Counter-Terrorism Act 2008 (Schedule 7)

Mark Hoban Excerpts

Thursday 2nd February 2012 Written Statements

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

Paragraph 38 of Schedule 7 to the Counter-Terrorism Act 2008 requires the Treasury to report to Parliament after each calendar year in which a direction under the schedule is at any time in force. This report provides details of the Treasury’s exercise of their functions under schedule 7 during the calendar year 2011.

The Schedule 7 powers

Schedule 7 provides HM Treasury with powers to implement a graduated range of financial restrictions in response to certain risks to the UK’s national interests. The risks it addresses are those posed by money laundering, terrorist financing and the proliferation of chemical, biological, radiological and nuclear weapons.

Direction given under the powers in Schedule 7

The Financial Restrictions (Iran) Order 2011 (“the Order”) came into force on 21 November 2011. The Order contains a direction by the Treasury requiring all UK financial and credit institutions to cease business relationships and transactions with all banks incorporated in Iran, including all subsidiaries and branches of such banks, wherever located, and the Central Bank of Iran.

The direction was issued on the basis that activity in Iran that facilitates the development or production of nuclear weapons poses a significant risk to the national interests of the UK. Iranian banks play a crucial role in providing financial services to individuals and entities within Iran’s nuclear and ballistic missile programmes. Any Iranian bank is exposed to the risk of being used by proliferators in Iran’s nuclear and ballistic missile programmes.

The Order was approved by the House of Lords on 12 December 2011 and by the House of Commons on 13 December 2011.

Licensing

Under paragraph 17 of schedule 7, the Treasury can exempt acts specified in a licence from the requirements of a direction requiring the cessation or limiting of transactions or business relationships between UK and Iranian banks.

In operating the licensing regime in respect of the Order, the Treasury’s aim is to minimise the impact of the restrictions upon third parties, without compromising the objective of the direction.

The Treasury issued six general licences on 21 November 2011:

General Licence 1 permits existing and new transactions involving transfers of under €40,000 for humanitarian purposes;

General Licence 2 allows personal remittances under €40,000;

General Licence 3 permits existing or new transactions related to the provision of insurance permitted by EU Regulation 961/2010;

General Licence 4 allows UK banks to continue to hold accounts for asset-frozen Iranian banks and credit payment to those accounts in accordance with EU Regulation 961/2010;

General Licence 5 allows UK banks to continue to hold accounts of non-frozen Iranian banks, although they cannot process any transactions on these accounts; and

General Licence 6 provided a seven-day grace period to allow payments in progress under existing contracts to be completed.

Applications that fall outside the scope of the six general licences are assessed on a case-by-case basis. In making the decision to issue a licence, the Treasury upholds the objective of the restriction while seeking to minimise the impact on third parties.

Between 21 November 2011 and 31 December 2011, four licences were granted and none refused:

Two were granted to facilitate banks exiting their relationships with Iranian banks in accordance with the restrictions.

Two more were issued to enable payments due under contracts agreed before the restrictions came into force to be made:

one allowed a UK business to receive payment owed under an existing contract for the delivery of goods; and

the other enabled an existing loan to be repaid.