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

John Glen Excerpts

Tuesday 27th February 2018 Public Bill Committees

[Alison Thewliss]

I agree very much with the amendments and support the hon. Lady in what she has said. I share the concerns that she has conveyed from both the NGO sector and the banking sector, where we seem to be caught between admirable public policy objectives—providing humanitarian aid—and the practicalities of sanctions compliance, which seems to be hindering the delivery of that aid in many different ways.

The amendments sensibly seek to expand a particularly narrow EU definition of humanitarian aid. That would give a wee bit more certainty and clarity to agencies working on the ground. It also gives us an opportunity to figure out how we ensure that money reaches those who need it and reaches them quickly. I understand that, at the moment, organisations can often wait up to six to nine months to get licences and agreements in place. Frankly, people on the ground in many of the countries involved do not have six to nine months to wait. They need money and aid almost immediately, so we need to find a way of fast-tracking the money in; we need to figure out what a viable financial route to get money from us here in the UK through to the frontlines in Yemen and Syria to ensure that people can survive looks like.

In Yemen particularly, there is a shortage of physical cash in the country. Hospitals in which people are working are often supported by the likes of Médecins Sans Frontières. MSF is paying those staff, but it needs to get the money into Yemen to pay them, so that they can turn up to work and feed their families, and provide vital assistance to people facing bombardment from the air. We need to find a way of getting the money in and doing that quickly.

There are practicalities involved in asking humanitarian agencies to go and carry out this work. Let us say that people are providing humanitarian aid on the ground; to move things around the country they need fuel. If they are in a country in which they have to choose between buying their fuel from Islamic State fighters or Assad, that is not actually a choice they can make, because both options would place them in breach of sanctions, so there needs to be a way of getting money to people and doing that quickly, so that organisations can do their work. If financial assistance has been granted to humanitarian organisations specifically for the purpose of buying fuel and then they cannot practically do that, that is a real problem and makes the delivery of much-needed aid extremely difficult.

There is an argument for granting up-front licences for infrastructure. If we know what is to be built—put in place—and it is a bridge that will allow people to cross it and move humanitarian aid around the country, or if it is a hospital or other facility that will provide aid, why cannot the licences be granted fast and up front, so that there is no delay in procuring the purchase of things to make that happen?

I agree very much with the points made by the hon. Member for Bishop Auckland about mutual recognition of licences. If we see fit to issue licences, that should be good enough for other countries as well. If we have gone through a due diligence regime, that should be good enough for other people to accept and would help speed up the process, and would prevent organisations from falling foul of someone else’s regulations. There should be agreement on that, whether in a treaty or some other form. It would be a hugely sensible way of speeding up the process.

I very much agree with the points that have been made on new clause 5. I understand that the United States has a huge amount of transparency around the exemptions and licensing regime. It is possible to see not only what has been licensed and how but the backlog to the licences, which is critically important because we can see delays in the process.

We need to understand why those delays are there and what we can do to overcome them. Frankly, people in different parts of the world cannot wait for us to go through a laborious process to issue licences. We cannot have those organisations spend huge amounts of money on lawyers. We just need to get the aid to where it needs to be with the best practicable due diligence.

[The Economic Secretary to the Treasury (John Glen)]

It is a pleasure to serve under your chairmanship, Mr McCabe. I have listened carefully to the respective Front-Bench speakers and studied the three amendments and the new clause: amendment 18 on fast-track exceptions; amendment 19 on consulting on exceptions to disapply; amendment 20 on an exception for humanitarian or peace-building purposes; and new clause 5, which would require the preparation of an annual report on humanitarian and non-humanitarian exemptions.

I will speak to each in turn. Like my right hon. Friend the Minister for Europe and the Americas, I acknowledge the spirit in which they were tabled, but I will set out the Government’s position on why they are not necessary.

I will address the point about FATF immediately, because I have had some contact with it. FATF was set up by 16 countries after the 1989 G7 summit. It is not an incorporated or treaty body. It does not create binding obligations on the UK. The UK is a founder member and plays a leading role. I would reinforce that with this point. I recently received the Pakistani Home Secretary, who was seeking to persuade the Government to resist the greylisting of Pakistan for not making sufficient progress. That was clearly taken very seriously by the Pakistanis. I also acknowledge the work that is going on across Government in the UK to deal with the considerable challenge of the current evaluation of our own compliance with FATF standards. This is a robust, internationally recognised set of obligations that have real meaning and authority.

Many of the amendments have been debated in the other place and lobbied for by UK Finance and a number of NGOs, as the hon. Member for Bishop Auckland set out. I can assure the Committee that the Government remain a steadfast supporter of NGOs working in conflict areas. The Government engaged with them while the Bill was in the other place, and we will continue to do so. We recognise that it is important to ensure that this work continues, where possible, in sanctioned countries.

It is equally vital, however, that we have appropriate safeguards in place that preserve our foreign policy priorities, by ensuring compliance with sanctions, but also serve to protect the NGOs and help prevent the sector from becoming attractive to criminals looking to circumvent our laws.

Amendment 18 calls on the Government to establish a fast-track process for dealing with requests for exceptions and licences for humanitarian purposes. I can assure hon. Members that the Government make every effort to prioritise urgent and humanitarian cases, where there is a risk of harm or a threat to life, and will continue to do so. However, we believe that any prioritisation criteria for considering licences and exceptions must remain as flexible as possible, to ensure that the Government can consistently prioritise the most important cases, including humanitarian cases where appropriate.

The process for considering licences is best done administratively and on a case-by-case basis. Government Departments will, of course, continue to reach out to the NGO sector to ensure that NGOs understand how that process works for humanitarian licence applications. Given the number of Departments involved—typically four: the Foreign Office, the Home Office, the Department for International Trade and the Department for International Development—and the many rightly differing derogations, exceptions and grounds for licensing that are involved, it would not be straightforward to operate a fast-track process as suggested by the amendment. To get each application right demands a tailored approach, because the facts differ greatly from case to case. Therefore the Government believe that it would not be prudent to establish a single fast-track process, which may impede the Government’s ability to assess cases accurately, and will be unwieldy to operate given the different ways in which the various types of sanctions work.

A fast-track process might also create perverse results—such as where an urgent request for a licence to allow a designated person access to medicine would have to come second to a routine application in respect of humanitarian activity that only involves changing the details of bank accounts. For all these reasons, we do not consider that a new and administratively burdensome requirement ought to be added to sanctions regulations.

Amendment 19 suggests that a consultation be undertaken for an overarching framework for exceptions and licences. The NGOs and UK Finance have called for that, as the hon. Member for Bishop Auckland said.

It must be said that we have carried out a consultation on our White Paper, including roundtables with banks and NGOs. We are still talking to them and have set up a working group with them. We intend to use the opportunity to improve licences—such as general licences for humanitarian activity—and we will issue guidance. We have been clear that we will do that, and because of that consultation we do not feel that the amendment is necessary. We have listened to the comments of all respondents and we intend to design a post-Brexit licensing framework that is fully informed by those comments. That is an ongoing process and one in which we are enthusiastically engaged.

Comprehensive regulations that will be laid before Parliament and debated will include detailed information on the exceptions and licences that are appropriate for each regime. We also intend to continue to consult with industry to ensure that the framework allows us to be flexible and has the minimum possible effect on industry whilst having the maximum effect on the intended targets of the sanctions. An overarching framework for licences will not allow us the flexibility that we need for each regime. For example, the licensing grounds for a proliferation regime should be different from those of a misappropriation or counterterrorism regime. Furthermore, the timetable for conducting such a consultation after the commencement of the Bill makes little sense. By then, we expect that the relevant sanctions regulations—with the appropriate exceptions and licensing arrangements for each regime currently existing in EU law—will already have been made and debated by Parliament. We fear that a further consultation would add confusion at a time when we would be working hard to ensure a smooth transition.

The Government have committed in the Bill—clause 37 —to issuing guidance about sanctions regulations. As the guidance is developed, we will engage with stakeholders, as we already do for guidance that is published on the implementation of sanctions.

[Alison Thewliss]

Could the Economic Secretary give more clarity on the timescale? We have the Bill just now; how soon will the guidance appear? The current guidance is not really useful in terms of how the sanctions landscape works.

[John Glen]

I cannot give a precise timetable. I will consult officials and write to the Committee to give clarification on that as soon as I can.

Amendment 20 would make it plain on the face of the Bill that exceptions to sanctions can be made for humanitarian development, reconstruction and peace-building activities. Broadening such exceptions to cover such a broad group of organisations and activities goes much further than the Government intended and is incompatible with both the policy intent and our obligations under UN and EU regimes. The Government are currently able to issue specific licences on application from humanitarian and other agencies. The licensing provision is read across and extended in clauses 15(2)(b) and 14(3)(a) to allow Ministers to issue both general and specific licences. It is the Government’s intention to use the power to issue general licences where appropriate. One key area in which it is foreseen that general licences could be written is for the purpose of delivering humanitarian aid. We should also be wary of the confusion caused by listing these activities but not others, such as denuclearisation activities. To add one would imply that the other was outside the scope of the Bill.

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[Anneliese Dodds]

I am grateful to the Minister for that explanation. I shall speak briefly on a couple of points.

First, the Minister helpfully stated that the Government do support NGO operations in countries subject to conflict. Will he be more explicit and state that the Government support NGO operations in countries subject to sanctions? That is exactly what we are talking about now. The concern for many in the development community is that the balance is currently towards a presumption against activities occurring in countries where there are sanctions, rather than that being feasible for those organisations when fulfilling international obligations, as we would expect.

Secondly, on amendment 18 on the fast-track process, I was encouraged by some of what the Minister said but was slightly concerned by the reference to the Government continuing current processes, with the suggestion that those are adequate. I have certainly received information, as I am sure other colleagues have—the hon. Member for Glasgow Central referred to some of this—on the impact of fuel sanctions. I understand that delays in getting appropriate licences and exemptions in relation to sanctions on fuel in Syria have led to farcical situations in which, for example, a hospital was destroyed before it was possible to get the fuel that would serve that hospital. The current system is not working at the moment. I wonder whether we may have more of a focus on not following existing practices, which clearly are not operating adequately.

The Minister suggested that the fast-track process would lead to some kind of inappropriate, one-size-fits-all system where, for example, a need for medicine in one situation could be trumped by humanitarian concerns. Surely medical needs could come under humanitarian concerns? What we are really talking about is the need for a fast-track approach to humanitarian peace-building action that will be interpreted sensitively and intelligently, but which could get away from the current impediments for NGOs.

[John Glen]

I am happy to address those points. I can of course confirm that NGOs in countries subject to sanctions are still able to access these provisions. On the hon. Lady’s point on the fast-tracking process, and the point on fuel sanctions, I said what I said in response to the amendments, but we are obviously living in a very imperfect situation, with highly challenging environments. It will not be possible to get things right every time, but I think the provisions in this legislation give us the best opportunity to do so. I think I have set out the Government’s position clearly.

[Helen Goodman]

The Economic Secretary is right that the situation is complex, and he is right that we do not want to add to the complexity with new requirements and new consultations. However, I am sorry to say that I do not think he has made the case for not accepting our new clause 5 on reporting to Parliament.

I want to draw the Committee’s attention to an article from The Guardian of 23 July 2014, which illustrates the problem. It is headed: “UK arms export licences for Russia still in place, despite claims of embargo”. It reported:

“More than 200 licences to sell British weapons to Russia, including missile-launching equipment,”

were still in place at the time,

“despite David Cameron’s claim in the Commons…that the government had imposed an absolute arms embargo against the country”.

I think we have seen a great reluctance on the part of the Government to be more open. What is going on with these sanctions, exemptions and licences is a highly sensitive political area. It seems to me that it would help the Government if we had more openness. We could then have arguments about what was really going on, not about what people might surmise or imagine. I wish to press new clause 5 to the vote.

[Helen Goodman]

I do not want to press amendment 18. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 15 ordered to stand part of the Bill.

Clause 16 ordered to stand part of the Bill.

Clause 17

Enforcement

[John Glen]

I beg to move amendment 4, in clause 17, page 16, line 12, at end insert—

“( ) Regulations—

(a) may create criminal offences for the purposes of the enforcement of prohibitions or requirements mentioned in subsection (2)(a) or (b) or for the purposes of preventing such prohibitions or requirements from being circumvented, and

(b) may include provision dealing with matters relating to any offences created for such purposes by regulations (including provision that creates defences).

( ) Regulations may not provide for an offence under regulations to be punishable with imprisonment for a period exceeding—

(a) in the case of conviction on indictment, 10 years;

(b) in the case of summary conviction—

(i) in relation to England and Wales, 12 months or, in relation to offences committed before section 154(1) of the Criminal Justice Act 2003 comes into force, 6 months;

(ii) in relation to Scotland, 12 months;

(iii) in relation to Northern Ireland, 6 months.”

This amendment enables sanctions imposed by regulations under Clause 1 to be enforced by criminal proceedings, and limits the terms of imprisonment that such regulations can allow to be imposed for breach of sanctions.

[The Chair]

With this it will be convenient to discuss amendment 21, in clause 17, page 16, line 36, at end insert—

“(8) An appropriate Minister must publish guidance from the Crown Prosecution Service on when it is in the public interest for a breach of a sanctions regulations to be prosecuted.”

This amendment would require the Government to publish guidance on when it is in the public interest for a breach of sanctions regulations to be prosecuted.

[John Glen]

The offences provisions are perhaps the most important amendments that we need to debate today, following the Government’s defeat in the other place. Hon. Members should be aware that without the fullest set of enforcement measures available to deal with breaches of sanctions, the UK will not be able to ensure effective implementation and enforcement of sanctions. That would make what are currently key foreign policy and national security tools virtually toothless, and therefore redundant.

It is important to recognise right at the start that the concerns in the other place were not about whether there should be criminal offences for breaching sanctions; it was accepted that there was a need for these offences. What was at issue was the circumstances where Parliament could properly give to Ministers the power to create offences. The Government have listened to those concerns. We understand them and these amendments address them.

Currently, EU sanctions against countries such Russia and Syria are imposed through EU legal Acts. These require member states to put in place enforcement measures at national level. In line with that requirement, the UK routinely creates criminal offences for breaches of sanctions by way of statutory instruments made under powers in the European Communities Act 1972 as modified by the Policing and Crime Act 2017, as well as other legislation such as the Export Control Act 2002. The Government therefore want to maintain continuity in this area by reproducing the powers available under existing legal frameworks for enforcement across the various forms of sanctions in the Bill.

Since the defeat in the Lords, Government officials and lawyers have worked with Lord Judge and others to seek a legislative solution. That has been a deep and meaningful dialogue, and I must express my gratitude to Lord Judge for his engagement in seeking to find a way forward. We believe that can be found in amendment 4, the enhanced procedural requirements, which we will debate later, in new clause 3 and the corresponding offence provisions for money laundering. The Government believe that combination of measures is the best solution to meet the concerns expressed in the other place while being practical to implement, which I think was the intention of those who raised the concerns.

The amendment restores to clause 17 the provisions to create sanctions offences in regulations. It provides for the enforcement of any prohibitions and requirements, to provide for criminal consequences if they are contravened or circumvented. The clause also provides for maximum penalties for breaches of sanctions in regulations. The provision states that regulations may not include offences with maximum penalties greater than 10 years’ imprisonment, which is in line with the maximum penalty available through the 2002 Act, and for offences other than trade sanctions we do not intend to create penalties greater than seven years’ imprisonment, in line with current practice. The clause should be read alongside the safeguards in new clause 3, which I will discuss later.

Even with the safeguards that we plan to introduce in new clause 3, the Government remain very aware that creating criminal offences and setting penalties in regulations is a serious matter, not to be undertaken lightly. I am therefore happy to repeat assurances given in the other place. First, no Government would ever create criminal offences for trivial matters. The powers detailed in clause 17 would be used only to create offences within the categories of offences that already exist for breaches of sanctions, breaches of licences and breaches of disclosure or information requirements. Secondly, Ministers should not use these powers in a way that is incompatible with the basic and fundamental rights of people in the UK—section 6 of the Human Rights Act 1998 expressly forbids it. Thirdly, as I said before, regulations under the Bill cannot create offences for trade sanctions with maximum penalties greater than 10 years, and we do not intend to create offences for financial sanctions and other types of sanctions with maximum penalties greater than seven years.

We have listened to the concerns expressed in the other place, and we have tabled amendments to introduce controls on the use of this power. As I said, I will speak to those amendments later in our consideration in Committee. In conclusion, the amendment will restore our ability to enforce sanctions by reintroducing the provision to create criminal and civil offences and penalties that are proportionate to the scale and nature of sanctions breaches and still effective as a deterrent. It should be read together with the enhanced procedural safeguards in new clause 3, which directly addresses the concerns raised in the other place.

[Helen Goodman]

I was very disappointed, but not surprised, when I saw that the Government had tabled this amendment before the weekend. I anticipated that they might seek to reverse one of their defeats in the Lords. I think it is striking that the Government are seeking to reverse amendment 45 from the other place, when they lost the vote on that amendment by 80 or 90 votes. It was not a narrow little thing. The amendment in the other place was moved not by some party hack, but by the former Lord Chief Justice of England and Wales. He made a number of speeches about the excessive use of Henry VIII powers.

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[Alison Thewliss]

I echo that. We are also very worried by this amendment, and by the return of something that was clearly and definitively rejected. As far as we are concerned, it is dangerous and an affront to democracy. The Government should accept that they were wrong, and withdraw the amendment. I point out that the Lords Constitution Committee said:

“We consider that such regulation-making powers are constitutionally unacceptable and should not remain part of the Bill.”

The Government should take heed.

[John Glen]

I am grateful for the dialogue with hon. Members on the Front Bench, and I will respond to some of the points that have been made. On the question of whether there is some sort of secret plot to hide any conversations with Lord Judge, Government lawyers have had a number of meetings. No letters have been exchanged, so there is no material to share. The vote was lost by 192 votes to 209; I concede that it was lost, but the thrust of the remarks by the hon. Member for Bishop Auckland concerns the notion that behind the measure is some kind of power grab by the Government. I see it as the Government needing to be accountable for how these powers create new offences and how they are used. New clause 3 will require the Government to lay a report before Parliament, setting out what criminal offences are included in any new sanctions regulations.