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.