Economic Crime and Corporate Transparency Bill

Lord Goldsmith of Richmond Park Excerpts

Committee stage
Tuesday 9th May 2023 Grand Committee

91A: After Clause 187, insert the following new Clause—
“Sanctions enforcement: monetary penalties
(1) In section 143 of the Policing and Crime Act 2017 (interpretation), in subsection (4) (meaning of “financial sanctions legislation”), in paragraph (f)—(a) the words from “contains” to the end become sub-paragraph (i);(b) at the end of that sub-paragraph insert—“;(ii) makes supplemental provision (within the meaning of section 1(6) of that Act) in connection with any prohibition or requirement mentioned in sub-paragraph (i).”(2) The Sanctions and Anti-Money Laundering Act 2018 is amended as follows.(3) In section 17 (enforcement), in subsection (9), in paragraph (a), after “(2)” insert “or makes supplemental provision in connection with any such prohibition or requirement”.(4) After section 17 insert—“17A Enforcement: monetary penalties(1) The provision that may be made by virtue of section 17(2) (enforcement of prohibitions or requirements) includes provision authorising a prescribed person to impose a monetary penalty on another person if satisfied, to the prescribed standard of proof, that the other person has breached a prohibition, or failed to comply with a requirement, that is imposed by or under regulations.(2) Regulations authorising the Treasury to impose a monetary penalty in respect of a breach or failure for which the Treasury could impose a monetary penalty under Part 8 of the Policing and Crime Act 2017 may not be made unless the regulations also make provision of the kind mentioned in section 17(9) to disapply Part 8 of that Act in respect of that breach or failure.(3) Regulations authorising the imposition of a monetary penalty may make provision that, in determining for the purposes of the regulations whether a person has breached a prohibition, or failed to comply with a requirement, any requirement relating to the person’s knowledge or intention is to be ignored. (4) Regulations authorising the imposition of a monetary penalty must provide that—(a) a person is not liable to such a penalty in respect of conduct amounting to an offence if—(i) proceedings have been brought against the person for that offence in respect of that conduct and the proceedings are ongoing, or(ii) the person has been convicted of that offence in respect of that conduct, and(b) no proceedings may be brought against a person in respect of conduct amounting to an offence if the person has been given such a penalty under the regulations in respect of that conduct.(5) Where regulations authorising the imposition of a monetary penalty authorise a prescribed person to determine the amount of the penalty, the regulations must provide for a maximum penalty.(6) The maximum penalty may be a prescribed sum of any amount or may be calculated in accordance with the regulations.(7) In this section—“conduct” means an act or omission;“regulations” mean regulations under section 1.””Member’s explanatory statement
This clause makes it clear that Treasury can impose monetary penalties under the Policing and Crime Act 2017 for breaches of provisions that are supplemental to financial sanctions and that regulations made under section 1 of SAMLA 2018 can include provision conferring power to impose monetary penalties.

[The Minister of State, Foreign, Commonwealth and Development Office (Lord Goldsmith of Richmond Park) (Con)]

My Lords, I rise to move Amendment 91A in the name of my noble friend Lord Sharpe of Epsom.

The Government take the enforcement of their sanctions regimes seriously. Ensuring that we have a firm basis for enforcement action is especially important given the unprecedented sanctions measures that we have implemented in response to Putin’s illegal invasion of Ukraine last year.

There are various methods to enforce UK sanctions, one of which is the imposition of civil monetary penalties, also known as CMPs, which are fines levied by the Government for breaches of sanctions. CMPs do not require a criminal prosecution and involve far less cost to the justice system than criminal prosecutions. To date, the Office of Financial Sanctions Implementation, which is known as OFSI and is part of His Majesty’s Treasury, has levied nine CMPs totalling more than £20 million since it was set up in 2016. The UK Government’s ability to impose CMPs is likely to factor in the calculations of those seeking to breach sanctions for financial gain.

This amendment is part of the Government’s work to strengthen enforcement across our UK sanctions regimes. The new clause will amend the Sanctions and Anti-Money Laundering Act 2018—SAMLA—to provide express provision in relation to the imposition of CMPs. New Section 17A of SAMLA clarifies and reinforces the broad enforcement powers contained in Section 17 of SAMLA, that:

“Regulations may make provision … for the enforcement of any prohibitions or requirements imposed by regulations”.


The amendment also strengthens the basis for CMPs to be imposed by the Treasury under the Policing and Crime Act 2017 for offences that are supplemental to financial sanctions. Again, this is a clarificatory amendment. While criminal and civil enforcement options are already in place, this measure provides clarity on the Treasury’s power to impose a CMP for such offences. The amendment also provides for the Policing and Crime Act 2017 to be disapplied where the Treasury has the power under both sanctions regulations and the Policing and Crime Act to impose CMPs in respect of prohibitions or requirements.

Of course, putting these powers on a firmer footing is worth while only if we invest the necessary resources to make use of them. In the recent Integrated Review Refresh, the Prime Minister announced a new £50 million economic deterrence initiative which will improve our sanctions implementation and enforcement. This will maximise the impact of our trade, transport and financial sanctions, including by cracking down on sanctions evasion. It will also be used to prepare the Government for future scenarios where the UK may need to deter or respond to hostile acts.

I hope that noble Lords will support this amendment. I beg to move.

[Lord Alton of Liverpool (CB)]

My Lords, there has been a change of Minister since we discussed this matter last week when we had a curtain-raiser on Amendment 85, which I moved in Grand Committee. It is always good to see the noble Lord, Lord Goldsmith, in his place; indeed, he had to answer the debate initiated in this Room last week by the right reverend Prelate the Bishop of St Albans. He also had to answer the question about how sanctions can be used to deter autocrats and flag British values against the values of authoritarian regimes; we discussed that issue at some length. As one would expect, the noble Lord gave a competent and welcome reply.

I notice, however, that the Minister’s noble friend Lord Johnson is sitting alongside him—

--- Later in debate ---

[Baroness Blake of Leeds (Lab)]

I will add some brief comments. I thank noble Lords for their contributions. I would like to understand whether this is adequate in terms of the opportunity that we now have. We know that if we miss this opportunity now, the risk is that it will not come round again for a long time. As we have heard, the situation is desperate and there have been enormous failings. I ask the Minister who will monitor the success of this and, assuming that the amendment is agreed, whether we will have an opportunity in future to understand whether it is having the desired impact.

The point has been well made: looking at other countries and other collections of companies around the globe that are grappling with this issue, are we missing a trick? Is there more that we could do at this stage? Context is everything. We have heard about the gaps that exist and the fact that too many people are getting away with not fully complying with the sanctions. We as a country need to take that very seriously. I would appreciate the Minister’s response to those questions, for clarification.

[Lord Goldsmith of Richmond Park (Con)]

I thank noble Lords for their contributions to this short exchange. I will start by addressing some of the points raised by the noble Lord, Lord Alton, who, as I have said many times—we seem to find ourselves in the same debates—is an indefatigable champion for human rights and has shone the light so often on abuses in China, Hong Kong and beyond. It is worth putting that on the record again. I am afraid that I cannot tell him what was raised in discussions between the Foreign Secretary, the Prime Minister and representatives of the CCPIT. I do not have that record, but I will try to uncover an answer for him in due course; I know that my colleagues will have taken a note of his question.

The noble Lord and the noble Lord, Lord Fox, are right to point to the scale of this amendment. A new package is not being introduced; that is not what this amendment is about. That is not to say that changes are not required or that no more can be done with the tools that have been assembled by the Government, not least through SAMLA, but this amendment is just a tidying-up exercise; it is about removing ambiguity. It will not answer the calls that we have heard from speakers in this debate, but it is not designed to. We have the tools that we need. As I mentioned, we now have SAMLA and the ability to tailor a specific sanctions regime using secondary legislation. The noble Lord, Lord Alton, is right that we should focus on using those tools to the maximum effect. There are plenty of places, organisations and people who perhaps ought to be on the sharp end of that sanctions regime. I cannot go into detail—I do not think that any Minister can or would—about any potential future sanctions, not least because doing so and highlighting them now would reduce their impact, but we are always looking to update the—

[Lord Alton of Liverpool (CB)]

I am grateful to the Minister. Will he look again at a proposal that a number of us have put before the House at various times for some degree of parliamentary oversight of the so-called Magnitsky sanctions? At the moment, they are opaque. Often, they seem very random and arbitrary: some are chosen and some are not. There may be good reasons for that. I recognise that we cannot sit in an open committee and discuss these things but, in camera, there is no reason at all why a Joint Committee of both Houses or one of our senior Select Committees, such as the House of Lords International Relations and Defence Committee, which is charged with looking at issues of genocide, for instance, should not be able to look at the details of sanctions and how and why they are imposed. I do not expect a straightforward reply from the Minister now, but will he give an assurance that he will look again at the way in which this regime is determined?

[Lord Goldsmith of Richmond Park (Con)]

The noble Lord makes an important point. I cannot answer it, because it is not an area over which I have any direct responsibility, as he can probably tell. However, it would be beneficial somehow to design a mechanism which would allow greater oversight. I do not know what that would look like, because there are risks associated with it. If the targets of any particular sanctions regime became aware in advance, we know what would happen. It is not an easy problem to solve, but in principle what the noble Lord has just said makes a lot of sense. If there is a way of doing so and injecting a bit more transparency—but not too much, for all the obvious reasons—I would certainly support that.

It is also worth saying that sanctions are just one tool that we have. For example, in relation to Hong Kong, as noble Lords know, we opened the doors of this country to a very large number from Hong Kong who were looking for safety and a home, where their fundamental rights would be respected. We created a bespoke immigration channel and suspended the UK- Hong Kong extradition treaty indefinitely. We extended the arms embargo that has applied to mainland China since 1989 to include Hong Kong—and so on. This is one tool in our arsenal; it is not the only tool.

I make one further point in relation to something raised by the noble Lord, Lord Alton, on the distinction between freezing and seizing. While I cannot provide him with a detailed answer—that is going to have to come from another Minister—I can tell him that the Government are sympathetic to proposals to use frozen funds to assist in the reconstruction of Ukraine following the bombardment that it has received from Vladimir Putin. The Government are actively looking at options continually to improve transparency around those assets that are held by—

[Baroness Kramer (LD)]

Just for clarification, the Minister said that there was an intention to use frozen funds for the reconstruction of Ukraine. I fully support that idea, but is it legal without a seizure?

[Lord Goldsmith of Richmond Park (Con)]

I have said that there are “proposals”. It is something that has been proposed, but I am not sure that I can use the word “intention”. If there is a way in which those frozen assets can be used to rebuild Ukraine, it is something that the UK Government will look very seriously at—but it is not something that the UK alone will be doing.

[Lord Fox (LD)]

To make the necessary legislation, the Government would need a Bill in which to do it, and this would seem to be the Bill that is tailor made to have those discussions. Could the Minister encourage colleagues to use this Bill as the medium by which the seizure process may be made legal?

[Lord Goldsmith of Richmond Park (Con)]

I thank the noble Lord, but I do not know what the legislative mechanism would look like to make that possible. I am afraid that it is something that I am going to have to—

[Baroness Altmann (Con)]

I thank my noble friend for giving way. I realise that he is in a somewhat difficult position, but I add my encouragement to him to discuss with colleagues the possible amendments that we have laid—

[Baroness Altmann (Con)]

Yes, Amendment 85 would allow seizure of assets with a view, one hopes, eventually to being able to use them to reconstruct Ukraine in this case, but for other purposes as well. It would be an ideal way to pave the way for this to happen.

[Lord Goldsmith of Richmond Park (Con)]

The noble Baroness makes a similar point. It is not for me to determine the legislative or other route for achieving the possibility of using those frozen assets. It is something that I know that the Government are looking at and are sympathetic to, but I cannot go into any further details, because it is not an area where I have any particular expertise or authority. But I know that the Government are looking closely at the possibilities of doing so and recognise that there is a huge value in doing so, if we can.

[Lord Alton of Liverpool (CB)]

My Lords, I shall not intervene again on this, but I am extremely grateful to the Minister. To return to the point that the Minister’s noble friend Lady Altmann has just made, to those who took part in the debate on Amendment 85 last week, which would do some of things that he has just described, it was suggested that we might have a chance to meet the noble Lord, Lord Sharpe, again before Report. It would be helpful if the Minister could at least in principle assure us that such a meeting will take place with those who participated in that debate last week. Other noble Lords and noble Baronesses, such as the noble Baroness, Lady Kramer, could be invited as well—those who are interested and are Members of the Committee—to see whether we can build on Amendment 85 to do some of the things that I was very pleased to hear the Minister just say that the Government are keen to do.

[Lord Goldsmith of Richmond Park (Con)]

As the noble Lord knows, I have not had an opportunity to consult my noble friend Lord Sharpe, but I am delighted to volunteer him for such a meeting—I am sure he will be very happy.

I will move on briefly to the question about who will monitor—I am so sorry; I cannot remember who made the point. The answer is that a government department is responsible for that, so if it is a financial sanction, HMT will be responsible for ensuring that it is working and successful, and if it is transport, it will be the Department for Transport, and so on.

This is a small but important change to ensure that we have a firm basis for enforcement action. It will provide greater clarity and reinforce those enforcement powers by making them explicit, removing ambiguity. The amendment should also demonstrate that the UK Government take their sanctions enforcement responsibilities seriously, and we will continue to intensify our enforcement of those sanctions. I hope that noble Lords will support it.

Amendment 91A agreed.