Sanctions and Anti-Money Laundering Bill [HL]

Baroness Ludford Excerpts

2nd reading (Hansard): House of Lords
Wednesday 1st November 2017 Lords Chamber

[Baroness Ludford (LD)]

My Lords, I start by also welcoming the contribution to the debate of the noble Baroness, Lady Anelay, whom we much miss from the Front Bench. I am sorry that she is lost from the team of Ministers in DExEU, and, like the noble Lord, Lord Hain, I fear that the balance of opinion in the ministerial team in that department has tipped for the worse. I hope she can continue to have input into government policy and towards the achievement of a sensible one from the Back Benches.

This Bill is necessary but inevitably, because of Brexit, it is not as good as what we have at the moment. Within the EU we operate through the common foreign and security policy framework, which serves as a vehicle for the UK to multilateralise its own sanctions policy and benefit from the support of EU partners. It is an example of where we punch above our weight and multiply our power through EU membership, which enhances our overall influence in the foreign policy arena.

The Government say the purpose of the Bill is to continue to work effectively and consistently with our European and international partners to tackle the shared challenges in foreign policy and security. However, part of the Brexit narrative is that we need flexibility to be able to do things differently. There is an obvious tension here, and the Bill represents the conundrum that is there in Brexit as a whole.

The first example of tension could be about how this greater flexibility outside the EU is used—to what purpose and with what potential loss. There will be a loss of voice and influence for the UK and potentially a loss in terms of a weakening of the global effort against rogue states and other actors, because the EU sanctions regime might be less efficient or effective, or if the strength of our own is diminished because of pressures that it will come under.

Secondly, “taking back control” means an increased administrative and bureaucratic burden—having to create and run a UK-only regime and taking up the time and energy of legislators on this Bill. We are not seeing less red tape with Brexit, but more. Compliance costs will increase. Businesses and individuals benefit from having to deal with only one regime, with uniformity and consistency. An authorisation for an exception from sanctions obtained in one member state is valid EU-wide at present. There is also a lot of litigation. Currently this all goes through the Court of Justice of the European Union. In future it will land on our courts, and I am sure they are welcoming the extra work. The sheer costs and upheaval being created in order to liberate ourselves—in the words of some—from an organisation that, despite some flaws, works well is amply demonstrated by the Bill.

Thirdly, as my noble friend Lady Bowles has well described, there is a reduction in transparency and democracy as scrutiny and joint legislative power for MEPs are replaced by a governmental power grab way beyond the correcting power in the repeal Bill. There is no taking back control for Westminster.

Fourthly, the UK risks a serious loss of influence. Will we become like Norway, not in the room when decisions are taken but having to align ourselves with the EU? How will the UK retain a position of leadership as opposed to accepting that it can be only a loyal follower of EU sanctions or choose to weaken that solidarity by departing from them? How will we influence EU sanctions policy from outside the EU?

We do not yet have the benefit of the EU External Affairs Select Committee’s report on sanctions policy as the inquiry is still in progress, but we have been able to dip into some of the evidence. A witness from RUSI said:

“We still have the biggest financial lever in the European Union”—


in the form of the City of London—

“that the EU can use”.

So the collective weight of the EU is greatly strengthened by UK participation in the sections regime. This also includes the institutional capacity of the EU, to which seconded British experts significantly contribute.

Another feature brought out in evidence to that inquiry is that the UK contributes considerably to the backbone—one witness described it as “the lead in the pencil”—of EU sanctions policy. We have a very important position in the development and promulgation of EU sanctions. When or if we are separated from the EU, the ability of the EU and UK to pursue common foreign policy objectives through sanctions will be reduced. Indeed, our pull-out could weaken the resolve and political will of the EU as well as its ability, since we are one of the strongest advocates of sanctions.

We would put at risk the so-called consensus bias in the EU—the way in which it creates an intention and willingness to work together in support of sanctions regimes, even when certain member states are suffering economically. A good example is the way the EU has coped with Russia’s divide-and-rule policy. The EU has managed to withstand the pressure because of its common institutional architecture, within which no doubt there can be compensation in other policies for unhappy member states that are feeling the pinch from Russian pressures. If that EU architecture is fragmented by UK exit, the outcome becomes less predictable and more vulnerable to such pressures.

On the Bill itself, I am glad to see the “reasonable grounds to suspect” standard of proof adopted, in line with the recommendation in the report from the EU Justice Sub-Committee, on which I sit. There has been some criticism in the past of due process failings in the EU sanctions regime, although there has been improvement in recent years. I was going to ask the Minister if he could highlight ways in which the Bill corrects those failings but the noble Lord, Lord Pannick, has answered the question: he says there are no ways in which the Bill improves the EU procedures. Indeed, he highlighted that in both remedy and review the Bill creates a worse situation. Could the Minister at least assure us that the administration and enforcement of UK sanctions will be well-resourced? We have seen that other enforcement areas, such as the police and trading standards, which are well away from sanctions, have been considerably weakened by cost-cutting. Will the enforcement of sanctions be protected from that?

It is asserted by some that if we get greater control we can better tailor compliance regimes to suit the needs of UK business and other affected sectors. The Minister mentioned licences for humanitarian NGOs, but there might be less laudable beneficiaries. What happens if the City of London tells the Government that it would like to see less pain than it currently gets under EU sanctions? How will the Government ensure that there is not inappropriate deregulation? At present the EU acts as a shield for national Governments who are reluctant to defend and justify their own decisions. “It was terrible; we got outvoted,” they say, when you know jolly well that the decision was taken by consensus. The UK Government running its own sanctions regime will not have that pretext and will be more exposed to lobbying at the national level. Can the Minister give us some idea of how the Government intend to exercise their new-found autonomy and flexibility and reassure those of us worried that this could mean a laxer regime?

A senior Treasury official told the EU Committee inquiry:

“We have the ambition of reducing burdens on business where we can with any additional flexibility we may have once we exit the EU”.


What did that remark specifically envisage? It could mean sensible reform or it could mean an ominous weakening.

The UK must not become a haven for those escaping validly applied sanctions elsewhere through British deviation from an EU sanctions listing. Britain must not become a refuge for the corrupt, the criminal and the corporate villains—or at least, no more than, sadly, we are now. Will the Government surprise us by exhibiting a resolve to use its new-found freedom from the alleged Brussels straitjacket to tackle money laundering as well as tax evasion in the British overseas and dependent territories? Will they now commit to introducing that register of true owners of overseas companies currently able to purchase UK property anonymously? That was highlighted by the noble Lord, Lord Freeman. As Transparency International, whose figures were cited by the noble Lord, said,

“this bill is a timely opportunity for ministers to confirm their determination to deliver on this promise”,

of introducing that register. It went on:

“Without doing so, there is little prospect of ending the UK’s role as a safe haven for corrupt money”.