Sanctions (EU Exit) (Miscellaneous Amendments) (No. 2) Regulations 2022

Lord Collins of Highbury Excerpts

Monday 17th October 2022 Lords Chamber

[Lord Collins of Highbury (Lab)]

My Lords, I, too, welcome the Minister’s introduction of these regulations. I assure him and the Government of our continued support for these measures. In the debate that we had last week, we made our continued support absolutely clear.

There are a couple of points I want to focus on. These were raised by my honourable friend Stephen Doughty in the other place in relation to cryptocurrencies being used to evade sanctions and particularly how they can be used to inject capital into the democracies of the world for the purposes of swaying elections. During the Commons debate, Stephen Doughty asked why the Government have not yet sanctioned Tornado Cash and Blender, two cryptocurrency services already sanctioned by the United States. While I am pleased that the Minister confirmed that the Government are looking at sanctioning those two organisations, I hope the Minister can update tonight about when we can expect further legislation in this regard.

Just picking up the point made by the noble Baroness, Lady Kramer, the Minister in the Commons was unable to update the House on the steps taken to pursue greater global regulation of cryptocurrencies. I hope the Minister can tell us whether the United Kingdom mission to the United Nations has taken part in any discussions on this and whether the point was raised at the annual meeting of the IMF and the World Bank earlier this month, in addition to answering some of the other points that the noble Baroness has raised.

Since the invasion of Ukraine by Putin’s regime, there has been a huge increase in rouble to crypto trades resulting from individuals and businesses wanting to evade sanctions on cross-border payments. Will the Minister tell us what the Government are doing to monitor the providers used for these exchanges?

Finally, earlier this month the US Government fined Bittrex, a cryptocurrency exchange, for repeated violations of sanctions. Will the Minister tell us, specifically and in a more general sense, how we are working with the United States and other allies on investigations such as these so that we can ensure that our measures have full compliance? As the noble Lord, Lord Ahmad, repeatedly says, sanctions are not effective unless we act in concert with others, so I hope the Minister can respond on these points.

[Lord Goldsmith of Richmond Park (Con)]

My Lords, I thank noble Lords who have contributed to this debate today. I will do my best to address the issues that were raised by noble Lords.

Crypto asset exchange providers and custodian wallet providers have been added to the definition of relevant firms in all UK sanctions regulations, and relevant firms must report certain information to the Treasury when encountering a designated person in the course of their business or where they become aware of a breach of financial sanctions regulations. Reporting obligations themselves have not changed.

The instrument that we are debating today strengthens our sanctions in two ways: first, the measure further supports the UK’s technical implementation of recommendation 15 of the Financial Action Task Force standards. It is the international standard-setting body for all anti-money laundering, counterterrorist financing and counterproliferation financing. Recommendation 15 requires the Government to ensure that certain financial sanctions reporting obligations are applied not only to financial institutions and designated non-financial businesses and professions but to virtual assets service providers. These regulations bring crypto asset exchange providers and custodians wallet providers into the scope of those obligations.

The second area in which this strengthens our regime relates to enforcement. The instrument seeks to address the risk of crypto assets being used to breach or circumvent financial sanctions. The definition of “relevant firm” now covers firms that either record holdings of or enable the transfer of crypto assets and are therefore most likely to hold relevant information.

I will address some of the specific points raised by the noble Baroness, Lady Kramer. I felt she made an interesting point about the possibility of the FCA and the NCA sharing the proceeds of fines to build up their capacity, and I will certainly convey that suggestion to my colleague in the other place. I believe the Office of Financial Sanctions Implementation has doubled in capacity this year, and we have seen that mirrored through the infrastructure we have to counter these forms of crime in the UK.

The noble Baroness gave a very effective plug for her Private Member’s Bill to protect whistleblowers. I will not pretend that I know chapter and verse of her Bill, but it certainly sounds sensible and worthy of serious consideration. I will also pass that to colleagues and do my best to ensure that it is treated with the seriousness it no doubt deserves.

The noble Lord, Lord Beith, asked a couple of questions about Burundi. As he acknowledged, the view—I think it is a consensus—is that the 2019 Burundi sanctions regulations remain in place. On the second point, the issue about guidance online has been brought to the attention of the FCDO. Colleagues in the FCDO are now working with those websites to ensure that the right guidance is available, so I think the point he made has already been registered in the Foreign Office by the relevant department.

The noble Lord, Lord Collins, repeated the question put to colleagues in the other place by Stephen Doughty in relation to two firms in particular. Although I do not have the answer for him now, I know that a letter is winging its way across to Stephen Doughty—I am told it will reach him this evening—and addresses the points he raised. I hope that is satisfactory. I will make sure that the noble Lord receives a copy of the letter.

The noble Viscount, Lord Waverley, made a number of interesting points. I flag to him that a new combating kleptocracy cell has been set up this year in the National Crime Agency. I hope it will be able to fulfil some of the roles and functions he outlined in his contribution.