Sanctions and Anti-Money Laundering Bill [Lords]

Nigel Mills Excerpts

2nd reading: House of Commons
Tuesday 20th February 2018 Commons Chamber

[Boris Johnson]

I will not, if the right hon. Gentleman will forgive me.

As sanctions have serious consequences for the individuals and entities that are singled out, they should be employed only in accordance with the rule of law, so it may be helpful to the House if I describe the scrupulous procedure laid out in the Bill.

Whenever the Government intend to impose a new sanctions regime, a statutory instrument will be laid before Parliament. When selecting targets, we will apply the legal threshold of “reasonable grounds to suspect”, which is the standard that we currently use for UN and EU sanctions. Both the British Supreme Court and the EU’s general court—the former court of first instance—have endorsed the use of that threshold in recent cases, and it is vital that the UK and our international partners continue to employ the equivalent threshold so that our sanctions policies and theirs can be co-ordinated.

The Bill contains safeguards allowing those listed for sanctions to challenge their designation and receive swift redress if it is warranted. Sanctions are not ends in themselves; they must not be maintained simply out of inertia or force of habit once the necessity for them dies away. The Bill will entitle any designated person to request an administrative reassessment by the Secretary of State, who will have a duty to consider any such request as soon as reasonably practicable. The Secretary of State can amend or revoke the designation in response to new information or a change in the situation. As a last resort, the designated person can apply to challenge the Government’s decision in the courts under the principles of judicial review, and the Bill provides for classified evidence to be shared with the court as appropriate.

Britain is obliged by international law to enforce any sanctions agreed by the UN Security Council. If a court in this country believes that such a designation is unlawful, the Secretary of State can use his or her best endeavours to remove a name from a UN sanctions list, bolstered by the fact that Britain has permanent membership of the Security Council. If a Secretary of State declines to seek a delisting at the UN, the relevant individual could challenge that decision before the courts. In addition, the Bill obliges the Government to conduct an annual review of every sanctions regime and place a report before Parliament. The Government are also required to review each individual designation under all regimes every three years.

The Bill allows the Government to grant licences to allow certain activities that would otherwise be prohibited—for instance, to permit any individuals subject to asset freezes to pay for essential needs such as food or medicine. The Bill will also give the Government the power and flexibility to issue general licences that could, for example, allow aid agencies to provide humanitarian supplies in a country subjected to sanctions.

[Nigel Mills (Amber Valley) (Con)]

Where assets have been frozen—for example, in the case of Libya and its support for the IRA—does the Secretary of State see any scope for a licence to allow that money to be used to help the victims of such outrageous crimes?

[Boris Johnson]

I completely concur with the objectives espoused by my hon. Friend. Many people would like to see some compensation flowing from a more prosperous Libya to the victims of IRA terrorism and, indeed, to other victims of terrorism. Given what we have done so far with Libya, it would be very difficult to unfreeze the assets; they are not our assets and it would be difficult for us to procure them. On the other hand, there is scope—working with the Libyan Government as Libya gets back on its feet, which is what we are currently working for —to set up a fund for the victims not just of IRA terrorism in this country, but of terror in Libya as well. That is the way forward: the UK and Libya working together to address that historical injustice. I am grateful to my hon. Friend for raising that subject, on which there are strong feelings both in this House and in the other place.

We must never lose the ability to keep pace with the criminals and terrorists who strain every nerve and sinew to confound and evade our efforts. The Bill provides the Government with the power to make, amend or repeal secondary legislation to combat money laundering and terrorist financing. Behind all this lies our primary goal: to restore the independent power of a global Britain to defend our interests and to exert our rightful influence on the world stage, acting in concert with our European friends whenever possible, sure in the knowledge that we are a force for good. I commend this Bill to the House.

--- Later in debate ---

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to follow the hon. Member for East Dunbartonshire (Jo Swinson). I also pay credit to her husband’s work at Transparency International. I think he came up with the phrase that, as we leave the European Union, we should be “a beacon, not a buccaneer”. That is the spirit in which I approach the Bill: we should look to set the highest standards for transparency and financial probity, not try to get some short-term advantage by short-changing on those important issues.

I want to focus on three matters. The first is sanctions, which I raised with the Secretary of State earlier. I accept that if we freeze other people’s assets, we should not try to take part of them. However, in rare situations when we freeze the assets of regimes that have caused or committed serious offences in our country that have done real harm to our citizens, it is perhaps right to say, “Those assets are there and there is no realistic prospect of getting compensation to the victims in any other way than by using them.” In those rare situations, rather than letting people continue suffering from the injuries that were done to them, should not we be able to use the assets to try to rectify the wrong, if only slightly? I cannot imagine many instances in which that would apply, but it would clearly apply to the victims of the previous Libyan regime, which supplied Semtex to the IRA. I hope that, when the Government consider licensing the use of assets that have been frozen, we would help those victims of events that took place at least 20 years ago, if we could find a way to do so. How much longer will they be around to benefit from compensation, even if we could agree it with a Libyan Government—if there ever were one that would do so?

I heartily support the arguments for the need for overseas territories to have public registers of beneficial ownership. I do not want to repeat the arguments, but I will add a couple. It is sometimes asked why the overseas territories should have to lead, and argued that they should be able to follow the rest of the world. It is claimed that if they act first, they will be at a disadvantage and lose revenue and business will be driven elsewhere, to even murkier regimes. The problem with that argument is that our overseas territories are such a large part of the market for the activity that we are discussing that, if they do not reform, nobody else will. We cannot follow the market—we are the market here. We have to take a lead. We have to say to our overseas territories, “You have to do this. We don’t want you to be accused of having dirty, corrupt, criminal money. We don’t want you to have it or be accused of having it. The only way that we and you can show that you have clean regimes is to have this transparency.”

I suspect one of the reasons why the overseas territories can attract such large amounts of business is their relationship with the UK, their protection by the UK, the rule of law that we help them have and their access to our financial market. There is a very real link between what they do and what happens here. We therefore have some obligation to act to ensure that they have the same standards as we have. We cannot just wash our hands and say that it is for them and that they are independent and can do what they like. They benefit greatly from their links to us, and the time has come for us to say that we need them to move to the same standards as we have and that they cannot be allowed to weaken our reputation. Everywhere else in the world thinks that they are part of the UK. Developing nations say, “What you’ve done is great, but our assets have been stolen and are being hidden by your territories and we can’t get at them or find out exactly where they are.” Everyone thinks that they are part of us and it damages our reputation if they do not adopt the same high standards.

I agree with my right hon. Friend the Member for Arundel and South Downs (Nick Herbert) who said that we cannot force that on overseas territories overnight. We have to give them a sensible and fair timeframe and we would much prefer them to choose to put the transparent register in place instead of our forcing them. I, too, would support an amendment that provided for a realistic and fair timetable, but we need the Government to tell the overseas territories that they want and expect them to do it and that, if they have not done it by the deadline, the Government will make them do it, so that we get that open, clear and transparent standard.

Let us be honest: the Government’s actions in the UK to increase transparency have been mostly extremely good. We have the open register of beneficial ownership for companies, although we need to sort out some of the Companies House details. A few weeks ago, the new power of unexplained wealth orders came into effect. But if devious people can hide from our regime by using our overseas territories, all those things will be for nothing. We need to extend these powers much more widely.

I am not usually keen on our transposing EU directives where we do not need to do so, but it would be a terrible situation if we were not to implement something consistent with the fifth EU anti-money laundering directive and were lagging behind. If we read what is in there, we see that it contains some things that we should do, such as having a cap where we do not have a register of who has a pre-paid card, so that someone cannot spend laundered money around the world using such a card. That is a perfectly sensible measure to take.

The directive also contains provision for the register of trusts in certain situations. It would be a strange situation if the country in Europe that probably has the most trusts was the only one that did not have any transparency. That would hardly aid our reputation for being a clean financial centre, which is what we should be keen to establish. I am not particularly fussed whether the Government implement the fifth directive before we go or whether we introduce similar, equivalent or, we hope, stronger measures of our own, but let us not fall behind on those sensible ideas that the EU has come up with. I am not aware that we opposed them in the EU. I believe that we agree with the direction of that directive, so let us get those things into force.

The third point I wish to cover is the property register. I have served on a few Bill Committees in my time and I have occasionally tabled amendments in my misspent youth; occasionally I have asked for reviews, as that has been the only way of getting things tabled. In general, the Government’s response is, “There is no point putting into a Bill a requirement for a review, as we review things in any case.” Yet in clause 44, on the property register, what we have managed to get is a requirement for three annual reviews of the progress the Government are making on their own policy. I accept that that was the result of a compromise in the House of Lords, but I, too, would love to see real progress made on this property register, as it is an important missing link in our transparency.

I followed that debate in the House of Lords, and I found Lord Ahmad’s argument convincing: if we are going to have this register, we want it to have real meaning and teeth, and if the reward for a delay is that we can have a mechanism in law that means that if someone does not disclose the beneficial ownership of that property correctly, we can prevent them from selling it in future, that is a price worth paying for a delay. That would be a real consequence: if someone does not register who really owns a property, they cannot sell it until they do. That would be a powerful message to send out to say that we do not want dirty money buying property in this country; that if we think someone has bought a property with dirty money, we will impose an unexplained wealth order and try to work out whether we should get that money back off them; and that if they just do not tell us who owns that property, they are not allowed to sell it until they do. That would be a real step forward, so I am reluctantly prepared to accept that we need to wait a couple of years to get those powers in a place that will be effective. I hope that as this Bill proceeds through this House we can have the same assurances that were given in the Lords that the Government are committed to that register and that we are not just left with three years of reviews, at the end of which we have made no progress on that situation. The Government have committed strongly to that register again, and I look forward to it.

If ever we needed a reminder of how important the measures in this Bill are, we need only look at a story again today of a large bookmaker being fined millions of pounds. One of the reasons for that was that it did not prevent money laundering through its shops for several years. I declare that I went to a charity darts tournament sponsored by that bookmaker, to get a donation for a charity in my constituency—that is on the register and I declare it. This just shows that money laundering is not just about large amounts of very clever things moving around the world, as the “McMafia” credits showed; it is everyday activity, and we need everyday businesses to be on their guard in preventing this from happening. So I support the fact that the Bill retains those important powers going forward.