Sanctions and Anti-Money Laundering Bill [HL]

Earl of Dundee Excerpts

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

[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?

Sanctions and Anti-Money Laundering Bill [HL]

Earl of Dundee Excerpts

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

[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.

[Lord Collins of Highbury]

My Lords, I shall be very brief. I have added my name to this amendment and support everything that the noble Baroness, Lady Northover, and the noble Earl, Lord Dundee, have said. Here, we are trying to acknowledge what the Minister has committed to in terms of guidance and ensuring that the licence regime operates efficiently. However, we know from the NGOs that there is still great uncertainty. Certainly, as the noble Baroness, Lady Northover, said, banks are risk-averse, and often urgent humanitarian aid gets halted and is extremely difficult to implement. On the other hand, we have to balance the need to create certainty with the need to maintain an effective sanctions regime. We do not want to see the sanctions regime undermined by any system of licensing. That is why it is important that the Government should move speedily on the guidance situation, which I know the noble Lord is committed to.