned in subsection (2)—

(a) it must be laid before Parliament after being made, and

(b) if not approved by a resolution of each House of Parliament before the end of 28 days beginning with the day on which it is made, it ceases to have effect at the end of that period (but without that affecting the power to make a new Order under this section).

(5) In calculating a period of 28 days for the purposes of subsection (4), no account is to be taken of any time during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than four days.

(6) For the purposes of this section, “British Overseas Territories” means a territory listed in Schedule 6 of the British Nationality Act 1981.

(7) For the purposes of this section, “a publicly accessible register of the beneficial ownership of companies” means a register which, in the opinion of the Secretary of State, provides information broadly equivalent to that available in accordance with the provisions of Part 21A of the Companies Act 2006.”

Lord Ahmad of Wimbledon - Hansard

My Lords, Amendment 22 would put a duty on the Government to provide all reasonable assistance to our overseas territories to help them set up public registers of company beneficial ownership by 31 December 2020. If they do not do so, the amendment would require the Secretary of State to prepare a draft Order in Council requiring the Government of the overseas territories to introduce such registers.

Noble Lords are aware that the issue of the register of beneficial ownership was debated extensively in your Lordships’ House. I welcomed the insight and the expertise and, while there were differences of views, there was a robust debate. In this regard, the Government tabled on Report in the other place a package of amendments that sought to enhance the existing measures on beneficial ownership in the overseas territories but stopped short of the preparation of any legislation for the overseas territories ahead of the introduction of a public register as an international standard. As is his prerogative, Mr Speaker did not, however, select these amendments for debate. Therefore, the Government in the other place listened to the strength of feeling on this issue and accepted that it was the overwhelming view of the other place that the overseas territories should take steps to put public registers in place ahead of them becoming international standard as set by the Financial Action Task Force. Therefore, the Government did not oppose the new clause tabled by the right honourable Member for Sutton Coldfield and the right honourable Member for Barking.

Given the views expressed in the other place and the fact that we respect the will of Parliament, the Government do not now propose to table any new amendments. However, I would, nevertheless, like to make a number of points on this issue, not least as Minister for the Overseas Territories. I want to make it clear from the outset that we would have preferred a different approach to this question, as evidenced by the amendments we had tabled in the other place and my response to this debate in your Lordships’ House. Our approach has always been, and remains, as a priority to work consensually, constructively and collaboratively, with the overseas territories. Indeed, we have established strong channels with the overseas territories.

Let me be absolutely clear: the overseas territories are British, but they are separate jurisdictions with their own democratically elected Governments, responsible for their own fiscal matters and are not represented in this Parliament. We have legislated for them without their consent only in exceptional circumstances, for example to decriminalise homosexuality in certain territories to ensure that they were compliant with international human rights obligations. By contrast, financial services are an area of domestic responsibility for territory Governments, where they surpass—an important point to remember—international standards in the context of beneficial ownership. Legislating for these jurisdictions without their consent in this field effectively disenfranchises their elected representatives.

We are also fully cognisant of the territories’ concerns that the economic impact of imposing public registers on them will be significant—and these are not under normal circumstances. As noble Lords know, the British Virgin Islands, Anguilla and the Turks and Caicos Islands are still recovering from the two unprecedented category 5 hurricanes of last September. In the British Virgin Islands, nine out of 20 schools still remain closed and are accommodating their students in tents. The tourism industry has experienced a drop of 50% and is only now starting to recover. There remains a real risk that this will destabilise the reconstruction efforts of the hurricane affected territories, and all of this shortly before the next hurricane season begins in June. Accordingly, our preference would have been not to legislate in this manner without the territories’ consent, and let me assure noble Lords that our aim remains to work consensually and collaboratively with them to achieve the best possible outcome following the amendment.

As the reaction of the territories and their leaders has demonstrated, legislating for them without their consent risks damaging not only our long-standing constitutional arrangements respecting their autonomy but also our very proactive, positive and progressive relations with the overseas territories. Let me assure noble Lords that I have held a number of meetings with leaders and their London-based representatives since our debates at Report stage, and I have reaffirmed the importance that the United Kingdom attaches to our relationship with their jurisdictions. Equally, I would place on the record our gratitude to the overseas territories and to the Crown dependencies for the work that they have undertaken to implement the bilateral arrangements on the exchange of beneficial ownership information we concluded with them in 2016. In a relatively short timeframe, they have passed new primary legislation and delivered technological improvements to comply with the terms of these arrangements.

All Crown dependencies have central registers in place. Of the seven overseas territories with financial centres, Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar and the Turks and Caicos Islands already have central registers or similarly effective systems in place. Montserrat has also committed to establishing a public register, and we have recently signed a memorandum of understanding with Anguilla to fund its electronic search platform. In the case of Anguilla, the British Virgin Islands and the Turks and Caicos Islands, progress has been made notwithstanding some of the most challenging circumstances caused by last year’s hurricanes.

These arrangements, which provide UK law enforcement authorities, on request, with access to beneficial ownership information within 24 hours and within one hour in urgent cases, are already bearing fruit. As of 8 February, they had been used more than 70 times and the information obtained by UK law enforcement authorities as a result has been used to enhance intelligence leads and to support ongoing criminal investigations into illicit finance. It is important that we continue to work with the overseas territories and the Crown dependencies to implement fully these arrangements and, where necessary, to make improvements to the mechanisms for the exchange of information. We also have the statutory review of these arrangements that will report to Parliament by July 2019, and I remain confident that that will provide further evidence to all concerned of the benefits this provides to law enforcement authorities.

We should be clear that the arrangements go beyond the current international standards set by the Financial Action Task Force; these do not yet require private, let alone public, registers, reflecting a lack of international consensus in this important area. Imposing public registers on the overseas territories now carries with it the risk of a flight of business from them to other less regulated jurisdictions where our law enforcement authorities would not have the same level of access to beneficial ownership information as they do under the existing arrangements.

The Government have been consistently clear about their desire for public registers to become the global standard. Let us also be clear that the overseas territories do not oppose this, once there is an international standard. As I set out in my Written Ministerial Statement on 1 May, the Government will use their best endeavours, diplomatically and with international partners, to promote public registers of company beneficial ownership as the global standard by 2023. We would also expect the Crown dependencies to adopt public registers in that event.

I should also like to take this opportunity to place on record my deep concern about some of the intemperate language that was used in the other place about our overseas territories. References to “slave labour” and “money will go to where it is darkest” are liable to be misconstrued and are quite unacceptable in this context.

I would also like to use this opportunity to rebut the widely held misconceptions about the overseas territories. They are important financial centres for investors around the world. They have successful industries because they comply with regulatory standards and have taken significant steps on transparency. All overseas territories with financial centres have committed to greater tax transparency, by adopting the new global OECD standard for the automatic exchange between jurisdictions of taxpayer financial account information, and have started to exchange this information. In addition, HMRC has received data since September 2016 on accounts held in the overseas territories by UK taxpayers. Taken together, these measures are an important tool in combating tax evasion, and we welcome the co-operation and collaboration that we have received from both the overseas territories and the Crown dependencies in this area.

I thank noble Lords for their indulgence in allowing me to put on record the Government’s position and our thoughts on where we currently are. The overseas territories are an important part of what constitutes Britain today. However, notwithstanding the arguments I have made, the other place has sought to change the basis. Let me reiterate, with the words with which I started, that the Government will ultimately respect the will of Parliament on this issue and will now work constructively and collaboratively with the overseas territories towards the best possible outcomes. Let me assure noble Lords—and our overseas territories as well—that we will use our best endeavours and a supportive, constructive and collaborative approach in the international sphere to promote public registers of company beneficial ownership as the global standard, so that we can, as the overseas territories agree, achieve a level playing field in this area—a principle that we are all agreed on. I beg to move.

Amendment 22A (as an amendment to the Motion on Amendment 22)

Moved by

Break in Debate

I welcome the commitment in the other place. I also welcome the fact that the Government decided not to oppose the amendment. It is now here because they did not oppose it. It is therefore right that the Government now determine how best to take it forward. It is a public commitment which I hope they will take forward. I do not underestimate the issues of concern raised by the overseas territories, nor their need to ensure a level playing, because, after all, until we have global agreement, we will not stop this problem. How do we achieve that global agreement? I agree with David Cameron that it is about us taking the lead, and I am grateful that the House of Commons and the Government have now taken the decision to do that.

Lord Ahmad of Wimbledon - Hansard

My Lords, I am grateful to all noble Lords for an extensive, well-reasoned, well-argued and expert debate in your Lordships’ House. I am grateful in particular to my noble friend Lord Naseby, who presented a case for the overseas territories which I empathise with. Noble Lords who were in the Chamber when I opened this debate would have heard the points that I made. I will respond to a few specific points and questions raised, but I want first to set the record straight. First and foremost, the Government’s position is what it was when the Bill left your Lordships’ House. As the noble Baroness, Lady Northover, said, the Government defeated the amendment tabled by the noble Baroness, Lady Stern. That was done because of reasoned debate and expert insight, which has been reflected in your Lordships’ House again today.

As my noble friend Lord Hunt said, my noble friend Lord Naseby has allowed us all an opportunity again to demonstrate the wisdom, insight and expertise your Lordships have, but the point of principle highlighted by the noble and learned Lord, Lord Brown, remains: notwithstanding the valuable discourse that we have had, the House of Commons has sought to vote otherwise. In that regard, I want to clarify a few points.

My noble friend Lord Northbrook mentioned that it was a government amendment. Of course, it was not; it was tabled from the government Benches—it was a joint amendment. In light of the support that the amendment had gathered, the Government decided not to oppose it. My noble friend Lord Naseby referred to the Government’s amendment being tabled late in the day. Let me assure my noble friends and your Lordships’ House that we had been in extensive negotiations with many Members of Parliament, including those of other parties and most notably the Scottish National Party, on the important issues of the constitution and about this Parliament voting on something that would apply to parliaments that did not have a say in the debate taking place—a point well made by the noble Earl, Lord Kinnoull. We were trying to find a way forward that respected both the drive for transparency, which many noble Lords have raised today, and the constitutional settlement with the overseas territories and Crown dependencies. It was also important that we continued to do this to reach the cross-party consensus that was being sought. We brought further amendments forward on 30 April and brought that to the attention of the House to find that consensus. That is why conversations were still ongoing throughout that morning. The amendment we tabled was taken as in order but, as I said in my opening remarks, it was not then debated or taken for debate by the Speaker of the House of Commons.

That said, we have had an extensive debate. The noble Lord, Lord Anderson, who I see is not in his place as such, asked for comment on the Foreign Affairs Committee’s report. We are looking at that report, which was issued this morning, carefully but the Prime Minister has made the general principle clear. I say to all noble Lords that there is not a difference between ourselves and the Governments of the overseas territories. Everyone wants to see us tackle illicit finance effectively. Let me assure the noble Lord, Lord Collins, that it remains a priority for this Government and that we will continue to take a leading role in this respect.

The noble Lord, Lord Beith, my noble friend Lord Naseby and my noble and learned friend Lord Mackay all touched on the important issues of the constitutional arguments. Our position in the light of the circumstances set out in the 2012 White Paper has not changed. We believe that the fundamental structure of our constitutional relationships is the right one. Of course, we retain the power to legislate directly and have done so, as I said in my opening remarks, but in this case we would prefer not to have done so without consent. However, as we have all heard, we are all in this situation since the decision taken by the House of Commons.

My noble and learned friend Lord Mackay raised how this provision will come into force. As I always do, I listened carefully to his insight on this matter and I can confirm that it will not come into force through Royal Assent; it will come into force and commence by regulations. We need to establish the detail, as he said, but I listened carefully to the points he raised in this respect.

My noble friend Lord Faulks asked about the next Bill and I again pay tribute to his efforts in this regard. Let me assure him once again that we have committed to bring forward legislation early in the next Session on the important issue, which he has raised during debate on this Bill, on the register of overseas companies that own UK property. We anticipate that that register will be ready for use in 2021.

The noble and learned Baroness, Lady Butler-Sloss, pointed to other jurisdictions such as Gibraltar. At this point, I acknowledge the contributions of my noble friend Lord Naseby and other noble friends, and noble Lords across the Chamber, who acknowledged the efforts that our overseas territories have made. While I totally accept the principle highlighted by the noble Lord, Lord Collins, and the noble Baroness, Lady Northover, of the importance of transparency—of seeing that flow of illicit finance coming to an end—let us not forget that, in the UK, we have a public register. This is not a panacea to end this issue. It needs concerted action, which is why I have been vocal in my defence of the overseas territories and not just, as the noble Lord, Lord Beith, pointed out, because I am the Minister responsible. Genuinely, when we look at the track record from the overseas territories—the exchange of notes that are operational and which we are reporting back on, or the accessibility for tax and law enforcement agencies—those jurisdictions have been co-operating fully and effectively. That is why I, as the Minister responsible, made that robust defence of the overseas territories. Not only has progress been made; the overseas territories are ahead of the curve. There is just not a case for not doing something until the others catch up, as they are already fully co-operating.

Several noble Lords alluded to the EU list. Anguilla, Bermuda, the BVI, the Cayman Islands and all three Crown dependencies are not included on any list because they are deemed to have been holding back by the EU Code of Conduct Group. They have been put on lists and acknowledged for being co-operative jurisdictions. All our Crown dependencies and overseas territories with financial centres are already committed to global tax transparency standards, which we all agree on, and the commitments that they have made go beyond those. I say again for the record that there is no grey list. All the overseas territories, as the noble Earl, Lord Kinnoull, highlighted, have made great strides, ahead of many other jurisdictions, in ensuring that they adhere not to any international standard but to the principles of ensuring that they can address the fact that law authorities and tax authorities can access such registers.

That said, we are in a position where the other place has decided—on a cross-party basis in certain respects, as the noble Lord, Lord Collins, said—that it is its will to go forward with public registers for the overseas territories, and it is the Government’s position that we have accepted that point of the elected Chamber. In doing so, though, I assure my noble friend Lord Naseby and others who have spoken about the overseas territories that from a government perspective we will seek to ensure that we collaborate and co-operate fully and work with the overseas territories to ensure that we get the results we want. We do not want to disable the overseas territories and we do not want them to lose out, but there is a reality of decisions that this Parliament has taken, and they have implications. We need to ensure that we work effectively and collaboratively with those overseas territories to ensure that we can still sustain and strengthen their economies for years to come.

I put on record for my noble friend Lord Naseby that I am very grateful to him for once again allowing me to articulate the Government’s position and my position as the Minister responsible for the overseas territories. I am also grateful for, as I am sure my noble friend has acknowledged, the great and wise expertise that we have heard from around your Lordships’ House, demonstrating again the wise insight on this subject and many. However, mindful of the fact that the other place has decided to pursue the issue of public registers with the overseas territories, an amendment that the Government have now accepted, I hope that after listening to the debate my noble friend is minded to withdraw his amendment.

Lord Naseby Portrait Lord Naseby - Hansard

My Lords, those were fine words from the Minister, and we have heard fine words from my colleagues who have supported me this evening. I hope those fine words have some strength behind them. Many noble Lords will know that I have been in the two Houses for 44 years. I deeply respect the rights of the House of Commons, so it is not with an easy heart that I resist the temptation to test the views of this House.

I have reflected deeply on this. I am trusting my noble friend on the Front Bench to move this forward. As my noble and learned friend Lord Mackay of Clashfern said: justice for all—which means, in particular, justice for all the overseas territories. I shall watch, be vigilant and challenge, but on this occasion I beg leave to withdraw the amendment.

Break in Debate

Moved by

Lord Ahmad of Wimbledon - Hansard

That this House do agree with the Commons in their Amendment 23.

23: Clause 46, page 34, line 25, at end insert—

“( ) Nothing in this Act affects any power exercisable in relation to ships by virtue of the prerogative of the Crown.”

Break in Debate

Moved by

Lord Ahmad of Wimbledon - Hansard

That this House do agree with the Commons in their Amendment 24.

24: Clause 47, page 34, line 38, leave out subsection (3) and insert—

“(3) Regulations under section 1 may amend the definition of “terrorist financing” in section 43(4) so as to remove any reference to a provision of regulations that is revoked by regulations under section 1.

(3A) Regulations under section 1 may amend the definition of “terrorist financing” in section 43(4) so as to add a reference to a provision of regulations under section 1 that contains an offence, but only if—

(a) each purpose of the regulations containing the offence, as stated under section 1(3), is compliance with a UN obligation or other international obligation, or

(b) paragraph (a) does not apply but the report under section 2 in respect of the regulations containing the offence indicates that, in the opinion of the appropriate Minister making those regulations, the carrying out of a purpose stated in those regulations under section 1(3) would further the prevention of terrorism in the United Kingdom or elsewhere.”

Lord Ahmad of Wimbledon - Hansard

I am sure the House willed that I move this formally but for good order I should speak to it, although I am sure I am not expressing the Deputy Speaker’s sentiments in any way.

This group contains the remainder of the amendments to the Bill made in the other place. Amendment 26 seeks to clarify the interaction of the powers in the Sanctions Bill and the European Union (Withdrawal) Bill. It has been prompted by amendments to the European Union (Withdrawal) Bill tabled by the Government during its passage. Amendment 26 does not change the intent of the sanctions Bill, nor does it change the scope of the powers contained in the Bill. It makes clear that any restrictions in the European Union (Withdrawal) Bill on the modification of retained EU law do not prevent Sanctions Bill powers being exercised as they were intended. The Government believe that the amendment is necessary to provide certainty and avoid any confusion about the interaction of the two Bills in this area.

Amendment 29 is a routine procedural amendment that removes the privilege amendment inserted in this House, which ensures that there are no amendments that would raise taxes or impose charges.

Amendment 24 makes changes to the ability to update the definition of terrorist financing, fulfilling a commitment that the Government made on Report in your Lordships’ House. It retains the ability to remove obsolete references from the definition, but restricts the ability to add new terrorist financing measures by way of sanctions regulations. Those new measures can now be added to the definition of terrorist financing only if the new measures are made either for the purpose of compliance with international obligations, or for the purpose of furthering the prevention of terrorism in the UK or elsewhere.

Noble Lords will be aware that Schedule 2 to this Bill, as already approved by your Lordships’ House, provides an express power permitting the Government to make anti-money laundering regulations that correspond or are similar to the money laundering regulations 2017, or to amend or revoke those regulations. These powers will enable the Government to update the UK’s anti-money laundering regime to reflect evolving international standards and address emerging risks.

Amendment 33 is also consequential on amendments to the EU withdrawal Bill, and confirms that these powers can be used once we leave the EU, in connection with the EU funds transfer regulation—which regulates payment service providers—and other EU-level legislation made under the fourth money laundering directive. This applies in particular to the existing EU list of high-risk third countries, in connection with which enhanced due diligence is required. This amendment provides legal certainty regarding the Government’s ability to update this legislation, which will be part of UK law, using the powers conferred through the Bill. This will ensure consistent treatment of the money laundering regulations 2017 and the closely interlinked legislation which also came into force last year. With those explanations, I beg to move.

Baroness Northover Portrait Baroness Northover - Hansard

I could say that I am going to test the opinion of the House, but I do not think that that would work. I just take the opportunity of this group to thank the Minister and the Bill team for their careful and constructive engagement on the Bill. Obviously, we would prefer that we were not having to take this legislation through, but if we leave the EU it will indeed be needed.

I also thank those on these Benches who have assisted on the Bill: my noble friends Lady Sheehan and Lord McNally and, especially on the anti-money laundering part, Lady Kramer and Lady Bowles, who single-handedly analysed and proposed restructuring of that part of the Bill and engaged with the Bill team and the Treasury, drawing on her experience as a former chair of the economics committee of the EU.

I also thank the noble Lord, Lord Collins, and his team, and the noble and learned Lord, Lord Judge, and the noble Lord, Lord Pannick, for their deep and constructive engagement.

As the Minister quickly discovered, although the subject matter of sanctions and anti-money laundering is not exactly controversial, the means of tackling it and the carryover into wider Brexit legislation in terms of powers taken meant that this was a forerunner to the EU withdrawal Bill. Above all, I thank the Minister and his team for their patience and engagement. Judging by the previous group, it sounds as though he still has much to do.

Lord Ahmad of Wimbledon - Hansard

My Lords, I am grateful to the noble Baroness, Lady Northover, and again put on record my thanks to her—and to the noble Baroness, Lady Bowles, in particular, on the issue of money laundering. In the same way, I extend my thanks to the Labour Front Bench, particularly the noble Lord, Lord Collins, and others in your Lordships’ House.

As I said when the Bill passed from your Lordships’ House, we have seen co-operation and your Lordships at their best. I said right at the beginning that we were in listening mode, and I think that has been reflected during the course of the Bill in both your Lordships’ House and the other place. I hope that the noble Baroness is also minded to note that we learn from the wise words of others such as the noble Lord, Lord McNally, and that in introducing this group, I resisted using the word “technical”. I commend the amendments.

Motion on Amendment 24 agreed.

Break in Debate

Moved by

Lord Ahmad of Wimbledon - Hansard

That this House do agree with the Commons in their Amendments 25 to 34.

25: After Clause 49, insert the following new Clause—

“Duties to lay certain reports before Parliament: further provision

(1) In this section “a reporting provision” means section 2(4), (Report in respect of offences in regulations)(2) or 40(2) or paragraph 20A(2) of Schedule 2 (duties to lay before Parliament certain reports relating to regulations).

(2) Where more than one reporting provision applies in relation to particular regulations under section 1, the reports to which those provisions relate may be contained in a single document.

(3) If a reporting provision is not complied with, the appropriate Minister who should have complied with that provision must publish a written statement explaining why that Minister failed to comply with it.

(4) Subsection (5) applies where a reporting provision applies and—

(a) a statutory instrument containing the regulations concerned, or

(b) a draft of such an instrument, is laid before the House of Commons and House of Lords on different days.

(5) Where this subsection applies, the reporting provision in question is to be read as requiring the laying of a copy of the report to which that provision relates—

(a) before the House of Commons at the time the instrument or draft mentioned in subsection (4) is laid before the House of Commons, and

(b) before the House of Lords at the time that instrument or draft is laid before the House of Lords.”

Sanctions and Anti-Money Laundering Bill [HL] Debate

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Sanctions and Anti-Money Laundering Bill [HL]

(3rd reading (Hansard): House of Lords)
Lord Ahmad of Wimbledon Excerpts
Wednesday 24th January 2018

(2 years, 7 months ago)

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1: Clause 43, page 33, line 16, leave out paragraphs (a) and (b) and insert—

“(a) enabling or facilitating the detection or investigation of money laundering, or preventing money laundering;(b) enabling or facilitating the detection or investigation of terrorist financing, or preventing terrorist financing;”

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

My Lords, it is a pleasure to stand before the House once again, and to speak to Amendments 1, 2, 5, 6 and 7. Although these are tabled as government amendments, they have been prepared through close collaboration with noble Lords. In particular, I convey my thanks for the collaborative and constructive engagement that we have had with the noble Baronesses, Lady Bowles and Lady Kramer.

I said at Second Reading, and have said throughout the Bill’s progress through your Lordships’ House, that I intended to co-operate and work constructively with all noble Lords as this important Bill progresses through the House. I am pleased—and I am sure that the sentiment is shared by all noble Lords—that we have been able to conduct debate on the Bill in this very spirit and that the noble Baronesses have been able to sign these government amendments. They improve the Bill, and I hope that the amendments which we will discuss today will further satisfy all those in your Lordships’ House that the powers in the Bill are appropriate for the UK’s future anti-money laundering regime.

In brief, Amendment 1 requires that future regulations made under Clause 43 can only make provision which enables or facilitates the detection or investigation of money laundering or terrorist financing. Power remains within Clause 43 to make regulations that prevent money laundering or terrorist financing and to implement the standards of the Financial Action Task Force. This clarifies the purposes for which regulations can be made and addresses concerns that have been raised by noble Lords.

Amendment 2 is a technical change which extends the definitions of money laundering and terrorist financing contained within Clause 43(4) to the proposed new clause that would be introduced in connection with the register of beneficial ownership of overseas companies that own UK property through government Amendment 3, which I will speak to later today. This amendment is necessary to ensure that the definitions already contained within Clause 43 are consistently applied throughout the sections of the Bill that relate to anti-money laundering.

Concerns have been raised over the breadth of paragraph 2 of Schedule 2. Amendment 5 addresses these concerns by limiting the ability of regulations made under Clause 43 to require only relevant government departments, anti-money laundering supervisory authorities, and persons carrying on a relevant business to identify and assess risks relating to money laundering, terrorist financing or other threats to the integrity of the international financial system. This also clarifies the scope of the power and essentially reflects the current position within Regulations 16 to 18 of the money laundering regulations 2017. This narrowing of the scope of potential duties to carry out such risk assessments is consistent with the approach currently taken by the United Kingdom’s anti-money laundering framework.

Amendment 6 will ensure that any regulations made under paragraph 3 of Schedule 2 to require a relevant person to adopt policies, controls and procedures must also fulfil the condition that these policies, controls and procedures are appropriate to the size and nature of the relevant person’s business. This will provide further certainty for firms that our existing approach within the money laundering regulations 2017 will not undergo fundamental change after the UK ceases to be a member of the European Union.

Break in Debate

Lord Collins of Highbury Portrait Lord Collins of Highbury (Lab) - Hansard

My Lords, I will save my thanks for later, when we consider the Motion that the Bill do pass. Before then, I want to echo the comments about how this Bill has proceeded in terms of the concerns of noble Lords which, of course, have turned on how we as a Parliament can constrain the Executive when they are seeking powers. Of course, this is the first Brexit Bill that the House has considered, and we heard earlier that we have another Bill on its way here. It is my intention to speak in the debate on Second Reading of that Bill to raise again our concerns about an Executive power grab, in particular when it concerns the important issue that the noble and learned Lord, Lord Judge, raised about powers to create criminal offences.

In one of those debates, the noble and learned Lord—of course, the noble Lord, Lord Pannick, also raised these issues—gave us a history lesson about Henry VIII. What struck me was when he said that not even Henry VIII had the nerve to take these powers. Not only have this Government had the nerve, but even when the House spoke overwhelmingly on this subject, we still have errors creeping into the Bill as it has been presented to us today. I hope that this is an error and that, when the Bill goes to the other place, we will not see an attempt to grab power back and that we will get this sorted out in accordance with the wishes of this House.

On the anti-money laundering provisions, as I said, this House, across the board, has done an excellent job of scrutiny, and I think the Minister has done an excellent job of listening to our concerns.

Lord Ahmad of Wimbledon - Hansard

My Lords, I once again thank noble Lords for their support on these amendments. I have listened very carefully, as I always have, to the noble and learned Lord, Lord Judge, on the issue of criminal offences. I think he referred to Clause 17 and Schedule 2. I assure him that we will return to this in the other place to ensure the consistency of the drafting. I will certainly take this up, but I can give him that reassurance.

Apart from that, I wish again to extend my thanks to all noble Lords who have engaged constructively. To pick up on the point made by the noble Baroness, Lady Kramer, I understand that the noble Baroness, Lady Bowles, was out in New Zealand. It is a good example for all of us that, if you have a 23-hour or 24-hour flight, drafting amendments is one way of utilising that time. I beg to move.

Amendment 1 agreed.

Break in Debate

3: After Clause 43, insert the following new Clause—

“Reports on progress towards register of beneficial owners of overseas entities

(1) The Secretary of State must, after the end of each reporting period, publish a report explaining the progress that has been made during that period towards putting in place a register of beneficial owners of overseas entities.(2) For the purposes of this section, the following are reporting periods—(a) the period of 12 months beginning with the day on which this section comes into force; (b) the period of 12 months beginning with the day after the end of the period mentioned in paragraph (a);(c) the period of 12 months beginning with the day after the end of the period mentioned in paragraph (b).(3) The first and second reports under this section must include—(a) a statement setting out the steps that are to be taken in the next reporting period towards putting the register in place, and(b) an assessment of when the register will be put in place.(4) The third report under this section must include a statement setting out what further steps, if any, are to be taken towards putting the register in place.(5) Where a report is published under this section the Secretary of State must lay a copy of it before Parliament.(6) For the purposes of this section “a register of beneficial owners of overseas entities” means a public register—(a) which contains information about overseas entities and persons with significant control over them, and(b) which in the opinion of the Secretary of State will assist in the prevention of money laundering.”

Lord Ahmad of Wimbledon - Hansard

My Lords, this amendment seeks to set down in legislation the commitment I made on Report that the Government would make regular reports to Parliament on the progress being made on its proposal to create a register of beneficial owners of overseas entities that own or buy property in the UK or participate in UK government procurement. The new clause requires the Secretary of State to publish and lay before Parliament three reports on the progress made to put in place the register. Each report will be due after the expiry of a 12-month reporting period. The first and second report must set out the steps that will be taken in the next reporting period towards putting the register in place and an assessment as to when the register will be put in place. The third and final report must also include a statement setting out what further steps, if any, are to be taken towards putting the register in place.

Noble Lords will have noted that my noble friend Lord Henley, the Business Minister, this morning laid a Written Ministerial Statement before the House confirming the Government’s intention to publish a draft Bill for scrutiny this summer, as I said on Report, and to introduce a Bill in the second Session—an assurance I gave on Report—and for the register to be operational in 2021.

I also reassure my noble friends, particularly my noble friend Lord Naseby, that the amendment places a duty on the Government to report on progress against implementing a public register of beneficial ownership of overseas legal entities involved in property or procurement within the UK, and will not cover the overseas territories. It would be fair to say that the House had quite a frank debate on this subject only last week. As the House decided, it is for the legislatures of the overseas territories to implement a public register. I reassure noble Lords that we will continue to work with our overseas territories. Indeed, the review periods of 2018 and 2019 that I highlighted will also reflect our continued co-operation with the overseas territories concerning their obligations.

I therefore hope that this covers the assurances that noble Lords, particularly my noble friends, sought, and that my noble friend Lord Naseby will be minded not to press his amendment. I beg to move.

Amendment 4 (to Amendment 3)

Moved by

Break in Debate

Lord Collins of Highbury Portrait Lord Collins of Highbury - Hansard

I will be very brief. I congratulate the noble Lord, Lord Faulks, on pushing this issue. I do not think he owes anyone an apology for doing so because it is vital that we tackle this. This amendment is about the commitment that was made but has been delayed for a long time. My concern, and that of the noble Lord, Lord Hodgson, is that the wording of the amendment potentially takes us to 2022 before we see something. I think all noble Lords will be behind the noble Lord, Lord Faulks, in putting pressure on the Government to ensure that they properly meet their commitment.

Still on public registers, I agree with the noble Baroness, Lady Kramer. I am glad to see that the noble Baroness, Lady Stern, is in her place. She made a powerful case for public registers in overseas territories. The front page of today’s Guardian has an article about Appleby and FBME Bank, which was banned from the US financial system. Appleby is a Cayman Islands-registered holding company. Anyone who reads that article will know that this issue will not go away and we will have to come back to it.

Lord Ahmad of Wimbledon - Hansard

My Lords, I am grateful to noble Lords. I reiterate my thanks to my noble friends Lord Faulks and Lord Hodgson for pressing the Government and holding us to account in this respect and ensuring that we move forward. I am also grateful to my noble friend Lord Naseby, who sought clarification. I have looked carefully at his amendment and I think what the Government have tabled and his amendment have the same intent. However, in the interests of ensuring thoroughness and completeness, I have asked officials to look again to make sure that the intent behind his amendment is achieved.

The Government have committed to the new Bill establishing the register. It will be primary legislation and will pass through your Lordships’ House, so I am sure there will be further discussions and plenty of opportunity to ensure that all issues, particularly those raised by my noble friend, are addressed. I assure him that we feel the intent behind his amendment has been achieved. I will, however, look at this again, and if there is a need to do anything further, we will seek to do that in the other place.

My noble friend Lord Hodgson asked me when Royal Assent might be granted. It is not within my gift as the Minister at the Dispatch Box to confirm that, but we are expecting Royal Assent at the end of this Session. On accountability, I reassure my noble friend that through the additional ministerial Statement laid today, I have sought to provide as much detail as I can at this juncture in the parliamentary timetable. However, as I said to him in our bilateral meetings—I believe this was communicated to him subsequently in other meetings we had—we have worked back, and as the Written Ministerial Statement again confirms, we are looking to have the register operational by 2021. I am sure there will be other opportunities. As for the Government laying a report, I confirm that the 12- month clock—the countdown—will commence as soon as Her Majesty has signed off on the Bill. However, it would be beyond the scope of my responsibilities to give an absolute, cast-iron guarantee as to when Royal Assent will be. I am sure my noble friend appreciates and respects that we have to follow due process. However, the Government are committed to the register being operational in 2021. From the points made by other noble Lords, I appreciate that wherever one is sitting in your Lordships’ House, there is no disagreement on the need to move forward on this and to do so as rapidly as we can.

My noble friend raised another issue, about procurement. Again, to reassure him on that, I draw his attention to the Written Ministerial Statement laid today by my noble friend Lord Henley, which says:

“I am today confirming to Parliament the Government’s timetable for implementation of its policy to achieve greater transparency around foreign entities that own or buy property in the UK or participate in UK Government procurement”.

As the Bill is drafted and pre-legislative scrutiny takes place on it—if that is the process which is agreed—that will allow further discussion to address the very points my noble friend raises in that primary piece of legislation.

The point about local government is well made. As someone who served 10 years in local government, I am acutely aware of how procurement works. It will reflect the very policies adopted by the UK Government. With those reassurances, I hope my noble friend will be minded to withdraw his amendment.

Lord Naseby Portrait Lord Naseby - Hansard

My Lords, having listened to my noble friend, I am most grateful to him for the patience he has shown and the care he has taken over the Bill and this amendment. In light of the commitment he has made—as he says, if necessary, some amendment could be made in another place—it is my pleasure to withdraw the amendment.

Break in Debate

Moved by

Lord Ahmad of Wimbledon - Hansard

That the Bill do now pass.

Lord Ahmad of Wimbledon - Hansard

My Lords, I stand before your Lordships’ House to reiterate my thanks to all noble Lords who have put a lot of time and energy into making sure that we reached the position that we have today. I would like to take this opportunity to say a few words about the progress achieved in recent months. As many noble Lords acknowledged at Second Reading, this has been the first Bill related to the UK leaving the EU to pass through this House. It has rightly, and I fully respect this, been subject to close scrutiny.

I hope noble Lords recognise the need for legislation. Indeed, I acknowledge that the noble and learned Lord, Lord Judge, notwithstanding our differences and the bridges that have been built in reaching agreement, has consistently recognised the necessity for such a Bill because it allows us to ensure that we can update and lift sanctions, as well as address—here I am grateful to the noble Baroness, Lady Bowles—the issue of an anti-money laundering framework after we leave the EU. I said at Second Reading, and indeed at all stages as progress was made on the Bill, that getting this right will enable the UK to continue to work closely with international partners—yes, our European partners as well—to ensure that we uphold our legal obligations and promote and protect our shared interests and values.

To offer the House some perspective, so far we have dealt with a total of 214 amendments. I am told that we have spent 24 hours and 24 minutes on the Bill in your Lordships’ House—someone has clearly been timing us down to the minute. Noble Lords have listened carefully to the arguments put forward on all sides, and I hope that is reflective of the Government’s attitude. In my opinion, that demonstrates your Lordships’ House at its best. I am confident that the interventions by noble Lords have led to an improved piece of legislation. I am also satisfied that we have been able to agree a range of government amendments, and I am delighted that in several cases these have been supported by noble Lords from across the House, reflecting what I believe is a convergence of views on a number of issues, such as the policy framework for anti-money laundering measures that we have debated today.

I and my officials have engaged closely with noble Lords, both ahead of the Bill and during its passage. In this regard, I put on record my particular thanks to the Opposition Benches, particularly the noble Lord, Lord Collins. We have joked with our respective partners that we have probably seen more of each other than we have of our other halves. Perhaps, with the moving of the Bill, we will be able to provide them with some adequate time. That said, I very much welcome the constructive nature with which the noble Lord has engaged in this, well supported in this regard by the noble Lord, Lord Lennie, with the constructive proposals that he has put forward, and which are now reflected in the Bill, to make absolutely sure that these powers are exercised by future Governments in a spirit of transparency and accountability.

Equally, I am pleased to acknowledge the support, constructive dialogue and exchanges that I have had with the noble Baroness, Lady Northover, for which I am grateful. As I said earlier, I am also grateful to her colleagues, the noble Baronesses, Lady Bowles and Lady Kramer, who have engaged constructively both directly with myself and with real impact, as the noble Baroness acknowledged, on the anti-money laundering part of the Bill.

On my own side—this shows that we are tested from all sides of your Lordships’ House—as I look over my shoulder, I see three noble Lords who have engaged on this, particularly my noble friend Lord Faulks, who has really pushed on the important issue of beneficial ownership, which we have just discussed. I use the term quite directly: he has ensured that the Government’s feet have been held to the fire on that issue. I also thank my noble friend Lady Goldie, who has supported me from the Government Front Bench throughout the passage of the Bill. I am also grateful to other Whips who have supported in this regard.

It would be remiss of me not to thank the noble and learned Lord, Lord Judge, and the noble Lord, Lord Pannick, who, I am told, tabled a total of 50 amendments between them, with a particular focus on strengthening procedural safeguards. I acknowledge and recognise their great expertise and thank them for their collaborative and collegiate approach, which has done so much to improve the Bill.

I would like to thank my Bill team. We have heard from various noble Lords that my team has devoted a huge amount of time and energy to making this work. I thank in particular Louise Williams, the Bill manager, who has also been planning her wedding while working on the Bill; Adam Morley; Jennifer Budniak; and the Bill lawyers, particularly Luke Barfoot and Michael Atkins. There has been a team of more than 50 officials from across government who have supported them, and it has been a truly cross-Whitehall effort. This Bill has played a large part in my life over the past three months but it is only part of my portfolio. The Bill team has been working on it only since last April, but they will continue in their role as a team to shepherd the Bill through the other place. As I move on to other challenges I believe that, with our team, the Bill remains in good hands.

Baroness Northover Portrait Baroness Northover (LD) - Hansard

My Lords, when the Minister introduced the Bill at Second Reading, he described it as “technical”. It was, of course, about issues on which we all agree: enabling us to have a sanctions regime and to counter money laundering. No sooner were those words out of his mouth than he and all of us registered how important the Bill was in constitutional terms. It is indeed a forerunner of the massive legislation coming our way in the European Union (Withdrawal) Bill, and much else besides.

I therefore thank the Minister for his mental and political flexibility in realising the significance of the way in which this Bill has been drawn up, but above all for being so ready to engage. I thank him today for his latest statement that he will address the inconsistencies on criminal offences immediately in the Commons. My thanks, too, to the Bill team for its equal readiness to engage with us, even responding to emails on Sundays—I think that was Jonny and Louise—when it was clearly beyond the call of duty.

Issues in the Bill included the usual kind of areas where we sought improvements. We failed to take forward the amendment tabled by the noble Baroness, Lady Stern, but I am sure we will return to that. In other areas we have made progress, either in the Bill or through promises that the Minister made in regard to actions that the Government will take; for example, in relation to NGOs working in fragile states and those who may or may not bank them.

However, of most importance were the constitutional issues. Here we are absolutely indebted to the noble and learned Lord, Lord Judge, and the noble Lord, Lord Pannick, for the clarity of their thinking and their determined engagement. I also think that we owe a huge debt to my noble friends Lady Bowles and Lady Kramer—I thank the Minister for that acknowledgement—for spotting quite how much needed to be addressed on the anti-money laundering side of Bill, and setting about reconstructing it. The best result is indeed when the Government bring forward amendments in response to such concerns.

I am extremely grateful to those in my group who have engaged on this Bill. I can hardly describe myself as leading them—they are far too experienced and knowledgeable to need leading. My special thanks go to my noble friends Lord McNally and Lady Sheehan as well as to my noble friends Lady Kramer and Lady Bowles for the extraordinary amount of work they put in. I also thank the noble Lord, Lord Collins, who has been his usual wonderful self throughout this Bill, and his colleagues, the noble and learned Lord, Lord Davidson, and the noble Lord, Lord Lennie. The Bill signals much beyond what it aims to cover, and we have worked collectively around the House, including with the Government. I thank the Minister for ensuring that that work was in the end so productive. He is now temporarily liberated from the Bill—the Bill team, of course, is not—until it returns to us in due course, hopefully in a very sound fashion.

Break in Debate

Lord Collins of Highbury Portrait Lord Collins of Highbury - Hansard

My Lords, I add my thanks to everyone involved in the Bill. I start by thanking my own team, my noble friend Lord Lennie and my noble and learned friend Lord Davidson. These people do not often get thanked publicly, but I thank also the team in the Labour opposition office, including Catherine Johnson, who did a particularly good job in helping me to be well prepared for my numerous meetings with the Minister.

I also thank the Lib Dem Benches, particularly the noble Baronesses, Lady Northover, Lady Kramer and Lady Bowles. We, again, had numerous meetings. One thing that the Minister omitted to mention—he mentioned all the time that we spent in Committee, in the Chamber, scrutinising the Bill—was that we spent substantial time in meetings outside the Chamber. In fact, the Minister got quite anxious at one point when I turned up to meetings with the noble Lord, Lord Faulks. I am sure he felt that I was in the wrong meeting at the time. We had very good cross-party and cross-Bench support, and I add my thanks to the noble Lord, Lord Pannick, and the noble and learned Lord, Lord Judge. We now have a better Bill. It is not necessarily a good Bill in all respects, but it is a much better one than what was originally delivered.

I also pay tribute and thanks to the Bill team, particularly Louise Williams, Adam Morley and Jennifer Budniak, and of course the lawyers. I think I had the most pleasure dealing with the lawyers, and I hope Luke Barfoot and Michael Atkins enjoyed those exchanges as well. They did a terrific job; they are great public servants and, again, they deserve our thanks and gratitude. Obviously, as the noble Baroness, Lady Northover, said, their work will continue.

One thing that surprised me was that at one of the lengthy meetings I had with the Minister, the BBC fly-on-the-wall cameras were there. I hope to God it is better than the programme it did on the House of Lords. I certainly hope I come across much better than some noble Lords did, but let us wait and see—I do not know when it will come out.

My final thanks, of course, go to the Minister. He said at the beginning of this Bill, “I am in listening mode” and I know we joked about that, but honestly, he has listened and his responses prove how much he listened. I am very grateful to him for dealing with us so well on this Bill.

Lord Ahmad of Wimbledon - Hansard

My Lords, I want again to thank all noble Lords.

Bill passed and sent to the Commons.

Sanctions and Anti-Money Laundering Bill [HL] Debate

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Sanctions and Anti-Money Laundering Bill [HL]

(Report: 1st sitting: House of Lords)
Lord Ahmad of Wimbledon Excerpts
Monday 15th January 2018

(2 years, 8 months ago)

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Lord Howell of Guildford Portrait Lord Howell of Guildford (Con) - Hansard

Can I just ask my noble friend a question, and apologise to your Lordships that I was not involved in earlier stages of this legislation? Was there ever a time when, in deciding on sanctions policy, we did so other than in alliance with other nations? Unilateral sanctions can always be evaded, and even collective sanctions, when they are only from the west, can be nullified by actions by China, Russia and other Asian powers, for instance. Is not the practical situation one in which we have to take account of our allies and the broad consensus of agreement with them on whether sanctions are justified, or are there individual unilateral instances that I may have missed?

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

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.

Amendment 3, in the names of the noble Baroness, Lady Northover, and the noble Lords, Lord Collins and Lord Pannick, proposes to add a more detailed set of purposes for which sanctions could be imposed. I fully recognise the importance of these additional purposes. In fact, they are all purposes for which sanctions regulations are currently, or could be, implemented by the UK, based on decisions by the UN or EU. I assure the noble Lords that it is certainly our intention to be able to maintain sanctions for such purposes after we leave the EU. As the Bill is currently drafted, the proposed requirement for a Minister to explain in writing the “good reasons” for imposing sanctions would ensure that the relevant foreign policy objectives were properly articulated and explained.

Break in Debate

Baroness Northover Portrait Baroness Northover - Hansard

My Lords, indeed this deals with some of the complexities faced by those operating for good reasons in areas where sanctions bite, and we will be returning to these issues in a later group. We will then talk about guidance and how to ensure that it is easier for financial institutions to derisk.

Amendment 39 in my name is about the mutual recognition of licences and streamlining humanitarian licensing, while Amendment 42 deals with the problems that NGOs may run into if multiple authorisations are required. Amendment 43 is about reporting, because if there is a requirement for parliamentary reporting, that assists in terms of highlighting the issues that NGOs are running into. As I say, we will be returning to these issues in a later grouping.

Lord Ahmad of Wimbledon - Hansard

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.

Amendment 42 calls for the government departments that provide the majority of funds for a humanitarian programme to arrange for a licence to be issued for the duration of the project. While I can see the logic here, the Government are concerned about the risk of this provision overlapping with the existing requirement for a licence to cover funded activities that fall within the scope of sanctions prohibitions. To mandate a licence in all circumstances, including those that would breach our compliance with UN requirements or which would be inappropriate, would undermine the sanctions themselves. The only way to square this circle would seem to be to remove government funding, and we do not want to do that.

Break in Debate

Lord Lennie Portrait Lord Lennie (Lab) - Hansard

My Lords, in relation to the clause on financial sanctions, I add my gratitude to the Minister for the way that he has engaged with us, the Cross-Benchers and those in other parties. We have turned what the noble and learned Lord, Lord Judge, described as a lamentable Bill into something approaching an acceptable Bill. There are some problems with it, but this will not be one of them. The three pre-conditions that the Minister has laid down will make it wholly exceptional that someone can be designated under the sanctions regime without identification, so the Maltese grandchildren that the noble and learned Lord referred to in Committee should feel fairly safe in their beds from here on in. We welcome the concessions made and support this part of the Bill.

Lord Ahmad of Wimbledon - Hansard

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.

Lord Pannick - Hansard

I am very grateful to the Minister, who has shown exemplary constructive engagement throughout discussions on the Bill. I am sure all parts of the House are very grateful to him and the Bill team for that.

Amendments restricting Ministers’ powers to designate by description are far from technical, and I simply point out one matter in response to the Minister. I think he suggested that, in relation to government Amendment 34, the issue would be whether the individual himself or herself would be able to identify from the description whether they were covered. In fact, government Amendment 34 goes a lot further than that, because the test under it is whether, from the description, a reasonable person would know whether the individual falls within the description. That is the test. But I am very grateful to the Minister and beg leave to withdraw Amendment 10.

Sanctions and Anti-Money Laundering Bill [HL] Debate

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Department: Foreign and Commonwealth Office

Sanctions and Anti-Money Laundering Bill [HL]

(Report stage (Hansard - continued): House of Lords)
Lord Ahmad of Wimbledon Excerpts
Monday 15th January 2018

(2 years, 8 months ago)

Lords Chamber
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Foreign and Commonwealth Office

27: Clause 9, page 9, line 36, leave out subsection (3) and insert—

“(3) Regulations under section 1 which contain a designation power must provide that where an appropriate Minister—(a) has made a designation under the power, or(b) has varied or revoked a designation made under the power (see section 18),that Minister must without delay take such steps as are reasonably practicable to inform the designated person of the designation, variation or revocation.(3A) The regulations may include provision, additional to that required by subsection (3), as to steps to be taken as regards notification or publicity where a designation has been made under the designation power or a designation made under the power has been varied or revoked.(3B) The regulations need not require a person to be notified of an intention to designate the person.”

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

My Lords, I thank all noble Lords again for their constructive engagement on this group of amendments. The government amendments I have tabled have been heavily influenced by the discussions we have had. Amendment 28 would require regulations to include provisions on notifying a person once designated and how to publicise designations. I am happy to say that government Amendment 27 does exactly that. When a person has been designated, or had their designation varied or revoked, the Minister must, without delay, take such steps as are reasonably practicable to inform the person. Sanctions regulations may also include further provision as to the specific arrangements for notification or publicity. In this regard, I am extremely grateful to the noble and learned Lord, Lord Judge, and the noble Lord, Lord Pannick, for their assistance.

Amendment 29 would require a person to be informed of their designation and to be given the fullest possible account of the reasons for designation and the steps required to address the concerns. Amendment 30 covers similar ground, while also requiring that the designated person be given the evidence underlying the designation or a gist of any evidence that is withheld for reasons of national security. In response, government Amendments 32, 37 and 59 make provision across the Bill to provide a statement of reasons to designated persons. When a person is designated, the Government will be obliged to provide a statement of the matters that the Minister knows, or has reasonable grounds to suspect, have led to the designation. I am sure noble Lords will appreciate that the Minister’s statement may exclude some matters, for reasons which I know noble Lords will understand and respect, such as when it is in the interests of national security. If a challenge is made in court, on those rare occasions when sensitive information is used to underpin a designation, the closed material procedure will apply. The courts, such as in the case of AF (No. 3), have long required the gist of sensitive material to be disclosed to enable an individual to understand the case against them. We accept that this is and will continue to be the case and the Bill does not seek to make any changes to the existing disclosure burden on the Government in such cases.

Amendment 38 would insert a new clause into the Bill requiring the appropriate Minister to exercise the power to designate only to the extent that it is proportionate to do so, having regard to the purpose of the designation and the impact on the person concerned. The government amendments I have tabled in response—Amendments 31, 36 and 58—use very similar language. They would require Ministers to consider that a designation is appropriate, having regard to the purpose of the regulations and the likely significant effects of the designation on the person concerned. I am again grateful to the noble Lord, Lord Pannick, and the noble and learned Lord, Lord Judge, for supporting these government amendments. While there seems to be a meeting of minds on this important issue, it may also be helpful if I briefly explain the thinking behind the Government’s revised language.

First, the European Convention on Human Rights entrenches individual rights, obliging the Government to consider the impact on an individual’s rights when making certain decisions. Section 6 of the Human Rights Act 1998 further ensures that the appropriate Minister must act in line with those convention rights, as informed by Strasbourg case law. We consider that this includes satisfying himself that the designation is proportionate, where convention rights are engaged, and I have been clear on this in relation to this Bill, including in Committee. Secondly, given that the Human Rights Act already requires proportionality to be considered where convention rights are engaged, a court might interpret the use of the word in the Bill to mean something different. Our amendments have tried to preserve the spirit of the intention underlying this amendment, without creating any difficulty of interpretation. As a result, the government amendments provide for a balancing test for designations between the purpose of the regulation and the impact on the individual, while avoiding an explicit reference to “proportionality”.

Amendment 50 requires the Government to provide specific guidance produced by the Crown Prosecution Service about the prosecution of sanctions breaches. The Government wholeheartedly support and have publicly committed to producing clear and accessible guidance on sanctions implementation and enforcement, both in this House and throughout our consultation on the White Paper. The Crown Prosecution Service already publishes guidance on how the public interest is taken into account in any decision to prosecute and this test is the same one that will be applied in decisions to prosecute sanctions offences. The procurator fiscal in Scotland and the Public Prosecution Service for Northern Ireland publish similar guidance. The Government’s view is that no additional public interest guidance is necessary simply for a sanctions prosecution decision.

The Bill will provide for the Government to issue guidance on the content and implementation of sanctions. Clause 36 requires 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. Clause 36 is a more comprehensive duty than that specified in the amendment to Clause 16 which I have said is unnecessary. It has been drafted so as to allow comprehensive guidance on all sanctions prohibitions and requirements to be prepared and consulted on by the appropriate sources of expertise. For financial sanctions, the Office of Financial Sanctions Implementation has already published a comprehensive guidance document setting out its general enforcement approach. This will be fully updated to reflect the new sanctions Bill regime.

Amendment 53 requires the Minister to respond,

“as soon as reasonably practical”

to a request to vary or revoke a designation. Government Amendments 56 and 61 are fully in line with this proposal.

Finally, government Amendments 51, 52, 57 and 60 make technical changes consequential on these changes, and I hope they will be accepted. I beg to move.

Lord Pannick (CB) - Hansard

My Lords, I have tabled, with the support of the noble and learned Lord, Lord Judge, the noble Lord, Lord Collins of Highbury, and the noble Baroness, Lady Northover, a number of amendments in this group on the subjects of procedural fairness and proportionality. The Minister acknowledged in Committee that these were topics that he and the Bill team would need to consider before Report. Given the adverse consequences of being designated, the Bill must provide for procedural fairness and the provisions must be applied in a proportionate manner. Again, I thank the Minister and the Bill team for some very helpful meetings on these subjects, and for tabling these amendments, which address my concerns.

In particular, government Amendments 31, 36 and 58 will require the Minister to be satisfied that any designation is appropriate, having regard to both,

“the purpose of the regulations … and … the likely significant effects of the designation”,

on the person concerned. That addresses the substance of my Amendment 38 on proportionality. It does not use the word “proportionality” but that does not matter. It contains the essence of proportionality and I am grateful to the Minister for confirming in his opening remarks that that is indeed the purpose of these government amendments.

Government Amendments 32, 37, 59 and 61 are also very important in placing in the Bill a requirement of procedural fairness; that is, that the person designated is entitled to a statement of the reasons why he or she has been designated. That is absolutely fundamental to any fair sanctions procedure. I recognise that the government amendments exclude any right to information the disclosure of which would harm interests such as national security, but they rightly provide that these exclusions will not allow the Minister to provide no statement of reasons. I would be grateful if the Minister could confirm that the intention here is to ensure that a person who is designated will always be entitled to at least a statement of the essence of the reasons for the designation, albeit that details which affect national security or other protected interests cannot be disclosed.

In the light of these government amendments, I am satisfied that the Bill now makes it clear that procedural fairness and the substance of proportionality are part of the administrative machinery. The Minister made it clear in Committee that this was always the intention and he made it clear—and I respectfully agree with him—that the courts would in any event hold Ministers to such basic standards of the rule of law. I am pleased that the Minister has recognised that it is appropriate to include these matters in the Bill and I thank him.

Break in Debate

Lord Lennie Portrait Lord Lennie (Lab) - Hansard

My Lords, I am also grateful to the Minister. Clearly, he has listened a lot and has provided a lot of change from the initial version of the Bill. There is a meeting of minds—there is no question about that—but the one issue that I am not sure he addressed was about the requisite steps that persons are expected to take to address the concerns which led to the designation in the first place. I would like the Minister to comment on that, but we support the changes.

Lord Ahmad of Wimbledon - Hansard

My Lords, again, I thank noble Lords. The noble Lord, Lord Pannick, asked me to confirm that the Bill makes no provision to change the ability of the designated person to be given the reasons for their designation and to be supplied with an irreducible minimum of the evidence against them. The only issue is that we have always said there would be national security elements. The amendment specifically says that,

“the regulations may not authorise the Minister to provide no statement of reasons”,

which I am sure the noble Lord has noted.

On the opportunity for the designated person to challenge their listing, which I believe the noble Lord also raised, currently designated persons and entities can challenge their designation and the content of the sanctions in EU courts. There are currently around 100 sanctions-related cases before EU courts. Those persons and entities designated under UK sanctions regulations made using the powers in the Bill will be protected by the ability to request an administrative reassessment of the Government’s decision at the time they are designated or re-designated. Designated persons under UK sanctions will also be able to challenge their designation in the High Court. The court will then have the ability to order the Government to think again and, if necessary, make declarations of unlawfulness and, in some cases, award damages.

Break in Debate

Lord Collins of Highbury Portrait Lord Collins of Highbury (Lab) - Hansard

My Lords, I thank the noble and learned Lord and noble Lords for their contributions. I agree wholeheartedly with their comments in relation to the thrust of this legislation. We are here because of another decision. We are here because we are being forced to take action speedily because of the precipice that we will be facing.

I said at Second Reading and will say now that we support this Bill because we are required to have a proper and full sanctions regime. I completely share the concerns expressed by your Lordships’ Constitution Committee. But, as I said in Committee, your Lordships’ Delegated Powers and Regulatory Reform Committee examined these clauses in some detail and did not quite share the view of the Constitution Committee. It referred to its previous memorandum on the subject and said that the reason for this clause related to the enforcement of the prohibitions and requirements set out in the regulations. In Committee, the Minister said that the Government were replicating existing enforcement regimes. He said:

“To be clear: these types of offences already exist”.—[Official Report, 21/11/17; col. 165.]

In Committee, I said that if that was the case, and the Minister was hearing us in terms of the concerns over principles, I hoped that he would come up with something better to address the concerns of the Delegated Powers and Regulatory Reform Committee. I am afraid that, as the noble and learned Lord, Lord Judge, said, I do not think that the Minister has come up with adequate provisions to address these concerns. They are limited, as the noble and learned Lord said, to some of the all-embracing powers such as determining evidence and the process for evidence. I welcome those changes but I do not think that the Government have gone far enough in terms of being very clear how these wide-ranging powers will be dealt with. If the noble and learned Lord presses this issue, I hope that the House will support him.

Lord Ahmad of Wimbledon - Hansard

My Lords, first, I thank the noble and learned Lord for tabling his amendment. Again, I also thank him for the extensive discussions we have had in this respect.

The amendments seek to remove the ability to make provision in sanctions regulations creating offences for breaches of sanctions. I say from the outset that I sympathise with the concerns that noble Lords have expressed during various parts of the debate, not just today but in previous stages. I am sure noble Lords will also acknowledge that we have done a lot of work to try to respond to these concerns. I have tabled some government amendments in this area, which the noble Lord, Lord Collins, acknowledged.

The powers in question enable offences to be created for breaches of sanctions, in line with our current practice when implementing EU legal acts. They also enable other enforcement tools to be used, such as deferred prosecution agreements or serious crime prevention orders. Having the power to punish individuals and entities for breaching sanctions deters non-compliance and ensures the measures are robust. Sanctions without teeth, as I am sure noble Lords acknowledge, are essentially meaningless. Indeed, we debated earlier an amendment that would have included preventing,

“the violation of sanctions regulations”,

as one of the explicit purposes to be set out in Clause 1. Although I argued against that amendment on technical grounds, I agree with the spirit.

EU sanctions against countries such as Russia and Syria are imposed through EU legal acts that require member states to put in place enforcement measures at a national level. In line with that requirement, the UK routinely creates criminal offences for breaches of sanctions by way of statutory instruments made under powers in the European Communities Act 1972, as well as other legislation such as the Export Control Act 2002 and the Policing and Crime Act 2017. Other EU member states implement similar enforcement measures through their national legislation.

As foreshadowed in the White Paper consultation before this Bill was introduced, the Government want to be in a position to maintain continuity in this area. Whatever one’s views on Brexit, I think there is wide support for the principle that the UK and EU should remain closely aligned on sanctions policy. If the UK’s future sanctions regime against Russia was stripped of any enforcement provisions, I am sure noble Lords would agree that this would send a very unfortunate signal to our EU partners and to other close allies. Amendments 45 and 47 would mean that breaching a sanctions regime would not be an offence. If they are passed, as existing criminal offences in EU retained law fall away when new UK regimes are introduced, we would be unable to replicate those offences in the new regimes.

We have covered some of these issues previously, and I hope that what I have said will persuade the noble and learned Lord to withdraw his amendment. As I have said, I understand the concerns that have been expressed, including today, about the scope of these powers and will set out in a moment the government amendments that I have tabled in response. But the abolition of offences from sanctions regulations clearly undermines the purpose of the Bill and would make the UK a weak link in broader international implementation of sanctions, which I am sure is not noble Lords’ intention. I know and totally accept that this House is concerned about the creation of criminal offences through secondary legislation, a point eloquently made by the noble and learned Lord, Lord Judge, the noble Lord, Lord McNally, and my noble friend Lord Deben. I can provide this House with the following reassurances.

First, the powers in Clause 16 would be used only to create offences within categories of offences that already exist in relation to sanctions. The categories are: offences for breaching prohibitions and requirements contained in sanctions regulations made under the Bill—for example, breaches of the prohibition on exporting items to North Korea—and offences relating to prohibitions or requirements imposed under regulations made under the Bill, such as breaches of or the circumvention of licence conditions.

Break in Debate

Baroness Northover Portrait Baroness Northover - Hansard

I am glad that to some extent the Government have moved in this area and I hope that, in the light of the vote that we have just had, that spirit of co-operation around the House will extend to other sections of the Bill that still need addressing.

Lord Ahmad of Wimbledon - Hansard

My Lords, I thank the noble Lord for his amendment. As he has already indicated, it would oblige the Government to conduct a re-examination of each designation on an annual basis. I agree completely on the need for sanctions designations to be based on solid evidence. The UK has pushed hard for that in the EU, and that is widely recognised—for example, in the recent report of the House of Lords EU Committee. We are committed to maintaining these high standards.

The Bill as drafted includes a robust package of procedural safeguards, which will be further reinforced by the government amendments I have tabled, including Amendment 55. The combined package will provide a high level of protection for designated persons, at least as strong as current EU standards. The Government would review all sanctions regulations annually and present the results in a written report to Parliament. Amendment 55 makes that clear on the face of the Bill; I know that noble Lords raised that point. If the report concluded that there were no longer good reasons for maintaining a UK sanctions regime, we would lift it. Any changes made to the equivalent sanctions regimes of the EU or other international partners would be examined closely as part of the annual review.

Alongside the annual review of the regulations, the Bill requires the Government to put in place a dynamic process to reassess designations upon request; the triennial review is not the only opportunity. A designated person can request a reassessment of their designation at any time, and a further reassessment when there is a significant matter that has not been previously considered by the Minister. I take the point that a designated person, once they had requested a reassessment, challenged it in court, and failed to establish any unlawfulness, would not have a further review until either there was a significant new matter or a triennial review. But what would the purpose of a further review be when the designation has been established to be lawful and nothing has changed since then? If there are new arguments to be tested, or if the passage of time has changed the situation, a further reassessment can be requested. If not, there is no need to do so.

In response to feedback from noble Lords in Committee, I am proposing to strengthen these safeguards through government amendments. The Minister would have to deal with a request for reassessment as soon as reasonably practicable, and inform the person of the decision and reasons as soon as reasonably practicable after a decision had been made. Ministers can also instigate a reassessment at any time—for example, if the person concerned has been delisted by the EU. Ministers would have every interest in initiating reassessments proactively, both in the interests of justice and to minimise the risk and cost of legal challenges. In any case, when the EU decided to revoke the designation of a person also designated in the UK, I would certainly want to reassess the corresponding UK designation.

Taken together, these provisions will ensure that UK sanctions are under constant scrutiny and the Government are obliged to respond swiftly to new information and challenges. The triennial review then provides a further backstop, ensuring that each and every designation is looked at afresh on a regular cycle. This aligns with current practice in Australia and would put us ahead of countries such as the United States and Canada, which have no such process. It does not prevent more frequent reviews, and we have mechanisms in place that oblige us to do so when appropriate. Requiring the Government to conduct these reviews every year would be extremely resource-intensive; we have had those discussions in the bilateral and constructive meetings with the noble Lord. There are finite government resources, and the noble Lord appreciated that that would take away from other important areas. However, the amendments that we have tabled ensure that the protections the noble Lord was after have been afforded. I am thankful for his co-operation in that regard.

Lord Pannick - Hansard

My Lords, I am grateful to the Minister. I beg leave to withdraw the amendment.

Break in Debate

Lord Collins of Highbury Portrait Lord Collins of Highbury - Hansard

My Lords, the noble Lord, Lord Faulks, said accurately that there was a balance to be struck here, and there is a debate to be had. I am not legally qualified and therefore wish to address the political and moral issues that have been raised. The noble Lord, Lord Pannick, said that this is an extremely rare situation and that we cannot pick and choose. The noble and learned Lord, Lord Brown of Eaton-under-Heywood, said in Committee:

“I see the force of the Government’s argument that the UK has no alternative under international law but to give effect to our obligations under the UN charter; indeed, Article 103 of the charter expressly dictates that these obligations prevail over any conflicting international law obligations.”——[Official Report, 29/11/17: cols. 703-4.]

The Opposition are concerned about the signal we would send if we adopted the amendment of the noble Lord, Lord Pannick. I hear his comments about the United Nations but this Parliament must uphold international law and the supremacy of the United Nations. It should not undermine that. If we adopt the amendment, we would send the signal to other countries, which may flagrantly flout decisions of the United Nations, that we insist that they should. We judge other countries by our own standards. The noble and learned Lord, Lord Mackay, is absolutely right that there should be provision for the British courts to consider a decision of the Secretary of State. However, ultimately they should support the Secretary of State and the United Nations, not say to the United Nations, “We are not going to accept that decision”. We cannot pick and choose; that is the fundamental point. Therefore, while I totally understand the power of the arguments put forward by the noble Lord, Lord Pannick, and have a lot of sympathy with them, there is one point that trumps all else—I use that word advisedly—namely, we must uphold the decisions of the United Nations.

Lord Ahmad of Wimbledon - Hansard

My Lords, as Minister for the United Nations, among other things, I echo the sentiments of the noble Lord, Lord Collins, about our commitment to the United Nations. As a permanent member of the UN Security Council, the UK is at the heart of shaping the UN’s response to crises around the world, as we have seen. I know that all noble Lords respect that. The United Kingdom takes this role very seriously, including in our approach to sanctions in the UN Security Council. We are one of the leading voices for UN sanctions where there are good reasons for them, as recently to constrain North Korea’s nuclear programme. At the same time, we place great importance on the need for sanctions to be used responsibly, with proper respect for due process and the rule of law. It is important to remember that as a permanent member of that Security Council, the UK exercises real authority over which sanctions are and are not adopted by the UN.

I thank all noble Lords for their comments, to which I listened carefully. The noble and learned Lord, Lord Mackay, made important points. We have exercised authority by committing that we would never support in the UN Security Council a designation that we considered unlawful. Put another way, we would not support a designation unless we had reasonable grounds to suspect that the person met the relevant criteria. Not only is this the right thing to do, it also reduces the risk of the UK being obliged to implement a UN designation that might be vulnerable to challenge in court.

The Bill recognises that persons designated by the United Nations must have a right of redress, including the ability to bring a legal challenge against the Government in the UK courts. The Bill accordingly contains the ability for such a person to have access to the court, and to obtain a remedy for any unlawfulness that the court uncovers. If the court were to consider the UN designation unlawful, the court could instruct the Minister to use best endeavours to secure a delisting at the United Nations. This is a significant remedy not to be underestimated. As a permanent member of the UN Security Council, the UK is particularly well placed to make representations that a designated person should be delisted.

The Government recognise there may be rare cases in which the Minister’s best endeavours are not sufficient to secure a delisting at the UN, as we discussed with the noble Lord, Lord Pannick, between Committee and Report. The question then is whether the UK courts should have the power to quash a UN designation and thus leave the Government in breach of their obligations under the UN charter. Our view is that this cannot be right.

First, the Bill recognises that the UK is under a duty in international law to designate those persons designated by the UN, and this proposition has not been criticised. Secondly, failure to implement a UN designation would damage the UK’s reputation as a country that stands by its commitments under international law—a point well made by the noble Lord, Lord Collins. Thirdly, it would restrict the ability of the UK to call out other states where they were falling short of their obligations under international law. If it was open to the UK not to implement our legal obligations, irrespective of whether it were following a court decision, it would be impossible to criticise other states where they were not implementing their obligations.

I take the point the noble Lord made that the EU court has very rarely quashed EU legal acts which implement a UN designation on procedural grounds. However, it has never done so where that would leave the EU member state itself in breach of its UN obligations. We should bear in mind that the EU itself is not bound by the charter, but EU states are. The noble Lord mentioned the case of Kadi, which has frequently been cited. In that case the UN had, in fact, delisted the person concerned by the time of the judgment, so EU member states themselves were spared the choice between respecting a decision of the EU courts and abiding by their UN obligations. Had they been forced to choose, I am confident that they would have prioritised their UN obligations as required—as a number of noble Lords mentioned—by Article 103 of the UN charter, which makes it clear that where there is a conflict between obligations under the UN charter and obligations under any other international agreement, the obligations in the UN charter shall prevail. The United Kingdom and all other EU member states are bound by that charter, even if the EU itself is not. That too is part of the rule of law—upholding those international laws where they bind the United Kingdom.

The United Nations has many flaws, but it is crucial to maintaining international peace and security. To allow the UK courts to stop the Government implementing sanctions agreed by the UN Security Council is not the right approach for a country such as ours that seeks to lead by example at the United Nations. I sincerely believe that any Minister, regardless of political persuasion, would share this view. I also believe we are in agreement that by continuing to make the UK’s support for UN designations conditional on fair procedural standards, we can and should do all we can to prevent this problem arising. However, in the unfortunate event that such a case arises, I remain of the view that a “best endeavours” obligation is the right way to square this difficult circle.

I deeply respect the noble Lord’s position. Again, we have had constructive discussions on this, although on this occasion we did not reach agreement. However, I hope that with the reassurances I have given, the noble Lord will be minded to withdraw his amendment.

Lord Pannick - Hansard

My Lords, I am grateful to the Minister. I recognise, as I said in opening this debate, the force of the arguments in favour of the Government’s approach. However, we have to be clear about what it comes down to. Justice for the individual who is designated, in circumstances where the High Court of Justice in this country regards the designation as arbitrary or as in conflict with the rule of law, must be sacrificed to the interests of the UN, our participation in the UN and the international legal order. There is no right answer to that question. I happen to believe that to obtain justice for the individual in that case, if and when it occurs, who is being designated in this country and who is suffering the consequences—their bank account is frozen, they cannot travel, and they are experiencing whatever the other adverse consequences are—they must have a legal remedy. There is no legal remedy available to them through the UN. There are political processes but there is no judicial procedure and no quasi-judicial procedure other than in terrorism cases. How can this possibly accord with the human rights principles and with the principles of the rule of law, which I know the Minister respects and which the Government are so keen on promulgating, and rightly so?

Break in Debate

Lord Collins of Highbury Portrait Lord Collins of Highbury - Hansard

My Lords, I shall be very brief. I have added my name to this amendment and support everything that the noble Baroness, Lady Northover, and the noble Earl, Lord Dundee, have said. Here, we are trying to acknowledge what the Minister has committed to in terms of guidance and ensuring that the licence regime operates efficiently. However, we know from the NGOs that there is still great uncertainty. Certainly, as the noble Baroness, Lady Northover, said, banks are risk-averse, and often urgent humanitarian aid gets halted and is extremely difficult to implement. On the other hand, we have to balance the need to create certainty with the need to maintain an effective sanctions regime. We do not want to see the sanctions regime undermined by any system of licensing. That is why it is important that the Government should move speedily on the guidance situation, which I know the noble Lord is committed to.

Lord Ahmad of Wimbledon - Hansard

My Lords, I thank all noble Lords who have participated in this short debate, and in doing so I thank once again the noble Baroness, Lady Northover, and the noble Lord, Lord Collins, for their constructive engagement on this important issue. I agree with the point just made by the noble Lord, Lord Collins, on the importance of balance, but as noble Lords will acknowledge, the Government already publish guidance on the definition of “owned and controlled” and they will continue to do so. That duty is enshrined in Clause 36. We feel that there is no need to make it explicit, as Amendment 63 would require, and that doing so would prompt unhelpful questions about why other aspects of the guidance are not referred to in the Bill. We do not wish to limit the ability of Clause 36 to provide guidance in any of these areas.

I turn now to Amendment 64. It would greatly broaden the scope of guidance to areas such as establishing effective banking and payment corridors, which are clearly beyond the remit of the Government to provide. For example, we cannot require banks to make payments on behalf of particular customers or to open new payment channels. The whole issue of how banks operate and the derisking that we have seen in certain parts of the world is reflective of that. A requirement to provide such detailed guidance would therefore be highly problematic.

However, I do take on board some of the points raised by noble Lords about assuring that we will publish guidance at the earliest opportunity, and I hope that I can offer some degree of further reassurance. While we cannot force banks to make commercial decisions one way or the other, we can certainly encourage them to do so. We can do that through clearly drafted humanitarian exemptions, general licences, guidance and the ability to prioritise flexibly appropriate applications. I assure noble Lords that all of these can be delivered under the Bill as drafted.

If I heard the noble Baroness, Lady Northover, and indeed my noble friend Lord Dundee correctly—I thank my noble friend for his support for the Government’s actions in this regard—they referred to how the Government “may” issue guidance. I can assure noble Lords that Clause 36 makes it clear that the Minister “must issue guidance”. As I said earlier, in the near future we will publish an initial framework for the exceptions and licences.

Perhaps I may make a final point on the issue of NGOs and the humanitarian aspects. I for one have found our dialogue to be extremely constructive on a cross-party basis with NGOs. In that spirit, I certainly look forward to working with both the noble Baroness and the noble Lord to take this matter further. With those assurances, I hope that the noble Baroness will be minded to withdraw her amendment.

Baroness Northover Portrait Baroness Northover - Hansard

I thank the noble Lord and others who have taken part in this debate. Yes, he is right: the Bill states that the Minister “must issue guidance”, but the problem is that underneath that phrase it states that the guidance “may” include this, that and the other; in other words, it is not sufficiently specific. However, I thank the noble Lord for his response and his promises; I am sure that both the NGOs and the banking sector will see them. I hope that will move things forward and that the specific guidance enabling the banks to become involved—of course, the Government cannot instruct them to do so—is issued. If the Government are clear about what they are expecting, that is what the banking sector needs, while the NGOs need that clarity so they can get on with their work. I am sure this issue will be discussed further in the Commons, but in the meantime, I beg leave to withdraw the amendment.

Break in Debate

65: Clause 38, page 27, line 1, leave out subsections (2) and (3) and insert—

“(2) The condition referred to in subsection (1)(b) is that the appropriate Minister making the new regulations—(a) considers that the regulations being amended will, as amended, be sanctions regulations within the meaning given by section 1(4) that are appropriate for the purpose stated in them under section 1(3), and(b) if any purpose stated in the regulations being amended is a purpose other than compliance with a UN obligation or other international obligation, considers in respect of each such purpose—(i) that carrying out that purpose would meet one or more of the conditions in paragraphs (a) to (d) of section 1(2),(ii) that there are good reasons to pursue that purpose, and(iii) that the imposition of sanctions is a reasonable course of action for that purpose.(2A) In subsection (2)(b)(iii) “sanctions” means prohibitions and requirements of the kinds imposed by the amended regulations for the purpose in question (or both for that purpose and for another purpose of those regulations).In this subsection “the amended regulations” means the regulations being amended as those regulations will be when amended.”

Lord Ahmad of Wimbledon - Hansard

My Lords, government Amendments 65 and 68 build on the new requirements for making sanctions regulations that we have already debated. They extend these requirements to situations where a Minister is amending sanctions regulations that are not based on a UN or international obligation. In this regard, I am grateful to the noble and learned Lord, Lord Judge, and the noble Lord, Lord Pannick, for co-signing these government amendments. When amending regulations, the Minister would have to ensure that they continue to meet the relevant purposes, that there are good reasons to pursue those purposes, and that sanctions are a reasonable course of action. The Minister must also lay a written memorandum explaining why these tests have been met.

Government Amendments 67 and 102 are technical in nature—I use that word again—and enable us to implement the obligations more efficiently. I can assure the noble Baroness, Lady Northover, that they reflect the fact that UN sanctions regimes are often based on a series of Security Council resolutions. I hope noble Lords agree that these amendments are uncontentious and feel able to support them. I beg to move.

Baroness Northover Portrait Baroness Northover - Hansard

We welcome the Government’s move.

Break in Debate

69: Clause 39, page 27, leave out line 16 and insert—

“(a) which are not for the time being authorised by Chapter 1 (ignoring section 7), but(b) which are kinds of prohibition or requirement that the United Kingdom—(i) has any UN obligation or other international obligation to impose, or(ii) has at any time had any UN obligation or other international obligation to impose.”

Lord Ahmad of Wimbledon - Hansard

My Lords, Clause 39, to which this group of amendments refers, has been included to allow the UK to impose new types of sanction measures in response to new, unforeseen circumstances. Let me summarise why we think it is needed and then explain the government amendments that I have tabled. I note that this was one of the issues highlighted in the report of the Delegated Powers and Regulatory Reform Committee, and I know that several noble Lords have received and considered carefully my letter of last week specifically responding to the committee’s recommendations.

The familiar types of sanctions include asset freezes, travel bans, arms embargoes and prohibitions on aviation and maritime transport. These types of sanctions are included in the Bill. It is not possible to predict all the types of sanctions which may in the future be useful or necessary. We all know that as technology advances and those who wish to do us harm find ever more sophisticated ways of doing so, we may need to be able to react in an agile manner. The Government intend to continue to play a leading role in the development of sanctions as a foreign policy tool. Wherever possible we will do this through the UN to ensure that the measures have global impact. On occasion, however, we will need to work with like-minded partners outside the UN framework and may need to adapt our own sanctions toolkit to keep pace with allies. On both Iran and Russia, for example, transatlantic co-operation resulted in sanctions that were substantively different from anything previously agreed.

The power in Clause 39 is designed to provide the necessary flexibility in cases where we are acting outside the UN framework. Regulations under this clause would be subject to the draft affirmative procedure as befitting a Henry VIII power of this kind. However, having listened to the concerns expressed in this House and having reflected carefully on them, I have tabled government Amendment 69, which would further restrict the use of this power by stipulating that it may be used to create new types of sanctions only where the UK is or has been subject to an international obligation to put in place sanctions of that type. This means that the new types of sanctions created by this power can only be those developed by the international community. This power, as amended, will no longer enable the UK unilaterally to put new types of sanctions in place, which was a concern that was expressed.

Government Amendment 70 also makes it clear, as requested in Committee, that Clause 39 cannot be used to alter the purposes of the sanctions regulations specified in Clauses 1 and 2. We think that this was the effect of the original drafting, but we are happy to make it explicitly clear in the Bill. I believe that this is a substantial move forward on the Government’s part, and I hope noble Lords will acknowledge this and support it. I beg to move.

Lord Pannick - Hansard

Again, I am very grateful to the Minister and the Bill team. Government Amendments 69 and 70 respond positively to the concerns that I and others expressed in Committee. Therefore, I will not move Amendment 71.

Sanctions and Anti-Money Laundering Bill [HL] Debate

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Department: Foreign and Commonwealth Office

Sanctions and Anti-Money Laundering Bill [HL]

(Committee: 4th sitting (Hansard): House of Lords)
Lord Ahmad of Wimbledon Excerpts
Tuesday 12th December 2017

(2 years, 9 months ago)

Lords Chamber
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Foreign and Commonwealth Office
Lord Judge Portrait Lord Judge (CB) - Hansard

My Lords, I will not say anything that would diminish what we just heard from the noble Lord, Lord Hain, and I do not believe in repetition. However, if I have to repeat it at the next stage of this process, I shall be as vehement as I was before. I support this amendment.

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

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 Collins of Highbury Portrait Lord Collins of Highbury - Hansard

I thank the Minister for his response. The words of the noble and learned Lord, Lord Judge, come to mind: he said that we are not simply bringing EU law into domestic law and preserving it, but extending it—a lot. That is the key issue of concern to noble Lords in this House. I hear what the Minister is saying but we will keep coming back to this issue in other groupings. On Report, we will certainly make the voices of all noble Lords heard on this subject. I beg leave to withdraw the amendment.

Break in Debate

Lord McNally Portrait Lord McNally (LD) - Hansard

My Lords, there is always a temptation in these processes, as the noble and learned Lord, Lord Judge, said, to make the same speech over and over again, but perhaps this speech will suffice for the other issues we will cover today and in the course of this Bill and other Bills.

Of course one of the big worries about the process on which the Government are embarked is—as has been said before, and has just been remarked on—this movement of sovereignty from Parliament to the Executive. I think that this House is doing its job by being very aware of that, but there is another issue in the background to this. I welcome the publication of the anti-corruption strategy. It is keeping faith with a process that has gone on over the past number of years, with all three parties that have been in government, to try to get our house in order regarding our reputation in dealing with corruption, money laundering and associated crimes.

The truth is that we must not be complacent about this. The noble Lord, Lord Hain, was quite right: there is a taint about the behaviour of some in the City. There is a taint about some of the operations of overseas territories, which we will be looking at later. When I was the Minister responsible for the Crown dependencies, my one piece of advice to them was to make sure that they were as transparent as possible in meeting the highest national and international standards. One of the things that the Government and both Houses have to think about as we go through this process that the Government are embarked on is that there are still those who see our future as the buccaneers of world trade, and believe that London and the UK will become a haven for practices that we do not approve of.

That is why it is important that what we put in place during this period will be the base and foundation of our reputation. Those of us who want to see that reputation based on upholding the highest standards—and I fully accept that the Minister shares this—have to understand that each piece of legislation we put forward will be tested against the questions: what do they mean by this, are they going to slip from previous commitments, and are they going to be as tough as they were? Those are the tests that are going to be put to us. Both Houses, and this House in particular, will have to be on their guard to make sure that those highest standards are maintained.

Lord Ahmad of Wimbledon - Hansard

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 Collins of Highbury Portrait Lord Collins of Highbury - Hansard

My Lords, I thank the Minister for his comments, but I think all noble Lords will be concerned. We are moving from one type of regime to another. The fact of the matter is that, as the noble Baroness, Lady Bowles, has said on numerous occasions, EU directives go through a very detailed process of democratic scrutiny—at European level and, of course, at domestic level. We know in advance what those directives contain and we debate them fully, and we have the opportunity, through our representation in Europe, to challenge elements of them. All that is going to disappear when we leave the EU. We want to know that we are not giving up that democratic accountability to simply place everything in the hands of the Executive. I am rather disappointed, to put it mildly, with the Minister’s response. I assure him that we will be tabling amendments on Report, particularly with regard to Clause 41, which will ensure that there is proper accountability and scrutiny.

Lord Ahmad of Wimbledon - Hansard

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 Collins of Highbury Portrait Lord Collins of Highbury - Hansard

I thank the Minister for those additional comments but they still do not change my concerns. I would welcome whatever further consideration he gives them and ask that we have what he has to say in plenty of time before Report. In the meantime, I beg leave to withdraw the amendment.

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Lord Davidson of Glen Clova Portrait Lord Davidson of Glen Clova (Lab) - Hansard

My Lords, this amendment is a useful reminder that the Brexit process needs to reflect the devolved nature of the United Kingdom. I take this opportunity of looking at this amendment to make certain observations more broadly and, indeed, to go back to the previous group where the Minister referred to a UK property register. He will be aware—and if he is not aware, he will no doubt be told by those sitting beside him—that the United Kingdom property register covers the whole United Kingdom via three separate registers. Indeed, two of those registers come from jurisdictions which voted by a majority to remain in the EU. Plainly the Minister does not intend to give ammunition to those who wish to withdraw from the UK. This Bill, and this part, are aimed at enabling withdrawal from the EU. That is one objective. There is a body of people who will find ground for complaint in more or less anything that in some way does not take account of the separate nature of various bits of the United Kingdom. With that small warning, I commend this amendment, and leave it at that.

Lord Ahmad of Wimbledon - Hansard

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.

Baroness Northover Portrait Baroness Northover - Hansard

My Lords, I thank the Minister for that response which was along the lines that I anticipated. Yet again, it is an argument for generally limiting the powers in the Bill so that the concerns that I have expressed would be lessened. I thank noble Lords for their support. In the meantime, I beg leave to withdraw the amendment.

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Baroness Kramer Portrait Baroness Kramer - Hansard

My Lords, I will speak briefly. I am no expert on the relevant legislation that is being repealed under this clause, but I have spoken to those who are, and the response I have had is one of shock. Legislation that went through both Houses of Parliament, with great care, debate, consideration and amendment, is now being swept away, to be replaced by a regulatory power, which, again, is not bounded in any way. It could be identical or it could be completely different, but it is not discussed or laid out anywhere in this legislation.

In the past we have talked primarily of powers that have come through a democratic process in Brussels: through the European Parliament’s scrutiny, consultation and voting processes, and through votes of the Council. In this case, we are talking about sweeping away, to be replaced by regulation, significant legislation that came through this Parliament in a democratic process. I do not understand, nor have I heard any explanation, why the Government are choosing to take this route.

Lord Ahmad of Wimbledon - Hansard

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.

The threshold for designations under TAFA is high and the powers have not been used since February 2015. Under the Bill, a designation could be made where there are reasonable grounds to suspect that the person or group is or has been involved in a defined terrorist activity and that designation is appropriate. As I have previously argued from the Dispatch Box, this is totally line with our current approach under UN and EU sanctions and would be balanced by procedural protections such as the ability of designated persons to challenge the Government in court.

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Lord McNally Portrait Lord McNally - Hansard

My Lords, these exchanges show some of the dilemma of dealing with this issue. I ask a fairly simple question when I look at these things. Why should a financial services organisation decide to base itself on some microdot in the Caribbean to provide its services? Once you ask that question, you begin to wonder whether it is to avoid the kind of rigour and inspection that they get in more well-established centres. As I said in my earlier intervention, I worked for three years with the Crown dependencies, ably aided by the Minister, in his then capacity as a Whip. I made two points. One, which I mentioned earlier, was my advice to them to make sure they answered the various questions put to them with full candour and transparency. I pay tribute to the Justice Committee under the chairmanship of my noble friend, who put forward a range of suggestions. Another point was that the British Government should get their act in better order. Sometimes, the job was to make sure that, when getting this dealt with, Whitehall departments were sufficiently accessible and aware of the particular status of the Crown dependencies.

During those three years of experience, I was impressed by the qualities of the Civil Service and the representatives of the Crown dependencies in dealing with these issues. That does not take away the fact that they, and we, have to face the fact that, as the noble Lord, Lord Collins, said, it is our reputation that is at stake. I had nothing to do with the overseas territories, but there is a qualitative difference which needs to be looked at between their standards of supervision of financial services and those of the Crown dependencies. I take the point made by the noble Lord, Lord Anderson, about the Isle of Man and Jersey. I hope they are both addressing what it is that has landed them on that list. That is something for their processes, because this is damaging to them, although there may be other jurisdictions within the EU which could not bear too close examination.

This is in our national interest. It is not us playing the neo-colonial or trying to order them about. We are defending our national interest when jurisdictions are seen as British Overseas Territories. When I had to learn that very peculiar lesson, the first thing I was told was that we joined them; they did not join us. The difference in constitutional relationship is because they were part of the Duchy of Normandy that conquered us. Nevertheless, the Channel Islands and the Isle of Man have to understand that their meeting the highest standards is going to be a legitimate interest of the British Parliament and British Government, in defence of Britain’s reputation.

Lord Ahmad of Wimbledon - Hansard

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 Collins of Highbury Portrait Lord Collins of Highbury - Hansard

I thank the Minister for his response. However, I am a little disappointed. We should not apologise for taking the lead in trying to build confidence globally in financial standards. We should not be in any way apologetic about leading the way because London is a global financial centre—

Lord Ahmad of Wimbledon - Hansard

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 Collins of Highbury Portrait Lord Collins of Highbury - Hansard

I thank the Minister for that intervention. However, I still come back to the point that the Government’s own strategy, published yesterday, is about building public and international confidence in our systems and maintaining our global reputation. I am disappointed because these amendments do not seek to impose but to ensure effective transparency and that we meet our international obligations. I am sure we will return to the subject when we discuss other amendments on Report, and in the light of that, I beg leave to withdraw the amendment.

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Lord Falconer of Thoroton Portrait Lord Falconer of Thoroton - Hansard

I apologise to him. The noble Lord who is also a Minister—I of all people should know that—means well in his intentions and assurances. From experience in the Executive, we reach for the legislation and read it as it is. My anxiety is that unless we get it right in the Bill, we will give the Executive huge powers. As the noble Baroness, Lady Kramer, said, when we voted to leave the European Union, we never intended to do anything other than leave the European Union. We did not intend to change completely the balance of the constitution and give the Executive that degree of extra power. I am talking not only about this Bill, but the whole balance of the constitution. This is happening because everything is necessarily having to be done in a hurry. The oddity about this Bill is that it is an early stage Brexit consequential. It is not adequate in the balance it has struck between the Executive and the legislature. If this Bill has got it wrong, then things will get worse as the pressure builds on parliamentary draftsmen, Ministers and policymakers. We must stand firm as a House to send a message that future Bills must be more accurate than this one in terms of the balance between the Executive and the legislature.

I support the amendment of my noble and learned friend Lord Davidson and my noble friend Lord Collins because it is inconceivable to me, in the light of the number of changes that we have sought, that everything will be put right on Report. The Bill should be time-limited for five years so that the Government have to come back with a further shot at it. We will need this sort of Bill indefinitely, but the balance in this one is so badly wrong that I think a separate clause is appropriate.

Lord Ahmad of Wimbledon - Hansard

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.

I make the point again that every sanctions regime made under the Bill will go before Parliament. Specifically on the sunset clause, we should remember that no one Parliament can bind another. Every Parliament is sovereign, so any future Parliament will be free to revisit this legislation if it so chooses. I therefore do not believe that it necessary or appropriate effectively to put into the Bill a requirement that a future Parliament would need to revisit the primary legislation in 2023. If the Government at that time choose to do so that is their prerogative and Parliament will remain sovereign, as it is now.

Sanctions and Anti-Money Laundering Bill [HL] Debate

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Department: Department for International Development

Sanctions and Anti-Money Laundering Bill [HL]

(Committee: 3rd sitting (Hansard): House of Lords)
Lord Ahmad of Wimbledon Excerpts
Wednesday 6th December 2017

(2 years, 9 months ago)

Lords Chamber
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Department for International Development
Baroness Kramer Portrait Baroness Kramer (LD) - Hansard

My Lords, I support the thought process behind the amendment of the noble and learned Lord, Lord Davidson, and the noble Lord, Lord Collins, and I also support my noble friend Lady Bowles. I do not think that I can better the explanation that she has given but perhaps I can reinforce a few of the key points.

Clause 41 has a huge impact on the balance of power between this Parliament and the Executive. Historically, the laws that have governed not the crime of anti-money laundering but the anti-money laundering regulations that provide the network with which to prevent money laundering have gone through an intensive democratic process within the European Union. They have gone through consultation, scrutiny, debate and votes within the European Parliament, and through discussion and presumably votes within the Council. The consequence has been a directive from which flows implementation within the UK through regulation, but only in the context of the very extensive democratic scrutinising and challenging process that has taken place beforehand.

In this transposition, that entire democratic process is destroyed in Clause 41—it disappears entirely. The process that has taken place in the European Parliament and the European Council and its various committees, as well as in the consultation and everything that surrounds it, disappears to be replaced purely by statutory instruments. That is a fundamental shift in the balance of power between a democratic body and an Executive body. I thought that the whole purpose of Brexit was to take the powers that lay with the European Parliament and the Council and to transfer them to this place, not to transfer them wholly to the Executive so that they could use that very narrow strategy of regulation. As my noble friend pointed out, this goes deep and wide. There are no frameworks and no constraints within the Bill that limit the range of powers that it essentially conveys and confers upon the Executive.

The Delegated Powers and Regulatory Reform Committee obviously responded with great vehemence to all this. It concluded:

“We take the view that the FCO”—

the committee saw it as a Foreign Office Bill but I think we may get a response from the Treasury—

“has not provided sufficient justification for the delegation of powers by clause 41, particularly having regard to their wide scope and the significance of the powers conferred. Accordingly we consider the delegation of powers by clause 41 to be inappropriate”.

When we have talked—the Minister has been kind enough to agree to meetings with him and his officials—the argument that has been placed before us is that this enables us to act with speed because speed is essential in the anti-money laundering arena. I think we can all agree that speed and the processes of the European Parliament and Council are not tangled together. If the European Parliament and Council feel it is appropriate to take the time and focus to develop the policy framework then surely there is no urgency for the United Kingdom to throw it away simply to be able to move directly to regulation.

As my noble friend said, it is quite possible within the amendments she has drafted to carve out the small arena in which speed might be relevant. It is limited. It is rare. It might happen and it can be carved out without requiring the rest of the framework to be dismissed and abandoned for a purely regulatory process.

When we had those meetings, my understanding was that one of the reasons for drafting Clause 41 in this way was to allow the consequences of the fifth money laundering directive—which is currently in process in the European Parliament and Commission; I think it is in trialogue at the moment—to be implemented in the UK. That process has taken a sufficiently long time that it seems perfectly possible for it to go through a process within this Parliament with its democratic background. We will probably have those regulations in place before Brexit—perhaps with the possibility of a spillover. I believe that, for those specific regulations, that is something that could very quickly be accommodated. What is fascinating, though, is that if that were the Government’s purpose, there would have been a very tight sunset clause for this—perhaps one of days or a few weeks—but there is no sunset clause. This process of acting through regulation and not through democratic process would be in perpetuity.

I want to pick up the comments from the noble and learned Lord, Lord Davidson. When I speak with these Ministers and with the Opposition today, I understand that they have a personal commitment, and I believe the Government have a commitment, to strong but proportionate anti-money laundering processes. It is because of that personal commitment to proportionality and good regulation that they have felt it completely unnecessary to enshrine those two factors in the Bill. I like very much the phrase that the noble and learned Lord, Lord Davidson, used. When I say we are talking to sheep, I mean it only in the benign sense of sheep—I think sheep are lovely; I do not mean it in a passive way. However, the framework of a Bill designed around those who have benign intentions will provide equal power for those who do not have benign intentions. I think every one of us in this House has often had conversations with people—particularly in the City of London, where I spend a certain amount of my time—who believe that it is absolutely necessary to go back to light-touch regulation and that we are overly fussed about issues such as money laundering and really do not understand the dynamics of modern business; and that it might be necessary for our future, post Brexit, to move to something that is much looser to ensure that London remains attractive. I attribute none of that to the Ministers who are sitting here. But they must recognise that they have permitted the inaction of just such an approach through regulation alone by the language they have put in the Bill. I have no idea if Clause 41 and the related clauses have been drafted in this way simply because there was very little time and, frankly, very little effort put into them, or whether there was a fundamental attempt to achieve a transfer of power. If it was the latter, it is crucial that Ministers tell us why this particular structure has been chosen.

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

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.

Baroness Kramer Portrait Baroness Kramer - Hansard

I hope that the Minister can clarify something. He said that it is important to have access to regulation to reflect changing policy standards. Where are those standards? Are they in a piece of legislation? Are they up for debate in this House? Are they really what one Minister decides is policy? Perhaps he can explain that, because that is the missing piece—there is no structure for policy to go through a democratic process.

Lord Ahmad of Wimbledon - Hansard

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.

Baroness Kramer Portrait Baroness Kramer - Hansard

I must press the Minister on this. He used the word “allow”. I am sure the Government can do what they wish in that sense and can bring forward primary legislation, which this is. Will the Minister confirm that it does not have to go through primary legislation? The—in effect—primary legislation that sits behind the 2017 regulations that he described took place within the extensive process of democratic debate, scrutiny and votes in the European Parliament. I am trying to understand where that piece goes in this legislation.

Lord Ahmad of Wimbledon - Hansard

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—

Baroness Kramer Portrait Baroness Kramer - Hansard

It was an error on my part. The more we go into this discussion, the more “if” sounds realistic.

Lord Ahmad of Wimbledon - Hansard

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.

Baroness Bowles of Berkhamsted Portrait Baroness Bowles of Berkhamsted - Hansard

The Minister said that the reason this is done in regulations is because telling a bank how to do its due diligence is too detailed for primary legislation. But he is rather overstating the case, because Regulation 18 of the 2017 money laundering regulations says that, “A relevant person”—this would be the bank—

“must take appropriate steps to identify and assess the risks of money laundering and terrorist financing to which its business is subject”.

The first requirement there is:

“In carrying out the risk assessment required under paragraph (1), a relevant person must take into account … information made available to them by the supervisory authority”,

under Regulation 17. If you go back, you find that the supervisory authority has to take notice of what the Treasury and the Home Office have said. So this is a cascade that automatically updates. If there is a new risk, the Government identify it, along with mitigating measures, and tell the supervisors, which devise ways to update the information for their sectors. Then the onus is still on the individual businesses to work out how to do this. Yes, there is a list of factors to include, but it is within the power of the Government to say, “This is an extra factor; it does not even need any legislation”. However, it embeds the duties of the Government to have a position and to come out with their reports and then the duties of the supervisors. None of that is definitely retained, because everything to do with this money laundering directive can be rubbed out. So it is not about the excruciating detail that the Minister says it is—the excruciating detail comes from the supervisors.

Lord Ahmad of Wimbledon - Hansard

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.

Baroness Bowles of Berkhamsted Portrait Baroness Bowles of Berkhamsted - Hansard

I concede that maybe we should have said “be at least as strict as”, but there is nothing in the Bill that says we are going to maintain and be ahead of global standards. We would all be a great deal happier if there were something in there indicating that standards would be maintained. We know there are good intentions, the Government have been doing good things and the Front Bench opposite would do good things, but it is not there in writing. That is what is fundamental to this: the principles are not fixed.

Lord Ahmad of Wimbledon - Hansard

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.

Baroness Bowles of Berkhamsted Portrait Baroness Bowles of Berkhamsted - Hansard

My Lords, there are a lot of regulations going on here that interact with one another. Will they be considered one by one, so that they can be looked at comprehensively, or will they come in a great big wodge—akin to the sort of thing we get on money laundering?

Lord Ahmad of Wimbledon - Hansard

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.

Lord Davidson of Glen Clova Portrait Lord Davidson of Glen Clova - Hansard

My Lords, the patience of this side has not been strained by the Minister, who provided a complex and interesting setting-out of the way in which the UK envisages the future. The debate in this complicated and difficult area has been most useful.

The noble Baroness, Lady Bowles, provided an intensive forensic analysis, which, I suspect, may leave one or two questions that require answers that we may, no doubt, look at on Report. Plainly, there is a difference of view between the Government and the Opposition as to the way forward on minor matters but not on the substantive way forward. While I therefore recognise the tack made on the Bill by the noble Baroness, Lady Bowles, we do not share the way forward that she suggests. However, we recognise a number of the concerns she identifies.

The noble Baroness, Lady Kramer, set out her assessment of the damage to democratic scrutiny that this approach adopts. One does, of course, speculate what would happen if a Labour Government had proposed such wide powers for Ministers. One might imagine that certain Brexiteers would have fairly vociferous views on any such proposal.

The speed argument for the anti-money laundering aspect of this clause is not entirely clear, to this side at least. As to the answer stating that there are emerging risks, it would perhaps be useful to have some examples of how they have emerged and how the current system has failed to deal with them.

The noble Baroness, Lady Kramer, identified the possibility of a sunset clause. She will be pleased to see that my noble friend Lord Collins has an amendment proposing such a clause.

I must reject the ovine reference. We are trying to find a way forward that is consonant with a good, strong regime on AML and terrorist financing. I welcome the Minister’s intention to get it right. He sees improvement as a way forward and we share that approach. Our concern is that not every future Minister might share this Minister’s good intentions and is therefore to push the legislation in an improving direction, and it is for that reason alone that we advanced this amendment.

The Minister set out the UK position at length. Long may it continue; it certainly puts the UK in a strong, leading position in relation to money laundering and terrorist financing protection. At this stage, we will go way and think about this further. I beg leave to withdraw the amendment.

Break in Debate

Lord Collins of Highbury Portrait Lord Collins of Highbury -