Sanctions and Anti-Money Laundering Bill [Lords]

Jonathan Djanogly Excerpts

2nd reading: House of Commons
Tuesday 20th February 2018 Commons Chamber

[The Secretary of State for Foreign and Commonwealth Affairs (Boris Johnson)]

I beg to move, That the Bill be now read a Second time.

I should begin by paying tribute to my noble Friend Lord Ahmad for piloting the Bill through the other place with such skill and finesse. The aim of the Bill is to grant Her Majesty’s Government full power over British sanctions policy after we leave the EU and, in a memorable phrase, to take back control.

This Government’s driving purpose is to strengthen Britain’s global role and widen the horizons of our foreign policy in order to advance the interests and promote the values of the British people, but if our diplomacy is to be effective, it cannot be solely declaratory: we must have the means to impose a price on those who would threaten to do us harm. In the last resort, that will sometimes mean the use of force—this Government will not resile from acting when necessary—but more often, we back our diplomacy through sanctions. Today, the UK enforces 36 sanctions regimes, targeted on countries such as North Korea, Syria and Russia and terrorist organisations including al-Qaeda and Daesh. In total, about 2,000 individuals and entities are listed for sanctions, varying from asset freezes and travel bans to trade restrictions and arms embargos. At this moment, assets worth £12.5 billion are frozen in the UK.

Our powers to impose those sanctions and measures against money laundering derive almost entirely from the European Communities Act 1972. I am delighted to say that Parliament will soon repeal that Act by means of the European Union (Withdrawal) Bill, which is now before the other place. When that Act comes into force, it will freeze Britain’s adherence to the existing sanctions regimes, but if we do nothing, we will lose the ability to impose new sanctions or remove current ones. That is why the Sanctions and Anti-Money Laundering Bill is necessary. It will give any British Government the power to impose, amend or lift an independent battery of UK sanctions, and update measures against money laundering and terrorist financing, thereby restoring our sovereignty over a vital tool of foreign policy.

The House will readily understand the freedom of action that all British Governments today and in the future will regain. If, for example, there is an international crisis and we judge that sanctions are the best response, we will no longer be compelled to wait for consensus among 28 members of the EU. The Bill will give us the freedom to decide on national sanctions as we see fit, bearing in mind that Britain possesses the fifth biggest economy in the world and the largest financial centre in Europe.

Hon. Members will know that sanctions are most effective when jointly enforced by many nations. Nothing in the Bill will stop us concerting our sanctions with any measures imposed by the EU, but if there is no agreement in the EU, as there often is not, Britain can act independently or alongside other allies. If the EU shares our position, we can act together. The outcome will be that Britain enjoys both freedom of manoeuvre and the option of working alongside our European friends. In the main, I hope that the latter will continue and that we can act in tandem, because the truth is that Britain and our European neighbours will always confront the same threats and defend the same values.

As my right hon. Friend the Prime Minister has said, Britain’s unconditional and immoveable commitment to the security and defence of Europe will not change one iota when we leave the EU, and this country has always played a leading role in devising EU sanctions—it is thanks to our national expertise in this field that the UK proposed more than half of all the individuals and entities currently listed for EU sanctions. The EU will have every reason to concert its sanctions policy with us in future, just as we will be happy in principle to work hand in glove with the EU. The Bill will place this British Government and our successors in the strongest possible position. We will be equipped with the power to impose sanctions independently, but without prejudice to our ability to co-ordinate with our European allies.

The Bill is also necessary for the UK to continue to play its full part in the struggle against money laundering and terrorist financing. Without the Bill, we should soon find ourselves in breach of international standards. I am proud to say that Britain was the first G20 country to introduce a public register of beneficial owners of companies, thanks to the Conservative-led Government. We are now going further by creating a public register of the beneficial owners of any non-UK entities that possess or buy property in this country, or that participate in UK Government procurement. No other state is compiling such a register, which will be the first of its kind in the world.

[Mr Jonathan Djanogly (Huntingdon) (Con)]

May I ask my right hon. Friend to confirm this: when he says property, is that all property or just real property?

[Boris Johnson]

I am grateful to my hon. Friend for that intervention—I was referring to real estate. As I am sure he knows, the proposal has the same intention as the tax on enveloped dwellings that was introduced by the former Chancellor of the Exchequer, which has proved, to the best of my knowledge, to be extremely lucrative for the Exchequer.

--- Later in debate ---

[Mr Jonathan Djanogly (Huntingdon) (Con)]

The Bill constitutes one piece of a patchwork of laws that are currently going through Parliament to create a post-Brexit framework of legislation, but it is potentially much more than just an enabler for the UK to implement sanctions post Brexit. Thinking about the Bill, it became clear to me how many scenarios it will actually cover, from sanctions used as an alternative to military or technological warfare to sanctions used to express the protection of national sovereignty or to counter financial corruption or human rights abuses, and in each case at state or individual level.

In short, I think that this is a good piece of legislation that will address the mechanical issues that we need to implement. As the Foreign Secretary has said, it recognises that the majority of sanctions implemented by the UK are derived from UN Security Council resolutions or EU multilateral agreements. In practice, our EU and domestically derived powers to implement multilateral sanctions and any domestically generated ones will be limited by redundant or inadequate UK legislation. Therefore, mechanically, the Bill does the job.

I have seen the Lords amendments to the Bill. As is so often the case, the other place has done a thorough job of tightening up these inherently intrusive provisions to provide more focus and to take on board human rights considerations and reporting requirements. There was also a significant narrowing of the Henry VIII powers to create new sanctions, which is generally to be welcomed.

However, there is of course much more to consider than just whether we can practically implement sanctions. There are also the policy questions of what types of sanctions we want to issue; to what extent we wish to continue following the sanctions regimes of various national groupings, or whether we increasingly want to assert our own new policy post Brexit; and how our view ties in with our wider policy objectives on the trade and security fronts going into our Brexit negotiations.

In that context, I recognise and strongly support how the Prime Minister spoke out recently in Munich, and before that in her Mansion House speech and on her visit to Estonia, against Russia meddling in elections and planting false stories in the media to “weaponise information”, and also against its aggression towards eastern Europe, which is threatening the international order. However, I suggest that this admirable and strong rhetoric needs to be backed up with more specific proposals showing how and with whom we intend to use sanctions in the post-Brexit world. I was somewhat surprised that more space was not given to that policy issue in the Foreign Secretary’s speech this evening. Yes, of course trade policy will be vital post Brexit, but so will our ability to protect our trade interests and our wider democratic values.

More to the point, if we do not stand up, engage on this issue and lead in the way that many countries expect us to, our authority and influence could quickly disappear. The UK was a party to the Budapest memorandum, by which Ukraine renounced its nuclear weapons in return for what it thought would be peace with Russia. But when it came to Europe taking ownership following the betrayal by Russia and its occupation of Crimea and east Ukraine, it was France and Germany, rather than the UK, that led on sanctions.

Is that a portent of post-Brexit Europe, with reducing UK influence? If we do not lead, will we simply fade away to relative international insignificance, in the same way that a couple of months ago the UK lost its seat on the International Court of Justice for the first time since its foundation in 1946? I repeat that we need leadership on this issue as to where we want to place ourselves as an international player, if we are no longer the global superpower we once were.

The key emerging issue on our future trade with the EU is that of regulatory alignment—whether we have it at all and, if so, whether it should be implemented by our choice or by tying ourselves to future changes through membership of the European economic area, for instance. The debate over alignment also holds for sanctions, but with a key difference, I believe: barring the extreme positions on the far left and the UKIP-style non-interventionist right, most of us would agree that close co-operation with the EU and the US will remain vital, and perhaps even more so now that we are possibly to lose our seat at the EU table and lose the leading role that the Foreign Secretary referred to in his speech today. That seems to have been confirmed by the Prime Minister in Munich last Friday, when she said that the UK will be leaving the EU’s common foreign and security policy.

Finding a new policy is therefore vital. It is no coincidence that Russia is delighted with the idea of Brexit, not least because of the potential weakening effect on the western alliance. It must be a key objective that we minimise that effect. We can see the importance of blocs in how Russia and China have been attempting to undermine UN sanctions on North Korea. Without a concerted US and EU insistence, what chance would we, the UK, have had of stopping recent Russian and Chinese abuse by acting alone? The answer, I fear, is very little, despite having the fifth biggest economy in the world.

In that regard, the more experts in this area that one listens to, the more one comes away with the understanding that the most effective sanctions regimes are those put in place by multiple countries. UK unilateral sanctions placed on Russia following its murder of Alexander Litvinenko in 2006 may have been right in principle, but they were seen to have little impact in practice. On the other hand, the EU, as the largest trading bloc in the world, can pack a heavy punch when it implements sanctions, as the figures show it is increasingly being prepared to do.

Alignment is therefore in our interests, but we need to ask what form it should take. Should we align like the neutral Swiss or Norway, and not have a seat at the table or determine policy but just join in with the others? Personally, I would see that as a failure of our long-held responsibility to engage and help lead the free international community.

My view is that, for sanctions, we should negotiate a position with the EU whereby we keep a decision-making and voting seat at the table. Whether that is done via some form of membership of the EU’s Political and Security Committee or through a new body is what we should now be considering. In Munich last week Mr Barnier called for an “ambitious partnership” that is “broad... beneficial and balanced”. I think that we should take him up on that invitation.

From a UK business perspective, there could be severe dangers associated with unilateral action. It could result in British companies being much more easily impacted by counter-sanctions imposed by the targeted regime, and it could have the additional regulatory headache involved in multiple export licence systems.

Finally on sanctions, like my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell) and the hon. Member for Bishop Auckland (Helen Goodman), I turn to the financial crooks, drug and people-smuggling barons and human rights abusers who are laundering more than £100 billion through the UK every year. We do not want that money here, and hopefully the asset freezing provisions of the new Criminal Finances Act 2017, including its Magnitsky human rights abuse amendment, will help, although some action from the Government would now be welcome.

However, it is not just about the money. We do not want these people or their families here, enjoying the rule of law and standards that they so blatantly disregard in their own countries. I should like to see a new visa-based regime and a list system. As every Russian opponent of the Putin regime will tell us, it is exposure and publicity that such people fear the most. At a time when the United States has just issued a further list of people whom it is only considering adding to its public Magnitsky list, I would appreciate an explanation of why Ministers continue to keep the banned list private here in the United Kingdom.

On the subject of anti-money laundering, let me say that it would be very helpful if the Government produced their long-awaited anti-corruption strategy. Many anti-corruption themes need to be pulled together and acted on. Let me issue a plea for moderation, common sense and risk assessment to be given more consideration in that context. That plea comes from the thousands of people who are ever more frustrated to hear that £100 billion of black money is being laundered in the UK while they have been banned from or delayed in opening simple bank accounts for some petty, spurious or jobsworth reason.

Sanctions and Anti-Money Laundering Bill [Lords]

Jonathan Djanogly Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 1st May 2018 Commons Chamber

[Richard Benyon]

Then they should feel extremely virtuous. It is important that we recognise that we are today putting in place something that already exists in a number of other legal jurisdictions—the Baltic states, the United States and Canada. A number of other countries are looking to do this, too.

David Cameron has been mentioned a lot today, and his commitment on this matter has been vital. In a recent speech to Transparency International he said:

“One of my regrets of my time in office was that we didn’t introduce the Magnitsky Act. The Foreign Office argument was that Britain’s existing approach was better, because we could sanction all the people on that list—and more besides. And I went along with it.

But I soon realised this ignored the advantages of working together—with other countries—under a common heading. It’s not PR, it’s a fact. You get extra clout from coming together across the world and saying with one voice to those who are responsible for unacceptable acts: ‘We are united in our action against you.’”

He then paid tribute to his successor as Prime Minister and to Parliament for passing the provisions in the recent Criminal Finances Act 2017, and also referred to a person who deserves mention in this House today. Bill Browder, along with others, has put himself at huge risk to make sure that those who murdered his lawyer and friend Sergei Magnitsky are not able to travel around the world, bank, buy property and operate in a manner that we rightly take for granted in this country but should be denied to people who have behaved in that way. If we remember anyone today, we should think of the piteous image of Sergei Magnitsky after months of imprisonment. He was extremely unwell and then beaten to death by thugs at the behest of people who have still not been held to account. Today we are saying to them, “Not in our country are you going to be able to do business,” and we should feel proud of that.

In an act of extreme serendipity, I found myself on the Bill’s Committee. I am extremely grateful to members of that Committee, to the Minister and his officials, and subsequently, in recent weeks after the Salisbury incident, to the Prime Minister for absolutely accepting that we need to have what will be known as the full Magnitsky. We went a considerable way towards that a year ago with the Criminal Finances Act, but are now in a position to say that we are in accordance with the Magnitsky provisions of other countries. It is important that we get the definitions right—I do not think that we got there in Committee—but to now have a definition of gross human rights abuse that is in accordance with the Proceeds of Crime Act 2002 is important.

My brief comments today will be about what Parliament does now, because the Bill is gratifyingly loose in its description of what kind of review mechanism Parliament will impose. This is crucial. In recent days, I have had useful discussions with Committee Clerks, the Chairmen of the Liaison and Procedure Committees and a number of others about what kind of structure we could create in accordance with the Bill to allow individuals—Members of this House, members of organisations such as Amnesty International or Bill Browder’s, or any individual—to say to the Government, “We have evidence that these people have done this and should be sanctioned.” The Government will produce a report to Parliament every 12 months setting out who has made representations to them. In an important response to the hon. Member for Aberavon (Stephen Kinnock), the Minister made a clear assertion that the names on the sanctions list will be made public. That is important.

[Mr Jonathan Djanogly (Huntingdon) (Con)]

I have to say that the Minister did not go into very much detail in his excellent opening remarks about what would be in the report proposed under new clause 3. If my right hon. Friend has had discussions with him on that, it would be interesting to hear about them. If not, it would be interesting to hear more from the Minister later on.

[Richard Benyon]

We have it in our power to create something in Parliament that will hold future Governments as well as this Government to account. I am full of respect for what our security Ministers have been doing recently to freeze the bank accounts of certain individuals, and I absolutely believe that the Government have the will to ensure that we get our economy sorted out so that we cannot be a safe haven for these people. However, what we are talking about will be happening way into the future. It will affect future Governments as well, and we must hold them to account.

We could put this in the hands of an existing Committee —perhaps a Select Committee—but I suggest that that might not be the right framework. A Select Committee has the specific role of holding a Department of State to account and looking into certain details. I personally like the idea of a bespoke Committee that would draw together members of different Committees. The example that I would throw out there for others more important than me to grab is the Committees on Arms Export Controls—the CAEC. It has a specific remit, with members from various Select Committees, and I think it would be an effective model.

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[Liam Byrne]

These are very real and very serious allegations, yet when I tabled questions to the Treasury about whether it was exploring the Maltese golden visa route, and the access to the European banking system and the Schengen area that it provides, it said no such conversations were under way.

The point is that I would like to know more about these brothers and whether they are beneficiaries of the money knocking around the overseas territories that derives from bad sources. I want to know whether that money is derived from Russian sources, and I want to know who the business partners were.

Global Witness has done this House an incredible service by highlighting how £68 billion of Russian money is now sloshing around the overseas territories. Given the national security situation that now confronts us, and given the update to the national security strategy that has just gone through, how can we be relaxed about our ignorance of where that £68 billion of Russian money, now buried safely and securely in the overseas territories and Crown dependencies, came from?

If there is innocence, it should be proved. It should be clear. That is why the disinfectant of sunlight is so important. What we cannot have is agents of influence peddling policies and proposals backed by dirty money from one of our country’s enemies. We cannot have that, and we in this House have a responsibility to ensure that we do not run that risk.

For far too long, good and bad money has been allowed to mix together in our overseas territories and Crown dependencies. There is good money there, but we need to be honest with ourselves that some of that money comes into too close contact with cash generated by economies of evil. It is our responsibility to take steps to shut down that regime, which is why new clause 6 and the arguments of my hon. Friend the shadow Minister are so important. I hope the Minister will listen.

[Mr Djanogly]

First, let me join many hon. Members in congratulating the Government and, in particular, the Minister on building a consensus within the parties and among hon. Members on the Magnitsky provisions, which I wish to speak to today.

Time is short, so I will make only a few brief points. On whether these powers are actually going to be used and on the methods of use, I do not yet see any significant change of Government policy. However, if this debate is going to be the herald of a new-found dynamism to clear the UK of the £90 billion of black money flowing through our banks, real estate market, private schools, Bond Street and the rest, I would certainly very much welcome that. My question is: will action now follow the law? I will be interested to hear whether the Foreign Office has had words with the Attorney General, the Home Office or other Departments in that regard—is there a strategy?

On the Government amendments, I see that new clause 3 provides for a reporting system for human rights violation-related sanctions. That is welcome, but my reading of this provision is that it is a retrospective check on what the Government have done and not so much on what they intend to do—if I am wrong on that, I would be grateful if the Minister would clarify the position. The measure in itself is commendable, and I agree that if the report is a sparse one, it would imply and provide evidence to support claims that the Government should be doing more. However, I was very pleased to hear the Minister suggesting today that we are also to have a list system that will be updated on an ongoing basis for those subject to sanctions, as this approach has clearly been so effective elsewhere. Having said that, will the Minister confirm whether people to whom the relevant sanctions have been applied would also need to be listed in the Government new clause 3 report? I believe the answer is yes, but I would be grateful if he would clarify that. Even if there is to be a running administrative list, it would be helpful to have the names set out in the report, with reasons given and an assessment.

There is another related issue here. Could the Minister confirm whether the visa bans attributed to section 1 -type sanctions would also be listed in the new proposed report? Again, maintaining the current system of secret visa bans is simply not as effective as people knowing that their lack of welcome here will be made public in a Magnitsky-list fashion. What these people fear, every bit as much as receiving a visa ban, is other people knowing about it.

My final point is that although this Bill creates a new post-Brexit framework for sanctions, it does not actually set out our policy for how sanctions will be considered or implemented on a multinational basis, which everyone agrees is the most effective approach, as has been said by my right hon. Friend the Member for Newbury (Richard Benyon). So will the Minister explain how these sanctions provisions would be considered within the European Union after we have left it? For instance, is consideration being given to setting up a new co-ordinating committee within the EU? In various speeches I have read, it seems clear that the EU will continue to wish to work closely with the UK on external security matters, so there seems to be goodwill to that end. I would be interested to hear more on how we propose that decision making on sanctions will be put into an institutional context.

We have mainly discussed Russia today. It is worth mentioning that the US aluminium sanctions on Russia were put in place only a few weeks ago, and I have since heard of a degree of kickback from other countries such as Germany and other negatively affected parties. Clearly, if we are going to get tough on sanctions, it will be important to continue to present a united front. So we are seeing progress, but ultimately this will need to be proved by a better UK record of sanctions, visa bans, asset seizures and active prosecutions. Will the law be backed by action? The days of the UK being a dumping ground for illegal black money need to come to an end, and I hope that this Bill will act as a spark to get the process moving.

[Chris Bryant]

I shall be brief, Mr Speaker. Several hon. Members have spoken about the dangers of our legislation meaning that dodgy money will leave the overseas territories and go to some other kind of territory. First, that will probably be a good thing for each of those territories. Secondly, and far more importantly, all too often the way we have run our affairs in this country, and how our overseas territories have run theirs, has meant we have been a magnet for that money. For a series of different reasons, rich people who have stolen money from their own people like having it squirreled away here or in our overseas territories or, as is normally the case, in a mixture of the two. That is because they like to send their children to our expensive schools; because they like to go shopping in the UK; because, ironically enough, they like to enforce their contracts in law in British courts; and because they know that the whole system of financial and land registration in this country is relatively weak. That is why I warmly welcome the changes we are going to bring about.