Economic Crime and Corporate Transparency Bill

Lord Alton of Liverpool Excerpts

Committee stage
Tuesday 9th May 2023 Grand Committee

[The Minister of State, Foreign, Commonwealth and Development Office (Lord Goldsmith of Richmond Park) (Con)]

My Lords, I rise to move Amendment 91A in the name of my noble friend Lord Sharpe of Epsom.

The Government take the enforcement of their sanctions regimes seriously. Ensuring that we have a firm basis for enforcement action is especially important given the unprecedented sanctions measures that we have implemented in response to Putin’s illegal invasion of Ukraine last year.

There are various methods to enforce UK sanctions, one of which is the imposition of civil monetary penalties, also known as CMPs, which are fines levied by the Government for breaches of sanctions. CMPs do not require a criminal prosecution and involve far less cost to the justice system than criminal prosecutions. To date, the Office of Financial Sanctions Implementation, which is known as OFSI and is part of His Majesty’s Treasury, has levied nine CMPs totalling more than £20 million since it was set up in 2016. The UK Government’s ability to impose CMPs is likely to factor in the calculations of those seeking to breach sanctions for financial gain.

This amendment is part of the Government’s work to strengthen enforcement across our UK sanctions regimes. The new clause will amend the Sanctions and Anti-Money Laundering Act 2018—SAMLA—to provide express provision in relation to the imposition of CMPs. New Section 17A of SAMLA clarifies and reinforces the broad enforcement powers contained in Section 17 of SAMLA, that:

“Regulations may make provision … for the enforcement of any prohibitions or requirements imposed by regulations”.


The amendment also strengthens the basis for CMPs to be imposed by the Treasury under the Policing and Crime Act 2017 for offences that are supplemental to financial sanctions. Again, this is a clarificatory amendment. While criminal and civil enforcement options are already in place, this measure provides clarity on the Treasury’s power to impose a CMP for such offences. The amendment also provides for the Policing and Crime Act 2017 to be disapplied where the Treasury has the power under both sanctions regulations and the Policing and Crime Act to impose CMPs in respect of prohibitions or requirements.

Of course, putting these powers on a firmer footing is worth while only if we invest the necessary resources to make use of them. In the recent Integrated Review Refresh, the Prime Minister announced a new £50 million economic deterrence initiative which will improve our sanctions implementation and enforcement. This will maximise the impact of our trade, transport and financial sanctions, including by cracking down on sanctions evasion. It will also be used to prepare the Government for future scenarios where the UK may need to deter or respond to hostile acts.

I hope that noble Lords will support this amendment. I beg to move.

[Lord Alton of Liverpool (CB)]

My Lords, there has been a change of Minister since we discussed this matter last week when we had a curtain-raiser on Amendment 85, which I moved in Grand Committee. It is always good to see the noble Lord, Lord Goldsmith, in his place; indeed, he had to answer the debate initiated in this Room last week by the right reverend Prelate the Bishop of St Albans. He also had to answer the question about how sanctions can be used to deter autocrats and flag British values against the values of authoritarian regimes; we discussed that issue at some length. As one would expect, the noble Lord gave a competent and welcome reply.

I notice, however, that the Minister’s noble friend Lord Johnson is sitting alongside him—

[Lord Fox (LD)]

No, he is not.

[Lord Alton of Liverpool (CB)]

Oh, is he not? I am sorry; I had better put my spectacles back on.

[Lord Coaker (Lab)]

Specsavers.

[Lord Alton of Liverpool (CB)]

I apologise to the noble Lord, Lord Evans. It seems that the noble Lord, Lord Johnson, is still travelling back from Hong Kong, but I can see that the noble Lord, Lord Sharpe of Epsom, is sitting in his place. He dealt with our debate last week; no one in this Committee knows more about Hong Kong than he does, having worked there. He will recall the discussions that we had not just on that occasion but on other occasions as well.

The matter was very much on my mind when reading the reports about the visit of the noble Lord, Lord Johnson. I wondered how the imprisonment of more than 1,000 legislators and lawmakers in Hong Kong has been dealt with during that visit, not least the position of Jimmy Lai, who is a British citizen. Indeed, in this very Room, sitting at the back of our proceedings just a couple of weeks ago was Sebastian Lai, his son. I know from our subsequent discussion that he felt deeply that not enough had been done by the United Kingdom in raising the case of his imprisoned father, who might well die in prison. I hope again as I press the Minister, as I did last week, that he will be able to tell us what the response has been from James Cleverly, the Foreign Secretary, and the Prime Minister, to the requests that have been made. Mr Sebastian Lai, who is also a British citizen, and his international legal team should have the opportunity to discuss his case, the role of assets and why no one in Hong Kong has been sanctioned, whereas British parliamentarians have been sanctioned. Despite the sanctioning of the former leader of the Conservative Party Sir Iain Duncan Smith and colleagues such as the noble Baroness, Lady Kennedy of The Shaws, we nevertheless continue business as usual by promoting closer and deeper business links, as the noble Lord, Lord Johnson, has been doing in Hong Kong. How does that link to the need for us to assess the assets that are held in this country by people who have been responsible for the incarceration of pro-democracy legislators and activists, more than 1,000 of whom are currently in jails in Hong Kong?

The main purpose of the amendment that I moved last week and of Amendment 91A before us today is to concentrate on the sanctions regime that has been imposed as a result of the war in Ukraine. I pay tribute to the Government for what they have tried to do, often in exacting circumstances, after the war erupted, but when I went to see the noble Lord, Lord Sharpe, and a member of his Bill team to discuss this last week, he was very straightforward in saying that there is nothing new in Amendment 91A and that it entrenches the current situation. It could be said to be sending a signal, but legislation is about more than semaphore and sending signals. Will the Minister say what is new in this amendment that is not already on the statute book?

Britain’s sanctions regime is broken, which is why some of the players who have been involved in the appalling events in Ukraine have been getting away with murder. Brave people have been laying down their lives defending not just their own country but our shared values of democracy and freedom. From the outset, we must recognise that our sanctions have always been held back by murky layers of financial secrecy in this country, which is why we need more than what is in Amendment 91A and why I hope that the noble Lord, Lord Sharp of Epsom, in particular, will continue to engage with those who spoke in favour of the amendment that I moved last week—they included the noble Lords, Lord Coaker and Lord Leigh, my noble friend Lord Fox and the noble Baroness, Lady Altmann. I therefore hope that Amendment 85 in its fullness, or something like it, will be put in place of Amendment 91A when the Bill comes back on Report.

It feels like every week we get a new story about this oligarch putting his wealth “in the hands of his young children” or that oligarch shrouding his UK assets behind so many shell companies and opaque trusts that we simply cannot track them down. I mentioned Roman Abramovich as a particularly high-profile example. The so-called oligarch files which were leaked earlier this year revealed how he was allegedly able rapidly to move at least $4 billion of his wealth away from law enforcement by transferring the beneficial ownership of several secretive trusts to his children just before he was slapped with sanctions by the Government.

We do not need to take a much closer look at the network of professional enablers who make this type of wrongdoing possible to see what is involved. There are accountants, lawyers and bankers who wilfully subvert our sanctions regime in exchange for tainted roubles. This is all absolutely legal. We have built a financial services sector in which people have been able to play an interminable game of cat and mouse with law enforcement, where the official owner of a given asset—if we can identify who that is in the first place—can change with little more than a stroke of the pen and no questions asked. Now we are finding that those same people—oligarchs, kleptocrats, call them what you will —know the rules of this game and its loopholes better than we do.

Accepting that our existing sanctions policy is not fit for purpose is important, but right now we can and should find a way to make sure that what sanctioned Russian assets we have managed to identify and freeze are taken away from these oligarchs and put towards Ukrainian reconstruction efforts. As it stands, if the war in Ukraine were to end tomorrow, we would have little choice but to hand back £18 billion of frozen assets to their dubious owners, with no questions asked. This is the distinction between freezing and seizing. We simply cannot allow that to happen. Ukrainian schools, hospitals and homes need to be rebuilt in their thousands and scores of unexploded bombs and mines need to be cleared to do so.

The question for us is whether this amendment goes anywhere at all towards achieving that. The cost of rebuilding the country could top £1 trillion, according to recent estimates. Ukraine’s death toll is 60,000 and rising, with millions more people displaced. Under international law, Russia has to pay for the damage that it has caused, yet so far it is the British taxpayer who has forked out £2.3 billion in military support and another £220 million in humanitarian aid. Secrecy and inertia are enabling this—two main reasons why our sanctions regime is not working and why we need to do more than what is contained in this amendment.

I have sympathy with the Government. The sanctions regime relating to Russia was hastily constructed, as I suggested at the outset of my remarks, in the wake of a conflict that has shocked the world. The seizure of assets that belong to individuals is certainly a complex issue. The rule of law, due process and property rights should all be considered, as I discussed with the noble Lord, Lord Sharpe. This is exactly why the Government must not miss the opportunity in this Bill to make a difference, without violating any of these principles.

Our allies have already put wheels in motion. The European Union is looking to seize €300 billion of frozen Russian central bank reserves and €19 billion in oligarch assets that it holds, while Canada has made good progress on a law to allow the seizure of frozen assets. What study have we made of what is happening elsewhere in the world? Should we not emulate those pieces of legislation and ensure that we act in concert? If the Minister thinks that I am asking the UK Government to go it alone on these things, I can assure him that he is mistaken. I recognise that we have to do this with others, but others seem to be ahead of the game. As it currently stands, I do not feel that this amendment is the way we should proceed. I look forward to hearing what the Minister has to say in response.

[Lord Fox (LD)]

My Lords, it is always a pleasure to follow the noble Lord, Lord Alton. Briefly, I am trying to get a sense of the proportion of this amendment. The noble Lord set a high expectation bar, whereas the Minister seemed to set a low one. I think that I heard the Minister say that it clarifies something that already exists, which sounds a little like fiddling around the margins, so it would be helpful if he could explain what this does that we cannot do already and how many cases will be brought as a result of having this power that are currently impossible to prosecute. In other words, what is this actually for, how many people do we expect it to be applied to and what sort of scale of penalty does he envision would be applied? Without that context, we will all leave the Room feeling that it really is fiddling around the margins. If he could give us a sense of scope and scale, he may be able to send us away with a slightly stronger feeling about this otherwise modest amendment.

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[Lord Goldsmith of Richmond Park (Con)]

I thank noble Lords for their contributions to this short exchange. I will start by addressing some of the points raised by the noble Lord, Lord Alton, who, as I have said many times—we seem to find ourselves in the same debates—is an indefatigable champion for human rights and has shone the light so often on abuses in China, Hong Kong and beyond. It is worth putting that on the record again. I am afraid that I cannot tell him what was raised in discussions between the Foreign Secretary, the Prime Minister and representatives of the CCPIT. I do not have that record, but I will try to uncover an answer for him in due course; I know that my colleagues will have taken a note of his question.

The noble Lord and the noble Lord, Lord Fox, are right to point to the scale of this amendment. A new package is not being introduced; that is not what this amendment is about. That is not to say that changes are not required or that no more can be done with the tools that have been assembled by the Government, not least through SAMLA, but this amendment is just a tidying-up exercise; it is about removing ambiguity. It will not answer the calls that we have heard from speakers in this debate, but it is not designed to. We have the tools that we need. As I mentioned, we now have SAMLA and the ability to tailor a specific sanctions regime using secondary legislation. The noble Lord, Lord Alton, is right that we should focus on using those tools to the maximum effect. There are plenty of places, organisations and people who perhaps ought to be on the sharp end of that sanctions regime. I cannot go into detail—I do not think that any Minister can or would—about any potential future sanctions, not least because doing so and highlighting them now would reduce their impact, but we are always looking to update the—

[Lord Alton of Liverpool (CB)]

I am grateful to the Minister. Will he look again at a proposal that a number of us have put before the House at various times for some degree of parliamentary oversight of the so-called Magnitsky sanctions? At the moment, they are opaque. Often, they seem very random and arbitrary: some are chosen and some are not. There may be good reasons for that. I recognise that we cannot sit in an open committee and discuss these things but, in camera, there is no reason at all why a Joint Committee of both Houses or one of our senior Select Committees, such as the House of Lords International Relations and Defence Committee, which is charged with looking at issues of genocide, for instance, should not be able to look at the details of sanctions and how and why they are imposed. I do not expect a straightforward reply from the Minister now, but will he give an assurance that he will look again at the way in which this regime is determined?

[Lord Goldsmith of Richmond Park (Con)]

The noble Lord makes an important point. I cannot answer it, because it is not an area over which I have any direct responsibility, as he can probably tell. However, it would be beneficial somehow to design a mechanism which would allow greater oversight. I do not know what that would look like, because there are risks associated with it. If the targets of any particular sanctions regime became aware in advance, we know what would happen. It is not an easy problem to solve, but in principle what the noble Lord has just said makes a lot of sense. If there is a way of doing so and injecting a bit more transparency—but not too much, for all the obvious reasons—I would certainly support that.

It is also worth saying that sanctions are just one tool that we have. For example, in relation to Hong Kong, as noble Lords know, we opened the doors of this country to a very large number from Hong Kong who were looking for safety and a home, where their fundamental rights would be respected. We created a bespoke immigration channel and suspended the UK- Hong Kong extradition treaty indefinitely. We extended the arms embargo that has applied to mainland China since 1989 to include Hong Kong—and so on. This is one tool in our arsenal; it is not the only tool.

I make one further point in relation to something raised by the noble Lord, Lord Alton, on the distinction between freezing and seizing. While I cannot provide him with a detailed answer—that is going to have to come from another Minister—I can tell him that the Government are sympathetic to proposals to use frozen funds to assist in the reconstruction of Ukraine following the bombardment that it has received from Vladimir Putin. The Government are actively looking at options continually to improve transparency around those assets that are held by—

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[Lord Goldsmith of Richmond Park (Con)]

The noble Baroness makes a similar point. It is not for me to determine the legislative or other route for achieving the possibility of using those frozen assets. It is something that I know that the Government are looking at and are sympathetic to, but I cannot go into any further details, because it is not an area where I have any particular expertise or authority. But I know that the Government are looking closely at the possibilities of doing so and recognise that there is a huge value in doing so, if we can.

[Lord Alton of Liverpool (CB)]

My Lords, I shall not intervene again on this, but I am extremely grateful to the Minister. To return to the point that the Minister’s noble friend Lady Altmann has just made, to those who took part in the debate on Amendment 85 last week, which would do some of things that he has just described, it was suggested that we might have a chance to meet the noble Lord, Lord Sharpe, again before Report. It would be helpful if the Minister could at least in principle assure us that such a meeting will take place with those who participated in that debate last week. Other noble Lords and noble Baronesses, such as the noble Baroness, Lady Kramer, could be invited as well—those who are interested and are Members of the Committee—to see whether we can build on Amendment 85 to do some of the things that I was very pleased to hear the Minister just say that the Government are keen to do.

[Lord Goldsmith of Richmond Park (Con)]

As the noble Lord knows, I have not had an opportunity to consult my noble friend Lord Sharpe, but I am delighted to volunteer him for such a meeting—I am sure he will be very happy.

I will move on briefly to the question about who will monitor—I am so sorry; I cannot remember who made the point. The answer is that a government department is responsible for that, so if it is a financial sanction, HMT will be responsible for ensuring that it is working and successful, and if it is transport, it will be the Department for Transport, and so on.

This is a small but important change to ensure that we have a firm basis for enforcement action. It will provide greater clarity and reinforce those enforcement powers by making them explicit, removing ambiguity. The amendment should also demonstrate that the UK Government take their sanctions enforcement responsibilities seriously, and we will continue to intensify our enforcement of those sanctions. I hope that noble Lords will support it.