Sanctions and Anti-Money Laundering Bill [HL]

Lord Ahmad of Wimbledon Excerpts

2nd reading (Hansard): House of Lords
Wednesday 1st November 2017 Lords Chamber

Moved by

[Lord Ahmad of Wimbledon]

That the Bill be now read a second time.

[The Minister of State, Foreign and Commonwealth Office (Lord Ahmad of Wimbledon) (Con)]

My Lords, I thank all noble Lords for attending the debate and for the useful comments already shared with me and my noble friend Lady Goldie during the meetings we have held since the Bill was introduced. This is an important piece of legislation and we need to get it right.

The United Kingdom has long played a leading role on the global stage in tackling threats to international peace and security. One method of influence increasingly used by the international community is the imposition of sanctions. Sanctions encompass a range of measures, such as travel bans, asset freezes, trade restrictions and broader economic measures. In recent years they have been employed in relation to Russia’s invasion of Ukraine and the conflict in Syria, and to put pressure on Iran to come to the negotiating table. Anti-money laundering regulations are also increasingly important in this globalised world and vital if the international community is to continue to protect itself from financial crime. The effectiveness of these measures depends on the consistent enforcement of technical and procedural controls mandated by the Financial Action Task Force, an international organisation of which the United Kingdom is a founder member.

I shall briefly set the scene as to where we are. The UK currently implements 35 sanctions regimes. These include country-specific regimes, such as those on North Korea, Syria and Iran, and regimes targeting terrorist organisations such as al-Qaeda and Daesh. Within these regimes there are currently around 2,000 individuals, groups and businesses subject to restrictive measures.

In broad terms, the UK implements four main types of sanction regime. The first is based entirely on UN Security Council resolutions. As a member of the UN, the UK is obliged to implement them. Indeed, our position as a permanent member of the Security Council means that we have agreed to those regimes in that forum before they become international law under the UN charter.

The second type of regime is where the EU has acted alone or with allies such as the US, generally where it has not been possible to reach agreement at the United Nations. I shall give an example of the former: after the annexation of Crimea, the UN was unable to impose sanctions on Russia because of Russia’s veto in the Security Council, so the EU decided to act in concert with the United States and other like-minded countries. The third type is hybrid regimes. These are where the EU has adopted UN sanctions but has decided to top up the provisions within those regimes with additional measures. An example of this occurred recently on North Korea. Finally, the UK has some domestic powers to impose sanctions—for example, under the Terrorist Asset-Freezing etc. Act 2010.

This is a technical Bill which ensures that the UK can continue to meet its international obligations and to implement UK sanctions and anti-money laundering measures after we leave the European Union. New domestic legislation is necessary because most of the UK’s powers to implement sanctions and anti-money laundering measures currently come from the European Communities Act 1972. When the EU withdrawal Act, as the Bill going through the other place will become, repeals the European Communities Act, it will freeze any sanctions regimes which are in force on the day on which the withdrawal Act commences, but we do not possess sufficient powers under current domestic legislation fully to impose, amend and lift existing or new EU UK autonomous sanctions regimes. Similarly, we do not currently possess sufficient domestic legal powers to update anti-money laundering and counterterrorist financing legislation after the UK ceases to be a member of the EU. This means that, without this Bill, the UK would quickly be in breach of international law.

Before I go into detail about the content of the Bill, I reassure noble Lords that there has been significant government engagement with individuals and businesses on this domestic framework. In April, the Foreign and Commonwealth Office, Her Majesty’s Treasury and the Department for International Trade published a White Paper and launched a public consultation on the UK’s future legal framework for imposing and implementing sanctions. My officials held round tables with a number of sectors including financial services, NGOs and the legal profession, as well as international partners. My right honourable friend Sir Alan Duncan, the Minister for Europe and the Americas, took part in a debate on sanctions in the other place on 19 July. On 2 August, the Government published their response to the consultation. This process had been transparent over the previous six months, and I intend to continue the same level of transparency with noble Lords as the Bill passes through this House.

Turning to the content of the Bill, I emphasise that it is about powers and not policy—it is a technical Bill which creates the legal framework for the UK to be able to continue to impose sanctions where appropriate. Part 1 allows the Government to impose a number of sanctions: financial, trade, transport and immigration. This will allow the UK to maintain the full range of sanctions available at the moment. Part 2 deals with anti-money laundering and counterterrorist financing regimes, and Part 3 deals with general matters such as supplementary provisions and definitions. For each new UK sanctions regime, the Government intend to bring forward a statutory instrument which contains details for that regime.

I know how important it is that we have robust parliamentary scrutiny of these new powers. I also know that the noble Lord, Lord Collins, in particular shares this view. This Bill allows for such scrutiny. Regulations which deal with UN regimes will be made under the negative procedure. Once agreed at the UN Security Council, the UK has an obligation to implement these sanctions under the UN charter. Not doing so would leave the UK in breach of international law. Regimes which both deal with UN obligations and include additional sanctions or hybrid regimes will also be made under the negative procedure. Regulations which do not deal with the UN regimes will be made under the made affirmative procedure. This will allow regimes to come into force immediately, thereby negating the risk that assets are removed before restrictions take effect, while allowing Parliament to debate the regulations.

The vast majority of anti-money laundering regulations will be made using draft affirmative procedures. The one exception to this will be where the UK makes updates to the current EU regulation. This requires enhanced due diligence measures to be applied to persons in countries with strategic deficiencies in their anti-money laundering regimes. Such updates need to be made quickly, and will be made by using the affirmative procedure. At present, anti-money laundering regulations are transposed into UK law through the negative procedure, so the Bill will increase parliamentary scrutiny.

Risks arising from money laundering and financial crime evolve quickly, as reflected by the Government’s active agenda to address these threats. The Bill therefore provides for the Government to take a sufficiently broad power to ensure that the UK’s anti-money laundering regime remains fit for purpose and is able to respond swiftly to emerging risks. The content of the current money laundering regulations is sufficiently technical that it is better suited for secondary legislation, rather than primary. This is in keeping with the approach typically taken in the UK and elsewhere to establish detailed obligations on the regulated sector.

In some of the meetings that we have held, engagement with noble Lords suggested that the current requirements of the fourth EU money laundering directive should be included in the Bill, and therefore capable of being amended only through primary legislation. I have listened to the discussions we had very carefully but it remains our view that this would dramatically increase the size of the Bill, adding more than 100 new clauses, and would not reflect the rapidly evolving nature of anti-money laundering policy. As many noble Lords will know, the EU is already in the process of amending the fourth money laundering directive, in spite of it being transposed only earlier this year. This demonstrates again the need to act swiftly. Similarly, when a Government of the future need to anticipate or react to new threats, they may wish to create new types of sanctions. It would be remiss of us not to ensure that the Bill was future-proofed so that it remained useful. Regulations which create new sanctions will be exercised through the draft affirmative procedure, thereby allowing Parliament to have a full say.

An important element of the Bill is the threshold for designations. The Bill proposes that, to impose restrictive measures on an individual, a Minister must have “reasonable grounds to suspect” that they are involved in an activity we want to change or prevent. This is the same standard that we currently use when considering designations at the United Nations and the EU. It is broadly equivalent to the “sufficiently solid factual basis” applied by EU courts. The application of this threshold was considered and endorsed by the Supreme Court in the case against Youssef in 2016; it was also considered acceptable by the EU General Court in the case against Mohammed Al-Ghabra, again in 2016, where the court emphasised the need for the threshold to be supported by sufficient evidence.

The importance of a clear threshold of this kind was also underlined by colleagues involved in the European Union Committee’s 11th report of the 2016-17 Session, The Legality of EU Sanctions, an inquiry conducted by its Justice Sub-Committee. Having the same threshold that we currently use when considering designations at the UN and EU will allow us to align with our international partners where our political objectives converge. Sanctions are always best applied by a broad coalition of countries. Working with partners increases the impact of the agreed measures and reduces the compliance burdens on business. I will return to this later.

As set out in our consultation response, the Bill also aligns the threshold for domestic counter-terrorism sanctions to this test of “reasonable grounds to suspect”. This is a change to the current approach under the Terrorist Asset-Freezing etc. Act 2010, where Treasury Ministers must have “reasonable grounds to believe” that an individual is involved in prohibited activity and that the measure is necessary for the protection of the public. No new designations under the TAFA threshold have been made for two years and a reduced threshold will have a number of benefits. It will bring counterterrorism sanctions in line with other UK financial sanctions regimes, improving the coherence and clarity of our sanctions framework as a whole. It will allow the Government to impose sanctions based on similar levels of evidence to those required by our international partners, ensuring that we can maintain productive international co-operation on this issue. It will also give the Government more flexibility in using asset-freezing tools domestically, and thereby help to mitigate the threat from terrorism.

Noble Lords will be aware of how this threat has changed even in the short time since TAFA was passed. I need not dwell on this matter too long, but terrorists and others who wish us harm can cause significant damage without significant resources. Therefore it is an important point, especially in the light of the foreign fighters flooding back to their own countries, including the United Kingdom, as Daesh is dismantled in Iraq and Syria.

That said, a fine balance must also be struck between keeping our citizens safe—a priority for any Government is the security of their citizens—at the same time as protecting the fundamental rights of individuals. While the threshold for designating individuals for counterterrorism asset freezes may have been lowered by the Bill, the protections and procedural safeguards offered elsewhere are robust and in line with international best practice. Let me highlight two areas.

[Lord Marlesford (Con)]

My Lords, just a moment ago the Minister—if I heard him right—said that terrorists are flooding back into the United Kingdom. Is that really what the Government think?

[Lord Ahmad of Wimbledon]

I shall repeat what I said for my noble friend. I said terrorists are flooding back to their places of origin, and of course there are people who may seek to return to the United Kingdom from Iraq and Syria. With the defeat of Daesh, that is a real possibility, so we need to ensure that there are measures both to keep them where they are in terms of prosecution and, if they do return, to ensure that any sanctions that we need are readily available.

I was about to provide practical examples of, first, challenges to designations allowing a route for redress for sanctioned individuals and entities; and, secondly, of reviews of regimes to ensure that the Government conduct due diligence on the restrictive measures they impose. In the Bill, there are two methods by which an individual can challenge their designation. The first allows them to request a reassessment of their listing by the Secretary of State. This is designed to offer quick redress to individuals, enabling those who are incorrectly designated or who can provide evidence which refutes the reason for their designation to be removed from a listing by the Secretary of State with the minimum of delay. If the designation is upheld following the administrative reassessment, individuals can challenge that designation before the High Court on the principles of judicial review. This is the second means of challenge. Provision is included in the Bill to allow for classified evidence to be shared with the court where appropriate. For UN sanctions, which the UK has an obligation to implement under international law, an individual can make a request that the Secretary of State uses his best endeavours to remove that person’s name from the UN list. Were the Secretary of State to decide not to seek a delisting at the UN, the individual can challenge that decision before the High Court.

It is important that the Government review sanction regimes and listings to make sure they remain fit for purpose and up to date. Sanctions are not designed to be punitive or permanent. They are always intended as a temporary measure designed to prevent or change behaviour. Regimes must have a clear purpose. A regular review will ensure that remains the case. The Government will conduct an annual political review of each regime to check that it remains appropriate for its purpose. Every three years the Government will review all the designations under the regime to make sure they remain necessary and continue to meet the evidential threshold. As now, the Government will continue to be able to grant licences to allow activities that would otherwise be prohibited—for example, to allow individuals subject to an asset freeze to pay for their essential needs, such as food or legal fees.

We recognise that there have been criticisms of the current EU licensing system. This was highlighted to me last year when we had to ask the EU to amend the Syrian regime so that general licences could be granted permitting NGOs to provide humanitarian aid and associated support activities. This Bill will give the Government more flexibility to issue such general licences, which will provide more clarity to humanitarian organisations and reduce unnecessary bureaucracy.

I know that many noble Lords will be interested in what impact the new regime will have on business. We recognise that multiple divergent sanction regimes can raise compliance costs for business. This is already an issue on Iran, for example, where the EU and US apply different sanctions. As our impact assessment sets out, we expect the aggregate impact of the Bill on UK businesses to be less than £1 million. Most of these costs will relate to compliance as companies familiarise themselves with the UK regime and related guidance.

In designing and implementing future UK sanctions, we will, wherever possible, work closely with the EU, the United States and other international partners to ensure maximum alignment and to reduce the impact on business. We want to maintain close co-operation on sanctions with European and other international partners because, as I said earlier, they are most effective when delivered by a number of countries together. UN sanctions have global reach and are always our preferred option. Outside the UN, we expect to remain aligned with like-minded partners such as the EU and the US on many of the policy goals that drive sanctions.

For example, we continue to believe that sanctions on Russia must remain until the Minsk agreement has been fully implemented. It is too early to speculate on exactly what future co-operation with the EU will look like, and decisions in this regard will be taken at the appropriate time. As the Prime Minister has said, we are leaving the EU, not Europe. Our aspiration is to remain close to partners on foreign policy issues, as proposed in Foreign Policy, Defence and Development: A Future Partnership Paper, which was published by the Department for Exiting the European Union on 12 September. For now, we remain active in shaping and implementing sanctions within the EU.

In conclusion, this is an important Bill to ensure that a legislative framework is available to the Government to maintain and adjust sanctions and anti-money laundering measures once we have left the European Union. It will allow us to continue to fulfil our international obligations and to work with allies to protect and promote our shared values. I beg to move.

--- Later in debate ---

[Lord Ahmad of Wimbledon]

My Lords, first, I thank all noble Lords for their very thoughtful speeches today. Again, they reflect the experience and expertise in your Lordships’ House not only in the matter before us, but in all discussions and debates we have. I cannot agree more with the final point made by the noble Lord, Lord Collins, on the issue of co-operation and working constructively. I hope that I have done so thus far, in terms of engagement and taking on the chin, as a Minister often does, the criticisms levelled at the Government. That will certainly be the basis on which I hope to continue the engagement we have had so far, and as we go forward.

Getting this Bill right, as I said at the start, is very important and our ability to impose sanctions and anti-money laundering measures is central to our vision of a rules-based international system. While, shall we say, differing opinions were expressed during the debate, the principle that I have just articulated is something that we all very much subscribe to. I thank the noble Lord, Lord Collins, the noble Baroness, Lady Northover, and the noble and learned Lord, Lord Hope, for the constructive discussions we have had with the respective Front Benches, and that will continue to be the case.

Again, all noble Lords have agreed on the importance of flexibility and the ability to impose sanctions against the most undesirable regimes—and not just the most undesirable. We find regimes across the world that commit inexplicable horrors against their own populations. When we leave the EU—I say “when”, correcting the noble Baroness, Lady Northover; I am sure that it was a mistake when she used the word “if”—it is right that we have the same ability to continue not to have any flights of assets.

At this juncture, I acknowledge the contribution of my noble friend Lady Anelay, who so aptly spoke of the principles, but also the sentiments and emotions of why we are doing this. This is about human beings, after all; it is about the human element that sanctions are imposed for. If we were living in a perfect world, we would not be having this debate but, unfortunately, that is not the case.

As I said in the opening speech—I hesitate to use the word “technical”, after listening to the noble Lord, Lord McNally—it is a Bill based on principle. Perhaps that is a better way to put it. Of course, I worked very closely with the noble Lord, Lord McNally, and we have had many discussions on this, although those discussions remain as part of the coalition agreement of that time. I listened carefully to his contribution and, in particular, to that of the noble and learned Lord, Lord Judge. I heard what he said about the powers of the Executive through secondary legislation. I was aware of his previous articles and the speeches that he has given, particularly on the Henry VIII powers. But let me assure all noble Lords that our intent here is not to take powers for the sake of the Executive; it is about ensuring that we have flexibility and sustainability in a sanctions regime.

As I am sure the noble and learned Lord will acknowledge, there are precedents for the use of secondary legislation, although I am sure that it will not change his opinion in any way. One example, of course, is the export control orders under the Export Control Act 2002. I fully acknowledge the difference in the views of noble Lords in this regard, but the Government are certainly of the view that we must balance the need to act swiftly with the importance of parliamentary oversight, which I alluded to earlier.

While the principle is clear, we must, as noble Lords have acknowledged, get the detail right, and the expertise of noble Lords in this Chamber will be vital to ensure that we get progress in this regard. While there are differences, as we have said already, I believe that we can agree on the broad principles of why this Bill is necessary.

I am conscious of limits on time, and I shall seek to get through as many of the issues raised as I can, with the caveat that, if I am unable to answer specific questions that noble Lords have raised, I shall write to them. To take an issue on process, I should say that the Delegated Powers Committee was supposed to meet earlier, but I believe that the revised date is 15 November. I look over to the Box and get a thumbs up, which is always good; it happens rarely from the Box, but I got that one right. Working through the usual channels, we will ensure that the Committee sittings reflect the ability to have that detailed scrutiny.

I turn to some of the questions asked, first by the noble Baroness, Lady Bowles. I welcome her expertise in this area—and I look forward to working with her, particularly on the aspects of money laundering that she raised. The noble and learned Lord, Lord Hope, spoke about the definition and powers being too broad. The definition of money laundering in the Bill replicates that currently used in UK law. It is necessarily broad to ensure that the full range of illicit activity criminalised through the Proceeds of Crime Act 2002 is similarly captured by the Bill. Where a person’s rights under the European Convention on Human Rights are affected by any regulations made under Clause 41, the Minister responsible will still be under the existing legal obligation to act with proportionality, as per Section 6 of the Human Rights Act.

The noble Baroness raised the issue of failure to prevent offences, and the noble Lord, Lord Hain, mentioned that in his contribution. When bringing forward secondary legislation of this type, we will consult and act in view of the responses, ensuring that there is a proportionate approach taken in this regard.

The noble Lord, along with the noble Baroness, Lady Ludford, and my noble friend Lord Freeman also raised the issue of beneficial ownership information and overseas territories. As the Minister responsible for OTs—it has been a rather busy brief in recent times—I can assure them that this issue is not lost on the Government. On the contrary, Crown dependencies and overseas territories have agreed to hold company beneficial ownership information in a central register and to share it with UK law enforcement on request. As noble Lords know, we have legislated through the Criminal Finances Act 2017 to review the effectiveness of the first 18 months of these arrangements, which will be before us on 1 July 2019. The Government’s focus right now is also on supporting the Crown dependencies and OTs in fully meeting their obligations in this regard.

The noble Baroness, Lady Bowles, referred to her regret Motion regarding the 2017 regulations. This is a happy place, and when we hear the word “regret”, that is always regrettable. As the noble Baroness notes, it will be debated on 6 November and the Government will respond more fully at that time. The transposition deadline by which the UK was legally required to implement the directive was 26 June 2017. This allowed very little time for the Government to publish the regulations after the general election, due to purdah restrictions. We regret that, as she acknowledged, there was a breach of the 21-day rule connected with the transposition of this directive. However, we had consulted extensively with stakeholders on our policy intention. That is all I will say right now; I am sure we will return to this issue when we debate the regret Motion.

The noble Baroness and the noble Lord, Lord Hain, raised the issue of the Government’s approach to criminal offences in secondary legislation. The 2017 money laundering regulations deal with both civil and criminal penalties, and the primary money laundering criminal offences are set out in the Proceeds of Crime Act 2002. The offences established through the money laundering regulations provide a necessary backstop to penalise the most serious sustained breaches of the regulations. Criminal sentences for sanction offences are set out in Clause 16(4), which refers to a statutory maximum of 10 years. I will write to the noble Baroness and the noble Lord about the other details.

The noble and learned Lord, Lord Hope, and the noble Lord, Lord Pannick, raised the exercise of power with appropriate safeguards. Yes, in our view there are sufficient safeguards. First, Parliament must authorise every type of sanction that can be imposed. Secondly, all designations are supported by evidence. Thirdly, those affected can ask for a reassessment and challenge through the courts. Fourthly, the Minister must act in accordance with human rights, as per Section 6 of the Human Rights Act 1998. Let me assure noble Lords that we intend to write this week to the newly constituted Joint Committee on Human Rights, setting out the detailed analysis of what I have just described.

The noble and learned Lord, Lord Hope, also talked about explicit authority for Parliament for non-UN sanctions. The Bill sets out in detail in Clauses 2 to 6 what Parliament is authorising. As I said in my opening remarks, any new sanction can take effect only after a vote in both Houses authorising that regulation.

The noble and learned Lord also raised the issue of appeals to the Supreme Court being available for the Court of Session in Scotland. Yes, the intention is very much that appeals to both the High Court and the Court of Session will be available.

The noble Lord, Lord Pannick, among others, raised proportionality, seeking assurance that it will always be part of the decision regarding non-UN sanctions. Yes, I can assure noble Lords that where human rights are affected, a Minister will always need to comply with the European Convention on Human Rights and Strasbourg case law, and that will include an assessment of proportionality.

Concern was expressed by several noble Lords about taking powers to prevent money laundering. The UK’s appeal as a financial centre makes it necessary that we prevent money laundering effectively—a point acknowledged by several noble Lords. The 2017 regulations and the EU funds transfer regulation both require that the transfer of funds be accompanied by specified information, enabling effective monitoring and transfer of funds. This will be vital in enabling enforcement authorities to understand and disrupt illicit financial flows.

The noble Lord, Lord Pannick, also raised designation by personal description. We anticipate that we will have sufficient information to identify a person and, where it is the case, we will do so by name. Designation of persons by description is necessary to deal with members of proscribed terrorist organisations who, for example, conceal their identities. We will also provide as much detail as we can so that businesses and banks can carry on their business.

The noble Lord went further and asked about the imposition of financial sanctions on persons connected with a prescribed country. This is necessary to ensure that broad sectoral measures can be imposed which restrict general access to financial persons and markets. There are other elements within this and exemptions that may be applied, so I will write to the noble Lord and place the letter in the Library as well.

The issue of thresholds was also raised by the noble Lord. Where relevant convention rights are engaged, proportionality will, as I have said, be part of the decision-making. Under Section 6 of the Human Rights Act 1998, the appropriate Minister must act in compliance with those convention rights and Strasbourg case law. We accept that this includes the need for the Minister to satisfy himself or herself that the designation is proportionate and includes consideration of the impact of the individual.

The noble Lord also raised issues of procedural fairness and several other matters. In the interests of time and covering other aspects, I will, with his kind permission, write to him and copy other noble Lords into that response.

The noble Baroness, Lady Ludford, who speaks from great experience of the European Parliament, talked about resourcing enforcement of sanctions. We have increased the maximum criminal sentences for breaches of financial sanctions in the Policing and Crime Act to seven years, which we are enabling in this Bill. This means that a breach of financial sanctions is a serious crime, which allows the National Crime Agency to dedicate significant resources to investigations and prosecutions.

She also asked about our having no influence on sanctions as we leave the EU. A question on our relationship was also asked by the noble Lord, Lord Collins. It would be great if I could say, “Right, here’s the page and here’s the answer”, but all this is under negotiation and the exact nature of our future relationship with the EU on sanctions, like much else, still needs to be determined. However, we need to look at this from a global context, with our relationship, our permanent seat on the Security Council at the UN and our other international engagement. The UK has led on many issues within the European Union and I certainly believe, reflecting the optimism across government, that pragmatism will prevail in many areas. I am sure we will see greater detail emerge on this relationship.

Periodic reviews were raised by the noble Lord, Lord Pannick, and my noble friend Lord Gold. These provisions are to ensure that designations are kept under regular review and do not simply lie on the shelf. It is important to remember that a number of things can happen within the period that we have set. First, the designated person can request a review and have the decision looked at again; secondly, they can challenge in court; thirdly, if new evidence arises or there is a new matter that has not been considered, they can request a further review; fourthly, the appropriate Minister can instigate a review on their own initiative in response to changing events; and fifthly, the appropriate Minister can bring the deadline forward and complete the review before the end of the three-year period. Given all this, and that the matter of designation is clearly a live matter throughout the period, we do not consider the period to be excessive.

Turning to other questions from several noble Lords, the issue of transparency associated with Scottish limited partnerships was raised by the noble Baroness, Lady Bowles. As of June this year, Scottish limited partnerships have been brought into the scope of the public register of beneficial ownership maintained by Companies House. They are also required to submit an annual confirmation statement that the information held on this register is accurate and to keep the information up to date.

My noble friend Lord Freeman asked whether the UK would remain a member of the Financial Action Task Force. The short answer is yes; the UK is the leading member of the Financial Action Task Force and has been since its establishment. We will continue to fulfil this leadership role after leaving the European Union, so as to continue to influence international standards.

The noble Baroness, Lady Bowles, raised the FATF. Given her expertise and experience, she will be aware that the standards set by the Financial Action Task Force form the basis for both the fourth money laundering directive and anti-money laundering legislation in FATF member states outside the EU. This reflects the international nature of how financial crime can be targeted and dealt with.

Beneficial ownership of property was raised by the noble Baroness and my noble friend Lord Freeman. We sought views earlier this year on the proposed ownership register of overseas companies that own UK property. The responses are being reviewed by the Department for Business, Energy and Industrial Strategy, which will make an announcement in due course.

Among other things in his contribution, my noble friend Lord James gave some practical examples of the Bill’s operation and asked whether it would stop money laundering in Libya. The short answer is yes; the powers in the Bill will enable us to locate and prohibit that type of criminal activity. We can also put sanctions in place against terrorist groups.

I turn to some of the other questions, to demonstrate that we were listening. The noble Lord, Lord Hain, raised a specific issue in relation to Dubai and Hong Kong having ties with the Gupta family. I am grateful to the noble Lord for bringing this information to our attention. As he acknowledged, he has already written to my right honourable friend the Chancellor of the Exchequer, and I will, of course, bring his contribution to my right honourable friend’s attention.

The noble Viscount, Lord Waverley, referred to international collaboration. I thank him for his wise words on the importance of linking sanctions to strategy agreed with international allies. The global impact of sanctions can work only if there is consensus across like-minded states.

My noble friend Lord Gold referred to anti-money laundering regulations being risk-based and proportionate. I agree with him. He is right to highlight the importance of firms taking a proportionate approach to implementing anti-money laundering systems and controls, and ensuring that they properly target the highest risks in this regard.

The noble Baroness, Lady Sheehan, asked about the Bill’s provision for general licences for humanitarian needs. I suggest to her that there are specific clauses on this issue. I will write to her in this respect but Clause 14(3)(a) allows the Government to issue specific and general licences. However, I am keen to hear her views on that, and those of the noble Baroness, Lady Northover, who was formerly a Minister with responsibility for this area, so it would be useful to hear from her. The noble Baroness, Lady Northover, asked whether we were talking. Yes, we are. My noble friend was sitting right next to me and we are working very closely with the Department for International Development in this regard.

The noble Baroness, Lady Northover, also referred to the anti-money laundering clause that was included at the last minute. That was always the plan, and she will have noticed that we have been transparent about this since the start. Our plans were set out in the FCO, HMT and DIT joint consultation, which was published in April, and confirmed in the government responses.

I apologise to the noble Lord, Lord Paddick: I will write to him on his specific questions as I had to leave the Chamber momentarily during his intervention. However, I thank him for it as we have talked about some of his concerns outside the Chamber. I hope that they have been addressed.

The noble Lord, Lord Collins, referred to licences for NGOs and said that they should be open-ended and last the duration of the regime. The Bill, as drafted, can deliver this.

I will write to noble Lords on any issues that I have not had time to cover today. Once again, I emphasise that the Bill is about powers rather than policy. It is not about punishing specific individuals, groups or Governments, but about enabling this Government, and every future UK Government, to act to keep this country safe and continue to play a responsible role in international peace and security once we leave the European Union.

It would be remiss of me not to conclude, entirely appropriately, by putting on record, if I may, the thanks of the whole House to my noble friend Lady Anelay. I embarrass her somewhat, but that is not my purpose. She has served both government and this House—and, indeed, our country—in an exemplary fashion. On a personal level, she was my first boss in government. She was the guiding hand of the Chief Whip when I first joined the Front Bench and acted not only as a guide, a mentor and a colleague but, most importantly, as a friend. She leaves the Front Bench with many fond memories, as she herself acknowledged in her contribution. Equally, however, the Front Bench has lost a great exponent of government policy who carries the full respect of this House. If I can emulate perhaps a portion of what my noble friend has achieved in her career, I will be a happy Peer. On that positive note, I thank all noble Lords again for their extremely valuable contributions and look forward to working with all across the Chamber on this important Bill.

Bill read a second time and committed to a Committee of the Whole House.

Sanctions and Anti-Money Laundering Bill [HL]

Lord Ahmad of Wimbledon Excerpts

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

[Baroness Sheehan (LD)]

My Lords, my name is attached to Amendment 1A. I wish to reinforce what has been said by my noble friend Lady Northover. The regulations that the Minister will have powers to impose through Clause 1 will have far-reaching consequences on “designated persons”, “prescribed persons” and “involved persons”, as affected individuals or entities are variously referred to throughout the Bill. Therefore, it is only right that the power to create a regulation should entail a more onerous thought process than consideration by the “appropriate Minister”. I agree that “compelling reasons” would be a more fitting foundation for making such momentous decisions.

[The Minister of State, Foreign and Commonwealth Office (Lord Ahmad of Wimbledon) (Con)]

My Lords, first, I thank all noble Lords who have spoken in the debate. A small point was made about what I said in my opening remarks at Second Reading about the Bill being technical. Maybe I should defend that by saying that every Bill is technical in some way and perhaps that was what I was alluding to. But I thank the noble Lord, Lord McNally, for whom I have great affection, for highlighting that point, and we live and learn through our experiences at the Dispatch Box and in the House.

As I said at Second Reading, this is a Bill that we need to get right—a point that was acknowledged by all noble Lords who have spoken. I stated that right from the outset, as I do again today, at the start of Committee. That is why I will put on record my immense thanks to noble Lords from all sides of the House who have engaged very constructively on this important Bill. I assure noble Lords that that will continue to be the case as the Bill progresses through your Lordships’ House. I thank all noble Lords—in particular the noble Lord, Lord Lennie—for recognising why we require this legislation.

After we leave the European Union we will need the Bill to ensure that we can continue to impose, amend and lift sanctions, and change our anti-money laundering framework. As noble Lords know, sanctions form part of the range of foreign policy tools that we can use in response to threats such as terrorism to the UK and UK interests. The Government fully recognise that sanctions are not to be used lightly—I assure noble Lords of that fact—and impose significant restrictions on individuals and entities. They should be imposed only after careful consideration of the political context, the desired impact and, of course, the potential risks. The Government also believe strongly that sanctions are a tool for changing unacceptable or threatening behaviour. They should not be used punitively as a substitute for criminal justice measures. A good recent example of the value of sanctions is the way that they encouraged Iran to accept constraints on its nuclear programme.

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[Baroness Kramer (LD)]

Perhaps I may ask the Minister a question to address a lack of clarity. A moment ago, he basically said that one of the checks would be that either or both Houses of Parliament could vote against the SI brought forward by the affirmative procedure. The last time I was in this House and we on these Benches sought to do so with an SI, the consequence was a review on removing the powers of the House of Lords to act under such circumstances. Indeed, I have frequently heard language suggesting that to vote against an SI is a complete overreach of powers. Is this a change in the Government’s position? Is there any way in which this could be enshrined? It is rather fundamental to the discussions we will have not just today but on future occasions.

[Lord Ahmad of Wimbledon]

As the noble Baroness will know, I have stated the position as it is. Of course it is within the powers of both Houses to vote against—that is the whole point of having statutory instruments that are presented to both Houses. This is not just about the House of Lords; I mentioned the House of Commons as well.

[Baroness Kramer]

Can I just confirm that the Government’s response to any such move would be exactly as we saw before? That is an important piece of information for this House to know. I believe that that is what the Minister has just confirmed.

[Lord Ahmad of Wimbledon]

I have stated that the position is as it is now. I know the noble Baroness is seeking to develop arguments that we have had on a previous occasion, but what I have stated is the position as it exists. The noble Baroness talked about it being enshrined in law. Currently, that is how affirmative instruments and statutory instruments work. I am sure she is fully cognisant of that fact.

The noble Lord, Lord Lennie, said that the amendment would not inhibit the Government in any way. But as I was saying—to give further explanation and clarity, if I may—changing “appropriate” to “necessary” would effectively force the Government to use sanctions only as a last resort. Let me assure noble Lords that by saying that I do not mean that sanctions are never our first option. It is important that the Government of the day have some flexibility in deciding when and how sanctions should be deployed. We would not want to find ourselves in a situation where we could not use sanctions in the early stages of a crisis and instead had to allow it to escalate until the necessity of sanctions could be demonstrated.

Moreover, sanctions work best when agreed multilaterally. To be required to demonstrate that other options have been exhausted and sanctions are therefore necessary would leave the UK more constrained than our allies and international partners in our ability to agree and deploy sanctions. It would be a high bar to meet, especially in cases where we may wish to impose sanctions as part of a multilateral agreement with allies in areas where there is no direct risk to UK citizens or direct impact on UK interests. Too high a bar could prevent the UK acting in these areas. This could not only reduce the ability of the UK to continue to play a central role in international affairs but reduce the effectiveness of the sanctions measures themselves. For example, financial sanctions against Russia—

[Lord Pannick]

I am puzzled by this point. The amendment is concerned, under Clause 1(1), with the circumstances in which regulations may be made, but it does not affect the broad discretion embodied in Clause 1(2), which defines purposes. Clause 1(2) states:

“A purpose is within this subsection if the appropriate Minister … considers”—


so it is a matter entirely for the Minister—

“that carrying out that purpose would”,

for example,

“further a foreign policy objective of the government of the United Kingdom”.

So, as I understand it, my noble and learned friend Lord Judge’s amendment would in no way inhibit the complete discretion of the Minister to decide matters of purpose and to decide what is or is not in the foreign policy objectives of the Government; for example, that sanctions should be imposed, in general terms. All the amendment does is to say that the Minister has to be satisfied that it is necessary to impose these regulations once the foreign policy objective has been determined—and it is to be determined by the Government. With great respect, I do not understand the point that the Minister is making.

[Lord Ahmad of Wimbledon]

The point I was making was about the implication in the current wording of “appropriate”. This is not an open invitation for a Minister to impose sanctions, and the appropriateness of imposing sanctions is qualified in the context in which they must be applied. That was why I referred to the specific section that I did.

I think I have made the point already that the concern would remain. Several noble Lords have referred to the Constitution Committee and the Delegated Powers Committee. We have received those reports as well, and I assure noble Lords that I am not dismissing them. We are reflecting very carefully on the representations made by both committees because it is important that we respond carefully and after detailed consideration of what is being put forward. As I said right at the start of my remarks, I will reflect very carefully and will very much bear in mind the voices and experience of those who have tabled these amendments. We certainly remain of the thinking that the current wording, with the balances and the qualifications in the context of the legislation as presented, means that this is not an open invitation for a Minister to apply a sanction. However, in the context of the two reports, I will of course look again at the basis on which perhaps we can look to qualify, and provide greater certainty in respect of, the language used.

Amendment 1A, tabled by the noble Baronesses, Lady Sheehan and Lady Northover, would require there to be a “compelling” reason why sanctions are appropriate for the purposes set out under subsection (2), which relates to non-UN sanctions. I agree with the sentiment behind this amendment and note that it reflects a specific recommendation of the Delegated Powers Committee. However, adding the requirement for a “compelling” reason might also give rise to some of the difficulties I have already highlighted in respect of the previous amendment.

As I said, we think that in matters of foreign affairs and security policy the Government should have discretion about when it is appropriate to act. This amendment would effectively remove some of that discretion. We also believe that it could restrict our ability to work with international partners to ensure that sanctions are effective. In some cases, sanctions may be more compelling for our international partners than for the UK, but it would undermine the effect of sanctions if we were not able to participate or agree to them being applied multilaterally. I am sure that all noble Lords will recognise that perspective. If the UK was unable to act, this could in turn undermine the UK’s relationships with our international partners.

Amendment 23 deals with a similar issue, but in relation to UN sanctions only. I think there is agreement on all sides of the Committee that it is appropriate that the UK can continue to comply with its international obligations, so I doubt there is much between us on this issue. We think “necessary” would in many cases be acceptable in that place in the Bill. However, we also think it is important that where the UN provides some flexibility about how to implement obligations, the Government should have the flexibility to decide how best to do so. The word “appropriate” provides that flexibility.

It should be noted that the power here is broadly consistent with the equivalent provision in Section 1 of the United Nations Act 1946, which enables Ministers to,

“make such provision as appears to”,

them,

“necessary or expedient for enabling”,

measures in UN Security Council resolutions “to be effectively applied”. It should also be noted that the word “appropriate” does not enable Ministers to do whatever they want. The noble and learned Lord, Lord Hope, referred to the Ahmed case, which I know he knows well. That demonstrated that the courts will take a robust approach to scrutinising the exercise of the Executive’s powers.

I have already alluded to the fact that we have received the reports of both the Constitution Committee and the Delegated Powers Committee. I put it on record that we will consider both committees’ recommendations very carefully. I have also listened carefully to the contributions during the course of this short debate, and I am sure we will explore the issues further as we scrutinise the Bill in Committee.

It says here, “I hope I have been able to convince noble Lords”, but, from looking around the Chamber, I think that would be a rather hopeful word to use at this juncture. Perhaps I have provided noble Lords with a degree of reassurance with some of the explanations that I have given about the context in which the sanctions would apply, but I respect and understand that there would be a need for continued parliamentary scrutiny and for ensuring, as I am sure all noble Lords appreciate, that the UK continues to comply with international law and maintains a leading role in international affairs after the UK’s exit from the EU.

As I said, we will continue to consider very carefully the recommendations of the two committees, and I am sure we will return to this issue in discussion with noble Lords. Again, there are important issues of discussion here. Both in the course of the Committee stage of the Bill and in the meetings that we are having beyond the Chamber, I am sure we will reach a means of moving forward constructively on this basis. The ultimate purpose and objectives of the sanctions regime are something that I know all noble Lords respect. Based on that, I hope the noble Lords will be minded at this juncture to withdraw the amendment.

[Lord Thomas of Gresford (LD)]

My Lords, I am pleased to hear the Minister confirm that this House has the power to vote down statutory instruments. Indeed, if the Government continued to pursue policy goals through secondary legislation, that procedure would become much more widely used than it has been in the past without the suggestion that the British constitution was being undermined.

The Minister has said that these powers have been taken in the pursuit of Foreign Office goals. A memorandum from the Foreign and Commonwealth Office, dated 19 October last, was sent to the Delegated Powers and Regulatory Reform Committee. Paragraph 52 says, under the heading “Justification for taking the powers”:

“The Government therefore considers it necessary and appropriate to provide framework powers that enable detailed sanctions regimes to be set out in secondary legislation”.


If the justification for taking the powers must be necessary and appropriate, why is the same test not to be applied to the exercise of those powers?

[Lord Ahmad of Wimbledon]

I thank the noble Lord for his late but important contribution. As I said to the noble Baroness, Lady Kramer, I was stating the position as is, regarding the context in which both Houses of Parliament can vote on statutory instruments. In the case of your Lordships’ House, it is clearly laid out in the Companion as well. Let us also put this into context: if a sanctions regime were being proposed and it were voted down in both Houses, the sanction itself would fall and would not apply. The context is not something that can be ignored. In the context of the second question, the noble Lord—

[Baroness Kramer]

May I ask for a clarification? The Minister just said the context could not be ignored. Is his conclusion that it is inappropriate for a statutory instrument related to sanctions ever to be voted down by either House? Is that the conclusion that we are to draw from his comment?

[Lord Ahmad of Wimbledon]

Perhaps I can read into what the noble Baroness seeks on this occasion. This is not an issue about both Houses or affirmative instruments. The position I have given is not the Government’s position; it is the position as it stands now. If she needs further elaboration, I respectfully refer her to the House of Lords Companion.

To return to the noble Lord’s final question, if I may, I will write on the specific issue that he raised for the purpose of clarity for all Members of your Lordships’ House.

[Lord Thomas of Gresford]

The noble Lord said that my intervention was late. This is Committee, and the advantage of Committee is that Members may reply to the Minister after he has made his contribution.

[Lord Ahmad of Wimbledon]

As ever, as I said, we live and learn. The noble Lord is of course right in this context: during Committee, any noble Lord can speak and intervene as appropriate.

[Lord Judge]

If I am allowed to speak, the reality is that neither House rejects subordinate legislation, even if it includes a provision which everybody thinks is lousy, because if you try to do that, the whole instrument falls, and there may be 77 regulations within it with which you agree. Our processes do not in reality admit of proper challenge to secondary legislation. But that is a battle for another occasion, perhaps when we come to Henry VIII.

I respectfully suggest to the Minister that the word “necessary” does not mean the same as “last resort”. If, when deciding whether to exercise these powers, he believed that he was acting in order to implement a treaty obligation or in accordance with a necessary stage in our foreign policy, that would be amply covered by the word “necessary”.

I was going to say that I will allow the Minister to reflect—that is very generous of me; the Minister is allowed as much time as he likes. What I meant was that when he has had time to reflect, I shall reflect on his reflections and return to the issue on Report. I beg leave to withdraw the amendment.

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[Lord Collins of Highbury]

I thank my noble friend for his intervention and wholeheartedly agree that actions speak louder than words. However, at this stage, we are discussing how we can ensure the effective scrutiny of these powers. What are we measuring them against? That is important. Earlier, noble Lords said that we could not just rely on the words used. We all admire the Minister’s good intentions but this issue concerns the future. I place on record that the next Labour Government will put human rights centre stage in all their actions. We will certainly take up my noble friend’s point but that is not what we debating. I do not want to make an election manifesto call just yet but I want the Minister to consider the mechanisms that can be included in the Bill to enable us properly to measure the use of executive power.

[Lord Ahmad of Wimbledon]

My Lords, in response to the noble Lord, Lord Collins, I was allowing for any noble Lords to speak, but of course we will continue to debate these issues. To pick up on the point made by the noble Lord, Lord Judd, to whom I listened carefully, it is fair to say that sometimes we can be critical within the Chamber, whoever is in power or in opposition. One thing I have seen in my short time as a Foreign Office Minister but also as a Minister for Human Rights, whether at the UN, in Geneva or travelling around the world—irrespective of which Government of whatever colour has led our great country—is that not only do we see respect for human rights as being at the heart and centre of what we do but many around the world respect the UK for it and hold it up as a beacon. I assure the Committee that the Government do not take their human rights responsibilities lightly. My noble friend Lord Faulks alluded to the fact that not just here but in other places, in different parts of legislation, we ensure adherence to that. In this regard I am proud that, whether at the Human Rights Council, as we have recently seen, through various universal periodical reviews that are taking place with countries, or on quite specific issues, whether human rights on freedom of religion or belief, the protection of LGBT communities, or on gender equality and ensuring that women’s rights are represented, throughout my life the UK has been a bastion and a beacon for human rights. That should and will remain a cornerstone of British foreign policy in years to come.

I thank noble Lords for their amendments. It is right that we again emphasise that we should look carefully at the purposes for which sanction regulations may be created. It may be helpful if I say something about the purposes set out in Clause 1(2). These are designed to cover situations and purposes where the UK is not implementing a UN or other international obligation. The list of purposes has been designed to ensure that we can continue to implement sanctions for the full range of purposes for which we use them now as part of the European Union. The EU is able to adopt sanctions for any purposes of its common foreign and security policy. The reference to “foreign policy objectives” in Clause 1(2) seeks to provide the same type of scope when the UK has left the European Union. This is why the amendment tabled by the noble Baronesses, Lady Northover and Lady Sheehan, would, as my noble friend Lord Faulks highlighted, potentially restrict our options. It seeks to remove the ability to impose sanctions to,

“further a foreign policy objective of”,

the UK.

I appreciate and accept that Amendments 3, 4, 5 and 6 aim to define UK national security and foreign policy objectives in more specific terms. I have little difficulty with the language as such. However, we may risk missing important objectives of UK national and foreign policy that might justify the use of sanctions in the future. For example, this may limit our ability to act with our international partners in the future to tackle serious threats to the national interest.

Noble Lords may recall that in 2015 the Government published a national security strategy, which provides a clear overview of Her Majesty’s Government’s objectives in the national security sphere. The practice has been to update this strategy every five years, as this can act as an indication of some of the purposes of sanctions as set out in the Bill. I assure noble Lords that the Government will not have unlimited discretion. As I set out in the previous debate, the Bill contains a number of checks and balances on the Government’s action, including scrutiny by Parliament and court challenges.

On the additional purposes that have been suggested, I note that these reflect our current practice. For example, preventing grave breaches of human rights and international humanitarian law are already among the purposes of UN sanctions against the Democratic Republic of the Congo and EU sanctions against Iran. I am satisfied that we would continue to impose such sanctions based on the purposes of the Bill as drafted, and that is certainly our intention.

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[Baroness Northover]

My Lords, I am grateful to everyone who has contributed to this mini debate. In some ways, I was surprisingly unreassured by what the Minister said; I was expecting to be much more reassured than I am. I was struck by the difference in his language. He mentioned that the EU uses sanctions for “foreign and security policy”, but the Bill talks only about “foreign policy”, which is a much more restricted meaning. He mentioned Iran, but it was the nuclear programme and the threat of it that led to sanctions, which is about security rather than foreign policy per se.

[Lord Ahmad of Wimbledon]

I suggest to the noble Baroness that foreign policy and security are the primary responsibility of any Government. Of course, security is a key feature of foreign policy, and I also referred to the Government’s national security strategy.

[Baroness Northover]

Indeed, security, and not just foreign policy, is a first aim of the whole of government. However, I find myself concerned about the language here and about the scope in the Bill for using this provision. I shall certainly think about this but, in the meantime, I beg leave to withdraw.

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[Lord Ahmad of Wimbledon]

My Lords, I thank all noble Lords who have spoken on this group of amendments. The noble Lord, Lord McNally, talked about Rhodesia, and historical context is one of the great values of your Lordships’ House—it always puts things into context.

The specific issue of banks and sanctions against Iraq in 1991 came up. As someone who spent 20 years in that sector and started his career at that time, I remember being acutely aware of those who were opposing the Saddam Hussein regime. It was perhaps used to having more liberal purses and was suddenly subjected to stringent rules based on those that were being applied in-country. Noble Lords have spoken quite rightly about the unintended consequences that lie behind sanctions. However, there are necessary occasions for them in the banking sector. As we have seen, certain banks in certain parts of the world will take a de-risking attitude, which then prevents essential services being performed. However, I will turn to the issue in front of us.

Amendments 8 and 9 make substantially the same points so I will address them together, if I may. First, let me stress again on record that I fully understand the reasoning behind these amendments. As the noble Baroness, Lady Northover, said, we have spoken about this during Second Reading and outside your Lordships’ Chamber.

It is important that, in imposing and maintaining sanctions, the Government do so with a clear understanding of what the impacts may be, and that there is a focus on minimising potential humanitarian impacts and other unintended consequences. I assure noble Lords that the Government work closely with humanitarian actors and NGOs and take their concerns into account when designing and implementing sanctions.

Last year, it was the United Kingdom that secured amendments to the EU’s Syria sanctions regime to provide an exemption for fuel purchases made in Syria by humanitarian organisations, which is exactly what the noble Lord, Lord Collins, talked about. Noble Lords may also be aware that, in October, after listening to NGOs, Her Majesty’s Treasury’s Office of Financial Sanctions Implementation published specific guidance for the charitable sector on sanctions compliance.

I assure noble Lords that the Bill provides the Government with relevant powers, such as issuing licences to help mitigate any potential impact on the operations of humanitarian organisations. EU case law currently restricts our ability to issue so-called general licences for the humanitarian sector, but the Bill would give us greater flexibility after our exit from the EU. When making and amending future sanctions regulations, the Government would incorporate humanitarian exemptions where appropriate, and these would be subject to parliamentary scrutiny.

As the amendment makes clear, there are already methodologies for assessing the humanitarian impact of sanctions, which are agreed internationally. These would continue to be applied. To require a humanitarian impact assessment to be published at the domestic level each time sanctions were imposed is something that I remain to be convinced about. It would duplicate the work already done at an international level before sanctions are agreed. It also carries the risk of causing delay, potentially undermining the effectiveness of sanctions.

The amendment tabled by the noble Baronesses, Lady Northover and Lady Sheehan, would require the impact assessment to be worked up in consultation with stakeholders each time. I fear that that might risk tipping off potential sanctions targets, who could then take evasive action. Again, this could undermine the effectiveness of sanctions.

I assure noble Lords that we will continue to work closely with our NGO partners. The noble Lord, Lord McNally, asked how we were taking that further. We are already working closely with colleagues in DfID on working with NGOs on how we can take the matter forward. The noble Lords, Lord Collins and Lord McNally, and the noble Baroness, Lady Northover, talked also about the NGOs themselves. I think it might be appropriate if, during the course of Committee and before Report, I make myself available to meet the NGOs to see how we may be able to further tighten up the language in this regard. I hope that following what I have presented to the House about the measures already in place, the noble Lord will be minded to withdraw his amendment.

[Lord Collins of Highbury]

I thank the noble Lord for his response and very much welcome his commitment to meet NGOs so that we can discuss their concerns before we come back to this at Report. In the light of those comments, I beg leave to withdraw the amendment.

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[Lord Ahmad of Wimbledon]

My Lords, these amendments seek to remove the ability of the Government to create sectoral financial sanctions measures by removing the power to apply certain sanction measures to, as we have heard,

“persons connected with a prescribed country”.

Amendments 10 to 14, 16 and 17 would make this change in Clause 2 while Amendment 19 speaks to Clause 5, Amendment 22 to Clause 6 and Amendment 81 to Clause 50. Amendment 30 to Clause 10 would make a slightly different change in that it would restrict the Government from being able to designate a person on the basis of their involvement with other designated persons. However, the amendments all have a common theme as they deal with the application of sanctions to persons other than those directly designated.

The Government are clear that sectoral financial sanctions remain a vital foreign policy and national security tool to enable us to meet our UN obligations. It is worth emphasising that we already implement these sanctions under both the United Nations and the European Union regimes. For example, sanctions against North Korea restrict that country’s access to certain financial markets in order to restrict its ability to generate funds for its nuclear and ballistic missile programmes. To do this and to make it work, we have had to impose sanctions on groups of persons—or in extreme cases, on all people—connected in a specified way with the prescribed country. This ensures that the sanctions measures are robust and effective.

We accept that this creates the potential for far-reaching sanctions that bite upon people who themselves have done no wrong, but it remains the case that it is a necessary part of some sanctions regimes. The more broadly sanctions can be drawn, the greater the impact they will have. I accept that it is a sad but necessary side-effect that at times this can affect persons who may not be directly involved with the activities of the target regime. For example, the current restrictions on the transfer of funds to and from North Korea—noble Lords will be aware that there have previously been restrictions on the transfer of funds to and from Iran—will affect people who do not directly support Kim Jong-un’s regime.

The UK, EU and Strasbourg courts have all considered and accepted that the harsh effects on individuals are justified due to the importance of sanctions and the need for them to have broad and deep effects. It was summarised by the European Court of Justice, which stated that,

“any measure imposing sanctions has, by definition, consequences which affect the right to property and the freedom to pursue a trade or business, thereby causing harm to persons who are in no way responsible for the situation which led to the adoption of the sanctions. Moreover, the importance of the aims pursued by the regulation at issue is such as to justify negative consequences, even of a substantial nature, for some operators”.

This was the Bosphorus case decided in 1996 in relation to sanctions that were placed on the former Federal Republic of Yugoslavia. It has been a settled principle of law for more than 20 years.

If the amendments were accepted, we would be unable to impose these measures. In some cases, they are mandated by resolutions of the UN Security Council, such as the obligations imposed in 2013 to cease business with North Korean banks and financial institutions. We would then be in breach of international law. Another example of a sanctions regime that we would be unable to maintain is the Ukraine sovereignty regime, which aims to restrict Russia from accessing certain financial services. Similar to the North Korea examples I have already given, we would be unable to maintain those financial sanctions if we were unable to impose sanctions on persons connected with Russia, or with persons of a certain description connected with Russia, such as state-owned banks. The clauses must remain if we are to be able to meet our international obligations and work with allies to use sanctions as an effective foreign policy and national security tool.

Clause 10 currently permits us to determine that a person is an “involved person” on the basis of their relationships with other “involved persons”. The noble and learned Lord, Lord Judge, raised this issue; I hope I can briefly explain the significance of it. A person can be designated only when the appropriate Minister has sufficient evidence to have reasonable grounds to suspect that they are involved in the activities targeted by sanctions. For example, if a senior member of a regime is controlling a public body that is developing weapons of mass destruction, they are involved in that activity and can be classified as an “involved person”. Assuming that the appropriate Minister deems it appropriate—and proportionate—to designate them, they can do so.

Clause 10 also enables a person to be an “involved person” if they are owned or controlled by, or acting on behalf of, an “involved person”—for example, as an agent. It goes further and enables a person to be an “involved person” on the basis of their association with other involved people. The key point is that this is often required of us by our international obligations. It is common for a UNSCR to require states to designate not just those involved in a particular activity, but those acting on their behalf or at their direction. Accordingly, we must be able to do that to meet our UN obligations, but it also has three other advantages. First, it enables us to apply sanctions more widely to affect the people around those directly involved, which would further restrict the regime’s ability to act and place further pressure on the regime to change its ways. Secondly, it allows us to designate those people who enable these activities by providing funds and financial services to the regime without direct involvement in the targeted activities. Thirdly, it enables us to apply sanctions across a whole group who share the same aims but are using different methods to achieve them. For example, it would enable us to designate all members of a terrorist group: not only those who are engaging directly in terrorist activity, but those providing funds and logistical support.

A current example of that would be the EU designation of Bashar al-Assad under the EU’s Syria sanctions regime, which has frozen the assets of Assad in the EU —including the UK—and banned him from entering the EU. However, people associated with him are also designated: leading businesspersons operating in Syria; members of the Syrian armed forces of the rank of colonel, or the equivalent or higher, in post after May 2011; members of the Syrian security and intelligence services in post after May 2011; and members of the regime-affiliated militias. Removing the ability to designate these as “associated persons”, as proposed in Amendment 30, would remove the ability to designate those who have a significant role in threats to peace and security.

The noble and learned Lord, Lord Judge, gave a personal example of being connected and made the pertinent point of the definition being very wide: it encompasses many people, even those whose connections are arguably tenuous. As I have already explained, it is necessary to ensure that sanctions are broad and effective. To say that somebody is connected because of a remote family relationship is tenuous. I doubt it would be lawful or stand up to scrutiny in a court, nor would it advance the purpose of the sanctions. However, it is almost impossible to foresee what type of connections will be required in future sanctions regimes, but I do not believe that this one, in terms of the detailed nature of what the noble and learned Lord expressed, would apply.

I have heard and listened very carefully to the concerns, but at the same time I have stated that there are good reasons for casting these powers in the way we have. There will be real difficulties in applying sanctions if they are too restricted. We believe that we have the balance right. With the practical examples I have given, and my interpretation of the Bosphorus case—especially when we bear in mind that power can be exercised only when proportionate and compliant with human rights; any other use would be forbidden by Section 6 of the Human Rights Act 1998—I hope that the noble and learned Lord will be minded to withdraw the amendment.

[Lord Judge]

My Lords, I shall withdraw the amendment for now; I may come back to it on Report. However, I do not want the Minister to misunderstand the purpose of my amendment. He has produced a very convincing argument for the need for sanctions to be available and used, and there are compelling cases where they have been used out of absolute necessity. The amendments we are proposing are nothing to do with that. The amendment we are driving at is that, in reality, there is no reason why the word “connection” cannot be defined now, as opposed to leaving it for few months down the road until a Minister gets round to making a definition. I look forward to his reflections on that, and I will reflect on it too.

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[Lord Lennie]

My Lords, to echo what has been said, the amendment would strengthen the Minister’s hand to act and seeks to address the problem of companies registered in this country with no connection to, business with or purpose in this country other than to evade detection and supply arms to those we regard as rather evil. There is a great difficulty with detection. I am not underestimating problems, particularly evidential ones, but I suspect that the wider the hand of the Minister in this regard, the greater the power of success. There has been some progress in this area recently under other Acts, such as the Bribery Act, but our chance of success in closing down what is simply a hosting arrangement would be greatly enhanced by the amendment.

[Lord Ahmad of Wimbledon]

My Lords, I am grateful for noble Lords seeking to strengthen the hand of the Minister at the Dispatch Box. I made specific note of that. I understand the reasons for wanting to go down the route of closing down designated companies and companies belonging to a designated person. However, the proposal contained in Amendments 15 and 46, and the supporting proposals in Amendments 78, 79 and 80, raise some concerns and illustrate why it may not be appropriate to accept them.

I remind noble Lords that the Bill aims to put in place the necessary powers to replicate the sanctions regimes that we currently implement as a member state of the European Union and, of course, those we are obligated to implement internationally through the UN. These amendments would go over and above the regimes and the type of sanction that the EU has put in place. It is essentially a new type of sanction and, as such, I urge a degree of caution in approaching this.

Clause 2 is about freezing assets of designated persons and preventing access to the UK’s financial markets. It is not about causing companies to cease to exist. Sanctions are intended to be temporary. That is why we have various reviews of sanction regimes set up and why they are reviewed periodically: their whole essence is to ensure that the target has changed behaviour in the desired manner. Once this change in behaviour has been achieved, sanctions may well be lifted. We do not intend to impose permanent measures that cannot be reversed. I suggest that shutting down a company is pretty irreversible.

This would be a unique power that does not exist at the United Nations or with EU sanctions. Sanctions have always been and will continue to be most effective when implemented multilaterally and with maximum consistency. Before implementing a new type of sanction, we would usually discuss with our partners whether it is effective and whether there is any appetite for it to be taken forward multilaterally. Only in very rare cases would we unilaterally introduce a new type of sanction that has effect within the UK’s jurisdiction only. Unilateral sanctions provisions such as this could also have an uncertain effect and could create difficulties for industry in general.

Dissolving a corporate entity is a permanent measure with far-reaching effects. It would also have an impact on the human rights of the people involved. Dissolving a company owned by a designated person would remove their property. Doing so without compensation would leave the Government open to a potential action for damages by a person alleging breach of their human right to ownership of their property. It is also uncertain where the property owned by the company would go and what effect this would have on the property rights of anybody involved. Accordingly, to do so may be in breach of the human rights convention.

When a company is designated under financial sanctions they will not be able to trade—that is clear—with any person connected to the UK or to any other countries that have joined us in the multilateral sanctions. We therefore feel that these measures are sufficient to ensure that the effects of the financial sanctions are maximised.

The noble Baroness, Lady Sheehan, gave a specific example about actions we can take against shell companies that, in her words, may be involved in illicit arms trading. If the arms trade is a breach of trade sanctions we will of course prosecute these companies and their directors for criminal offences using powers in the Bill and the export control order 2000, which she referred to previously.

Given my explanation, the importance of the intent, the fact that we would be creating a totally new type of sanction here and in the context of this not being something that either the UN or the EU currently designate, I hope the noble Baroness will be minded to withdraw the amendment.

[Baroness Sheehan]

I thank the Minister for his reply. He said quite a lot about how we may diverge from the EU, but as I thought Brexit was about diverging from the EU and taking back control, I thought he might have welcomed the powers these amendments would confer on him.

[Lord Ahmad of Wimbledon]

Am I to take it that the Liberal Benches are now suggesting that that is exactly what the Government should be doing?

[Baroness Sheehan]

I am suggesting that the Liberal Benches might wish to take advantage of what the Government have been proposing when it suits our ends. This is such an important issue. We are presented with an opportunity in the Bill to do something about the illicit arms trade and arms brokering. It is a real stain on the UK that so much of that trade is facilitated here. Although I will withdraw the amendment for now, I reserve the right to come back to this issue at a later stage.

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[Lord Collins of Highbury]

My Lords, I do not have much more to add. Obviously, the amendments in this group are probing. I hope the Minister can respond in terms of what the current arrangements are in respect of the circumstances outlined in the amendments and how they may not be necessary. As the noble Baroness said, it is important that we consider all the unintended consequences, as well as our objective of imposing sanctions that are effective.

[Lord Ahmad of Wimbledon]

My Lords, I thank the noble Baroness for raising this important issue. As we discussed earlier, the Government take seriously the impact that sanctions can have on the civilian population of a country and acknowledge the important work of NGOs and other humanitarian organisations in difficult situations.

The amendments would exempt ships or aeroplanes from sanctions if they are being used to transport refugees. While I agree with the principle of the amendments, which I know are well intentioned and seek to assist those who require international protection, in my opinion this is not the right way to achieve the desired effect.

I cited earlier the example of NGOs operating in Syria, where exemptions were granted on fuel access. We need to ensure that NGOs can operate in countries that are subject to sanctions by providing licences and exceptions. The Bill makes it easier—it is not just about having wide powers—by allowing government to draft exceptions and grant general licences aimed specifically at assisting humanitarian activities, including those assisting refugees or displaced persons, which is the intent behind the noble Baroness’s amendment. Of course, these are currently not permitted by EU law.

There are good reasons why broad prohibitions are applied to a country with licences, then used to provide targeted exceptions. That is the right way to move forward on this. If we were to provide a general exception for ships and aeroplanes in these circumstances, it could be subject to abuse and would be impossible to enforce. In extremis, it could help organisations circumvent sanctions. It would also be very difficult to apply in practice. If a person on a ship or aircraft claimed to be a refugee, such a circumstance would seem to engage the exemption proposed by the amendment. However, if it was later determined by the proper authorities and the courts that they were not a refugee, the ship or aircraft would have breached sanctions, as well as that person having circumvented immigration controls.

In many cases, it is impossible to tell whether a person is a refugee until after their claim has been examined and determined. I totally understand the intent behind the amendment, but I am sure the noble Baroness can also understand the difficulty it would pose in respect of a person on a ship or aircraft making such a claim.

I assure the noble Baroness and the Committee that the system of licences and exceptions currently in the Bill offers the best way to maintain the integrity of sanctions while ensuring that NGOs can provide humanitarian support to refugees and displaced persons. I committed during a previous debate to join the noble Baroness and the noble Lord, Lord Collins, in meeting NGOs perhaps to strengthen the narrative behind the exceptions—on how they work and how the current rules would be applied—but I am still minded to ask the noble Baroness to withdraw her amendment. I feel that looking to strengthen the communication and availability of current processes to NGOs, as well as their knowledge of them, would be a better way forward.

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[Lord Lennie]

Amendments 33 and 34 concern Clause 10. Where Clause 10(6) says:

“The regulations may make provision, for the purposes of the regulations, as to the meaning of a person’s”,


we want to replace the word “may” with “must”. We also want to add a final subsection to the end of the clause, as follows:

“( ) The regulations must make provision for the notification of persons designated under subsection (3)(b) to (d), and such notifications must state, to the fullest possible extent consistent with the purpose of the regulations … which person or persons the designation has been made in connection with, and … the nature of the connection identified for the purposes of the designation”.


It is a question, if you are going to designate, of identifying who the person is associated with and what are the reasons for associating with them.

The regulations must make provision for the notification of persons designated on the grounds of indirect involvement in prohibited activities, including the requirement to inform such persons of the specific nature of any activities or other persons they have been designated in connection with. I am not sure how they are to know unless they are advised as to what it is and who it is they have been designated for associating with.

[Lord Ahmad of Wimbledon]

My Lords, I thank all noble Lords who have spoken in this very brief debate thus far. This clause introduces the power to include designated persons under sanctions regulations and defines the meaning of this term as used in the Bill. It sets out the designated persons, which can include individuals, companies and other entities which have a legal personality, as well as groups and associations. The noble Baroness, Lady Sheehan, said that it is so wide that anyone in a particular country who was not designated would be a refugee. That is not the case. In conflict situations—Syria is a prime example—there are members of the opposition, for example. When I was qualifying the status of those who may or may not be “influenced by” or “under the control or direction of”, in a previous debate, that point was made quite clear. The clause will ensure that Governments can, for example, designate particular organisations, and terrorist organisations come to mind in this respect.

The decision to designate an individual or organisation would be made by an appropriate Minister and the Minister would be informed by strategic, tactical and evidentiary advice; so the evidence would need to be there. A decision to designate would also be made where a designation advanced the purposes of a specific sanctions regime, taking into account the political picture and the evidence available. This approach is consistent with EU practice and the practices of our key sanctions partners-for example, the United States and Canada, where the power to designate rests with the Executive. It is for the Executive to use the powers then provided by Parliament as the situation demands.

I fully accept the point that there is a need for appropriate safeguards, and the Bill gives designated persons the right to ask for an administrative reassessment and then bring a challenge in the courts. It also requires annual political and triennial evidentiary reviews. These are, of course, in addition to the Government’s day-to-day accountability to Parliament.

Amendment 33 in the names of the noble Lords, Lord Collins and Lord Lennie, would make it necessary to set out what was meant by being,

“owned or controlled directly or indirectly”,

by another person and of being “associated with” another person. I agree that there should be restrictions on designation powers. That is why the Bill allows designation only where there are reasonable grounds to suspect that a person is involved with or connected to an activity set out in the regulations, and that it is appropriate to designate them on that basis. I hope that, with the explanation I have given, the noble Baroness will feel able to withdraw her opposition to Clause 8 standing part of the Bill.

[Baroness Northover]

My Lords, I thank noble Lords for their contributions. This clause does indeed seem to be challenging, and I look forward to the noble and learned Lord, Lord Judge, perhaps coming up with some overarching set of protections for the whole Bill which would apply to this as well. The Minister mentioned reviews: we will be coming to reviews later in the Bill, and there are questions around those, so that is not tremendously reassuring. He also mentioned answerability to Parliament. That has the problems that my noble friend Lady Kramer referred to earlier in our initial debates.

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[Lord Lennie]

My Lords, we are having a bit of a Groundhog Day. Following on from the noble and learned Lords, Lord Judge and Lord Falconer, where did this idea come from? Where has this authority been dreamed up? It clearly risks overzealous action or a meaningless designation. If it is seen to designate the citizens of an entire nation, it is entirely meaningless. That is a real fear and possibility.

If a person is to be designated, they should be designated by name. I think that is common cause. There may be an occasional circumstance when it is simply not possible to identify or get hold of their name through all kinds of investigative methods, but it would be a rarity-it will not be the generality of the application of this law. The difficulty with enforcement for the banks—the noble and learned Lord, Lord Judge, mentioned this—is real and serious and has been referred to before. The Government should identify the source and purpose of this and then rewrite the Bill in line with what is intended rather than what the unintended consequence would be.

[Lord Ahmad of Wimbledon]

My Lords, I thank the noble and learned Lord for moving his amendment. I know that he has spoken before about the powers that are being given to Ministers in this respect. The amendment seeks to remove the ability of the Government to make designations by description which cover groups of people. It would mean that we could designate individual persons only when we knew their names.

Picking up a point made by the noble and learned Lord, Lord Falconer—I hear what he said—I assure the Committee that we will always seek to designate by name wherever possible. We anticipate that the power to designate by description will be rarely used, for reasons that I will set out shortly. But, as I hope to explain to the Committee, it remains a useful tool for the imposition of sanctions. The noble Lord, Lord Lennie, commented just now that some exceptions might apply. That is exactly the kind of exception for which we want to ensure these powers will allow us to apply sanctions.

It is important that this proposal is seen in its proper context. Sectoral sanctions—those aimed at groups or sectors rather than individuals—remain a vital foreign policy and national security tool. The ability to designate by description also enables us to refer to lists of designated persons produced by others, such as the United Nations. To have a single list to look at will reduce the administrative burden upon business. It will also enable us to target particular entities within a given sector: for example, state-owned banks operating in a particular market. Finally, it will enable us to target groups of persons, such as members of a terrorist group—for example, the Hezbollah military wing.

In some cases—they may be few but there will be exceptions—we will not be able to identify all members of a group by name. But it remains important that those members are subjected to sanctions, to prevent them using their funds and assets to commit terrorist crimes. We are also cognisant of the difficulties that this might cause to banks; the noble and learned Lord, Lord Judge, raised this issue. We accept that a designation by description will be harder for them to implement, but I hope that I can offer a few reasons why this power should be retained despite the difficulties that have been highlighted.

First, as I have said, we will always seek to designate by name where we can and this power will be used very rarely. Secondly, when we use this power we will provide as much information as possible to assist institutions, such as banks and other businesses, to carry out their obligations under the sanctions. Thirdly, it may sometimes be necessary to impose these types of sanctions to cover groups of persons where, as I have said, not all the names of members are not known. Fourthly, banks and businesses carry out their own customer assessments and are well placed to carry out their obligations under sanctions. They also have their own compliance procedures, which enable them to identify persons subject to sanctions and can be used to assist them to identify members of a group. For example, if we designate a group of persons acting in a geographical area, the compliance systems can then be used to pick up economic activity in that area and trigger a deeper investigation into the relevant account holders.

If this amendment were to be accepted, we would be unable to impose these kinds of measures in the cases that I have illustrated. This provision needs to remain to ensure that sanctions can be used as an effective tool for not just foreign policy but, importantly, national security. Noble Lords have alluded to the difficulties, which I fully acknowledge, but I hope that I have offered some degree of reassurance in the context of how they might be overcome.

The noble and learned Lord, Lord Judge, also mentioned the phrase “connected to” and designation by description in primary legislation. The issue remains that the connections and descriptions can be context-specific. For example, what is applied under counterterrorism sanctions may not be applied under Russian sanctions, hence the proposal to include these definitions as regulations. That said, he also referred again to the reports by the two committees. As I alluded to earlier, we are reflecting on the specific points that they have raised, including the one that the noble and learned Lord raised in the context of this debate. I will return to those points and reflect—

[Lord Patten (Con)]

I apologise for not having entered into the debate at an earlier stage but I have been reflecting on what the noble and learned Lord, Lord Falconer, said about the importance of legislation being specific. I also reflect on the fact that, working in the financial services as I do, I often see names but we are never quite sure who is behind the names. It may therefore be necessary to have a secondary back-up power to address the groups of unspecified people who one thinks are behind those whose names are specified. Much in the spirit of the noble and learned Lord, I suggest to my noble friend that he may wish to reflect on whether there is some way of specifying in the Bill that these are reserved powers, to be used under particular circumstances. That might well reassure those who feel that they are too overarching.

[Lord Ahmad of Wimbledon]

I thank my noble friend for his intervention. He speaks from experience and, as someone who spent 20 years in the financial services sector, I am acutely aware of the challenges presented by the issue of designations. I will of course take his suggestion and reflect upon it. To address particularly the point raised by the noble and learned Lord, Lord Falconer, this would be the exception. It would not be the norm but would be to cover situations that do occur and have occurred. I have sought in my response to illustrate the circumstances in which that would occur and, based on that, I hope that at this time the noble and learned Lord will be minded to withdraw his amendment.

[Lord Thomas of Gresford]

Can the Minister explain what the point is of having sanctions if you do not know who they are against? I am looking again at the memorandum to which I referred earlier, which says in paragraph 44:

“Designated persons attract individual sanctions, including asset freezes. Designations are an effective way of coercing or constraining individuals who are directly involved or closely associated with the activity or behaviour targeted by the sanctions. The Government would intend to publish the names of designated persons on a list on its website, and would also notify those persons, where possible, in accordance with clause 1. There are currently around 2000 designated persons under existing sanctions regimes implemented by the UK”.


If that is the purpose of it—to coerce or constrain individuals when you do not know who they are—how can these sanctions be effective in any way?

[Lord Ahmad of Wimbledon]

I suggest to the noble Lord that if there is a person who is not named but is connected to a group on which that sanction is being observed, that would stop them carrying out particular actions. It would ensure that that sanction was effective.

[Lord Judge]

My Lords, it really is not beyond the wit of parliamentary draftsmen to produce primary legislation that says, “Designated by name unless it is impracticable to do so” or “Save exceptionally”. That is not difficult, neither is it difficult for parliamentary counsel to produce for us a Bill which says, “Designated by identifying a group or body”. It is not a problem. I make a fuss about this because we are coming to Clause 16, which will enable a Minister to create offences punishable with 10 years’ imprisonment and define the defences. It will be open to the Minister to say in the regulations: “This is an absolute offence. You, the bank, have dealt with somebody for whom we gave a description. It did not quite fit but you dealt with him”. If we have an absolute offence created, I do not suppose that the bank will go to prison for 10 years. But the whole of this legislation goes together; the Bill needs to be seen in its overall context. I do not think that I should pursue it any further at this stage and I beg leave to withdraw the amendment.

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[Lord Judge]

Your name goes on the sanctions list before you are told, so as to avoid the dissipation of your assets, but afterwards you are told that you are now designated, these are the consequences, this is why it is happening, this is what you must not do, this is what you must do and—what is more—you had better know that it is X who has given us this information or that we think you are Igor Judge, but actually there is another Igor Judge who lives in, shall we say, Russia and it is him we are after. That way, you can very rapidly get your review looked at and justice done to you.

[Lord Ahmad of Wimbledon]

My Lords, I agree with the underlying principle of these amendments, which aim to ensure that designated persons are told the reasons why they have been designated and given sight of the evidence on which this designation is based as soon as is practically possible. I reassure noble Lords that I do not believe that these amendments are necessary. As is the case currently, the Government fully intend to inform all designated parties after their designation either directly in writing or, if we do not have an address for them, through the government website. This notification will set out clearly why they have been designated and the clear and transparent channels through which they can challenge their designation via a request for a reassessment of their designation or a legal challenge in the courts. While we intend to inform designated persons of the reason for their designation, as we have heard from the noble and learned Lord, Amendment 60 rightly highlights that some evidence may not be suitable for disclosure for national security reasons. In these cases, we would provide a summary of the information.

In short, this amendment would simply codify standards to which the Government are already committed and would in any case be expected to meet by the courts. The courts have already made several findings on the need for disclosure of reasons and evidence in cases of designations, which we think would continue to apply, and the Bill makes no effort to disturb these standards.

However, I have listened very carefully to this short but important debate and in the light of the powerful points put forward and the Constitution Committee’s comments, which the noble and learned Lord did not read out, I will consider further and come back to the House.

[Lord Lennie]

In the light of those helpful comments, I beg leave to withdraw the amendment.

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[Baroness Northover]

From these Benches, I concur. I look forward to hearing what the Minister is planning to do in light of the reports from the Constitution Committee and the Delegated Powers Committee.

[Lord Ahmad of Wimbledon]

My Lords, I agree with the spirit behind the amendments. Targeted sanctions inevitably involve significant impacts on the people affected by them. That reflects the purpose of sanctions, which are about changing behaviour. I shall repeat, as was mentioned by the noble and learned Lord, Lord Judge, and the noble Lord, Lord Collins, what I said at Second Reading: I reassure noble Lords that where relevant rights under the European Convention on Human Rights are engaged, we consider that proportionality and the impact on the individual will be part of the decision-making. Under Section 6 of the Human Rights Act 1998, the appropriate Minister must act in compliance with those convention rights as informed by the Strasbourg case law. We consider that that includes satisfying themselves that the designation is proportionate.

In the response to our consultation published in August, we made clear that our approach to sanctions would be compatible with UK and international law and we would continue to ensure that the UK’s obligations under the European Convention on Human Rights, particularly Article 6(8) and Article 1 of Protocol 1, are upheld when imposing and maintaining human rights and maintaining designation. However, as a result of the Human Rights Act 1998, the requirement to act proportionately applies across a wide range of legislation regardless of whether it is stated explicitly in the legislation. It is also relevant that the Bill contains a range of protections to ensure that designations are used appropriately.

In cases where the UK has chosen to act in an area where the UN is not acting, the affirmative procedure will apply, ensuring that Parliament has a vote. This will provide an opportunity for Parliament also to consider whether the designation powers being taken by the Government are appropriate. Parliament will also have the opportunity to consider the exceptions and licensing arrangements that will apply to a regime, which can allow, for example, the release of frozen funds to meet basic expenses or travel to be authorised for humanitarian reasons. The Bill further provides for an annual review of each sanctions regime against the purpose that it was put in place to achieve, which will involve looking at the current global picture. The Bill also provides opportunities for reassessments and court challenges.

I state all that because it is important for the record. I hope I have been able to provide noble Lords with reassurance. Nevertheless, while this debate has been extremely short, it is a pertinent one based on a word. I will therefore consider with my officials what further reassurances we can give and, as the noble Lord, Lord Collins, said, reflect on the committee reports. For now, though, I am minded to ask the noble and learned Lord to withdraw his amendment.

[Lord Judge]

On the basis that the Minister is going to reflect, I beg leave to withdraw the amendment.

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[Baroness Northover]

My Lords, this is part of the running theme of the Bill. Once again, we wish to know why Ministers need the wide powers that they appear to have through regulations. I do not need to repeat the arguments that were so well put earlier, but I flag the wide powers here once more. I beg to move.

[Lord Ahmad of Wimbledon]

My Lords, I shall speak to both amendments in this group, because although referring to different areas—UN lists and International Maritime Organization numbers—I believe that they have some similarities.

For sanctions to be effective, we believe that it is important that the Government act quickly and that the targets of sanctions are easily identifiable. This enables those who are affected by sanctions, including businesses, quickly to work out what they need to do to comply with whatever restrictive measures are put in place.

When a Minister is specifying a ship, they must be confident that they have identified the correct one. There are a variety of ways in which a ship can be identified—using the ship’s name, tonnage, or the country whose flag it flies. I am sure that noble Lords accept that all those details are important. However, they are also changeable. The most reliable way to identify a vessel is by referring to its International Maritime Organization number, which remains with the vessel throughout its lifetime. This is the method used by the UN to specify ships and one that the Government recommend.

The names of those who are on UN lists can be subject to regular changes. As an example, the UN list relating to North Korea has changed five times in the past year. The ability to refer to a UN list, without having to change regulations each time the UN list is amended, would not only be less bureaucratic but would result in less risk of mistakes. I hope that I have underlined the importance of referring to the UN and IMO lists when designating people and specifying ships and that, in the light of that, having provided that clarification, the noble Baroness will be minded to withdraw her amendment.

[Baroness Northover]

For the moment, I beg leave to withdraw the amendment.

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[Lord Collins of Highbury]

My Lords, I support all the amendments in this group and address particularly Amendments 40, 41 and 51 and the requirement for a fast-track process. Like the noble Baroness, Lady Northover, I welcome the Minister’s commitment to meet the NGOs before the next stage of the Bill. It is important to understand that their anxiety is not due to the Minister’s lack of commitment, his intentions or the policy of the Office of Financial Sanctions Implementation, which has a stated policy of processing licence applications for humanitarian purposes as quickly as possible. However, the NGOs and all the amendments in this group seek to create more certainty because, as the noble Earl mentioned, delays occur and when sanctions are biting hard we are unable to get assistance where it is needed. Humanitarian crises can emerge extremely suddenly and we are most concerned about how the new regime will deal with them. As the noble Earl said, there are plenty of examples of the costs of slow-moving sanctions policy—for example, in Somalia in 2011, where uncertainty about the sanctions regime slowed down the NGOs’ response to the famine in that country. I certainly support the proposal of the noble Baroness, Lady Northover, for a general licensing exemption. I hope the Minister will come back with some very concrete reassurances after meeting the NGOs, so that there will not simply be his kind words but a declaration in the Bill to ensure that uncertainty is removed.

[Lord Ahmad of Wimbledon]

My Lords, Amendment 39 seeks to enable the procedure by which individuals or entities could apply for licences and exceptions to be included in the regulations. Amendment 40 would require the Government to establish a fast-track process for dealing with requests in respect of exceptions and licences for humanitarian purposes, as the noble Lord, Lord Collins, just highlighted.

I would like to make it clear that the consultation on the White Paper raised the need for clear guidance and swift and robust licensing processes. I assure my noble friend Lord Dundee that the Government are committed to a positive reply on both issues. I hope the Committee will be reassured that, given the number of departments involved and the many different derogations, exemptions and grounds for licensing that exist, the relevant application procedures in each sanctions regulation are all contained in guidance. This guidance is publicly accessible to all via various departmental websites. To reproduce them in the regulations themselves would certainly create a substantial administrative burden and greatly lengthen the instruments, so we do not think it is necessary to do that.

On Amendment 40, the variety and complexity of exemptions and licensing arrangements in place means it could also be difficult to establish a single fast-track process that would be straightforward to operate. The Government believe that the criteria for considering the prioritisation for granting licences and exemptions should remain as flexible as possible. We have already committed to dealing with licences as swiftly as possible and we will of course prioritise urgent requests. The fact that a licence is required for humanitarian reasons is something that we already factor into, and will continue to factor into, the time we take to respond to the request. However, I am sure that noble Lords will also acknowledge that humanitarian licences are not the only ones that might require an urgent response. For example, a legal fees licence might be needed to enable an imminent court deadline to be met. To have a fast-track procedure confined to humanitarian licences alone might put these at additional risk by giving priority to a humanitarian needs licence that is not urgent over another request that is. For all these reasons, we do not consider that new requirements need to be added to the sanctions regulations.

I appreciate the sentiment behind Amendment 41, which proposes that a consultation be undertaken for an overarching framework for exceptions and licences. The White Paper consultation on exceptions and licences highlighted the need for good systems and clear guidance when applying exceptions and licensing. We have taken on board the comments of all respondents and replied to them and, as we said in our reply, we intend to design the post-Brexit licensing framework based on these representations. We also intend to consult industry from now until the day we leave the European Union and thereafter, to ensure that the framework allows us to be flexible and has the minimum possible effect on industry while having the maximum effect on the intended targets.

It is also true that an overarching framework for licences might not allow us to take advantage of the flexibility that we currently have for each regime. For example, the licensing grounds for a proliferation regime should be different from those of a misappropriation regime. Different types of sanctions also require different approaches. We currently have centres of expertise on the different types of sanctions, and any move to an overarching framework might put these at risk.

Finally, the Committee will be aware that the moment of leaving the EU is approaching. In that time, after the Bill is enacted, we will need to design the replacement UK regimes. To undertake a consultation exercise on top of that will make it harder to prepare in time. Given that the purpose of this amendment is to ensure good licensing and clear guidance, I hope I have been able to reassure the Committee that we are committed to both.

On the humanitarian exceptions, I have great sympathy with the intention behind Amendment 42; humanitarian, development, reconstruction and peacebuilding agencies need to continue the important work they conduct, often in very difficult circumstances, without fear of unintentionally falling in breach of sanctions. The Government should have the necessary discretion to enable this. The intended effect of this amendment is to make it explicit in the Bill that the types of exceptions that can be granted include,

“humanitarian, development, reconstruction and peace-building agencies”.

However, the addition is unnecessary, as Clause 14(2) as currently drafted allows the Government to create exceptions and issue licenses for activities that are not explicitly listed in Clause 14(2). It is the Government’s intention to use this drafting to create exceptions for a wide range of activities. Humanitarian activities are currently included under existing exceptions and licensing provisions in the sanctions regimes in place, and I assure noble Lords that we intend to continue to include them. Clause 14(6) is an additional clarification of purposes for which exceptions can be created, not an exclusive list. For this reason, accepting the amendment would have no effect on the powers, as they are already contained there and therefore unnecessary.

Clause 14(2)(b) also gives a power to issue general licences. This goes further than the position we currently have under EU law, giving the Government the ability to put in place licensing arrangements for humanitarian purposes, which would enable multiple parties to undertake specified activity without the need for a specific tailored licence. Given that this provision is unnecessary as we already have this power, I hope noble Lords will not press the amendment.

I entirely agree with the intent—although the drafting may need to be looked at—of Amendments 50 and 51, which we understand require the Government to provide guidance about enforcement procedures for sanctions breaches. The need for clear and accessible guidance was highlighted throughout the Government’s consultation on the White Paper. In our response, we said:

“We recognise the call for clear and consistent guidance. Accordingly, the bill would provide for the government to issue guidance on the content and implementation of sanctions. The government is committed to ensuring that this guidance would be of a high standard”.


I am happy to say that the Government have delivered on that promise and have included a provision in the Bill—Clause 36—requiring Ministers to issue guidance about any prohibitions and requirements imposed by sanctions regulations. There will be a mandatory requirement to provide comprehensive guidance for all those affected by sanctions implementation. One strand of the guidance requirement set out in Bill—in Clause 36(2)(b)—explicitly specifies that the guidance may cover,

“the enforcement of the prohibitions and requirements”.

In line with this, we intend to continue to publish guidance on sanctions enforcement.

Clause 36, which we will debate at a later stage, provides for a more comprehensive duty than that specified in the amendment. It has been drafted to allow guidance to be given to all persons in the UK and it enables consultation with sources of expertise as appropriate. For example, we do not expect that the CPS will need to feed into any guidance about how civil monetary penalties are issued in respect of breaches of financial sanctions.

My noble friend Lord Dundee asked specific questions about help for NGOs. I am not sure whether he was in your Lordships’ House when I discussed that matter with the noble Lord, Lord Collins, and the noble Baroness, Lady Northover. We will be meeting NGOs before the next stage of the Bill to discuss how we can better understand and address some of their concerns, but we will continue to issue clear guidance to them. I also assure my noble friend that we will provide speedy and efficient responses to requests for licences. As I have already indicated, under the Bill we can issue general licences, which offer more comfort to banks—which I believe my noble friend specifically mentioned—and give them a greater appetite to assist in these areas.

With that somewhat detailed explanation of where we currently stand on Clause 36, I hope the noble Baroness will be minded to withdraw her amendment.

[Baroness Northover]

My Lords, I thank everybody, especially the noble Earl, Lord Dundee, for contributing at this late stage of the evening. I welcome that. I agree with the noble Lord, Lord Collins, about the need for certainty in the Bill. I noted what the Minister said. It reflects the complexity of Brexit and the energy that it is taking up, even in this area, and I therefore look forward to the meeting with NGOs that he has promised. In the meantime, I beg leave to withdraw the amendment.

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[Lord Ahmad of Wimbledon]

My Lords, the provision for sharing information is vital to ensure that a sanctions regime works in practice. For example, the provision of information by the private sector is essential in monitoring the financial transactions of sanctioned persons. We need this information to ensure effective implementation and compliance with our obligations under the various sanctions regimes, and to ensure robust enforcement when the law is broken.

The information powers contained in the Bill will ensure that sanctions regimes continue to work effectively by requiring people to report relevant information and by authorising the sharing of information. It may be helpful for me to specify those powers. They provide the basis for the Government to monitor compliance with the regulations; to investigate and obtain evidence if they believe that the regulations have been contravened or circumvented; and to share information with third parties to enable co-operation on the development of sanctions and enforcement efforts.

There is already a duty in EU law on all persons in the UK to supply information to the relevant competent authorities. We currently make failure to comply with this duty an offence only in relation to “relevant institutions” in the regulated financial services sector and “relevant businesses or professions”. We could, if we chose, apply this duty more widely. Clause 15 has been drafted widely to enable the duty to be placed on, and the offence of not supplying information on financial sanctions breaches to apply to, all persons in the UK. The extension of this offence to cover everyone who obtains such information in the course of their business would equalise the scope of the offence with the scope of the related duty. This will give the Government the ability to compel production of information to aid the investigation of reported breaches and ensure there is effective redress for not complying with legal obligations. The regulations will safeguard how the information is used, stored and shared. This will be consistent with the Government’s data protection, commercial and banking confidentiality obligations.

These powers provide the basis for the Government to continue monitoring compliance with the regulations and to obtain evidence if they believe that the regulations have been contravened or circumvented. They will also enable the Government to share information with partners to aid their enforcement efforts.

The deletion of two key paragraphs as suggested in Amendment 43 would have a serious impact on the enforcement of UK sanctions. Let me illustrate how. First, powers of entry set out in paragraph (d) are essential for compliance inspectors to check that the terms of general licences have been upheld and that there has been no circumvention of sanctions. These powers are in line with those in the Export Control Order 2008, which were reviewed in 2014 and considered necessary for ensuring compliance with the terms of licences. Without them, authorities would be unable to check that exporters were complying with the terms and conditions of their licences if they were unco-operative.

Secondly, deleting paragraph (e) would completely remove our ability to authorise the sharing of information relating to designated persons. This is essential both for law enforcement purposes and for liaising with international bodies and our foreign partners on compliance and enforcement in individual sanctions cases. It would also have unwanted effects as we would be unable to communicate information to designated persons, them affected by sanctions and the wider UK. We maintain that the powers in paragraphs (d) and (e) ensure continuity with the existing legislation. Both will continue to be needed for sanctions when we leave the EU.

Amendment 44 seeks to ensure that legal professional privilege, or in Scotland the obligation of confidentiality, is upheld. I would like to say first and without any reservation that of course we do, and intend to continue to, respect legal professional privilege, a point made by the noble Lord. This is the position we currently take in all sanctions regulations and we intend to continue to do so. As the Bill does not explicitly authorise the Government to make regulations that remove this privilege, we do not think we would be able to do so if we so desired. Any such cavalier use of the power would surely be struck down by the courts. I hope that I have reassured noble Lords of the Government’s intentions towards legal professional privilege and that any departures from it can and undoubtedly will be the subject of a judicial decision.

Finally, I turn to Amendment 45. I think I understand the intent of this amendment. It is to ensure that persons who do not have ministerial accountability cannot request information from sanctioned persons or use that information. However, the amendment unnecessarily limits the Government’s ability to request information which is vital for ensuring that sanctions can be enforced and implemented in a robust manner. It will increase the workload of Ministers significantly and unnecessarily if they are required to approve every single information request relating to sanctions. It would also cause difficulty where the Minister is not the appropriate authority. For example, shipping and aircraft sanctions will be implemented by bodies outside Whitehall such as the Civil Aviation Authority, harbour authorities, and the Registrar General of Shipping and Seamen. Depriving them of the ability to seek and use information will make it harder to implement sanctions and will only assist those who avoid or breach them. This clause allows us to work with industry to ensure that sanctions are effective and that we have all the necessary information and evidence available.

The restriction on who can use the information requested would create difficulties in the use of powers to impose civil monetary penalties for breaches of financial sanctions given to HM Treasury in the Policing and Crime Act 2017. In that law, the relevant Minister is required to personally review penalty decisions imposed by the Treasury; the Minister’s view is independent of Treasury officials. The amendment would place the Minister in the investigatory and decision-making process, and then the review process. This would not be appropriate and would give rise to challenge on appeal on process grounds.

I understand the concerns that the Committee might have about these powers being more widely available, as the noble Baroness mentioned, but I hope I have reassured the Committee that we believe that they are necessary for the effective implementation of sanctions. Moreover, I hope the Committee will also be reassured by the fact that the appropriate Minister cannot make regulations delegating powers which are incompatible with the basic and fundamental rights of people in the UK. Indeed, as noble Lords will know, Section 6 of the Human Rights Act 1998 forbids it. I hope that, with this detailed explanation, the noble Baroness is reassured and will withdraw her amendment.

[Baroness Northover]

I thank the Minister and others. He will know that the deletion of clauses is, as is usual in this place, a challenge to the Minister to come up with something that is more consistent with amendable primary legislation. That is what we are seeking here, along with more specific detail. I have already made reference to the fact that it is difficult to see that the Human Rights Act is necessarily the protection the Minister thinks it might be, but in the meantime, I beg leave to withdraw the amendment.

--- Later in debate ---

[Lord Collins of Highbury]

My Lords, I do not want to repeat the comments that have been made. The one thing that I would make clear to the Minister is that he has a wide range of opinion against him on this, not least the Law Society’s own briefing, which raised huge concerns about this clause. The Constitution Committee has been very clear. The Delegated Powers Committee has also raised concerns, even though it says that the Foreign & Commonwealth Office has made “a compelling case” in relation to this.

The noble Baroness, Lady Bowles, referred to the argument that it is impossible or too difficult to create a framework. The Delegated Powers Committee said that,

“the FCO’s reasons provide a compelling case for allowing the creation of criminal offences in sanctions regulations … Trying to set out the offences in primary legislation would risk producing offences and penalties that are defective or disproportionate or both”.

We have heard in the debate that it cannot be beyond the powers of the Minister to come up with a much better answer to this difficulty than the one currently being offered by his department. Even though the Delegated Powers Committee says that there is a compelling case, it thinks that parliamentary scrutiny should be enhanced if these powers are conceded. So I hope that the Minister will give deep thought to this and come back at some stage with a much better and more acceptable option.

[Lord Ahmad of Wimbledon]

My Lords, obviously I have noted the opinions that have been expressed, as the noble Lord, Lord Collins, said. I see that your Lordships’ Committee is concerned about the new criminal offences. To be clear: these types of offences already exist. People who breach financial, trade, immigration and transport-related sanctions can be convicted for those breaches in the criminal courts. We will continue to legislate on this basis so that breaches of sanctions can continue to be an offence.

We have set safeguards. We have set a cap of 10 years on maximum sentences for breaches of trade sanctions, which is consistent with the Export Control Act; for breaches of financial sanctions the cap is set at seven years, which is consistent with recent changes introduced by the Policing and Crime Act 2017. Coming back to the point made by the noble Lord, Lord Thomas, about differentiation between the types of offence, we have lower sentences in respect of information provisions and money laundering regulations.

I hear what noble Lords have said. The purpose behind the sanctions is to replicate the existing legal frameworks for enforcement across the various forms of UK sanctions that will be created by the Bill. For all types of sanctions, Clause 16 includes provision for creating offences and dealing with offences, including defences and the treatment of evidence. It also provides for powers and duties to be vested in persons who assist in the enforcement of any prohibitions. For example, for trade sanctions, Clause 16 enables regulations to apply any provision of the Customs and Excise Management Act 1979, which provides a full suite of powers for the enforcement of these measures. The clause also enables civil monetary penalties, introduced in the 2017 Act, to continue to be issued for breaches of financial sanctions. It does not extend these to other types of sanctions. It also enables regulations made under the Bill to replicate the current position on maximum terms of imprisonment. I have already referred to that. It contains further powers for deferred prosecution agreements and serious crime prevention orders for all measures in the Bill.

Clause 16 also makes a provision that would enable the UK to extend the existing offence of failing to supply information on financial sanctions breaches. As noble Lords know, there is an existing duty on everyone to supply such information, which will be transposed by the Bill. However, the associated criminal offence for not doing so applies only to relevant institutions in the regulated financial services sector and relevant businesses or professions. The Bill enables the UK to equalise the scope of that duty and offence, as I said earlier, by making it a general offence applicable to everyone.

I assure the Committee that I am listening carefully to the representations being made, in particular those made by the noble and learned Lord, Lord Judge. However, we believe that the sanctions enforcement provisions, including criminal and civil penalties, remain proportionate to the scale and nature of sanctions breaches and that they will continue to act as a deterrent. That is the ultimate objective. Although I am sure I will not get a ringing endorsement for—or agreement with—everything I have said, I hope I have outlined where the Government are coming from in drafting Clause 16. Based on my explanation, I hope the noble and learned Lord will be minded to withdraw his amendment.

[Lord Judge]

My Lords—

[Baroness Northover]

My Lords, it is this noble Lord doing that.

[Lord Ahmad of Wimbledon]

I am sorry.

[Baroness Northover]

The Minister will have heard the voices, including those from behind him on his own Benches. The noble and learned Lord, Lord Judge, was right to get up because I knew my best bet was to introduce the amendment briefly and pass it across to him. The Minister will have heard him, too. Something tells me that we will return to this on Report and that various things will happen in between but, in the meantime, I beg leave to withdraw the amendment.

Sanctions and Anti-Money Laundering Bill [HL]

Lord Ahmad of Wimbledon Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Wednesday 29th November 2017 Lords Chamber

[Lord Faulks (Con)]

My Lords, I note the nature of the amendment and the final provisions in the Bill in Clause 51(3). I was at one stage a Minister with responsibility for the Crown dependencies, so I am acutely conscious of the particular constitutional relationship between the United Kingdom and the Crown dependencies. As I understand it, we do not normally legislate without their express consent. I wonder whether that is why the Bill is framed as it is. However, I look forward to hearing the Minister’s response on this.

[The Minister of State, Foreign and Commonwealth Office (Lord Ahmad of Wimbledon) (Con)]

My Lords, I thank the noble Lord for tabling this amendment. The noble Baroness, Lady Northover, talked about the Joint Ministerial Council; as a Minister for the Overseas Territories, today has been one of those days when I find myself shuttling between the Joint Ministerial Council and your Lordships’ House. I can confirm to the noble Baroness that this issue—and other elements that relate to the departure of the UK from the European Union—is very much on the agenda of our discussions with the overseas territories. Indeed, as we speak, my honourable friend Minister Walker is hosting a session with them on the implications of the United Kingdom leaving the European Union. The noble Baroness raised issues on guidance and I will certainly take back the issue of where we can clarify certain elements.

I will pick up on a couple of points so I can clear them at the start. In his intervention, my noble friend Lord Faulks—

[Lord Collins of Highbury (Lab)]

As a matter of information, it is our amendment.

[Lord Ahmad of Wimbledon]

I am fully cognisant of that. I meant no discourtesy to noble Lords on the Opposition Front Bench; I thought it appropriate to give the context of what I was going to say. The clarification that my noble friend provided from the outset is exactly why the particular clauses have been framed as such.

I will now take up what the noble Lord, Lord Collins, has just pointed out. The amendment is in the names of the noble Lords on the Opposition Front Bench. I thank them, as I did at the start. I believe that I came to the noble Lord, Lord Lennie, first—we will have to check Hansard on that—to thank him for tabling the amendment.

Clause 17 sets out which persons can be bound by sanctions regulations, in the UK and elsewhere. It also confirms that prohibitions or requirements can be imposed on any conduct in the UK, including UK territorial waters, or on any UK person anywhere in the world. This clause is consistent with the way the UK currently implements sanctions as part of the European Union. If noble Lords are interested, further detail is provided in the White Paper we published in April.

Clause 17 also allows for Her Majesty, by an Order in Council, to extend the effect of sanctions to bodies incorporated or constituted under the law of any of the Channel Islands, the Isle of Man and any of the British Overseas Territories. This amendment would remove the ability of Her Majesty to make an Order in Council in respect of corporate bodies registered in the overseas territories and Crown dependencies. Instead, it would require that, when UK Ministers legislate to create sanctions in regulations, these bodies would automatically be caught.

When introducing this particular amendment, the noble Lord referred to the overseas territories in a very generic way. I have had the good fortune of visiting one or two of them—somewhat tragically in the aftermath of the hurricanes that hit—and generalising all our overseas territories in a particular way is not something I would subscribe to. They provide some incredible potential. For example, I am not sure how many Ministers partake of lobster, but apparently Tristan da Cunha has the best lobster in the world. On a more practical note, we have done some incredible work with them on marine protection and building sustainable economies.

I make that point because it is important to recognise the role that our overseas territories play. However, I agree with the point the noble Lord raised that the overseas territories and Crown dependencies must follow the UK Government’s foreign policy, including the sanctions we apply, and that bodies incorporated or constituted in these jurisdictions must also be bound by sanctions. The Foreign Office—to confirm what I said at the start to the noble Baroness, Lady Northover—has discussed the Bill with the overseas territories and Crown dependencies, and they also accept this point of principle.

However, there are constitutional considerations that affect the way sanctions are implemented by the overseas territories and Crown dependencies. As my noble friend Lord Faulks pointed out, at the moment all Crown dependencies—Jersey, Guernsey and the Isle of Man—legislate on their own behalf, as do Gibraltar and Bermuda. We anticipate that these jurisdictions will seek to continue to do so—save, possibly, for a transitional period. We legislate for some of these jurisdictions directly through Orders in Council. However, as I have said, other jurisdictions legislate for themselves.

The Bill is drafted in a way that reflects this reality. It is consistent with the current implementation model for UN and EU sanctions, as well as measures under the Terrorist Asset-Freezing etc. Act 2010. To change this model would depart from current practice and we do not see a compelling case for this. With that explanation—and the assurance I have given to the noble Baroness on the valid point she raised about the Law Society, which I will certainly look at again—I hope that the noble Lord will be minded to withdraw this amendment.

[Lord Lennie]

I thank the Minister for that answer. We will consider, read carefully what he said and, perhaps, come back to it. In the meantime, we will seek leave to withdraw the amendment.

--- Later in debate ---

[Lord Judge (CB)]

Without this amendment, we are leaving a recipe for lethargy, which is inappropriate. We need it so that the court will get hold of the complaint, if one is needed, as soon as practicable.

[Lord Ahmad of Wimbledon]

My Lords, I thank the noble Lord, Lord Pannick, and the noble and learned Lord, Lord Judge, for tabling this amendment, and I thank other noble Lords for their contributions. Perhaps I will disappoint the noble Lord, Lord Pannick, somewhat by saying that I agree with the substance and constructive nature of the proposal before us. When the noble Baroness, Lady Northover, started talking about “shortly” and so on, I was reminded of my time as the Aviation Minister and the occasion when an announcement on Heathrow Airport was pending—but we got there.

In that mood, let me outline the Government’s position on this amendment. When a request is received from a designated person to vary or revoke their designation, the appropriate Minister should ensure that they make their decision as soon as is reasonably practicable. As sanctions are applied without giving those sanctioned the opportunity to make representations, and because they have serious consequences on the individuals concerned, it is important to ensure that mistakes are rectified swiftly.

As sanctions are intended to change behaviour, it is also important that people should be able to have their designation revoked if they change their behaviour. Clause 19 therefore provides a quicker and less costly option than going to court. It will also have the advantage of keeping unnecessary pressure off the courts and potentially reducing costs to the taxpayer. The reassessment process exists to allow designated persons to seek swift redress when wrongly designated—and I can assure noble Lords that the Government fully intend to act promptly to requests for reassessments.

I shall certainly reflect on the amendment. I have listened carefully to noble Lords, who have made a compelling case for us to look at our position. With the assurance today that we will look at the amendment again—although it is only an assurance at this juncture—I ask the noble Lord, Lord Pannick, to withdraw his amendment.

[Lord Pannick]

I am grateful to the Minister. I look forward to hearing from him before Report that the Government are able to move on this matter. He has heard the views that there is no basis for not including this in the Bill. I hope this is the first of many amendments today that he will see the wisdom of. On that basis, I beg leave to withdraw the amendment.

--- Later in debate ---

[Lord Lennie]

My Lords, we have heard, and the noble Lord, Lord Pannick, has repeated, the gravity of the consequences of sanctions on the lives of individuals and dependants upon them. Three years is a very long time, particularly if the designation is wrong or if behaviour has changed and they are now compliant. Therefore, we ask that the three years be reviewed and replaced by one year. It cannot be left for a length of time without a review taking effect. The Minister has the right to review. The individual has only one possibility of an application review. Therefore, we ask that this become automatic in the Bill.

[Lord Ahmad of Wimbledon]

My Lords, I thank the noble Lord for tabling this amendment. The noble and learned Lord, Lord Judge, sat down before making a further point. I was reminded not of Richard III but of Oliver Twist, who wanted “more”.

On this particular point, Clause 20 is one of a number of safeguards, as I am sure noble Lords have seen, within the Bill that provides for designated persons and requires the Government regularly to conduct a thorough re-examination of designated decisions. The Government must, as we have heard from noble Lords who have spoken through this short debate, conduct this review at least every three years. The noble Lord, Lord Pannick, has rightly raised the issue, and I accept the point, that the EU carries out reviews more frequently. However, Clause 20 should be considered as part of a system of safeguards that the Government have built into this Bill which I believe will provide at least an equivalent, and in some respects greater, level of protection to that afforded to individuals designated by the European Union.

--- Later in debate ---

[Baroness Northover]

In the Explanatory Notes accompanying the Bill, it is mentioned that sanctions apply to about 2,000 people. That does not seem a huge number of people where one might need to make this kind of assessment.

[Lord Ahmad of Wimbledon]

I am not quite sure what the noble Baroness’s question is.

[Baroness Northover]

The Minister was saying that this was very onerous. I am aware that there is discussion elsewhere in the Bill of immigration status conflicting with those who have had sanctions imposed upon them. Obviously, when one is dealing with immigration status, one is dealing with very many people, but the point made in the Explanatory Notes is that one is not dealing with a large number of people here or a large number of sanctions provisions.

[Lord Ahmad of Wimbledon]

I think I understand the noble Baroness’s question, but, notwithstanding the issue of numbers alone, Clause 20 lays out a process which the Government perceive to be more efficient than that currently adopted by the EU.

[Lord Pannick]

My Lords, I thank the Minister for his response. It is disappointing. I am not persuaded. As the noble Baroness pointed out, a limited number of people are involved here, and surely the time and the resources are justified by the significance of the sanctions imposed. It is right and proper that sanctions of such significance should be reviewed more often than every three years.

The Minister says that the individual can seek a review, which is right, but the individual can do so only if there is a significant matter known to the individual not previously considered by the Minister. There may well be material in the files available to the Government which is not known to the individual. The Minister says that the individual can go to court, but it is the same under the EU system: you can go to court but the whole point of the Bill is to encourage court procedures as a last resort.

The Minister’s other point was that there is a sanctions review every year, but as I understand it—the Minister will correct me if I am wrong—that is not a review of individual cases but a review of the structure of the system, so for my part I do not see that that adds to the debate.

I will reflect on what the Minister has said, and I hope that he will reflect on this debate before Report, but we may well come back to this on Report. For the moment, I beg leave to withdraw the amendment.

--- Later in debate ---

[Baroness Northover]

My Lords, these amendments in the name of the noble Lord, Lord Collins, helpfully make much clearer the commitments that Ministers must make to review the regulations they have put in place, giving a time by which this must happen and more detail on what they should include. They would, indeed, as the noble Lord has indicated, make these reviews more transparent and accountable and we are happy to support them.

[Lord Ahmad of Wimbledon]

My Lords, they say that generosity defines the spirit of a person, so perhaps I can be slightly more generous than noble Lords may perceive. The noble Lord, Lord Collins, is quite correct: we have talked about this issue, and sanctions, we all accept, can be an effective tool of foreign policy and national security, but I also accept that they can have serious implications, not only for those directly designated but also for businesses and charities operating in particular areas.

Foreign policy priorities can change frequently. It is therefore important that Ministers regularly revisit the decision to apply sanctions regimes to political problems and security challenges, and also consider carefully whether the sanctions are having the intended purpose, whether there are unintended consequences and what adjustments might be needed to achieve the desired effect.

Clause 26 therefore requires the Government to carry out a political review of its sanctions every year. The EU also carries out annual reviews of its sanctions regimes. The purpose here is to consider whether the sanctions should continue unchanged or be amended. If there is a published outcome, it is simply confirmation that the legal Acts have been renewed or amended. We have in mind a similar model for the UK; the annual review would be mainly an internal policy exercise, rather than a report for external publication. If the Government decided as a result to amend the sanctions regulations, this would involve a process of parliamentary scrutiny through which we would set out the rationale. Of course, the Government would always respond to Parliamentary Questions about specific areas of policy through the usual channels.

That said, I have listened very carefully to the noble Lord, Lord Collins, and we are looking at the amendment specifically. I will reflect on the proposal in that regard. He made the helpful suggestion that, between Committee and Report, we meet again to work out some of the perhaps necessary parameters. I know he appreciates national security issues and other such issues. I hope, with the assurance that we will reflect on his proposal, the noble Lord is minded to withdraw his amendment.

[Lord Collins of Highbury]

I thank the Minister. I am going to take that as his continued giving mood and I certainly would welcome a meeting. If you are going to have a political review, I do not see how it can be limited to the Executive; Parliament needs to be involved. I therefore welcome his comments and, in light of them, beg leave to withdraw the amendment.

--- Later in debate ---

[Lord Lennie]

My Lords, I had not realised that there would be quite such a debate on the application of the rule of law, but I am now aware that it is an important matter. When a sanction’s designation is in place, and a review has been requested but denied by a Minister, the court here will have the authority to set aside the designation if the Government are found in breach of the applicable principles. That is entirely appropriate and sensible. I support the amendment.

[Lord Ahmad of Wimbledon]

My Lords, I thank the noble Lord for tabling the amendment and all noble Lords for their contributions.

I agree that appropriate remedies for designated persons are vital, but the Bill achieves this. However, since some noble Lords have mentioned comparisons with other systems of challenges—there was reference to the EU—it is worth emphasising how this Bill has been designed to reflect the current procedural protections for designated persons that exist in the European Union.

As the noble Lord acknowledged, I stated at Second Reading that the proposed threshold of “reasonable grounds to suspect” for designations is the same standard that the UK currently uses when considering designations at the EU and the United Nations. It is broadly equivalent to the threshold applied by EU courts. The Bill then provides a system for reviews and reassessments. Where those lead the appropriate Minister to decide that designation is not appropriate, they must take remedial actions. As I indicated in a previous debate, these provisions provide at least an equivalent level of protection to that afforded to individuals designated by the EU.

I agree with the noble Lords that designations should be put in place and maintained by the United Nations only if there is a sound basis to do so. I can assure all noble Lords—the noble Lord, Lord Pannick, in particular—that, as a permanent member of the UN Security Council, the UK makes this point consistently. The Bill provides a route for persons designated by the UN to bring a challenge in UK courts. As the noble Lord stated, if the court finds that the decision of the Secretary of State not to use best endeavours to secure an individual’s delisting at the UN is unlawful, the court may order the Secretary of State to do so.

However, as the noble and learned Lord, Lord Brown, also pointed out, this matter is slightly more complex. As a member state of the UN, we are legally bound to implement decisions of the United Nations Security Council taken under Chapter VII of the charter. If a person has been designated by the UN, the UK is bound by international law to maintain sanctions against the person unless and until the UN Security Council agrees to remove this designation. Again, as the noble and learned Lord pointed out, as set out in Article 103 of the UN charter, these UN obligations take precedence over obligations under any other international agreement, such as those in the European Convention on Human Rights.

I recognise that in the past—as the noble Lord, Lord Pannick, referred to—the EU court has occasionally made rulings striking down EU designations in place to implement UN sanctions. The UK’s position has consistently been firmly that it should not do so and the UK has made this point in submissions to the EU courts in the Kadi case. The EU courts adopting this approach does not change our analysis of the position. The EU is not a signatory to the UN charter and is therefore not bound by its terms—we are. It is not correct to say that this will leave a person in the UK in a worse-off position than a person in another EU member state. All the other member states of the European Union are also signatories to the UN charter, and are bound by it. If there is no EU law in place to implement a UN designation, those countries would need to take alternative steps, for example under their own domestic law, to remain in compliance with their UN obligations. The noble and learned Lord, Lord Brown, has just reflected that we have done this in the UK in the past. When, in 2010, the Supreme Court in the case of Ahmed ruled that an order putting UN counterterrorist sanctions in place was ultra vires, we created domestic legislation—the Terrorist Asset- Freezing etc. Act 2010 to ensure that the UN sanctions remained in place.

--- Later in debate ---

[Lord Judge]

I will not add very much, but I am beginning to think that there is a computer in every department which produces a Henry VIII clause at least once in every Bill. That is what we have here. This is not belt and braces; it is belt, braces and Henry VIII’s great big heavy boots. We do not want it.

[Lord Ahmad of Wimbledon]

The noble and learned Lord made me imagine Henry VIII’s boots for a moment.

As regards thinking, I am forever thinking; I think it is a good thing to do. The Government are reflecting very carefully on all elements of the arguments noble Lords are putting forward on these amendments. I will say at the outset that I can see that a number of these amendments gather around a central theme—namely, the appropriate roles of Parliament and the Government when creating and implementing future policy on sanctions. I assure noble Lords that I recognise that this is a difficult balance to strike. As power flows back to the United Kingdom from the European Union —I say to the noble Baroness, Lady Northover, that it is a case of “when” we leave the EU—it will not be appropriate to simply follow the model in the European Communities Act 1972, where decisions of the EU either apply directly in UK law or are implemented through statutory instruments following the negative procedure.

I assure noble Lords that we have tried hard to strike the balance correctly in this Bill and ensure that Parliament has the right level of oversight of the Government’s exercise of sanctions policy. For example, we have ensured that the UK autonomous sanctions regulations must be approved by Parliament before they are put in place. I continue to listen very carefully to the points that have been made about the need for proper parliamentary scrutiny. I assure noble Lords that I will continue to reflect on those points—and not just in respect of these amendments.

It is perhaps worth remembering that sanctions are, in essence, as I have said repeatedly, a matter of foreign policy and national security, which fall more to the Government than Parliament. This was recognised by the great constitutional lawyer A V Dicey, who wrote that the “right of making treaties” was,

“left by law in the hands of the Crown, and are exercised in fact by the executive government”.

That is also the practice in other western countries with national sanctions regimes and legislation, such as Canada and Australia.

On the amendment we are discussing, it is important to recognise that the imposition of sanctions is not a punishment but an attempt to change the behaviour of those who are acting in a threatening or unacceptable manner. That is why the provisions provide ways of suspending, amending and revoking sanctions. Iran is an example of where sanctions have been suspended. Under the 2016 nuclear deal, Iran sanctions can be “snapped back” by the EU if there is a breach of the international commitments made by Iran in relation to nuclear development. Noble Lords will be aware that those suspension arrangements were part of a delicate political balancing act, which the UK is working hard with the EU and other partners to preserve.

--- Later in debate ---

[Lord Falconer of Thoroton (Lab)]

I thank the Minister for his detailed explanation. Does the Henry VIII power in Clause 44(2) allow the Government, by regulations, to remove protections that an individual has under other primary legislation in relation to sanctions, for example under the Human Rights Act 1998?

[Lord Ahmad of Wimbledon]

My understanding is that the regulations would apply only to the sanctions themselves, but I shall clarify that legally as well in answer to the noble and learned Lord and return to the specific issue on Report.

[Lord Falconer of Thoroton]

Will the Minister write to me, so that we know the Government’s position before Report?

[Lord Ahmad of Wimbledon]

Perhaps I was not clear: that was exactly my intention. I do not want to say something from the Dispatch Box that is not accurate, so I will write to the noble and learned Lord on that particular point.

[Baroness Sheehan (LD)]

I am a little intrepid in saying this as I am not a lawyer or a constitutional expert but this seems to be a Bill that, from a layman’s point of view, lets the Government give themselves great powers through the way it designates individuals, connecting persons through descriptions, through definitions of involved people and through clauses that give powers to amend. These include Clause 39, which gives power to amend all of Part 1 so as to authorise additional sanctions, and Clause 44(2), which gives sweeping Henry VIII powers to amend, repeal and revoke amendments and enactments. To me, this seems like Jekyll and Hyde legislation. You think you are getting one thing, yet there is every ability within the proposed Act to change itself into something quite different.

I was quite concerned in last week’s debate, when my noble friend Lady Bowles talked about how Acts could be used for unintended purposes. I recall the case of Maya Evans, who read out the names of 97 British soldiers during the remembrance ceremony at the Cenotaph in 2005. Although it was a very innocuous statement that she was making—she was protesting against Britain being taken into the Iraq war; she felt that it was illegal—she was arrested and was the first person in the UK to be convicted under the Serious Organised Crime and Police Act 2005. Also in the same year—I might embarrass the Labour Benches here—Walter Wolfgang was forcibly removed from the Labour Party conference. Again, he wanted to protest about the Iraq war, and shouted out “Nonsense!” and “That’s a lie!” during a speech made from the conference platform by Jack Straw. He was ejected and was stopped from re-entering the conference hall by a police officer citing the Terrorism Act.

From my point of view as a lay person, I am fully supportive of the well-informed noble Lords here who are leading the charge to make sure that the Bill does what it says on the tin and does not turn into a Jekyll and Hyde Bill.

[Lord Pannick]

Whether I am well informed or not, can the Minister confirm that in his response on Amendment 72 he gave a reassurance to the Committee that these powers would be used only when necessary? That was the word he used on more than one occasion. He will remember an earlier debate we had in this Committee on whether that word should be written into an earlier clause. If with the aid of parliamentary draftsmen “necessary” could be written in to confine the use of that power, it would mitigate substantially my concern about Clause 44(2); I speak only for myself. Perhaps the Minister and the Bill team could reflect on that before Report.

[Lord Ahmad of Wimbledon]

To pick up on that final point, of course we will. I confirm that I used “necessary”. As regards the intervention from the noble Baroness, perhaps I did not quite follow her whole argument—various rules were in play—but I got the general principle that she was in support of the powers that are being conferred. As I said right at the beginning, laying it out in quite a lot of detail, I totally accept the point about the Henry VIII powers—the use of secondary legislation rather than primary legislation—which we have debated several times. Certainly, from our perspective as the Government—that is true not only of ourselves but of previous Governments as well—there is a point in principle that we try to strike a balance. Therefore I am listening carefully. On the specific point that the noble Lord made at the end, I will take that back and see how it can be adapted.

I am in reflective mode, as several noble Lords have noted during some of the earlier debates in Committee. However, on this group of amendments, I hope that after the explanation I have given the noble Lord will be minded to withdraw his amendment.

[Lord Collins of Highbury]

I agree with many noble Lords who have decided to come back to the Minister before he sat down. His response has been disappointing. These are clearly issues of principle that we will return to. I find it amazing that often, when the Minister gives examples of how difficult it would be to do X or Y, they do not appear that difficult. You can give a reason why sanctions need to be revoked. At the end of the day, whatever Crown powers or executive powers there are, the political reality is that these figures work when there is consent—when people buy into them. We are attempting to ensure that the Executive do not act with untrammelled powers and that they have to account for their actions and explain them. If Parliament then gives its support and consent, those actions and powers become more effective. That is what this debate is about today. We will certainly return to this issue on Report, but in the light of the comments the Minister made to the noble Lord, Lord Pannick, I beg leave to withdraw the amendment.

--- Later in debate ---

[Baroness Northover]

My Lords, I was rather intrigued by the Minister’s definition of sanctions as being something little more than a gentle nudge. I found myself thinking about—

[Lord Ahmad of Wimbledon]

It is certainly not a gentle nudge. What I was alluding to is that the ultimate purpose behind sanctions is that they should not exist for an indefinite period of time. It is about changing behaviour. As I noted in the example that I gave of Iraq, there are times when we could use these to very good effect to ensure, with people’s behaviour—be they individuals, corporations or, indeed, countries—that sanctions act as an effective, and deterrent, tool.

[Baroness Northover]

I am glad to have that further clarification. My eyebrows rather rose at that and I was wondering, speaking of what is benign, what my kids would have made of being sanctioned and having their PlayStations removed. They would not regard that as particularly benign. But, very seriously, it is quite striking how leaders around the world with sanctions on them strive hard to get them lifted, so I am glad to have that clarification.

I propose that Clause 35 does not stand part of the Bill. We have a series of such proposals through the Bill, as the Minister will be aware. We have had a wide-ranging discussion just now. I appreciate the efforts to improve things made by the noble Lord, Lord Collins. However, it still seems to us that this clause remains unacceptable, even if amended in the way that he proposed. That is why we propose that it does not stand part of the Bill.

Just as we wish to ensure that the imposition of sanctions is done in a way which is appropriate, transparent and accountable, so too should be the suspension of sanctions. No one here would wish to see the UK as a harbour for those not wanted elsewhere, but we must not give future Ministers the power to do that either. We feel that these powers are wide and vague, and bearing in mind that the secondary legislation coming down to us will include—as the noble and learned Lord, Lord Judge, pointed out last time—many things with which we would no doubt agree, which are then jeopardised should we take the very unusual action of voting down the SI, we need to read the Bill in that light. For example:

“The period begins when a specified condition is met and lasts for so long as the suspending regulations or a specified provision of those regulations has effect”.


That would catch a large number of things. Although the noble Lord, Lord Collins, sought to help the Government regarding the amendment we have just debated, we feel that the Government should think again over the whole clause.

--- Later in debate ---

[Lord Ahmad of Wimbledon]

My Lords, it is important to recognise that the imposition of sanctions is not just a punishment but rather an attempt—as I have articulated in relation to an earlier comment by the noble Baroness—to change the behaviour of those who are acting in a threatening or unacceptable manner.

I state clearly that Clause 35 on suspensions is important. It gives Ministers the ability to provide relief from sanctions to countries, organisations and, yes, individuals where there is evidence of positive steps towards the desired change of behaviour. The ability to suspend sanction measures, rather than fully lifting them, allows Ministers to recognise moves in the right direction while maintaining a credible threat that sanctions can be easily reimposed. We know from past experience that this is an option worth having; thus I believe this clause should stand part of the Bill. I hope the noble Baroness will accept the response I have given, which makes the point that the Bill, at its essence, through Clause 35 provides for the suspension of particular sanctions to ensure that those seeking to improve their behaviour are given an opportunity to prove it. This should be without having the immediate comfort of knowing that their sanction has been not only suspended but lifted altogether. Not having Clause 35 would prevent Ministers from having this very important tool available to impose that kind of suspension.

Clause 35 agreed.

--- Later in debate ---

[Lord Ahmad of Wimbledon]

My Lords, I thank the noble Lord, Lord Collins, for tabling this amendment. I agree that sanctions are not the first port of call, a point I have made in previous debates in Committee. The amendment specifically deals with the decision to lift sanctions, and it merits close scrutiny based on a careful assessment of whether the sanctions have achieved their political objectives, as the noble Lord said.

The amendment seeks to oblige the Government to issue a written memorandum alongside any regulation revoking sanctions which would set out the rationale in terms of the original purposes of the sanctions as outlined in Clause 1. While I agree with the important principle of parliamentary scrutiny, I believe that the Bill as drafted provides an appropriate level of scrutiny.

Let me elaborate, if I may. In the case of UN sanctions, revocation would be an automatic response to a decision of the UN Security Council. We can assume that the reasons for the lifting of sanctions would be clearly understood, making a report unnecessary. In the case of UK autonomous sanctions, the regulations could only be revoked using the made-affirmative procedure. The Government would also need to explain the rationale for lifting sanctions and would do this when presenting the said regulations. The explanations provided by the Government would cover the areas proposed in the amendment. However, the Government would need to be careful about putting the full details of the UK’s strategy in the public domain. I know the noble Lord appreciates that point.

This means that, although we support the principle of transparency, obliging the Government to issue a full written memorandum, as proposed by the noble Lord, would be inappropriate. With that explanation, I hope the noble Lord is minded to withdraw his amendment.

[Lord Collins of Highbury]

I am not sure whether that is a cup half-full or half-empty sort of response. However, I shall take it away and consider it. I beg leave to withdraw the amendment.

--- Later in debate ---

[Lord Collins of Highbury]

My Lords, I think this is one area where the Minister will have to be in his giving mood, because there is very strong opinion on it across the Committee. What the noble Lord, Lord Faulks, said is absolutely correct: it is a “just in case” clause. What if this happens? What if that happens? If things happen, there is a process and a procedure and the noble Lord, Lord Pannick, said it quite explicitly: bring in laws to deal with it; bring in a Bill that addresses those specific concerns. If it is an urgent situation that we had not thought of, there are processes and procedures we can adopt.

As my noble and learned friend said, there is an opportunity here for what he calls “pesky lawyers”. I am always cautious—whenever I dealt with lawyers in my life I always took the precaution never to ask a question I did not know the answer to. That is the situation here. Because you cannot think of the circumstances, but there may be circumstances, you say, “Let us put it in the Bill”. I am sorry, that is not acceptable. There is a consensus across the board on this and it is even a clause on which, as the noble Baroness, Lady Northover, said, the Constitution Committee and the Delegated Powers Committee are as one, as they are not on other clauses. So I fear this is one issue about which the Minister will have to think again.

[Lord Ahmad of Wimbledon]

My Lords, I thank all noble Lords for their contributions on this clause. I am hearing the message loud and clear, but in doing so I need to pick up on a few points as to the motive and the intent behind the clause. I appreciate the clarification by the noble and learned Lord, Lord Falconer, of the Government’s motives. I will not comment on his description of lawyers; it would be entirely inappropriate for me to do so. However, he makes a valid point about the explanation and it is appropriate to explain the Government’s intention behind the clause.

The clause will allow the UK to make amendments to the Bill, as noble Lords have mentioned, to allow for the imposition of new and unforeseen sanction measures, a point well made by my noble friend Lord Faulks. The power is confined to new types of sanctions and cannot be used to alter the purposes for which sanctions can be imposed. I should explain what I mean by new types of sanctions. Common types of sanction include asset freezes, travel bans, arms embargos and prohibitions on aviation and maritime transport. These are included in the Bill. However, the international community sometimes finds it necessary to develop and deploy new types of sanctions. Indeed, a recent example is the UN sanctions imposed in respect of North Korea. That resolution requires that UN member states do not grant work permits to North Koreans save where the UN agrees, in advance, on a case-by-case basis. Prior to the UN’s putting in place that sanction, such a sanction did not exist. There may be times in the future when a currently unforeseen type of sanction would again be appropriate.

[Lord Pannick]

I am sorry to interrupt the Minister but if the new type of sanction is to be imposed because the UN has considered it appropriate, it surely falls within Clause 7.

[Lord Ahmad of Wimbledon]

I think I mentioned Clause 7 in the preamble, but the noble Lord is correct. I was going on to say that, while Clause 7 would allow the UK to adopt new types of sanction when mandated by the UN, there may be times in the future when the UK needs to act outside the direct auspices of the UN.

Without the power provided by Clause 39, the UK will not be able to deploy these types of sanction without first passing new primary legislation. I have heard that point very clearly from noble Lords. That could significantly hinder our ability to co-ordinate sanctions with allies at times when UN action is not possible for political reasons. I alluded to the circumstances in earlier debates. This would risk the UK becoming the weak link in co-ordinated international responses to international crises of the kind we have seen in the Syrian civil war and Russia’s annexation of Crimea.

I also agree that it is important to give Parliament its assent when new powers are bestowed on government. That is why this clause provides that the draft affirmative procedure be used in these circumstances. In proposing that this procedure be followed—I come back to a point I made in earlier debates—the Government have sought to balance the twin demands of ensuring parliamentary scrutiny and ensuring rapid international responses.

That said, I will make two points, first on the substantive issue. I have again indicated the Government’s willingness to listen. The noble Baroness, Lady Northover, among others, rightly made the point about the reports that have been produced by both the Constitution Committee and the Delegated Powers and Regulatory Reform Committee. Indeed, they have made a similar point to that which has been debated in this House and we will be responding to those reports shortly. Therefore, I will take this back and look at the sentiment and the strength of opinion that has been expressed in this House.

On the point made by the noble Lord, Lord Pannick, and the noble and learned Lord, Lord Hope, on the drafting of Clause 39(2), while I am not a lawyer, I was looking specifically at the drafting as the noble Lord spoke. It is extremely important that we look at that again and I will take that back to ensure the drafting reflects the intent behind Clause 39. With that proposal, I hope the noble Lord will be minded to agree to the clause standing part of the Bill.

Clause 39 agreed.

--- Later in debate ---

[Lord Paddick (LD)]

My Lords, in asking that Clause 40 should not stand part of the Bill, we seek the clarification that I asked for at Second Reading, and failed to receive from the Minister, about Clause 40 and the power to make provision relating to routes to challenging decisions with immigration implications. Noble Lords will know that the Bill gives powers to Ministers to impose sanctions. Among them are immigration sanctions or the power to designate persons as “excluded persons” for the purposes of Section 8B of the Immigration Act 1971. In essence, part of the sanctions package could be either to remove designated persons from the UK or to prevent them entering the UK. The Bill provides a mechanism for those affected to ask for the decision to impose sanctions to be reviewed, initially by a Minister and subsequently by the courts—the Court of Session in Scotland and the High Court in the rest of the UK—which could include the decision to designate an individual an excluded person. This would, in effect, be an appeal against the decision to impose the sanction.

An excluded person could, alternatively or in addition, claim that they have a right to asylum in the UK or that their human rights would be infringed if they were returned to their country of origin or refused entry to the UK. This would, in effect, be an appeal against the consequences of the imposition of the sanction, rather than against the decision to impose the sanction itself. It is important that these two potential routes to challenge being designated an excluded person—either the decision to designate or the consequences of being designated—are dealt with separately and appropriately. My understanding is that that is what Clause 40 allows the Government to do, by regulation.

However, Clause 40 is quite complex and, at the same time, non-specific about what the regulations and their effect might be. The Explanatory Notes to the Bill appear to suggest, in paragraphs 115 and 116, that claims of asylum and human rights will continue to be dealt with by the Home Secretary as the Minister with the knowledge, experience and expertise to decide these matters, not by the Minister imposing the sanctions, and that any appeal against the Home Secretary’s decision would be to the immigration and asylum chamber of the First-tier Tribunal, a specialist tribunal with expertise in deciding such claims, not the High Court or Court of Session, where an appeal against the imposition of the sanction would be heard.

In a letter dated 16 November, the Minister stated that it was the Government’s,

“intention to provide, at Committee stage, an illustrative draft Statutory Instrument in relation to the powers under clause 40, so that Peers can fully scrutinise how decisions that have immigration implications will be taken and the routes of challenge”.

We are in Committee and have come to Clause 40 in the Bill, and no illustrative draft statutory instrument has been made available. Can the Minister tell the Committee how noble Lords are expected to accept Clause 40 in the absence of what he promised in his letter?

[Lord Ahmad of Wimbledon]

My Lords, perhaps I might intervene in this debate and save the Committee some time. First, they say that sorry seems to be the hardest word but it is not for me. I apologise to the noble Lord, Lord Paddick, since after Second Reading, as he said, I wrote to him and said that the Government intended to bring forward a draft instrument and would put on record during Committee the Government’s intended policy in regard to this clause. I regret to say that we have not fulfilled the first part of that intention—I will come to it in a moment—but I hope that, through what I say, I can fulfil the second part of it now.

Let me assure the noble Lord, Lord Paddick, and the Committee more generally that much work has been, and continues to be, done between officials in various departments on refining this important policy area. As the noble Lord acknowledged, the issue is complex and involves not only the specialist tribunal but how this relates to other aspects of the Bill. This has meant that, despite best efforts by officials, the draft statutory instrument was not ready to be published. It was my view and that of the Government that, rather than publish a statutory instrument that is not yet fully ready, Parliament would be better assisted by seeing a more mature version of that instrument. To that end, my officials and others across Whitehall will continue this work apace. We will endeavour to publish a version of the statutory instrument ahead of Report. I would be happy to meet the noble Lord in the interim to discuss this specific issue. I would also like to put on record for the Committee the intention behind this clause and address some of the points that he made.

Clause 40 concerns how appeals against the immigration consequences of UK autonomous sanctions are handled. I would like to give the Committee some background as to the current arrangements before I go on to speak about the clause. Under the current arrangements, UN or EU travel bans are, in the vast majority of cases, imposed on individuals who are outside the UK and have no connection to the UK. The Immigration Act 1971 already makes provision for persons subject to UN travel bans. Clause 40 allows us to ensure that the persons subject to UK autonomous travel bans can benefit from a similar provision.

In the unlikely event that a UK autonomous travel ban were to be imposed on a person in the UK, this would, as a matter of domestic law, have consequences for their immigration status in the UK—a point I know concerned the noble Lord, Lord Paddick. Whereas a person who is outside the UK will be refused entry, those who are in the UK will lose the right to remain here and may be subject to removal. A person affected in this way might argue that any removal from the UK would interfere with their rights under the European Convention on Human Rights, or be contrary to our obligations under the refugee convention. As a result, they may wish to make a human rights or humanitarian protection claim to prevent their removal. These immigration claims are usually decided by the Home Secretary, and a very developed machinery has grown up around the decision-making process to ensure that it is fair and effective and, importantly, complies with our international obligations. Such decisions, once made, can also give rise to a right of appeal before the immigration and asylum chamber of the First-tier Tribunal, a specialist tribunal with expertise in deciding such claims.

I turn to the Bill. Such immigration claims may also be made against the immigration consequences of a UK autonomous travel ban imposed under the Bill. Again, immigration claims are most likely to arise where an individual in the UK would lose their right to remain here. Noble Lords might ask why we need Clause 40, given that this situation can already arise in the context of a UN or EU travel ban. I wish to explain the point here. The Bill establishes a new administrative reassessment process for designations and a court review process in the High Court or, in Scotland, the Court of Session. No such equivalent administrative and court mechanisms are currently applied in domestic law for UN or EU travel bans. The mechanisms in place are different, so we will need to adapt the existing decision-making and appellate structures that I described earlier in order to accommodate the Bill. That is why we need Clause 40.

I turn back to the practicalities. Cases of this kind are likely to be limited in number, but it is vital that we get this right—a point made by the noble Lord himself. The Government consider it important to ensure that such claims are handled appropriately. We want to ensure that domestic sanctions do not unjustifiably interfere with fundamental rights or run contrary to our obligations under the refugee convention. It is also important that the effectiveness of our domestic sanctions regime is not compromised because our domestic legislation no longer enables us to manage effectively such immigration claims as may be made. The Government have therefore considered how these immigration claims should be treated in the context of the new administrative reassessment and court review processes.

Our conclusion is that, as a starting point, we should seek to maintain the status quo. The Home Secretary and the Immigration and Asylum Tribunal should remain the appropriate decision-makers, as they are now. Both the Home Office and the tribunal are vastly experienced in this area, having dealt with 38,681 human rights and asylum claims and appeals in 2016 alone. However, some changes will be necessary in order to ensure that domestic legislation enables us to manage situations where, for example, there would otherwise be the possibility of both the High Court and the tribunal considering the same issues, or the High Court being required to determine a protection claim that the Home Office had not had the opportunity to consider.

To illustrate the point, whereas the tribunal would be best placed to determine an appeal against an immigration decision, determining the lawfulness of a decision to freeze an individual’s assets is a decision that would be better suited to the High Court. The clause provides the powers necessary to make these changes, which will ensure that we continue to comply with our international obligations and that the effectiveness of our domestic sanctions regime is not compromised. To provide appropriate scrutiny, regulations made under this power will use the draft affirmative procedure.

I give this very detailed explanation along with, once again, an apology to the noble Lord, Lord Paddick. I believe that at Second Reading when he raised this issue I had momentarily left the Chamber or I was near the Box to clarify something, so I did not fully hear his contribution and read it only later in Hansard. As I said, I put on record that we would look to return to this in Committee, which clearly we have not been able to do. I am much minded that the instrument put forward is one that we have looked at extensively and reflects the detail of what I have just submitted to your Lordships’ House. I therefore hope that with that somewhat detailed explanation, which I briefly mentioned to the respective Front Benches out of courtesy to your Lordships’ House, the noble Lord will be minded to withdraw his amendment, with the assurance that I look forward to working with him specifically on that SI before Report.

[Lord Falconer of Thoroton]

I am grateful to the Minister for that helpful and detailed explanation. As I understand him, he is saying that regulations can be produced under this provision, which will delineate between the Minister, the High Court and the Upper Tribunal as to who decides what in relation to the variety of legal challenges that are available both in ordinary law relating to asylum and the right to remain and the rights given under this Act.

That is pretty complex. It is very difficult to judge whether this regulation-making provision is appropriate in its width without seeing a draft of what the Government have in mind. It is critical that the draft be made available a significant time before Report. I do not know when Report will take place, but it may be in the middle of January. Therefore, in the light of what the Minister said about the detailed work on this draft instrument, when might we see it? Obviously, a lot of work has been done on it and there is a draft in existence. The issue is legal appropriateness and there is no reason why we should not see the draft now.

[Lord Ahmad of Wimbledon]

The noble and learned Lord makes an important point about ensuring appropriate time before Report. He is correct to say that we are looking at Report taking place towards the middle of January in the new year, and correct to say that we must allow sufficient time to accommodate it. I cannot give him chapter and verse on the exact date but he makes his point well. I also subscribe to his view that it is important to allow noble Lords sufficient time.

[Lord Falconer of Thoroton]

I am not asking for a specific date, but will it be by the end of the week, or the end of next week? The Minister must give us some assurance that we will have it in time.

[Lord Ahmad of Wimbledon]

As I said, there are already, as the noble and learned Lord will acknowledge, various issues. We will do this in good order. Perhaps I may take this matter back—because various departments are working on this—and clarify appropriately. I will write to noble Lords on the specific date by the end of the week, which will then provide the detail. I fully acknowledge what the noble and learned Lord said about the importance of allowing effective scrutiny before Report. I say to the noble Lord, Lord Pannick—I am sorry, I meant the noble Lord, Lord Paddick; the noble Lord, Lord Pannick, has left but he clearly left an impression on me—that I look forward to working with him once the draft instrument has been circulated. For good order—I look over to the Box and my private office—once the draft has been published, we will seek to circulate it and lay a copy in the Library, as appropriate.

[Lord Collins of Highbury]

I, too, welcome the noble Lord’s statement that Report will not be until mid-January.

[Lord Ahmad of Wimbledon]

I think that I am being corrected by my rather forceful Whip on my left. I am sure that this matter will be clarified through the usual channels.

[Lord Paddick]

My Lords, I very much welcome the support and contribution of the noble and learned Lord, Lord Falconer of Thoroton. I am very grateful to the Minister for explaining that asylum claims, and any claim that somebody’s human rights will be infringed, will be dealt with by the most appropriate Minister—the Home Secretary—and through the immigration appeal tribunal route, and not by the provisions in the Bill to appeal against the imposition of the sanction itself. I am grateful for that reassurance; it is the one that I was seeking.

I am grateful, too, for the Minister’s apology for missing some deadlines, if I may put it that way. Obviously, I am content to withdraw my opposition to Clause 40 standing part of the Bill.

Sanctions and Anti-Money Laundering Bill [HL]

Lord Ahmad of Wimbledon Excerpts

Committee: 3rd sitting (Hansard): House of Lords
Wednesday 6th December 2017 Lords Chamber

[The Minister of State, Foreign and Commonwealth Office (Lord Ahmad of Wimbledon) (Con)]

My Lords, I thank noble Lords for introducing their respective amendments. I recognise, as I did at Second Reading, that there has been a good deal of interest in the anti-money laundering provisions of the Bill. In that regard, noble Lords may have noticed—and I am delighted—that I have been joined by my noble friend Lord Bates beside me on the Government Front Bench. I shall defer to him for some of the groups that we will discuss today.

Importantly, I hope this emphasises three things to the Committee: first; the Government’s cross-Whitehall and collaborative approach to the Bill; secondly, the Government’s recognition, as I said, that this is an important Bill and our desire is to get it right; and thirdly, as I hope noble Lords acknowledge—I know I speak for myself and my noble friend—that the Government deeply value what this House brings to discussions and scrutiny and equally respect its role in this regard. That is also true of today’s Committee. We have therefore ensured that appropriate Ministers are present to listen to the points raised by noble Lords.

The description of a wolf in sheep’s clothing took me back to reading the story of the Big Bad Wolf to my three and five year-old children. I assure noble Lords that there are no surprises in the Bill. The intent is very clear. I shall also provide greater detail in laying out the context behind the Government’s response to the amendments before us because that is important to your Lordships’ Committee.

Amendments 68ZA, 68ZB and 68ZC propose that regulations made under Clause 41 may be made only for the purposes of improving the detection, investigation or prevention of money laundering or terrorist financing, or for improving the implementation of international standards published by the Financial Action Task Force. I agree with the intention behind these amendments. This Government and our predecessor have, since 2015, led the way in combating money laundering and terrorist financing. Earlier this year, we brought the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 into force, ensuring that our anti-money laundering and counterterrorist financing regime met the global standards set by the Financial Action Task Force. We are the only G20 country with a public register of company beneficial ownership and, through the Criminal Finances Act 2017, we are taking further action to permit banks to share information relevant to identifying financial crime.

The United Kingdom plays an active role in shaping the international standards set by the Financial Action Task Force, and has done so since it was first established in 1989. In view of the UK’s clear intentions and long record in leading the way in this area, and taking particular account of the commitment shown by this Government and our predecessor, I do not think these amendments are required to take us any further forward. I am sure that the noble and learned Lord, Lord Davidson, and the noble Lord, Lord Collins, would agree that, realistically, no Government would bring forward regulations under Clause 41 to weaken our abilities to detect, investigate or prevent money laundering or terrorist financing, or worsen our compliance with international standards. Therefore, I hope the noble and learned Lord may be minded to withdraw his amendment.

Turning to Clause 41 in more detail and Amendment 68A, I understand that Amendments 68A, 69A and 69E—tabled by the noble Baroness—seek to protect the current anti-money laundering regime. That is set out in the 2017 money laundering regulations—I set out the full title earlier and will not burden the Committee with it again—which implement the EU’s fourth money laundering directive. Although I sympathise with that intention, I hope I can reassure the Committee that the level of protection afforded by these amendments is excessive and may have unwelcome effects.

Current regulations on money laundering and terrorist financing follow the internationally agreed standards set by the FATF and impose granular obligations on regulated firms. The UK has chosen to follow the FATF standards as anti-money laundering regimes are more effective where they are aligned internationally. That is a general principle accepted by noble Lords. As a general point, the precise nature of the obligations contained in regulations, such as detail of how firms should approach conducting due diligence on their customers and the factors they should take into account in assessing risk, is better suited to secondary legislation than primary.

That follows the approach typically taken in the UK and elsewhere to establishing detailed obligations on regulated firms. For example, the UK transposition of the fourth EU money laundering directive was given effect through primary legislation, for matters of a general nature—including existing provisions of the Proceeds of Crime Act 2002, the Terrorism Act 2000 and the Anti-Terrorism, Crime and Security Act 2001—with more detailed requirements on firms relating to, for example, their approach to due diligence and identifying beneficial owners being made in the 2017 money laundering regulations. A similar approach to transposition was taken by other EU member states.

To provide more detail on the UK legislation relating to the prevention of money laundering, the Proceeds of Crime Act 2002 establishes the general obligations on the regulated sector to report details of transactions that give rise to suspicion of money laundering or terrorist financing. Part 7 of that legislation additionally establishes the substantive money laundering offences relating to the concealment, acquisition, use and possession of criminal property. The 2017 money laundering regulations establish further and more detailed obligations, such as how firms should conduct due diligence on customers, establish and maintain group-wide policies and procedures, and assess risk connected with different customers. Unlike the provisions contained in POCA, those obligations are better suited to secondary legislation, given the detailed requirements that they impose on firms and the need to keep the detail of such obligations updated, to address emerging risks.

An example of the need to address emerging risks can be found through the rapidly evolving policy framework at EU and international level. As noble Lords will be aware, the EU’s fourth money laundering directive was largely transposed into UK law in June via secondary legislation, through the money laundering regulations, as I have said. Yet noble Lords will also be aware that amendments to the fourth money laundering directive were being negotiated even before EU member states had transposed the original directive, demonstrating that anti-money laundering and counterterrorist financing standards can evolve at a rapid pace. The noble Baroness, Lady Kramer, made the point about the justification that the Government are giving and continue to give in this regard: to quickly and effectively address emerging risks and ensure that the UK is a hostile environment for illicit finance, it is right that we use secondary legislation to implement future policy changes. That will ensure that the UK stays aligned with the evolving international standards in this area.

[Baroness Kramer]

I hope that the Minister can clarify something. He said that it is important to have access to regulation to reflect changing policy standards. Where are those standards? Are they in a piece of legislation? Are they up for debate in this House? Are they really what one Minister decides is policy? Perhaps he can explain that, because that is the missing piece—there is no structure for policy to go through a democratic process.

[Lord Ahmad of Wimbledon]

As I have already indicated—and I will perhaps challenge the noble Baroness—when we take the legislation in a wider sense, whatever the legislation, there is primary and secondary legislation. As I have said before on secondary legislation, the procedure being put forward by the Government would allow that policy to be stated and debated in both Houses of Parliament.

I shall finish the point. In terms of existing money laundering, I have already alluded to the fact that with the previous directive the money laundering regulations laid out the detail to which the noble Baroness refers.

[Baroness Kramer]

I must press the Minister on this. He used the word “allow”. I am sure the Government can do what they wish in that sense and can bring forward primary legislation, which this is. Will the Minister confirm that it does not have to go through primary legislation? The—in effect—primary legislation that sits behind the 2017 regulations that he described took place within the extensive process of democratic debate, scrutiny and votes in the European Parliament. I am trying to understand where that piece goes in this legislation.

[Lord Ahmad of Wimbledon]

My Lords, once we leave the European Union—and I notice the change in tack from the noble Baroness who said “when” and not “if” any more—

[Baroness Kramer]

It was an error on my part. The more we go into this discussion, the more “if” sounds realistic.

[Lord Ahmad of Wimbledon]

The noble Baroness knows how much I care for the accuracy of Hansard. She has clarified that.

In this case, the Government’s view is that there will be scrutiny of all future legislation once we have left the European Union. The Government will decide what element of policy that is subsequently translated into legislation will appear as primary legislation or as secondary legislation. However, for the purposes of this Bill, which I will come on to in a moment, there are certain elements that we are laying out in primary legislation and in secondary legislation. In both cases, after we leave the EU it will not be scrutiny in the European Parliament but scrutiny in this Parliament, and the Government will ensure it. I ask the noble Baroness to reflect on this point. When I come to the more substantive comment, if she will allow me, there are mechanisms within secondary legislation to allow for the effective debate to which I alluded at Second Reading.

To get back to the point that I was making—perhaps we differ on this and I acknowledge what the noble Baroness says—we believe that in order to address emerging risks quickly and effectively it is important to ensure that the UK is a hostile environment for illicit finance. This is consistent with the broader regulatory regime relating to financial services, for example, which also requires swifter tools that can be more readily updated to address emerging risks than primary legislation. A similar approach to implementing the standards set by the FATF is applied outside the UK in countries such as the United States. There, the Currency and Foreign Transactions Reporting Act 1970 imposes requirements relating to the reporting of suspicious transactions and so is broadly analogous to the Proceeds of Crime Act 2002. The detailed requirements of the international standards relating to areas such as due diligence and record keeping are then established through regulations promulgated by the Financial Crimes Enforcement Network, housed within the Department of the Treasury.

The Government are committed to parliamentary scrutiny of legislation made through delegated powers as we leave the European Union. This is the point I wish to make to the noble Baroness. I have made it before, but I hope it will reassure some, if not all, noble Lords that regulations made under Clause 41 will be subject to the draft affirmative procedure, unless they update the list of high-risk third countries, in which case they will be subject to the made-affirmative procedure. I made this point previously. I emphasise that updates to the list of high-risk countries will still require parliamentary approval, but they need to be put in place swiftly, as I am sure many noble Lords accept, so that banks and businesses can start to apply the enhanced due diligence measures which are appropriate for these high-risk areas.

The use of secondary legislation to amend anti-money laundering and counterterrorist financing regulations is consistent with our legislative approach in the past. The noble Baroness, Lady Bowles, raised the use of secondary legislation with certain Acts, but in general that is not new. I believe I have already made this point, but it was used, for example, to put the money laundering regulations 2017 in place following the fourth money laundering directive. It also provides consistency with our approach to regulations related to financial services and ensures that our anti-money laundering and counterterrorist financing regime remains consistent with internationally agreed standards. It also avoids the unusual position whereby secondary legislation made by a Minister cannot be changed without primary legislation made by Parliament. I hope that I have convinced the House that Amendment 68A is unnecessary and would place an excessive burden on legislation that needs to be flexible and capable of rapid change.

[Baroness Bowles of Berkhamsted]

The Minister said that the reason this is done in regulations is because telling a bank how to do its due diligence is too detailed for primary legislation. But he is rather overstating the case, because Regulation 18 of the 2017 money laundering regulations says that, “A relevant person”—this would be the bank—

“must take appropriate steps to identify and assess the risks of money laundering and terrorist financing to which its business is subject”.

The first requirement there is:

“In carrying out the risk assessment required under paragraph (1), a relevant person must take into account … information made available to them by the supervisory authority”,


under Regulation 17. If you go back, you find that the supervisory authority has to take notice of what the Treasury and the Home Office have said. So this is a cascade that automatically updates. If there is a new risk, the Government identify it, along with mitigating measures, and tell the supervisors, which devise ways to update the information for their sectors. Then the onus is still on the individual businesses to work out how to do this. Yes, there is a list of factors to include, but it is within the power of the Government to say, “This is an extra factor; it does not even need any legislation”. However, it embeds the duties of the Government to have a position and to come out with their reports and then the duties of the supervisors. None of that is definitely retained, because everything to do with this money laundering directive can be rubbed out. So it is not about the excruciating detail that the Minister says it is—the excruciating detail comes from the supervisors.

[Lord Ahmad of Wimbledon]

I understand the point the noble Baroness makes, but it is not about—to use her term—the excruciating detail. Secondary legislation—with parliamentary scrutiny—provides the Government with the ability to react to rapidly changing circumstances. Relying on primary legislation would not allow the Government to do that. We have a difference of opinion in that regard—but, on the point she made, guidance to financial institutions would follow whatever legislation and whatever rules and laws prevail at that given time.

I turn to Amendment 69A. After the EU (Withdrawal) Bill receives Royal Assent, the powers under the Bill as they are drafted will allow changes to the money laundering regulations 2017 and to the funds transfer regulation which are appropriate to prevent deficiencies that arise as a result of the UK ceasing to be a member of the European Union. It will not enable any other changes to be made. I note that the noble Baronesses, Lady Bowles and Lady Kramer, are aware of the need to make such changes to the money laundering regulations 2017, as demonstrated by Amendment 69D, which we will discuss later today. However, the Government’s approach in this area is to ensure continuity for regulated firms, and certainty for businesses as to the nature of the obligations with which they need to comply.

In order to ensure that our anti-money laundering regime makes legal sense on withdrawal from the EU, we anticipate laying brief regulations made under the power in Clause 7 of the EU (Withdrawal) Bill so as to fix a limited number of deficiencies within the money laundering regulations and the funds transfer regulation. Our approach will make amendments such as—for example—removing references to the Government needing to have regard to reports published by the European Commission and to the Government having to file notifications of risk assessments with EU institutions. It would not be appropriate to keep these obligations, as I am sure noble Lords acknowledge, once the UK ceases to be a member of the European Union.

Given the necessity for such changes in order to have functioning UK law, I do not agree with Amendment 69A, which would remove the ability to make these necessary fixes to our existing laws. Being unable to make necessary changes of the type that I describe would not take account of the fact—the basic fact—that the UK will have ceased to be a member of the European Union.

Legislative reform orders that derive from the 2006 Act are designed to reduce the regulatory burden rather than achieve any policy changes. They must meet a number of preconditions before they can be used to reduce regulatory burdens. Most importantly, they are not allowed to remove any necessary protection, and are therefore not a risk to regulatory safeguards within the money laundering regulations 2017.

I do not agree with the proposed exclusion of a useful tool to ensure that the UK’s anti-money laundering regimes can be simpler, easier to understand and easier to comply with, while ensuring—a point well made by the noble Baronesses in speaking to their amendments—that standards are not driven down, which I agree with, and the strength of the system is maintained. That is another point of principle I agree with.

I hope the Committee will also consider how legislative reform orders are used. There is no convention to use them to make controversial changes, and the preconditions in the 2006 Act will always apply. I believe that the preconditions of the 2006 Act are the appropriate way of constraining the use of its powers. Further, disapplying legislative reform orders in a single case might suggest that it would be appropriate to use them in other similar contexts.

I turn now to the proposed new clause contained in Amendment 69E that would limit amendments to the money laundering regulations 2017 to only those which implement standards published by the Financial Action Task Force, or that identify or revoke a designation of a high-risk third country. I should add that I am again grateful that within the clause both noble Baronesses recognise that new powers are required to update the UK’s money laundering regime after we leave the EU.

The Government are committed to playing a leading role in shaping global anti-money laundering standards through our membership of the Financial Action Task Force. Noble Lords will be aware that we led a successful campaign through the FATF to clarify that only some charitable organisations, such as those working in conflict zones, are vulnerable to terrorist financing, and in doing so improved the ability of civil society organisations to function and receive funding. We have also actively worked to clarify the obligations on the private sector to share financial intelligence. In doing so, we are addressing a key priority for the private sector, which consistently delivers the message that we will be better able to manage financial crime risk if it is able to share more information regarding suspicious customers.

It is right that the Government have the power to update the UK regime when such standards change. There are, however, several areas where the UK’s anti-money laundering regime already goes beyond these standards. Our recently established register of trusts generating tax consequences, for example, goes beyond the standards set by the Financial Action Task Force. Similarly, the decision at Budget 2015 to regulate virtual currency exchanges for the purposes of anti-money laundering and counterterrorist financing did not reflect an expectation of the Financial Action Task Force—it went beyond and it was a policy decision to which we expect to give effect through transposing amendments to the fourth EU anti-money laundering directive.

Although we will remain aligned with Financial Action Task Force standards after the UK ceases to be a member of the EU, our anti-money laundering regime already exceeds its standards in certain areas and we will wish to ensure that our defences against misuse of the financial system remain ahead of global standards, rather than solely reflecting them. Ensuring that we can make regulations so as to detect, investigate and prevent money laundering or terrorist financing, as well as to implement the standards of the Financial Action Task Force, is the most certain method of placing future changes to our anti-money laundering system on a sound legal basis. Adopting the amendment would limit our ability to do so in future.

[Baroness Bowles of Berkhamsted]

I concede that maybe we should have said “be at least as strict as”, but there is nothing in the Bill that says we are going to maintain and be ahead of global standards. We would all be a great deal happier if there were something in there indicating that standards would be maintained. We know there are good intentions, the Government have been doing good things and the Front Bench opposite would do good things, but it is not there in writing. That is what is fundamental to this: the principles are not fixed.

[Lord Ahmad of Wimbledon]

I thank the noble Baroness for acknowledging the actions that this Government have taken and—I am sure I speak for the Front Benches—for the faith that she has in both Front Benches. I have listened carefully to her point. The point that I am making is that the UK has already shown that through our commitment to the FATF, which we will continue to be part of. Not only are we complying but we are leading, and that role will continue and indeed be strengthened by the UK’s membership of the FATF. The objectives and obligations that it asks member states to adhere to will continue after we leave the EU.

I turn to Amendment 72A. The definition of terrorist financing contained in Clause 41 of the Bill is identical to that which already exists in the 2017 money laundering regulations. This definition provides that “terrorist financing” means an act that constitutes an offence under various legislative provisions, being sections of the Terrorism Act 2000; the Anti-Terrorism, Crime and Security Act 2001, the ISIL (Da’esh) and Al-Qaida (Asset-Freezing) Regulations 2011 and the Terrorist Asset-Freezing etc. Act 2010.

As noble Lords will note, elements of the definition of terrorist financing within Clause 41 cross-refer to secondary legislation that creates a criminal offence; namely regulation 10 of the ISIL (Da’esh) and Al-Qaida (Asset-Freezing) Regulations 2011. This provides that any person who contravenes prohibitions contained elsewhere in those regulations commits an offence relating to the financing of terrorism. The offences created through those regulations play an important role in deterring the financing of terrorist organisations. Regulation 14 of those regulations further provides that a person guilty of the relevant offence is liable, on conviction on indictment, to imprisonment for a term not exceeding two years’ imprisonment or to a fine or indeed both.

Clause 1 of the Bill provides that an appropriate Minister may make sanctions regulations where doing so would further the prevention of terrorism, whether in the UK or elsewhere. It is possible that such regulations made under the powers conferred by Clause 1 could impose targeted sanctions and penalties similar to those that are established through the ISIL (Da’esh) and Al-Qaida (Asset-Freezing) Regulations 2011, and which are already captured within the definition of terrorist financing within the 2017 money laundering regulations. If such regulations are made, they will effectively update the UK’s regime for counterterrorist financing. I am sure noble Lords will also note that the reference in the definition to the Terrorist Asset Freezing Act etc. 2010 will become obsolete when Part 1 of that Act is repealed.

In these circumstances, it is right that the definition of terrorist financing within Clause 41 of this Bill can be updated so that the UK’s counterterrorist financing framework can be applied consistently, working off a single definition of terrorist financing. Clause 45(5) of the Bill provides that any regulations updating this definition would rightly be made through the draft affirmative procedure, providing Parliament with an opportunity for fully scrutinising any such changes. In the absence of such a power, the Government would otherwise be obliged to maintain a definition of terrorist financing within this legislation that could quickly go out of date and so limit the effectiveness of our response to the financing of terrorist groups.

[Baroness Bowles of Berkhamsted]

My Lords, there are a lot of regulations going on here that interact with one another. Will they be considered one by one, so that they can be looked at comprehensively, or will they come in a great big wodge—akin to the sort of thing we get on money laundering?

[Lord Ahmad of Wimbledon]

My Lords, I am sure that the noble Baroness will accept that there are times when it makes sense to discuss certain regulations together in a group. At other times, they will be discussed individually. We will certainly look at the context of each regulation and introduce it in the appropriate manner. The key point I would make in all this is that, under the procedure we have adopted, we want to ensure that there is effective scrutiny.

I totally accept the point of principle and have noted our difference of opinion on the point made by both noble Baronesses and others on primary and secondary legislation. However, I have explained why the Government believe their approach is the right one. I also appreciate the patience of Members of the Committee in our detailed discussions setting the context, which I am sure will be reflected in our discussions today. I thank noble Lords for their patience and indulgence, and hope that they are minded to withdraw or not move their amendments.

[Lord Davidson of Glen Clova]

My Lords, the patience of this side has not been strained by the Minister, who provided a complex and interesting setting-out of the way in which the UK envisages the future. The debate in this complicated and difficult area has been most useful.

The noble Baroness, Lady Bowles, provided an intensive forensic analysis, which, I suspect, may leave one or two questions that require answers that we may, no doubt, look at on Report. Plainly, there is a difference of view between the Government and the Opposition as to the way forward on minor matters but not on the substantive way forward. While I therefore recognise the tack made on the Bill by the noble Baroness, Lady Bowles, we do not share the way forward that she suggests. However, we recognise a number of the concerns she identifies.

The noble Baroness, Lady Kramer, set out her assessment of the damage to democratic scrutiny that this approach adopts. One does, of course, speculate what would happen if a Labour Government had proposed such wide powers for Ministers. One might imagine that certain Brexiteers would have fairly vociferous views on any such proposal.

The speed argument for the anti-money laundering aspect of this clause is not entirely clear, to this side at least. As to the answer stating that there are emerging risks, it would perhaps be useful to have some examples of how they have emerged and how the current system has failed to deal with them.

The noble Baroness, Lady Kramer, identified the possibility of a sunset clause. She will be pleased to see that my noble friend Lord Collins has an amendment proposing such a clause.

I must reject the ovine reference. We are trying to find a way forward that is consonant with a good, strong regime on AML and terrorist financing. I welcome the Minister’s intention to get it right. He sees improvement as a way forward and we share that approach. Our concern is that not every future Minister might share this Minister’s good intentions and is therefore to push the legislation in an improving direction, and it is for that reason alone that we advanced this amendment.

The Minister set out the UK position at length. Long may it continue; it certainly puts the UK in a strong, leading position in relation to money laundering and terrorist financing protection. At this stage, we will go way and think about this further. I beg leave to withdraw the amendment.

--- Later in debate ---

[Lord Collins of Highbury]

The Opposition’s view, in terms of global economic theft, for want of a better word—the noble Baroness, Lady Kramer, raised this point—is that we are not talking about domestic industries or domestic activities. We are talking about transactions that are going global in terms of what I would call international crime. Not only the Panama papers but also the Paradise papers are showing that these activities are causing far more damage.

I believe that the overseas territories have an obligation to comply with international agreements, certainly regarding our UN obligations on sanctions. If we sanction a country for corrupt activities, the overseas territories have to comply. If it is good enough for sanctions, it is important that we consider it important enough for some of the crimes we have heard described this afternoon.

[Lord Ahmad of Wimbledon]

My Lords, I thank all noble Lords who have taken part in this debate. In particular I thank the noble Baroness, Lady Stern, for tabling this amendment. It would require the Secretary of State to provide all reasonable assistance to the Governments of certain of the British Overseas Territories with significant financial centres to enable each of those named overseas territories to establish a public register of company beneficial ownership. It further provides that if, by 1 January 2019, such overseas territories have not established such a register, the Secretary of State should take all reasonable steps to ensure that the Privy Council legislates to require each relevant overseas territory to do so. With your Lordships’ indulgence, I shall refer to the overseas territories as the OTs to save a degree of time.

I also appreciate that, as the noble Baroness articulated in moving the amendment, it was a probing amendment. That allows me to outline what steps have been taken. The OTs, as you know, are separate jurisdictions with their own democratically elected governments. They are not represented in this Parliament and so it has only been in exceptional circumstances that we have legislated for the OTs without their consent.

Financial services are the domestic responsibility of territory Governments. This creates an entirely different relationship from examples where we have had to legislate. For example, we have acted over international human rights obligations and, indeed, on decriminalising homosexuality. On the governance structures in which these territories work, as the noble Earl and my noble friend Lord Naseby have indicated, and as the territories and the House will recognise, legislating for the OTs without their consent would effectively disfranchise their own elected representatives. It would create considerable ill-feeling, which the Government do not wish to do.

Legislating to require certain OTs to establish public registers of company beneficial ownership when they do not wish to do so of their own volition would also mean that the territories would be less keen to maintain their current level of co-operation. This would jeopardise the progress—which I shall come to in a moment—that has already been made in this area and the spirit of working in partnership that we have fostered with them. The noble Lord, Lord Collins, said that I was running off to the joint ministerial council—I think I ran from it. We covered this subject; indeed, it was also covered by my right honourable friend the Prime Minister in her meeting with the overseas territories. Jeopardising progress in this respect is not something any of us want to do. Given the necessary lead-in period for establishing any new register of beneficial ownership, this would set back UK law enforcement’s ability to access information relating to the beneficial ownership of companies in the OTs.

Let me assure noble Lords that this does not mean we are content for no action to be taken in this space. It simply means that we wish to take action within the existing framework of friendly co-operation, building on the progress already made. The noble Baroness, Lady Stern, made the point that I am the Minister for Overseas Territories. I have been dealing quite extensively with them, as noble Lords will understand, particularly certain territories, because of the tragic hurricanes that struck. We raised these issues directly, and we have seen good progress.

As noble Lords will know, the UK is a global leader in the cause of corporate transparency. We are the only country among the G20 to have a fully established public register of company beneficial ownership, and we continue to push for this to become a global standard. The international standards set by the Financial Action Task Force do not require it, however, reflecting the lack of international consensus in this area. These standards require only that:

“Countries should ensure that there is adequate, accurate and timely information on the beneficial ownership and control of legal persons that can be obtained or accessed in a timely fashion by competent authorities”.


Nevertheless, should public registers become the global standard, we would expect the OTs to meet it. The UK is far ahead of other countries in this area. The current EU framework does not require all member states to establish public registers of company beneficial ownership, so many have chosen not to do so. There is already progress in this area and we need to build on it within the existing framework of friendly co-operation, to which I have alluded. Under the arrangements that we concluded with the OTs in 2016, overseas territories with significant financial centres committed to hold beneficial ownership information in central registers or similarly effective systems, and to provide UK law enforcement authorities with automatic access to such information within 24 hours of a request being made, or within one hour in urgent cases.

These arrangements—also known as the “exchange of notes”—came into effect on 30 June this year and are in the process of being fully implemented by the OTs. An important point is that effective implementation of these arrangements will put the OTs ahead of many G20 members and many individual states of the United States—a point made well by my noble friend Lord Naseby.

I am pleased to report that Bermuda, the British Virgin Islands, the Cayman Islands and Gibraltar have central registers of beneficial ownership information or similarly effective systems in place, and they are taking forward population of their systems with beneficial ownership data.

We are also providing support to the Government of Anguilla to establish an electronic search platform providing access to beneficial ownership information, as well as support in drafting underpinning legislation. We are now working with Anguilla to finalise a memorandum of understanding on the terms for provision of our support, and we expect its beneficial ownership system to be established in the spring of 2018, notwithstanding the current rebuilding challenges it is facing following the hurricane. Work on establishing a central register in the Turks and Caicos Islands has been delayed owing to the impact of Hurricane Irma, but we expect this to be in place soon.

We did not seek a bilateral arrangement with Montserrat, as we had with the other OTs with financial centres, because Montserrat had already committed in November 2015 to include beneficial ownership information in its existing public companies register. A Bill requiring the inclusion of beneficial ownership information in the existing register will be introduced to Montserrat’s Legislative Assembly this month. The target date for the addition of that information to the register is 1 April 2018.

Having heard that detail, I hope your Lordships will agree that it demonstrates what can be achieved by working consensually with the OTs. It is right, therefore, that we focus on the implementation of the existing arrangements and that future work in this area be carried out within the existing framework of friendly co-operation, rather than generating ill will by imposing upon the OTs without their consent.

We are committed to following up on these arrangements to ensure that they deliver in practice, are implemented effectively and meet our law enforcement objectives. There is explicit provision in the exchange of notes for the operation of the arrangements to be reviewed six months after they came into force—that is, at the end of this year—and subsequently on an annual basis. These formal review processes are in addition to ongoing monitoring of the practical application of the exchange of notes by the UK and each relevant OT.

In addition, noble Lords will recall that Section 9 of the Criminal Finances Act 2017 amended Part 11 of the Proceeds of Crime Act 2002 to establish a statutory review process for the implementation of the exchange of notes. This report must be prepared before 1 July 2019 and relate to the implementation of the exchange of notes from 1 July 2017 to the end of December 2018. Once prepared, it will be published and laid before Parliament. The Government are clear that OTs with significant financial centres must fully implement the exchange of notes to which they have each agreed. The noble Baroness, among others, asked whether this matter had been raised. I have already said that it was raised at the JMC, and the Prime Minister reiterated this at her meeting with the leaders of the OTs last week. These arrangements have been made and must be honoured.

A key feature of the Government’s approach has been to maintain a level playing field between the OTs with financial centres and the Crown dependencies. As I am sure noble Lords reflecting on my contribution will see, we have robust review processes for the implementation of these arrangements, both on an ongoing basis with the Crown dependencies and the OTs and through the Criminal Finances Act. If these review processes demonstrated that full implementation of the exchange of notes was not taking place in any individual jurisdiction, it would be right for us to consider the issue further.

My noble friend Lord Patten, who I see in his place, raised the EU blacklist. Perhaps I may, first, give some factual information. I will check Hansard but I believe that he mentioned that Bermuda was on the blacklist. Bermuda is not on it; nor are the Cayman Islands or the Crown dependencies. Bermuda, the Cayman Islands and the Crown dependencies are on a separate list—I am quoting here—of co-operative jurisdictions which have been assessed by the EU as being unsuitable for the blacklist. They have also further committed to address any remaining concerns by the end of 2018. I can be quite specific in saying that this is not a grey list; on the contrary, it is a demonstration of the progress and positive commitments that have been made and are being achieved.

Sanctions and Anti-Money Laundering Bill [HL]

Lord Ahmad of Wimbledon Excerpts

Committee: 3rd sitting (Hansard - continued): House of Lords
Wednesday 6th December 2017 Lords Chamber

[The Minister of State, Foreign and Commonwealth Office (Lord Ahmad of Wimbledon) (Con)]

My Lords, we are coming to the end—this is the last group. The noble Baroness has given a detailed exposition of the reasons behind the proposed amendments. I can say quite clearly that the Government do not agree with her position. She used phrases such as “the Government going it alone”. Throughout the Committee stage—and today with my noble friend—I have articulated the fact that with the FATF we have led the way. These are areas where Britain is ahead of the curve, not behind it. Perhaps I can answer some of her questions directly, and I will also look carefully at her contribution in Hansard.

Schedule 2 provides further detail on the scope of the anti-money laundering and counterterrorist financing regulations that can be made under Clause 41. Paragraphs 1 to 17 of this schedule confirm that regulations made under Clause 41 can cover the topics already addressed in the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

The noble Baroness quoted a few paragraphs. I will quote a few in return. For example, paragraph 4 confirms that regulations made under Clause 41, which she referred to, can require prescribed persons to take specified actions in relation to customers in prescribed circumstances.

The money laundering regulations 2017 currently give effect to the international standards set by the Financial Action Task Force and EU law, by including provisions of this type which require regulated firms to conduct varying levels of due diligence on their customers on a risk-sensitive basis. Further, and for example, paragraph 7, which I think the noble Baroness also mentioned, confirms that regulations under Clause 41 can confer supervisory functions—and corresponding powers—on supervisory authorities, such as the FCA. Other paragraphs within the schedule similarly clarify or supplement other aspects of regulations under Clause 41. For example, paragraph 18 provides that regulations made under Clause 41 cannot provide for criminal sentences that exceed the statutory maximums already established through the money laundering regulations 2017. Section 7 of the Proceeds of Crime Act 2002 provides for longer prison sentences of up to 14 years; these provisions should be seen in that wider context.

Finally, the noble Baroness mentioned paragraph 20 on a few occasions. This paragraph confirms that regulations made under Clause 41 may make provision corresponding or similar to the money laundering regulations. Sub-paragraph (2) also confirms that regulations made under Clause 41 can be used to amend or revoke the money laundering regulations. Indeed, this is exactly what was done when the money laundering regulations came in to replace the 2007 regulations. This is not something new that has been created.

[Baroness Kramer]

When the money laundering directive came in, there was, through the cascade mechanism, a framework within which the regulations sat. Will the Minister at least acknowledge that that framework is the missing piece here? Does he acknowledge that the cascade structure, which was a backbone to make sure that the framework and the principles were translated down through the system, is also missing here? Amendment and revocation had to be within that context, with those constraints and principles. The new amendment that he quoted has no such constraint or principle sitting around it. That is the whole point that everyone is attempting to make in this discussion. He needs to tell us why the Government have chosen that route, where those frameworks, principles and backbones are eliminated.

[Lord Ahmad of Wimbledon]

The noble Baroness says “everyone”. I know that she and the noble Baroness, Lady Bowles, made that point but I do not agree. She has made her point and I have listened; perhaps she should listen to the point that I am making in response.

As the noble Baroness says, Schedule 2 ignores the cascade of information. The power in Clause 41 will enable us to update and amend existing legislation that does this, as we did when the regulations were replaced this year, as I have already mentioned. This should not be viewed in isolation, which I fear is what the noble Baroness is doing. When new categories of risk manifest—the noble Baroness, Lady Bowles, talked about virtual currency exchanges—new legislation will be needed, and this power helps to fill that gap.

In sum, Schedule 2 sets out examples of the scope of the anti-money laundering and counterterrorist financing power contained in Clause 41, and it defines the limits of this power in relation to criminal penalties. The noble Baroness, Lady Bowles, ignores proportionality. However, this issue must be looked at in the wider context, not in isolation. Ministers are bound to use these powers proportionately, taking account of people’s human rights, and they are bound by Section 6 of the Human Rights Act 1998. I therefore contend that Schedule 2 should stand part of the Bill.

Perhaps I may briefly mention Amendment 71A, which I understand is related to the opposition of the noble Baronesses, Lady Kramer and Lady Bowles, to Schedule 2. To give an example, the reference in paragraph 2 of Schedule 2 to regulations, mentioned by the noble Baroness, being capable of requiring,

“prescribed persons to identify and assess risks relating to money laundering, terrorist financing and other threats to the integrity of the international financial system”,

corresponds with regulations 16 to 18 of the money laundering regulations 2017. These require the Government, supervisors and regulated firms to assess the risks of money laundering and terrorist financing at a national, sectoral and business level as appropriate so as to inform the nature and extent of any due diligence measures applied by regulated firms.

Perhaps I may give a further example. The reference to “prescribed persons” in paragraph 4 of Schedule 2, which again the noble Baroness quoted, corresponds to Part 3 of the money laundering regulations 2017. This establishes a framework giving effect to the standards of the Financial Action Task Force relating to simplified and enhanced customer due diligence, which I am sure we all welcome. Again, this is not about the UK going it alone; it is about how we are part and parcel of the FATF.

Therefore, the amendment would not remove the Government’s ability to designate categories of business as regulated for anti-money laundering purposes, or designate supervisors. These purposes are already permitted under Clause 41 and are referred to in Schedule 2.

There may also be a number of areas where we want to confer functions upon persons to assist with the implementation and enforcement of sanctions. I think that the noble Baroness, Lady Bowles, startled the doorkeepers when she quoted various examples. Captains of ships and harbour masters, for example, might need to exercise functions in order to comply with shipping sanctions. We might also need to confer functions to help enforce sanctions on border officials, agents of Her Majesty’s Revenue and Customs, or law enforcement agencies, such as the National Crime Agency.

I know the noble Baroness. She is well versed in the money laundering issue, and I respect that. That is why I said at the outset that I will listen again, or read, I should say—listening to Hansard may be stretching it a bit—her contribution very carefully and see if there are aspects that need further amplification and explanation from the Government. I hope that through my practical examples I have addressed some, if not all, of her concerns and that at this point, she will be minded to withdraw her amendment.

[Baroness Bowles of Berkhamsted]

I thank the Minister for his reply. I fear that a large part of it merely proved my point that small extracts have been turned into powers. I maintain that without the surrounding framework to give proportionality, you do not need everything that is in there. It is difficult—

[Lord Ahmad of Wimbledon]

I was merely giving a few illustrative examples. Like the noble Baroness mentioned, I think she and I would be the only ones here if we carried on in this respect. What I was doing was merely illustrating, but it is dealt with comprehensively.

[Baroness Bowles of Berkhamsted]

That is the point. It is converted into a power very comprehensively but it just takes the first section. For instance the one I quoted does not even point out that they are responsible only for what goes on in their own business. That makes it very difficult. A lot of this could be dealt with by putting in those proportionality statements and a few more things.

The other source from which this list of powers has been obtained—which I think the Minister was referring to—is the FATF recommendations. However, you have to bear in mind that the FATF is an organisation meant to look at risks to the financial system, terrorist financing and those kinds of things. It is not set up with a branch to deal with civil liberties or even human rights. It leaves that to the nation states which are then going to implement. I could probably find it in the FATF but it is too late in the evening to do that. You cannot just put the list of powers or of things that the FATF wants you to do into powers without acknowledging that there has to be a framework.

Yes, there may be human rights elements that we have not abolished, nevertheless there are more things—

[Lord Ahmad of Wimbledon]

To clarify, I said that we need to look at this in the wider context. That is why I referred to the obligations that Ministers are bound by in the Human Rights Act. That is part of our statute, so we are obliged to follow that.

[Baroness Bowles of Berkhamsted]

Unfortunately, it seems that that ends up in the courts from time to time, which is very difficult for the sorts of people that might find themselves entangled in this. My plea is really that we just make an effort to get this a little bit more right. In that spirit, I will not be pressing Amendment 71A, which was linked to the creation of supervisory powers, which was why it was in the same group. This issue is one that we will wish to return to in general on Report.

Sanctions and Anti-Money Laundering Bill [HL]

Lord Ahmad of Wimbledon Excerpts

Committee: 4th sitting (Hansard): House of Lords
Tuesday 12th December 2017 Lords Chamber

[The Minister of State, Foreign and Commonwealth Office (Lord Ahmad of Wimbledon) (Con)]

My Lords, I thank the noble Lord, Lord Collins, and other noble Lords who spoke in this brief debate. In addition—to depart from my notes—for the first time I welcome the new Deputy Chairman of Committees to his position. It is certainly the first time for me stand at the Dispatch Box with him in his place.

From the outset I agree—I made this point clear in various debates at both Second Reading and in Committee—on the need for proper parliamentary oversight of sanctions regimes and I recognise the importance that noble Lords attach to this. That has been made very clear to me during Committee. Amendments 73 and 74 would require the draft affirmative procedure to be used for any non-UN sanctions regimes. As noble Lords know, the UK, through the European Union, imposes a number of sanctions regimes and measures that do not derive from the United Nations. These include, for example, sanctions against Russia over its illegal annexation of Crimea, and sanctions against the Assad regime in Syria.

In the future, it is likely—indeed, highly probable—that the UK would want to join its allies in imposing sanctions in circumstances where UN agreement is not possible. The noble Baroness, Lady Northover, talked about Ministers deciding. No, it would be Parliament deciding, requiring that these sanctions regimes come into effect only after the approval of both Houses of Parliament. In that way it would significantly undermine their effectiveness and make it harder for the UK to impose sanctions at the same time as international partners. Future targets of sanctions would be given forewarning of their designation, which would enable them to move their assets out of the UK and take other steps to nullify the effect of sanctions. This would undermine the credibility of sanctions as a foreign policy tool.

The Bill provides instead that the made-affirmative procedure, as the noble Lord, Lord Collins, acknowledged, should be used for non-UN sanctions to ensure that measures have immediate effect, while still requiring the approval of both Houses within 28 days. This strikes the right balance between enabling the Government to act decisively and ensuring accountability to Parliament.

Amendment 75 would require the draft affirmative procedure for any regulations that suspend, revoke or amend existing sanctions. As the Bill stands, regulations that suspend sanctions are subject to the negative procedure. This is to ensure that they can be used flexibly to recognise an improvement in behaviour while maintaining a credible threat that sanctions would immediately be re-imposed in the event of backsliding. This approach has been used to good effect as part of international diplomacy—for example, in the context of the Iran nuclear deal. If the Government were unable to suspend sanctions without waiting for the express approval of Parliament, it would reduce our ability to swiftly deploy these options in support of foreign policy goals.

In addition, as suspension of sanctions has the effect of reducing restrictions on individuals, we do not consider that it requires the higher level of scrutiny required to introduce such restrictions by imposing non-UN sanctions.

As regards regulations to revoke or amend sanctions, the Bill provides that this may be done using the same procedure as was used to create the regulations in the first place. Regimes containing UN-mandated sanctions would be revoked or amended by the negative procedure, and UK-autonomous sanctions by the made-affirmative procedure. I do not see a reason why the revocation or amendment of sanctions regimes should require greater scrutiny than their creation.

Amendment 75A intends to require the draft affirmative procedure for all sanctions regulations that contain enforcement provisions as set out in Clause 16. I acknowledge that we debated Clause 16 on the first day in Committee. I listened carefully to the concerns expressed about the creation of criminal offences through secondary legislation. We are looking at and reflecting on these concerns.

Let me may say a word or two about the process we currently follow as an EU member state and what we envisage following the enactment of the Bill. For each of the current UN and EU sanctions regimes we currently implement through EU law, the UK has created the relevant criminal penalties through statutory instruments made under the negative procedure. Similarly, we expect that all the sanctions regulations created under this Bill will include enforcement provisions of some kind. We envisage one regulation for each country, setting out the purpose of the sanctions, the specific measures being imposed, and the corresponding prohibitions and offences.

This approach allows a degree of nuance when determining penalties. For example, a breach of sanctions that results in nuclear material being made available to North Korea is obviously very serious, whereas failing to supply information to the relevant authority might attract a less severe penalty. Each regime is different, meaning different offences and penalties might be appropriate. This principle was accepted by the Delegated Powers and Regulatory Reform Committee.

Given that all sanctions regulations will include enforcement provisions, this amendment would require the use of the draft affirmative procedure in all cases, both UN and non-UN. For the reasons I have set out, we believe the correct approach is negative procedures for regulations containing UN sanctions and made-affirmative for UK-autonomous sanctions.

The use of the draft affirmative procedure for UN sanctions regulations would mean that we would routinely breach our obligation to implement the relevant asset freezes “without delay”. Noble Lords may be aware that Part 8 of the Policing and Crime Act 2017—approved by this House—contains specific powers designed to bridge the sometimes lengthy gap between the adoption of measures by the UN Security Council and the entry into force of the corresponding EU legal Acts. The amendment would undo our recent efforts to accelerate our domestic implementation of UN sanctions. Given my explanation to the Committee, I hope that the noble Lord, Lord Collins, is minded to withdraw his amendment.

[Lord Collins of Highbury]

I thank the Minister for his response. The words of the noble and learned Lord, Lord Judge, come to mind: he said that we are not simply bringing EU law into domestic law and preserving it, but extending it—a lot. That is the key issue of concern to noble Lords in this House. I hear what the Minister is saying but we will keep coming back to this issue in other groupings. On Report, we will certainly make the voices of all noble Lords heard on this subject. I beg leave to withdraw the amendment.

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[Lord Ahmad of Wimbledon]

My Lords, I am very grateful to the noble Lord, Lord Collins, for again raising the issue of parliamentary oversight, and to all noble Lords who have spoken in this debate. I start with a confession: unlike the noble Baroness, Lady Bowles, I did not go to bed last night thinking about the Sanctions and Anti-Money Laundering Bill. I had a three year-old to contend with at that time, so I did not share that experience, nor did I dream about the Bill. Nevertheless, let me say at the outset that I accept the importance of scrutiny, as I have said, and before I come to the amendments in the name of the noble Lord, Lord Collins, I shall address the point just made by the noble Lord, Lord McNally, who spoke about his ministerial responsibilities when he was Minister for the Crown dependencies. His advice is something that I have continued to say to our overseas territories. I was his Whip at that time and I recall those conversations well. Equally, although the noble Lord, Lord Hain, is not in his place, in addressing these amendments I totally acknowledge the important points made in Committee about anti-money laundering and raised again in relation to the previous groups.

I shall address Amendments 75B, 76A and 76B together, as they have a single effect of changing the procedure for regulations made under Clause 41 of the Bill, which concerns anti-money laundering, to the so-called super-affirmative procedure. As we have discussed previously, the Government are committed to ensuring robust scrutiny of regulations made under the Bill. Any regulations made under this clause already have to be made under the draft affirmative procedure and require Parliament’s consent before they take effect. The sole exception to this is when regulations are made to add or remove countries from a list of high-risk jurisdictions in connection to which enhanced due diligence measures must be undertaken. Both the Financial Action Task Force and the European Union currently publish such lists. After the United Kingdom ceases to be a member of the EU, we will seek to align our list of high-risk jurisdictions with that published by the FATF. Part 3 of the Bill provides that regulations updating this list will be made through the made affirmative procedure. This will ensure effective parliamentary scrutiny of such changes, while ensuring that we can align promptly with international standards around which jurisdictions present high risks of money laundering or terrorist financing.

However, this amendment would go further. It seeks to impose the so-called super-affirmative procedure. This would require the Government to publish a draft statutory instrument, with a detailed explanation of its contents, and have due regard to any representations made within a 40-day or 60-day period, including any resolutions of Parliament, before seeking the consent of Parliament to the original or an amended version. I totally appreciate the need for parliamentary oversight, but I believe that this amendment is unnecessary. I assure noble Lords that the Government take parliamentary scrutiny seriously, reflected in the fact that regulations under this clause are already under the draft affirmative procedure.

The Bill will already increase levels of parliamentary scrutiny above and beyond the status quo. We—and other Governments, regardless of party—typically make anti-money laundering regulations through the negative procedure. The Labour Government did this when transposing the third EU money laundering directive through the Money Laundering Regulations 2007. A similar approach was taken earlier this year when we transposed the fourth EU money laundering directive through the money laundering regulations 2017. As noble Lords will be aware, the implementation of the 2017 regulations followed a 12-week policy consultation, followed by a four-week consultation on the draft regulations. Consultations of this type are usual practice for significant changes to regulatory regimes, such as those relating to anti-money laundering.

The Government always pay close attention to the views of parliamentarians, and of noble Lords in particular, on anti-money laundering. In last week’s debate on the Bill we talked about the anti-corruption strategy, which, as the noble Lord, Lord Collins, acknowledged, we published yesterday. In it we reaffirmed our commitment to establishing a public register of the beneficial ownership of overseas companies which own UK property. The Government will publish a draft Bill to this effect in this parliamentary Session, allowing an opportunity for pre-legislative scrutiny. The noble Lord, Lord Collins, asked about the strategy. I assure him that the Home Secretary, as a senior member of the Cabinet, will personally chair a new economic crime strategic board to drive forward action in this regard.

When changing the UK’s anti-money laundering framework after leaving the EU, the laying of regulations through the draft affirmative procedure will allow Parliament and the relevant committees sufficient time to look at the draft before it is debated or comes into effect. I also remind noble Lords that the regulations will be subject to an affirmative resolution in both Houses before they come into force. These measures, along with changes to the Government’s processes for bringing forward secondary legislation, will go further to addressing the issues that the noble Lord, Lord Tunnicliffe, raised earlier this year in relation to the process by which the money laundering regulations 2017 were brought into force.

On the point of broader consultation, I reassure noble Lords that the Government regularly speak to interested stakeholders when considering changes to policy or process. I am confident that this will remain the standard practice in matters of this kind, where the Government are dependent on banks, businesses and other stakeholders to ensure effective compliance. With that explanation, I hope the noble Lord is minded to withdraw his amendment.

[Lord Collins of Highbury]

My Lords, I thank the Minister for his comments, but I think all noble Lords will be concerned. We are moving from one type of regime to another. The fact of the matter is that, as the noble Baroness, Lady Bowles, has said on numerous occasions, EU directives go through a very detailed process of democratic scrutiny—at European level and, of course, at domestic level. We know in advance what those directives contain and we debate them fully, and we have the opportunity, through our representation in Europe, to challenge elements of them. All that is going to disappear when we leave the EU. We want to know that we are not giving up that democratic accountability to simply place everything in the hands of the Executive. I am rather disappointed, to put it mildly, with the Minister’s response. I assure him that we will be tabling amendments on Report, particularly with regard to Clause 41, which will ensure that there is proper accountability and scrutiny.

[Lord Ahmad of Wimbledon]

I assure the noble Lord that I am listening very carefully. I did the noble Baroness, Lady Kramer, an injustice when flicking through my notes. As noble Lords can probably hear, my voice is deeper. That is the result of telling your children to wrap up warmly on Wimbledon Common but not following that advice yourself. Nevertheless, I listened to the points made by the noble Lord and the noble Baroness, Lady Kramer, very carefully. I will consider carefully the points the noble Baroness has raised in Committee, particularly on having a framework, and I recognise the importance of the points raised by the noble Lord—I hear his strength of feeling. I will respond to these issues, as I have said. Some of these concerns have been raised in the Delegated Powers Committee’s report, which we will respond to shortly as well.

[Lord Collins of Highbury]

I thank the Minister for those additional comments but they still do not change my concerns. I would welcome whatever further consideration he gives them and ask that we have what he has to say in plenty of time before Report. In the meantime, I beg leave to withdraw the amendment.

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[Lord Davidson of Glen Clova (Lab)]

My Lords, this amendment is a useful reminder that the Brexit process needs to reflect the devolved nature of the United Kingdom. I take this opportunity of looking at this amendment to make certain observations more broadly and, indeed, to go back to the previous group where the Minister referred to a UK property register. He will be aware—and if he is not aware, he will no doubt be told by those sitting beside him—that the United Kingdom property register covers the whole United Kingdom via three separate registers. Indeed, two of those registers come from jurisdictions which voted by a majority to remain in the EU. Plainly the Minister does not intend to give ammunition to those who wish to withdraw from the UK. This Bill, and this part, are aimed at enabling withdrawal from the EU. That is one objective. There is a body of people who will find ground for complaint in more or less anything that in some way does not take account of the separate nature of various bits of the United Kingdom. With that small warning, I commend this amendment, and leave it at that.

[Lord Ahmad of Wimbledon]

My Lords, the Bill provides powers to be used in pursuit of the UK’s foreign policy and to ensure our national security. Under the UK’s constitutional settlement, these matters are reserved to Westminster. This Bill is accordingly one that is so reserved.

The amendment would, in effect, give the devolved Administrations the right to veto legislation related to UK foreign and security policy. This is contrary to the devolution settlement between Westminster and the devolved legislatures. Devolved legislatures do not have any right to veto measures where they relate to matters of foreign and security policy, including decisions of the UN Security Council. Any such amendments can arise only as the consequence of the sanctions themselves. Their primary purposes will always be a reserved matter.

I reassure noble Lords that during the preparation of the Bill the devolved Administrations were fully consulted on this point and they have not disagreed with our assessment that the Bill is reserved. The amendment would rewrite the devolution settlement, and I am sure that was not the intention behind it.

On the observation and implementation of international obligations within the competence of the devolved Administrations, while they have the power to legislate to implement measures required as a result of international obligations entered into by the UK, that does not provide them with any right to veto UK measures for the purposes of foreign and security policy, including measures negotiated and agreed by the UK in the UN. As I have already said, we have consulted extensively with the devolved Administrations on this very point and they have not disagreed with the Government’s assessment.

[Baroness Northover]

My Lords, I thank the Minister for that response which was along the lines that I anticipated. Yet again, it is an argument for generally limiting the powers in the Bill so that the concerns that I have expressed would be lessened. I thank noble Lords for their support. In the meantime, I beg leave to withdraw the amendment.

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[Baroness Kramer]

My Lords, I will speak briefly. I am no expert on the relevant legislation that is being repealed under this clause, but I have spoken to those who are, and the response I have had is one of shock. Legislation that went through both Houses of Parliament, with great care, debate, consideration and amendment, is now being swept away, to be replaced by a regulatory power, which, again, is not bounded in any way. It could be identical or it could be completely different, but it is not discussed or laid out anywhere in this legislation.

In the past we have talked primarily of powers that have come through a democratic process in Brussels: through the European Parliament’s scrutiny, consultation and voting processes, and through votes of the Council. In this case, we are talking about sweeping away, to be replaced by regulation, significant legislation that came through this Parliament in a democratic process. I do not understand, nor have I heard any explanation, why the Government are choosing to take this route.

[Lord Ahmad of Wimbledon]

My Lords, I draw noble Lords’ attention to the White Paper that preceded the Bill, in which we noted that the terrorist threat has evolved since the enactment in 2010 of the Terrorist Asset-Freezing etc Act—TAFA—which the noble Baroness, Lady Kramer, just referred to. We need to ensure that UK counterterrorist sanctions powers remain a useful tool for law enforcement and intelligence agencies. We therefore propose to use the Bill to establish a common approach to designations under counter- terrorism and country sanctions regimes, including the asset-freezing powers set out in Clause 2.

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[Lord McNally]

My Lords, these exchanges show some of the dilemma of dealing with this issue. I ask a fairly simple question when I look at these things. Why should a financial services organisation decide to base itself on some microdot in the Caribbean to provide its services? Once you ask that question, you begin to wonder whether it is to avoid the kind of rigour and inspection that they get in more well-established centres. As I said in my earlier intervention, I worked for three years with the Crown dependencies, ably aided by the Minister, in his then capacity as a Whip. I made two points. One, which I mentioned earlier, was my advice to them to make sure they answered the various questions put to them with full candour and transparency. I pay tribute to the Justice Committee under the chairmanship of my noble friend, who put forward a range of suggestions. Another point was that the British Government should get their act in better order. Sometimes, the job was to make sure that, when getting this dealt with, Whitehall departments were sufficiently accessible and aware of the particular status of the Crown dependencies.

During those three years of experience, I was impressed by the qualities of the Civil Service and the representatives of the Crown dependencies in dealing with these issues. That does not take away the fact that they, and we, have to face the fact that, as the noble Lord, Lord Collins, said, it is our reputation that is at stake. I had nothing to do with the overseas territories, but there is a qualitative difference which needs to be looked at between their standards of supervision of financial services and those of the Crown dependencies. I take the point made by the noble Lord, Lord Anderson, about the Isle of Man and Jersey. I hope they are both addressing what it is that has landed them on that list. That is something for their processes, because this is damaging to them, although there may be other jurisdictions within the EU which could not bear too close examination.

This is in our national interest. It is not us playing the neo-colonial or trying to order them about. We are defending our national interest when jurisdictions are seen as British Overseas Territories. When I had to learn that very peculiar lesson, the first thing I was told was that we joined them; they did not join us. The difference in constitutional relationship is because they were part of the Duchy of Normandy that conquered us. Nevertheless, the Channel Islands and the Isle of Man have to understand that their meeting the highest standards is going to be a legitimate interest of the British Parliament and British Government, in defence of Britain’s reputation.

[Lord Ahmad of Wimbledon]

I thank all noble Lords who have taken part in this important debate. As we have heard, the UK is responsible for the foreign affairs and security of both the Crown dependencies and overseas territories. That is the constitutional position. Our long-standing practice is that we do not generally legislate for these jurisdictions without their consent. This point was well made, in the context of the Crown dependencies, by the noble Lord, Lord Beith. Sanctions are tools of foreign policy, or are used to protect our national security. It is clear that the overseas territories and Crown dependencies must follow the UK Government’s foreign policy, including the sanctions we apply. I assure noble Lords that the Foreign Office has discussed this with the overseas territories and Crown dependencies and they also accept this central point of principle.

There are currently two ways in which sanctions are implemented by the overseas territories and Crown dependencies. The UK legislates directly for the majority of these jurisdictions through Orders in Council. Other jurisdictions legislate for themselves, but follow precisely the sanctions implemented in the UK. This model is well established and respects the rights of these jurisdictions.

The Bill is drafted in a way that reflects this reality. It is consistent with the current implementation model for UN and EU sanctions as well as measures under the Terrorist Asset-Freezing etc. Act 2010. It allows those jurisdictions that wish to follow UK sanctions through their own legislation to continue to do so. It also allows the UK to legislate directly for certain overseas territories as appropriate.

With regard to anti-money laundering laws, all the Crown dependencies, and each of the overseas territories with a significant financial centre, subscribe to the international standards for anti-money laundering and counterterrorist financing set by the Financial Action Task Force. They are assessed in their own right for compliance with these standards and have responsibility for implementing them within their own domestic frameworks.

The Government, of course, retain an interest in ensuring that the Crown dependencies and overseas territories have robust anti-money laundering regimes. As noble Lords are aware, and as I stated in a previous debate—this point was raised with the overseas territories at the recent joint ministerial council—we are already working very closely with those jurisdictions which do not already have national company beneficial ownership registers on establishing such registers or similarly effective mechanisms, and ensuring that information held on these can be shared in near real time with UK law enforcement authorities.

I remind noble Lords that we legislated earlier this year, through the Criminal Finances Act, to establish a statutory review of how these arrangements have been implemented. This will take place before 1 July 2019 and will inform any further debate about the effectiveness of measures relating to beneficial ownership in place in individual Crown dependencies or overseas territories. We should also recall that full implementation of these arrangements will put these jurisdictions ahead of the international standards in this area, and ahead of the approach taken by many G20 countries and individual states of the United States.

This demonstrates the benefits of the co-operative relationship that we have established with the Crown dependencies and overseas territories in combating money laundering and terrorist financing. These jurisdictions are self-governing and take their compliance with the FATF standards very seriously. The anti-money laundering regimes of each of the Crown dependencies have been evaluated since 2015, with overseas territories, including the Cayman Islands and the British Virgin Islands, both scheduled to be evaluated in the coming year. The commitment of these jurisdictions to international standards in this area is the best way to ensure that they continue to have robust anti-money laundering and counterterrorist financing regimes. As I said in the previous debate in Committee, this is a point we have once again emphasised in all our communications, and it was emphasised by my right honourable friend the Prime Minister in her recent meeting with the overseas territories. These are long-standing arrangements.

The noble Baroness and the noble Lord, Lord Collins, talked about progress and moving forward. We are moving forward positively and I have already talked about the results. In this regard, I do not believe that these amendments are needed. I am sure noble Lords would not wish to jeopardise the achievements that we have seen thus far, which have come from direct co-operation and working with these jurisdictions, and the progress that has already been made. With that, I ask the noble Lord to withdraw his amendment.

[Lord Collins of Highbury]

I thank the Minister for his response. However, I am a little disappointed. We should not apologise for taking the lead in trying to build confidence globally in financial standards. We should not be in any way apologetic about leading the way because London is a global financial centre—

[Lord Ahmad of Wimbledon]

My Lords, I do not think I apologised in any sense, and nor should we—I agree with the noble Lord. We are leading the way and we are proud of that. We have to put this into context. The noble Lord, Lord Beith, talked about the important relationship with Crown dependencies. I have talked about the relationship with our overseas territories. They legislate in many areas. The relationship does not just work; the strength of relationship allows us to make the progress we are making. Britain is leading the way and our overseas territories and Crown dependencies have shown substantial progress in this respect. Perhaps other G20 countries have a lot of catching up to do. We are leading in this respect.

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[Lord Falconer of Thoroton]

I apologise to him. The noble Lord who is also a Minister—I of all people should know that—means well in his intentions and assurances. From experience in the Executive, we reach for the legislation and read it as it is. My anxiety is that unless we get it right in the Bill, we will give the Executive huge powers. As the noble Baroness, Lady Kramer, said, when we voted to leave the European Union, we never intended to do anything other than leave the European Union. We did not intend to change completely the balance of the constitution and give the Executive that degree of extra power. I am talking not only about this Bill, but the whole balance of the constitution. This is happening because everything is necessarily having to be done in a hurry. The oddity about this Bill is that it is an early stage Brexit consequential. It is not adequate in the balance it has struck between the Executive and the legislature. If this Bill has got it wrong, then things will get worse as the pressure builds on parliamentary draftsmen, Ministers and policymakers. We must stand firm as a House to send a message that future Bills must be more accurate than this one in terms of the balance between the Executive and the legislature.

I support the amendment of my noble and learned friend Lord Davidson and my noble friend Lord Collins because it is inconceivable to me, in the light of the number of changes that we have sought, that everything will be put right on Report. The Bill should be time-limited for five years so that the Government have to come back with a further shot at it. We will need this sort of Bill indefinitely, but the balance in this one is so badly wrong that I think a separate clause is appropriate.

[Lord Ahmad of Wimbledon]

My Lords, I thank all noble Lords—indeed, noble and learned Lords—who have taken part in the debate. I acknowledge the points that have been raised on this amendment.

Turning to Amendment 85, it will not surprise the noble Lord that we do not believe that there should be a sunset clause in the Bill. Whatever the nature of our future relationship with the EU—I am sure that the noble Lord, Lord Collins, meant when, not if, we leave the EU; he may choose to clarify otherwise—the powers in the Bill will be necessary. We will need them to comply with UN obligations and we will need autonomous powers to be able to create, amend or lift sanctions to address a wide variety of national security and foreign policy challenges. It is true that the design and scope of sanctions has changed over the years, but we need the power to implement sanctions as part of our diplomatic toolkit, which will not go away.

I also acknowledge and appreciate the point of the noble and learned Lord, Lord Falconer, that all noble Lords, irrespective of the approach and mechanisms, agree with the principle that this Bill is required. I also acknowledge, as I have done in Committee, the important role of this House in the scrutiny of legislation. In the responses I have given on which we are not agreed, I hope it is clear that there are areas that the Government will reflect on and return to. In that respect, I hope to meet with noble Lords in the intervening period before Report to see how we can bridge some of the challenges and differences that have been raised.

Further, I assure noble Lords that we are committed as a Government to getting this legislation right. The Bill is designed to ensure that we can continue to use sanctions appropriately—I know that is a principle accepted by all noble Lords—in response to future global developments and challenges, and to provide that the right safeguards are in place for the use of those powers, which I also respect. I am immensely grateful for the active contributions of noble Lords in helping us to do this.

Sanctions and Anti-Money Laundering Bill [HL]

Lord Ahmad of Wimbledon Excerpts

Report: 1st sitting: House of Lords
Monday 15th January 2018 Lords Chamber

[Lord Howell of Guildford (Con)]

Can I just ask my noble friend a question, and apologise to your Lordships that I was not involved in earlier stages of this legislation? Was there ever a time when, in deciding on sanctions policy, we did so other than in alliance with other nations? Unilateral sanctions can always be evaded, and even collective sanctions, when they are only from the west, can be nullified by actions by China, Russia and other Asian powers, for instance. Is not the practical situation one in which we have to take account of our allies and the broad consensus of agreement with them on whether sanctions are justified, or are there individual unilateral instances that I may have missed?

[The Minister of State, Foreign and Commonwealth Office (Lord Ahmad of Wimbledon) (Con)]

My Lords, first, before I go any further, as I said in Committee on the Bill—and I shall come on to the specific question from my noble friend in a moment—I am genuinely grateful for the constructive engagement that we have had on all sides of the House on this very important Bill. The set of government amendments that I tabled last week reflects proposals through discussions and meetings that we have had with Peers and representatives from across the House, from the Opposition Benches and, indeed, from the Cross-Bench Peers. I am also pleased that the noble and learned Lord, Lord Judge, and the noble Lord, Lord Pannick, also felt able, after our constructive discussions, to put their names to some of the government amendments, including the one that I shall present in a moment. It also reflects very strongly that, at a time of great challenge internationally, we reflect the finest traditions of your Lordships’ House, in that we are able to practically demonstrate co-operation across the House in ways to improve legislation.

I fully recognise that sanctions involve significant restrictions and should not be imposed lightly. The standard to be applied by a Minister when introducing sanctions regulations is therefore one of the most important parts of this Bill. I assure noble Lords that I have listened very carefully to the range of views on exactly what that standard should be, with a view to finding the right balance between the Government’s ability to impose sanctions when the relevant conditions are met and the need to guard against excessive use of these powers. I have therefore tabled Amendment 9, which introduces three additional requirements when a Minister is considering making sanctions regulations for a purpose beyond compliance with a UN or international obligation. First, the Minister must have good reasons to pursue that purpose; secondly, the Minister must be satisfied that the imposition of sanctions is a “reasonable course of action” for that purpose; and finally, when making regulations, the Minister must lay a report to Parliament explaining how the above two tests have been met.

These requirements are picked up again in Amendment 6, which is a technical drafting point consequential on Amendment 9. The requirement for the Minister to lay a written report before Parliament when making sanctions regulations reflects Amendment 7, proposed by the noble Lord, Lord Collins, and I am grateful for his suggestion. The principle that unites us here is that sanctions need to form part of a wider political strategy that is properly articulated to Parliament and the wider public. Amendment 9 aims to provide the House with the requested reassurance that sanctions will not be imposed lightly, while at the same time ensuring that the UK can continue to play an active and constructive role in international affairs. On that basis, I hope that noble Lords will be persuaded not to press Amendments 1 and 7.

Amendments 2 to 5 refer to the purposes for which sanctions regulations may be created. The current list of purposes in the Bill is designed to ensure that we can continue to implement sanctions across the full range of purposes currently pursued by EU sanctions. The EU can adopt sanctions for any of the purposes of its common foreign and security policy. The reference to “foreign policy objectives” in subsection (2) seeks to maintain this same scope for the UK when we have left the EU.

In Amendment 2, the noble Baronesses, Lady Northover and Lady Sheehan, propose to remove the ability to impose sanctions for the purpose of advancing a UK foreign policy objective. The amendment would restrict the flexibility of future UK Governments, potentially preventing them from using sanctions, and putting the UK out of step with our international partners, including the European Union. That was a point made well by my noble friend Lord Howell—and again, I appreciate his international experience in this regard. As I have said previously, and noble Lords have acknowledged, sanctions are at their best when they are acting in unison and in co-operation and co-ordination with partners.

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Moved by

[Lord Ahmad of Wimbledon]

6: Clause 1, page 2, line 13, at end insert—
“( ) Section (Additional requirements for regulations for a purpose within section 1(2)) contains additional requirements in relation to regulations stating a purpose within subsection (2) above.”

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[Baroness Northover]

My Lords, indeed this deals with some of the complexities faced by those operating for good reasons in areas where sanctions bite, and we will be returning to these issues in a later group. We will then talk about guidance and how to ensure that it is easier for financial institutions to derisk.

Amendment 39 in my name is about the mutual recognition of licences and streamlining humanitarian licensing, while Amendment 42 deals with the problems that NGOs may run into if multiple authorisations are required. Amendment 43 is about reporting, because if there is a requirement for parliamentary reporting, that assists in terms of highlighting the issues that NGOs are running into. As I say, we will be returning to these issues in a later grouping.

[Lord Ahmad of Wimbledon]

My Lords, the Government are well aware of the concerns in this House about the humanitarian impact of sanctions, and we are committed to finding constructive solutions through close engagement with NGOs and other humanitarian actors. Indeed, I would like to thank the noble Lord, Lord Collins, and the noble Baroness, Lady Northover, for the engagement we have had directly with representatives from NGOs between the Committee and Report stages.

As noble Lords will be aware, in 2016 the UK secured amendments to the EU’s Syria sanctions regime to provide a specific exemption for fuel purchases by humanitarian organisations. This assisted such organisations to carry out their operations in Syria while ensuring that they were still sanctions compliant. Provisions in the Bill as it is currently drafted enable the Government to include humanitarian exemptions in sanctions regulations and to issue licences for legitimate activity that might otherwise be prohibited by sanctions. Currently, EU case law limits our ability to issue so-called general licences for the humanitarian sector, but, as I have said before, the Bill has been drafted to enable us to issue these licences and thus provide greater flexibility. We will also publish additional guidance and ensure, through continued engagement with the humanitarian sector, that any additional sector-specific guidance addresses its concerns.

The process of issuing licences is best handled administratively on a case-by-case basis to respond efficiently to fast-moving events. That means we are cautious about putting too much detail in the Bill. However, I can assure noble Lords that the Government make every effort to prioritise urgent and humanitarian licence application cases where there is a risk of harm or a threat to life, and we will continue to do so going forward. Once sanctions are in place, the Government will remain alert to any unintended consequences for humanitarian operations and make adjustments where appropriate, as we did for Syria.

I turn briefly to the amendments in this group. Amendment 8, proposed by the noble Lord, Lord Collins, would require the Government to publish a detailed, stand-alone humanitarian impact assessment both in advance of sanctions regulations being made and at subsequent points thereafter. There is no precedent for this approach in the EU or among other western countries with national sanctions legislation. It could hamper the UK’s ability to deploy sanctions quickly and make multilateral co-ordination more challenging. It may also have the unfortunate effect of facilitating sanctions avoidance—if we give advance warning that we are considering sanctions, we create the ability for sanctions targets to remove their assets from the UK before sanctions bite. That having been said, I can assure noble Lords that the report that the Government would lay before Parliament when making or amending sanctions regulations, and the guidance issued in respect of those regulations, would explain the approach to mitigating humanitarian impacts, including through exemptions and licensing, which was a concern expressed by NGOs and noble Lords.

Amendment 39 proposes a system whereby licences from other jurisdictions would be recognised in the UK where more than one jurisdiction is involved. While I have sympathy with the desire to simplify compliance procedures for those operating across borders, I am afraid that this amendment poses real difficulties. Licences issued by our international partners may not necessarily align with UK policy objectives or work within UK systems. This is simply because other licensing authorities will not need to consider UK policy, UK law or practicalities before they issue such a licence.

Further, the amendment risks creating legal uncertainty. It is not clear what other jurisdictions may be within scope or which jurisdiction would enforce the sanctions when a licence is breached. Nor is it clear whether a licence issued by an overseas jurisdiction would be recognised by financial and other institutions in the UK without some form of validation by the UK licensing authority. The Government believe that the UK authorities remain best placed to interpret UK sanctions regulations and to determine when and in what circumstances activities or transactions may be licensed.

Amendment 40 calls for the Government to establish a fast-track process for dealing with requests for exceptions and licences for humanitarian purposes. As I have just said, the Government make every effort to prioritise urgent and humanitarian licence application cases and will continue to do so. However, establishing a specific fast-track process could have unwelcome effects in relation to other types of licences. Some other categories of licences, such as those aimed at meeting “basic needs”, may not be strictly humanitarian by definition but may have very serious consequences if not prioritised. The amendment could result in certain humanitarian applications that are not urgent being prioritised over non-humanitarian applications that do require an urgent response.

Amendment 41 would require a consultation to be undertaken on an overarching framework for exceptions and licences. As noble Lords will know, the White Paper consultation that preceded this Bill sought specific feedback on exceptions and licences, and we have considered all the comments very carefully. We will publish an initial framework for exceptions and licences in the near future and will continue to consult interested parties before the Bill enters into force. This will inform the approach that we take to exemptions and licensing provisions in the regulations that set up each individual sanctions regime. I am not convinced of the need to undertake a further consultation after the commencement of the Bill. By then, the relevant sanctions regulations, with the appropriate exceptions and licensing provisions, will have already been made and scrutinised by Parliament.

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Moved by

[Lord Ahmad of Wimbledon]

9: After Clause 1, insert the following new Clause—
“Additional requirements for regulations for a purpose within section 1(2)
(1) This section applies to regulations under section 1 any of whose purposes (as stated under section 1(3)) is a discretionary purpose. In this section “discretionary purpose” means a purpose which is not compliance with a UN obligation or other international obligation but is within section 1(2).(2) An appropriate Minister may not decide that it is appropriate to make regulations to which this section applies unless, in respect of each discretionary purpose stated in the regulations, that Minister—(a) has considered whether there are good reasons to pursue that purpose and has determined that there are, and(b) has considered whether the imposition of sanctions is a reasonable course of action for that purpose and has determined that it is.(3) In subsection (2)(b) “sanctions” means prohibitions and requirements of the kinds which are imposed by the regulations for the purpose in question (or both for that purpose and for another purpose of the regulations).(4) In relation to any regulations to which this section applies, the appropriate Minister making the regulations (“the Minister”) must at the required time lay before Parliament a report which explains in respect of each discretionary purpose stated under section 1(3) in the regulations—(a) why the Minister considers that carrying out that purpose would meet one or more of the conditions in paragraphs (a) to (d) of section 1(2),(b) why the Minister considers that there are good reasons to pursue that purpose, and(c) why the Minister considers that the imposition of sanctions (within the meaning given by subsection (3)) is a reasonable course of action for that purpose.(5) Nothing in subsection (4) requires the report to contain anything the disclosure of which may, in the opinion of the Minister, damage national security or international relations.(6) In subsection (4)“the required time” means—(a) in the case of regulations contained in a statutory instrument which is laid before Parliament after being made, the same time as the instrument is laid before Parliament;(b) in the case of regulations contained in a statutory instrument a draft of which is laid before Parliament, the same time as the draft is laid.”

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[Lord Lennie (Lab)]

My Lords, in relation to the clause on financial sanctions, I add my gratitude to the Minister for the way that he has engaged with us, the Cross-Benchers and those in other parties. We have turned what the noble and learned Lord, Lord Judge, described as a lamentable Bill into something approaching an acceptable Bill. There are some problems with it, but this will not be one of them. The three pre-conditions that the Minister has laid down will make it wholly exceptional that someone can be designated under the sanctions regime without identification, so the Maltese grandchildren that the noble and learned Lord referred to in Committee should feel fairly safe in their beds from here on in. We welcome the concessions made and support this part of the Bill.

[Lord Ahmad of Wimbledon]

My Lords, once again I thank the noble and learned Lord, Lord Judge, and the noble Lord, Lord Pannick, for their constructive engagement on understanding and then coming forward with appropriate amendments in this regard.

The group of amendments in front of us focuses upon the description of persons who can be subject to sanctions by way of sectoral sanctions and individual designations. Before I come to the main thrust of the amendments—and I use this term advisedly, notwithstanding the contribution of the noble Baroness, Lady Northover—there are two technical government amendments to Clause 2. These amendments will ensure that sanctions regulations can prevent the procurement of funds or economic resources, as well as receiving such funds or economic resources. This will help prevent sanctions being evaded and thus improve their overall effectiveness, which I know is the intent of all noble Lords in respect of the Bill. I hope that this small and technical change will be deemed non-controversial, and would be grateful if your Lordships would support the amendments and enable us to further enhance the Bill’s provisions.

I turn to the amendments tabled by noble Lords, which seek to stop the Government from being able to impose sanctions on persons “connected with” a prescribed country. As I have assured your Lordships during previous stages of the Bill, while I understand the concerns in this respect, I believe the Government have acted to address them where we can and there are good reasons why these provisions are needed. I totally understand the concern raised by the noble and learned Lord, Lord Judge, in Committee that a Minister would be able to define the connection to a country by regulations, and do so in ways that were unacceptable. I assure him that there are safeguards to prevent this power being misused.

As set out in the Bill, sanctions measures can be made in line only with the purposes for regulations set out in Clause 1. The definition of “connected with” must therefore be appropriate for the pursuit of the said purpose. It would not be reasonable or appropriate to create sanctions measures relating to persons that have only a very loose connection with a sanctioned country.

The noble and learned Lord, Lord Judge, said in Committee that it surely makes sense for the Government to define connection now, in primary legislation, rather than at some point in the future. We have considered this suggestion carefully and looked at a couple of types of possible approaches in this respect. The first approach would be to list the connections that sanctions currently impose, but this poses two problems. First, the list would be very long, as there are a great deal of different types of connections. Secondly, an exclusive list would not give us the flexibility that we will need in future when new types of connections need to be made. It is worth remembering that the context of international policy is changing rapidly. This is perhaps best typified by the sanctions regime on North Korea, which has changed three times in the last six months alone. We do not know how much further we will be obliged to act on North Korea; unpredictable world events could make it necessary to have new regimes with measures of increasing complexity.

We also considered whether it might be possible to restrict the power by making sure that certain types of loose connections could not be specified. Again, the vast number and shifting type of these connections make drafting such provisions prohibitively difficult. The situation also changes in each case. I agree with the noble and learned Lord, Lord Judge, that a connection based on familial connection might be very loose and unjustifiable in many circumstances, but in the context of misappropriated wealth spread through the close family of a former head of state, such a connection might be required. I therefore request noble Lords not to press their amendments in relation to connected persons for the reasons that I have given.

On designation by description, I have listened closely to the concerns of noble Lords who spoke in Committee, including those about the practical difficulty that this would present for banks and others responsible for complying with such sanctions. I noted in Committee that it is important for the Government to have the power to designate by description in some circumstances, such as where we do not have the names of members of a terrorist group. I have accordingly sought to strike a balance here by placing restrictions on the use of this power to ensure that it can be used only in limited circumstances.

Based on the debate in Committee, I have tabled government Amendments 33 to 35 to ensure that the use of this power is tightly constrained, as the noble Lord, Lord Pannick, acknowledged. With this amendment in place, the Government must impose sanctions on an individual by name if we have access to their name, as the power to designate by description cannot be used when we do. The description must also be sufficiently detailed that a person can apply it to themselves and decide whether they are subject to sanctions. For example, if we wished to sanction all Ministers of a certain state, we would designate as many as possible by name and would then be able to designate any others of unknown name by the description “Ministers of that state”. A Minister of that state will clearly know that the sanction applies to them, and UK persons, such as banks, will be able to ascertain the position in relation to their own business dealings. This enshrines the Government’s commitment to use this power only when it is not practicable to designate by name, thus easing the compliance burden on industry. I thank the noble Lord, Lord Pannick, for his acknowledgement of the government amendments in this respect.

The noble Lord, Lord Hain, raised a specific issue relating to the work of Hogan Lovells for the South African Revenue Service. The noble Lord has raised various matters during the passage of the Bill, and I am grateful to him for bringing this information to our attention. I assure the noble Lord that, on this matter and the matters he has raised previously, the Government continue to be concerned about the allegations of corruption in South Africa. I further assure him that the British high commission continues to monitor this issue very closely. As the noble Lord said, he has already brought this issue to the attention of the Solicitors Regulation Authority and awaits its reply. Once he has heard from it on that subject, any correspondence could be copied to the Government, although I am sure we will already be informed. It has been helpful to have his interventions in this respect.

We have listened very carefully to the various elements and concerns raised in Committee. I once again thank noble Lords for their engagement in reaching the position that we have on these amendments. As I said at the start of Report, and during Committee and Second Reading, the guiding principle that I have adopted in this regard is that I believe very passionately that legislation is not just made more effective and more practical but enhanced in your Lordships’ House. Through the co-operation we have had on this group of amendments, we have seen that level of constructive engagement.

On the basis of that explanation, I hope I have been able to persuade all noble Lords to support the government amendments and would ask them to withdraw or not move their amendments.

[Lord Pannick]

I am very grateful to the Minister, who has shown exemplary constructive engagement throughout discussions on the Bill. I am sure all parts of the House are very grateful to him and the Bill team for that.

Amendments restricting Ministers’ powers to designate by description are far from technical, and I simply point out one matter in response to the Minister. I think he suggested that, in relation to government Amendment 34, the issue would be whether the individual himself or herself would be able to identify from the description whether they were covered. In fact, government Amendment 34 goes a lot further than that, because the test under it is whether, from the description, a reasonable person would know whether the individual falls within the description. That is the test. But I am very grateful to the Minister and beg leave to withdraw Amendment 10.

Sanctions and Anti-Money Laundering Bill [HL]

Lord Ahmad of Wimbledon Excerpts

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

Moved by

[Lord Ahmad of Wimbledon]

23: Clause 2, page 4, line 2, after “received” insert “, procured”

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Moved by

[Lord Ahmad of Wimbledon]

27: Clause 9, page 9, line 36, leave out subsection (3) and insert—
“(3) Regulations under section 1 which contain a designation power must provide that where an appropriate Minister—(a) has made a designation under the power, or(b) has varied or revoked a designation made under the power (see section 18),that Minister must without delay take such steps as are reasonably practicable to inform the designated person of the designation, variation or revocation.(3A) The regulations may include provision, additional to that required by subsection (3), as to steps to be taken as regards notification or publicity where a designation has been made under the designation power or a designation made under the power has been varied or revoked.(3B) The regulations need not require a person to be notified of an intention to designate the person.”

[The Minister of State, Foreign and Commonwealth Office (Lord Ahmad of Wimbledon) (Con)]

My Lords, I thank all noble Lords again for their constructive engagement on this group of amendments. The government amendments I have tabled have been heavily influenced by the discussions we have had. Amendment 28 would require regulations to include provisions on notifying a person once designated and how to publicise designations. I am happy to say that government Amendment 27 does exactly that. When a person has been designated, or had their designation varied or revoked, the Minister must, without delay, take such steps as are reasonably practicable to inform the person. Sanctions regulations may also include further provision as to the specific arrangements for notification or publicity. In this regard, I am extremely grateful to the noble and learned Lord, Lord Judge, and the noble Lord, Lord Pannick, for their assistance.

Amendment 29 would require a person to be informed of their designation and to be given the fullest possible account of the reasons for designation and the steps required to address the concerns. Amendment 30 covers similar ground, while also requiring that the designated person be given the evidence underlying the designation or a gist of any evidence that is withheld for reasons of national security. In response, government Amendments 32, 37 and 59 make provision across the Bill to provide a statement of reasons to designated persons. When a person is designated, the Government will be obliged to provide a statement of the matters that the Minister knows, or has reasonable grounds to suspect, have led to the designation. I am sure noble Lords will appreciate that the Minister’s statement may exclude some matters, for reasons which I know noble Lords will understand and respect, such as when it is in the interests of national security. If a challenge is made in court, on those rare occasions when sensitive information is used to underpin a designation, the closed material procedure will apply. The courts, such as in the case of AF (No. 3), have long required the gist of sensitive material to be disclosed to enable an individual to understand the case against them. We accept that this is and will continue to be the case and the Bill does not seek to make any changes to the existing disclosure burden on the Government in such cases.

Amendment 38 would insert a new clause into the Bill requiring the appropriate Minister to exercise the power to designate only to the extent that it is proportionate to do so, having regard to the purpose of the designation and the impact on the person concerned. The government amendments I have tabled in response—Amendments 31, 36 and 58—use very similar language. They would require Ministers to consider that a designation is appropriate, having regard to the purpose of the regulations and the likely significant effects of the designation on the person concerned. I am again grateful to the noble Lord, Lord Pannick, and the noble and learned Lord, Lord Judge, for supporting these government amendments. While there seems to be a meeting of minds on this important issue, it may also be helpful if I briefly explain the thinking behind the Government’s revised language.

First, the European Convention on Human Rights entrenches individual rights, obliging the Government to consider the impact on an individual’s rights when making certain decisions. Section 6 of the Human Rights Act 1998 further ensures that the appropriate Minister must act in line with those convention rights, as informed by Strasbourg case law. We consider that this includes satisfying himself that the designation is proportionate, where convention rights are engaged, and I have been clear on this in relation to this Bill, including in Committee. Secondly, given that the Human Rights Act already requires proportionality to be considered where convention rights are engaged, a court might interpret the use of the word in the Bill to mean something different. Our amendments have tried to preserve the spirit of the intention underlying this amendment, without creating any difficulty of interpretation. As a result, the government amendments provide for a balancing test for designations between the purpose of the regulation and the impact on the individual, while avoiding an explicit reference to “proportionality”.

Amendment 50 requires the Government to provide specific guidance produced by the Crown Prosecution Service about the prosecution of sanctions breaches. The Government wholeheartedly support and have publicly committed to producing clear and accessible guidance on sanctions implementation and enforcement, both in this House and throughout our consultation on the White Paper. The Crown Prosecution Service already publishes guidance on how the public interest is taken into account in any decision to prosecute and this test is the same one that will be applied in decisions to prosecute sanctions offences. The procurator fiscal in Scotland and the Public Prosecution Service for Northern Ireland publish similar guidance. The Government’s view is that no additional public interest guidance is necessary simply for a sanctions prosecution decision.

The Bill will provide for the Government to issue guidance on the content and implementation of sanctions. Clause 36 requires Ministers to issue guidance about any prohibitions and requirements imposed by sanctions regulations. There will be a mandatory requirement to provide comprehensive guidance for all those affected by sanctions implementation. Clause 36 is a more comprehensive duty than that specified in the amendment to Clause 16 which I have said is unnecessary. It has been drafted so as to allow comprehensive guidance on all sanctions prohibitions and requirements to be prepared and consulted on by the appropriate sources of expertise. For financial sanctions, the Office of Financial Sanctions Implementation has already published a comprehensive guidance document setting out its general enforcement approach. This will be fully updated to reflect the new sanctions Bill regime.

Amendment 53 requires the Minister to respond,

“as soon as reasonably practical”

to a request to vary or revoke a designation. Government Amendments 56 and 61 are fully in line with this proposal.

Finally, government Amendments 51, 52, 57 and 60 make technical changes consequential on these changes, and I hope they will be accepted. I beg to move.

[Lord Pannick (CB)]

My Lords, I have tabled, with the support of the noble and learned Lord, Lord Judge, the noble Lord, Lord Collins of Highbury, and the noble Baroness, Lady Northover, a number of amendments in this group on the subjects of procedural fairness and proportionality. The Minister acknowledged in Committee that these were topics that he and the Bill team would need to consider before Report. Given the adverse consequences of being designated, the Bill must provide for procedural fairness and the provisions must be applied in a proportionate manner. Again, I thank the Minister and the Bill team for some very helpful meetings on these subjects, and for tabling these amendments, which address my concerns.

In particular, government Amendments 31, 36 and 58 will require the Minister to be satisfied that any designation is appropriate, having regard to both,

“the purpose of the regulations … and … the likely significant effects of the designation”,

on the person concerned. That addresses the substance of my Amendment 38 on proportionality. It does not use the word “proportionality” but that does not matter. It contains the essence of proportionality and I am grateful to the Minister for confirming in his opening remarks that that is indeed the purpose of these government amendments.

Government Amendments 32, 37, 59 and 61 are also very important in placing in the Bill a requirement of procedural fairness; that is, that the person designated is entitled to a statement of the reasons why he or she has been designated. That is absolutely fundamental to any fair sanctions procedure. I recognise that the government amendments exclude any right to information the disclosure of which would harm interests such as national security, but they rightly provide that these exclusions will not allow the Minister to provide no statement of reasons. I would be grateful if the Minister could confirm that the intention here is to ensure that a person who is designated will always be entitled to at least a statement of the essence of the reasons for the designation, albeit that details which affect national security or other protected interests cannot be disclosed.

In the light of these government amendments, I am satisfied that the Bill now makes it clear that procedural fairness and the substance of proportionality are part of the administrative machinery. The Minister made it clear in Committee that this was always the intention and he made it clear—and I respectfully agree with him—that the courts would in any event hold Ministers to such basic standards of the rule of law. I am pleased that the Minister has recognised that it is appropriate to include these matters in the Bill and I thank him.

[Lord Lennie (Lab)]

My Lords, I am also grateful to the Minister. Clearly, he has listened a lot and has provided a lot of change from the initial version of the Bill. There is a meeting of minds—there is no question about that—but the one issue that I am not sure he addressed was about the requisite steps that persons are expected to take to address the concerns which led to the designation in the first place. I would like the Minister to comment on that, but we support the changes.

[Lord Ahmad of Wimbledon]

My Lords, again, I thank noble Lords. The noble Lord, Lord Pannick, asked me to confirm that the Bill makes no provision to change the ability of the designated person to be given the reasons for their designation and to be supplied with an irreducible minimum of the evidence against them. The only issue is that we have always said there would be national security elements. The amendment specifically says that,

“the regulations may not authorise the Minister to provide no statement of reasons”,

which I am sure the noble Lord has noted.

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Moved by

[Lord Ahmad of Wimbledon]

31: Clause 10, page 10, line 10, leave out paragraph (b) and insert—
“(b) considers that the designation of that person is appropriate, having regard to—(i) the purpose of the regulations as stated under section 1(3), and(ii) the likely significant effects of the designation on that person (as they appear to the Minister to be on the basis of the information that the Minister has).”

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Moved by

[Lord Ahmad of Wimbledon]

33: Clause 11, page 10, line 33, leave out “authorise” and insert “grant a power for”

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[Lord Collins of Highbury (Lab)]

My Lords, I thank the noble and learned Lord and noble Lords for their contributions. I agree wholeheartedly with their comments in relation to the thrust of this legislation. We are here because of another decision. We are here because we are being forced to take action speedily because of the precipice that we will be facing.

I said at Second Reading and will say now that we support this Bill because we are required to have a proper and full sanctions regime. I completely share the concerns expressed by your Lordships’ Constitution Committee. But, as I said in Committee, your Lordships’ Delegated Powers and Regulatory Reform Committee examined these clauses in some detail and did not quite share the view of the Constitution Committee. It referred to its previous memorandum on the subject and said that the reason for this clause related to the enforcement of the prohibitions and requirements set out in the regulations. In Committee, the Minister said that the Government were replicating existing enforcement regimes. He said:

“To be clear: these types of offences already exist”.—[Official Report, 21/11/17; col. 165.]


In Committee, I said that if that was the case, and the Minister was hearing us in terms of the concerns over principles, I hoped that he would come up with something better to address the concerns of the Delegated Powers and Regulatory Reform Committee. I am afraid that, as the noble and learned Lord, Lord Judge, said, I do not think that the Minister has come up with adequate provisions to address these concerns. They are limited, as the noble and learned Lord said, to some of the all-embracing powers such as determining evidence and the process for evidence. I welcome those changes but I do not think that the Government have gone far enough in terms of being very clear how these wide-ranging powers will be dealt with. If the noble and learned Lord presses this issue, I hope that the House will support him.

[Lord Ahmad of Wimbledon]

My Lords, first, I thank the noble and learned Lord for tabling his amendment. Again, I also thank him for the extensive discussions we have had in this respect.

The amendments seek to remove the ability to make provision in sanctions regulations creating offences for breaches of sanctions. I say from the outset that I sympathise with the concerns that noble Lords have expressed during various parts of the debate, not just today but in previous stages. I am sure noble Lords will also acknowledge that we have done a lot of work to try to respond to these concerns. I have tabled some government amendments in this area, which the noble Lord, Lord Collins, acknowledged.

The powers in question enable offences to be created for breaches of sanctions, in line with our current practice when implementing EU legal acts. They also enable other enforcement tools to be used, such as deferred prosecution agreements or serious crime prevention orders. Having the power to punish individuals and entities for breaching sanctions deters non-compliance and ensures the measures are robust. Sanctions without teeth, as I am sure noble Lords acknowledge, are essentially meaningless. Indeed, we debated earlier an amendment that would have included preventing,

“the violation of sanctions regulations”,

as one of the explicit purposes to be set out in Clause 1. Although I argued against that amendment on technical grounds, I agree with the spirit.

EU sanctions against countries such as Russia and Syria are imposed through EU legal acts that require member states to put in place enforcement measures at a 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 well as other legislation such as the Export Control Act 2002 and the Policing and Crime Act 2017. Other EU member states implement similar enforcement measures through their national legislation.

As foreshadowed in the White Paper consultation before this Bill was introduced, the Government want to be in a position to maintain continuity in this area. Whatever one’s views on Brexit, I think there is wide support for the principle that the UK and EU should remain closely aligned on sanctions policy. If the UK’s future sanctions regime against Russia was stripped of any enforcement provisions, I am sure noble Lords would agree that this would send a very unfortunate signal to our EU partners and to other close allies. Amendments 45 and 47 would mean that breaching a sanctions regime would not be an offence. If they are passed, as existing criminal offences in EU retained law fall away when new UK regimes are introduced, we would be unable to replicate those offences in the new regimes.

We have covered some of these issues previously, and I hope that what I have said will persuade the noble and learned Lord to withdraw his amendment. As I have said, I understand the concerns that have been expressed, including today, about the scope of these powers and will set out in a moment the government amendments that I have tabled in response. But the abolition of offences from sanctions regulations clearly undermines the purpose of the Bill and would make the UK a weak link in broader international implementation of sanctions, which I am sure is not noble Lords’ intention. I know and totally accept that this House is concerned about the creation of criminal offences through secondary legislation, a point eloquently made by the noble and learned Lord, Lord Judge, the noble Lord, Lord McNally, and my noble friend Lord Deben. I can provide this House with the following reassurances.

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Moved by

[Lord Ahmad of Wimbledon]

51: Clause 18, page 16, line 2, at end insert “(reading that provision, so far as made under section 10(2)(b), as if references to the designation were references to leaving the designation in place)”

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[Baroness Northover]

I am glad that to some extent the Government have moved in this area and I hope that, in the light of the vote that we have just had, that spirit of co-operation around the House will extend to other sections of the Bill that still need addressing.

[Lord Ahmad of Wimbledon]

My Lords, I thank the noble Lord for his amendment. As he has already indicated, it would oblige the Government to conduct a re-examination of each designation on an annual basis. I agree completely on the need for sanctions designations to be based on solid evidence. The UK has pushed hard for that in the EU, and that is widely recognised—for example, in the recent report of the House of Lords EU Committee. We are committed to maintaining these high standards.

The Bill as drafted includes a robust package of procedural safeguards, which will be further reinforced by the government amendments I have tabled, including Amendment 55. The combined package will provide a high level of protection for designated persons, at least as strong as current EU standards. The Government would review all sanctions regulations annually and present the results in a written report to Parliament. Amendment 55 makes that clear on the face of the Bill; I know that noble Lords raised that point. If the report concluded that there were no longer good reasons for maintaining a UK sanctions regime, we would lift it. Any changes made to the equivalent sanctions regimes of the EU or other international partners would be examined closely as part of the annual review.

Alongside the annual review of the regulations, the Bill requires the Government to put in place a dynamic process to reassess designations upon request; the triennial review is not the only opportunity. A designated person can request a reassessment of their designation at any time, and a further reassessment when there is a significant matter that has not been previously considered by the Minister. I take the point that a designated person, once they had requested a reassessment, challenged it in court, and failed to establish any unlawfulness, would not have a further review until either there was a significant new matter or a triennial review. But what would the purpose of a further review be when the designation has been established to be lawful and nothing has changed since then? If there are new arguments to be tested, or if the passage of time has changed the situation, a further reassessment can be requested. If not, there is no need to do so.

In response to feedback from noble Lords in Committee, I am proposing to strengthen these safeguards through government amendments. The Minister would have to deal with a request for reassessment as soon as reasonably practicable, and inform the person of the decision and reasons as soon as reasonably practicable after a decision had been made. Ministers can also instigate a reassessment at any time—for example, if the person concerned has been delisted by the EU. Ministers would have every interest in initiating reassessments proactively, both in the interests of justice and to minimise the risk and cost of legal challenges. In any case, when the EU decided to revoke the designation of a person also designated in the UK, I would certainly want to reassess the corresponding UK designation.

Taken together, these provisions will ensure that UK sanctions are under constant scrutiny and the Government are obliged to respond swiftly to new information and challenges. The triennial review then provides a further backstop, ensuring that each and every designation is looked at afresh on a regular cycle. This aligns with current practice in Australia and would put us ahead of countries such as the United States and Canada, which have no such process. It does not prevent more frequent reviews, and we have mechanisms in place that oblige us to do so when appropriate. Requiring the Government to conduct these reviews every year would be extremely resource-intensive; we have had those discussions in the bilateral and constructive meetings with the noble Lord. There are finite government resources, and the noble Lord appreciated that that would take away from other important areas. However, the amendments that we have tabled ensure that the protections the noble Lord was after have been afforded. I am thankful for his co-operation in that regard.

[Lord Pannick]

My Lords, I am grateful to the Minister. I beg leave to withdraw the amendment.

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Moved by

[Lord Ahmad of Wimbledon]

55: Clause 26, leave out Clause 26 and insert the following new Clause—
“Review by appropriate Minister of regulations under section 1
(1) Subsection (2) applies where any regulations under section 1 are in force.(2) The appropriate Minister who made the regulations must in each relevant period review whether the regulations are still appropriate for the purpose stated in them under section 1(3).(3) If a purpose so stated in any regulations under section 1 is a purpose other than compliance with a UN obligation or other international obligation, any review of those regulations under this section must also include a consideration of—(a) whether carrying out that purpose would meet any one or more of the conditions in paragraphs (a) to (d) of section 1(2),(b) whether there are good reasons to pursue that purpose, and(c) whether the imposition of sanctions is a reasonable course of action for that purpose.(4) In subsection (3)(c) “sanctions” means prohibitions and requirements of the kinds which are imposed by the regulations for the purpose in question (or both for that purpose and for another purpose of the regulations).(5) An appropriate Minister who has carried out a review under this section must lay before Parliament a report containing—(a) the conclusions of the review,(b) the reasons for those conclusions, and(c) a statement of any action that that Minister has taken or proposes to take in consequence of the review.(6) Nothing in subsection (5) requires the report to contain anything the disclosure of which may, in the opinion of that Minister, damage national security or international relations.(7) For the purposes of this section each of the following is a “relevant period” in relation to regulations under section 1 —(a) the period of one year beginning with the date when the regulations are made;(b) each period of one year that begins with the date when a report under this section containing the conclusions of a review of the regulations is laid before Parliament.”

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Moved by

[Lord Ahmad of Wimbledon]

56: Clause 27, page 19, line 15, at end insert—
“( ) Regulations made under this section in relation to a request under section 19 , 21 , 23 or 25 must require—(a) the decision on any such request to be made as soon as reasonably practicable after the receipt by the appropriate Minister dealing with the request of the information needed for making the decision, and(b) the person who made the request to be informed of the decision and the reasons for it as soon as reasonably practicable after the decision is made.( ) The regulations may authorise matters to be excluded from the reasons given for the decision where the appropriate Minister who made the decision considers that those matters should be excluded—(a) in the interests of national security or international relations,(b) for reasons connected with the prevention or detection of serious crime in the United Kingdom or elsewhere, or(c) in the interests of justice(but the regulations may not authorise that Minister to provide no reasons).”

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Moved by

[Lord Ahmad of Wimbledon]

57: Clause 29, page 20, line 6, leave out “the appropriate” and insert “that”

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Moved by

[Lord Ahmad of Wimbledon]

61: Clause 30, page 21, line 24, at end insert—
“( ) Regulations made under subsection (5) in relation to a request under this section or section 31 must require—(a) the decision on any such request to be made as soon as reasonably practicable after the receipt by the appropriate Minister dealing with the request of the information needed for making the decision, and(b) the person who made the request to be informed of the decision and the reasons for it as soon as reasonably practicable after the decision is made.( ) The regulations may authorise matters to be excluded from the reasons given for the decision where the appropriate Minister who made the decision considers that those matters should be excluded—(a) in the interests of national security or international relations,(b) for reasons connected with the prevention or detection of serious crime in the United Kingdom or elsewhere, or(c) in the interests of justice(but the regulations may not authorise that Minister to provide no reasons).”

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[Lord Collins of Highbury]

My Lords, the noble Lord, Lord Faulks, said accurately that there was a balance to be struck here, and there is a debate to be had. I am not legally qualified and therefore wish to address the political and moral issues that have been raised. The noble Lord, Lord Pannick, said that this is an extremely rare situation and that we cannot pick and choose. The noble and learned Lord, Lord Brown of Eaton-under-Heywood, said in Committee:

“I see the force of the Government’s argument that the UK has no alternative under international law but to give effect to our obligations under the UN charter; indeed, Article 103 of the charter expressly dictates that these obligations prevail over any conflicting international law obligations.”——[Official Report, 29/11/17: cols. 703-4.]


The Opposition are concerned about the signal we would send if we adopted the amendment of the noble Lord, Lord Pannick. I hear his comments about the United Nations but this Parliament must uphold international law and the supremacy of the United Nations. It should not undermine that. If we adopt the amendment, we would send the signal to other countries, which may flagrantly flout decisions of the United Nations, that we insist that they should. We judge other countries by our own standards. The noble and learned Lord, Lord Mackay, is absolutely right that there should be provision for the British courts to consider a decision of the Secretary of State. However, ultimately they should support the Secretary of State and the United Nations, not say to the United Nations, “We are not going to accept that decision”. We cannot pick and choose; that is the fundamental point. Therefore, while I totally understand the power of the arguments put forward by the noble Lord, Lord Pannick, and have a lot of sympathy with them, there is one point that trumps all else—I use that word advisedly—namely, we must uphold the decisions of the United Nations.

[Lord Ahmad of Wimbledon]

My Lords, as Minister for the United Nations, among other things, I echo the sentiments of the noble Lord, Lord Collins, about our commitment to the United Nations. As a permanent member of the UN Security Council, the UK is at the heart of shaping the UN’s response to crises around the world, as we have seen. I know that all noble Lords respect that. The United Kingdom takes this role very seriously, including in our approach to sanctions in the UN Security Council. We are one of the leading voices for UN sanctions where there are good reasons for them, as recently to constrain North Korea’s nuclear programme. At the same time, we place great importance on the need for sanctions to be used responsibly, with proper respect for due process and the rule of law. It is important to remember that as a permanent member of that Security Council, the UK exercises real authority over which sanctions are and are not adopted by the UN.

I thank all noble Lords for their comments, to which I listened carefully. The noble and learned Lord, Lord Mackay, made important points. We have exercised authority by committing that we would never support in the UN Security Council a designation that we considered unlawful. Put another way, we would not support a designation unless we had reasonable grounds to suspect that the person met the relevant criteria. Not only is this the right thing to do, it also reduces the risk of the UK being obliged to implement a UN designation that might be vulnerable to challenge in court.

The Bill recognises that persons designated by the United Nations must have a right of redress, including the ability to bring a legal challenge against the Government in the UK courts. The Bill accordingly contains the ability for such a person to have access to the court, and to obtain a remedy for any unlawfulness that the court uncovers. If the court were to consider the UN designation unlawful, the court could instruct the Minister to use best endeavours to secure a delisting at the United Nations. This is a significant remedy not to be underestimated. As a permanent member of the UN Security Council, the UK is particularly well placed to make representations that a designated person should be delisted.

The Government recognise there may be rare cases in which the Minister’s best endeavours are not sufficient to secure a delisting at the UN, as we discussed with the noble Lord, Lord Pannick, between Committee and Report. The question then is whether the UK courts should have the power to quash a UN designation and thus leave the Government in breach of their obligations under the UN charter. Our view is that this cannot be right.

First, the Bill recognises that the UK is under a duty in international law to designate those persons designated by the UN, and this proposition has not been criticised. Secondly, failure to implement a UN designation would damage the UK’s reputation as a country that stands by its commitments under international law—a point well made by the noble Lord, Lord Collins. Thirdly, it would restrict the ability of the UK to call out other states where they were falling short of their obligations under international law. If it was open to the UK not to implement our legal obligations, irrespective of whether it were following a court decision, it would be impossible to criticise other states where they were not implementing their obligations.

I take the point the noble Lord made that the EU court has very rarely quashed EU legal acts which implement a UN designation on procedural grounds. However, it has never done so where that would leave the EU member state itself in breach of its UN obligations. We should bear in mind that the EU itself is not bound by the charter, but EU states are. The noble Lord mentioned the case of Kadi, which has frequently been cited. In that case the UN had, in fact, delisted the person concerned by the time of the judgment, so EU member states themselves were spared the choice between respecting a decision of the EU courts and abiding by their UN obligations. Had they been forced to choose, I am confident that they would have prioritised their UN obligations as required—as a number of noble Lords mentioned—by Article 103 of the UN charter, which makes it clear that where there is a conflict between obligations under the UN charter and obligations under any other international agreement, the obligations in the UN charter shall prevail. The United Kingdom and all other EU member states are bound by that charter, even if the EU itself is not. That too is part of the rule of law—upholding those international laws where they bind the United Kingdom.

The United Nations has many flaws, but it is crucial to maintaining international peace and security. To allow the UK courts to stop the Government implementing sanctions agreed by the UN Security Council is not the right approach for a country such as ours that seeks to lead by example at the United Nations. I sincerely believe that any Minister, regardless of political persuasion, would share this view. I also believe we are in agreement that by continuing to make the UK’s support for UN designations conditional on fair procedural standards, we can and should do all we can to prevent this problem arising. However, in the unfortunate event that such a case arises, I remain of the view that a “best endeavours” obligation is the right way to square this difficult circle.

I deeply respect the noble Lord’s position. Again, we have had constructive discussions on this, although on this occasion we did not reach agreement. However, I hope that with the reassurances I have given, the noble Lord will be minded to withdraw his amendment.

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[Lord Ahmad of Wimbledon]

My Lords, I thank all noble Lords who have participated in this short debate, and in doing so I thank once again the noble Baroness, Lady Northover, and the noble Lord, Lord Collins, for their constructive engagement on this important issue. I agree with the point just made by the noble Lord, Lord Collins, on the importance of balance, but as noble Lords will acknowledge, the Government already publish guidance on the definition of “owned and controlled” and they will continue to do so. That duty is enshrined in Clause 36. We feel that there is no need to make it explicit, as Amendment 63 would require, and that doing so would prompt unhelpful questions about why other aspects of the guidance are not referred to in the Bill. We do not wish to limit the ability of Clause 36 to provide guidance in any of these areas.

I turn now to Amendment 64. It would greatly broaden the scope of guidance to areas such as establishing effective banking and payment corridors, which are clearly beyond the remit of the Government to provide. For example, we cannot require banks to make payments on behalf of particular customers or to open new payment channels. The whole issue of how banks operate and the derisking that we have seen in certain parts of the world is reflective of that. A requirement to provide such detailed guidance would therefore be highly problematic.

However, I do take on board some of the points raised by noble Lords about assuring that we will publish guidance at the earliest opportunity, and I hope that I can offer some degree of further reassurance. While we cannot force banks to make commercial decisions one way or the other, we can certainly encourage them to do so. We can do that through clearly drafted humanitarian exemptions, general licences, guidance and the ability to prioritise flexibly appropriate applications. I assure noble Lords that all of these can be delivered under the Bill as drafted.

If I heard the noble Baroness, Lady Northover, and indeed my noble friend Lord Dundee correctly—I thank my noble friend for his support for the Government’s actions in this regard—they referred to how the Government “may” issue guidance. I can assure noble Lords that Clause 36 makes it clear that the Minister “must issue guidance”. As I said earlier, in the near future we will publish an initial framework for the exceptions and licences.

Perhaps I may make a final point on the issue of NGOs and the humanitarian aspects. I for one have found our dialogue to be extremely constructive on a cross-party basis with NGOs. In that spirit, I certainly look forward to working with both the noble Baroness and the noble Lord to take this matter further. With those assurances, I hope that the noble Baroness will be minded to withdraw her amendment.

[Baroness Northover]

I thank the noble Lord and others who have taken part in this debate. Yes, he is right: the Bill states that the Minister “must issue guidance”, but the problem is that underneath that phrase it states that the guidance “may” include this, that and the other; in other words, it is not sufficiently specific. However, I thank the noble Lord for his response and his promises; I am sure that both the NGOs and the banking sector will see them. I hope that will move things forward and that the specific guidance enabling the banks to become involved—of course, the Government cannot instruct them to do so—is issued. If the Government are clear about what they are expecting, that is what the banking sector needs, while the NGOs need that clarity so they can get on with their work. I am sure this issue will be discussed further in the Commons, but in the meantime, I beg leave to withdraw the amendment.

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Moved by

[Lord Ahmad of Wimbledon]

65: Clause 38, page 27, line 1, leave out subsections (2) and (3) and insert—
“(2) The condition referred to in subsection (1)(b) is that the appropriate Minister making the new regulations—(a) considers that the regulations being amended will, as amended, be sanctions regulations within the meaning given by section 1(4) that are appropriate for the purpose stated in them under section 1(3), and(b) if any purpose stated in the regulations being amended is a purpose other than compliance with a UN obligation or other international obligation, considers in respect of each such purpose—(i) that carrying out that purpose would meet one or more of the conditions in paragraphs (a) to (d) of section 1(2),(ii) that there are good reasons to pursue that purpose, and(iii) that the imposition of sanctions is a reasonable course of action for that purpose.(2A) In subsection (2)(b)(iii) “sanctions” means prohibitions and requirements of the kinds imposed by the amended regulations for the purpose in question (or both for that purpose and for another purpose of those regulations).In this subsection “the amended regulations” means the regulations being amended as those regulations will be when amended.”

[Lord Ahmad of Wimbledon]

My Lords, government Amendments 65 and 68 build on the new requirements for making sanctions regulations that we have already debated. They extend these requirements to situations where a Minister is amending sanctions regulations that are not based on a UN or international obligation. In this regard, I am grateful to the noble and learned Lord, Lord Judge, and the noble Lord, Lord Pannick, for co-signing these government amendments. When amending regulations, the Minister would have to ensure that they continue to meet the relevant purposes, that there are good reasons to pursue those purposes, and that sanctions are a reasonable course of action. The Minister must also lay a written memorandum explaining why these tests have been met.

Government Amendments 67 and 102 are technical in nature—I use that word again—and enable us to implement the obligations more efficiently. I can assure the noble Baroness, Lady Northover, that they reflect the fact that UN sanctions regimes are often based on a series of Security Council resolutions. I hope noble Lords agree that these amendments are uncontentious and feel able to support them. I beg to move.

[Baroness Northover]

We welcome the Government’s move.

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Moved by

[Lord Ahmad of Wimbledon]

66: Clause 38, page 27, line 7, leave out “The purpose stated” and insert “Except as permitted by subsection (4A), the purpose stated under section 1(3)”

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Moved by

[Lord Ahmad of Wimbledon]

69: Clause 39, page 27, leave out line 16 and insert—
“(a) which are not for the time being authorised by Chapter 1 (ignoring section 7), but(b) which are kinds of prohibition or requirement that the United Kingdom—(i) has any UN obligation or other international obligation to impose, or(ii) has at any time had any UN obligation or other international obligation to impose.”

[Lord Ahmad of Wimbledon]

My Lords, Clause 39, to which this group of amendments refers, has been included to allow the UK to impose new types of sanction measures in response to new, unforeseen circumstances. Let me summarise why we think it is needed and then explain the government amendments that I have tabled. I note that this was one of the issues highlighted in the report of the Delegated Powers and Regulatory Reform Committee, and I know that several noble Lords have received and considered carefully my letter of last week specifically responding to the committee’s recommendations.

The familiar types of sanctions include asset freezes, travel bans, arms embargoes and prohibitions on aviation and maritime transport. These types of sanctions are included in the Bill. It is not possible to predict all the types of sanctions which may in the future be useful or necessary. We all know that as technology advances and those who wish to do us harm find ever more sophisticated ways of doing so, we may need to be able to react in an agile manner. The Government intend to continue to play a leading role in the development of sanctions as a foreign policy tool. Wherever possible we will do this through the UN to ensure that the measures have global impact. On occasion, however, we will need to work with like-minded partners outside the UN framework and may need to adapt our own sanctions toolkit to keep pace with allies. On both Iran and Russia, for example, transatlantic co-operation resulted in sanctions that were substantively different from anything previously agreed.

The power in Clause 39 is designed to provide the necessary flexibility in cases where we are acting outside the UN framework. Regulations under this clause would be subject to the draft affirmative procedure as befitting a Henry VIII power of this kind. However, having listened to the concerns expressed in this House and having reflected carefully on them, I have tabled government Amendment 69, which would further restrict the use of this power by stipulating that it may be used to create new types of sanctions only where the UK is or has been subject to an international obligation to put in place sanctions of that type. This means that the new types of sanctions created by this power can only be those developed by the international community. This power, as amended, will no longer enable the UK unilaterally to put new types of sanctions in place, which was a concern that was expressed.

Government Amendment 70 also makes it clear, as requested in Committee, that Clause 39 cannot be used to alter the purposes of the sanctions regulations specified in Clauses 1 and 2. We think that this was the effect of the original drafting, but we are happy to make it explicitly clear in the Bill. I believe that this is a substantial move forward on the Government’s part, and I hope noble Lords will acknowledge this and support it. I beg to move.

[Lord Pannick]

Again, I am very grateful to the Minister and the Bill team. Government Amendments 69 and 70 respond positively to the concerns that I and others expressed in Committee. Therefore, I will not move Amendment 71.

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Moved by

[Lord Ahmad of Wimbledon]

70: Clause 39, page 27, leave out lines 22 and 23 and insert—
“( ) For the avoidance of doubt, regulations under this section may not add to or amend the purposes mentioned in section 1(1) or amend section 1(2).”

Sanctions and Anti-Money Laundering Bill [HL]

Lord Ahmad of Wimbledon Excerpts

3rd reading (Hansard): House of Lords
Wednesday 24th January 2018 Lords Chamber

Moved by

[Lord Ahmad of Wimbledon]

1: Clause 43, page 33, line 16, leave out paragraphs (a) and (b) and insert—
“(a) enabling or facilitating the detection or investigation of money laundering, or preventing money laundering;(b) enabling or facilitating the detection or investigation of terrorist financing, or preventing terrorist financing;”

[The Minister of State, Foreign and Commonwealth Office (Lord Ahmad of Wimbledon) (Con)]

My Lords, it is a pleasure to stand before the House once again, and to speak to Amendments 1, 2, 5, 6 and 7. Although these are tabled as government amendments, they have been prepared through close collaboration with noble Lords. In particular, I convey my thanks for the collaborative and constructive engagement that we have had with the noble Baronesses, Lady Bowles and Lady Kramer.

I said at Second Reading, and have said throughout the Bill’s progress through your Lordships’ House, that I intended to co-operate and work constructively with all noble Lords as this important Bill progresses through the House. I am pleased—and I am sure that the sentiment is shared by all noble Lords—that we have been able to conduct debate on the Bill in this very spirit and that the noble Baronesses have been able to sign these government amendments. They improve the Bill, and I hope that the amendments which we will discuss today will further satisfy all those in your Lordships’ House that the powers in the Bill are appropriate for the UK’s future anti-money laundering regime.

In brief, Amendment 1 requires that future regulations made under Clause 43 can only make provision which enables or facilitates the detection or investigation of money laundering or terrorist financing. Power remains within Clause 43 to make regulations that prevent money laundering or terrorist financing and to implement the standards of the Financial Action Task Force. This clarifies the purposes for which regulations can be made and addresses concerns that have been raised by noble Lords.

Amendment 2 is a technical change which extends the definitions of money laundering and terrorist financing contained within Clause 43(4) to the proposed new clause that would be introduced in connection with the register of beneficial ownership of overseas companies that own UK property through government Amendment 3, which I will speak to later today. This amendment is necessary to ensure that the definitions already contained within Clause 43 are consistently applied throughout the sections of the Bill that relate to anti-money laundering.

Concerns have been raised over the breadth of paragraph 2 of Schedule 2. Amendment 5 addresses these concerns by limiting the ability of regulations made under Clause 43 to require only relevant government departments, anti-money laundering supervisory authorities, and persons carrying on a relevant business to identify and assess risks relating to money laundering, terrorist financing or other threats to the integrity of the international financial system. This also clarifies the scope of the power and essentially reflects the current position within Regulations 16 to 18 of the money laundering regulations 2017. This narrowing of the scope of potential duties to carry out such risk assessments is consistent with the approach currently taken by the United Kingdom’s anti-money laundering framework.

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[Lord Ahmad of Wimbledon]

My Lords, I once again thank noble Lords for their support on these amendments. I have listened very carefully, as I always have, to the noble and learned Lord, Lord Judge, on the issue of criminal offences. I think he referred to Clause 17 and Schedule 2. I assure him that we will return to this in the other place to ensure the consistency of the drafting. I will certainly take this up, but I can give him that reassurance.

Apart from that, I wish again to extend my thanks to all noble Lords who have engaged constructively. To pick up on the point made by the noble Baroness, Lady Kramer, I understand that the noble Baroness, Lady Bowles, was out in New Zealand. It is a good example for all of us that, if you have a 23-hour or 24-hour flight, drafting amendments is one way of utilising that time. I beg to move.

Amendment 1 agreed.

Moved by

[Lord Ahmad of Wimbledon]

2: Clause 43, page 33, leave out line 24 and insert “In this Part—”

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Moved by

[Lord Ahmad of Wimbledon]

3: After Clause 43, insert the following new Clause—
“Reports on progress towards register of beneficial owners of overseas entities
(1) The Secretary of State must, after the end of each reporting period, publish a report explaining the progress that has been made during that period towards putting in place a register of beneficial owners of overseas entities.(2) For the purposes of this section, the following are reporting periods—(a) the period of 12 months beginning with the day on which this section comes into force; (b) the period of 12 months beginning with the day after the end of the period mentioned in paragraph (a);(c) the period of 12 months beginning with the day after the end of the period mentioned in paragraph (b).(3) The first and second reports under this section must include—(a) a statement setting out the steps that are to be taken in the next reporting period towards putting the register in place, and(b) an assessment of when the register will be put in place.(4) The third report under this section must include a statement setting out what further steps, if any, are to be taken towards putting the register in place.(5) Where a report is published under this section the Secretary of State must lay a copy of it before Parliament.(6) For the purposes of this section “a register of beneficial owners of overseas entities” means a public register—(a) which contains information about overseas entities and persons with significant control over them, and(b) which in the opinion of the Secretary of State will assist in the prevention of money laundering.”

[Lord Ahmad of Wimbledon]

My Lords, this amendment seeks to set down in legislation the commitment I made on Report that the Government would make regular reports to Parliament on the progress being made on its proposal to create a register of beneficial owners of overseas entities that own or buy property in the UK or participate in UK government procurement. The new clause requires the Secretary of State to publish and lay before Parliament three reports on the progress made to put in place the register. Each report will be due after the expiry of a 12-month reporting period. The first and second report must set out the steps that will be taken in the next reporting period towards putting the register in place and an assessment as to when the register will be put in place. The third and final report must also include a statement setting out what further steps, if any, are to be taken towards putting the register in place.

Noble Lords will have noted that my noble friend Lord Henley, the Business Minister, this morning laid a Written Ministerial Statement before the House confirming the Government’s intention to publish a draft Bill for scrutiny this summer, as I said on Report, and to introduce a Bill in the second Session—an assurance I gave on Report—and for the register to be operational in 2021.

I also reassure my noble friends, particularly my noble friend Lord Naseby, that the amendment places a duty on the Government to report on progress against implementing a public register of beneficial ownership of overseas legal entities involved in property or procurement within the UK, and will not cover the overseas territories. It would be fair to say that the House had quite a frank debate on this subject only last week. As the House decided, it is for the legislatures of the overseas territories to implement a public register. I reassure noble Lords that we will continue to work with our overseas territories. Indeed, the review periods of 2018 and 2019 that I highlighted will also reflect our continued co-operation with the overseas territories concerning their obligations.

I therefore hope that this covers the assurances that noble Lords, particularly my noble friends, sought, and that my noble friend Lord Naseby will be minded not to press his amendment. I beg to move.

Amendment 4 (to Amendment 3)

Moved by

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[Lord Collins of Highbury]

I will be very brief. I congratulate the noble Lord, Lord Faulks, on pushing this issue. I do not think he owes anyone an apology for doing so because it is vital that we tackle this. This amendment is about the commitment that was made but has been delayed for a long time. My concern, and that of the noble Lord, Lord Hodgson, is that the wording of the amendment potentially takes us to 2022 before we see something. I think all noble Lords will be behind the noble Lord, Lord Faulks, in putting pressure on the Government to ensure that they properly meet their commitment.

Still on public registers, I agree with the noble Baroness, Lady Kramer. I am glad to see that the noble Baroness, Lady Stern, is in her place. She made a powerful case for public registers in overseas territories. The front page of today’s Guardian has an article about Appleby and FBME Bank, which was banned from the US financial system. Appleby is a Cayman Islands-registered holding company. Anyone who reads that article will know that this issue will not go away and we will have to come back to it.

[Lord Ahmad of Wimbledon]

My Lords, I am grateful to noble Lords. I reiterate my thanks to my noble friends Lord Faulks and Lord Hodgson for pressing the Government and holding us to account in this respect and ensuring that we move forward. I am also grateful to my noble friend Lord Naseby, who sought clarification. I have looked carefully at his amendment and I think what the Government have tabled and his amendment have the same intent. However, in the interests of ensuring thoroughness and completeness, I have asked officials to look again to make sure that the intent behind his amendment is achieved.

The Government have committed to the new Bill establishing the register. It will be primary legislation and will pass through your Lordships’ House, so I am sure there will be further discussions and plenty of opportunity to ensure that all issues, particularly those raised by my noble friend, are addressed. I assure him that we feel the intent behind his amendment has been achieved. I will, however, look at this again, and if there is a need to do anything further, we will seek to do that in the other place.

My noble friend Lord Hodgson asked me when Royal Assent might be granted. It is not within my gift as the Minister at the Dispatch Box to confirm that, but we are expecting Royal Assent at the end of this Session. On accountability, I reassure my noble friend that through the additional ministerial Statement laid today, I have sought to provide as much detail as I can at this juncture in the parliamentary timetable. However, as I said to him in our bilateral meetings—I believe this was communicated to him subsequently in other meetings we had—we have worked back, and as the Written Ministerial Statement again confirms, we are looking to have the register operational by 2021. I am sure there will be other opportunities. As for the Government laying a report, I confirm that the 12- month clock—the countdown—will commence as soon as Her Majesty has signed off on the Bill. However, it would be beyond the scope of my responsibilities to give an absolute, cast-iron guarantee as to when Royal Assent will be. I am sure my noble friend appreciates and respects that we have to follow due process. However, the Government are committed to the register being operational in 2021. From the points made by other noble Lords, I appreciate that wherever one is sitting in your Lordships’ House, there is no disagreement on the need to move forward on this and to do so as rapidly as we can.

My noble friend raised another issue, about procurement. Again, to reassure him on that, I draw his attention to the Written Ministerial Statement laid today by my noble friend Lord Henley, which says:

“I am today confirming to Parliament the Government’s timetable for implementation of its policy to achieve greater transparency around foreign entities that own or buy property in the UK or participate in UK Government procurement”.


As the Bill is drafted and pre-legislative scrutiny takes place on it—if that is the process which is agreed—that will allow further discussion to address the very points my noble friend raises in that primary piece of legislation.

The point about local government is well made. As someone who served 10 years in local government, I am acutely aware of how procurement works. It will reflect the very policies adopted by the UK Government. With those reassurances, I hope my noble friend will be minded to withdraw his amendment.

[Lord Naseby]

My Lords, having listened to my noble friend, I am most grateful to him for the patience he has shown and the care he has taken over the Bill and this amendment. In light of the commitment he has made—as he says, if necessary, some amendment could be made in another place—it is my pleasure to withdraw the amendment.

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Moved by

[Lord Ahmad of Wimbledon]

5: Clause 54, page 41, line 19, at end insert—
“( ) section (Reports on progress towards register of beneficial owners of overseas entities);”

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Moved by

[Lord Ahmad of Wimbledon]

6: Schedule 2, page 50, line 6, leave out sub-paragraph (1) and insert—
“(1) Require—(a) the Secretary of State or the Treasury, or both of them acting jointly,(b) supervisory authorities (within the meaning given by paragraph 23), and(c) such persons carrying on relevant business (within the meaning given by that paragraph) as are prescribed for the purposes of this paragraph,to identify and assess risks relating to money laundering, terrorist financing or other threats to the integrity of the international financial system.”

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Moved by

[Lord Ahmad of Wimbledon]

That the Bill do now pass.

[Lord Ahmad of Wimbledon]

My Lords, I stand before your Lordships’ House to reiterate my thanks to all noble Lords who have put a lot of time and energy into making sure that we reached the position that we have today. I would like to take this opportunity to say a few words about the progress achieved in recent months. As many noble Lords acknowledged at Second Reading, this has been the first Bill related to the UK leaving the EU to pass through this House. It has rightly, and I fully respect this, been subject to close scrutiny.

I hope noble Lords recognise the need for legislation. Indeed, I acknowledge that the noble and learned Lord, Lord Judge, notwithstanding our differences and the bridges that have been built in reaching agreement, has consistently recognised the necessity for such a Bill because it allows us to ensure that we can update and lift sanctions, as well as address—here I am grateful to the noble Baroness, Lady Bowles—the issue of an anti-money laundering framework after we leave the EU. I said at Second Reading, and indeed at all stages as progress was made on the Bill, that getting this right will enable the UK to continue to work closely with international partners—yes, our European partners as well—to ensure that we uphold our legal obligations and promote and protect our shared interests and values.

To offer the House some perspective, so far we have dealt with a total of 214 amendments. I am told that we have spent 24 hours and 24 minutes on the Bill in your Lordships’ House—someone has clearly been timing us down to the minute. Noble Lords have listened carefully to the arguments put forward on all sides, and I hope that is reflective of the Government’s attitude. In my opinion, that demonstrates your Lordships’ House at its best. I am confident that the interventions by noble Lords have led to an improved piece of legislation. I am also satisfied that we have been able to agree a range of government amendments, and I am delighted that in several cases these have been supported by noble Lords from across the House, reflecting what I believe is a convergence of views on a number of issues, such as the policy framework for anti-money laundering measures that we have debated today.

I and my officials have engaged closely with noble Lords, both ahead of the Bill and during its passage. In this regard, I put on record my particular thanks to the Opposition Benches, particularly the noble Lord, Lord Collins. We have joked with our respective partners that we have probably seen more of each other than we have of our other halves. Perhaps, with the moving of the Bill, we will be able to provide them with some adequate time. That said, I very much welcome the constructive nature with which the noble Lord has engaged in this, well supported in this regard by the noble Lord, Lord Lennie, with the constructive proposals that he has put forward, and which are now reflected in the Bill, to make absolutely sure that these powers are exercised by future Governments in a spirit of transparency and accountability.

Equally, I am pleased to acknowledge the support, constructive dialogue and exchanges that I have had with the noble Baroness, Lady Northover, for which I am grateful. As I said earlier, I am also grateful to her colleagues, the noble Baronesses, Lady Bowles and Lady Kramer, who have engaged constructively both directly with myself and with real impact, as the noble Baroness acknowledged, on the anti-money laundering part of the Bill.

On my own side—this shows that we are tested from all sides of your Lordships’ House—as I look over my shoulder, I see three noble Lords who have engaged on this, particularly my noble friend Lord Faulks, who has really pushed on the important issue of beneficial ownership, which we have just discussed. I use the term quite directly: he has ensured that the Government’s feet have been held to the fire on that issue. I also thank my noble friend Lady Goldie, who has supported me from the Government Front Bench throughout the passage of the Bill. I am also grateful to other Whips who have supported in this regard.

It would be remiss of me not to thank the noble and learned Lord, Lord Judge, and the noble Lord, Lord Pannick, who, I am told, tabled a total of 50 amendments between them, with a particular focus on strengthening procedural safeguards. I acknowledge and recognise their great expertise and thank them for their collaborative and collegiate approach, which has done so much to improve the Bill.

I would like to thank my Bill team. We have heard from various noble Lords that my team has devoted a huge amount of time and energy to making this work. I thank in particular Louise Williams, the Bill manager, who has also been planning her wedding while working on the Bill; Adam Morley; Jennifer Budniak; and the Bill lawyers, particularly Luke Barfoot and Michael Atkins. There has been a team of more than 50 officials from across government who have supported them, and it has been a truly cross-Whitehall effort. This Bill has played a large part in my life over the past three months but it is only part of my portfolio. The Bill team has been working on it only since last April, but they will continue in their role as a team to shepherd the Bill through the other place. As I move on to other challenges I believe that, with our team, the Bill remains in good hands.

[Baroness Northover (LD)]

My Lords, when the Minister introduced the Bill at Second Reading, he described it as “technical”. It was, of course, about issues on which we all agree: enabling us to have a sanctions regime and to counter money laundering. No sooner were those words out of his mouth than he and all of us registered how important the Bill was in constitutional terms. It is indeed a forerunner of the massive legislation coming our way in the European Union (Withdrawal) Bill, and much else besides.

I therefore thank the Minister for his mental and political flexibility in realising the significance of the way in which this Bill has been drawn up, but above all for being so ready to engage. I thank him today for his latest statement that he will address the inconsistencies on criminal offences immediately in the Commons. My thanks, too, to the Bill team for its equal readiness to engage with us, even responding to emails on Sundays—I think that was Jonny and Louise—when it was clearly beyond the call of duty.

Issues in the Bill included the usual kind of areas where we sought improvements. We failed to take forward the amendment tabled by the noble Baroness, Lady Stern, but I am sure we will return to that. In other areas we have made progress, either in the Bill or through promises that the Minister made in regard to actions that the Government will take; for example, in relation to NGOs working in fragile states and those who may or may not bank them.

However, of most importance were the constitutional issues. Here we are absolutely indebted to the noble and learned Lord, Lord Judge, and the noble Lord, Lord Pannick, for the clarity of their thinking and their determined engagement. I also think that we owe a huge debt to my noble friends Lady Bowles and Lady Kramer—I thank the Minister for that acknowledgement—for spotting quite how much needed to be addressed on the anti-money laundering side of Bill, and setting about reconstructing it. The best result is indeed when the Government bring forward amendments in response to such concerns.

I am extremely grateful to those in my group who have engaged on this Bill. I can hardly describe myself as leading them—they are far too experienced and knowledgeable to need leading. My special thanks go to my noble friends Lord McNally and Lady Sheehan as well as to my noble friends Lady Kramer and Lady Bowles for the extraordinary amount of work they put in. I also thank the noble Lord, Lord Collins, who has been his usual wonderful self throughout this Bill, and his colleagues, the noble and learned Lord, Lord Davidson, and the noble Lord, Lord Lennie. The Bill signals much beyond what it aims to cover, and we have worked collectively around the House, including with the Government. I thank the Minister for ensuring that that work was in the end so productive. He is now temporarily liberated from the Bill—the Bill team, of course, is not—until it returns to us in due course, hopefully in a very sound fashion.

--- Later in debate ---

[Lord Collins of Highbury]

My Lords, I add my thanks to everyone involved in the Bill. I start by thanking my own team, my noble friend Lord Lennie and my noble and learned friend Lord Davidson. These people do not often get thanked publicly, but I thank also the team in the Labour opposition office, including Catherine Johnson, who did a particularly good job in helping me to be well prepared for my numerous meetings with the Minister.

I also thank the Lib Dem Benches, particularly the noble Baronesses, Lady Northover, Lady Kramer and Lady Bowles. We, again, had numerous meetings. One thing that the Minister omitted to mention—he mentioned all the time that we spent in Committee, in the Chamber, scrutinising the Bill—was that we spent substantial time in meetings outside the Chamber. In fact, the Minister got quite anxious at one point when I turned up to meetings with the noble Lord, Lord Faulks. I am sure he felt that I was in the wrong meeting at the time. We had very good cross-party and cross-Bench support, and I add my thanks to the noble Lord, Lord Pannick, and the noble and learned Lord, Lord Judge. We now have a better Bill. It is not necessarily a good Bill in all respects, but it is a much better one than what was originally delivered.

I also pay tribute and thanks to the Bill team, particularly Louise Williams, Adam Morley and Jennifer Budniak, and of course the lawyers. I think I had the most pleasure dealing with the lawyers, and I hope Luke Barfoot and Michael Atkins enjoyed those exchanges as well. They did a terrific job; they are great public servants and, again, they deserve our thanks and gratitude. Obviously, as the noble Baroness, Lady Northover, said, their work will continue.

One thing that surprised me was that at one of the lengthy meetings I had with the Minister, the BBC fly-on-the-wall cameras were there. I hope to God it is better than the programme it did on the House of Lords. I certainly hope I come across much better than some noble Lords did, but let us wait and see—I do not know when it will come out.

My final thanks, of course, go to the Minister. He said at the beginning of this Bill, “I am in listening mode” and I know we joked about that, but honestly, he has listened and his responses prove how much he listened. I am very grateful to him for dealing with us so well on this Bill.

[Lord Ahmad of Wimbledon]

My Lords, I want again to thank all noble Lords.

Bill passed and sent to the Commons.

Sanctions and Anti-Money Laundering Bill [HL]

Lord Ahmad of Wimbledon Excerpts

Ping Pong (Hansard): House of Lords
Monday 21st May 2018 Lords Chamber

Moved by

[Lord Ahmad of Wimbledon]

That this House do agree with the Commons in their Amendments 1 to 3.

1: Clause 1, page 2, line 10, at end insert—
“(ea) provide accountability for or be a deterrent to gross violations of human rights, or otherwise promote—
(i) compliance with international human rights law, or
(ii) respect for human rights,”

3: Clause 1, page 2, line 15, leave out “human rights,”

[The Minister of State, Foreign and Commonwealth Office (Lord Ahmad of Wimbledon) (Con)]

My Lords, the abuse of human rights was an issue of significant concern to both your Lordships’ House and the other place, as was made clear by many people who spoke at various stages of the Bill. The Government fully recognise why noble Lords and Members of the other place wished to reference gross human rights abuses explicitly, particularly in reference to the abhorrent case of Sergei Magnitsky. In her speech to the other House on 14 March, the Prime Minister made clear the Government’s intention to bring forward a “Magnitsky amendment” to the Bill. As a result, the Government worked closely and constructively with all sides of the other House to table these amendments, which have captured the maximum possible consensus in this area.

Commons Amendment 1 puts gross human rights abuses in the Bill as a purpose for which sanctions may be imposed. Commons Amendment 5 links the existing definition of a,

“gross violation of human rights”,

to the definition in the Proceeds of Crime Act 2002, and so ensures that it includes the torture of a person,

“by a public official, or a person acting in an official capacity”,

where the tortured person has sought to,

“expose illegal activity carried out by a public official”,

or to defend,

“human rights and fundamental freedoms”.

This makes it clear that all gross human rights abuses or violations are explicitly captured within the Bill. Commons Amendments 2, 3, 6, 7, 8, 14, 15, 19 and 20 are consequential on the changes to Clause 1.

Amendment 17 requires reports to be made about the use of the power to make sanctions regulations. Reports must identify regulations that have been made for human rights purposes. They must also specify any recommendations made by a parliamentary committee about the use of that power in relation to gross human rights violations, and include the Government’s response to any recommendations. It is right and proper that scrutiny of the regulations is carried out by Parliament.

Commons Amendment 16 was tabled in recognition of the concerns, raised by both the Independent Reviewer of Terrorism Legislation and the Joint Committee on Human Rights, that the repeal of Part 1 of the Terrorist Asset-Freezing etc. Act 2010—TAFA—would remove the independent reviewer’s oversight of the UK’s counter-terrorism asset freezes. I can assure all noble Lords that there was never any intention by the Government to remove independent oversight of the UK’s counter- terrorism asset-freezing regulations made under this Bill. That is why a carefully drafted government amendment was tabled in the other place to replicate effectively the scope of the independent oversight currently provided under TAFA. This ensures that there will be no removal or narrowing of the oversight of counterterrorism asset freezes as a result of the Bill.

The amendment also makes the Government’s commitment to this clear by imposing a duty to appoint an independent reviewer. The duty applies to any part of sanctions regulations that imposes asset freezes that are not made for a purpose that implements international obligations in this area but would further the prevention of terrorism. This is consistent with the scope of the independent oversight provided for under TAFA, thereby ensuring there is no removal or narrowing of the oversight of counterterrorism asset freezes as a result of the Bill.

I put it on record again that the Government are committed to promoting and strengthening universal human rights, and holding to account states and individuals responsible for the most serious violations. We will continue to do this after we leave the European Union and we intend that the powers in the Bill should allow us to be part of a global network of like-minded jurisdictions, working together to tackle those who commit gross human rights violations. We will continue to work with international partners to this end. I beg to move.

[Lord Anderson of Swansea (Lab)]

My Lords, it is good to turn to a period of calm after the clash and clamour of Brexit. I congratulate the Government on responding to the pressures in this House and the other place, and on taking a stand that I hope will be followed by other countries where appropriate. The current amendments relate to sanctions on the perpetrators of human rights abuses, wherever committed, and against individuals rather than states. They are therefore smart sanctions and I congratulate Sir Alan Duncan in the other place and those who have worked together. The Minister stressed that it was an all-party group and I believe the amendments in the other place were signed by all parties. This is therefore very important.

I congratulate also Bill Browder, who has worked tirelessly following the murder in custody of Sergei Magnitsky. These amendments are made in the context of the poisoning of Sergei and Yulia Skripal in Salisbury and the murder of Magnitsky in Russia in 2009, but they are clearly not limited to Russia. They are much broader and universal, just as the Magnitsky Act of 2012 in the US was, in 2016, broadened to include perpetrators of gross human rights abuses wherever committed. As the Prime Minister has said:

“There is no place for these people—or their money—in our country”.

--- Later in debate ---

[Lord Ahmad of Wimbledon]

My Lords, I am grateful to all noble Lords who have taken part in this short debate. From the outset, I thank Members for their engagement during this Bill, both in your Lordships’ House or in the other place. I commend the efforts of the noble Lord, Lord Pannick, my noble friend Lord Faulks and others who over a lengthy period of time, from all sides of the Chamber, have talked on the importance of such a clause. I am mindful that I do not see the noble Baroness, Lady Kennedy, in her place, but I know that she has a Private Member’s Bill in this respect as well, and I acknowledge her efforts in that regard.

I shall pick up on the specific points. The noble Lord, Lord Anderson, asked when the Bill was likely to be implemented in relation to all things considered around Brexit. As he acknowledges, the Bill provides the framework to impose sanctions, and under the Bill will sit a series of regulations that will put specific sanctions regimes into place. This will be done in accordance with the timetable of Brexit. He also asked about the implementation period, which we will have to take into account. As some of the specifics come on board on this, I shall share them with your Lordships’ House. He also asked about the procedure for listing individuals. The sanctions regulations will be set out, and the activities targeted by sanctions. If the Minister concerned has sufficient evidence to meet the thresholds in the Bill, they can place a person on an administrative list of designated persons to whom sanctions apply. That list will also be made public.

The noble Lord, Lord Anderson, and my noble friend Lord Faulks asked about encouraging others. As I have said during the Bill, when it comes to sanctions generally—and specifically on this clause—I can assure them that the UK will continue to play a leading and constructive role. As such, we will continue to work with all our international partners to achieve the maximum consensus possible on issues of concern to the UK, including those in these clauses.

I thank the noble Baroness, Lady Northover, and her team for her engagement on this Bill. She asked specifically about the reports and their frequency. They will be made annually, and the report to Parliament will also be laid before Parliament as well.

The noble Lord, Lord Hain, raised important issues around South Africa and the SRA’s withdrawal of the registration around Hogan Lovells. I have listened, as I always do, to his various contributions very carefully, and shall ensure that his concerns are relayed to the relevant departments and authorities.

The noble Lord, Lord Pannick, asked whether the Minister can confirm whether safeguards could apply on HR sanctions. I am always mindful when he asks questions because he knows the answer already, and I am pleased to answer very shortly and succinctly—yes, they will.

Motion agreed.

Motion on Amendment 4

[Lord Ahmad of Wimbledon]

Moved by

That this House do agree with the Commons in their Amendment 4.

4: Clause 1, page 2, line 37, after “to” insert “17, (Enforcement: goods etc on ships), (Goods etc on ships: non-UK conduct) and”

[Lord Ahmad of Wimbledon]

My Lords, this amendment relates to the important area of enforcing trade sanctions on board ships outside of UK territorial waters. I know that the noble Lord, Lord Collins, has an amendment in this respect, and I am cognisant that the Delegated Powers and Regulatory Reform Committee has expressed some concerns. I assure him and your Lordships’ House that I commit to respond to the committee in writing. In the meantime, I hope that I can reassure noble Lords about the necessity and appropriateness of these powers.

In a moment, I will turn to the specific issues which the committee has raised. I want to make it clear from the outset that these powers are needed to address exceptional and potentially dangerous situations in which goods sanctioned by the UK are being transported to or from a sanctioned country in international and foreign waters; to ensure adherence to the standards set out in the relevant UN Security Council resolutions; and to provide protection against the transportation of dangerous and harmful goods in international waters—strengthening our ability to counter foreign policy and national security threats via the enforcement of sanctions regimes. Especially in light of recent events, noble Lords will appreciate that it is both necessary and important for the UK to have such powers and that is why we have sought to include these clauses.

Amendment 11 would enable UK officials to board and search ships where there are reasonable grounds to suspect that the ship is carrying sanctioned goods or technology. Amendment 12 also allows these powers to be exercised in circumstances where Amendment 11 does not apply but where there are reasonable grounds to suspect that the ship is carrying goods that would be sanctioned if there were a UK link. The powers could be exercised against British ships in both foreign and international waters, and against foreign and stateless ships in international waters. These clauses would also allow officials to seize goods that are being dealt with in contravention, or deemed contravention, of sanctions regulations.

Amendment 18 would allow the procedures for dealing with goods once seized to be set out in regulations. We expect these powers to be exercised, for example, in circumstances where the UK is aware that a ship is carrying goods such as components of chemical weapons, military materials heading towards a conflict zone in breach of an arms embargo, or even illicit nuclear materials heading towards a sanctioned state.

The clauses contain important safeguards limiting the use of these powers. The Bill makes it clear that there must be reasonable grounds to suspect that the ship in question is carrying sanctioned goods before any action can be taken. Further, consent from a foreign state is required before these powers can be exercised in relation to a British ship in foreign waters. The powers may be exercised in relation to a foreign ship in international waters only with the authorisation of the Secretary of State, which may be given only in certain limited circumstances, thereby ensuring that these powers will be used only on foreign ships with either flag-state consent or under the authority of international law. Where there is no flag state, as in the case of a stateless ship, such safeguards are not required as the ship is not subject to the jurisdiction of, and protection from, any other state.

These powers are analogous to those contained in other provisions of domestic legislation. For example, Chapter 5 of the Policing and Crime Act 2017 allows for these same powers to be exercised in circumstances where there are reasonable grounds to suspect that an offence under the law of England and Wales is being committed on board a ship in international waters. We intend to confer these new powers on the same UK authorities which are already capable of exercising those existing powers, namely constables, NCA officers and customs officials. In addition, we intend to add commissioned officers of Her Majesty’s ships to that list, as we expect that the Navy is likely to be the authority best placed to exercise these powers in respect of ships in international waters. This is not a novel approach as such officers are, for example, already designated maritime enforcement officers under the Criminal Justice (International Co-operation) Act 1990.

I draw noble Lords’ attention to the fact that the various maritime enforcement powers contained in existing legislation go further in some respects. For example, they allow for the arrest and detention of persons on board the ship. The purpose of these powers is not to target individuals, but to ensure that we can prevent the improper transportation of goods to or from a sanctioned country. These maritime powers are both necessary and important because the UK has legal obligations to enforce sanctions regimes on board British ships whether these ships are in domestic waters or not, which these powers will allow us to do. The UK also has legal obligations to seize and dispose of UN-sanctioned goods; we will be able to meet those under these powers. The UN Security Council also calls on the UK to search foreign ships for such goods, and expects the same approach to be taken in relation to stateless ships. The powers contained in this clause will allow us to do this as well.

On the concerns raised by the Delegated Powers and Regulatory Reform Committee in particular, I will explain why these amendments provide for the powers to be set out in regulations. This mirrors the approach that has been taken to the sanctions Bill as a whole. The Bill sets out the framework to be applied in sanctions regulations. The purpose of these maritime powers is to enforce UK trade sanctions, and so they should be exercisable in relation to any country on which trade sanctions have been imposed by the United Kingdom. For the sake of clarity and accessibility, it makes sense for there to be one regulation per sanctions regime which sets out all the detail pertaining to that regime, and that includes these powers.

However, it must be remembered that almost all the detail around these powers has been set out in the primary legislation already: the nature of the coercive powers that may be exercised, the circumstances in which these powers must be exercised, and the nature of the procedure that is to be followed when goods have been seized under these powers. Ministers therefore have very little discretion about what can be set out in the regulations in relation to these powers. For this reason, we consider this approach to be appropriate. For the same reasons, we consider that there is no reason for any additional parliamentary scrutiny of sanctions regulations based on the inclusion of these powers in those regulations, beyond the parliamentary scrutiny already provided for in the Bill in relation to those regulations.

The Delegated Powers Committee has also raised concerns about the particular wording of Amendments 11 and 12 and about whether the powers set out there are a non-exhaustive list. I reassure noble Lords that there is no intention to exercise any coercive powers that are not explicitly set out in Amendments 11 and 12. Indeed, if the intention was to have additional powers to take any other coercive action of the sort provided for in these amendments, one would expect the primary legislation to set out those additional powers, and it does not do so.

Turning briefly to the other amendments in this group, Amendments 4, 13, 23 and 30 are consequential on these clauses. Amendment 4 would ensure that the reference to supplemental provision, in Clause 1, includes these clauses. Amendment 13 ensures that the exercise of these powers in international and foreign waters is not limited by Clause 19 on extraterritorial application. Amendment 23 would ensure that the Bill does not affect powers exercised by the royal prerogative in relation to ships, and Amendment 30 would allow amendments to be made to the Customs and Excise Management Act to be able to properly enforce UK sanctions.

These maritime powers are necessary and important to ensure that we can take steps against the transportation of dangerous and harmful goods in international waters. Their inclusion in the Bill is an important step in enhancing the integrity and impact of sanctions regimes. I beg to move.

[Lord Collins of Highbury]

My Lords, I read the report of the Delegated Powers Committee on Friday and thought that I needed to act immediately, because I wanted to ensure that this House had the opportunity to fully debate its implications. I welcome what the Minister said and his commitment to respond fully to the committee’s report.

With regard to the powers, one of the biggest concerns at Second Reading in this House, through to Committee, has been the power grab—the concept of legislation being made by regulation, which seems to be expanding the whole time. I was particularly concerned about Clause 4 and how its powers appear not to be limited. I know that we have safeguards in the Bill, and I thank the noble Lord, Lord Pannick, and the noble and learned Lord, Lord Judge, who is not in his place, for moving substantial amendments, which the Government listened to, on how you can confine and constrain the powers that are needed. We know that at some time in the future, a Government will simply look at what the law gives them power to do and use it, because it could apply in different circumstances. Therefore I was responding in particular to Clause 4 and the committee’s report. I hear what the Minister said about the safeguards and the constraints on Ministers in making regulations, and I hope that other noble Lords will be satisfied with the response. At this stage, I am.

--- Later in debate ---

[Lord Pannick]

I am very disappointed—at other noble Lords are—at the approach of the Government. All these points were fully debated at Second Reading, in Committee and on Report, and the constant theme across the House was that it was vital to constrain the powers that Ministers were giving themselves in relation to the Bill. The Minister was very receptive to those concerns and accepted a number of amendments, and it is therefore very disappointing that at this very late stage we see again the same vice. So I share the disappointment and regret that, given the stage we are at, it is too late to do anything about it. But I hope that the Minister will take back to his department our concern and the promise—it is not a threat—that, if similar powers are put before us in another Bill, no doubt noble Lords will have more to say about it.

[Lord Ahmad of Wimbledon]

My Lords, I thank noble Lords for their comments on this amendment and, of course, I have noted what all noble Lords said and the concerns they expressed. Let me assure them once again—I mention in particular the noble Baroness, who mentioned Amendments 11 and 12—that I will address specifically the powers of the Minister, and give the assurance once again that a detailed response will be provided to the Delegated Powers Committee. I am seeking to ensure that this response will be provided before the Recess.

Motion on Amendment 4 agreed.

Moved by

[Lord Ahmad of Wimbledon]

That this House do agree with the Commons in their Amendments 5 to 8.

5: Clause 1, page 2, line 37, at end insert—
“(6A) In this Act any reference to a gross violation of human rights is to conduct which—
(a) constitutes, or
(b) is connected with,
the commission of a gross human rights abuse or violation; and whether conduct constitutes or is connected with the commission of such an abuse or violation is to be determined in accordance with section 241A of the Proceeds of Crime Act 2002.”

--- Later in debate ---

Moved by

[Lord Ahmad of Wimbledon]

That this House do agree with the Commons in their Amendments 9 and 10.

9: 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.”

10: After Clause 17, insert the following new Clause—
“Report in respect of offences in regulations
(1) In this section “relevant regulations” means regulations under section 1 which create any offence for the purposes of—
(a) the enforcement of any prohibitions or requirements imposed by or under regulations under section 1, or
(b) preventing any such prohibitions or requirements from being circumvented.
(2) The appropriate Minister making any relevant regulations (“the Minister”) must at the required time lay before Parliament a report which—
(a) specifies the offences created by the regulations, indicating the prohibitions or requirements to which those offences relate,
(b) states that the Minister considers that there are good reasons for those prohibitions or requirements to be enforceable by criminal proceedings and explains why the Minister is of that opinion, and
(c) in the case of any of those offences which are punishable with imprisonment—
(i) states the maximum terms of imprisonment that apply to those offences,
(ii) states that the Minister considers that there are good reasons for those maximum terms, and
(iii) explains why the Minister is of that opinion.
(3) Subsection (4) applies where an offence created by the regulations relates to a particular prohibition or requirement and the Minister considers that a good reason—
(a) for that prohibition or requirement to be enforceable by criminal proceedings, or
(b) for a particular maximum term of imprisonment to apply to that offence,
is consistency with another enactment relating to the enforcement of a similar prohibition or requirement.
(4) The report must identify that other enactment.
(5) In subsection (3) “another enactment” means any provision of or made under an Act, other than a provision of the regulations to which the report relates.
(6) In subsection (2) “the required time” means—
(a) in the case of regulations contained in a statutory instrument which is laid before Parliament after being made, the same time as the instrument is laid before Parliament;
(b) in the case of regulations contained in a statutory instrument a draft of which is laid before Parliament, the same time as the draft is laid.
(7) This section applies to regulations which amend other regulations under section 1 so as to create an offence as it applies to regulations which otherwise create an offence.”

[Lord Ahmad of Wimbledon]

My Lords, we now come to the important issue of criminal offences. This group of amendments would allow powers in the Bill to be used to create criminal offences and penalties in regulations for both sanctions and money laundering breaches, subject to new safeguards.

I say at the outset that I recognise that your Lordships’ House had serious concerns about the inclusion of these powers, and the noble and learned Lord, Lord Judge, in particular, remains very concerned. I assure all noble Lords that once the Bill left your Lordships’ House we continued to listen to those concerns and have sought to address them. That is why these amendments also include an important new procedural safeguard of a requirement to report to Parliament, meaning that the Government have to inform Parliament specifically about the use of the powers to create criminal offences in secondary legislation. This is intended to enable Parliament to be better informed about the use of these powers and to be able to properly hold the Minister to account.

I shall go through each of the amendments in more detail. Amendments 9 and 21 restore the ability to provide for criminal offences and penalties in sanctions and money laundering regulations. In tabling these amendments, I acknowledge your Lordships’ recognition of the importance of rigorous anti-money laundering and sanctions regimes. In order to ensure the robustness of future sanctions and anti-money laundering regulations, corresponding powers to create criminal offences for breaches of those future regimes are necessary so as to preserve the ability of future Governments to impose effective and dissuasive sanctions for breaches of regulations.

I recognise that some in your Lordships’ House had concerns about the scope of these powers when the Bill was first introduced. These amendments address those concerns through additional safeguards, which must be met before the powers can be used. When I come to Amendments 31, 32 and 34, I shall elaborate upon the safeguards, which the Government have discussed with noble Lords since the Bill’s passage through this House.

The amendments restore our ability to enforce sanctions. As noble Lords are aware, sanctions are used to prevent serious threats to national and international peace and security. It is therefore right that breach of them is a criminal offence, and it is also right that penalties should be set at a level that acts as a proper deterrent for these serious crimes. The Bill gives us the ability to set penalties at up to 10 years’ imprisonment, but that does not mean that we will set them at the maximum in every case.

In respect of trade sanctions, offences for breaches of prohibitions made under the Export Control Act 2002 all have maximum penalties of 10 years’ imprisonment. That does not apply to the trade sanction prohibitions created under the European Communities Act 1972, which are capped at two years’ imprisonment, despite the breaches being just as serious a matter. This Bill will enable us to remedy that disparity by harmonising maximum penalties for breaches of all trade sanctions at 10 years.

Currently, breaches of financial sanctions can be punished by up to seven years’ imprisonment, and we plan to continue to set penalties at this level for financial sanctions. We also plan for breaches of other sanctions, such as transport sanctions, to have penalties set to match this level. There will also be offences, such as the failure to provide information when required to do so by law, that require lesser penalties, such as up to two years’ imprisonment, and we do not plan to increase penalties in those areas either.

I have set out in previous debates how the enforceability of new regulations would be seriously weakened without the power to create criminal offences, and how it is not unusual for requirements in delegated legislation to be enforced using criminal penalties. I now turn to the procedural safeguards we have introduced, which I hope will constitute sufficient reassurance to noble Lords who have expressed concerns.

Amendments 10, 25 and 32 introduce the important safeguard of requiring the Government to lay a report before Parliament whenever criminal offences are created or amended in sanctions regulations made under Clause 1 or in anti-money laundering regulations made under Clause 43. The amendments require the report to be laid at the same time as the regulations are laid or when the draft statutory instrument containing the relevant regulations is laid, depending on which parliamentary procedure is used. The report will facilitate effective parliamentary scrutiny of future use of criminal offences in sanctions regulations and goes further than the status quo in enabling Parliament to scrutinise the creation of criminal offences through sanctions or money laundering regulations.

The amendment specifies what elements should be included in these reports. Specifically, this will include: first, the details of the offences that have been created and the requirements to which they refer; secondly, the good reasons why a breach of these requirements should be enforced via criminal offences; thirdly, the maximum prison terms for any offences created which are punishable by imprisonment; and, fourthly, the reasons why those maximum terms have been set at the level they have. I trust noble Lords will agree that these reports will provide increased transparency as to the reasons for creating future criminal offences, and so give both Houses of Parliament a new and solid basis for holding the Government to account on the use of these powers when debating regulations made under the Bill. Nevertheless, the Government remain very aware that creating criminal offences and setting penalties in regulations is a serious matter and not one to be undertaken lightly. We hope that these amendments address that.

I would also like to take this opportunity to assure your Lordships’ House that the requirement contained in Amendment 25—for a Minister, when for whatever reason a report is not laid on time, to make a statement about that failure to the House—does not in any way circumvent the obligation to make the statement. It is an additional requirement, meant to create a further obligation to Parliament that if, for example, there has been some administrative error in publishing a statement, Ministers must provide an explanation to Parliament for that failure.

Amendment 31 is consequential to new paragraph 20A inserted by Amendment 32. The envisaged paragraph 20A(1) of Schedule 2 clarifies the scope of potential offences created for the purposes of the enforcement of requirements imposed by or under regulations under Clause 43.

Amendment 32 also makes the power to create criminal offences in money laundering regulations subject to the requirement for a report to Parliament along the same lines as the amendments for Part 1 of the Bill. This amendment clarifies that the scope of the power for creating future offences is restricted to offences for the purposes of enforcing future anti-money laundering regulations. It is both necessary and, importantly, proportionate.

Amendment 34 ensures that references made to regulations made under Clause 43, with respect to paragraph 15 of Schedule 2, and requirements imposed by regulations made under Clause 43, with respect to paragraph 20A of Schedule 2, also include reference to or requirements imposed by the Money Laundering Regulations 2017. This amendment ensures that new money laundering offences can be created by amending the Money Laundering Regulations 2017. It will therefore enable the Government to create new offences in order to respond, for example, to emerging risks identified by the national risk assessment of money laundering and terrorist financing, which was published in October of last year, or in response to the ongoing review by the Financial Action Task Force of the UK’s anti-money laundering and counterterrorist finance regime. I beg to move.

[Lord Pannick]

My Lords, in the early stages of this Bill, my noble and learned friend Lord Judge, who is not in his place, expressed the concerns that many of us felt about Ministers being given a power to create new criminal offences and, indeed, to specify maximum sentences. I am very pleased that the Government have recognised a need for safeguards in this context. This is an exceptional circumstance, and I very much hope that the Government will not see this as a precedent to be used in other contexts.

[Baroness Northover]

My Lords, the potential creation of new criminal offences by Ministers was of course the subject of major debate in the Lords, and the Government were defeated. It is the Government’s compromise that we are considering here. I know that the Government and the noble and learned Lord, Lord Judge, spent a great deal of time on this, as did my noble friend Lady Bowles. Noble Lords did not quite get to where they would have liked, but I know that they thought progress had been made. We are therefore content to accept the position that we have reached. However, the noble Lord, Lord Pannick, makes an important point about this not being a precedent.

[Lord Ahmad of Wimbledon]

I thank the noble Lord and the noble Baroness who have spoken. When this issue left your Lordships’ House, I emphasised and assured noble Lords that we would continue to work, particularly, with the noble and learned Lord, Lord Judge, and officials continue to do so. Every time I saw him in a Division Lobby or outside it—often he was going in the opposite direction, but we will park that for a moment—he reassured me that progress was being made, and this is the culmination of that. I thank noble Lords for their support.

Motion on Amendments 9 and 10 agreed.

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Moved by

[Lord Ahmad of Wimbledon]

That this House do agree with the Commons in their Amendment 11.

11: Insert the following new Clause—
“Enforcement: goods etc on ships
(1) The provision that may be made by virtue of section 17(2) (enforcement of prohibitions or requirements) includes provision as to the powers and duties of prescribed persons in relation to—
(a) British ships in foreign waters or international waters,
(b) ships without nationality in international waters, and
(c) foreign ships in international waters.
(2) Regulations may make provision by virtue of this section only for the purpose of enforcing relevant prohibitions or requirements.
(3) A prohibition or requirement is a “relevant prohibition or requirement” for the purposes of this section if it is—
(a) a prohibition or requirement specified by the regulations which is imposed by regulations for a purpose mentioned in any of paragraphs 2 to 7, 15(a), (b) or (c) or 16(a) of Schedule 1, or
(b) a prohibition or requirement imposed by a condition of a licence or direction issued by virtue of section 15 in relation to a prohibition or requirement mentioned in paragraph (a).
(4) The powers that may be conferred by virtue of this section include powers to—
(a) stop a ship;
(b) board a ship;
(c) require any person found on a ship boarded by virtue of this section to provide information or produce documents;
(d) inspect and copy such documents or information;
(e) stop any person found on such a ship and search that person for—
(i) prohibited goods, or
(ii) any thing that might be used to cause physical injury or damage to property or to endanger the safety of any ship;
(f) search a ship boarded by virtue of this section, or any thing found on such a ship (including cargo), for prohibited goods;
(g) seize goods found on a ship, in any thing found on a ship, or on any person found on a ship (but see subsection (8));
(h) for the purpose of exercising a power mentioned in paragraph (e), (f) or (g), require a ship to be taken to, and remain in, a port or anchorage in the United Kingdom or any other country willing to receive it.
(5) Regulations that confer a power mentioned in subsection (4)(a) to (f) or (h) must provide that a person may not exercise the power in relation to a ship unless the person has reasonable grounds to suspect that the ship is carrying prohibited goods (and the regulations need not require the person to have reasonable grounds to suspect that an offence is being or has been committed).
(6) Regulations that confer a power mentioned in subsection (4)(e)(i) or (f) must provide that the power may be exercised only to the extent reasonably required for the purpose of discovering prohibited goods.
(7) Regulations that confer a power mentioned in subsection (4)(e)(ii) on a person (“the officer”) may permit the search of a person only where the officer has reasonable grounds to believe that that person might use a thing in a way mentioned in subsection (4)(e)(ii).
(8) Regulations that confer a power mentioned in subsection (4)(g) on a person—
(a) must provide for the power to be exercisable on a ship only where that person is lawfully on the ship (whether in exercise of powers conferred by virtue of this section or otherwise), and
(b) may permit the seizure only of—
(i) goods which that person has reasonable grounds to suspect are prohibited goods, or
(ii) things within subsection (4)(e)(ii).
(9) Regulations that confer a power on a person by virtue of this section may authorise that person to use reasonable force, if necessary, in the exercise of the power.
(10) Regulations that confer a power by virtue of this section must provide that—
(a) the power may be exercised in relation to a British ship in foreign waters only with the authority of the Secretary of State, and
(b) in relation to foreign waters other than the sea and other waters within the seaward limits of the territorial sea adjacent to any relevant British possession, the Secretary of State may give authority only if the State in whose waters the power would be exercised consents to the exercise of the power.
(11) Regulations that confer a power by virtue of this section must provide that—
(a) the power may be exercised in relation to a foreign ship only with the authority of the Secretary of State, and
(b) the Secretary of State may give authority only if—
(i) the home state has requested the assistance of the United Kingdom for the purpose of enforcing relevant prohibitions or requirements,
(ii) the home state has authorised the United Kingdom to act for that purpose, or
(iii) the United Nations Convention on the Law of the Sea 1982 (Cmnd 8941) or a UN Security Council Resolution otherwise permits the exercise of the powers in relation to the ship.
(12) The reference in subsection (11) to the United Nations Convention on the Law of the Sea includes a reference to any modifications of that Convention agreed after the passing of this Act that have entered into force in relation to the United Kingdom.
(13) In this section—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);
“British ship” means a ship falling within paragraph (a), (c), (d) or (e) of section 7(12);
“foreign ship” means a ship which—
(a) is registered in a State other than the United Kingdom, or
(b) is not so registered but is entitled to fly the flag of a State other than the United Kingdom;
“foreign waters” means the sea and other waters within the seaward limits of the territorial sea adjacent to any relevant British possession or State other than the United Kingdom;
“goods” includes technology within the meaning of Schedule 1 (see paragraph 36 of that Schedule);
“home state”, in relation to a foreign ship, means—
(a) the State in which the ship is registered, or
(b) the State whose flag the ship is otherwise entitled to fly; “international waters” means waters beyond the territorial sea of the United Kingdom or of any other State or relevant British possession;
“prohibited goods” means goods which have been, or are being, dealt with in contravention of a relevant prohibition or requirement (see subsection (3));
“regulations” means regulations under section 1;
“relevant British possession” has the same meaning as in section 7 (see subsection (14) of that section);
“ship” has the same meaning as in section 7 (see subsection (14) of that section);
“ship without nationality” means a ship which—
(a) is not registered in, or otherwise entitled to fly the flag of, any State or relevant British possession, or
(b) sails under the flags of two or more States or relevant British possessions, or under the flags of a State and relevant British possession, using them according to convenience.
(14) In the definition of “prohibited goods” in subsection (13), the reference to goods dealt with in contravention of a relevant prohibition or requirement includes a reference to a case where—
(a) arrangements relating to goods have been entered into that have not been fully implemented, and
(b) if those arrangements were to be fully implemented, the goods would be dealt with in contravention of that prohibition or requirement.”

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Moved by

[Lord Ahmad of Wimbledon]

That this House do agree with the Commons in their Amendment 12.

12: Insert the following new Clause—
“Goods etc on ships: non-UK conduct
(1) Regulations may make provision conferring on prescribed persons powers exercisable—
(a) in relation to—
(i) British ships in foreign waters or international waters,
(ii) ships without nationality in international waters, and
(iii) foreign ships in international waters,
(b) for the purpose of—
(i) investigating the suspected carriage of relevant goods on such ships, or
(ii) preventing the continued carriage on such ships of goods suspected to be relevant goods.
(2) The powers that may be conferred by virtue of this section include powers to—
(a) stop a ship;
(b) board a ship;
(c) require any person found on a ship boarded by virtue of this section to provide information or produce documents;
(d) inspect and copy such documents or information;
(e) stop any person found on such a ship and search that person for—
(i) relevant goods, or
(ii) any thing that might be used to cause physical injury or damage to property or to endanger the safety of any ship;
(f) search a ship boarded by virtue of this section, or any thing found on such a ship (including cargo), for relevant goods;
(g) seize goods found on a ship, in any thing found on a ship, or on any person found on a ship (but see subsection (6));
(h) for the purpose of exercising a power mentioned in paragraph (e), (f) or (g), require a ship to be taken to, and remain in, a port or anchorage in the United Kingdom or any other country willing to receive it.
(3) Regulations that confer a power mentioned in subsection (2)(a) to (f) or (h) must provide that a person may not exercise the power in relation to a ship unless the person has reasonable grounds to suspect that the ship is carrying relevant goods.
(4) Regulations that confer a power mentioned in subsection (2)(e)(i) or (f) must provide that the power may be exercised only to the extent reasonably required for the purpose of discovering relevant goods.
(5) Regulations that confer a power mentioned in subsection (2)(e)(ii) on a person (“the officer”) may permit the search of a person only where the officer has reasonable grounds to believe that that person might use a thing in a way mentioned in subsection (2)(e)(ii).
(6) Regulations that confer a power mentioned in subsection (2)(g) on a person—
(a) must provide for the power to be exercisable on a ship only where that person is lawfully on the ship (whether in exercise of powers conferred by virtue of this section or otherwise), and
(b) may permit the seizure only of—
(i) goods which that person has reasonable grounds to suspect are relevant goods, or
(ii) things within subsection (2)(e)(ii).
(7) Regulations that confer a power on a person by virtue of this section may authorise that person to use reasonable force, if necessary, in the exercise of the power.
(8) Regulations that confer a power by virtue of this section must provide that—
(a) the power may be exercised in relation to a British ship in foreign waters only with the authority of the Secretary of State, and
(b) in relation to foreign waters other than the sea and other waters within the seaward limits of the territorial sea adjacent to any relevant British possession, the Secretary of State may give authority only if the State in whose waters the power would be exercised consents to the exercise of the power.
(9) Regulations that confer a power by virtue of this section must provide that—
(a) the power may be exercised in relation to a foreign ship only with the authority of the Secretary of State, and
(b) the Secretary of State may give authority only if—
(i) the home state has requested the assistance of the United Kingdom for a purpose mentioned in subsection (1)(b),
(ii) the home state has authorised the United Kingdom to act for such a purpose, or
(iii) the United Nations Convention on the Law of the Sea 1982 (Cmnd 8941) or a UN Security Council Resolution otherwise permits the exercise of the powers in relation to the ship.
(10) The reference in subsection (9) to the United Nations Convention on the Law of the Sea includes a reference to any modifications of that Convention agreed after the passing of this Act that have entered into force in relation to the United Kingdom.
(11) In this section—
“regulations” means regulations under section 1;
“relevant goods” means goods in relation to which relevant non-UK conduct is occurring or has occurred;
“relevant non-UK conduct” means conduct outside the United Kingdom by a person other than a United Kingdom person that would constitute a contravention of a relevant prohibition or requirement if the conduct had been—
(a) in the United Kingdom, or
(b) by a United Kingdom person;
“relevant prohibition or requirement” has the same meaning as in section (Enforcement: goods etc on ships) (see subsection (3) of that section);
“United Kingdom person” has the same meaning as in section 18 (see subsection (2) of that section).
(12) In the definition of “relevant non-UK conduct” in subsection (11), the reference to conduct that would constitute a contravention of a relevant prohibition or requirement if the conduct had been in the United Kingdom or by a United Kingdom person includes a reference to a case where—
(a) arrangements relating to goods have been entered into that have not been fully implemented, and
(b) if those arrangements were to be fully implemented (and if the conduct had been in the United Kingdom or by a United Kingdom person) the goods would be dealt with in contravention of that prohibition or requirement.
(13) In this section, the following expressions have the same meaning as in section (Enforcement: goods etc on ships)—
“arrangements”,
“British ship”,
“foreign ship”,
“foreign waters”,
“goods”,
“home state”,
“international waters”,
“relevant British possession”,
“ship”, and
“ship without nationality”.”

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Moved by

[Lord Ahmad of Wimbledon]

That this House do agree with the Commons in their Amendments 13 to 21.

13: Clause 18, page 17, line 13, at end insert—
“( ) Nothing in this section limits the provision that may be made in regulations under section 1 by virtue of section (Enforcement: goods etc on ships) or (Goods etc on ships: non-UK conduct).”

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Moved by

[Lord Ahmad of Wimbledon]

That this House do agree with the Commons in their Amendment 22.

22: After Clause 44, insert the following new Clause—
“Public registers of beneficial ownership of companies registered in British Overseas Territories
(1) For the purposes of the detection, investigation or prevention of money laundering, the Secretary of State must provide all reasonable assistance to the governments of the British Overseas Territories to enable each of those governments to establish a publicly accessible register of the beneficial ownership of companies registered in each government’s jurisdiction.
(2) The Secretary of State must, no later than 31 December 2020, prepare a draft Order in Council requiring the government of any British Overseas Territory that has not introduced a publicly accessible register of the beneficial ownership of companies within its jurisdiction to do so.
(3) The draft Order in Council under subsection (2) must set out the form that the register must take.
(4) If an Order in Council contains requirements of a kind mentioned in subsection (2)—
(a) it must be laid before Parliament after being made, and
(b) if not approved by a resolution of each House of Parliament before the end of 28 days beginning with the day on which it is made, it ceases to have effect at the end of that period (but without that affecting the power to make a new Order under this section).
(5) In calculating a period of 28 days for the purposes of subsection (4), no account is to be taken of any time during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than four days.
(6) For the purposes of this section, “British Overseas Territories” means a territory listed in Schedule 6 of the British Nationality Act 1981.
(7) For the purposes of this section, “a publicly accessible register of the beneficial ownership of companies” means a register which, in the opinion of the Secretary of State, provides information broadly equivalent to that available in accordance with the provisions of Part 21A of the Companies Act 2006.”

[Lord Ahmad of Wimbledon]

My Lords, Amendment 22 would put a duty on the Government to provide all reasonable assistance to our overseas territories to help them set up public registers of company beneficial ownership by 31 December 2020. If they do not do so, the amendment would require the Secretary of State to prepare a draft Order in Council requiring the Government of the overseas territories to introduce such registers.

Noble Lords are aware that the issue of the register of beneficial ownership was debated extensively in your Lordships’ House. I welcomed the insight and the expertise and, while there were differences of views, there was a robust debate. In this regard, the Government tabled on Report in the other place a package of amendments that sought to enhance the existing measures on beneficial ownership in the overseas territories but stopped short of the preparation of any legislation for the overseas territories ahead of the introduction of a public register as an international standard. As is his prerogative, Mr Speaker did not, however, select these amendments for debate. Therefore, the Government in the other place listened to the strength of feeling on this issue and accepted that it was the overwhelming view of the other place that the overseas territories should take steps to put public registers in place ahead of them becoming international standard as set by the Financial Action Task Force. Therefore, the Government did not oppose the new clause tabled by the right honourable Member for Sutton Coldfield and the right honourable Member for Barking.

Given the views expressed in the other place and the fact that we respect the will of Parliament, the Government do not now propose to table any new amendments. However, I would, nevertheless, like to make a number of points on this issue, not least as Minister for the Overseas Territories. I want to make it clear from the outset that we would have preferred a different approach to this question, as evidenced by the amendments we had tabled in the other place and my response to this debate in your Lordships’ House. Our approach has always been, and remains, as a priority to work consensually, constructively and collaboratively, with the overseas territories. Indeed, we have established strong channels with the overseas territories.

Let me be absolutely clear: the overseas territories are British, but they are separate jurisdictions with their own democratically elected Governments, responsible for their own fiscal matters and are not represented in this Parliament. We have legislated for them without their consent only in exceptional circumstances, for example to decriminalise homosexuality in certain territories to ensure that they were compliant with international human rights obligations. By contrast, financial services are an area of domestic responsibility for territory Governments, where they surpass—an important point to remember—international standards in the context of beneficial ownership. Legislating for these jurisdictions without their consent in this field effectively disenfranchises their elected representatives.

We are also fully cognisant of the territories’ concerns that the economic impact of imposing public registers on them will be significant—and these are not under normal circumstances. As noble Lords know, the British Virgin Islands, Anguilla and the Turks and Caicos Islands are still recovering from the two unprecedented category 5 hurricanes of last September. In the British Virgin Islands, nine out of 20 schools still remain closed and are accommodating their students in tents. The tourism industry has experienced a drop of 50% and is only now starting to recover. There remains a real risk that this will destabilise the reconstruction efforts of the hurricane affected territories, and all of this shortly before the next hurricane season begins in June. Accordingly, our preference would have been not to legislate in this manner without the territories’ consent, and let me assure noble Lords that our aim remains to work consensually and collaboratively with them to achieve the best possible outcome following the amendment.

As the reaction of the territories and their leaders has demonstrated, legislating for them without their consent risks damaging not only our long-standing constitutional arrangements respecting their autonomy but also our very proactive, positive and progressive relations with the overseas territories. Let me assure noble Lords that I have held a number of meetings with leaders and their London-based representatives since our debates at Report stage, and I have reaffirmed the importance that the United Kingdom attaches to our relationship with their jurisdictions. Equally, I would place on the record our gratitude to the overseas territories and to the Crown dependencies for the work that they have undertaken to implement the bilateral arrangements on the exchange of beneficial ownership information we concluded with them in 2016. In a relatively short timeframe, they have passed new primary legislation and delivered technological improvements to comply with the terms of these arrangements.

All Crown dependencies have central registers in place. Of the seven overseas territories with financial centres, Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar and the Turks and Caicos Islands already have central registers or similarly effective systems in place. Montserrat has also committed to establishing a public register, and we have recently signed a memorandum of understanding with Anguilla to fund its electronic search platform. In the case of Anguilla, the British Virgin Islands and the Turks and Caicos Islands, progress has been made notwithstanding some of the most challenging circumstances caused by last year’s hurricanes.

These arrangements, which provide UK law enforcement authorities, on request, with access to beneficial ownership information within 24 hours and within one hour in urgent cases, are already bearing fruit. As of 8 February, they had been used more than 70 times and the information obtained by UK law enforcement authorities as a result has been used to enhance intelligence leads and to support ongoing criminal investigations into illicit finance. It is important that we continue to work with the overseas territories and the Crown dependencies to implement fully these arrangements and, where necessary, to make improvements to the mechanisms for the exchange of information. We also have the statutory review of these arrangements that will report to Parliament by July 2019, and I remain confident that that will provide further evidence to all concerned of the benefits this provides to law enforcement authorities.

We should be clear that the arrangements go beyond the current international standards set by the Financial Action Task Force; these do not yet require private, let alone public, registers, reflecting a lack of international consensus in this important area. Imposing public registers on the overseas territories now carries with it the risk of a flight of business from them to other less regulated jurisdictions where our law enforcement authorities would not have the same level of access to beneficial ownership information as they do under the existing arrangements.

The Government have been consistently clear about their desire for public registers to become the global standard. Let us also be clear that the overseas territories do not oppose this, once there is an international standard. As I set out in my Written Ministerial Statement on 1 May, the Government will use their best endeavours, diplomatically and with international partners, to promote public registers of company beneficial ownership as the global standard by 2023. We would also expect the Crown dependencies to adopt public registers in that event.

I should also like to take this opportunity to place on record my deep concern about some of the intemperate language that was used in the other place about our overseas territories. References to “slave labour” and “money will go to where it is darkest” are liable to be misconstrued and are quite unacceptable in this context.

I would also like to use this opportunity to rebut the widely held misconceptions about the overseas territories. They are important financial centres for investors around the world. They have successful industries because they comply with regulatory standards and have taken significant steps on transparency. All overseas territories with financial centres have committed to greater tax transparency, by adopting the new global OECD standard for the automatic exchange between jurisdictions of taxpayer financial account information, and have started to exchange this information. In addition, HMRC has received data since September 2016 on accounts held in the overseas territories by UK taxpayers. Taken together, these measures are an important tool in combating tax evasion, and we welcome the co-operation and collaboration that we have received from both the overseas territories and the Crown dependencies in this area.

I thank noble Lords for their indulgence in allowing me to put on record the Government’s position and our thoughts on where we currently are. The overseas territories are an important part of what constitutes Britain today. However, notwithstanding the arguments I have made, the other place has sought to change the basis. Let me reiterate, with the words with which I started, that the Government will ultimately respect the will of Parliament on this issue and will now work constructively and collaboratively with the overseas territories towards the best possible outcomes. Let me assure noble Lords—and our overseas territories as well—that we will use our best endeavours and a supportive, constructive and collaborative approach in the international sphere to promote public registers of company beneficial ownership as the global standard, so that we can, as the overseas territories agree, achieve a level playing field in this area—a principle that we are all agreed on. I beg to move.

Amendment 22A (as an amendment to the Motion on Amendment 22)

Moved by

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I welcome the commitment in the other place. I also welcome the fact that the Government decided not to oppose the amendment. It is now here because they did not oppose it. It is therefore right that the Government now determine how best to take it forward. It is a public commitment which I hope they will take forward. I do not underestimate the issues of concern raised by the overseas territories, nor their need to ensure a level playing field, because, after all, until we have global agreement, we will not stop this problem. How do we achieve that global agreement? I agree with David Cameron that it is about us taking the lead, and I am grateful that the House of Commons and the Government have now taken the decision to do that.

[Lord Ahmad of Wimbledon]

My Lords, I am grateful to all noble Lords for an extensive, well-reasoned, well-argued and expert debate in your Lordships’ House. I am grateful in particular to my noble friend Lord Naseby, who presented a case for the overseas territories which I empathise with. Noble Lords who were in the Chamber when I opened this debate would have heard the points that I made. I will respond to a few specific points and questions raised, but I want first to set the record straight. First and foremost, the Government’s position is what it was when the Bill left your Lordships’ House. As the noble Baroness, Lady Northover, said, the Government defeated the amendment tabled by the noble Baroness, Lady Stern. That was done because of reasoned debate and expert insight, which has been reflected in your Lordships’ House again today.

As my noble friend Lord Hunt said, my noble friend Lord Naseby has allowed us all an opportunity again to demonstrate the wisdom, insight and expertise your Lordships have, but the point of principle highlighted by the noble and learned Lord, Lord Brown, remains: notwithstanding the valuable discourse that we have had, the House of Commons has sought to vote otherwise. In that regard, I want to clarify a few points.

My noble friend Lord Northbrook mentioned that it was a government amendment. Of course, it was not; it was tabled from the government Benches—it was a joint amendment. In light of the support that the amendment had gathered, the Government decided not to oppose it. My noble friend Lord Naseby referred to the Government’s amendment being tabled late in the day. Let me assure my noble friends and your Lordships’ House that we had been in extensive negotiations with many Members of Parliament, including those of other parties and most notably the Scottish National Party, on the important issues of the constitution and about this Parliament voting on something that would apply to parliaments that did not have a say in the debate taking place—a point well made by the noble Earl, Lord Kinnoull. We were trying to find a way forward that respected both the drive for transparency, which many noble Lords have raised today, and the constitutional settlement with the overseas territories and Crown dependencies. It was also important that we continued to do this to reach the cross-party consensus that was being sought. We brought further amendments forward on 30 April and brought that to the attention of the House to find that consensus. That is why conversations were still ongoing throughout that morning. The amendment we tabled was taken as in order but, as I said in my opening remarks, it was not then debated or taken for debate by the Speaker of the House of Commons.

That said, we have had an extensive debate. The noble Lord, Lord Anderson, who I see is not in his place as such, asked for comment on the Foreign Affairs Committee’s report. We are looking at that report, which was issued this morning, carefully but the Prime Minister has made the general principle clear. I say to all noble Lords that there is not a difference between ourselves and the Governments of the overseas territories. Everyone wants to see us tackle illicit finance effectively. Let me assure the noble Lord, Lord Collins, that it remains a priority for this Government and that we will continue to take a leading role in this respect.

The noble Lord, Lord Beith, my noble friend Lord Naseby and my noble and learned friend Lord Mackay all touched on the important issues of the constitutional arguments. Our position in the light of the circumstances set out in the 2012 White Paper has not changed. We believe that the fundamental structure of our constitutional relationships is the right one. Of course, we retain the power to legislate directly and have done so, as I said in my opening remarks, but in this case we would prefer not to have done so without consent. However, as we have all heard, we are all in this situation since the decision taken by the House of Commons.

My noble and learned friend Lord Mackay raised how this provision will come into force. As I always do, I listened carefully to his insight on this matter and I can confirm that it will not come into force through Royal Assent; it will come into force and commence by regulations. We need to establish the detail, as he said, but I listened carefully to the points he raised in this respect.

My noble friend Lord Faulks asked about the next Bill and I again pay tribute to his efforts in this regard. Let me assure him once again that we have committed to bring forward legislation early in the next Session on the important issue, which he has raised during debate on this Bill, of the register of overseas companies that own UK property. We anticipate that that register will be ready for use in 2021.

The noble and learned Baroness, Lady Butler-Sloss, pointed to other jurisdictions such as Gibraltar. At this point, I acknowledge the contributions of my noble friend Lord Naseby and other noble friends, and noble Lords across the Chamber, who acknowledged the efforts that our overseas territories have made. While I totally accept the principle highlighted by the noble Lord, Lord Collins, and the noble Baroness, Lady Northover, of the importance of transparency—of seeing that flow of illicit finance coming to an end—let us not forget that, in the UK, we have a public register. This is not a panacea to end this issue. It needs concerted action, which is why I have been vocal in my defence of the overseas territories and not just, as the noble Lord, Lord Beith, pointed out, because I am the Minister responsible. Genuinely, when we look at the track record from the overseas territories—the exchange of notes that are operational and which we are reporting back on, or the accessibility for tax and law enforcement agencies—those jurisdictions have been co-operating fully and effectively. That is why I, as the Minister responsible, made that robust defence of the overseas territories. Not only has progress been made; the overseas territories are ahead of the curve. There is just not a case for not doing something until the others catch up, as they are already fully co-operating.

Several noble Lords alluded to the EU list. Anguilla, Bermuda, the BVI, the Cayman Islands and all three Crown dependencies are not included on any list because they are deemed to have been holding back by the EU Code of Conduct Group. They have been put on lists and acknowledged for being co-operative jurisdictions. All our Crown dependencies and overseas territories with financial centres are already committed to global tax transparency standards, which we all agree on, and the commitments that they have made go beyond those. I say again for the record that there is no grey list. All the overseas territories, as the noble Earl, Lord Kinnoull, highlighted, have made great strides, ahead of many other jurisdictions, in ensuring that they adhere not to any international standard but to the principles of ensuring that they can address the fact that law authorities and tax authorities can access such registers.

That said, we are in a position where the other place has decided—on a cross-party basis in certain respects, as the noble Lord, Lord Collins, said—that it is its will to go forward with public registers for the overseas territories, and it is the Government’s position that we have accepted that point of the elected Chamber. In doing so, though, I assure my noble friend Lord Naseby and others who have spoken about the overseas territories that from a government perspective we will seek to ensure that we collaborate and co-operate fully and work with the overseas territories to ensure that we get the results we want. We do not want to disable the overseas territories and we do not want them to lose out, but there is a reality of decisions that this Parliament has taken, and they have implications. We need to ensure that we work effectively and collaboratively with those overseas territories to ensure that we can still sustain and strengthen their economies for years to come.

I put on record for my noble friend Lord Naseby that I am very grateful to him for once again allowing me to articulate the Government’s position and my position as the Minister responsible for the overseas territories. I am also grateful for, as I am sure my noble friend has acknowledged, the great and wise expertise that we have heard from around your Lordships’ House, demonstrating again the wise insight on this subject and many. However, mindful of the fact that the other place has decided to pursue the issue of public registers with the overseas territories, an amendment that the Government have now accepted, I hope that after listening to the debate my noble friend is minded to withdraw his amendment.

[Lord Naseby]

My Lords, those were fine words from the Minister, and we have heard fine words from my colleagues who have supported me this evening. I hope those fine words have some strength behind them. Many noble Lords will know that I have been in the two Houses for 44 years. I deeply respect the rights of the House of Commons, so it is not with an easy heart that I resist the temptation to test the views of this House.

I have reflected deeply on this. I am trusting my noble friend on the Front Bench to move this forward. As my noble and learned friend Lord Mackay of Clashfern said: justice for all—which means, in particular, justice for all the overseas territories. I shall watch, be vigilant and challenge, but on this occasion I beg leave to withdraw the amendment.

--- Later in debate ---

Moved by

[Lord Ahmad of Wimbledon]

That this House do agree with the Commons in their Amendment 23.

23: Clause 46, page 34, line 25, at end insert—
“( ) Nothing in this Act affects any power exercisable in relation to ships by virtue of the prerogative of the Crown.”

--- Later in debate ---

Moved by

[Lord Ahmad of Wimbledon]

That this House do agree with the Commons in their Amendment 24.

24: Clause 47, page 34, line 38, leave out subsection (3) and insert—
“(3) Regulations under section 1 may amend the definition of “terrorist financing” in section 43(4) so as to remove any reference to a provision of regulations that is revoked by regulations under section 1.
(3A) Regulations under section 1 may amend the definition of “terrorist financing” in section 43(4) so as to add a reference to a provision of regulations under section 1 that contains an offence, but only if—
(a) each purpose of the regulations containing the offence, as stated under section 1(3), is compliance with a UN obligation or other international obligation, or
(b) paragraph (a) does not apply but the report under section 2 in respect of the regulations containing the offence indicates that, in the opinion of the appropriate Minister making those regulations, the carrying out of a purpose stated in those regulations under section 1(3) would further the prevention of terrorism in the United Kingdom or elsewhere.”

[Lord Ahmad of Wimbledon]

I am sure the House willed that I move this formally but for good order I should speak to it, although I am sure I am not expressing the Deputy Speaker’s sentiments in any way.

This group contains the remainder of the amendments to the Bill made in the other place. Amendment 26 seeks to clarify the interaction of the powers in the sanctions Bill and the European Union (Withdrawal) Bill. It has been prompted by amendments to the European Union (Withdrawal) Bill tabled by the Government during its passage. Amendment 26 does not change the intent of the sanctions Bill, nor does it change the scope of the powers contained in the Bill. It makes clear that any restrictions in the European Union (Withdrawal) Bill on the modification of retained EU law do not prevent sanctions Bill powers being exercised as they were intended. The Government believe that the amendment is necessary to provide certainty and avoid any confusion about the interaction of the two Bills in this area.

Amendment 29 is a routine procedural amendment that removes the privilege amendment inserted in this House, which ensures that there are no amendments that would raise taxes or impose charges.

Amendment 24 makes changes to the ability to update the definition of terrorist financing, fulfilling a commitment that the Government made on Report in your Lordships’ House. It retains the ability to remove obsolete references from the definition, but restricts the ability to add new terrorist financing measures by way of sanctions regulations. Those new measures can now be added to the definition of terrorist financing only if the new measures are made either for the purpose of compliance with international obligations, or for the purpose of furthering the prevention of terrorism in the UK or elsewhere.

Noble Lords will be aware that Schedule 2 to this Bill, as already approved by your Lordships’ House, provides an express power permitting the Government to make anti-money laundering regulations that correspond or are similar to the money laundering regulations 2017, or to amend or revoke those regulations. These powers will enable the Government to update the UK’s anti-money laundering regime to reflect evolving international standards and address emerging risks.

Amendment 33 is also consequential on amendments to the EU withdrawal Bill, and confirms that these powers can be used once we leave the EU, in connection with the EU funds transfer regulation—which regulates payment service providers—and other EU-level legislation made under the fourth money laundering directive. This applies in particular to the existing EU list of high-risk third countries, in connection with which enhanced due diligence is required. This amendment provides legal certainty regarding the Government’s ability to update this legislation, which will be part of UK law, using the powers conferred through the Bill. This will ensure consistent treatment of the money laundering regulations 2017 and the closely interlinked legislation which also came into force last year. With those explanations, I beg to move.

[Baroness Northover]

I could say that I am going to test the opinion of the House, but I do not think that that would work. I just take the opportunity of this group to thank the Minister and the Bill team for their careful and constructive engagement on the Bill. Obviously, we would prefer that we were not having to take this legislation through, but if we leave the EU it will indeed be needed.

I also thank those on these Benches who have assisted on the Bill: my noble friends Lady Sheehan and Lord McNally and, especially on the anti-money laundering part, Lady Kramer and Lady Bowles, who single-handedly analysed and proposed restructuring of that part of the Bill and engaged with the Bill team and the Treasury, drawing on her experience as a former chair of the economics committee of the EU.

I also thank the noble Lord, Lord Collins, and his team, and the noble and learned Lord, Lord Judge, and the noble Lord, Lord Pannick, for their deep and constructive engagement.

As the Minister quickly discovered, although the subject matter of sanctions and anti-money laundering is not exactly controversial, the means of tackling it and the carryover into wider Brexit legislation in terms of powers taken meant that this was a forerunner to the EU withdrawal Bill. Above all, I thank the Minister and his team for their patience and engagement. Judging by the previous group, it sounds as though he still has much to do.

[Lord Ahmad of Wimbledon]

My Lords, I am grateful to the noble Baroness, Lady Northover, and again put on record my thanks to her—and to the noble Baroness, Lady Bowles, in particular, on the issue of money laundering. In the same way, I extend my thanks to the Labour Front Bench, particularly the noble Lord, Lord Collins, and others in your Lordships’ House.

As I said when the Bill passed from your Lordships’ House, we have seen co-operation and your Lordships at their best. I said right at the beginning that we were in listening mode, and I think that has been reflected during the course of the Bill in both your Lordships’ House and the other place. I hope that the noble Baroness is also minded to note that we learn from the wise words of others such as the noble Lord, Lord McNally, and that in introducing this group, I resisted using the word “technical”. I commend the amendments.

Motion on Amendment 24 agreed.

Moved by

[Lord Ahmad of Wimbledon]

That this House do agree with the Commons in their Amendments 25 to 34.

25: After Clause 49, insert the following new Clause—
“Duties to lay certain reports before Parliament: further provision
(1) In this section “a reporting provision” means section 2(4), (Report in respect of offences in regulations)(2) or 40(2) or paragraph 20A(2) of Schedule 2 (duties to lay before Parliament certain reports relating to regulations).
(2) Where more than one reporting provision applies in relation to particular regulations under section 1, the reports to which those provisions relate may be contained in a single document.
(3) If a reporting provision is not complied with, the appropriate Minister who should have complied with that provision must publish a written statement explaining why that Minister failed to comply with it.
(4) Subsection (5) applies where a reporting provision applies and—
(a) a statutory instrument containing the regulations concerned, or
(b) a draft of such an instrument, is laid before the House of Commons and House of Lords on different days.
(5) Where this subsection applies, the reporting provision in question is to be read as requiring the laying of a copy of the report to which that provision relates—
(a) before the House of Commons at the time the instrument or draft mentioned in subsection (4) is laid before the House of Commons, and
(b) before the House of Lords at the time that instrument or draft is laid before the House of Lords.”