Sanctions and Anti-Money Laundering Bill [HL]

Baroness Northover Excerpts

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

[Baroness Northover (LD)]

My Lords, I thank the noble Lord, Lord Ahmad, for introducing this Bill and pay tribute to all those who have spoken. I pay tribute in particular to the noble Baroness, Lady Anelay, and thank her for everything that she did in her long service as a much-respected Minister. It was a great pleasure working with her.

This is the first Bill to reach the House of Lords which seeks to set into UK law the law and regulations under which we have been operating in the EU. I am not sure how auspicious it is. Clearly, if we leave the EU, this is an area of law that we must have in place. We cannot have a hiatus in this or other areas. The Bill will therefore be followed by many others. That poses an enormous challenge to us as we can see from simply looking at this area. It is an area which per se—enabling us to have a sanctions regime and to prevent money laundering—should be non-controversial, which is no doubt why this Bill is starting here in the Lords.

The Minister has explained that the Bill would enable the UK to continue to implement United Nations sanctions regimes, to use sanctions to meet national security and foreign policy objectives and to enable anti-money laundering and counterterrorist financing measures to be kept up to date. If we leave the EU, we fully support the proposal that the UK must have the ability to maintain its sanctions and anti-money laundering regimes.

Like other UN charter states, the UK is obliged under international law to implement UN sanctions. The UK has also taken action where there are no UN sanctions, through the EU and often with the US, Canada, Norway and others. Thus we have had sanctions in relation to Syria, Iran, North Korea, Sudan and Zimbabwe, and would wish to have the ability to continue to use them as part of our foreign affairs armoury. The noble Baroness, Lady Anelay, made the clear and incontrovertible case for the use of sanctions, although she will be aware that the UK has often led the EU in this field and our leaving may have a negative impact—my noble friend Lady Ludford also made this very clear, as have witnesses to the House of Lords EU Sub-Committee on External Affairs.

The Bill also creates the power to amend the money laundering regulations of 2017 should the UK withdraw from the EU and to pass new regulations making provision against money laundering and terrorist financing. Part 1 of that legislation, which deals with terrorist asset-freezing, will be replaced by the Bill. It also enables the Government to update UK provisions to reflect international standards set by the Financial Action Task Force, of which the UK is a member.

Our task in this House is to scrutinise closely whether the legislation brought before us does what is required, does nothing detrimental—either by design or inadvertently—and puts in place a framework that will work for the future. The Minister and his team will be in no doubt that we will take very seriously our responsibilities to scrutinise. There are areas in which we may wish to improve things, as there always are in Bills. We hear, for example, of the way that sanctions may make life difficult for NGOs working in the humanitarian sphere in places such as Syria and we will have to see whether the Bill adequately addresses their concerns. I welcome what the Minister has indicated in that regard. Is he in contact with DfID over how best to frame exemptions and licences for such organisations? I note that his noble friend Lord Bates was next to him at the beginning of this debate. Will such issues be addressed in the Bill, rather than buried in secondary legislation and possibly moved to the back of the queue? The NGOs especially request the power to provide for exemptions and general licences in respect of humanitarian responses, international development and peacebuilding activities, and for these to be administered flexibly.

As we have heard, Transparency International has made a very cogent case on the money laundering section; no doubt the Minister has heard that as well. I look forward to hearing how the case to which the noble Lord, Lord Hain, referred now progresses. As my noble friend Lord McNally said, I have seen the very useful effect on African regimes of foreign banks pulling out for fear of US courts and fines.

This is an important opportunity to see whether what the Government propose could be strengthened. They have always argued that while no protections that the EU afforded would be lost in the process of leaving the EU, improvements could also be made. My noble friends Lady Ludford and Lord McNally have warned that things could of course move in the other direction, and he also made it clear that this must be an opportunity to put into UK law what the Government have long promised on fighting corruption. I recall during the coalition, for example, the moves made to ensure that property ownership in the UK was placed on a public register and the promises to extend that further. My noble friend Lady Sheehan referred to this. Yet we see that this provision is only in secondary legislation here. This means that there is a possibility of it being implemented; it may also mean that no one acts and nothing is done.

However, as noble Lords have made extremely clear, there are much more fundamental concerns about the Bill. Noble Lords have heard devastating critiques in this Second Reading, in particular from my noble friends Lady Bowles and Lady Ludford, the noble Lord, Lord Pannick, and the noble and learned Lords, Lord Judge and Lord Hope. These concerns stem largely from the wide use of secondary legislation. The Government are clearly constrained, as they have no idea what the likely future relationship with the EU will be. Their capacity is stretched to breaking point with all that they need to cover. We thus do not even know whether we are trying to have a sanctions and anti-money laundering regime that is so close to the EU as to be indistinguishable, as Norway argues is in its economic and other interests. What a piece of homework to set our civil servants. Much is therefore being put into secondary legislation, suggesting that the Government might do this or that. The extent of powers afforded to Ministers in the Bill raises huge concerns, as we have heard.

We have also heard that the anti-money laundering measures were added at a late stage—people have mentioned that to us. Given how short the part of the Bill is in this regard, it certainly looks likely. The very fact that there was earlier scrutiny of the sanctions section rather bears that out. It would also explain why so much of this part is being put into secondary legislation, even to the extent of allowing Ministers to create new criminal offences, as noble Lords have pointed out. It seems as if this part of the Bill was particularly rushed: lest the Bill enshrine in primary legislation elements that the Government were not quite sure about, they resort to secondary legislation to allow them to set things in place later. But the risk must be that if we put overarching frameworks in secondary legislation, exactly when would primary legislation setting out the parameters ever come back to Parliament?

My noble friend Lady Bowles, with her long experience as a former MEP—even more so as a former chair of the EU Parliament’s Committee on Economic and Monetary Affairs from 2009 to 2014, which was a rather crucial time in the world’s financial history—is right to point out the severe challenges in this part of the Bill. When she makes it plain that there is a whole democratic layer missing here, we should listen. Here are offences decided by Ministers without safeguards, and without the safeguards that exist in their EU counterparts, as the noble Lord, Lord Pannick, explained.

Secondary legislation is a very blunt instrument. As my noble friend Lady Sheehan pointed out, we know that it is very much a “take it or leave it” affair in the UK Parliament and that the Government became extremely heated when in this House we decided that we would not accept their tax credit changes as proposed in secondary legislation. When they were voted down, there was, as my noble friend pointed out, almost a constitutional crisis. The Government risk the same here by setting in place an arrangement by which such important decisions are made. That is why it is important that a democratic and sound framework is put in the Bill and we do not have important areas simply left to secondary legislation. For that reason, it will be important to see what the Delegated Powers Committee has to say about the Bill, and I note what my noble friend Lord McNally proposed as a way through.

I am sure the Bill is meant to be a non-controversial start to the Brexit legislation we will need to have in place should we leave the EU in March 2019. I also picked up on the Minister’s reference to this Bill being simply technical. This is an area where there is much cross-party agreement, but it is very clear from the Bill how challenging it will be to do what the Government are doing in such a short time. As my noble friend Lord McNally indicated, it may well be that nobody would doubt the intentions of the current Minister, but he will know, as I do, that Governments and Ministers come and go. What we need here is a far more robust—to use his word—piece of legislation which does not push all the decisions down the track to be opted into or out of according to the whim of another Minister or Government, even to the extent of creating new criminal offences.

I look forward to the scrutiny of the Bill, to the extent to which the Minister can reassure the House that the powers taken here are appropriate and to his willingness to think again where he and we find that the Bill as drafted simply cannot stand. Only then will the ultimate aims of enabling the UK to have effective sanctions and anti-money laundering regimes be achieved.

Sanctions and Anti-Money Laundering Bill [HL]

Baroness Northover Excerpts

Committee: 1st sitting (Hansard): House of Lords
Tuesday 21st November 2017 Lords Chamber

[Baroness Northover (LD)]

My Lords, I too will speak to Amendments 1, 23 and 1A, which is in my name and that of my noble friend Lady Sheehan. As the Constitution Committee and the Delegated Powers Committee have made clear, and as we have just heard, the Bill, though described by the Minister at Second Reading as simply “technical”, proposes to give wide powers to Ministers—I see the Minister’s rueful smile; I suspect he regrets using that phrase—in the event that the UK decides to leave the EU and sanctions and money laundering arrangements have to be set in place. I was struck as he used that expression that, when he heard from the noble and learned Lords, Lord Judge and Hope, and the noble Lord, Lord Pannick, this might sum up how he now feels.

The case for Amendment 1 has already been cogently made by the noble and learned Lords and the noble Lord. I also want to quote the Delegated Powers Committee, because it is worth the Minister being aware that there is, I am sure, cross-party support for its very sombre conclusions about this first Brexit Bill we are considering in the Lords. The committee states that,

“clause 1(1) allows the Minister to make sanctions regulations where the Minister considers that doing so is ‘appropriate’ to achieve one of the purposes listed in that clause … we take the view that the Minister should only have power to make sanctions regulations if doing so is considered ‘necessary’ to achieve the purpose for which they are made”.

That theme runs right the way through the reports of both the Delegated Powers Committee and the Constitution Committee. I am sure the Minister will take note of this advice and the widespread agreement with those committees across the House. I hope he will not only accept the amendment but apply the same logic through the rest of the Bill.

The noble and learned Lord, Lord Judge, made it clear that the Constitution Committee and the Delegated Powers Committee are concerned about parliamentary involvement right the way through the Bill. The Delegated Powers Committee has also noted various other areas about which it is concerned, and that is the subject of our Amendment 1A. It states:

“In our view, an appropriate Minister should only be allowed to make sanctions regulations for a purpose other than compliance with an international obligation, where there are compelling reasons for the Minister’s belief that carrying out the purpose will achieve one of the objectives listed in clause 1(2)”.


One would almost think that one did not have to state this, but it is very clear from this legislation that we do.

The committees request that we fully scrutinise this Bill and insist on full parliamentary involvement. In other areas, the Delegated Powers Committee seeks the affirmative procedure; in another, the Constitution Committee states that we should consider,

“whether the consent of the devolved legislatures should be required when this power is used to amend or repeal legislation enacted by them”.

All these issues need to be considered.

In sum, the Constitution Committee states that,

“given that the purpose of the Bill is to address the need for domestic powers to impose, amend and revoke sanctions after Brexit”—

assuming Brexit happens—

“it is important to ensure that there are sufficient safeguards and there is adequate parliamentary scrutiny to make the delegated powers constitutionally acceptable”.

That point has been made by the noble and learned Lord and the noble Lord from the Cross Benches. I am sure it will be repeated throughout the Committee stage. That is what we need to hold on to as we see this Bill through.

[Lord Lennie (Lab)]

My Lords, I say for the record and from the outset, and for the avoidance of any doubt in the mind of the Minister, that we on this side of the House recognise the importance of such a Bill coming into being. We are leaving the EU. The Government’s position is that EU jurisprudence will no longer apply and therefore the Bill becomes an imperative. That is not the same thing as saying that everything in the Bill is rosy and we support it all, and that is why we are here. We strongly support the case made by the noble and learned Lord, Lord Judge, the noble Lord, Lord Pannick, and the noble Baroness, Lady Northover.

This amendment is the starting point of the Bill: it concerns the power for a Minister to act. Should it be when the Minister considers it appropriate or should it be when it is provably necessary to do so? One is an opinion, the other an evidential absolute. Does it weaken the Government’s position? No, it makes it more robust to have “necessary” replacing “appropriate”. Will it inhibit the Government? No, it will make for greater certainty as other clauses in the Bill are debated. Does it strengthen the Bill? We believe that it does: it will become more bullet-proof and less able to be challenged.

On Friday, as the noble Lord, Lord Pannick, said, the Delegated Powers Committee considered this and concluded:

“In the light of the width and significance of the powers, we take the view that the Minister should only have power to make sanctions regulations if doing so is considered ‘necessary’ to achieve the purpose”.


That is where this amendment ends. Does the Minister accept this? Will he reflect on this and come back on this point?

--- Later in debate ---

Moved by

[Baroness Northover]

2: Clause 1, page 2, line 7, leave out paragraph (d)

[Baroness Northover]

I shall speak also to Amendments 3 and 4 in my name and the other amendments in the group. Amendment 2 once again addresses the wide and poorly defined powers in the Bill. The amendment, which is also in the name of my noble friend Lady Sheehan, would delete Clause 1(2)(d). It is to seek clarification from the Minister how a purpose which includes to,

“further a foreign policy objective of the government of the United Kingdom”,

might be applied. This is something to which the noble Lord, Lord Pannick, and my noble friend Lord Thomas just referred. Remember that we need to read the Bill in the light of it being, as the noble and learned Lord, Lord Judge, said, a bulk buy of regulations.

For example, the Government of the United Kingdom have had a number of foreign policy objectives with which one would not want disagreement to result in sanctions. Thus, for example, might someone risk being sanctioned because they opposed the invasion of Iraq or objected to selling arms to some dubious regime? That might be ridiculed as of course not intended here, but we need to probe the unintended consequences, given the wide scope of the Bill. Given that we know that the Human Rights Act cannot be counted on for protection, as this Government have at times wished to repeal it, and that members of the party opposite have also made it clear that they do not wish to be bound by the European Convention on Human Rights, despite the UK playing a leading role in drafting it, what protection can the Minister offer?

In addressing Amendments 2 and 4 in my name, and that of my noble friend Lady Sheehan, I pay tribute to the work of Amnesty International in briefing us, and for its work around the world. This returns us to seeking to improve the Bill, as we normally do in this House—and the concern here is to include human rights breaches in the definition of purpose in this clause and ensure that the Government have the means to prevent the violation of sanctions regulations. I note that the noble Lord, Lord Collins, has further proposals in this regard. I make it clear that we also feel that they would strengthen the Bill—for example, the amendments that would ensure that sanctions were in compliance with international humanitarian and human rights law and would provide for a humanitarian impact assessment before sanctions were introduced so that their impact can be properly gauged. I am well aware, as a former DfID Minister, of the impact on NGOs working in Syria, for example, in the restrictions on them due to the sanctions regime that was in place.

I look forward to hearing what the Minister says, and I beg to move.

[Baroness Sheehan]

My Lords, I rise to speak to Amendment 3 which, as my noble friend Lady Northover said, adds to the list of purposes for making regulations under Clause 1 to include human rights breaches, as well as prevention of acts contravening the international law on armed conflict and prevention of internal repression in any country. That those purposes are not mentioned is a grave omission and cannot be encompassed in subsection (2)(d), which says that the purpose would,

“further a foreign policy objective of the government of the United Kingdom”.

To give our amendments the force that we as a civilised country intend, they must be spelled out in the Bill. That is the basic thrust of my argument as to why I hope that the Minister will give serious consideration to Amendment 3.

However, on a more technical note, can the Minister give consideration to the fact that there is an unexplained gap between this Bill and the Export Control Act 2002? That Act has a specific section called “Relevant Consequences”, which sets the conditions whereby the Government can act. Clause 1 of the Bill and the relevant consequences of the 2002 Act are aligned with the exception of human rights and international humanitarian law provisions, which are in the 2002 Act but do not feature in the Bill before us. That is a serious omission; trade sanctions and, specifically, arms embargos, are largely triggered because of the humanitarian concerns over the provision of weapons in these cases, and the very serious and grave violations of international humanitarian law that arise as a consequence. The amendments would give powers to the Government to impose sanctions on these grounds and ensure direct consistency on the two Acts when dealing with issues around trade and arms embargos.

Amendment 4, also in my name, would add the provision,

“prevent the violation of sanctions regulations made under this Act”.

That addition may seem unnecessary, but it would give consistency with the corresponding sanctions mechanisms agreed at UN and EU level and would require the Government to take action to prevent breaches of sanctions.

I have another passing point. On the front page of the House of Lords Library briefing to the Bill, a sentence reads:

“The Government agrees that there is a mutual interest in continued collaboration with European partners in this area, and has suggested that the UK and EU could cooperate on sanctions listings and align policy in future where appropriate”.


I have not spotted many government concessions in the Bill to demonstrate the importance of aligning sanctions regimes with those of international partners, so this small amendment would go a little way to meeting the Government’s own stated position of working collaboratively going forward, should Brexit take place.

--- Later in debate ---

As I hope I have demonstrated, while I appreciate the sentiments behind these amendments, the Government do not consider them necessary, and in some cases, as has been said, they could restrict the ability of the UK to continue to play a significant role in the negotiation and use of sanctions. This could not only undermine the UK’s role in international affairs but weaken the impact of international sanctions as a tool for solving some of the most pressing issues of the day. With that explanation, I hope the noble Baroness may be minded to withdraw the amendment.

[Baroness Northover]

My Lords, I am grateful to everyone who has contributed to this mini debate. In some ways, I was surprisingly unreassured by what the Minister said; I was expecting to be much more reassured than I am. I was struck by the difference in his language. He mentioned that the EU uses sanctions for “foreign and security policy”, but the Bill talks only about “foreign policy”, which is a much more restricted meaning. He mentioned Iran, but it was the nuclear programme and the threat of it that led to sanctions, which is about security rather than foreign policy per se.

[Lord Ahmad of Wimbledon]

I suggest to the noble Baroness that foreign policy and security are the primary responsibility of any Government. Of course, security is a key feature of foreign policy, and I also referred to the Government’s national security strategy.

[Baroness Northover]

Indeed, security, and not just foreign policy, is a first aim of the whole of government. However, I find myself concerned about the language here and about the scope in the Bill for using this provision. I shall certainly think about this but, in the meantime, I beg leave to withdraw.

Amendment 2 withdrawn.

--- Later in debate ---

[Lord Collins of Highbury]

The purpose of this amendment is to reflect on the discussions that we have had with many NGOs actively engaged in humanitarian support. I had not fully appreciated the difficult circumstances that can arise when they operate in countries affected by sanctions. This is not just a technical matter; people’s lives are put at risk and the ability to travel across certain countries can be impeded. Therefore, it is very important that the impact of any proposed sanction is fully understood by the NGOs.

We also fully support the amendment in the names of the noble Baronesses, Lady Northover and Lady Sheehan, which would ensure the provision of impact assessments. We are very keen to ensure the provision of impact assessments to cut down the time between sanctions coming into effect and licences being granted. I have no doubt that the Minister will say that there is a process and that the Government are dealing with the NGOs’ concerns, but this is a mechanism that can better help the planning and implementation of their humanitarian projects. I beg to move.

[Baroness Northover]

My Lords, I shall speak to Amendment 9, which stands in my name and that of my noble friend Lady Sheehan, and I support the amendment in the names of the noble Lords, Lord Collins and Lord Lennie.

The Minister made clear at Second Reading and in our discussions—I welcome this—that he is open to the possibility of trying to ensure that NGOs working in humanitarian disaster areas and very challenging situations have greater assistance in doing their work when sanctions get in their way. As I just mentioned, I recall from my work as a DfID Minister that sanctions could have a significant impact on the work of NGOs when they sought to assist in Syria.

As the noble Lord, Lord, Collins, pointed out, it is essential that we review current and future sanctions so that we can identify any disproportionate impacts. I know that was the case in Syria, where there were different arrangements for our NGOs compared with those for American NGOs, for example. We need to be able to assess the impact of sanctions and make adjustments accordingly. Therefore, our Amendment 9 speaks of consultation with stakeholders, who are obviously in a very good position to inform the Government of any unintended consequences, so that those consequences can be addressed.

Our amendment is a probing one. As I said, the Minister has said that he is open to ensuring that licences for NGOs are more fit for purpose than has been the case in the past. We are seeking to move the Minister further along that line so that that is not just a possibility but is put in a more concrete form and more specifically, so that we can see the changes that the noble Lord, Lord Collins, and I have outlined.

[Baroness Sheehan]

My Lords, Amendment 9 is broad enough to cover a range of activities—not just humanitarian assistance but peacebuilding, reconstruction and development assistance. It would also enable a range of stakeholders—for example, banks, businesses that supply goods or services in sanctioned countries and other experts—to be included in any discussions.

Consultation is very important as it will reduce unintended consequences for diplomats, aid workers and others. For example, a British diplomat was prevented from getting a mortgage because his bank found out that he lived in Sudan. Sanctions that are badly applied or inappropriate can give banks and international companies a reason to be risk-averse, reducing the availability of services to poor and vulnerable people or countries. For example, in 2011 Standard Chartered Bank received a large fine for breaching Iranian sanctions. That led to all banks becoming more risk-averse to the point where they now overimplement the sanction where the value of the market is not worth the risk. Therefore, even if the activity they are carrying out is excluded, they will often choose to avoid the market altogether. Another example is Somalia, where Barclays closed the accounts of small money transfer companies used by the Somali diaspora to send money home. We all know how important these remittances are these days. Perhaps with consultation those problems could be avoided.

It is very important that any potential impact of a new sanctions regime is properly understood and documented. As well as the other factors that I have mentioned, this would also reduce the lag time between sanctions coming into effect and licences or exemptions being provided to mitigate their impact.

--- Later in debate ---

[Baroness Northover]

I echo what my noble friend said and I commend the amendments to noble Lords, especially the Minister. He has been arguing that he needs wide scope in the Bill to ensure that those who might seek to evade sanctions can be brought within their scope. This is an area where we seek to help him to draw that wider scope based on what the world has discovered about the ingenuity of those who use bogus companies to, for example, evade sanctions. I hope he will look kindly on these amendments.

[Lord Lennie]

My Lords, to echo what has been said, the amendment would strengthen the Minister’s hand to act and seeks to address the problem of companies registered in this country with no connection to, business with or purpose in this country other than to evade detection and supply arms to those we regard as rather evil. There is a great difficulty with detection. I am not underestimating problems, particularly evidential ones, but I suspect that the wider the hand of the Minister in this regard, the greater the power of success. There has been some progress in this area recently under other Acts, such as the Bribery Act, but our chance of success in closing down what is simply a hosting arrangement would be greatly enhanced by the amendment.

--- Later in debate ---

Moved by

[Baroness Northover]

18: Clause 5, page 4, line 43, at end insert “unless they are a person, or are doing so to provide legitimate travel to a person, recognised as a refugee under the UN Convention relating to the Status of Refugees”

[Baroness Northover]

My Lords, I extremely glad that the Minister wishes to align so closely with the EU. I can think of very simple ways he might achieve that. In the meantime, in moving Amendment 18 I will speak to Amendments 20 and 21 in my name and that of my noble friend Lady Sheehan. I am sure the Minister will be relieved to know that we are returning to our main theme: whether the scope of the Bill is too wide in giving him extra powers. Our concerns here are about unintended consequences of the sanctions, so I am afraid we are seeking to restrict the Minister again.

If these bans on aircraft and ships prove detrimental to those fleeing persecution, what exceptions might there be? We understand why the Government would wish to have such sanctions, but we are once again scrutinising for wide powers with unintended consequences. Clearly, we would not wish to include traffickers in any exception, but one can envisage, for example, a plane leaving North Korea and seeking asylum for all those on board or, more commonly, those commandeering a boat wishing to escape a terrible regime. What is emerging from the Minister’s account is that the Bill is drawn widely to allow sanctions in unusual and ingenious cases. We need to see what the protections might be where wide powers are sought.

[Lord Collins of Highbury]

My Lords, I do not have much more to add. Obviously, the amendments in this group are probing. I hope the Minister can respond in terms of what the current arrangements are in respect of the circumstances outlined in the amendments and how they may not be necessary. As the noble Baroness said, it is important that we consider all the unintended consequences, as well as our objective of imposing sanctions that are effective.

--- Later in debate ---

[Lord Hylton]

My Lords, following on from what the Minister has just said, perhaps I may be allowed to put a drafting point to the noble Baroness, Lady Northover. Her amendments state, “recognised as a refugee”. Might it not be better to say, “claiming to be a refugee”? That is because the process of obtaining recognition can often take a very long time and, in certain circumstances, it is just not obtainable. I would favour a wider wording.

[Baroness Northover]

I thank the noble Lord for his suggestion. This was my thought when reading the Bill —it did not come at the request of any of the NGOs, so they might be slightly surprised that discussion of this is included in what we are covering, which indeed came from them.

I was thinking not about the general exceptions that the Minister talked about, or of NGOs’ work, but about the example of a group fleeing Syria. What protection would they have if there was a sanctions regime that would otherwise have included the means by which they escaped from that regime? That is what I was probing for. Perhaps the Minister could go away and consider a more thorough answer on how that is dealt with. I would appreciate that. In the meantime, I beg leave to withdraw the amendment.

Amendment 18 withdrawn.

--- Later in debate ---

Debate on whether Clause 8 should stand part of the Bill.

[Baroness Northover]

My Lords, I found reading this Bill enormously instructive. I am no lawyer, but I nevertheless found myself wondering at many points about the possible unintended consequences of what was in it. Clause 8, along with various other clauses, seemed to me rather full of such potential unintended consequences, so I want to know from the Minister what protections are being put around the mass of regulations to which the noble and learned Lord, Lord Judge, referred in the first group of amendments. Here the Bill specifies,

“persons designated under any power contained in the regulations”,

which we know are very widely drawn. That causes me concern. It goes on to talk about,

“any organisation and any association or combination of persons”.

It struck me as I read this provision that it was enormously widely drawn. If we are seeking to check the abuse of power, how does this wide definition fit in?

I also support the amendments of the noble Lords, Lord Collins and Lord Lennie, in this group. They have rightly picked up on the point that regulation “must” make provision in certain areas, as opposed to simply “may”, which again is very widely drawn. I am seeking from the Minister an explanation of what protections there are in relation to Clause 8.

[Baroness Sheehan]

I have only a short sentence to say on this. Clause 8, on “Designated persons” is so widely drawn that it occurs to me that in a prescribed country anyone who is not a designated person will doubtless be a refugee.

[Lord Ahmad of Wimbledon]

My Lords, I thank all noble Lords who have spoken in this very brief debate thus far. This clause introduces the power to include designated persons under sanctions regulations and defines the meaning of this term as used in the Bill. It sets out the designated persons, which can include individuals, companies and other entities which have a legal personality, as well as groups and associations. The noble Baroness, Lady Sheehan, said that it is so wide that anyone in a particular country who was not designated would be a refugee. That is not the case. In conflict situations—Syria is a prime example—there are members of the opposition, for example. When I was qualifying the status of those who may or may not be “influenced by” or “under the control or direction of”, in a previous debate, that point was made quite clear. The clause will ensure that Governments can, for example, designate particular organisations, and terrorist organisations come to mind in this respect.

The decision to designate an individual or organisation would be made by an appropriate Minister and the Minister would be informed by strategic, tactical and evidentiary advice; so the evidence would need to be there. A decision to designate would also be made where a designation advanced the purposes of a specific sanctions regime, taking into account the political picture and the evidence available. This approach is consistent with EU practice and the practices of our key sanctions partners-for example, the United States and Canada, where the power to designate rests with the Executive. It is for the Executive to use the powers then provided by Parliament as the situation demands.

I fully accept the point that there is a need for appropriate safeguards, and the Bill gives designated persons the right to ask for an administrative reassessment and then bring a challenge in the courts. It also requires annual political and triennial evidentiary reviews. These are, of course, in addition to the Government’s day-to-day accountability to Parliament.

Amendment 33 in the names of the noble Lords, Lord Collins and Lord Lennie, would make it necessary to set out what was meant by being,

“owned or controlled directly or indirectly”,

by another person and of being “associated with” another person. I agree that there should be restrictions on designation powers. That is why the Bill allows designation only where there are reasonable grounds to suspect that a person is involved with or connected to an activity set out in the regulations, and that it is appropriate to designate them on that basis. I hope that, with the explanation I have given, the noble Baroness will feel able to withdraw her opposition to Clause 8 standing part of the Bill.

[Baroness Northover]

My Lords, I thank noble Lords for their contributions. This clause does indeed seem to be challenging, and I look forward to the noble and learned Lord, Lord Judge, perhaps coming up with some overarching set of protections for the whole Bill which would apply to this as well. The Minister mentioned reviews: we will be coming to reviews later in the Bill, and there are questions around those, so that is not tremendously reassuring. He also mentioned answerability to Parliament. That has the problems that my noble friend Lady Kramer referred to earlier in our initial debates.

Clause 8 agreed.

--- Later in debate ---

[Lord Lennie]

My Lords, I shall also speak to Amendment 26. Amendment 25 would replace “may” with “must”, which would make it consistent with other places in the Bill. Amendment 26 is the real substance and raises a new requirement to notify a designated person once relevant sanction regulations have been made. If a sanction is made, thereafter the individual will have to be notified that it has been made against them. They must also be given a reason for the sanction having been made, under procedural fairness. The legislation contains rights of appeal and review, but how can you appeal or review something you do not know about, or do so if you do not know the reasons for it? That seems a justification for this amendment. What actions are necessary to address the concerns which have led to their designation? On that basis, we invite the Minister to consider whether this is an appropriate amendment to be accepted into the Bill.

[Baroness Northover]

I shall speak to one amendment in this group, Amendment 61. I support the noble Lords, Lord Collins and Lord Lennie, on the various protections they have outlined in their other amendments. Amendment 61 is extremely simple. It puts forward the proposition that a Minister should provide reasons for complying or refusing to comply with a request for removal from the EU sanctions list. This is very straightforward, not very much to ask and a very reasonable proposition.

[Lord Judge]

I shall speak to Amendment 60, which is in this group. It is simply a question of elementary procedural fairness. It is really no more than that and no less than that. It may not be wise to tell an individual before he is designated that he is going to be designated because, obviously, if that were to happen the designation would come too late and the assets would be hidden or dissipated, but procedural fairness is a basic principle of the common law. If you are arrested, you must be informed of the reasons for your arrest. If you are made subject to sanctions of the kind envisaged in this Bill, they affect your livelihood and your ability to support your family and to live an ordinary life so that you are, in the words of my noble and learned friend Lord Hope at Second Reading, in effect a prisoner in your own home. If you are in any way going to be subjected to the coercive powers of the state, you should be told why those coercive powers are being exercised against you and they should be justified. This Bill is bung full of massive coercive powers. In these circumstances, the amendment that my noble friend Lord Pannick and I propose is absolutely self-evident, but without it, or without some concession to this group of amendments, we will end up with having done some insidious damage to an essential constitutional principle, and we should not be doing it. I highlight paragraph 29 of the Constitution Committee’s report, but I do not suppose noble Lords want me to read it.

--- Later in debate ---

[Lord Collins of Highbury]

Maybe I should read out the Constitution Committee’s report, as it might be helpful for the record. We have to acknowledge, like the noble and learned Lord, Lord Judge, that at Second Reading the Minister said that where human rights were affected, a Minister would always need to comply with the European Convention on Human Rights and Strasbourg case law, which will include an assessment of proportionality. The Constitution Committee said it was grateful for those words, but it is such an important limitation on ministerial powers that it should be expressly stated in the Bill. I know the Minister will say, “I am considering the report of the Constitution Committee and the Delegated Powers Committee”, but I hope that by the time he and his colleagues have read those reports, they will be able to come back and agree to the insertion of this very long but important word.

[Baroness Northover]

From these Benches, I concur. I look forward to hearing what the Minister is planning to do in light of the reports from the Constitution Committee and the Delegated Powers Committee.

[Lord Ahmad of Wimbledon]

My Lords, I agree with the spirit behind the amendments. Targeted sanctions inevitably involve significant impacts on the people affected by them. That reflects the purpose of sanctions, which are about changing behaviour. I shall repeat, as was mentioned by the noble and learned Lord, Lord Judge, and the noble Lord, Lord Collins, what I said at Second Reading: I reassure noble Lords that where relevant rights under the European Convention on Human Rights are engaged, we consider that proportionality and the impact on the individual will be part of the decision-making. Under Section 6 of the Human Rights Act 1998, the appropriate Minister must act in compliance with those convention rights as informed by the Strasbourg case law. We consider that that includes satisfying themselves that the designation is proportionate.

In the response to our consultation published in August, we made clear that our approach to sanctions would be compatible with UK and international law and we would continue to ensure that the UK’s obligations under the European Convention on Human Rights, particularly Article 6(8) and Article 1 of Protocol 1, are upheld when imposing and maintaining human rights and maintaining designation. However, as a result of the Human Rights Act 1998, the requirement to act proportionately applies across a wide range of legislation regardless of whether it is stated explicitly in the legislation. It is also relevant that the Bill contains a range of protections to ensure that designations are used appropriately.

In cases where the UK has chosen to act in an area where the UN is not acting, the affirmative procedure will apply, ensuring that Parliament has a vote. This will provide an opportunity for Parliament also to consider whether the designation powers being taken by the Government are appropriate. Parliament will also have the opportunity to consider the exceptions and licensing arrangements that will apply to a regime, which can allow, for example, the release of frozen funds to meet basic expenses or travel to be authorised for humanitarian reasons. The Bill further provides for an annual review of each sanctions regime against the purpose that it was put in place to achieve, which will involve looking at the current global picture. The Bill also provides opportunities for reassessments and court challenges.

I state all that because it is important for the record. I hope I have been able to provide noble Lords with reassurance. Nevertheless, while this debate has been extremely short, it is a pertinent one based on a word. I will therefore consider with my officials what further reassurances we can give and, as the noble Lord, Lord Collins, said, reflect on the committee reports. For now, though, I am minded to ask the noble and learned Lord to withdraw his amendment.

--- Later in debate ---

Moved by

[Baroness Northover]

37: Clause 12, page 11, line 19, leave out subsection (3)

[Baroness Northover]

My Lords, this is part of the running theme of the Bill. Once again, we wish to know why Ministers need the wide powers that they appear to have through regulations. I do not need to repeat the arguments that were so well put earlier, but I flag the wide powers here once more. I beg to move.

[Lord Ahmad of Wimbledon]

My Lords, I shall speak to both amendments in this group, because although referring to different areas—UN lists and International Maritime Organization numbers—I believe that they have some similarities.

For sanctions to be effective, we believe that it is important that the Government act quickly and that the targets of sanctions are easily identifiable. This enables those who are affected by sanctions, including businesses, quickly to work out what they need to do to comply with whatever restrictive measures are put in place.

When a Minister is specifying a ship, they must be confident that they have identified the correct one. There are a variety of ways in which a ship can be identified—using the ship’s name, tonnage, or the country whose flag it flies. I am sure that noble Lords accept that all those details are important. However, they are also changeable. The most reliable way to identify a vessel is by referring to its International Maritime Organization number, which remains with the vessel throughout its lifetime. This is the method used by the UN to specify ships and one that the Government recommend.

The names of those who are on UN lists can be subject to regular changes. As an example, the UN list relating to North Korea has changed five times in the past year. The ability to refer to a UN list, without having to change regulations each time the UN list is amended, would not only be less bureaucratic but would result in less risk of mistakes. I hope that I have underlined the importance of referring to the UN and IMO lists when designating people and specifying ships and that, in the light of that, having provided that clarification, the noble Baroness will be minded to withdraw her amendment.

[Baroness Northover]

For the moment, I beg leave to withdraw the amendment.

Amendment 37 withdrawn.

--- Later in debate ---

Moved by

[Baroness Northover]

39: Clause 14, page 12, line 26, at end insert—
“( ) provide for the procedure to be followed for an application for an exception or licence.”

[Baroness Northover]

My Lords, I shall speak also to Amendments 42 and 50 in my name and that of my noble friend Lady Sheehan. I also support the amendments in the names of the noble Lords, Lord Collins and Lord Lennie.

We return here to exceptions. The Law Society of Scotland has pointed out to us that there is no provision for regulations to provide for the application procedure for an exception or licence, so that is contained in Amendment 39. We feel that it is useful to have provision for exceptions and licences, and therefore that we need to provide for an application procedure for them. Amendment 42 seeks to make the policy on exceptions clearer, so that they can be granted for humanitarian, development, reconstruction and peacebuilding agencies, as my noble friend Lady Sheehan outlined earlier. Again, we think that it is useful to have those exceptions and, as we discussed earlier, sanctions are having an impact on NGOs. I welcome the proposal by the Minister to meet the NGOs and hope that, therefore, we can take this group of amendments forward in those discussions as well.

Amendment 50 would insert a new subsection in relation to what the Crown Prosecution Service might publish by way of guidance, so that it is clearer where sanctions might have been breached and where somebody might be prosecuted. One thing that we have been hearing is that one uncertainty for NGOs, banks and other suppliers is the lack of clarity on when NGOs or companies will be prosecuted for sanctions breaches. This amendment seeks to clarify that, to assist in that area, too—and, again, I hope that that is something that we can address when the Minister meets the NGOs. I beg to move.

[The Earl of Dundee (Con)]

My Lords, I support Amendment 42, proposed by the noble Baronesses, Lady Northover and Lady Sheehan, as I do the other proposed amendments in this grouping, including those from the noble Lords, Lord Lennie and Lord Collins of Highbury.

Following what the noble Baroness has just said, I should like to connect four points: first, the case for the Government to provide a licensing system for humanitarian activity; secondly, the desirability that the Government should report back regularly on the humanitarian effects of sanctions; thirdly, the urgent necessity of interim measures to assist NGOs to deal with banking restrictions; and fourthly, the need to implement the recommendations of the current United Nations/Swiss report on international co-operation.

On the case for a licensing regime, as we know, banks are considerably held back by government prohibitions. As a result, the flow of funds for important work is often blocked—for example, in Syria. To redress that anomaly, can my noble friend the Minister say what steps the Government will take to provide a licensing system for essential civilian and humanitarian activity?

Then there are lessons to be learned from Iraq and Somalia, where, as an unintended consequence, broad-based sanctions have impacted adversely on the civilian population, demonstrating the need for frequent scrutiny and review. Therefore, what plans do the Government have to report to Parliament at regular intervals on the effect of sanctions—in particular, where humanitarian work has been impeded?

On interim measures, which ones does my noble friend favour to enable safe, transparent, dependable banking and payment channels? As soon as possible, how will the Government advance a regime of exceptions, to prevent the current blocking of humanitarian work? Such interim measures should reduce restrictions on NGOs functioning in sanctioned countries and surrounding territories.

Just now, fundraising and vital aid are being held up by lack of banking facilities. NGOs active in the Levant, even those registered with the Charity Commissioners, find it difficult to open a bank account in the United Kingdom, and in some instances find it not possible at all. A case in point is Sawa, the first Lebanese NGO to help Syrian refugees when they arrived in the Beqaa valley in 2011. For its achievements in Lebanon and elsewhere, this NGO is much respected; it is the winner of the Global Pluralism Award 2017. However, Sawa is still unable to open a bank account in the UK. Consequently, it cannot receive funds which are urgently required, as well as ready and waiting, in the United Kingdom.

On international co-operation, UK Finance has written a parliamentary briefing paper calling for a new international approach towards humanitarian licensing. Correctly, it asserts that relevant changes in the UK will take proper effect only if also supported and structured elsewhere. A report commissioned by the United Nations along with the Swiss Government advocates setting up viable, transparent safe banking and payment corridors. Not least, that expedient would improve the flow of permissible funds into Syria. I know my noble friend would wish the UK to take a lead in assisting this process. Therefore, what plans do the Government have for backing up the recommendations of the UN and the Swiss authorities’ report so that these proposals can then be taken forward?

--- Later in debate ---

[Lord Ahmad of Wimbledon]

My Lords, Amendment 39 seeks to enable the procedure by which individuals or entities could apply for licences and exceptions to be included in the regulations. Amendment 40 would require the Government to establish a fast-track process for dealing with requests in respect of exceptions and licences for humanitarian purposes, as the noble Lord, Lord Collins, just highlighted.

I would like to make it clear that the consultation on the White Paper raised the need for clear guidance and swift and robust licensing processes. I assure my noble friend Lord Dundee that the Government are committed to a positive reply on both issues. I hope the Committee will be reassured that, given the number of departments involved and the many different derogations, exemptions and grounds for licensing that exist, the relevant application procedures in each sanctions regulation are all contained in guidance. This guidance is publicly accessible to all via various departmental websites. To reproduce them in the regulations themselves would certainly create a substantial administrative burden and greatly lengthen the instruments, so we do not think it is necessary to do that.

On Amendment 40, the variety and complexity of exemptions and licensing arrangements in place means it could also be difficult to establish a single fast-track process that would be straightforward to operate. The Government believe that the criteria for considering the prioritisation for granting licences and exemptions should remain as flexible as possible. We have already committed to dealing with licences as swiftly as possible and we will of course prioritise urgent requests. The fact that a licence is required for humanitarian reasons is something that we already factor into, and will continue to factor into, the time we take to respond to the request. However, I am sure that noble Lords will also acknowledge that humanitarian licences are not the only ones that might require an urgent response. For example, a legal fees licence might be needed to enable an imminent court deadline to be met. To have a fast-track procedure confined to humanitarian licences alone might put these at additional risk by giving priority to a humanitarian needs licence that is not urgent over another request that is. For all these reasons, we do not consider that new requirements need to be added to the sanctions regulations.

I appreciate the sentiment behind Amendment 41, which proposes that a consultation be undertaken for an overarching framework for exceptions and licences. The White Paper consultation on exceptions and licences highlighted the need for good systems and clear guidance when applying exceptions and licensing. We have taken on board the comments of all respondents and replied to them and, as we said in our reply, we intend to design the post-Brexit licensing framework based on these representations. We also intend to consult industry from now until the day we leave the European Union and thereafter, to ensure that the framework allows us to be flexible and has the minimum possible effect on industry while having the maximum effect on the intended targets.

It is also true that an overarching framework for licences might not allow us to take advantage of the flexibility that we currently have for each regime. For example, the licensing grounds for a proliferation regime should be different from those of a misappropriation regime. Different types of sanctions also require different approaches. We currently have centres of expertise on the different types of sanctions, and any move to an overarching framework might put these at risk.

Finally, the Committee will be aware that the moment of leaving the EU is approaching. In that time, after the Bill is enacted, we will need to design the replacement UK regimes. To undertake a consultation exercise on top of that will make it harder to prepare in time. Given that the purpose of this amendment is to ensure good licensing and clear guidance, I hope I have been able to reassure the Committee that we are committed to both.

On the humanitarian exceptions, I have great sympathy with the intention behind Amendment 42; humanitarian, development, reconstruction and peacebuilding agencies need to continue the important work they conduct, often in very difficult circumstances, without fear of unintentionally falling in breach of sanctions. The Government should have the necessary discretion to enable this. The intended effect of this amendment is to make it explicit in the Bill that the types of exceptions that can be granted include,

“humanitarian, development, reconstruction and peace-building agencies”.

However, the addition is unnecessary, as Clause 14(2) as currently drafted allows the Government to create exceptions and issue licenses for activities that are not explicitly listed in Clause 14(2). It is the Government’s intention to use this drafting to create exceptions for a wide range of activities. Humanitarian activities are currently included under existing exceptions and licensing provisions in the sanctions regimes in place, and I assure noble Lords that we intend to continue to include them. Clause 14(6) is an additional clarification of purposes for which exceptions can be created, not an exclusive list. For this reason, accepting the amendment would have no effect on the powers, as they are already contained there and therefore unnecessary.

Clause 14(2)(b) also gives a power to issue general licences. This goes further than the position we currently have under EU law, giving the Government the ability to put in place licensing arrangements for humanitarian purposes, which would enable multiple parties to undertake specified activity without the need for a specific tailored licence. Given that this provision is unnecessary as we already have this power, I hope noble Lords will not press the amendment.

I entirely agree with the intent—although the drafting may need to be looked at—of Amendments 50 and 51, which we understand require the Government to provide guidance about enforcement procedures for sanctions breaches. The need for clear and accessible guidance was highlighted throughout the Government’s consultation on the White Paper. In our response, we said:

“We recognise the call for clear and consistent guidance. Accordingly, the bill would provide for the government to issue guidance on the content and implementation of sanctions. The government is committed to ensuring that this guidance would be of a high standard”.


I am happy to say that the Government have delivered on that promise and have included a provision in the Bill—Clause 36—requiring 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. One strand of the guidance requirement set out in Bill—in Clause 36(2)(b)—explicitly specifies that the guidance may cover,

“the enforcement of the prohibitions and requirements”.

In line with this, we intend to continue to publish guidance on sanctions enforcement.

Clause 36, which we will debate at a later stage, provides for a more comprehensive duty than that specified in the amendment. It has been drafted to allow guidance to be given to all persons in the UK and it enables consultation with sources of expertise as appropriate. For example, we do not expect that the CPS will need to feed into any guidance about how civil monetary penalties are issued in respect of breaches of financial sanctions.

My noble friend Lord Dundee asked specific questions about help for NGOs. I am not sure whether he was in your Lordships’ House when I discussed that matter with the noble Lord, Lord Collins, and the noble Baroness, Lady Northover. We will be meeting NGOs before the next stage of the Bill to discuss how we can better understand and address some of their concerns, but we will continue to issue clear guidance to them. I also assure my noble friend that we will provide speedy and efficient responses to requests for licences. As I have already indicated, under the Bill we can issue general licences, which offer more comfort to banks—which I believe my noble friend specifically mentioned—and give them a greater appetite to assist in these areas.

With that somewhat detailed explanation of where we currently stand on Clause 36, I hope the noble Baroness will be minded to withdraw her amendment.

[Baroness Northover]

My Lords, I thank everybody, especially the noble Earl, Lord Dundee, for contributing at this late stage of the evening. I welcome that. I agree with the noble Lord, Lord Collins, about the need for certainty in the Bill. I noted what the Minister said. It reflects the complexity of Brexit and the energy that it is taking up, even in this area, and I therefore look forward to the meeting with NGOs that he has promised. In the meantime, I beg leave to withdraw the amendment.

Amendment 39 withdrawn.

--- Later in debate ---

Moved by

[Baroness Northover]

43: Clause 15, page 13, line 28, leave out paragraphs (d) and (e)

[Baroness Northover]

I shall speak also to Amendment 45 in my name and that of my noble friend Lady Sheehan. I also support Amendment 44 in the name of the noble Lord, Lord Collins.

Once again, we are concerned that regulations confer wide powers—in this case of entry and disclosure. Clearly, regulations should not authorise the disclosure of information that is subject to legal professional privilege, and the noble Lord, Lord Collins, will no doubt address that in a moment.

We are seeking the deletion of Clause 15(1)(d) and (e), which confer wide powers of entry and to authorise or restrict the disclosure of information. We want to give the Minister an opportunity to place protections around these areas, as we have in other instances. We are also concerned that under Clause 15(3)(b) an “appropriate authority” could be,

“such other person as may be prescribed”.

It is difficult to think of anything wider than that description. Therefore, once again, we flag enormous concern about wide powers—especially those put in regulations. I beg to move.

[Lord Lennie]

My Lords, I will speak to Amendment 44 in this group, which seeks to add the words printed in the Marshalled List to the end of Clause 15 to give protection to the relationship between client and lawyer. It may be thought that that goes without saying, but it does not seem to as far as this Bill is concerned. Legal professional privilege is key to the rule of law and the administration of justice. To omit it from this legislation would seem to be a mistake. It permits information to be communicated between a lawyer and a client without fear of it becoming known to a third party without the clear permission of the client, except in rare cases where LPP is used to protect communications from a client in a case of illegality.

[Lord Ahmad of Wimbledon]

My Lords, the provision for sharing information is vital to ensure that a sanctions regime works in practice. For example, the provision of information by the private sector is essential in monitoring the financial transactions of sanctioned persons. We need this information to ensure effective implementation and compliance with our obligations under the various sanctions regimes, and to ensure robust enforcement when the law is broken.

The information powers contained in the Bill will ensure that sanctions regimes continue to work effectively by requiring people to report relevant information and by authorising the sharing of information. It may be helpful for me to specify those powers. They provide the basis for the Government to monitor compliance with the regulations; to investigate and obtain evidence if they believe that the regulations have been contravened or circumvented; and to share information with third parties to enable co-operation on the development of sanctions and enforcement efforts.

There is already a duty in EU law on all persons in the UK to supply information to the relevant competent authorities. We currently make failure to comply with this duty an offence only in relation to “relevant institutions” in the regulated financial services sector and “relevant businesses or professions”. We could, if we chose, apply this duty more widely. Clause 15 has been drafted widely to enable the duty to be placed on, and the offence of not supplying information on financial sanctions breaches to apply to, all persons in the UK. The extension of this offence to cover everyone who obtains such information in the course of their business would equalise the scope of the offence with the scope of the related duty. This will give the Government the ability to compel production of information to aid the investigation of reported breaches and ensure there is effective redress for not complying with legal obligations. The regulations will safeguard how the information is used, stored and shared. This will be consistent with the Government’s data protection, commercial and banking confidentiality obligations.

These powers provide the basis for the Government to continue monitoring compliance with the regulations and to obtain evidence if they believe that the regulations have been contravened or circumvented. They will also enable the Government to share information with partners to aid their enforcement efforts.

The deletion of two key paragraphs as suggested in Amendment 43 would have a serious impact on the enforcement of UK sanctions. Let me illustrate how. First, powers of entry set out in paragraph (d) are essential for compliance inspectors to check that the terms of general licences have been upheld and that there has been no circumvention of sanctions. These powers are in line with those in the Export Control Order 2008, which were reviewed in 2014 and considered necessary for ensuring compliance with the terms of licences. Without them, authorities would be unable to check that exporters were complying with the terms and conditions of their licences if they were unco-operative.

Secondly, deleting paragraph (e) would completely remove our ability to authorise the sharing of information relating to designated persons. This is essential both for law enforcement purposes and for liaising with international bodies and our foreign partners on compliance and enforcement in individual sanctions cases. It would also have unwanted effects as we would be unable to communicate information to designated persons, them affected by sanctions and the wider UK. We maintain that the powers in paragraphs (d) and (e) ensure continuity with the existing legislation. Both will continue to be needed for sanctions when we leave the EU.

Amendment 44 seeks to ensure that legal professional privilege, or in Scotland the obligation of confidentiality, is upheld. I would like to say first and without any reservation that of course we do, and intend to continue to, respect legal professional privilege, a point made by the noble Lord. This is the position we currently take in all sanctions regulations and we intend to continue to do so. As the Bill does not explicitly authorise the Government to make regulations that remove this privilege, we do not think we would be able to do so if we so desired. Any such cavalier use of the power would surely be struck down by the courts. I hope that I have reassured noble Lords of the Government’s intentions towards legal professional privilege and that any departures from it can and undoubtedly will be the subject of a judicial decision.

Finally, I turn to Amendment 45. I think I understand the intent of this amendment. It is to ensure that persons who do not have ministerial accountability cannot request information from sanctioned persons or use that information. However, the amendment unnecessarily limits the Government’s ability to request information which is vital for ensuring that sanctions can be enforced and implemented in a robust manner. It will increase the workload of Ministers significantly and unnecessarily if they are required to approve every single information request relating to sanctions. It would also cause difficulty where the Minister is not the appropriate authority. For example, shipping and aircraft sanctions will be implemented by bodies outside Whitehall such as the Civil Aviation Authority, harbour authorities, and the Registrar General of Shipping and Seamen. Depriving them of the ability to seek and use information will make it harder to implement sanctions and will only assist those who avoid or breach them. This clause allows us to work with industry to ensure that sanctions are effective and that we have all the necessary information and evidence available.

The restriction on who can use the information requested would create difficulties in the use of powers to impose civil monetary penalties for breaches of financial sanctions given to HM Treasury in the Policing and Crime Act 2017. In that law, the relevant Minister is required to personally review penalty decisions imposed by the Treasury; the Minister’s view is independent of Treasury officials. The amendment would place the Minister in the investigatory and decision-making process, and then the review process. This would not be appropriate and would give rise to challenge on appeal on process grounds.

I understand the concerns that the Committee might have about these powers being more widely available, as the noble Baroness mentioned, but I hope I have reassured the Committee that we believe that they are necessary for the effective implementation of sanctions. Moreover, I hope the Committee will also be reassured by the fact that the appropriate Minister cannot make regulations delegating powers which are incompatible with the basic and fundamental rights of people in the UK. Indeed, as noble Lords will know, Section 6 of the Human Rights Act 1998 forbids it. I hope that, with this detailed explanation, the noble Baroness is reassured and will withdraw her amendment.

[Baroness Northover]

I thank the Minister and others. He will know that the deletion of clauses is, as is usual in this place, a challenge to the Minister to come up with something that is more consistent with amendable primary legislation. That is what we are seeking here, along with more specific detail. I have already made reference to the fact that it is difficult to see that the Human Rights Act is necessarily the protection the Minister thinks it might be, but in the meantime, I beg leave to withdraw the amendment.

Amendment 43 withdrawn.

--- Later in debate ---

Moved by

[Baroness Northover]

47: Clause 16, page 14, line 12, leave out subsections (3) and (4)

[Baroness Northover]

I rise to move Amendment 47 and speak to the other relevant ones in the group.

We are seeking to delete sections that allow the creation of offences by regulation. I am sure that we will return to this as we go through the Bill. The Delegated Powers Committee notes the very wide powers and very high penalties that are capable of being set for criminal offences under the regulations. I know that other noble Lords will contribute and I look forward keenly to hearing what the noble and learned Lord, Lord Judge, has to say. We are enormously concerned about this provision. I beg to move.

[The Deputy Chairman of Committees (Lord Haskel)]

I have to inform the Committee that if this amendment is agreed, I cannot call Amendment 48 because of pre-emption.

--- Later in debate ---

[Lord Judge]

My Lords—

[Baroness Northover]

My Lords, it is this noble Lord doing that.

[Lord Ahmad of Wimbledon]

I am sorry.

[Baroness Northover]

The Minister will have heard the voices, including those from behind him on his own Benches. The noble and learned Lord, Lord Judge, was right to get up because I knew my best bet was to introduce the amendment briefly and pass it across to him. The Minister will have heard him, too. Something tells me that we will return to this on Report and that various things will happen in between but, in the meantime, I beg leave to withdraw the amendment.

Amendment 47 withdrawn.

Sanctions and Anti-Money Laundering Bill [HL]

Baroness Northover Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Wednesday 29th November 2017 Lords Chamber

[Lord Lennie (Lab)]

My Lords, this is a probing amendment concerning the territorial application of sanctions regulations. The amendment will make it automatic that the sanctions imposed would apply to bodies incorporated or constituted in the Channel Islands, the Isle of Man or the British Overseas Territories. This is not because they are favourite places to hide away from tax regimes—although they are—but because they are dependent on the UK in terms of foreign and defence policy matters. For sanctions to have an effect, they have to have an international dimension. Currently determined by the UN or the EU, they require co-operation and co-ordination between and across nations. It is surely a matter of good policy to seek to put our own house in order first—which this amendment would help to do.

The Bill currently proposes that its sanction provisions “may” be applied to the Channel Islands, the Isle of Man or the British Overseas Territories by use of an Order in Council, which I understand is a Privy Council matter. I am not a member of the Privy Council and I do not know how it operates. I do not understand in detail how it works, and I am not sure whether such orders are always granted, whether there is ever a debate about them, whether they can be challenged or whether there is delay built into the process. This amendment would make it clear that, as far as sanctions are concerned, the UK will have a consistent application of the law. We would welcome the Government’s views on that.

[Baroness Northover (LD)]

My Lords, I support the amendment. It is useful to have more precise definitions within the Bill, and it seems that the amendment seeks to tighten up the subsections which relate to the Channel Islands, the Isle of Man and the British Overseas Territories, so that instead of a Minister being able by an Order in Council to add these areas, they are included in primary legislation. It makes sense to clarify that now and in primary legislation in this way to ensure that those whom the UK wishes to sanction cannot evade that sanction by association with these areas. If the UK is to leave the EU, it makes sense to tighten in this way.

The Minister will know that there is a meeting today of the Joint Ministerial Council at the Foreign Office with the overseas territories. Perhaps he could assure us that they would be content to be clearly within the same sanctions regime. I know that they will be less keen on aligning themselves with the UK on anti-money laundering measures; we will of course come to that later.

I also flag to the Minister that, in addition, the Law Society emphasises that guidance should be given on the terms in Clause 17, as well as those in Sections 2, 10, 15 and 46. It points out that in Clause 17 it is unclear whether the UK sanctions regime would apply,

“where UK currency is used, where a non-UK subsidiary of a UK company is involved, or where a UK person on the board of a non-UK company is present when a decision is taken in breach of the UK sanctions regime”.

It suggests that Clause 17 should be renamed “UK nexus” as its current subject matter does not deal sufficiently with “Extra-territorial application”.

It seems that further clarity is required on such issues. Clearly, it would be useful if stakeholders were properly consulted to assess the impact of the scope of application of the UK sanctions regime, simply to identify any unintended consequences. Clearly, intended consequences are fine. So this is a complicated area, but I hope that the Minister will take on board this advice.

[Lord Faulks (Con)]

My Lords, I note the nature of the amendment and the final provisions in the Bill in Clause 51(3). I was at one stage a Minister with responsibility for the Crown dependencies, so I am acutely conscious of the particular constitutional relationship between the United Kingdom and the Crown dependencies. As I understand it, we do not normally legislate without their express consent. I wonder whether that is why the Bill is framed as it is. However, I look forward to hearing the Minister’s response on this.

--- Later in debate ---

[Lord Pannick (CB)]

My Lords, this amendment is in my name and those of the noble and learned Lord, Lord Judge, and the noble Lord, Lord Collins of Highbury. It is not concerned with lobsters; it is concerned with the duty of the Minister to consider a request to vary or revoke a designation. The Bill contains no provision requiring the Minister to address such a request within any specific time period. I can understand why it would be inappropriate to set any defined time period—how long it takes to address a request to vary or revoke a designation will inevitably depend on the circumstances of the individual case—but the Bill should, I think, contain a more general obligation on the Minister in relation to time. This amendment would require the Minister to decide on a request to revoke or vary,

“as soon as reasonably practicable”.

It is important for the Bill to impose such an obligation because, under Clause 32, read with Clause 33(5), a person who is put on a sanctions list cannot seek a review from the court until the Minister has made the decision on the request to vary or revoke the designation. It would be quite wrong for a person to be listed, with all the adverse consequences that that involves, with no opportunity to complain to a court unless the Minister had an obligation to act with reasonable expedition. In an extreme case, were this amendment to be included in the Bill, the courts would be able to say to the Minister that his or her delays were unacceptable.

I cannot see that a “reasonably practicable” test could be in any way objectionable. I suspect that the Minister will tell the Committee that the amendment is unnecessary because of course Ministers will decide these cases as soon as reasonably practicable. We have heard such assurances repeatedly during this Committee stage. However, I am sure that the Minister understands that in contexts as important as this Bill I prefer to see obligations written into the statute rather than rely on assurances from Ministers, however fair and reasonable they are. I beg to move.

[Baroness Northover]

This seems an eminently reasonable amendment. It almost seems unambitious in its scope—it invites Ministers to answer questions along the lines of “as soon as possible” and “shortly”—but noble Lords are surely right to seek to put something of a common-sense timetable on this, and we support them. The Bill proposes to give such wide and untrammelled powers to Ministers that any moves to qualify them should be welcomed.

[Lord Collins of Highbury]

As the noble Lord said, I have added my name to this amendment, and I have done so for a very good reason, which is that it is about an important matter of procedural fairness and should be included in the Bill. It is not unreasonable to say that there should be a judgment about the actions of a Minister in terms of timeframes. As we have understood in this House on many occasions, the summer can often be extended into the autumn without the blink of an eyelid.

--- Later in debate ---

[Baroness Northover]

The noble Lord, Lord Pannick, was eagle-eyed as ever, and this issue came up at Second Reading. He now brings forward this amendment with other noble Lords, and we support them.

The point here is that the review period for designations would occur not after one year but only after three. As the Minister said on Second Reading, it could happen earlier, but of course it does not have to. I also note that, on Second Reading, the Minister said that he did not regard the period proposed by the Government as excessive. He did not answer the point that this was a detrimental change from the position should we stay in the EU. I expect that he has now had time to consult on that and—if you like—to recognise that the writing is on the wall and, I hope, to persuade his colleagues that this cannot stand.

There is no reason for the frequency of reviews to change from one year, as now in the EU, to three years. I hope and expect that the Minister will find that this is one straightforward area in which to concede. After all, it has always been said that if we were to leave the EU, no protections or rights of UK citizens would be diminished. This is a case in point.

I raise one other issue, which I think has been flagged to the Bill team. This is, again, from the Law Society. It is concerned that UK courts should have the jurisdiction to hear wrongful listings in the case of UN listed persons. It points out that the Bill does not require or permit a UK court to quash a wrongful listing for a person who is UN listed and can only ask the Government to use their best endeavours to secure a de-listing in the UN. It recommends that the Bill directly transpose into UK law—

[Lord Pannick]

I am sorry to interrupt, but that is the specific subject of Amendment 62, to which we are coming. I do not wish to inhibit the noble Baroness, but she may wish to be aware of that.

[Baroness Northover]

I did not spot that point. In that case, I will wait until we get to it. I hope that the Bill team will have taken it on board, both from the amendment submitted in the noble Lord’s name and, indeed, from what we sent through.

[Lord Judge]

My Lords, I had thought of saying something but while the Minister, unlike Richard III, is in the giving mood, I do not want to discourage him.

--- Later in debate ---

Therefore, on the basis of the explanation I have given—

[Baroness Northover]

In the Explanatory Notes accompanying the Bill, it is mentioned that sanctions apply to about 2,000 people. That does not seem a huge number of people where one might need to make this kind of assessment.

[Lord Ahmad of Wimbledon]

I am not quite sure what the noble Baroness’s question is.

[Baroness Northover]

The Minister was saying that this was very onerous. I am aware that there is discussion elsewhere in the Bill of immigration status conflicting with those who have had sanctions imposed upon them. Obviously, when one is dealing with immigration status, one is dealing with very many people, but the point made in the Explanatory Notes is that one is not dealing with a large number of people here or a large number of sanctions provisions.

[Lord Ahmad of Wimbledon]

I think I understand the noble Baroness’s question, but, notwithstanding the issue of numbers alone, Clause 20 lays out a process which the Government perceive to be more efficient than that currently adopted by the EU.

--- Later in debate ---

[Lord Collins of Highbury]

My Lords, when we had discussions with the Minister prior to Second Reading and just after, the review of the regulations cropped up on a few occasions, the justification being that some of these new powers and regulations would not be subject to primary legislation. In those discussions, I asked, if you are reviewing in government, who tests and scrutinises that review? This is the first Brexit Bill and we have heard on many occasions that Brexit is an opportunity, or an obligation, to bring powers back to the United Kingdom. If that is the case—I do not necessarily agree—and the Minister supports it, this is an opportunity for him to support the principles of these amendments, which are about ensuring that powers taken by the Executive are subject to proper scrutiny, and that the Executive are held to account by Parliament.

Amendment 59 sets out the details and asks: how do we do that job? What are we measuring? But if there are issues and the Minister says, “I cannot have this list because there are things in it that may be subject to national security, or other things that cannot be disclosed”—the Government seem to have a habit of not disclosing information to Parliament on matters relating to Brexit—I would be more than willing to consider those concerns and take them into account. Obviously, if there are issues with the list then the minimum standard that I am arguing for is Amendment 58. I do not think it unreasonable that if the Government are taking these powers, we should be able to hold them to account in any possible review. I know the Minister will say that regulations are subject to consideration by Parliament, et cetera, et cetera, but that is not the scrutiny we want to see here. I hope that if the noble Lord is able to continue in his giving mood, he can give us some positive words about how Parliament will be able to hold the Executive to account.

[Baroness Northover]

My Lords, these amendments in the name of the noble Lord, Lord Collins, helpfully make much clearer the commitments that Ministers must make to review the regulations they have put in place, giving a time by which this must happen and more detail on what they should include. They would, indeed, as the noble Lord has indicated, make these reviews more transparent and accountable and we are happy to support them.

[Lord Ahmad of Wimbledon]

My Lords, they say that generosity defines the spirit of a person, so perhaps I can be slightly more generous than noble Lords may perceive. The noble Lord, Lord Collins, is quite correct: we have talked about this issue, and sanctions, we all accept, can be an effective tool of foreign policy and national security, but I also accept that they can have serious implications, not only for those directly designated but also for businesses and charities operating in particular areas.

Foreign policy priorities can change frequently. It is therefore important that Ministers regularly revisit the decision to apply sanctions regimes to political problems and security challenges, and also consider carefully whether the sanctions are having the intended purpose, whether there are unintended consequences and what adjustments might be needed to achieve the desired effect.

Clause 26 therefore requires the Government to carry out a political review of its sanctions every year. The EU also carries out annual reviews of its sanctions regimes. The purpose here is to consider whether the sanctions should continue unchanged or be amended. If there is a published outcome, it is simply confirmation that the legal Acts have been renewed or amended. We have in mind a similar model for the UK; the annual review would be mainly an internal policy exercise, rather than a report for external publication. If the Government decided as a result to amend the sanctions regulations, this would involve a process of parliamentary scrutiny through which we would set out the rationale. Of course, the Government would always respond to Parliamentary Questions about specific areas of policy through the usual channels.

That said, I have listened very carefully to the noble Lord, Lord Collins, and we are looking at the amendment specifically. I will reflect on the proposal in that regard. He made the helpful suggestion that, between Committee and Report, we meet again to work out some of the perhaps necessary parameters. I know he appreciates national security issues and other such issues. I hope, with the assurance that we will reflect on his proposal, the noble Lord is minded to withdraw his amendment.

--- Later in debate ---

I say to the Minister that the amendment raises a fundamental issue of the rule of law. The Bill should not deny our judges the power to quash, where appropriate —and I hope it will rarely, if ever, be appropriate—a designation that is based on a defective UN listing. I beg to move.

[Baroness Northover]

My Lords, Amendment 62 is partly in the name of my noble friend Lord McNally. I knew he would not be able to be here, and he sends his apologies for that. I have to say that I read the amendment and the clause a number of times and it seemed to me that the amendment tightened and clarified the clause. What I failed to spot, as a non-lawyer, was what lay underneath it. I am extremely glad that the issue I raised earlier has been so effectively explained by the noble Lord, Lord Pannick. I again express support from these Benches for what he has said.

[The Lord Bishop of Chester]

My Lords, if I heard the Minister correctly, he compared the noble Lord, Lord Pannick, to Oliver Twist asking for more. I wonder, having heard the noble Lord, whether the Minister would agree that Oliver Twist had right and justice on his side.

--- Later in debate ---

[Baroness Northover]

My Lords, the noble Lord, Lord Collins, is once again trying to help the Government, and I appreciate his efforts. He seeks to put a very useful time limit on how long a so-called “specified period” in Clause 35 might be, and his Amendment 64 proposes a further time limitation. We will come back to Clause 35 when we discuss the next group of amendments and I shall address that clause as a whole shortly.

Amendment 65 in the name of the noble Lord, Lord Collins, seeks to check the wider and unspecified powers on the revocation of sanctions that the Government seem to want to grant themselves in Clause 38. We do not want to see wide and untrammelled powers in either the setting or the revoking of sanctions. The noble Lord is right to seek to address this.

My name is, indeed, attached to Amendment 72. The case for this amendment was very cogently argued by the noble Lord, Lord Pannick. The clause contains one of the wide-ranging Henry VIII powers that we have seen elsewhere in the Bill. I cannot see how this power can stand. Clause 44(2) states:

“Regulations under this Act may make supplemental, incidental, consequential, transitional or saving provision”.


That is a rather wide-ranging description. Therefore, I trust that the Minister has been given enough leeway by his colleagues across government to think again.

[Lord Judge]

I will not add very much, but I am beginning to think that there is a computer in every department which produces a Henry VIII clause at least once in every Bill. That is what we have here. This is not belt and braces; it is belt, braces and Henry VIII’s great big heavy boots. We do not want it.

--- Later in debate ---

Debate on whether Clause 35 should stand part of the Bill.

[Baroness Northover]

My Lords, I was rather intrigued by the Minister’s definition of sanctions as being something little more than a gentle nudge. I found myself thinking about—

[Lord Ahmad of Wimbledon]

It is certainly not a gentle nudge. What I was alluding to is that the ultimate purpose behind sanctions is that they should not exist for an indefinite period of time. It is about changing behaviour. As I noted in the example that I gave of Iraq, there are times when we could use these to very good effect to ensure, with people’s behaviour—be they individuals, corporations or, indeed, countries—that sanctions act as an effective, and deterrent, tool.

[Baroness Northover]

I am glad to have that further clarification. My eyebrows rather rose at that and I was wondering, speaking of what is benign, what my kids would have made of being sanctioned and having their PlayStations removed. They would not regard that as particularly benign. But, very seriously, it is quite striking how leaders around the world with sanctions on them strive hard to get them lifted, so I am glad to have that clarification.

I propose that Clause 35 does not stand part of the Bill. We have a series of such proposals through the Bill, as the Minister will be aware. We have had a wide-ranging discussion just now. I appreciate the efforts to improve things made by the noble Lord, Lord Collins. However, it still seems to us that this clause remains unacceptable, even if amended in the way that he proposed. That is why we propose that it does not stand part of the Bill.

Just as we wish to ensure that the imposition of sanctions is done in a way which is appropriate, transparent and accountable, so too should be the suspension of sanctions. No one here would wish to see the UK as a harbour for those not wanted elsewhere, but we must not give future Ministers the power to do that either. We feel that these powers are wide and vague, and bearing in mind that the secondary legislation coming down to us will include—as the noble and learned Lord, Lord Judge, pointed out last time—many things with which we would no doubt agree, which are then jeopardised should we take the very unusual action of voting down the SI, we need to read the Bill in that light. For example:

“The period begins when a specified condition is met and lasts for so long as the suspending regulations or a specified provision of those regulations has effect”.


That would catch a large number of things. Although the noble Lord, Lord Collins, sought to help the Government regarding the amendment we have just debated, we feel that the Government should think again over the whole clause.

--- Later in debate ---

[Lord Collins of Highbury]

My Lords, with this amendment I return to the principle of “tools for the job” and how we enable Parliament to scrutinise effectively. In the previous group, the Minister spoke quite effectively about the reasons for certain sanctions being introduced and how they sometimes underpin and support much broader foreign policy objectives, and he quoted the Iran situation. I did not think that he found that particularly difficult to do. We know that when sanctions are introduced—I come back to this point—we need political support and commitment for them to be effective. Without proper support, they will not be.

That is why it is important that, when the powers and regulations are introduced, we specify how the sanctions fit into the broader foreign policy objectives and why they are there. I fear that sometimes people jump on the sanctions bandwagon because they cannot think of any other action to achieve particular foreign policy objectives. For example, the struggle for human rights is difficult, and different leverages can be used. I do not necessarily think that sanctions are the first port of call, and I accept that they can be part of a suite of actions.

However, when we introduce sanctions, it is important and incumbent on the Government to set out clearly why they are there and how they fit into their overall foreign policy objectives. Furthermore, when will the sanctions be brought to an end and when will we judge them to have been successful? I have heard in this House on a number of occasions that sanctions have been “successful”. That is measured by whether we have stopped certain trade and a certain activity, not by whether they have achieved the foreign policy objectives set for introducing them, and that is what this amendment seeks to do. Once again, I hope that the Minister is in his listening and giving mode. I beg to move.

[Baroness Northover]

My Lords, once again the noble Lord, Lord Collins, seeks to assist the Government by ensuring that some of the wide-ranging powers sought by Ministers have a little sunlight shone upon them. We support what the noble Lord has said about making the Minister’s actions more transparent and accountable, but we worry—the noble Lord, Lord Collins, has in some ways made reference to this—about the broad categorisation of foreign policy objectives in defining when sanctions are appropriate.

We discussed this issue on the first day of Committee and, although I realise that the noble Lord has carried over the aims as stated in the Bill, we feel that “foreign policy objectives” is too wide a concept. Clearly, if our foreign policy objective were, say, trade with India and we decided, for some reason, to put sanctions on Pakistan and, as described in the Bill, all those associated with that country—as, again, we debated on our first day in Committee—a large number of law-abiding citizens could potentially be caught up in that. That may be regarded as far-fetched, but we always have to look for unintended consequences, given that unexpected things happen in politics.

As we have said before, it is all very well the Minister potentially quoting the Human Rights Act or the European convention, given that some members of his party have spoken of repealing the first and withdrawing from the second. It is therefore important that we ensure that legislation is watertight. With that caveat, I commend the noble Lord, Lord Collins, for trying to assist us in making Ministers under this Bill more transparent and accountable.

--- Later in debate ---

That is very wise because the Minister should not and cannot have, by regulation, a power to add to the list of purposes—that is to make regulations for the purposes of complying with UN obligations, international obligations, to deal with terrorism, national security, international peace and security or foreign policy objectives. We have debated earlier whether those provisions are too wide in some respects, too narrow in others. It is, however, quite right that Clause 39(2) prevents the Minister by regulations from adding to those purposes. The drafting point is that that is stated only at the end of Clause 39(2), and it should, I think, be made clear that that limitation applies to the whole of Clause 39, in particular Clause 39(1), but that is a minor point for the consideration of the Minister and the Bill team. The other point is much more substantial.

[Baroness Northover]

My Lords, just as my noble friend Lord McNally and I opposed Clause 35 standing part of the Bill, so we oppose Clause 39 standing part of the Bill. Of course, this is in many ways a more dangerous clause. While, under Clause 35, we might find ourselves not imposing sanctions which other countries—say, within the EU—were imposing, in this case the Government are apparently happy to secure carte blanche powers for imposing sanctions.

As the noble Lord, Lord Pannick, has said,

“an appropriate Minister, may by regulations”,

amend this part of the Bill to,

“impose prohibitions or requirements of kinds additional to those for the time being authorised in Chapter 1”.

The Constitution Committee states:

“We do not consider it appropriate for Ministers to have powers as broad as those conferred by Clause 39. In particular, we consider it constitutionally inappropriate for Ministers to have the power, by regulations, to create new forms of sanctions”.


The Delegated Powers Committee states that,

“we do not consider the powers conferred by Clause 39 to be appropriate”.

They explain:

“We do not consider that the FCO’s reasons are sufficient to justify the powers conferred by Clause 39, particularly having regard to the potential width of the powers and the very significant effects on individual rights that amendments made under these powers would be capable of having”.


They also point out, in relation to UN sanctions, that,

“this power is unnecessary for enabling additional sanctions measures to be imposed for the purposes of complying with UN obligations since Clause 7 already has this effect”.

From right across this Chamber and from the Constitution Committee and Delegated Powers Committee comes a clear message, so we join others in opposing that Clause 39 stand part of the Bill.

[Lord Falconer of Thoroton]

The width of this power seems extraordinary and constitutionally offensive. As I understand the drafting of the Bill, it is open to a Minister to pass regulations which allow him to identify individuals on whom he can impose a sanction or prohibition that he has invented. What is more, the only restriction on him is that it must be for the purposes set out in Clause 2(1). If the Minister honestly believes that the invention of a new sanction or prohibition is justified by “a foreign policy objective” of the Government—for example, gaining support from one country by attacking its nationals in this country—the power given by Clause 39 would entitle them to invent a new prohibition and impose it by regulations. Furthermore, should any primary legislation stand in the way of a Minister inventing such a new prohibition that he or she believes is designed to promote a foreign policy objective, that primary legislation can be amended to get rid of an objection by the very same regulations under Clause 44(2). That a Minister could do by secondary legislation such a thing—for example, restrict somebody’s spending their own money, prevent them leaving their home, take away their car or stop certain sorts of bank account being used—without primary legislation strikes me as well beyond what any responsible Government would think should be done by secondary legislation. Can the Minister confirm that my analysis of what could theoretically be done is right, and explain why it is appropriate that that be done by secondary legislation?

Sanctions and Anti-Money Laundering Bill [HL]

Baroness Northover Excerpts

Committee: 4th sitting (Hansard): House of Lords
Tuesday 12th December 2017 Lords Chamber

[Lord Collins of Highbury (Lab)]

My Lords, I will wait a moment while the Minister gets into his listening mode. This amendment picks up points which have already been addressed in Committee relating to the principles of parliamentary scrutiny. Your Lordships’ Constitution Committee said that,

“given that the purpose of the Bill is to address the need for domestic powers to impose, amend and revoke sanctions after Brexit, it is important to ensure that there are sufficient safeguards and there is adequate parliamentary scrutiny to make the delegated powers constitutionally acceptable”.

I know that the Minister will say: “We are doing precisely that. We are using the affirmative procedures”. This probing amendment seeks to increase the level of parliamentary scrutiny so that powers cannot be used until there is a positive vote by Parliament. It is important that we do not walk blindly into a situation whereby we give the Executive powers that cannot be amended, considered or changed. The Minister may say that the necessary scrutiny powers will be used and that they are in the Bill, but why does he not accept that we need the highest possible level of scrutiny? Therefore, I seek from him an assurance that these new powers will not be used and that draft orders will not come into force until there is a vote of Parliament at the highest level.

I certainly accept that there is a need for speed and for delegated powers, but I hope that the Minister will tell us the specific circumstances in which the existing arrangements are not sufficient, and why there needs to be a speeded-up process that does not rely on primary legislation. We have tabled other amendments that we shall discuss later in Committee but I hope that the Minister will explain exactly why he thinks these new powers are necessary without these improved levels of scrutiny. I beg to move.

[Baroness Northover (LD)]

My Lords, I support the noble Lord, Lord Collins. I wish to speak also to Amendment 75A, which stands in my name and that of my noble friend Lady Sheehan.

We clearly have an international obligation to agree UN sanctions, which, of course, we play a part in agreeing at the UN. It is when we come to sanctions that do not fall under that heading that we must be especially careful about what we leave simply in the hands of Ministers to decide. The noble Lord, Lord Collins, has made that case. Our Amendment 75A would add Clause 16 to those which must be covered by the affirmative procedure. That surely should be the least that should happen. The noble Lord will have heard the debate on Clause 16. The noble and learned Lord, Lord Judge, described this clause as “lamentable”. It gives the power to a single Minister, by regulation, to create criminal offences for conduct that contravenes laws made by secondary legislation. I am sure that we will come back to this on Report. Our Amendment 75A would place a small check on this power, and I therefore commend it to the Minister.

[Baroness Sheehan (LD)]

My Lords, I wish to speak to Amendment 75A, which is also in my name. I agree with all that the noble Lord, Lord Collins, said. The Bill allows such sweeping powers to future Ministers that we on this side of the House seek to put in place safeguards which will enable Parliament greater scrutiny over the regulations made under Clause 16—namely, that they are made by the affirmative procedure.

Clause 16 is the enforcement clause which includes not only the creation of criminal offences punishable by up to 10 years in prison but makes provision for matters in relation to those offences, including defences and evidentiary matters. The Constitution Select Committee has recommended that Clause 16 should not remain part of the Bill, stating its opinion that such regulation-making powers are constitutionally unacceptable. Indeed, we heard arguments to that effect from the noble and learned Lord, Lord Judge, and my noble friend Lady Bowles on the first day of Committee. I agree with the noble and learned Lord, Lord Judge, that this clause should not disfigure our statute book, as he said. Therefore, this amendment is purely an attempt to create a safety net should Clause 16 remain part of the Bill.

--- Later in debate ---

Moved by

[Baroness Northover]

76: Clause 45, page 30, line 45, at end insert—
“( ) A statutory instrument containing regulations under section 1 that repeals, revokes or amends—(a) an Act of the Scottish Parliament,(b) a Measure or Act of the National Assembly for Wales, or(c) Northern Ireland legislation,must receive the consent of the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly, respectively.”

[Baroness Northover]

My Lords, Amendment 76 is in my name and that of my noble friend Lady Sheehan. It states that where a statutory instrument that contains regulations under Section 1 repeals, revokes or amends an Act of the Scottish Parliament, a Measure or Act of the National Assembly for Wales, or Northern Ireland legislation, that instrument must have received the consent of the Scottish Parliament, the National Assembly for Wales or the Northern Irish Assembly. I am sure that the Minister will argue that the Sewel convention provides that the Parliament of the United Kingdom,

“would not normally legislate with regard to devolved matters without the consent of the Scottish Parliament”,—[Official Report, 21/7/1998; col. 791.]

but that it does not apply to UK subordinate legislation.

Nevertheless, the new regulation-making powers in the Bill are, as we have heard throughout the Committee stage, very significant. The regulations detailed in Clause 45(5) will enable the Government to amend any Act of the Scottish Parliament and any legislation passed by the Assemblies in Wales and Northern Ireland. I am grateful to the Law Society of Scotland for flagging this up. Once again, this is a wide-ranging power that requires further justification and checks, which is why we have put this amendment forward. When the Minister replies, it would be helpful if he indicated which devolved legislation the Government would envisage amending under regulations made under Clause 1 and, for that matter and perhaps more importantly, which they would not. I beg to move.

[Baroness Sheehan]

My Lords, I support Amendment 76, to which my name is attached. It would amend Clause 45, which lays out the “Parliamentary procedure for regulations”. The amendment gives substance to the recommendation in the eighth report of the Constitution Select Committee which, at the end of paragraph 6, said:

“If it is the Government’s intention that it would, in practice, liaise with the devolved administrations prior to the exercise of this power, such a requirement could be written into the Bill”.


The Government have argued that this power reflects a reciprocity with that which enables Welsh or Scottish Ministers to amend Acts of Parliament. However, reciprocity can be said to operate only where one is comparing similar powers; this is not the case here. Welsh and Scottish legislation can authorise devolved Ministers to amend UK legislation only within devolved competence, whereas UK legislation can authorise UK Ministers to amend enactments of the devolved legislatures irrespective of devolved competence.

I believe this to be a common-sense amendment, one that seeks the consent of the devolved nations before amending any Act passed by the Scottish Parliament and any legislation passed by the Assemblies of Wales and Northern Ireland. Dare I say it, consultation with the devolved nations may save the Government from further embarrassments such as the fiasco with the DUP that we witnessed, open-mouthed, just last week.

--- Later in debate ---

[Lord Ahmad of Wimbledon]

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]

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.

Amendment 76 withdrawn.

--- Later in debate ---

[Lord Collins of Highbury]

My Lords, in this group of amendments we are trying to address an issue that we have discussed before but in a way that improves not only accountability but responsibility. Amendment 84 states that the Secretary of State must lay a report before Parliament on the adequacy of the implementation and enforcement of current legislation on sanctions, money laundering and terrorist financing in the Crown dependencies and overseas territories. It requires also that the Secretary of State must consult on whether any further legislative changes or enforcement powers are needed in connection with these territories. Amendments 82 and 83 are also probing, designed purely to raise a debate on the adequacy of the implementation and enforcement of current legislation on sanctions, money laundering and terrorist financing in the overseas territories, the Channel Islands and the Isle of Man.

The Minister has, on previous occasions in Committee, stated that the overseas territories are separate jurisdictions with their own democratically elected Governments. They are not represented in this Parliament and so it has been only in exceptional circumstances that we have legislated for the OTs without their consent. These amendments are of course not about imposing legislation. They are about questioning whether we are meeting our responsibilities and whether we are satisfied with our collective responsibility. The one area in which the overseas territories do comply is foreign policy, and in particular UN sanctions. They do not have a choice about that; they have to meet the obligations that the United Kingdom does.

I want to focus on collective responsibility. I promised the Minister that while I was sitting here I would try to start reading the anti-corruption strategy, and it is worth reading some of it out. Tackling corruption is in the United Kingdom’s national interest. It helps to keep us safe from threats to our safety and security from organised crime, terrorism and illegal migration, and from insiders who exploit their position to access assets for malign purposes. It is our global reputation and global responsibilities that are at stake. These amendments seek to ask whether we are taking those responsibilities seriously in respect of the overseas territories, the Channel Islands and the Isle of Man.

These are not domestic issues. They are not about local finance arrangements. I did say previously in Committee that if the financial services are to thrive, they need to have public confidence. That is what has been stated and why we want to take the lead globally. We know that our reputation as an international financial centre is dependent on people having confidence in it. That responsibility is particularly important in relation to anti-money laundering and the threat from international terrorism. If illegal activities take place in respect of one form of activity, you can bet your bottom dollar that they will be taking place in respect of other activities. That is the real threat that we face.

These amendments are a reasonable request in terms of the overseas territories. They are not necessarily abrogating the other demands that we have been making but seek to ensure that in our global responsibility in the fight against international crime, we have taken all the necessary measures to ensure that we can defend not only our security but that of the overseas territories. I beg to move.

[Baroness Northover]

My Lords, Amendments 82 and 83 ensure that the Act extends to the overseas territories and Crown dependencies, as we have heard, and that regulations in the Bill may be extended to those areas. Amendment 84 makes it clear that the provisions relate not only to sanctions but to money laundering. We had an extensive discussion about this in the previous sitting. These amendments would certainly move us forward, but my question to the noble Lord, Lord Collins, is this: is this strong enough when he states that he seeks to ensure that, “applicable legal frameworks” are,

“sufficiently robust to achieve the objectives of the relevant legislation across the United Kingdom, the Crown Dependencies and the British overseas territories”?

It strikes me that we are not yet in a position where the Crown dependencies and the British Overseas Territories are in the same place as the UK.

The noble Baroness, Lady Stern, and others made a strong case in our previous sitting that it is time to move the matter forward and align the Crown dependencies and British Overseas Territories with the stronger position that we have in recent years secured in the UK. In new subsections (8)(b) and (8)(c), in Amendment 84, we would wish to see that strengthened. Certainly, it is useful to have a report, but we would wish the provisions here to be stronger on the anti-money laundering front. That said, this is clearly an improvement on the current Bill, which is permissive in regard to these areas rather than stating the changes we wish to see.

[Lord Collins of Highbury]

I just want to reassure the noble Baroness, Lady Northover, that simply tabling these amendments does not diminish our support for other necessary changes, particularly in relation to the overseas territories. We want the Minister to say why these bare minimums are not necessary. It is about moving the debate forward; it is not back-tracking. As I said in my opening remarks, we are not saying that this is somehow preferable to some of the other amendments we have moved, but it is a way of holding the Minister to account. He has to explain why he thinks the current arrangements are satisfactory, and say why such a report would not be appropriate, so that we can operate a policy in line with the strategy published yesterday.

[Baroness Northover]

I thank the noble Lord for that clarification, which is very helpful.

[Lord Beith]

My Lords, I am bound, which will be no surprise to my noble friend or to the Labour Front Bench, to express some reservation about conclusions that might be drawn from this amendment but which were perhaps not intended in the way in which it is framed. In doing so, I am speaking purely about the Crown dependencies and not about the overseas territories. My interest in the Crown dependencies is minor, and recorded in the register, but my real interest is having been involved in the production of reports which helped to set the framework for the relationship between the Crown dependencies and the United Kingdom. My thanks go particularly to my noble friend Lord McNally, when he was the Minister responsible, for implementing those reports.

It is partly a matter of tone and partly a matter of phraseology, but our relationship with the Crown dependencies recognises that these are democratic jurisdictions that are fully open to media scrutiny—not just local media, but national and international media as well. They have both legislative and administrative autonomy to a significant degree. In the case of their legislative autonomy, it is recognised by this Parliament that it is for the authorities in the Crown dependencies to pass their own legislation. However, the process by which they secure Royal Assent for it, involving the Privy Council, is one that gives Ministers a full opportunity to raise any issues they might need to raise that touch on UK Ministers’ responsibility for the international relations of Crown dependencies. That responsibility is exercised by Ministers who will look at legislation in that light.

What we discouraged at the time I was chairman of the Justice Committee is Ministers merely marking the homework of Crown dependencies, and saying, “If we were legislating in this way about dogs, or whatever, we would not phrase the legislation like this”—a wholly time-wasting and pointless exercise. But where a UK responsibility arises, as it does in the case of international treaties, for example, it is entirely appropriate that Ministers seek to ensure that there is proper compliance on the part of dependencies. Of course, the autonomy that dependencies enjoy also applies to the administration and enforcement of law; that administration is something for which they are democratically accountable and is open to any scrutiny and international criticism that media and non-governmental organisations can produce.

--- Later in debate ---

[Lord Collins of Highbury]

My Lords, the purpose of this amendment is to try to reflect a lot of the debates and discussions we have had in Committee. At Second Reading many noble Lords, myself among them, said that the Bill was necessary. In the event of Brexit we need to ensure that we can meet our international obligations and treaty obligations; it is a necessary Bill in the event of Brexit and we certainly would not oppose it. I will repeat the words of the noble and learned Lord, Lord Judge—although I do not want to stop him intervening and making this point—who described the Bill as,

“a bonanza of regulations”.—[Official Report, 1/11/17; col. 1400.]

In Committee he suggested that it should be renamed the,

“Sanctions and Anti-Money Laundering (Regulation Bulk Buy) Bill”.—[Official Report, 21/11/17; col. 107.]

That sums up many of the concerns expressed by noble Lords across the Chamber.

This is and should be necessary in terms of meeting our obligations. However, we need to be able to be in a position to assess just what sort of impact leaving the European Union will have. We are giving the Executive substantial powers; we are not sure quite how those powers will be used, and I hope that the Minister will come back with proposals on a number of suggested amendments. However, in light of all the concerns that have been expressed, the Bill should be revisited—and revisited after a period of time. The time we suggest of five years is adequate to ensure that we meet our international and treaty obligations. However, we do not know—this comes back to the point I made earlier—about the “known unknowns”. The known is that we will leave the EU; the unknown is precisely what the consequences will be—what we need to do.

At Second Reading and in Committee we addressed the issue of mechanisms to ensure co-operation with our European partners and allies. The Minister has repeatedly said, “We will do this, we will be that; we’re not leaving Europe, we’re only leaving the EU”. How do we assess that? How do we know? The important element of the Bill, which is why this clause and this amendment are so important, is that the known unknowns can be properly addressed after a due period of time so that we can come back and say, “Yes, this is adequate”, or, if it is not, the Government—of whatever complexion, whoever is in power in five years’ time—will be required to revisit these issues properly in the light of all the consequences of leaving the European Union. I beg to move.

[Baroness Northover]

My Lords, I support the amendment. As the noble Lord, Lord Collins, indicated, we have heard enough during the debate on the Bill to know that much needs to change in it. The noble Lord proposes a sunset clause for the Bill—in that way it will not be on the statute books in perpetuity—and I like the notion that it breathes its last in five years and simply expires.

Meanwhile, the Government can work out their relationship with the EU—and where, in the light of that, legislation is required—and develop appropriate primary legislation both on the UK’s sanctions regime and anti-money laundering measures, which can be properly scrutinised in Parliament.

I note that the noble Lord, Lord Collins, said, “in the event that we leave the EU”. There is indeed a question mark about this and what our relationship with the EU will be if we do. So it is no wonder that drafting the Bill was a difficult challenge.

A sunset clause is a useful backstop. However, as the noble Lord, Lord Collins, and others made clear, it still leaves in place a flawed Bill that we will need to address further on Report.

[Baroness Kramer]

My Lords, it is the responsibility of this House and the other place to ensure that any legislation that leaves our hands is properly drafted, with the necessary clauses and relevant safeguards and instructions. That is our responsibility. I look at sunset clauses as an absolute last resort. They can be appropriate where legislation is, by definition, short term and deals with an event that will disappear. However, neither sanctions nor money laundering fall into that category. Therefore, although I believe we are talking about “when” not “if” we will withdraw from the EU, I would hate to see that become the rationale for legislation that we do not feel is as good as it could be in delivering the purposes of the two Houses.

I support the amendment as a backstop. However, in a sense, it is incredibly sad that we are having to contemplate such a clause because the Bill itself is so inherently flawed. The House will know from the many comments I have made that I think that there are many flaws in it. However, the most fundamental is that, through a back door, in effect—the Bill does not state this and nor have Ministers been willing to state it—it shifts significantly the balance of power between Parliament and the Executive. We have generations of history in battling to prevent that change—whether through front doors or back doors—and I hope that the Bill can be amended on Report or at Third Reading so that it no longer engineers that shift in power and will not still be an example of a Bill that requires a sunset clause because it is so inherently inappropriate.

Sanctions and Anti-Money Laundering Bill [HL]

Baroness Northover Excerpts

Report: 1st sitting: House of Lords
Monday 15th January 2018 Lords Chamber

[Lord Judge (CB)]

My Lords, the noble Lord, Lord Pannick, speaks for me. I am afraid that if I spoke too much today I might have a party political conference problem, so I shall say no more.

[Baroness Northover (LD)]

My Lords, I support what the noble Lord, Lord Pannick, said. I welcome, as did he, the moves from the Government in this part of the Bill. I shall speak to Amendments 2 and 5 in my name as well as supporting Amendment 3 in the name of the noble Lord, Lord Collins, myself and the noble Lord, Lord Pannick. Our criticism of the Bill in Committee focused on the way in which Ministers were being granted wide powers unchecked by Parliament. The Minister has made moves to address this at certain points in the Bill but we still do not think that the sanctions for foreign-policy objectives are tightly drawn enough. We made the case in Committee as to how this might be abused, and we still seek reassurance. An amendment that would undoubtedly help is Amendment 3 on the definition of the purpose of sanctions, which has been very effectively summarised by the noble Lord, Lord Pannick. We feel this very strongly, and it is surprising that such a definition is not already in the Bill. In our view it is also important that the purpose should include preventing the violation of sanctions regulations, and that is the other amendment here. As the noble Lord, Lord Pannick, has indicated, if the noble Lord, Lord Collins, chooses to vote, we will support him.

[Lord Collins of Highbury (Lab)]

My Lords, I am particularly grateful to the noble Lord, Lord Pannick, for his comments. He has set me a test here: normally I rely on his powers of persuasion and arguments rather than my own, but on this occasion I will take up the challenge and hope to persuade the Minister why Amendment 3 is important. I was rather hoping that the noble Lord, Lord Faulks, would jump up before me; I am sure he will jump up after me, because he made comments about this in Committee.

I stress that this is not just about adding words for words’ sake; it is not just about being nice, kind and positive. These words are very important in one vital respect. The Bill—we have heard much criticism of this—is heavily reliant on regulation and the Executive taking powers. We have received many assurances from the Minister that they will use these powers wisely and that Parliament will anyway have the opportunity properly to scrutinise secondary legislation.

These words are important because, when Parliament scrutinises secondary legislation, it must know what it is judging the Government’s actions against. It cannot have vague definitions. I heard what the noble Lord, Lord Faulks, said in Committee: that we do not want to limit the powers of the Executive when it comes to foreign policy matters. These words do not limit, they enable. They enable Parliament to do its job of properly scrutinising regulations proposed under the Bill. Is it meeting the clear objectives that we set ourselves, which we all share, particularly, as the noble Lord, Lord Pannick, said in relation to human rights?

The Minister assured the Committee that the Government,

“do not take their human rights responsibilities lightly … the UK has been a bastion and a beacon for human rights. That should and will remain a cornerstone of British foreign policy in years to come”.—[Official Report, 21/11/17; col. 123.]

That is a powerful argument why we should include these words, because it is about being consistent in future. If I were to be slightly partisan—and I am not usually in these matters, as the Minister knows—there have been doubts about the Government’s commitment, and certainly that of the Conservative Party, to the European Convention on Human Rights, and I want to put it beyond doubt that we are wholeheartedly committed to this vital element of our foreign policy. It is, as the Minister said, the cornerstone. I very much hope that he will think hard about accepting the amendment. It would not cause too much pain, because he is already committed to the principle. It is about how these words can help future scrutiny. If he is unable to accept the amendment, I will certainly wish to test the opinion of the House.

--- Later in debate ---

[Lord Collins of Highbury]

My Lords, this issue is going to be picked up in a later group, so I do not want to detain noble Lords too much on this particular group. Suffice to say that what we have responded to, following Committee, is the concerns of a number of NGOs in relation to their ability to undertake humanitarian work. What the NGOs are seeking from the Government is clarity. We have had discussions with UK Finance, and the amendments under group 9 are where we should focus the debate. Rather than detain the House with comments on this group, I will reserve them until we come to the later group. I beg to move.

[Baroness Northover]

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]

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.

--- Later in debate ---

[Lord Pannick]

My Lords, Amendment 10 is in my name and those of the noble and learned Lord, Lord Judge, and the noble Baroness, Lady Northover. The amendments in this group are concerned with the powers that the Bill confers for the Minister to make sanctions regulations relating to a person connected to a specified country or to make sanctions regulations that allow for designation of a person by description rather than identification.

I am persuaded by the points made by the Minister in meetings and correspondence on the need to have a power to designate by connection with a specified country. I am sure the Minister will want to say more about that when he replies to this short debate. Designation by description is a more troubling issue. The concern is that if designation is by description, banks and others who have to comply with the designation will find it difficult to identify who is covered by it. Obviously designation by membership of al-Qaeda would be problematic since you cannot find a membership list published on the internet. The concern is that, when persons are designated by description, banks and other institutions will inevitably adopt a cautious approach. Those who then find that their funds are frozen will have great difficulty securing legal redress because the banks and other institutions have, in general, no contractual obligation to maintain a relationship with a client or potential client. That is the problem.

Again, I am most grateful to the Minister and the Bill team because they have responded positively to this concern. Government Amendment 34, to which I have added my name, confines the power to designate by description to those cases where the description is such that “a reasonable person” would know whether a particular individual falls within the description, and that,

“at the time the description is specified, it is not practicable for the Minister to identify and designate by name all the persons falling within the description at that time”.

That government amendment meets my concerns. I am grateful to the Minister and the Bill team for considering this difficult problem and responding so positively.

I find it very difficult to envisage that there will be many circumstances, if any, where it is not practicable for the Minister to designate by name and a reasonable person would know from the designation by description whether a particular person fell within it. It seems there will be very few cases where designation by description can occur, but I am very content with the government amendment. Therefore, I beg to move.

[Baroness Northover]

My Lords, I too am very glad that the Minister listened to the debates in Committee and engaged, with his team, so effectively with the noble Lord, Lord Pannick, and others. I was slightly amused that, in his letter to us, the Minister described his amendments as technical in nature. I thought that was a phrase he might have avoided, given the trouble he ran into on it before. That aside, I welcome the amendments.

[Lord Hain (Lab)]

My Lords, I shall speak to these amendments, on which the noble and learned Lord, Lord Judge, and the noble Baroness, Lady Northover, made some persuasive and consensual points about how we uphold our international obligations. I will focus on sanctions in the related context affecting UK-based companies. I would be very grateful for some leeway from your Lordships in this so that we can make progress on the whole Bill, especially on Wednesday, when time will be short.

It should be a matter of shame that companies headquartered here in the UK have so far evaded sanctions for aiding and abetting money laundering, corruption and state capture in South Africa, including Bell Pottinger, KPMG, McKinsey, SAP and banks such as HSBC, Standard Chartered and Baroda, in total betrayal of Nelson Mandela’s legacy. I have just referred Hogan Lovells, the international law firm headquartered here in London, to the Solicitors Regulation Authority—the SRA—for enabling a corrupt money launderer to be returned to his post as second-in-command of the critically important South African Revenue Service, SARS. I have asked the SRA to withdraw Hogan Lovells’ authorisation as a recognised body and to examine what other disciplinary action can be taken against its leading partners, including withdrawing their permission to practise as solicitors.

Hogan Lovells spared two of the most notorious perpetrators of state capture in South Africa, Tom Moyane, head of SARS, and his deputy, Jonas Makwakwa, from accountability for their complicity in and cover up of serious financial crimes. In so doing, Hogan Lovells are complicit in undermining South Africa’s once revered tax-collection agency and thereby effectively underpinning President Jacob Zuma and his business associates, the Gupta brothers and others, in perverting South Africa’s democracy, damaging its economy and robbing its taxpayers. When Hogan Lovells was engaged by the corrupt Moyane in September 2016, it was well known that he and Makwakwa were synonymous with President Jacob Zuma’s capture of the state. Hogan Lovells could therefore not plead ignorance as they walked right into that web of corruption and cronyism for a fat fee.

To help protect himself from 783 counts of corruption, fraud, racketeering and money-laundering levelled against him when he came to power in 2009, President Zuma systematically dismembered and manipulated the once highly functional South African Revenue Service and the National Prosecuting Authority. Zuma’s key man in this process was his long-time comrade, Tom Moyane, whom he appointed as head of SARS, as commissioner, in 2014 and who, from day one, loyally set about obliterating all its investigative capacity, with the assistance of his deputy, Jonas Makwakwa. These two turned the institution, which under the leadership of the highly respected Pravin Gordhan had consistently overdelivered on revenue collection, into one now facing a 51 billion rand, or £3 billion, revenue shortfall.

Makwakwa’s unethical behaviour was quickly exposed in May 2016 when South Africa’s financial crime regulator, the Financial Intelligence Centre, ordered SARS to establish whether several “suspicious and unusual cash deposits and payments” into the accounts of Makwakwa and his lover, a low-level SARS employee, Kelly-Ann Elskie, were “the proceeds of crime and/or money laundering”. About 1.7 million rand—about £100,000, a lot in South African purchasing power—had been paid into their bank accounts over a six-year period. The FIC noted that the amounts flowing out of Makwakwa’s account,

“are of concern as they originate from unknown sources and undetermined legal purpose”.

However, when the FIC reported these suspicious transactions to Moyane, he tried to ignore the request by keeping it a secret. At the same time, the FIC reported the suspicious transactions to the police, known as the Hawks, to investigate the alleged criminality associated with the transactional flows and they opened a case.

Four months later, in September 2016, news of the FIC’s report to Moyane was exposed by investigative journalists and he begrudgingly suspended Makwakwa and later Elskie. This is when Hogan Lovells entered the picture. Moyane appointed the law firm to conduct “an independent investigation” into the Financial Intelligence Centre’s allegations to ensure “transparency, independence and integrity”, and then to recommend and independently facilitate necessary action, including disciplinary action. Hogan Lovells was therefore appointed to investigate the allegations contained in the FIC report and to conduct disciplinary proceedings against Makwakwa on behalf of SARS. To that effect, Hogan Lovells drafted the terms of reference for the engagement, a seven-page roadmap signed and adopted by SARS. However, Hogan Lovells failed to investigate the very reason the firm was appointed; the allegations contained in the FIC report. Hogan Lovells deviated so materially from its own terms of reference, allowing itself to be blindly led by Moyane, who redefined the terms of reference as and when it suited him, that a respected investigative journalist described the outcome as being,

“so tailored that it borders on the realm of being cooked”.

What an indictment of a leading international firm, Hogan Lovells, and its role.

The allegations against Makwakwa involved layers of possible transgressions; these being, first, tax law breaches, linked to whether he declared the transactions; secondly, criminal breaches, linked to whether the suspicious transactions were predicated on corruption or money laundering; and thirdly, whether internal SARS policy breaches had occurred. Moyane also mandated PricewaterhouseCoopers to analyse Makwakwa’s tax compliance, with regards to the “suspicious and unusual” money flows through his accounts. The Hawks were simultaneously investigating the criminality. Hogan Lovells’s mandate was, according to its terms of reference, to institute an independent investigation, partly using the findings of these other processes, to assess the veracity of the FIC allegations against labour and administrative law, and institute a disciplinary process.

But then two things happened. First, SARS declined to provide Hogan Lovells with the PricewaterhouseCoopers investigative report into Makwakwa, citing taxpayer confidentiality—an inaccurate interpretation of the law, which Hogan Lovells accepted without question. Secondly, Hogan Lovells never made contact with the Hawks to assess the status of their investigation—information which would logically be crucial to its assessment of Makwakwa’s fitness as a senior SARS employee. Equally puzzling is that around that time, South Africa’s Parliament got interested in Moyane’s puppet mastery of Hogan Lovells, prompting a parliamentary question about the nature of the engagement between the two organisations.

Sanctions and Anti-Money Laundering Bill [HL]

Baroness Northover Excerpts

Report stage (Hansard - continued): House of Lords
Monday 15th January 2018 Lords Chamber

[Lord Pannick (CB)]

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.

[Baroness Northover (LD)]

My Lords, I apologise if I caused hiccups by not moving Amendment 20. That was deliberate on my part. I did not mean to cause any hiccups, though. I thank the Minister for engaging with these issues. This is yet another example of co-operation right around the Chamber on this part of the Bill.

[Lord Lennie (Lab)]

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.

--- Later in debate ---

[Lord Pannick]

My Lords, Amendment 54 is in my name and that of my noble and learned friend Lord Judge, the noble Baroness, Lady Northover, and the noble Lord, Lord Collins of Highbury. It proposes that the obligation under the Bill on Ministers to review a designation every three years should be reduced to one year.

I have reflected on this matter in the light of very helpful meetings with the Minister and the Bill team. In the light of the right of the person concerned to request a review if there are new significant matters and of the duty on Ministers under Clause 26, to be amended by government Amendment 55 in this group, themselves to review regulations every year and to place a report for Parliament, I shall not pursue Amendment 54. Simply to enable other noble Lords to participate in this short debate if they so wish, I beg to move.

[Baroness Northover]

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]

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.

--- Later in debate ---

[Lord Pannick]

My Lords, Amendment 62 in my name and the names of the noble and learned Lord, Lord Judge, and the noble Baroness, Lady Northover, raises an important and difficult issue about the rule of law. The Bill provides, by Clauses 21 and 32, that if a person is designated in this country as a result of being placed on a UN sanctions list, the only remedy that the person concerned can obtain from the courts of this country is to require the Secretary of State to use best endeavours at the UN to have that person removed from the UN sanctions list. If those best endeavours fail, the domestic court has no power to quash the domestic designation, however strong the arguments are by the person concerned that she is the victim of procedural unfairness because the UN will not say why her name has been added to the UN list, or however strong the person’s argument that the UN has made a serious error of substance in adding her name to the UN list—for example, by confusing her with another Baroness Northover.

The exclusion of the powers of the domestic court to quash the domestic designation in such circumstances is very troubling. To be designated under this legislation will have a very damaging effect—devastating, indeed—on the life of the person concerned and their family. A number of noble and learned Lords are in the House, as well as a number of noble Lords with an expertise in law. I for my part cannot think of any other comparable context where there is no judicial review remedy in this country to quash action taken by Ministers which is directed at, and imposes a serious detriment on, a specified individual. This is all the more troubling because the person concerned has no remedy before any judicial body, or indeed any quasi-judicial body, at the UN, except in terrorist cases. There is no judicial system at the UN to which you can take your plea. The remedy for procedural unfairness or an arbitrary decision will depend, in almost all cases, on political pressure. The justice of the individual case may not—I put this point as politely as I can—be a matter of the highest priority for the UN. Let us be realistic. We are, after all, talking about an organisation whose Human Rights Council includes Saudi Arabia.

The Minister will say—and there is force in the point—that this country is committed to international law and that, if a person’s name is on the UN sanctions list, this country must faithfully abide by such a ruling until it is changed at international level. The Minister will also say, and again there is substance in the argument, that we need to be very careful indeed about suggesting to other countries that they can pick and choose whether to implement UN resolutions on sanctions. I recognise all of that, and that is why this issue is so difficult.

My answers to these points are as follows. First, under this amendment, a conflict between the UN ruling and the domestic court will occur very rarely indeed; I would hope never. The amendment provides that, if the court here concludes that the listing is a breach of the rule of law, the court in the first instance can do no more than so declare. The Minister will then use best endeavours at the UN to secure change. Only if that fails will the court have a power—I emphasise, a power not a duty—to quash the domestic listing.

Secondly, the very existence of judicial power in this country will help the Minister in using best endeavours at the UN. The risk of a judge here quashing the domestic listing will ensure that the rule-of-law concerns are given proper consideration in the political forum of the UN. Thirdly, the European Court of Justice in the Kadi case asserted its jurisdiction to quash a listing under EU law even though it was based on a UN resolution. I see no reason why the judges in this country should be denied a power which the Court of Justice in Luxembourg enjoys, especially when the very purpose of the Bill is to create domestic procedures to replace EU ones when this country leaves the EU.

Fourthly, the court in this country will take fully into account the importance of complying with international law. It would only be in a very plain case that a domestic designation based on a UN listing would be quashed by our judges. If there is a case where our judges are persuaded that a person has been designated by Ministers in this country because of a UN listing which is in defiance of basic rule-of-law standards of fairness and rationality, the judges of this country must have power to provide a remedy for the domestic designation. Your Lordships’ Constitution Committee, of which I am a member, so recommended in paragraph 27 of its 8th Report of this Session.

It comes to this: the Minister’s reliance on international law cannot take priority over the rule of law. The rule of law in this country cannot be subcontracted to the political processes of the United Nations. I beg to move.

[Baroness Northover]

My Lords, given that I have been named here and therefore have a key interest, I ought to address this in case I get sanctioned in the place of another Baroness Northover. I am sure my kids would think that was an extremely interesting situation for me, but I am not sure that I would. The noble Lord, Lord Pannick, has made a very powerful case on this matter, as he did in Committee. If an error is made with a designation as a result of UN sanctions being imposed then, as he said, the ECJ could, at the moment, protect that person within the EU and allow it to be challenged. There clearly should be a way of doing this. As the noble Lord said, it is a matter of the rule of law.

We have been told that the rights of British citizens will not be lessened if we leave the EU. This protection should, therefore, be carried over into British law. I clearly have an interest here and I support the amendment in the name of the noble Lord, Lord Pannick.

[Lord Faulks (Con)]

My Lords, I was present in the Chamber and listened to the debate when this matter was debated in Committee, although the amendment has changed slightly. Since then, I have read and considered the arguments. At the time, I was persuaded that, on balance, the noble Lord, Lord Pannick, was right and the absence of such a power as is envisaged by the amendment was a real risk of injustice. However, I have changed my mind. It is, of course, fundamentally important that we respect our treaty obligations, particularly Article 103 of the UN charter. What higher obligation could there be?

The UN, in common with all international institutions, is not infallible. For example, we know that the European Court of Justice, which we must obey, and the European Court of Human Rights are not infallible. However, sometimes there is a need to subsume individual, national needs into the need for an overall, international understanding. It is vital that we respect the decisions on sanctions that have been made by the UN. As a permanent member of the Security Council, we can influence those. The Human Rights Council, to which my noble friend referred, can of course make mistakes, but it is undesirable that individual countries can pick and choose which sanctions they want to follow. I look forward with interest to hearing what the party opposite says about our relationship with the UN.

The Secretary of State can, and should, use his best endeavours in appropriate circumstances to try to influence matters, and can be told to do so by the court, but this goes further. Although the amendment has precursors to the exercise of the power, it does ultimately give the court the power to set aside the decision of the Minister. The noble Lord, Lord Pannick, says that this is a rule-of-law issue. It is indeed; it is a rule of international law and international comity, so I am afraid I cannot support the amendment.

--- Later in debate ---

Moved by

[Baroness Northover]

63: Clause 36, page 26, line 20, at end insert—
“( ) Where regulations under section 1 make provision as to the meaning of any reference in the regulations to a person “owned” or “controlled” by another person pursuant to section 50(3), the appropriate Minister must issue guidance.”

[Baroness Northover]

My Lords, I will also speak to Amendment 64. I note the departure of a number of noble Lords at this point. Indeed, we have been considering some important constitutional issues this afternoon, and right now we are returning to the normal fare of legislation in the Lords: the routine matter of improving legislation. So your Lordships are safe to depart. We have been assisted here by UK Finance, for which I am grateful, and we are also grateful for the engagement of Bond and other NGOs. We visited this subject briefly in an earlier amendment.

We are all agreed that it is appropriate to have sanctions regimes in certain countries, and we are agreed that these should be in place against the regime in Syria, for example. We are also agreed that we want to enable humanitarian organisations to be able to operate in places of conflict, as most notably Syria is, where half of the population have been displaced, injured or killed over the last few terrible years. We also realise that it is important to have licence regimes to prevent, as far as is possible, funds deliberately or inadvertently going to groups whom we wish to sanction. However, this is where we can encounter problems. Banks are understandably risk-averse and may not wish to handle funds where they fear that they will not be able to defend their actions. The tightening of legislation in the US and the EU—including the UK—has had beneficial effects in countering corruption and money laundering, for example, but we need greater clarity for the banks. They do not have to assist NGOs, and often they do not.

The Government set up a group to consider this and other issues, but it has met briefly only once, and none of its sub-groups, which will be carrying forward its work, has been set up. That is why we are asking not that the Government “may” issue guidance but that it “must” do so and that it must cover certain areas. The Bill indicates that guidance accompanying new sanction regimes must be issued, but there is no certainty regarding what it will contain, because the Bill specifies “may” include rather than “must” include.

The Office of Financial Sanctions Implementation has recently issued guidance in respect of NGOs and their sanctions obligations, but this guidance deals with legal obligations at a general level and is not regime or programme specific. For example—to me, this is astonishing—to date no guidance has been issued that specifically deals with regimes such as Syria, where broad-based financial sanctions are in place alongside a major humanitarian situation. Since 2012, the banking sector has proactively, and unsuccessfully, called for guidance to help address the very significant challenges of sending funds to Syria in support of humanitarian activity. Considering the billions of international humanitarian funds mobilised to date in support of the Syrian population, the ability to find safe, transparent and dependable banking and payment channels that cover the whole of Syria has become an international imperative priority, and it is astonishing that that situation has not yet been addressed.

Within a situation such as Syria, guidance becomes utterly imperative and vital. It is incredibly encouraging that the banks themselves are seeking this guidance so that they are able to assist the humanitarian organisations and ensure that they are not associated with the kind of risk that currently prevents their involvement.

At this point, I want to return to some of the things that the Minister said on the second group of amendments. I am not sure why, but we sped through that group at great speed. I welcome the fact that reporting to Parliament will cover humanitarian aspects, and I hope that NGOs and the banking industry can engage with the Minister and his department on what this might consist of. However, I thought that his attitude to streamlining licences was not helpful. We are talking here of working with like-minded countries. We usually work in concert with other countries, so it is pretty limiting to seem to indicate that they would not have our foreign policy objectives, for example. If we are working in concert with them—and that is what we are talking about here—they clearly will.

Earlier today, the noble Lord, Lord Howell, made the point that it would be pretty ineffective for us to have sanctions by ourselves. Therefore, I hope that the Minister will rethink this issue with an open mind. Where Governments have aligned objectives that have led them to impose sanctions on a given country, we should ensure that the mutual recognition of humanitarian licences is possible. For example, at the moment processing a humanitarian transaction with Syria is likely to include some type of exposure to multiple sanctions authorities across the EU and the US. If we leave the EU, an option that the Government may wish to consider is a mutual co-operation agreement with agreed EU competent authorities. If we were aligned in that way then, for example, if the French were to issue a licence for a payment under EU sanctions, the UK bank or NGO could rely on the French licence and need not seek a similar licence from UK authorities.

The noble Lord was also doubtful about licences for a whole project, and, again, this needs further thought. The NGOs and UK Finance are concerned about this. Looking at the UK’s and DfID’s role, we often see major humanitarian programmes being majority funded by DfID, but no thought has been given to how the relevant programme will be granted authorisations. For example, a water and sanitation project in Syria is likely to require multiple licences to cover engagement with the ministry of health, Syrian government officials and the export of dual-use parts from the EU to Syria—for example, drilling pipes and payment authorisations for funds moving into Syria. A licence might be issued at the inception of the project, which could save NGOs having to apply for multiple licences.

As Bond has made clear, we need the Government to work to a greater extent globally on licences, to be clearer and to have licences for the duration of the project. Of course, the Government need the tri-sector group, which the Minister mentioned before and which was mentioned in meetings—the group that has met only once and as yet has no sub-committees—to engage, to meet and to work out what the guidance must say, and to give clarity to organisations, including banks, in this area. I beg to move.

[The Earl of Dundee (Con)]

My Lords, while supporting this amendment, I welcome and recognise the Minister’s continuing resolve to issue guidance—thus the text to that effect, as is already within the Bill. Yet there is no certainty about it, as subsection (2) specifies only what such guidance “may” rather than “must” include.

Also to be welcomed is the recent guidance given by the Office of Financial Sanctions Implementation to NGOs about their sanctions obligations. Nevertheless, this focus is upon general legal obligations. It is not regime or programme specific. So far, it appears that there is no official guidance which deals with regimes such as Syria, where financial sanctions coexist with a major humanitarian situation. Since 2012, the banking sector has repeatedly urged that guidance should be given to address all the many complications in sending funds to Syria in order to assist humanitarian activity. As we know, and as the noble Baroness, Lady Northover, has just said, the process is not working nearly well enough. Therefore, it is now a priority for humanitarian agents and their banks to find safe, transparent banking and payment channels.

It may be objected that the issuing of too much specific guidance might enable sanctions to be evaded by criminals and terrorists. At the same time, appropriate guidance can only help to ensure that the vast humanitarian sums entering Syria are not diverted instead to benefit those who are sanctioned. This can be prevented by a shared view between government, banks and NGOs on how best to risk-manage such payments, and by them as well through a shared identification of viable avenues to make sure that funds arrive safely where they are intended to go.

The Government are also to be commended for setting up a tri-sector group comprising government departments, NGOs and banks. Yet, while supporting that development, all the same we should perhaps appreciate that such arrangements rarely produce the type of outcome that the amendments seek. In fact, as the noble Baroness, Lady Northover, has observed, this particular group has had only one short meeting and none of the sub-groups has as yet met at all. Moreover, as government officials move their positions rather frequently, it can be notoriously difficult to ensure proper traction.

--- Later in debate ---

[Lord Ahmad of Wimbledon]

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]

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.

Amendment 63 withdrawn.

--- Later in debate ---

[Lord Ahmad of Wimbledon]

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]

We welcome the Government’s move.

Amendment 65 agreed.

Sanctions and Anti-Money Laundering Bill [HL]

Baroness Northover Excerpts

3rd reading (Hansard): House of Lords
Wednesday 24th January 2018 Lords Chamber

[Lord Judge (CB)]

My Lords, I had not intended to speak again—your Lordships have been patient with me already—but there is a slight problem. Someone in the Minister’s office must have had a Homeric nod, because Clause 43 makes the express provision that regulations under subsection (1) may not make provisions that create new criminal offences. That was consequent on the vote in the House last week. Unfortunately, criminal offences remain in Schedule 2. Regulations under Section 43, in paragraphs 18 and 19, provide for the creation of criminal offences. Something has gone wrong and I look forward to the Minister telling the House how he proposes to deal with it.

A similar point arises in connection with Clause 17. The original clause made provision for the creation of criminal offences punishable by up to 10 years’ imprisonment. That proposal was defeated in this House and does not appear in Clause 17, which is the former Clause 16. However, in Clause 17(6) there is a provision that:

“Regulations may provide that a particular offence which is … created by virtue of this section”.


There is no such power, so I wonder whether the Homeric nod extended to both parts of the Bill.

[Baroness Northover (LD)]

My Lords, I thank the Minister for the amendments he has tabled. I support the noble and learned Lord, Lord Judge. One has to think that the continued inclusion we have just heard described was inadvertent and that the Minister will make sure that it is cleaned up immediately in the Commons—otherwise we will have to address the issue when the Bill returns to this House so that it is consistent throughout.

[Lord Hain (Lab)]

My Lords, I rise briefly to thank your Lordships’ House for allowing me to speak at length on three occasions to spell out the corruption and money laundering involving some British companies. I am told by those involved that, when the leadership change took place in South Africa just before Christmas, these interventions had some effect on the margin, and I am grateful for that. I thank in particular the Minister. When last Monday I spoke on Report, I think that I may have strayed outside order, narrowly—or not, as the case may be. I am grateful to him and to those involved for their tolerance. I have thanked him personally but I wanted to put it on the record.

--- Later in debate ---

[Lord Ahmad of Wimbledon]

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 (LD)]

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.

[Lord Pannick (CB)]

My Lords, I add my thanks to the Minister and the Bill team for what the Minister accurately described as the collaborative co-engagement on the Bill. It has been quite remarkable and exceptional, and I am very grateful to him. My only regret is that, personally, I prefer a good argument—it may be my professional training—but I realise we are not here for my personal gratification. I very much look forward—perhaps the Minister may communicate this to his colleagues on the Front Bench—to the same collaborative engagement, co-operation and desire to accommodate concerns when we consider any other Bill that may come before this House in the weeks ahead.

Sanctions and Anti-Money Laundering Bill [HL]

Baroness Northover Excerpts

Ping Pong (Hansard): House of Lords
Monday 21st May 2018 Lords Chamber

[Lord Faulks (Con)]

My Lords, I endorse everything that the noble Lord, Lord Anderson, rightly said. These matters were a concern across party in both the House of Commons and your Lordships’ House. The Magnitsky law was somewhat incomplete after the Criminal Finances Bill was enacted, and this is a necessary completion of those reforms. I share the noble Lord’s concern that, in our enthusiasm, we must not lose sight of the need for safeguards. This measure seems to be welcome not only here but in a number of other jurisdictions, and I agree that we should continue to do all we can to encourage its take-up worldwide.

[Baroness Northover (LD)]

My Lords, we, too, welcome Amendment 1 and the consequential amendments, which are the concession made by the Government in the Commons explicitly to include gross human rights abuses in the Bill, recognising the vote in the House of Lords led by the noble Lord, Lord Pannick, and others. We also welcome Amendment 16, which deals with the concern raised by the Independent Reviewer of Terrorism Legislation and the Joint Committee on Human Rights. We also welcome Amendment 17, requiring the Government to make periodic reports on the use of powers to make sanctions. How frequently may those occur and what form may they take? Most of all, I thank the Government for listening to the views expressed here and hope that we can take heart in relation to other legislation and votes we have seen in recent times.

[Lord Hain (Lab)]

My Lords, I, too, welcome government Amendment 1 and its associated amendments and applaud the Minister for the way he has spoken forthrightly on the human rights agenda and stewarded the Bill, which is a case study in how a Government and a Minister should and can respond to amendments from the Opposition, the Liberal Democrats and Cross-Benchers.

At the same time, I crave the indulgence of the Minister, the Whip sitting next to him and your Lordships’ House in returning to a subject which I have raised before—which, I am authoritatively told, has had some impact on the welcome change in the leadership of South Africa. This week marks South African President Cyril Ramaphosa’s first 100 days in office. I will be brief, but the official state money laundering and corruption virus he inherited from President Zuma is significantly more virulent and pervasive than even Ramaphosa could have anticipated, made immeasurably worse by the complicity of UK-based global corporates.

Take Hogan Lovells, the international law firm headquartered here in London and in Washington, its role starkly exposed in documents recently released to the parliamentary finance committee in South Africa. In your Lordships’ House, Report on the Bill on 15 January, I first criticised its role for whitewashing corruption by Tom Moyane, chief of the South African Revenue Service, now suspended by the new President. According to these documents, Hogan Lovells kept silent even when its findings related to money laundering and corruption by Moyane’s former deputy, Jonas Makwakwa, and even after Moyane misled the South African Parliament. Through its despicable, fee-grabbing complicity, Hogan Lovells spared these two notorious perpetrators of state capture in South Africa from accountability for their complicity in, and cover up of, serious criminal behaviour, including money laundering and corruption.

At the same time, Hogan Lovells has been undermining the criminal justice system in a series of other cases, as proven by the fearless Forensics for Justice NGO investigator, Paul O’Sullivan. Effectively, Hogan Lovells was acting as former President Zuma’s legal fudger-in-chief.

Brave investigative journalist Pauli van Wyk has exposed lies by the senior partner of Hogan Lovells in South Africa, Mr Lavery Modise. In the Daily Maverick, she pointed out:

“Despite having the benefit of the report by Price Waterhouse Coopers (who actually conducted the investigation), Modise and his team ultimately charged Makwakwa with everything he could explain, and with exactly nothing that he previously struggled to explain, or simply refuse to account for”.


Indeed, the more serious allegations in the PwC report were carefully filtered out of Hogan Lovells’s report, and the firm did not point out that Moyane was preventing critical evidence from being given to PwC.

Hogan Lovells’s most specious piece of lawyer sophistry was to claim that it could look only at the employer-employee issue involved and not at any criminal issue, giving the excuse that the employee, Makwakwa, could otherwise implicate himself. Surely all good employers, and indeed employees, should report on any criminality at their workplace, and surely even more so in the vital state revenue agency when the crime relates to money laundering and tax evasion. Effectively, Hogan Lovells turned a blind eye to the looting of the tax agency. It took a fat fee and ignored the truth. Most astonishing to me is that Hogan Lovells still refuses to acknowledge, let alone apologise for, its complicity, thereby actively supporting those still trying to undermine President Ramaphosa’s reform programme.

The behaviour of Hogan Lovells in South Africa is a classic example of a British-based company obfuscating its behaviour, using the complexities afforded by the law, including client confidentiality, to conceal the crimes of money laundering and corruption. Hogan Lovells fits exactly the behaviour exposed by investigator Pauli van Wyk when she concluded:

“The tale of State Capture ... co-exists in a mutually parasitic relationship where the public purse is the feeding ground and corporates are the enablers and agents of whitewash”.


British based corporates such as Hogan Lovells should be supporting, not thwarting, President Ramaphosa’s anti-money laundering agenda.

The Solicitors Regulatory Authority has now declared that Hogan Lovells South Africa is a “connected party” to its UK firm and I therefore request—I hope that I will have the Minister’s support—that the SRA withdraws recognition from Hogan Lovells UK and suspends its UK senior partners from practising here for its scandalous activities in South Africa. I also ask British Ministers to ensure that Hogan Lovells UK receives no more UK public sector contracts until it at least apologises for its shameful and shameless South African role. Additionally I can report that, after I raised this matter at Second Reading in November, the Financial Conduct Authority has recently informed me that it is engaging with the whistleblower who has supplied evidence that I believe should see HSBC prosecuted for conspiracy for facilitating money laundering.

I conclude: unless Ministers ensure that there are penalties for UK-based corporates like Hogan Lovells, HSBC, the Bank of Baroda, Standard Chartered, Bell Pottinger, KPMG, McKinsey—and who knows how many others?—for their complicity in protecting criminals engaged in money laundering in the South African case, I am afraid this legislation will not be worth a candle.

--- Later in debate ---

[Baroness Northover]

My Lords, as the Minister will know, and as the noble Lord, Lord Collins, expressed, the Delegated Powers Committee was very concerned about Amendments 11 and 12. I must say that I found it astonishing to read that yet again, at this late stage of the Bill, the same issues are coming up that we had at the beginning, and to hear the Delegated Powers Committee noting,

“the Department’s failure to explain the width of the powers being granted, and why it is not possible to limit the powers … and to specify on the face of the Bill the persons who are to exercise the powers”.

I hear what the Minister says. I note that the Delegated Powers Committee is reluctantly saying that, if the Lords accepts the way that these amendments have come forward, the powers should be subject to the affirmative procedure in both cases. I wonder what the noble Lord, Lord Pannick, makes of the amendments.

[Lord Pannick]

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.

--- Later in debate ---

[Lord Pannick]

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]

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]

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.

--- Later in debate ---

[Baroness Hooper (Con)]

My Lords, with all due respect to those who have spoken against the amendment, anybody listening to the arguments that have been put forward in support of my noble friend Lord Naseby’s amendment would happily follow him into the Division Lobby should he decide to test the opinion of the House. I declare a long-standing interest in the overseas territories: I am a vice-chairman of the Overseas Territories All-Party Parliamentary Group and an officer of many of those for individual overseas territories.

It seems extraordinary that these territories, which keep all the required records available to be shown to the appropriate authorities, should be required to publish them as a result of what seems to have been a last-minute decision in the other place. I had not intended to speak to the amendment, but I was tempted to do so to show my support for the overseas territories and my noble friend’s amendment.

[Baroness Northover]

My Lords, I will address the principles of this. The proposal was narrowly defeated in the Lords and has been debated for many years. Personally, I was delighted by the coalition across the parties in the Commons on this issue and I commend the Government on recognising that coalition. I especially commend the noble Baroness, Lady Stern, my noble friends Lady Kramer and Lord McNally, and others on their long fight on this issue. The transparency of public registers of beneficial ownership is the key issue and it will bring change. I have seen the positive effect of the unexpected spotlight provided, for example, by the Panama papers in some of the areas on which I focus in Africa. I have seen steady change and I welcome the decision to adopt public registers of beneficial ownership in the United Kingdom. London has not collapsed: Brexit may do more damage. I have seen the effect that bribery legislation in the United States, Europe and elsewhere has had on companies trading around the world and I have seen the change as a result, which we will see here too.

I recall some saying that the Bribery Act would differentially damage UK business. Ken Clarke saw those people off and rightly so. The noble Lord, Lord Naseby, did his right honourable friend Andrew Mitchell a disservice: he worked for many years in banking and spent many years supporting international development, so he does know both sides. Therefore our position is that we do not support the amendment of the noble Lord, Lord Naseby, for the reasons I have given of that change occurring across the world over time: it is very beneficial and if the overseas territories are concerned about losing that business then it is probably, as the noble Lord, Lord Anderson, indicated, business that they should not wish to have.

[Lord Collins of Highbury]

My Lords, I might as well begin by declaring what is not really a direct interest. My father was born in Bermuda and his father was born in Bermuda, so I think that entitles me to go and live there at some point and not have to deposit the $30 million that I think is currently needed if you want to live there. It is a very nice island, and I do love it and I love its people.

This debate is a reflection of constitutional concerns. There are concerns over the rights of people to determine their own laws and no one can disagree with that. But it is also a very strong moral debate, because we know that developing countries lose three times as much in tax avoidance as they get in all the international aid that is available to them. That is the scandal of this world we now live in. The Paradise papers and the Panama papers highlighted just how much of an issue this really is, and that is why we have such huge public concern. If we want to break the business model of stealing money and hiding it in places where it cannot be seen, transparency is the answer. I agree completely with the words of David Cameron in 2013 when he spoke about ripping aside “the cloak of secrecy” and repeated the well-known mantra that “sunlight is the best disinfectant”. I think that that commitment by David Cameron in 2013 is what this debate is about.

Last week, I had the opportunity of meeting the Prime Minister and Leader of the Opposition of the British Virgin Islands. They made their case very strongly to me about their concerns over this amendment. However, whatever position you are taking constitutionally, no matter what the concerns are, there is one thing that everyone agrees on, and that is that the scandal of money flowing out of countries and being hidden is something that has to stop. The Prime Minister of the British Virgin Islands acknowledges that transparency is important. We have heard about the actions of Bermuda and other places. David Cameron was actually trying to change the global position, to get to a position where we would have global agreement on addressing this issue.

How do we get global agreement? David Cameron believed it was by giving a lead. There is an issue here about reputation and being able to influence things. While we are in the European Union and saying, “You’ve got to ensure that all territories within the European Union comply with this”, and when we are in other global fora, we should be able to say that we will be acting on this. We know that the excuse of the overseas territories is often used by others to say, “If you’re not doing it there, why should we do it here?”. That is something that we have to address.

I absolutely understand the need to ensure that all the territories have the proper opportunity to consider this, but this is something that they have been acting on for some time. I respect the Minister’s undertaking to ensure that they have the necessary means as well as the necessary policy and advice.

--- Later in debate ---

[Lord Ahmad of Wimbledon]

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]

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]

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.