The Sanctions and Anti-Money Laundering Bill (“the Bill”) received its second reading in the House of Commons on 20 February 2018. (See our related blog)
The Bill has been introduced to address the fact that, following Brexit, the UK could face being in breach of its international obligations if it does not have in place powers to impose sanctions. At present, many of the UK’s powers to impose sanctions are derived via the European Communities Act 1972 (ECA), which will be repealed in March 2019.
If enacted, the Bill will give the UK the power to make sanctions in order to comply with UN and other international obligations, for various purposes including the prevention of terrorism or in the interests of international peace and security.
The Bill has already passed through and been amended by the House of Lords, and is now making its way through the Commons. (See our related blog)
The reading raised two main proposals for amendment of the Bill, and raised other issues for further discussion, as follows:
- Several MPs noted that the Bill does not incorporate Magnitsky clauses, the new power that enables the NCA to seize property obtained through gross human rights abuses, and in this case would enable sanctions to be made in order to prevent or respond to gross human rights violations (see our related blog). Boris Johnson argued that the Bill already makes clear at section 1(2) that sanctions may be imposed to promote compliance with international humanitarian and human rights abuses, that sanctions could be imposed to promote human rights, but not all members agreed that the Bill goes far enough. An amendment has therefore been proposed to make clear at s1(2) that sanctions may be imposed if the purpose would provide “further accountability for, or act as a deterrent to, the commission of a gross human rights abuse or violation”, with the definition of “gross human rights abuse or violation” being specifically defined.
- An amendment was also moved to enable sanctions to be enforced by criminal proceedings. It is proposed that regulations may create criminal offences for the purposes of enforcement. The maximum penalty that it is proposed can be made by regulation is 10 years’ imprisonment for conviction on indictment.
- A key proposal under discussion was the way in which the Bill will operate in British Overseas Territories. Dame Margaret Hodge argued that while the UK claims to be at the forefront of the global fight against corruption, by failing to require our overseas territories to publish registers of beneficial ownership of companies, we are complicit in allowing money to be hidden there, as seen in the recent Panama and Paradise papers exposés. She therefore proposed a cross-party amendment “setting a clear and reasonable timeframe within which the overseas territories would be required to prepare and launch public registers of beneficial ownership.” This would go further than the Bill as currently drafted, which merely requires the Secretary of State to report on the progress made towards putting in a place such a register, at 12 month intervals after the coming into force of the Bill (s44).
In support of this amendment it was noted by several members that companies in overseas territories such as the British Virgin Islands have been known to be used to help countries evade sanctions. Reference was also made to the fact that there remain problems on the UK mainland. Despite new rules requiring UK companies to disclose details of natural persons with significant control, many companies have been able to avoid providing these details without penalty, as there is no good mechanism for enforcement. It was also noted that the UK property market is a haven for dirty money (see my blog on Unexplained Wealth Orders).
- Sanctions regimes are notorious for making the work of NGOs problematic, as they can find it difficult to operate in countries where banks refuse to send funds for fear of breaching sanctions. The Bill therefore provides at section 15 that regulations may create exceptions to any prohibitions imposed, or to provide that prohibitions do not apply where appropriate licences are provided. However, some members suggested that more could still be done and called for a licensing system for financial transactions which are “essential to the delivery of critical aid” in sanctioned areas.