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.