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

Baroness Kramer Excerpts

Monday 17th October 2022 Lords Chamber

[Viscount Waverley (CB)]

My Lords, I apologise if this is Burundi-specific. I would like to address to the Minister a particular point that has been drawn to my attention. He spoke about the economic crime Act and loopholes. Some people from overseas register a company, open a bank account through lawyers and then, when everything is in place, there is a transfer of shares to a party, which rather defeats the object of the exercise. I am sure that the Minister does not wish to go into detail about this today. However, would he care to reflect and pass on to his officials that, in the spirit of the economic crime Act, they might wish to address that situation?

[Baroness Kramer (LD)]

My Lords, I point out that I am speaking as a winding-up speaker, just in case there is anyone else who is interested in speaking from the Back Benches.

The Minister has explained that this statutory instrument brings into the sanctions orbit both crypto asset exchanges and custodian wallet providers. We agree that that is necessary, but I would like to get some clarity from the Minister. Very few crypto asset exchanges are actually located in the UK—I was struggling to think of one. Some of the most popular, such as Binance, are registered in British Overseas Territories. Just to continue the example, Binance is one of the major exchanges and is registered in the Cayman Islands. What impact does this SI have on the regulation of these exchanges and wallet custodians? To stay with the Binance example, that organisation claims that it does not have the authority to sanction or freeze all Russian users’ assets, leaving the expectation that sanctioned individuals are freely using it under assumed or friendly names.

I would also ask how adequate resources are to make regulation and enforcement effective. As the Minister is aware, the FCA is underresourced and, frankly, demoralised. It does from time to time act against small organisations, which would seem to include misbehaving crypto exchanges, and I think that the crypto group in the FCA is actually one of its stronger sections. But the complexity and global nature of crypto makes it very tricky to supervise. The National Crime Agency has only 118 staff to cover all of the powerful and complex world of finance. Would the Minister consider giving the FCA and the NCA a share in the fines and confiscations from successful prosecutions, in order to build their capacity? Will further legislation come forward, despite the Conservative mantra of “deregulate, deregulate”, to deal with the dark side of the crypto industry, which has a real mix of responsible players and sheer anarchists, which obviously is an avenue for running sanctions that makes no use of the respectable exchanges and wallet custodians?

Will the Government also go after the enablers—the lawyers, accountants, property developers and others who facilitate sanctions-busting through a variety of routes? In a sense, I am picking up the point from the noble Viscount, Lord Waverley; he described one such route. These firms are a major part of the infrastructure of what is widely known, unfortunately, as the London laundromat. Would the Minister agree that we need a “failure to prevent” sanction to put genuine pressure on and change the behaviour of these enablers?

This statutory instrument—and this is true for upcoming legislation—still fails to give proper protection to whistleblowers or to champion follow-up on their disclosures, even though they are crucial to exposing wrongdoing, particularly in the areas of sanctions-busting, which crosses complex borders and is very hard to track through conventional routes used by regulators or enforcement agencies. This SI once again fails to include as whistleblowers the wide range of people who speak out, and it continues the limitation of the definition of whistleblowers to employees.

This statutory instrument gives confidentiality to disclosures made by employees to proscribed organisations; it lists a long list of proscribed organisations among its various regulations. But this kind of confidentiality is frequently useless. The identity of many whistleblowers is hard to hide, particularly when dealing with kleptocrats, oligarchs and authoritarian states, which, frankly, use all kinds of aggressive means to find the identity of those who have exposed them.

Under the current law, recourse for a whistleblower, who is at risk of retaliation, is to an employment tribunal. That hardly seems meaningful protection to someone whose income, family and life, very likely, are on the line. The Minister will be aware from his portfolio that far too many whistleblowing reports remain anonymous because people are terrified. The regulator then uses the fact that the report is anonymous, and therefore it cannot ask more questions of whoever has been doing the reporting, as an excuse not to follow up on the information that has been provided. Frankly, we have a very sorry track record in acting against these entities. The advice that has been given by so many in this field is, if you can, go to the Americans, because they will be fierce and they will act. That is a very sad story to tell.

I have a Private Member’s Bill that would create an office of the whistleblower to be a proper champion. It is an updated version of the Bill promoted by a Conservative MP, Mary Robinson, who chairs the APPG on whistleblowing, so I assure the Minister that there is no party-political issue here. In light of the Minister’s concern over sanctions and in catching people who bust sanctions, will he give us his support?

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[Lord Goldsmith of Richmond Park (Con)]

My concern in answering this question is that I never know where the line is drawn. We are not supposed to talk about individual or upcoming sanctions. My understanding is that this has been largely an academic issue—I really hope I am not crossing any lines here—and that, regardless of whether the regulations had been revoked, and we understand that they have not, it would have had no material impact on any company or individual. It is unfortunate and an error, but it has not had any real-world impact. I hope that addresses his question.

[Baroness Kramer (LD)]

I thank the Minister for the responses he has given me so far, but I raised the issue of British Overseas Territories and cited the example of Binance, one of the largest crypto exchanges, which is based in the Cayman Islands, and how these SIs would impact that. If he cannot answer, I am perfectly happy if he comes back in written form.

[Lord Goldsmith of Richmond Park (Con)]

I apologise for missing that question. The new sanctions automatically come into force in the overseas territories—all except Gibraltar and Bermuda—as soon as they come into force in the UK. As noble Lords would imagine, the UK’s Office of Financial Sanctions Implementation has for many years been engaging substantially and very regularly with the overseas territories and Crown dependencies to help support their development of compliance, enforcement and licensing functions. I hope that addresses the noble Baroness’s question.

It is the responsibility of the UK and our allies to ensure that our sanctions regimes are maintained and updated appropriately so that we can respond at pace to the activities of malign actors around the world. In co-ordination with our allies, we must and do continue to make sure that our sanctions regimes take account of the most modern financial services and prevent loopholes being exploited in the future. I am grateful to noble Lords for having indicated their support for this measure and once again thank them for their contributions.

Russia (Sanctions) (EU Exit) (Amendment) (No. 2) Regulations 2022

Baroness Kramer Excerpts

Thursday 3rd March 2022 Lords Chamber

[Lord Austin of Dudley (Non-Afl)]

My Lords, I congratulate the Minister and the Government on the tough regime of sanctions that has been introduced this week, and I agree with every word of the previous speech.

This is an extraordinary time. Civilians are being bombed and war crimes are being committed, and extraordinary times require special and extraordinary responses. Ministers are completely right to say that one of the ways to isolate a weakened Putin and to put him under pressure is to target him and his supporters and the money they have stolen from the impoverished people of Russia. As the Foreign Secretary has said, we should sanction Russian government Ministers, senior officials, Putin’s inner circle, the oligarchs who look after his funds, members of the parliament and senior members of the security services and armed forces.

We in this country have a particular responsibility, because so much of the money looted from the people of Russia has been spent and invested here in London. The way to identify the funds, the properties that such people have bought and the businesses they have invested in is to target those who enable them to spend and invest these funds. Just as accountants are required to report clients they suspect of tax evasion, so other businesses and professionals should be required to report people they suspect of benefiting from Putin’s regime. We should make it a legal requirement for lawyers, accountants, company formation agencies, financial services firms, investment companies and estate agents to report on the structures and holdings set up to allow sanctioned individuals to hold assets in this country. Surely, this would make the whole sanctions process swifter, simpler and more straightforward. Will the Minister look at including measures such as this in the sanctions Bill being brought forward in the next few days?

Secondly, is it true, as Politico reported this morning, that during the rollover of EU sanctions rules into British law during the Brexit process, the UK sanctions regime became significantly more procedurally complex because the new laws were amended to ensure procedural fairness for those being sanctioned, to strengthen measures those sanctions could take in response, and to ensure that sanctions were imposed in what was described at the time as a “proportionate manner”? If it is the case that these changes made the imposition of sanctions more complicated and difficult here in the UK than in the EU or the US, should we not use the legislation that the Minister is bringing forward to unravel these changes so that we can speed these processes up?

Thirdly, is it also the case, as reported in this morning’s Times, that the Government are finding it difficult—despite the work the Minister is doing, which I applaud, and the work of his officials, who I know are working flat out on this—to impose sanctions swiftly because of a shortage of lawyers and officials able to carry out the work? If so, what plans do Ministers have to recruit more people urgently to do this?

Finally, what happens to funds and property and other assets that are frozen or seized from people in this process? I suggest that they be held in trust to support the future democratic Government of a free Ukraine, to rebuild their economy.

[Baroness Kramer (LD)]

My Lords, I raise again with the Government the issue of cryptocurrencies. Effectively, Russians cannot now transfer roubles into dollars, euros and pounds sterling but they can transfer into cryptocurrency. The Minister will know that the Ukrainian Minister of Finance on Monday called on all the decentralised finance—the DeFi exchanges—to remove Russia from their schemes. Some, such as Coinbase, have done so, but others—Binance is the big one that comes to mind—have decided to sanction only the 100 names on the sanctions list and otherwise to allow free translation of roubles into cryptocurrency. We have heard from the Ukrainian Government that this is a serious mechanism for evading sanctions. Binance, which I mentioned, is registered in the Cayman Islands and therefore falls into the UK financial family. What more will the Minister do to prevent what may have looked like a loophole from becoming what is now growing into—a major escape hole?

[Viscount Waverley (CB)]

My Lords, these are dark days. I am delighted to follow and identify with the initial remarks of the noble and learned Lord, Lord Garnier, and the noble Lord, Lord Austin. Our hearts are with the brave people of Ukraine. The Russian people will suffer long-term hardship but nothing compared to that befalling the extraordinary people of Ukraine.

It is no fault of the Russian people that they have no understanding of the reality of why they are being fully penalised. It is quite astounding that, from my calls to Russia, their perception of what is going on in Ukraine borders, frankly, on the fanciful. Disinformation is rife. These measures are very necessary and the UK Government are doing exactly what they have to do. They have my full support.

Autocrats, Kleptocrats and Populists

Baroness Kramer Excerpts

Thursday 3rd February 2022 Grand Committee

[Baroness Kramer (LD)]

My Lords, the crisis in Ukraine has finally put on the front pages an inconvenient truth largely, if not deliberately, ignored by the Government. The safe haven and money laundering which the UK provides to kleptocrats and oligarchs sustains, enables and rewards pretty much any and every corrupt and autocratic regime on the globe. In 2016, the UK Government estimated that the amount of corrupt money flowing into the UK had reached £100 billion a year.

The Government introduced legislation, particularly the Proceeds of Crime Act, to tackle some aspects of economic crime transacted by what I might call traditional organised crime, but they have notably avoided the key pieces of legislation necessary to stem the laundering of money from oligarchs and kleptocrats. Their money is laundered particularly through UK property. Transparency International has identified at least £1 billion in property bought with suspect money from Russia alone. That will never be stemmed until we have legislation to require not just a register but a public register of the beneficial owners of property in the UK, enabling civic society and activists across the globe to aid our woefully understaffed and fragmented enforcement bodies and regulators, described by Chatham House as "weak and under-resourced”. That legislation was fully drafted weeks—possibly months—ago but, for some reason, the Government have chosen to halt it. Perhaps the Minister would tell us why. We also need proper verification of the Companies House public register of the beneficial ownership of companies. Will the Government tell us when we can expect its introduction—we have been waiting for months—and the other reforms of Companies House regulations?

Other gaping loopholes exist in some of our overseas territories and crown dependencies which do not yet have public registers of the beneficial owners of companies or property. We in the Lords thought that we had, in recent Financial Services Acts, fixed this problem, but the Government have used every strategy they can muster not to force changes. Will the Minister now update us? While UK property is at the heart of what is now known globally as the London laundromat, the other locations which make up the British financial family are almost as important to the kleptocrats.

The Americans have stopped being polite about the problem. The Center for American Progress, very close to the Biden Administration, has called for a joint US-UK counter-kleptocracy working group; in other words, they just do not trust us to take effective action on our own. I ask the Minister: will we agree to it? I suspect we have all read this quote:

“uprooting Kremlin-linked oligarchs will be a challenge given the close ties between Russian money and the United Kingdom’s ruling Conservative party, the press, and its real estate and financial industry”.

However, Government laxity, some might say collusion, is far from the only problem. As other have said, we need to go after the enablers—I quote the CAP again—

“the law firms, accountants, real estate firms, and investment firms that all profit from integrating Russian oligarch wealth into the West.”

Will the Government introduce a “failure to prevent” to stop such enablers? Speaking of prevention, will the Government end their disgraced golden visa scheme, described by Chatham House as a national embarrassment?

Free ports are now being introduced to the UK, with a proposal that there will be a register of beneficial ownership of businesses in them but that it will not be made public. Will the Government accept my amendment on this issue, recognising the importance of a public register, not a secret one, particularly given our weakened enforcement agencies? Will they take up my Private Member’s Bill to create an office of the whistleblower to provide proper protection for whistleblowers, who are presently ruined by their disclosures, but whose actions are vital to effective enforcement against powerful people such as oligarchs and kleptocrats?

Jonathan Taylor: SBM Offshore

Baroness Kramer Excerpts

Tuesday 10th November 2020 Lords Chamber

[The Parliamentary Under-Secretary of State, Foreign, Commonwealth and Development Office (Baroness Sugg) (Con) [V]]

My Lords, at this time we have no evidence that this arrest is linked to Mr Taylor’s whistleblowing on corruption. However, Mr Taylor has alleged that the arrest is linked to the whistleblowing. We will continue to provide consular support and are in regular contact with Mr Taylor. If we receive evidence that Mr Taylor’s arrest is linked to his whistleblowing activities, or that due process is not being followed, we will of course consider what further steps we should take.

[Baroness Kramer (LD) [V]]

My Lords, I am shocked by the line in the Government’s response that says we have no evidence that this arrest is linked to Mr Taylor’s whistleblowing on corruption. Employers retaliate against whistleblowers, not on the grounds of their whistleblowing, but by asserting spurious, contrived and false accusations. By the time the whistleblowers are exonerated—in the UK, often in an employment tribunal dragged out over years—they have been financially ruined, their families scarred and sometimes their mental health compromised. That is how employers and hostile Governments punish whistleblowers and persuade others to keep silent about wrongdoing. I hope the Minister will meet the All-Party Parliamentary Group for Whistleblowing, because we have to change the whole regime to provide genuine protection. Will the Government recognise that this behaviour, captured by this UQ, is classic retaliation against a whistleblower, and will they protect Jonathan Taylor now?

[Baroness Sugg (Con) [V]]

My Lords, of course we must do what we can to protect whistleblowers, and we have done so through the Employment Rights Act and, indeed, the improvements we have made to protect whistleblowers over recent years. I am afraid that in this case in particular, as I said, we have not received specific evidence of this arrest being linked to whistle- blowing, but we will continue to monitor the case very closely and consider any evidence that we receive.

South Africa: Money Laundering and Corruption

Baroness Kramer Excerpts

Thursday 17th October 2019 Lords Chamber

[Lord Ahmad of Wimbledon]

I assure the noble Lord that this is very much ongoing, not just on the particular individuals concerned, but more specifically across the piece, both with the US and our European partners. In that respect, he will be fully aware, and as I have said repeatedly from the Dispatch Box, that for sanctions to be effective co-operation is required to stop the scourge of illicit financing and money laundering more generally. On sanctions specifically, we hope to introduce secondary legislation in due course very shortly, as part of the Sanctions and Anti-Money Laundering Act, specific provisions on the human rights element of the sanctions regime. I will update the House accordingly in that respect.

[Baroness Kramer (LD)]

My Lords, I think the whole House would agree that the best way to prevent corruption is transparency, particularly of the various organisations that can be enablers. On that point, could the Minister tell us what progress has been made on public registers of beneficial owners in the overseas territories and Crown dependencies—an area where the Government have resisted many of the pressures introduced by this House?

[Lord Ahmad of Wimbledon]

I disagree with the noble Baroness’s final point. The Government have accepted the amendment that was made, and we are working closely with the overseas territories. She will also be aware that we have a very effective exchange of notes scheme already operational with key overseas dependencies, which provide law enforcement agencies and tax authorities with direct access. On the specific issue of registers, I am sure that she has observed very closely recent statements that have been made publicly, such as those by the Turks and Caicos Islands and by the Cayman Islands only yesterday, that they will be in line with the whole issue of public registers, reflecting European Union priorities and consistent with European priorities as will be required. The noble Baroness will be further aware that we are working directly with the OTs. We have technical groups set up to ensure public registers will be operational by 2023.

Lord Mayor’s Show: Taiwan

Baroness Kramer Excerpts

Wednesday 1st May 2019 Lords Chamber

[Lord Ahmad of Wimbledon]

As I have already said, and I am sure times have not changed since the noble Lord was a Foreign Office Minister, we pride ourselves on diplomacy and charm in encouraging people towards what we believe are the right decisions. However, the governance of the Lord Mayor’s Show is independent. We have given clear and unequivocal advice, and it is appropriate that organisations take decisions according to how they perceive moving forward. Our position on the Lord Mayor’s Show and other bodies is clear: Taiwan is an important partner and we will continue to encourage its partnership when it comes to issues of culture, trade and education.

[Baroness Kramer (LD)]

My Lords, I had the privilege of leading a trade mission to Taiwan and it was evident that the route into the Chinese market for much of our financial services industry was with a Taiwanese partner or intermediary. Can the Minister make the City much more aware of the importance of that relationship and of the fact that, in anticipation of Brexit, taking this sort of supplicant position to a power such as China is not an appropriate way to build our future economy?

[Lord Ahmad of Wimbledon]

As someone who spent 20 years in the City of London, I never felt that it took supplicant positions. The City made some clear decisions based on its interests and it continues to do so. The role of government is to provide sound advice. I believe that we did so on this occasion and we will continue to do so in the future.

Sanctions and Anti-Money Laundering Bill [HL]

Baroness Kramer Excerpts

3rd reading (Hansard): House of Lords
Wednesday 24th January 2018 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I will speak exceedingly briefly because so much has been said. In fact, it has all been said, but it has not been said by me—and I refer of course to the thanks. I thank in particular the Minister, who took the view from the beginning that, if we worked together, we could improve the Bill. I appreciate so much that approach to this piece of legislation. It has been reflected in his Bill team, which, I may say, is made up of people of exceptional quality. They understood the issues we raised and recognised that we were not being either party political or pernickety but, rather, that our points touched on fundamental issues. They also understood that changes could be made to the Bill that would meet the requirements not only of the Government but also of those of us who thought that the way the Bill had been drafted achieved a transfer of power from Parliament to the Executive that was not appropriate—and I suspect in this case was probably not intended. Members of the Bill team also responded with very creative language rather than casually accepting our wording. They did not take what we provided and simply print it; they went back and looked closely at the issues, and came forward with very satisfactory language.

Like others in the House, I thank the noble and learned Lord, Lord Judge, and the noble Lord, Lord Pannick, for leading the charge on removing the powers for Ministers to create criminal offences—something that is so fundamental to our underlying constitution. I hope that the Minister has taken on board that there seems to have been a slip, so that consequentials have remained in the Bill when they should have slipped out. I hope that it will not be necessary for this House to have to deal with them. When the whole issue of criminal offences is considered in the Commons, I hope that it will be dealt with in the appropriate way and in the spirit in which the Bill has moved forward.

I have one last set of particular thanks. Obviously my noble friend Lady Northover will make formal thanks to everyone later, but a key player in all of this has been my great friend and colleague, my noble friend Lady Bowles. The attention that she has paid to the detail of the Bill, and her assiduity, have unlocked everyone’s thinking by demonstrating that you could use reasonable language and sensible approaches to shape the Bill into something better. It has been an exceptional example of the work that this House does in an extraordinary way. I know that my noble friend is relatively new to the House—although she is not new to politics or to Parliament—and I am grateful to her and I really appreciate the fact that the Minister has recognised the contribution that she has made.

[Lord Collins of Highbury (Lab)]

My Lords, I will save my thanks for later, when we consider the Motion that the Bill do pass. Before then, I want to echo the comments about how this Bill has proceeded in terms of the concerns of noble Lords which, of course, have turned on how we as a Parliament can constrain the Executive when they are seeking powers. Of course, this is the first Brexit Bill that the House has considered, and we heard earlier that we have another Bill on its way here. It is my intention to speak in the debate on Second Reading of that Bill to raise again our concerns about an Executive power grab, in particular when it concerns the important issue that the noble and learned Lord, Lord Judge, raised about powers to create criminal offences.

In one of those debates, the noble and learned Lord—of course, the noble Lord, Lord Pannick, also raised these issues—gave us a history lesson about Henry VIII. What struck me was when he said that not even Henry VIII had the nerve to take these powers. Not only have this Government had the nerve, but even when the House spoke overwhelmingly on this subject, we still have errors creeping into the Bill as it has been presented to us today. I hope that this is an error and that, when the Bill goes to the other place, we will not see an attempt to grab power back and that we will get this sorted out in accordance with the wishes of this House.

On the anti-money laundering provisions, as I said, this House, across the board, has done an excellent job of scrutiny, and I think the Minister has done an excellent job of listening to our concerns.

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We still have some work to do in this area. Nevertheless, in concluding my remarks I thank my noble friend very much for what he has done so far. The steps he has taken are in the right direction, but we still have some work to do on looking at government procurement and whether this issue covers local government procurement, as I am not sure we have got it all quite right yet.

[Baroness Kramer]

My Lords, I want to make a short intervention on this issue. Your Lordships will remember that the amendment, moved with great energy and skill by the noble Baroness, Lady Stern, to extend public registers to overseas territories—by order, if necessary—was defeated in this House by a narrow margin. It was notable in the speeches of those who stood up to support the government position that we should focus on central registers and that public registers would not be part of that agenda. Speaker after speaker—the majority—spoke against public registers of every kind. I noticed a lot of nodding on some Benches because the arguments were around the importance of privacy, non-intrusion and the protection of identity. Anyone listening to that debate would have assumed that this House was taking a stand against public registers. It is crucial that we see urgent action by the Government on this public register, which the noble Lords, Lord Faulks and Lord Hodgson, have so eloquently described as necessary to expose and, presumably, drive out the abuse of property and government contracts in the UK by those who see them as excellent mechanisms for laundering money obtained through corruption or other nefarious activity.

I hope the Government will understand that they need to defend public registers—I was somewhat stunned that the Minister did not do so in his response—and demonstrate to all of us that this is the mechanism that can deal with this problem. I hope that other locations will understand that and will take up the baton, but one of the best ways to make sure that happens is to demonstrate the change it can deliver for us in the UK.

[Lord Collins of Highbury]

I will be very brief. I congratulate the noble Lord, Lord Faulks, on pushing this issue. I do not think he owes anyone an apology for doing so because it is vital that we tackle this. This amendment is about the commitment that was made but has been delayed for a long time. My concern, and that of the noble Lord, Lord Hodgson, is that the wording of the amendment potentially takes us to 2022 before we see something. I think all noble Lords will be behind the noble Lord, Lord Faulks, in putting pressure on the Government to ensure that they properly meet their commitment.

Still on public registers, I agree with the noble Baroness, Lady Kramer. I am glad to see that the noble Baroness, Lady Stern, is in her place. She made a powerful case for public registers in overseas territories. The front page of today’s Guardian has an article about Appleby and FBME Bank, which was banned from the US financial system. Appleby is a Cayman Islands-registered holding company. Anyone who reads that article will know that this issue will not go away and we will have to come back to it.

Sanctions and Anti-Money Laundering Bill [HL]

Baroness Kramer Excerpts

Wednesday 17th January 2018 Lords Chamber

[Baroness Kramer (LD)]

My Lords, my name is also attached to this amendment. The case has been so clearly and emphatically made by the noble and learned Lord, Lord Judge, that I cannot see that there is anything that I have to say that could strengthen that argument. There are other arguments in favour of Amendment 71A, but they are frankly of second order. It is the constitutional issue, right at the heart of our constitution, that is the fundamental one that we have to consider today. I hope that the Minister takes that on board and responds accordingly.

I want to use this opportunity, because this amendment is part of a much larger group, to pay tribute to the Minister and the Bill team. On quite a number of the other amendments in this group—and my noble friend Lady Bowles may speak for a moment or two to them—the Minister and the Bill team have recognised that the issues in contention are those that concern all of us and there was a great deal of common ground. The Minister and the Bill team have listened—in fact, the Bill team have come many times and listened—and they have responded. I expect that by the end of the Minister’s comments on this grouping, we will feel that, with one exception, it is going to be possible to withdraw the amendments, because the response has been satisfactory and respectful on both sides. I attribute a lot of that to the real skill in the Bill team in understanding the core issues and finding ways in which to respond to them that meet the Government’s requirements, as well as the requirements of those scrutinising the issues. I thank noble Lords for this opportunity and hope very much that this House recognises the importance of Amendment 71A.

[Viscount Hailsham]

My Lords, I rise briefly to say that I found the observations of the noble and learned Lord extraordinarily persuasive. I have had a look at the regulations set out in Schedule 2 and, in particular, paragraphs 15 and 18 of that schedule, which make the point that the regulations create criminal offences and deal, too, with the defences that can be advanced as well as the evidentiary requirements. Furthermore, paragraph 18 makes the point that the regulations can impose custodial sentences of not in excess of two years. If we accept what the Government are asking us to accept, we would create powers that are very intrusive in criminal processes and impose custodial sentences—and we are being asked to do so by regulations, which are not amendable. I regard that as the chief vice of this process, because the resolution procedure is simply not amendable.

If we were being asked to contemplate an emergency situation, I might find these exceptional powers acceptable, but I do not think—for the reasons advanced by the noble and learned Lord—that we are dealing with emergency situations, because no such situations, or the likelihood of the same, have been identified. There is a raft of existing legislation that covers the kind of issues that are likely to arise.

I am personally always against giving delegated powers to Ministers whenever I can avoid doing so. There is a fundamental rule in politics that I have observed over nearly 40 years in Parliament, which is that, if you give powers to Ministers or officials, on occasion they will be abused. That is a fundamental rule of politics. Consequently, you give powers to Ministers and officials only where you must and, when you do, you ensure that there are as many safeguards as possible. I find the observations of the noble and learned Lord wholly persuasive. If he seeks the view of this House, he will have my support.

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[Lord Ahmad of Wimbledon]

What I have been saying in the examples I have quoted is that the use of the regulations is not something new.

[Baroness Kramer]

Perhaps the Minister could confirm that at present, the primary legislation takes place in Europe through the various processes of the European Parliament and Council. It is from those that the current regulation flows. The issue here is that in the future, there will be no mechanism for primary legislation to sit behind the regulation; it will be the regulation disembodied.

[Lord Ahmad of Wimbledon]

The noble Baroness has correctly pointed out that all this is to do with what we do after we leave the European Union, which I have sought to make clear to my noble and learned friend. We will set up the mechanism and put in place the provisions to allow the Government to address the issue of criminal offences. The Government’s proposal would be to continue on the same basis as we do now—through the use of regulatory powers. As I indicated earlier, this is not different. I have also stressed that this would be subject to the affirmative procedure, which would allow for debates in both Houses. We covered that area extensively both at Second Reading and in Committee.

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[Baroness Kramer]

My Lords, my name is added to the amendment and I am delighted that it is. However, I did not think that when I got up to speak I would need to make a vigorous defence of public registers, yet I find that I must because the objections that we have heard from so many around this House have been to public registers per se.

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[Lord Ahmad of Wimbledon]

My Lords, I am grateful to all noble Lords who have taken the time to contribute to this important debate. The amendment would require the Secretary of State to provide all reasonable assistance to the Governments of certain of the British Overseas Territories with significant financial centres to enable each of those named overseas territories to establish a public register of company beneficial ownership. It further provides that, if by 1 January 2020 such overseas territories have not established such a register, the UK Secretary of State should take all reasonable steps to ensure that the Privy Council legislates to require the overseas territory to do so.

I am again grateful to the noble Baroness, Lady Stern. We have had a constructive discussion where we laid out the differences over our approach. I do not object to the fact that we are all seeking—that is clear from all contributions today—to ensure fairness and transparency but also to do the right thing to ensure progress in this regard. I appreciate that the deadline set in this revised amendment for preparation of an Order in Council has been put back by one year compared with the amendment tabled by the noble Baroness and others in Committee. I previously addressed many of these points in Committee. But I hope that the House will bear with me if I reiterate certain key points.

I first want to inform noble Lords of the commitments that the territories have made to advance transparency in the company and tax fields. We heard the noble Baroness, Lady Kramer, talk about taking leadership, having that relationship and allowing the British Government to work with the overseas territories and that this amendment is the way to achieve that. But we are already doing it. The overseas territories are part of my responsibilities as a Minister. They are totally engaged on this agenda. With respect, the noble Baroness laid out a series of assertions on how money laundering and certain activities occur. Is it right that these six territories alone are singled out? Where is the evidence base? That is important, but so is the action that is being taken. We need to focus on that.

For example, the overseas territories with financial centres are leading the world. They are among the early adopters of the OECD common reporting standard. I say to the noble Lord, Lord Collins, that the overseas territories, working with the British Government, are taking the lead. There is an agreement under which they automatically exchange offshore financial account information with taxpayers’ jurisdictions of residence. They started exchanging information with third jurisdictions in September last year. I join many noble Lords in the Chamber in commending our previous Prime Minister, David Cameron, and the steps that he took. But the process that we are now following is exactly the same process that was agreed during the coalition years with the Liberal Democrats. Since September 2016—in other words, a year before the common reporting standard came into effect, so I say to the noble Lord, Lord Collins, that this is another example of taking the lead—HMRC has been receiving data on accounts held in the overseas territories by UK taxpayers and has used this to further its compliance work.

The issue of public registers is relevant here. None of this means that we do not want to see the overseas territories take further action to move forward on the transparency agenda. We should, however, acknowledge the significant steps that they have already taken in this area and build incrementally on that progress, in partnership and with support.

As noble Lords will acknowledge, the UK is at the forefront of promoting corporate transparency. The UK is the only G20 country to have fully established a public register of company beneficial ownership and we continue to push for this to become—in the words of the noble Lord—a global standard. As I noted in Committee, however, the international standards set by the Financial Action Task Force do not require this, reflecting a lack of international consensus in this area. I am grateful to noble Lords who contributed on this. These standards state:

“Countries should ensure that there is adequate, accurate and timely information on the beneficial ownership and control of legal persons that can be obtained or accessed in a timely fashion by competent authorities”—


for example, tax authorities and law enforcement authorities. The OTs are moving ahead on this agenda. Nevertheless, should public registers become the global standard, we would of course expect the overseas territories and Crown dependencies to meet this standard. The territories themselves have indicated their willingness to adopt a public register in that event.

I will highlight something important to this debate: namely, the progress that the overseas territories have already made on the beneficial ownership agenda in a relatively short time. Since we concluded our arrangements with them in the run-up to the Anti-Corruption Summit of 2016, the territories, which have their own legislative bodies and elected representatives, have passed new primary legislation and delivered technological improvements to comply with the terms of the arrangements known as the exchange of notes. I am grateful to my noble friends Lord Leigh and Lord Flight for highlighting the positive progress that the OTs have made in this respect. My noble friend Lord Naseby also pointed to the positive steps taken by Cayman.

Under these arrangements, each of the overseas territories with a significant financial centre committed to hold beneficial ownership information in a central register or a similarly effective system and to provide UK law enforcement authorities with automatic access to such information within 24 hours of a request being made—or within one hour in urgent cases. These arrangements, which have been put in place since 2016, are already bringing benefits to UK law enforcement. They mark a significant increase in the ability of UK law enforcement authorities to investigate bribery and corruption, money laundering and tax evasion. I am sorry that I do not share the opinion of the noble Baroness, Lady Kramer, that somehow these law authorities are very limited in scope. They make an incredible contribution.

[Baroness Kramer]

Perhaps I might ask the Minister a question. Does he not agree that one reason we have public registers in the UK is that law enforcement authorities here said that they could not successfully track down those crimes if they were not backed by public register arrangements? If we in the UK cannot be effective as law enforcers without public registers, how will we be effective as enforcers across the sea without public registers?

[Lord Ahmad of Wimbledon]

I have already said—and I repeat to the noble Baroness—that the OTs are already moving in this direction. I will put it very simply and in context. We have agreed legislation in both Chambers. We have passed it. We have had anti-corruption summits. We have asked OTs to step up to the mark. They are stepping up to the mark. They are taking the action required. Half way through the process, before we have even tested the very objectives that the noble Baroness has just outlined, we say to them, “Sorry, we’re changing the rules”. That to me is unacceptable.

Sanctions and Anti-Money Laundering Bill [HL]

Baroness Kramer Excerpts

Report stage (Hansard - continued): House of Lords
Monday 15th January 2018 Lords Chamber

[Lord Faulks (Con)]

My Lords, I was present in the Chamber and listened to the debate when this matter was debated in Committee, although the amendment has changed slightly. Since then, I have read and considered the arguments. At the time, I was persuaded that, on balance, the noble Lord, Lord Pannick, was right and the absence of such a power as is envisaged by the amendment was a real risk of injustice. However, I have changed my mind. It is, of course, fundamentally important that we respect our treaty obligations, particularly Article 103 of the UN charter. What higher obligation could there be?

The UN, in common with all international institutions, is not infallible. For example, we know that the European Court of Justice, which we must obey, and the European Court of Human Rights are not infallible. However, sometimes there is a need to subsume individual, national needs into the need for an overall, international understanding. It is vital that we respect the decisions on sanctions that have been made by the UN. As a permanent member of the Security Council, we can influence those. The Human Rights Council, to which my noble friend referred, can of course make mistakes, but it is undesirable that individual countries can pick and choose which sanctions they want to follow. I look forward with interest to hearing what the party opposite says about our relationship with the UN.

The Secretary of State can, and should, use his best endeavours in appropriate circumstances to try to influence matters, and can be told to do so by the court, but this goes further. Although the amendment has precursors to the exercise of the power, it does ultimately give the court the power to set aside the decision of the Minister. The noble Lord, Lord Pannick, says that this is a rule-of-law issue. It is indeed; it is a rule of international law and international comity, so I am afraid I cannot support the amendment.

[Baroness Kramer (LD)]

My Lords, I have no legal background, but I want to intervene quickly to pick up an issue which has been treated as almost in passing. I understand that the United Nations entirely accepts that the European Court of Justice can provide the kind of protection that the noble Lord, Lord Pannick, has described as being contained within the amendment. If I happen to be Russia, China or some country that wishes to abuse a correct designation by the United Nations, I have the European Union and the ECJ as my example of an entity that does take upon itself the right to provide protection where it believes the UN is in error. Allowing citizens of the United Kingdom to have that same protection adds no particular strength to any such position that might be taken by some other power. We have heard a deep commitment from the Government that exiting the European Union will not reduce the rights and protections that have been provided to British citizens through the mechanism of the ECJ. There can, therefore, be no challenge to the appropriateness of the measure which the noble Lord, Lord Pannick, has put before this House.

Sanctions and Anti-Money Laundering Bill [HL]

Baroness Kramer Excerpts

Committee: 4th sitting (Hansard): House of Lords
Tuesday 12th December 2017 Lords Chamber

[Baroness Kramer (LD)]

My Lords, perhaps I may just add a word on this occasion. I welcome the comments of the noble Lord, Lord Collins, and the speech of my noble friend Lady Bowles, but I would be far less concerned about trying to change the regulatory procedures we are considering today if we had in Clause 41 an appropriate policy framework under which regulations were to be placed—that is, the safeguards, the range of powers and the proper kind of scope that I think every noble Lord has considered normal in primary legislation. That layer is completely missing. The whole range of safeguards, including policy safeguards, rests with the Executive, while Parliament will have an opportunity to express itself only through its response to statutory instruments. If that were the end state at which we arrived then I think that anything other than provision for the super-affirmative procedure would be so undemocratic as to be offensive to this House.

I still think that the better solution is for the Government to accept that this is an area of genuine policy which requires genuine safeguards and genuine scope, and they should take on the responsibility of putting those safeguards in primary legislation. I do not understand why they have chosen not to do so. The reasons they have given are, first, that some things need to be done fast, though I think we have agreed across the House that it could be done through a carve-out; and, secondly, that there will need to be a transposition from EU law, although that too can be handled on a mere technical basis.

The issue is the absence of primary legislation as the framework for this process. There is no sunset clause on this provision; that is almost a side issue. The fact that the Government are seeking to manage this entire process without bringing crucial issues back to be dealt with by Parliament, in the proper and democratic way, troubles me hugely. I do not think we have heard any explanation from the Government as to why it is crucial to change the balance of power between Parliament and the Executive or why they are using this Bill as an instrument to do so.

[Lord McNally (LD)]

My Lords, there is always a temptation in these processes, as the noble and learned Lord, Lord Judge, said, to make the same speech over and over again, but perhaps this speech will suffice for the other issues we will cover today and in the course of this Bill and other Bills.

Of course one of the big worries about the process on which the Government are embarked is—as has been said before, and has just been remarked on—this movement of sovereignty from Parliament to the Executive. I think that this House is doing its job by being very aware of that, but there is another issue in the background to this. I welcome the publication of the anti-corruption strategy. It is keeping faith with a process that has gone on over the past number of years, with all three parties that have been in government, to try to get our house in order regarding our reputation in dealing with corruption, money laundering and associated crimes.

The truth is that we must not be complacent about this. The noble Lord, Lord Hain, was quite right: there is a taint about the behaviour of some in the City. There is a taint about some of the operations of overseas territories, which we will be looking at later. When I was the Minister responsible for the Crown dependencies, my one piece of advice to them was to make sure that they were as transparent as possible in meeting the highest national and international standards. One of the things that the Government and both Houses have to think about as we go through this process that the Government are embarked on is that there are still those who see our future as the buccaneers of world trade, and believe that London and the UK will become a haven for practices that we do not approve of.

That is why it is important that what we put in place during this period will be the base and foundation of our reputation. Those of us who want to see that reputation based on upholding the highest standards—and I fully accept that the Minister shares this—have to understand that each piece of legislation we put forward will be tested against the questions: what do they mean by this, are they going to slip from previous commitments, and are they going to be as tough as they were? Those are the tests that are going to be put to us. Both Houses, and this House in particular, will have to be on their guard to make sure that those highest standards are maintained.

--- Later in debate ---

[Baroness Bowles of Berkhamsted]

My Lords, Amendment 77, which is in my name and that of my noble friend Lady Kramer, takes your Lordships again to the issues of the Ahmed case. The amendment would delete the first three subsections of Clause 47, which repeal the Terrorist Asset-Freezing etc Act 2010, so would stop that Act being revoked. We do not agree with the repeal of that Act and its replacement by a general power to do anything, which is what the Bill does.

There have already been significant contributions from noble Lords, and especially noble and learned Lords, in respect of powers in Clauses 10, 11, 16 and 32 which reach into the same issues. If anything, the amendments proposed already have not gone far enough. The rights of appeal as well as review that are contained in the Terrorist Asset-Freezing etc Act 2010 should not be dispensed with.

The Supreme Court struck down the Treasury’s previous regime as an oppressive one that had devastating effects on families, which led to the 2010 Act. It looks like the Government are giving themselves power to do that again. We come back to worthy intentions, but the safeguards must be there. Under the current law, the court hears appeals against designation decisions, not just reviews. That should be maintained.

This amendment revisits issues debated at the time of the 2010 Act, such as who decides questions of fact and the scope of error allowed to the administrative decision-maker. There will be noble and learned Lords who have a better grasp of the issues than me, and as I mentioned, we have already been around that loop in previous debates on other clauses. However, to me, it is a question of principle: to seek to increase power and simultaneously reduce defences is not acceptable, all the more so when there is no relevant change in circumstances or threats brought about by Brexit. It is no excuse to ravage what have previously been just defences. I beg to move.

[Baroness Kramer]

My Lords, I will speak briefly. I am no expert on the relevant legislation that is being repealed under this clause, but I have spoken to those who are, and the response I have had is one of shock. Legislation that went through both Houses of Parliament, with great care, debate, consideration and amendment, is now being swept away, to be replaced by a regulatory power, which, again, is not bounded in any way. It could be identical or it could be completely different, but it is not discussed or laid out anywhere in this legislation.

In the past we have talked primarily of powers that have come through a democratic process in Brussels: through the European Parliament’s scrutiny, consultation and voting processes, and through votes of the Council. In this case, we are talking about sweeping away, to be replaced by regulation, significant legislation that came through this Parliament in a democratic process. I do not understand, nor have I heard any explanation, why the Government are choosing to take this route.

[Lord Ahmad of Wimbledon]

My Lords, I draw noble Lords’ attention to the White Paper that preceded the Bill, in which we noted that the terrorist threat has evolved since the enactment in 2010 of the Terrorist Asset-Freezing etc Act—TAFA—which the noble Baroness, Lady Kramer, just referred to. We need to ensure that UK counterterrorist sanctions powers remain a useful tool for law enforcement and intelligence agencies. We therefore propose to use the Bill to establish a common approach to designations under counter- terrorism and country sanctions regimes, including the asset-freezing powers set out in Clause 2.

--- Later in debate ---

[Baroness Northover]

My Lords, I support the amendment. As the noble Lord, Lord Collins, indicated, we have heard enough during the debate on the Bill to know that much needs to change in it. The noble Lord proposes a sunset clause for the Bill—in that way it will not be on the statute books in perpetuity—and I like the notion that it breathes its last in five years and simply expires.

Meanwhile, the Government can work out their relationship with the EU—and where, in the light of that, legislation is required—and develop appropriate primary legislation both on the UK’s sanctions regime and anti-money laundering measures, which can be properly scrutinised in Parliament.

I note that the noble Lord, Lord Collins, said, “in the event that we leave the EU”. There is indeed a question mark about this and what our relationship with the EU will be if we do. So it is no wonder that drafting the Bill was a difficult challenge.

A sunset clause is a useful backstop. However, as the noble Lord, Lord Collins, and others made clear, it still leaves in place a flawed Bill that we will need to address further on Report.

[Baroness Kramer]

My Lords, it is the responsibility of this House and the other place to ensure that any legislation that leaves our hands is properly drafted, with the necessary clauses and relevant safeguards and instructions. That is our responsibility. I look at sunset clauses as an absolute last resort. They can be appropriate where legislation is, by definition, short term and deals with an event that will disappear. However, neither sanctions nor money laundering fall into that category. Therefore, although I believe we are talking about “when” not “if” we will withdraw from the EU, I would hate to see that become the rationale for legislation that we do not feel is as good as it could be in delivering the purposes of the two Houses.

I support the amendment as a backstop. However, in a sense, it is incredibly sad that we are having to contemplate such a clause because the Bill itself is so inherently flawed. The House will know from the many comments I have made that I think that there are many flaws in it. However, the most fundamental is that, through a back door, in effect—the Bill does not state this and nor have Ministers been willing to state it—it shifts significantly the balance of power between Parliament and the Executive. We have generations of history in battling to prevent that change—whether through front doors or back doors—and I hope that the Bill can be amended on Report or at Third Reading so that it no longer engineers that shift in power and will not still be an example of a Bill that requires a sunset clause because it is so inherently inappropriate.

[Lord Judge]

I am going to say much the same as the noble Baroness. I am ever an optimist about this. I think that when the Minister has had time to reflect on the wisdom of some of the amendments that have been proposed that will eradicate some of the less desirable features of this Bill, and make it a much better Act in consequence, we will not need a sunset clause. Oh dear—I have reflected that I may be being optimistic, but I think that I am also being utterly naïve.

I shall not support the amendment at this stage—but if when we come the next stage we have had no improvements in the Bill, then I shall.