Sanctions and Anti-Money Laundering Bill [Lords]

Alan Duncan Excerpts

2nd reading: House of Commons
Tuesday 20th February 2018 Commons Chamber

[Helen Goodman]

I am afraid that I do not think the Bill makes that clear. First, it does not include the phrase, “gross human rights abuses”, which the Foreign Secretary just used, and furthermore, it does not refer to public officials. This is a matter that we can debate upstairs in Committee, and I will be happy to do so with the Minister.

Another key area that the Government have failed to address properly is the position of refugees and victims of human trafficking. Last month, the House unanimously resolved:

“That…conflict resolution…and the protection of human rights should be at the heart of UK foreign policy and that effective action should be taken to alleviate the refugee crisis”.

There are now 66 million refugees—more than there have ever been and more than the population of the United Kingdom. The flow of desperate people across the Mediterranean and through Turkey is continuing. Yet the Bill gives no impression that Ministers have given any thought whatsoever to the plight of these people, who are seeking refuge from desperate and protracted conflicts around the world.

[The Minister for Europe and the Americas (Sir Alan Duncan)]

May I draw the hon. Lady’s attention again to clause 1(2)? Paragraph (e) mentions exactly what she is talking about—promoting

“the resolution of armed conflicts or the protection of civilians in conflict zones”.

Paragraphs (f), (g) and (h) refer exactly to the human rights abuses that my right hon. Friend the Foreign Secretary mentioned in response to her earlier comments.

[Helen Goodman]

That is absolutely true, but if the Minister reads a little further into the Bill and looks at clauses 6 and 7 on aircraft and shipping, he will see that there are some problems at that point. Again, we can come back to this in Committee.

The Bill states that prohibitions can be applied to UK nationals and companies based in the United Kingdom, but not against companies based or incorporated in the British overseas territories. Recent reports from UN monitors implicate territories such as the British Virgin Islands in the setting up of front companies that helped North Korea to evade the sanctions imposed on it. The problem of sanctions avoidance is very serious. Last week, I was told in answer to a written parliamentary question that the total cost of financial sanctions reported as having been breached last year was £170 million. This afternoon, I received a letter from the Treasury, which has looked at the numbers again and says that the number is £1.4 billion. We need to look at this in more detail in Committee.

I now turn to the anti-money laundering provisions—what one might call the McMafia section of the Bill. To set this in context, the Home Affairs Committee report of June 2016 found:

“Money laundering is undoubtedly a problem in the UK…It is disgraceful that at least a hundred billion pounds is being laundered through the UK every year. If the UK is to remain the centre of global finance, this must be addressed.”

It pointed out that

“money laundering takes many…forms…from complex financial vehicles and tax havens around the world through to property investments in London…and high value jewellery. It is astonishing that just 335 out of some 1.2 million property transactions…were deemed to be suspicious. This suggests to us that supervision of the property market is totally inadequate”.

At the moment, it is far too easy—

--- Later in debate ---

[Alison Thewliss]

Yes, that would be a very useful addition. The Secretary of State did not answer the questions on the fifth money laundering directive: how it will be transposed; how it will be scrutinised; if there is a transitional phase; what that transition will look like; how we will prevent any loopholes; and how we will make sure that criminals do not exploit that transition.

[Sir Alan Duncan]

Perhaps at this stage I can give the hon. Members for Glasgow Central (Alison Thewliss) and for Bishop Auckland (Helen Goodman) the answer they are seeking on the fifth money laundering directive. It will be published in the summer of 2018 and member states will have 18 months to implement it. That will be after we leave the EU, so whether we or Gibraltar are legally required to transpose will depend on the terms of the implementation period, which of course are under negotiation.

[Alison Thewliss]

That sounds like a vague, “I don’t know” kind of answer.

--- Later in debate ---

[The Minister for Europe and the Americas (Sir Alan Duncan)]

As my right hon. Friend the Foreign Secretary said in his opening speech, this Bill is necessary to ensure that we can continue to use sanctions and anti-money laundering regulations to support our foreign policy and national security goals as we leave the European Union. We have had a lively and passionate Second Reading debate, but I sense that the setting up of a UK sanctions regime on our departure from the EU would appear to enjoy the broad support of this House.

It is often invidious in winding up a debate to pick out some speeches but not all, but forgive me, Mr Speaker, if I do that this evening, because I think the two strongest and most remarkable speeches were those of the right hon. Member for Barking (Dame Margaret Hodge) and my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell), with whom I worked very closely as his deputy in DFID. I appreciate the passion of the right hon. Lady; we will no doubt debate these matters at great length in Committee and on Report, and we will take on board the strength of the arguments we have heard tonight, and which, of course, we have heard before. Likewise, my right hon. Friend made an impassioned plea for humanitarian agencies to be fully considered, and I will come to that shortly. He also spoke of Magnitsky, as did many Members; I will go into more detail later, but for now I will say that this Bill has wide-ranging powers to sanction people for human rights abuse. On open registers, we share my right hon. Friend’s view on wanting to bear down on illicit money flows; as he said, the registers are open to instant access by regulatory authorities, but I quite understand his view that such action alone does not suffice.

I have a small point to make to my hon. Friend the Member for Huntingdon (Mr Djanogly), who asked if we could publish the anti-corruption strategy; we did so in December of last year. The hon. Member for Brighton, Kemptown (Lloyd Russell-Moyle) asked why nobody has been prosecuted for export control offences; in fact, there have been 23 not just prosecutions, but convictions, for export control offences in the 10 years from 2006 to 2016, and a number of these prosecutions relate to exports to countries covered by UN and EU sanctions regimes.

This being a Second Reading debate, I want to dwell on a few key principles contained in the legislation, as I have no doubt that we will discuss the closer detail further in Committee. The first such issue is that of delegated powers. They are rightly coming under scrutiny in this place today. However, it is important to recognise that Ministers implement sanctions and anti-money laundering regulations by using delegated powers now, through secondary legislation under the European Communities Act 1972, and this Bill will not change that approach. In fact, in the future Parliament will have greater oversight of sanctions than it currently does, with votes needed in both Houses when the UK acts outside the requirements of the UN, and given the need to respond quickly to global events, the Government believe that regulations remain the best mechanism for implementing and amending sanctions and anti-money laundering regimes.

There is, however, the question of creating criminal offences, as referred to by the hon. Member for Glasgow Central (Alison Thewliss), and I am confident this will be addressed before Report. We have listened to these concerns and we are working on a solution that we hope will be accepted by those who expressed them in another place. Indeed, Lord Judge, whom we have been talking to, and his colleagues did not disagree that breaches of sanctions should be criminal offences, and we will introduce amendments to fix this and address their concerns in due course.

On procedure, we believe we have the right balance of affirmative and negative resolutions. Regulations that implement UN regimes will be made under the negative procedure; regulations that do not implement UN sanctions regimes will be made under the made-affirmative procedure.

The hon. Member for Glasgow Central talked about the ability to amend devolved legislation as being “monstrous”. I think she slightly misunderstands the process here. Sanctions are a matter of foreign policy.

[Helen Goodman]

On negative and affirmative resolutions, the Minister is choosing to draw a distinction based on the origin of the sanctions—whether they are from the UN or the EU—but would there not be a greater logic in drawing a distinction between individual sanctions on people, which obviously have to be done quickly, and the rules of the game for the regimes, where the House would be reasonable in seeking to be consulted before they are introduced?

[Sir Alan Duncan]

The reason that we have made this distinction in terms of procedure is that we are obliged in law to implement UN sanctions. Once the sanctions have been agreed at the UN Security Council, the UK has an obligation to implement them under the UN charter. Not to do so would leave the UK in breach of international law—hence the distinction in the procedure that we are using.

Returning to what the hon. Member for Glasgow Central described as “monstrous”, I say again that sanctions are a matter of foreign policy and so are reserved to this Parliament.

[Alison Thewliss]

Will the Minister give way?

[Sir Alan Duncan]

No. We consulted the devolved Administrations—that answers a question that the hon. Lady asked—and they did not disagree with us. The ability to make changes to devolved legislation that can be used only to make changes required as a result of sanctions does not injure the devolution settlement. Their primary purpose is for a reserved matter.

Let me move on to the issue of Magnitsky. I recognise the concerns expressed about the importance of taking a stand against individuals responsible for committing gross abuses of human rights. We recognise and indeed share those concerns. I would like to make it clear that this Government are committed to promoting and strengthening universal human rights, and this Bill will permit us to do so. We already have a range of powers to take action against those who commit gross human rights abuses, most recently through the Proceeds of Crime Act 2002, as amended by the Criminal Finances Act 2017. The Home Secretary also has the power to exclude individuals whose presence we believe to be contrary to the public good, and we keep track of potentially dangerous individuals to prevent them from entering the UK. To complement this, we also have a range of domestic asset-freezing powers.

We are already committed to using sanctions in this area. This is demonstrated by the number of countries against whom we use human rights-related sanctions. They include the Democratic Republic of the Congo, Iran, Libya, Mali, South Sudan, Venezuela and Zimbabwe. The Bill will rightly continue this, allowing the UK to continue to implement existing sanctions regimes and to impose new sanctions in the future. I reiterate my point that paragraphs (f) and (h) of clause 1(2) will empower the Government to implement sanctions on human rights grounds. These are broad powers that will provide maximum flexibility and allow us to include all sorts of abuses, including but not only gross human rights abuses.

I should like to refer to the comments made by my right hon. Friend the Member for Sutton Coldfield about humanitarian access and freedoms. This is an important point. The Government recognise the concerns expressed in the House about the humanitarian impact of sanctions, and we understand the need for engagement with non-governmental organisations and other humanitarian actors. We fully support the work of NGOs operating in difficult areas, and we recognise that they are important partners in delivering the UK’s objectives in challenging environments. I want to reassure the House that the Government have been actively engaging with NGOs. As part of the consultation for the Bill, we held a roundtable to understand their concerns. Within the past couple of months, we have also met organisations involved in humanitarian, development and peace-building work.

The Bill provides a number of tools that will enable the Government to tailor each regime to help to meet the needs of NGOs. In particular, it will enable the Government to make exemptions for humanitarian reasons and to issue licences for legitimate activity. EU case law currently limits our ability to issue general licences, but the Bill will provide greater flexibility by allowing us to do so in circumstances where Ministers judge it appropriate. It will also help to prevent the exploitation of NGOs by those seeking to circumvent sanctions. We have committed to remain engaged with the humanitarian sector and to provide it with high-quality guidance on the implementation and enforcement of individual regimes. We will continue to work with NGOs and other stakeholders to develop the best possible system.

Beneficial ownership has been at the heart of tonight’s debate. We will no doubt discuss it in Committee and perhaps on Report. It is important to recognise that the UK is the only member of the G20 with a public register of company beneficial ownership. We welcome the fact that the EU is catching up with us, but, when it does, public registers of beneficial ownership will still not be a global standard. The non-EU members of the G20 will still not have them.

We hope to work with the Financial Action Task Force and other partners to establish registers of beneficial ownership as a global standard, the effect of which will be not to allow companies or people simply to shift from one regime to another and hide their assets somewhere else. In the meantime, we should remember that the overseas territories are well ahead of most jurisdictions, including many G20 partners, in developing private registers.

In the exchange of notes in 2016, the overseas territories with significant financial centres each committed to holding central or equivalent registers of company beneficial ownership and to making information held on those registers available to UK law enforcement and tax authorities. Those arrangements are almost complete, with some of the territories understandably slightly delayed by last year’s devastating hurricanes.

Moreover, the overseas territories are separate jurisdictions with their own democratically elected Governments. The UK respects the constitutional relationship with the overseas territories and Crown dependencies. It is entirely right to work consensually with them, rather than to impose legislation. The UK has only legislated directly without the overseas territories’ consent in the most exceptional of circumstances, such as on capital punishment.

We do not generally legislate for the overseas territories, and to do so would have the effect of overruling their own legislatures and could be interpreted as disenfranchising the citizens who voted for them. The overseas territories have taken great steps forward in this area, further indeed than many other jurisdictions, and I urge the House to appreciate the importance of not jeopardising what has been agreed with them.

Until we leave the European Union, the United Kingdom will continue to exercise all the rights and obligations of membership, including with respect to common foreign and security policy, sanctions and anti-money laundering. After we leave, this Government intend to continue working closely with our European neighbours to ensure our collective peace and security. Sanctions and anti-money laundering regulations will continue to be a powerful tool in that effort.

Through this Bill, the Government intend to ensure that these important foreign policy instruments continue to be fully available for the United Kingdom to use wherever it is deemed appropriate so to do. I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Sanctions and Anti-money Laundering Bill [Lords] (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Sanctions and Anti-Money Laundering Bill [Lords]:

Committal

1. The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

2. Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 6 March.

3. The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Proceedings on Consideration and up to and including Third Reading

4. Proceedings on Consideration and any proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.

5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

6. Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.

Other proceedings

7. Any other proceedings on the Bill may be programmed.—(Chris Heaton-Harris.)

Question agreed to.

Sanctions and Anti-money Laundering Bill [Lords] (Money)

Queen’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Sanctions and Anti-Money Laundering Bill [Lords], it is expedient to authorise the payment out of money provided by Parliament of:

(a) any expenditure incurred under or by virtue of the Act by the Secretary of State or the Treasury; and

(b) any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Chris Heaton-Harris.)

Question agreed to.

SANCTIONS AND ANTI-MONEY LAUNDERING BILL [LORDS] (WAYS AND MEANS)

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Sanctions and Anti-Money Laundering Bill [Lords], it is expedient to authorise:

(1) the imposition, by regulations under the Act, of charges by persons exercising functions under the regulations in connection with the detection, investigation or prevention of money laundering or terrorist financing or the combating of threats to the integrity of the international financial system; and

(2) the payment of sums into the Consolidated Fund.—(Chris Heaton-Harris.)

Question agreed to.