Sanctions and Anti-Money Laundering Bill [ Lords ] (First sitting)
(6 years, 1 month ago)
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The Committee divided: - Ayes: 7 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 7 - Question accordingly agreed to.
The Chair
Before we begin, can I ask everyone to ensure that all electronic devices are turned off or switched to silent mode? I remind Committee members that Mr Speaker says that teas and coffees are not allowed during sittings. Today, we will consider first the programme motion on the amendment paper, then a motion to enable the reporting of written evidence for publication.
The Minister for Europe and the Americas (Sir Alan Duncan)
I beg to move,
That—
(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 27 February) meet—
(a) at 2.00 pm on Tuesday 27 February;
(b) at 11.30 am and 2.00 pm on Thursday 1 March;
(c) at 9.25 am and 2.00 pm on Tuesday 6 March;
(2) the proceedings shall be taken in the following order: Clauses 2 to 5; Schedule 1; Clauses 6 to 18; Clause 1; Clauses 19 to 43; Schedule 2; Clauses 44 to 50; Schedule 3; Clauses 51 to 56; new Clauses; new Schedules; remaining proceedings on the Bill.
(3) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Tuesday 6 March.
May I take this opportunity to welcome you to the Chair, Mr McCabe, and say what a pleasure it is to serve under your chairmanship? Because the Bill in its principles enjoys cross-party support, in the spirit of what I believe is cross-party agreement I am happy to offer to any member of the Committee the services of my officials, should they want any briefing or advice on any detail of the Bill.
Question put and agreed to.
The Chair
The deadline for amendments to be considered during the first two line-by-line sitting days of the Bill has passed. The deadline for amendments to be considered on the third line-by-line sitting day is the rise of the House on Thursday.
Resolved,
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Sir Alan Duncan.)
The Chair
We now begin line-by-line consideration of the Bill. The selection list for today is available in the room and on the Bill webpage. This shows how selected amendments have been grouped together for debate. Amendments grouped together are generally on the same or a similar issue. A Member who has put their name to the lead amendment in a group is called first. Other Members remain free to catch my eye to speak on all or any of the amendments within that group. A Member may speak more than once in a single debate.
At the end of a debate on a group of amendments, I shall call the Member who moved the leading amendment again. Before they sit down, they will need to indicate if they wish to withdraw the amendment or to seek a decision. If any Member wishes to press any other amendment or new clause in a group to a vote, they need to let me know. I shall work on the assumption that the Minister wishes the Committee to reach a decision on all Government amendments, if any are tabled.
Please note that decisions on amendments do not take place in the order they are debated but in the order they appear on the amendment paper. In other words, debate proceeds according to the selection and grouping list; decisions are taken when we come to the clause that the amendment affects. I will use my discretion to decide whether to allow a separate stand part debate on individual clauses and schedules, following the debate on the relevant amendments. I hope that explanation is helpful.
The Committee has just agreed a programme motion that will be reproduced in the amendment paper for tomorrow. The programme motion sets out the order in which we have to consider the Bill.
Clauses 2 to 5 ordered to stand part of the Bill.
Schedule 1
Trade sanctions
Helen Goodman (Bishop Auckland) (Lab)
I beg to move amendment 29, in schedule 1, page 49, leave out lines 39 and 40.
The Chair
With this it will be convenient to discuss the following:
Amendment 30, in schedule 1, page 50, leave out lines 2 and 3.
Amendment 31, in schedule 1, page 50, leave out paragraph 33.
Helen Goodman
May I say what a pleasure it is to see you in the Chair on this bright and sunny, if cold, morning, Mr McCabe? I will not press the amendments, as they are simply a vehicle enabling me to ask a question: on trade sanctions, is there a loophole in relation to the Isle of Man?
Sir Alan Duncan
I thank the hon. Lady for her question. It is never unhelpful to be able to clarify a point of detail of this sort, and I hope I can now do that to her satisfaction.
Amendments 29 to 31 would cause the Bill to deviate from the established practice in export controls and customs matters where transfers of goods to the Isle of Man are not classified as exports and imports. The Isle of Man is part of a joint customs and indirect tax area within the United Kingdom, and across all customs matters goods transferred to the Isle of Man are not said to be exported from the United Kingdom, and goods transferred from the Isle of Man are not said to be imported into the United Kingdom. That is a long-standing customs arrangement and has been reflected in legislation as well as in custom and practice.
The Isle of Man is integrated into HM Revenue and Customs’ CHIEF—customs handling of import and export of freight—computer system, which enables it to operate UK customs. The Isle of Man mirrors UK export control and sanctions legislation and makes licensing decisions on exactly the same basis as the UK. The amendment, if it were carried, would put sanctions policy out of step with export control and customs. Only goods covered by sanctions legislation would be affected by this change and would in essence be subject to the same export controls twice. If a good were travelling to a sanctioned destination, via the Isle of Man under a licence, it would require one licence from the UK and another from the Isle of Man. The amendment would cause procedural and legal difficulties and increase administrative burdens for business and Her Majesty’s Government, and all for no observable benefit
I hope that I have persuaded the hon. Lady and given a satisfactory explanation in response to the amendment, which in any event she does not intend to press.
Anneliese Dodds (Oxford East) (Lab/Co-op)
Like my hon. Friend, I am grateful to you for chairing the Committee, Mr McCabe.
I am also grateful to the Minister for his explanation. Very briefly, he referred to the Isle of Man’s treatment under the CHIEF system, but we are moving to the contractual disclosure system—CDS—for customs policies. That should have happened by last year, but it has been delayed and there are many concerns about it. Will the Minister assure me that the Isle of Man will be treated properly in any new customs arrangements, and that is the Government’s understanding of the situation?
Sir Alan Duncan
Although I am not familiar with the exact details of the system the hon. Lady mentions, I think I can say confidently that the Isle of Man will be treated in the way that I described in my previous remarks.
Helen Goodman
I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 1 agreed to.
Clause 6
Aircraft sanctions
Helen Goodman
I beg to move amendment 15, in clause 6, page 5, line 40, at end insert
“unless they are a person, or are doing so to provide legitimate travel to a person, recognised as a refugee under the UN Convention Relating to the Status of Refugees”.
This amendment would prevent sanctions being imposed on recognised refugees who own or operate aircraft registered in a prescribed country.
The Chair
With this it will be convenient to discuss the following:
Amendment 16, in clause 6, page 6, line 33, at end insert “,
unless an aircraft is providing legitimate travel to a person recognised as a refugee under the UN Convention Relating to the Status of Refugees.”
This amendment would mean that aircraft containing a recognised refugee would not constitute a disqualified aircraft under this Act.
Amendment 17, in clause 7, page 7, line 36, at end insert “,
unless the ship belongs to a person or the ship provides legitimate travel to a person, recognised as a refugee under the UN Convention Relating to the Status of Refugees.”
This amendment would mean that shipping sanctions could not be imposed on ships belonging to, or carrying, a recognised refugee.
Helen Goodman
The amendments are rightly grouped together, because they deal with essentially the same issue. Many refugees are coming to Europe at the moment, mainly by sea, but a small number by aircraft. We want a system that has firm sanctions on shipping and aircraft but does not penalise or criminalise refugees. I know the Minister is as keen as I am to achieve that.
The numbers are striking: more than 1 million refugees or migrants reached Europe by sea in 2016, and 1 million arrived in that way last year. Most of them are fleeing conflict and political persecution in three places: Syria, Afghanistan and Africa. Unfortunately, at least 3,000 people died crossing the Mediterranean last year. We need a system that is firm in the sanctions aspect but humane for the individual refugees. The Minister has been a Department for International Development Minister, and I know that he has experience in this area and will be able to tell us what he thinks is the right way to proceed. In the Lords, when the Minister, Lord Ahmad, was asked about this, his response was that it would be covered by exemptions and licences for non-governmental organisations, but these people do not always arrive with the help of NGOs; they arrive in ad hoc ways.
If anybody would like to read about that journey, they would do well to look at “The Lightless Sky” by Gulwali Passarlay. He describes his life as a teenager, going from Afghanistan across Iran, through Turkey, being pushed back from Bulgaria, making the journey again, going through Greece and getting to Italy. Interestingly, at some points he describes the people who travelled with him and who organised the journey for him as “traffickers”, and their treatment of him was extremely violent, unpleasant, negative and exploitative; but it was sometimes a positive experience, and he regarded them as agents who he had paid to help him. The dilemma the Minister faces is that we do not wish to encourage the people traffickers, but we need to protect the people. Our amendments are aimed at squaring that circle. I agree that that will be difficult, but that is what we are trying to do.
There is also the question of incentives and the pull factor. Goldsmiths University and Oxford University have looked at this and they do not believe that the pull factor is strong, so I submit that we need to take a more humane approach. We have had British forces in the Mediterranean and we have had HMS Bulwark picking people up in the Mediterranean. That is what the amendments are driving at, and that is the debate I wish to have on them this morning.
Alex Norris (Nottingham North) (Lab/Co-op)
I rise to speak in support of the amendments, not least so that I do not freeze to my chair, Mr McCabe.
On Second Reading, the rough theme of the discussion was that we wanted a sanctions regime in this country that punished the individuals for their behaviour but did not as a result punish their countrymen and women or people in their care, and what is proposed would seem to fit perfectly with that. The circumstances that might cause us to use sanctions—persecution, human rights abuses or violent conflict at home—are the very circumstances that cause refugees and people to need to leave their country and seek sanctuary elsewhere. We always have to be mindful of unintended consequences, and the amendment seems to offer one way of avoiding them.
Alison Thewliss (Glasgow Central) (SNP)
I am happy to rise in support of the amendment moved by the hon. Member for Bishop Auckland (Helen Goodman). She makes some good points. We need to be mindful that there are people who are trapped in difficult situations, and if getting on a plane or into a boat is the only way to get out of that situation, and the alternative is almost certain death—particularly for people in Syria and Yemen—they will do that. We need to seek protection for those operating services for such people. I do not know whether Migrant Offshore Aid Station or Médecins Sans Frontières or any of those other people operating boats in the Mediterranean could fall foul of any sanctions regime. It would be good to get reassurance from the Minister on that, because those are important humanitarian services that rescue people and ensure that they are kept safe.
People are taking a huge risk. Recently there was a case of Somali refugees who sought first sanctuary in Yemen and then tried to leave Yemen because it is so dangerous there, and ended up being shot out of the sea by an airstrike. There are huge risks for people in the choices they make when they are trying to flee. We need to do everything we can to protect them in their efforts to get to a position of safety. I support the amendment.
Sir Alan Duncan
I genuinely thank hon. Members for raising this issue, which we dwelt on at some length on Second Reading. As the hon. Member for Bishop Auckland says, I am a former DFID Minister, so I feel these issues deeply. I am familiar with not only the plight of refugees, but the legal void in which they sometimes have to try to survive. The amendment is a laudable attempt to address that very issue and I make no criticism whatsoever of the intent behind it, because it is one that we all share.
The Government take seriously the impact that sanctions might or can have on a country’s civilian population. We also acknowledge the important work of NGOs and other humanitarian organisations working in difficult and often threatening situations—look at what is happening in Ghouta in Syria at the moment. The amendments are designed to exempt ships or aircraft from sanctions if they are being used to transport refugees. I agree with the principle, but in my opinion this is not the right way to achieve the desired effect.
I hope that hon. Members recognise that refugee status—and hence the ability to deem someone a refugee under the amendment—is usually granted after a person has fled from their country of origin: once they have reached safety, they can apply for asylum and be recognised as refugees. The amendment would not cover persons fleeing from their country of origin in order to claim asylum. I suspect that that does not reflect the good intentions of those who tabled it.
As I said earlier, the UK is very proactive in ensuring that NGOs can operate in countries subject to sanctions by providing licences and exceptions. In fact, the Bill would make it easier by allowing us to draft exceptions and grant general licences specifically aimed at assisting humanitarian activities, which include assisting refugees or displaced persons. There are good reasons why broad prohibitions are applied to a country, and licences are used to provide targeted exceptions. If we were to provide a general exception for ships and aircraft in those circumstances, aside from the practical difficulty with these amendments that I have mentioned, it could be subject to abuse and would be pretty well impossible to enforce.
Sir Alan Duncan
I will just take this through to the logical conclusion, and then of course I will give way. I am sure the hon. Lady can understand the difficulty that the situation I described would pose in respect of a person on a ship or aircraft making such a claim.
Helen Goodman
I understand the Minister’s point, but since he accepts the humanitarian case we are making, why did he not put down his own amendments to cover those asylum seekers, as well as refugees?
Sir Alan Duncan
Because the provision is already in the Bill. I would argue that it is in the Bill to the satisfaction of the hon. Lady, because the system of licences and exceptions in the Bill offers the best way to maintain the integrity of sanctions, while ensuring that NGOs can provide humanitarian support to refugees, asylum seekers and displaced persons. It is often the displaced persons who are greatest in number.
That is not a difference of principle; that is simply our interpretation of why this proposal would not work in practice and why the Bill does work in practice and achieves the objectives of the amendments that the hon. Lady has tabled. On that basis, I ask her not to press her amendments, because provision is in the Bill to meet the demands that she seeks.
Helen Goodman
I know that the Minister is doing his best and that the idea is to take minimum amendments in Committee as the Bill goes through—I have been a Minister too; I have had those briefings. However, the Minister is not taking into account the scale of the problem and the situation in which people are finding themselves.
The House voted unanimously last month for a foreign policy that had human rights at its very centre. We all acknowledge that there are now a record 66 million refugees around the world. That is more than there have ever been and more than the population of the United Kingdom. The fact is that we know people are fleeing from horrendous situations, and particularly from Libya, where there are reports of people who have come up from sub-Saharan Africa or across from Eritrea being sold in vast markets. I am afraid that to rely on the notion that people in that situation will be able to get to an NGO is completely unrealistic. I am going to test the will of the Committee on amendment 15.
Question put, That the amendment be made.
Sir Alan Duncan
It might be helpful, given the debate we have had, to rehearse the arguments for why we think clause 6 deservedly stands as it does without amendment. Clause 6 introduces provisions to ensure that the Secretary of State has the power to impose sanctions in respect of aircraft, most notably disqualified aircraft. Sanctions on transport form an important part of the suite of measures available to the UK. As a permanent member of the United Nations Security Council, the UK fully supports the imposing of transport sanctions on prescribed countries.
These powers would allow prohibitions and requirements to be introduced and directions to be issued to control the movement of disqualified aircraft as defined in subsection (6). Directions include preventing disqualified aircraft from entering UK airspace or, if they have already done so, detaining them in a UK airport or compelling them to leave UK airspace. More generally, where a designated person has a prescribed interest in an aircraft, the UK will ensure that this aircraft cannot be registered on the UK register. The UK will also have the power to remove such aircraft from the register. This clause also enables the UK to prevent aircraft from being registered in the prescribed country. Finally, the provisions would enable the UK to prevent British-controlled aircraft from overflying or landing in a prescribed country.
These clauses, therefore, will allow the UK to prevent the use of aircraft—where transport sanctions apply—by people connected to sanctioned countries such as North Korea. The powers in this clause are necessary for the UK to be able to develop and enforce transport sanctions and meet its international obligations. The implementation and enforcement of transport sanctions are a crucial element of the UK’s future foreign policy, and I believe this clause should stand part of the Bill.
Question put and agreed to.
Clause 6 accordingly ordered to stand part of the Bill.
Clauses 7 to 14 ordered to stand part of the Bill.
Clause 15
Exceptions and licences
Helen Goodman
I beg to move amendment 18, in clause 15, page 14, line 41, at end insert—
“(3A) Regulations must include provision for the establishment of a fast-track process for dealing with requests for exceptions and licences for humanitarian purposes.”
This amendment would mean that regulations have to provide a fast-track process for dealing with any requests for exceptions and licences for humanitarian purposes.
The Chair
With this it will be convenient to discuss the following:
Amendment 19, in clause 15, page 14, line 41, at end insert—
“(3A) The Secretary of State must, within six months of this Act coming into force, undertake a consultation on measures to establish an overarching framework for exceptions and licences to be granted for the purposes of subsections (2) and (3).”
This amendment would require the Government to consult on measures to establish a framework for exceptions and licences to disapply the effect of sanctions.
Amendment 20, in clause 15, page 15, line 12, at end insert—
“(c) humanitarian, development, reconstruction and peace-building agencies engaging with sanctioned individuals and entities in order to safely and effectively carry out their activities.”
This amendment would enable exceptions to any prohibition or requirement imposed by regulations for humanitarian, development, reconstruction or peace-building purposes.
New clause 5—Reports on the use of exemptions and licensing—
“(1) Where regulations are made under section 1, the appropriate Minister must—
(a) prepare a report on the matters mentioned in subsection (2) for—
(i) the period of twelve months beginning with the day on which the regulations made under section 1 come into force; and
(ii) every subsequent twelve month period; and
(b) lay a copy of each such report before Parliament.
(2) The matters are—
(a) the number of applications for humanitarian licences made during the reporting period including specific detail about whether licences were requested by EU Member States or the United States of America;
(b) the number of humanitarian licences granted, refused or withdrawn during the reporting period;
(c) the number of non-humanitarian exemptions and licences requested;
(d) the number of non-humanitarian exemptions and licences granted, refused or withdrawn; and
(e) the amount of time taken for each application to be processed during the reporting period.”
This new clause would require the Government to lay a report before Parliament every 12 months reporting on the use of both humanitarian and non-humanitarian exemptions and licensing.
Helen Goodman
We have now jumped to the section on exceptions and licences, which relates directly to our previous discussion about refugees and the treatment of aircraft and ships. On Report in another place there were some amendments relating to the effects of sanctions on humanitarian work and to exceptions for humanitarian work, and an amendment that looked to get the Government to establish an overarching framework.
We are looking to amend three things in clause 15. First, with amendment 18, we would like to see the inclusion of provisions for the establishment of a fast-track process for dealing with requests for exceptions and licences for humanitarian purposes. I will go on to describe a situation where that was not working and had very bad consequences. We also want a consultation on measures to establish an overarching framework for all exceptions and licences within six months of the Bill coming into force. We have had representations on that from NGOs and the banking sector because they are all affected by it. Finally, we want to see exceptions to any prohibition or requirement imposed by sanctions for humanitarian, development, reconstruction and peace-building purposes.
I am pleased that new clause 5 has been put into this group, because it seeks a report on exemptions. I will come on to explain why that is for humanitarian exemptions and other exemptions.
The system of exemptions and licences is of long standing and well intentioned, but it does not always work as well as we would all like. Chatham House, which did a big piece of work on this last year, said:
“British NGOs undertaking humanitarian operations in or near areas where non-state armed groups…are active face increasing restrictions on their access to the financial system, including delayed transfers, the freezing of funds and in some cases the complete closure of bank accounts. These restrictions impede the UK government’s ability to meet its commitment under the 2015 National Security Strategy and Strategic Defence and Security Review to refocus its aid budget to support fragile and broken states and regions.”
We are obviously in a situation where we have large populations moving around a great deal, sometimes under the control of ISIS or al-Qaeda. It is a very unpleasant and difficult situation.
Helen Goodman
Right. The situation has left responsibility for the due diligence required for funds transfers with humanitarian NGOs operating in high-risk zones.
Banks and NGOs must cultivate relationships, with the support of the Charity Commission, that allow for reciprocal education with respect to compliance expectations, operating risks and mitigation steps. The Government therefore have a challenge in this situation. They need to provide guidance and clear messaging where there is ambiguity at the moment with respect to sanctions and counter-terrorism legislation.
I want to give the explanation for the fast-track process. We have a serious situation in Syria. Everyone knows that 400,000 people have died; 5 million have sought refuge overseas; 6 million have been displaced internally; and half a million people are in besieged areas. Yet this is what is going on. Saleh Saeed, the then chief executive of the Disasters Emergency Committee, said a couple of years ago about Syria:
“The DEC is concerned that the current regulatory regime is significantly slowing and seriously complicating legitimate transfers of much needed funds to pay for humanitarian aid operations inside Syria.”
The lengthy process for getting the money means that on one occasion a programme supporting 10,000 people simply had to close in 2013.
Emanuela Rizzo, who works for what I think is a French organisation, Terre des Hommes, is quoted as saying:
“Receiving money from Europe to Syria is a disaster,”.
The report states that the organisation made a request and waited:
“After 15 days of delay, it contacted the bank in Italy, which informed the NGO that the transfer had been rejected…The bank required a long list of documents, including the NGO’s agreement with the UN Office for Coordination of Humanitarian Affairs, its memorandum of understanding with the Syrian Arab Red Crescent, a letter vowing not to fund ‘terrorist’ groups, and a list of implementing partners.
After two months and a 200 euro…fee, TDH was able to get the money transferred through a different Italian bank with an affiliate in Syria. ‘But it’s becoming incredibly difficult’”.
The report states:
“Other aid agencies struggling to transfer money have resorted to wiring money to banks in Lebanon and physically driving across the border to pick it up. Aid coming in via social solidarity networks has had to do the same.
Since the beginning of the Syrian crisis in 2011, the USA, European Union, Turkey and the League of Arab States…have imposed a series of sanctions on Syria’s arms, banking, energy and oil sectors”—
all for perfectly good reasons—
“as well as on specific individuals, with the stated aim of stopping state repression of protests, initially, and later, of weakening the government.”
However, the sanctions regime has had significant unintended repercussions and second-order effects.
About 15 months ago, when I was on the Treasury Committee, we took evidence from the Charities Aid Foundation and UK Finance. We had some interesting exchanges, so I asked the Charities Aid Foundation what representations it had made. The witness said:
“We worked, for example, in changing proposition 8 in the FATF arrangements, which has a presumption that charities are high risk. We have now had that changed to a risk-based approach”.
However, that
“has created terrible distortions in the assessment of charities.”
The witness added:
“The best example that I could give you is in Egypt, which is scored very highly by FATF because it follows explicit rules in the treatment of charities. Yet all we have seen is a closing of civil society space in Egypt, where charities are simply closed down. That produces the best result, as far as FATF is concerned, because there is then no risk, since they are inherently high risk. Many of these charities are the ones that criticise the Government, so there is a real adverse effect coming through from some of these actions.”
On the question of compliance costs, I asked about the Financial Conduct Authority’s report, which had said that one large, well-known
“charity required £40k of advice on sanctions regimes in order to maintain operations in a number of jurisdictions.”
The Charities Aid Foundation witness said:
“The large international NGOs are spending significant amounts of money on compliance...DFID’s own recommendations in terms of the funding that it provides is that 7% of the cost of any grant that it gives may be used on compliance costs.”
In practice, he said, it is often twice that: between 7% and 14%. It is underwhelming for people who write their cheque for £100 to the Red Cross to know that only £86 of it gets through because the other £14 is spent on lawyers in the UK.
The Charities Aid Foundation would also like more guidance about acceptable risk. Its witness said:
“You could have Treasury-approved guidance, developed along the lines of the guidance that is available from the Joint Money Laundering Intelligence Taskforce for other areas of activity.”
There is a question as to whether we want general exemptions for large, well-known organisations such as the Red Cross or UNICEF, or particular, small licences. Our view is that there is a lot of confusion, and that the individual licences system is not working that well. It is not only non-governmental organisations that agree with that, but the banks too.
UK Finance says it is
“imperative that the UK legislative architecture clearly defines how new legislation will be applied…Our members are clear that the UK’s departure from the EU offers a timely opportunity to create a domestic licensing regime”.
It is asking for a consultation, because that is a complex matter. It is not something that we can sort out in five minutes or in a Bill Committee of amateurs—albeit well-intentioned ones—such as ourselves. It needs expertise.
Alongside the legislation, UK Finance is asking for consideration through
“a wider dialogue on longer-term sanctions implementation.”
It says that
“the impending UK legal sanctions framework will…introduce a new and extremely important dynamic…This will result in an increased scrutiny among globally operating corporate and financial institutions on the approach that will be taken by the UK towards pursing unilateral sanctions and extra-territorial enforcement activity…we would not wish either EU or overseas business to withdraw from the UK due to legal uncertainty, or for it to impede business reacting to potential future relaxation of sanctions”.
The situation is complex. UK Finance does not want people to not use British banks because we have a different and unclear set of rules that might bang up against the risk rules run by the Europeans or the Americans.
To summarise, UK Finance says that banks and international NGOs,
“have increasingly articulated that the current framework permitting humanitarian transactions into sanctioned and conflict environments needs re-thinking and an update.”
It proposes that,
“a new equilibrium be found that recognises the strategic importance of facilitating both humanitarian aid and permissible civilian transactions to higher risk jurisdictions subject to economic sanctions, whilst balancing expectations of appropriate sanctions compliance and counter terrorist controls”
that are required to make such movements of funds.
At the moment, banks and charities are,
“required to navigate a combination of complex multi-jurisdictional regulatory guidance and an inconsistent licensing regime which has led to a significant impact on the funding of humanitarian projects into certain conflict zones”
and other high-risk countries. The banks would like
“mutual recognition for humanitarian licences issued by ‘like minded’ competent authorities”
and
“general exemptions for certain mission critical activities”.
They, too, are interested in having a consultation.
Alison Thewliss
I agree very much with the amendments and support the hon. Lady in what she has said. I share the concerns that she has conveyed from both the NGO sector and the banking sector, where we seem to be caught between admirable public policy objectives—providing humanitarian aid—and the practicalities of sanctions compliance, which seems to be hindering the delivery of that aid in many different ways.
The amendments sensibly seek to expand a particularly narrow EU definition of humanitarian aid. That would give a wee bit more certainty and clarity to agencies working on the ground. It also gives us an opportunity to figure out how we ensure that money reaches those who need it and reaches them quickly. I understand that, at the moment, organisations can often wait up to six to nine months to get licences and agreements in place. Frankly, people on the ground in many of the countries involved do not have six to nine months to wait. They need money and aid almost immediately, so we need to find a way of fast-tracking the money in; we need to figure out what a viable financial route to get money from us here in the UK through to the frontlines in Yemen and Syria to ensure that people can survive looks like.
In Yemen particularly, there is a shortage of physical cash in the country. Hospitals in which people are working are often supported by the likes of Médecins Sans Frontières. MSF is paying those staff, but it needs to get the money into Yemen to pay them, so that they can turn up to work and feed their families, and provide vital assistance to people facing bombardment from the air. We need to find a way of getting the money in and doing that quickly.
There are practicalities involved in asking humanitarian agencies to go and carry out this work. Let us say that people are providing humanitarian aid on the ground; to move things around the country they need fuel. If they are in a country in which they have to choose between buying their fuel from Islamic State fighters or Assad, that is not actually a choice they can make, because both options would place them in breach of sanctions, so there needs to be a way of getting money to people and doing that quickly, so that organisations can do their work. If financial assistance has been granted to humanitarian organisations specifically for the purpose of buying fuel and then they cannot practically do that, that is a real problem and makes the delivery of much-needed aid extremely difficult.
There is an argument for granting up-front licences for infrastructure. If we know what is to be built—put in place—and it is a bridge that will allow people to cross it and move humanitarian aid around the country, or if it is a hospital or other facility that will provide aid, why cannot the licences be granted fast and up front, so that there is no delay in procuring the purchase of things to make that happen?
I agree very much with the points made by the hon. Member for Bishop Auckland about mutual recognition of licences. If we see fit to issue licences, that should be good enough for other countries as well. If we have gone through a due diligence regime, that should be good enough for other people to accept and would help speed up the process, and would prevent organisations from falling foul of someone else’s regulations. There should be agreement on that, whether in a treaty or some other form. It would be a hugely sensible way of speeding up the process.
I very much agree with the points that have been made on new clause 5. I understand that the United States has a huge amount of transparency around the exemptions and licensing regime. It is possible to see not only what has been licensed and how but the backlog to the licences, which is critically important because we can see delays in the process.
We need to understand why those delays are there and what we can do to overcome them. Frankly, people in different parts of the world cannot wait for us to go through a laborious process to issue licences. We cannot have those organisations spend huge amounts of money on lawyers. We just need to get the aid to where it needs to be with the best practicable due diligence.
The Economic Secretary to the Treasury (John Glen)
It is a pleasure to serve under your chairmanship, Mr McCabe. I have listened carefully to the respective Front-Bench speakers and studied the three amendments and the new clause: amendment 18 on fast-track exceptions; amendment 19 on consulting on exceptions to disapply; amendment 20 on an exception for humanitarian or peace-building purposes; and new clause 5, which would require the preparation of an annual report on humanitarian and non-humanitarian exemptions.
I will speak to each in turn. Like my right hon. Friend the Minister for Europe and the Americas, I acknowledge the spirit in which they were tabled, but I will set out the Government’s position on why they are not necessary.
I will address the point about FATF immediately, because I have had some contact with it. FATF was set up by 16 countries after the 1989 G7 summit. It is not an incorporated or treaty body. It does not create binding obligations on the UK. The UK is a founder member and plays a leading role. I would reinforce that with this point. I recently received the Pakistani Home Secretary, who was seeking to persuade the Government to resist the greylisting of Pakistan for not making sufficient progress. That was clearly taken very seriously by the Pakistanis. I also acknowledge the work that is going on across Government in the UK to deal with the considerable challenge of the current evaluation of our own compliance with FATF standards. This is a robust, internationally recognised set of obligations that have real meaning and authority.
Many of the amendments have been debated in the other place and lobbied for by UK Finance and a number of NGOs, as the hon. Member for Bishop Auckland set out. I can assure the Committee that the Government remain a steadfast supporter of NGOs working in conflict areas. The Government engaged with them while the Bill was in the other place, and we will continue to do so. We recognise that it is important to ensure that this work continues, where possible, in sanctioned countries.
It is equally vital, however, that we have appropriate safeguards in place that preserve our foreign policy priorities, by ensuring compliance with sanctions, but also serve to protect the NGOs and help prevent the sector from becoming attractive to criminals looking to circumvent our laws.
Amendment 18 calls on the Government to establish a fast-track process for dealing with requests for exceptions and licences for humanitarian purposes. I can assure hon. Members that the Government make every effort to prioritise urgent and humanitarian cases, where there is a risk of harm or a threat to life, and will continue to do so. However, we believe that any prioritisation criteria for considering licences and exceptions must remain as flexible as possible, to ensure that the Government can consistently prioritise the most important cases, including humanitarian cases where appropriate.
The process for considering licences is best done administratively and on a case-by-case basis. Government Departments will, of course, continue to reach out to the NGO sector to ensure that NGOs understand how that process works for humanitarian licence applications. Given the number of Departments involved—typically four: the Foreign Office, the Home Office, the Department for International Trade and the Department for International Development—and the many rightly differing derogations, exceptions and grounds for licensing that are involved, it would not be straightforward to operate a fast-track process as suggested by the amendment. To get each application right demands a tailored approach, because the facts differ greatly from case to case. Therefore the Government believe that it would not be prudent to establish a single fast-track process, which may impede the Government’s ability to assess cases accurately, and will be unwieldy to operate given the different ways in which the various types of sanctions work.
A fast-track process might also create perverse results—such as where an urgent request for a licence to allow a designated person access to medicine would have to come second to a routine application in respect of humanitarian activity that only involves changing the details of bank accounts. For all these reasons, we do not consider that a new and administratively burdensome requirement ought to be added to sanctions regulations.
Amendment 19 suggests that a consultation be undertaken for an overarching framework for exceptions and licences. The NGOs and UK Finance have called for that, as the hon. Member for Bishop Auckland said.
It must be said that we have carried out a consultation on our White Paper, including roundtables with banks and NGOs. We are still talking to them and have set up a working group with them. We intend to use the opportunity to improve licences—such as general licences for humanitarian activity—and we will issue guidance. We have been clear that we will do that, and because of that consultation we do not feel that the amendment is necessary. We have listened to the comments of all respondents and we intend to design a post-Brexit licensing framework that is fully informed by those comments. That is an ongoing process and one in which we are enthusiastically engaged.
Comprehensive regulations that will be laid before Parliament and debated will include detailed information on the exceptions and licences that are appropriate for each regime. We also intend to continue to consult with industry to ensure that the framework allows us to be flexible and has the minimum possible effect on industry whilst having the maximum effect on the intended targets of the sanctions. An overarching framework for licences will not allow us the flexibility that we need for each regime. For example, the licensing grounds for a proliferation regime should be different from those of a misappropriation or counterterrorism regime. Furthermore, the timetable for conducting such a consultation after the commencement of the Bill makes little sense. By then, we expect that the relevant sanctions regulations—with the appropriate exceptions and licensing arrangements for each regime currently existing in EU law—will already have been made and debated by Parliament. We fear that a further consultation would add confusion at a time when we would be working hard to ensure a smooth transition.
The Government have committed in the Bill—clause 37 —to issuing guidance about sanctions regulations. As the guidance is developed, we will engage with stakeholders, as we already do for guidance that is published on the implementation of sanctions.
Alison Thewliss
Could the Economic Secretary give more clarity on the timescale? We have the Bill just now; how soon will the guidance appear? The current guidance is not really useful in terms of how the sanctions landscape works.
John Glen
I cannot give a precise timetable. I will consult officials and write to the Committee to give clarification on that as soon as I can.
Amendment 20 would make it plain on the face of the Bill that exceptions to sanctions can be made for humanitarian development, reconstruction and peace-building activities. Broadening such exceptions to cover such a broad group of organisations and activities goes much further than the Government intended and is incompatible with both the policy intent and our obligations under UN and EU regimes. The Government are currently able to issue specific licences on application from humanitarian and other agencies. The licensing provision is read across and extended in clauses 15(2)(b) and 14(3)(a) to allow Ministers to issue both general and specific licences. It is the Government’s intention to use the power to issue general licences where appropriate. One key area in which it is foreseen that general licences could be written is for the purpose of delivering humanitarian aid. We should also be wary of the confusion caused by listing these activities but not others, such as denuclearisation activities. To add one would imply that the other was outside the scope of the Bill.
Anneliese Dodds
I am grateful to the Minister for that explanation. I shall speak briefly on a couple of points.
First, the Minister helpfully stated that the Government do support NGO operations in countries subject to conflict. Will he be more explicit and state that the Government support NGO operations in countries subject to sanctions? That is exactly what we are talking about now. The concern for many in the development community is that the balance is currently towards a presumption against activities occurring in countries where there are sanctions, rather than that being feasible for those organisations when fulfilling international obligations, as we would expect.
Secondly, on amendment 18 on the fast-track process, I was encouraged by some of what the Minister said but was slightly concerned by the reference to the Government continuing current processes, with the suggestion that those are adequate. I have certainly received information, as I am sure other colleagues have—the hon. Member for Glasgow Central referred to some of this—on the impact of fuel sanctions. I understand that delays in getting appropriate licences and exemptions in relation to sanctions on fuel in Syria have led to farcical situations in which, for example, a hospital was destroyed before it was possible to get the fuel that would serve that hospital. The current system is not working at the moment. I wonder whether we may have more of a focus on not following existing practices, which clearly are not operating adequately.
The Minister suggested that the fast-track process would lead to some kind of inappropriate, one-size-fits-all system where, for example, a need for medicine in one situation could be trumped by humanitarian concerns. Surely medical needs could come under humanitarian concerns? What we are really talking about is the need for a fast-track approach to humanitarian peace-building action that will be interpreted sensitively and intelligently, but which could get away from the current impediments for NGOs.
John Glen
I am happy to address those points. I can of course confirm that NGOs in countries subject to sanctions are still able to access these provisions. On the hon. Lady’s point on the fast-tracking process, and the point on fuel sanctions, I said what I said in response to the amendments, but we are obviously living in a very imperfect situation, with highly challenging environments. It will not be possible to get things right every time, but I think the provisions in this legislation give us the best opportunity to do so. I think I have set out the Government’s position clearly.
Helen Goodman
The Economic Secretary is right that the situation is complex, and he is right that we do not want to add to the complexity with new requirements and new consultations. However, I am sorry to say that I do not think he has made the case for not accepting our new clause 5 on reporting to Parliament.
I want to draw the Committee’s attention to an article from The Guardian of 23 July 2014, which illustrates the problem. It is headed: “UK arms export licences for Russia still in place, despite claims of embargo”. It reported:
“More than 200 licences to sell British weapons to Russia, including missile-launching equipment,”
were still in place at the time,
“despite David Cameron’s claim in the Commons…that the government had imposed an absolute arms embargo against the country”.
I think we have seen a great reluctance on the part of the Government to be more open. What is going on with these sanctions, exemptions and licences is a highly sensitive political area. It seems to me that it would help the Government if we had more openness. We could then have arguments about what was really going on, not about what people might surmise or imagine. I wish to press new clause 5 to the vote.
The Chair
We come to new clause 5 later. At the moment, we are dealing with amendment 18.
Helen Goodman
I do not want to press amendment 18. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 15 ordered to stand part of the Bill.
Clause 16 ordered to stand part of the Bill.
Clause 17
Enforcement
John Glen
I beg to move amendment 4, in 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.”
This amendment enables sanctions imposed by regulations under Clause 1 to be enforced by criminal proceedings, and limits the terms of imprisonment that such regulations can allow to be imposed for breach of sanctions.
The Chair
With this it will be convenient to discuss amendment 21, in clause 17, page 16, line 36, at end insert—
“(8) An appropriate Minister must publish guidance from the Crown Prosecution Service on when it is in the public interest for a breach of a sanctions regulations to be prosecuted.”
This amendment would require the Government to publish guidance on when it is in the public interest for a breach of sanctions regulations to be prosecuted.
John Glen
The offences provisions are perhaps the most important amendments that we need to debate today, following the Government’s defeat in the other place. Hon. Members should be aware that without the fullest set of enforcement measures available to deal with breaches of sanctions, the UK will not be able to ensure effective implementation and enforcement of sanctions. That would make what are currently key foreign policy and national security tools virtually toothless, and therefore redundant.
It is important to recognise right at the start that the concerns in the other place were not about whether there should be criminal offences for breaching sanctions; it was accepted that there was a need for these offences. What was at issue was the circumstances where Parliament could properly give to Ministers the power to create offences. The Government have listened to those concerns. We understand them and these amendments address them.
Currently, EU sanctions against countries such Russia and Syria are imposed through EU legal Acts. These require member states to put in place enforcement measures at 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 modified by the Policing and Crime Act 2017, as well as other legislation such as the Export Control Act 2002. The Government therefore want to maintain continuity in this area by reproducing the powers available under existing legal frameworks for enforcement across the various forms of sanctions in the Bill.
Since the defeat in the Lords, Government officials and lawyers have worked with Lord Judge and others to seek a legislative solution. That has been a deep and meaningful dialogue, and I must express my gratitude to Lord Judge for his engagement in seeking to find a way forward. We believe that can be found in amendment 4, the enhanced procedural requirements, which we will debate later, in new clause 3 and the corresponding offence provisions for money laundering. The Government believe that combination of measures is the best solution to meet the concerns expressed in the other place while being practical to implement, which I think was the intention of those who raised the concerns.
The amendment restores to clause 17 the provisions to create sanctions offences in regulations. It provides for the enforcement of any prohibitions and requirements, to provide for criminal consequences if they are contravened or circumvented. The clause also provides for maximum penalties for breaches of sanctions in regulations. The provision states that regulations may not include offences with maximum penalties greater than 10 years’ imprisonment, which is in line with the maximum penalty available through the 2002 Act, and for offences other than trade sanctions we do not intend to create penalties greater than seven years’ imprisonment, in line with current practice. The clause should be read alongside the safeguards in new clause 3, which I will discuss later.
Even with the safeguards that we plan to introduce in new clause 3, the Government remain very aware that creating criminal offences and setting penalties in regulations is a serious matter, not to be undertaken lightly. I am therefore happy to repeat assurances given in the other place. First, no Government would ever create criminal offences for trivial matters. The powers detailed in clause 17 would be used only to create offences within the categories of offences that already exist for breaches of sanctions, breaches of licences and breaches of disclosure or information requirements. Secondly, Ministers should not use these powers in a way that is incompatible with the basic and fundamental rights of people in the UK—section 6 of the Human Rights Act 1998 expressly forbids it. Thirdly, as I said before, regulations under the Bill cannot create offences for trade sanctions with maximum penalties greater than 10 years, and we do not intend to create offences for financial sanctions and other types of sanctions with maximum penalties greater than seven years.
We have listened to the concerns expressed in the other place, and we have tabled amendments to introduce controls on the use of this power. As I said, I will speak to those amendments later in our consideration in Committee. In conclusion, the amendment will restore our ability to enforce sanctions by reintroducing the provision to create criminal and civil offences and penalties that are proportionate to the scale and nature of sanctions breaches and still effective as a deterrent. It should be read together with the enhanced procedural safeguards in new clause 3, which directly addresses the concerns raised in the other place.
Helen Goodman
I was very disappointed, but not surprised, when I saw that the Government had tabled this amendment before the weekend. I anticipated that they might seek to reverse one of their defeats in the Lords. I think it is striking that the Government are seeking to reverse amendment 45 from the other place, when they lost the vote on that amendment by 80 or 90 votes. It was not a narrow little thing. The amendment in the other place was moved not by some party hack, but by the former Lord Chief Justice of England and Wales. He made a number of speeches about the excessive use of Henry VIII powers.
Alison Thewliss
I echo that. We are also very worried by this amendment, and by the return of something that was clearly and definitively rejected. As far as we are concerned, it is dangerous and an affront to democracy. The Government should accept that they were wrong, and withdraw the amendment. I point out that the Lords Constitution Committee said:
“We consider that such regulation-making powers are constitutionally unacceptable and should not remain part of the Bill.”
The Government should take heed.
John Glen
I am grateful for the dialogue with hon. Members on the Front Bench, and I will respond to some of the points that have been made. On the question of whether there is some sort of secret plot to hide any conversations with Lord Judge, Government lawyers have had a number of meetings. No letters have been exchanged, so there is no material to share. The vote was lost by 192 votes to 209; I concede that it was lost, but the thrust of the remarks by the hon. Member for Bishop Auckland concerns the notion that behind the measure is some kind of power grab by the Government. I see it as the Government needing to be accountable for how these powers create new offences and how they are used. New clause 3 will require the Government to lay a report before Parliament, setting out what criminal offences are included in any new sanctions regulations.