Global Anti-Corruption Sanctions Regulations 2021 - Motion to Approve

– in the House of Lords at 2:25 pm on 26 May 2021.

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Lord Parkinson of Whitley Bay:

Moved by Lord Parkinson of Whitley Bay

That the draft Regulations laid before the House on 26 April be approved.

Photo of Lord Parkinson of Whitley Bay Lord Parkinson of Whitley Bay Lord in Waiting (HM Household) (Whip)

My Lords, as noble Lords will be aware, on 26 April Her Majesty’s Government laid these regulations under the powers provided by the Sanctions and Anti-Money Laundering Act 2018. These regulations were made on 23 April.

As has been noted many times in your Lordships’ House, corruption is one of the key drivers undermining human rights, democracy, development and the rule of law around the world. It undermines global trade and prosperity. The World Economic Forum estimates that corruption increases the cost of doing business for individual companies by as much as 10%, distorting markets and deterring trade and investment. Corruption also undermines our national security, by exacerbating conflict and facilitating serious and organised crime. This new sanctions regime is a significant step forward for the UK’s global leadership in combating corruption around the world.

The instrument before the House will enable us to prevent and combat serious corruption around the world by imposing asset freezes and travel bans on individuals and organisations involved. The scope of the regime is deliberately targeted to combat corruption around the world, and to prevent corrupt actors and their enablers using the UK as a haven for dirty money. Its scope also draws on the corrupt practices that almost all countries in the world have agreed to combat through the UN Convention against Corruption.

As set out in the regulations, the activities which come into the scope of the regime are bribery and misappropriation. The regulations define bribery as both the giving of a financial or other advantage to a foreign public official and the receipt by a foreign public official of a financial or other advantage. They define misappropriation of property as improper diversion by foreign public officials of property entrusted to them in their official role, for their own benefit or that of a third person. Property can include anything of value, including contracts, licences or concessions.

The regulations also enable us to target those involved in corrupt acts in other ways, such as those who facilitate, profit from, conceal, transfer or launder the proceeds of serious corruption and those who obstruct justice relating to serious corruption. As my right honourable friend the Foreign Secretary noted in his April Statement:

“whatever the particular circumstances, at the heart of this lies the same debilitating cycle of behaviour: corrupt officials ripping off their own people”.—[Official Report, Commons, 26/4/21; col. 58.]

These sanctions send a clear message to those involved in serious corruption around the world: that the UK will not tolerate them, or the proceeds of their corruption, coming into our country.

In the interests of clarity and transparency we have published a policy note which sets out how we will consider designations under these regulations, as well as an information note designed to help NGOs engage with the sanctions regime. As required by the sanctions Act, we have also published two statutory reports: one under Section 2 of that Act about the purposes of the regulations, and another under Section 18 setting out the criminal offences created by them. As with all UK sanctions, we adhere to rigorous due process and protections so that the rights of others are respected. This means that those designated under the sanctions regime will be able to request that a Minister reviews the decision and can subsequently apply to challenge that decision in UK courts.

As noble Lords will be aware, the Government made immediate use of this new tool and announced sanctions last month on 22 individuals from six countries who have been involved in serious corruption. These names are published online on the UK’s sanctions list for these regulations. Each designation is underpinned by evidence and meets the tests set out in the sanctions Act and the regulations.

The designations include 14 individuals involved in the diversion of $230 million of Russian state property through a fraudulent tax refund scheme, uncovered by Sergei Magnitsky—one of the largest tax frauds in recent Russian history. We imposed sanctions on Ajay, Atul and Rajesh Gupta, and their associate Salim Essa, who were at the heart of a long-running process of corruption in South Africa which caused significant damage to the economy of that country. We also designated the Sudanese businessman Ashraf Said Ahmed Hussein Ali, widely known as al-Cardinal, for his involvement in the misappropriation of significant amounts of state assets in South Sudan, one of the poorest countries in the world. His actions, in collusion with South Sudanese elites, have contributed to ongoing instability and conflict. Finally, we announced sanctions on several individuals involved in serious corruption in Latin America, including people who had facilitated bribes to support a major drug-trafficking organisation and others who had misappropriated funds which led to citizens being deprived of vital resources for development. This is just the first tranche of designations. Given the sensitivities involved, however, I cannot speculate on whom we may target in future.

All targeted sanctions are most effective when backed by co-ordinated, collective action. The steps that we have taken to expand our sanctions framework, to cover corruption as well as human rights, give us similar powers to the Magnitsky frameworks of the United States of America and Canada. This will enable even closer co-operation and co-ordination with our like-minded friends and partners to combat and prevent corruption and its corrosive effects.

I welcome this opportunity to hear the views of noble Lords on these regulations. I beg to move.

Photo of Lord Anderson of Swansea Lord Anderson of Swansea Labour 2:31, 26 May 2021

My Lords, I thank the Minister for his very clear explanation of what is a highly complex matter. In the past, I criticised what appeared to be a long delay between the passing of the 2018 Act and the regulations in respect of human rights. When I saw those regulations and the extreme care and complexity, I fully understood the delay, and I congratulate the parliamentary draftsmen on their work on those regulations and on these ones.

The final page of the document accompanying the regulations boldly states:

“The Regulations will have strong cross-party support in principle”— and, I add, in practice. This was clear from the principal Act, the Sanctions and Anti-Money Laundering Act 2018 —SAMLA—and the Global Human Rights Sanctions Regulations 2020, which were debated in your Lordships’ House on 29 July 2020.

This was pressed by a very much cross-party coalition in the other place: Andrew Mitchell and Margaret Hodge, who were joined by a then Back-Bencher called Dominic Raab, who has not lost his zeal in this respect—I congratulate him on this. In your Lordships’ House, my noble friend Lord Collins has been extremely active in this respect, and the noble Baroness, Lady Northover, who regrets that she cannot be here on this occasion, has helped to lead the campaign.

The mischief is very clear: the poisoning of the well of good governance, and indeed corporate governance, by corruption. The report under the terms of the Act puts it this way:

“Corruption undermines democracy, human rights and the rule of law. It undermines good governance and the functioning of public institutions and international organisations, as well as trust in their integrity.”

Of course, there is a nexus between these regulations and the human rights regulations that we debated in July last year. This is easily shown by looking at the history of Sergei Magnitsky: there were those who were responsible for his torture and murder in that Russian prison who had been dealt with by the human rights regulations, and there were the tax officials in Russia who were responsible for misappropriating the funds of the organisation that employed him.

I congratulate Bill Browder and his team on the work that they have done in this respect in honouring the memory of Sergei Magnitsky—and the number of countries that have adopted similar measures since. I had the privilege of watching the Browder team in action; tracing the trail of the corruption in that respect was an enormously complex matter.

Many of the questions that were raised in the debate in July apply, mutatis mutandis—perhaps we are not allowed to say that nowadays—or in similar measure, to today’s debate. First, what is the definition of “serious corruption”? Will guidance be issued by the Government? For example, does it refer to the amount involved or the eminence of the individual who is responsible for them to be a designated person?

Obviously, the sanctions are more powerful in their effect if they are adopted by several countries: then, the regulations act as a protective shield for the one country that may be targeted by Russia or whoever in that way. The Minister has already said that there are similar regulations in the USA and Canada. I understand that there are not yet similar regulations in the European Union. Perhaps he can indicate what progress, if any, has been made in that respect.

I was disappointed that the newly appointed European prosecutor is supported by only 22 of the 27 EU members, when the €800 billion recovery fund must give very much opportunity for corruption. What is the degree of international support for similar measures? Will we in the UK be spreading the word, seeking to proselytise other countries in this respect, giving advice and assistance?

There are also questions relating to evidence: there must be a problem of obtaining evidence sufficient to support a designation in these cases. Presumably, this will involve the criminal standard of proof. Which international organisations and NGOs will be relied upon for evidence? There are to be only two new employees in the FCDO; a very much wider information diaspora is needed to give the information. It is so easy to point the finger at someone, but it is less easy to provide sufficient and objective evidence.

Lastly, there is the question of due process, which was touched upon by the Minister—namely, how to safeguard the integrity of the process. Presumably, the safeguard provisions are included in SAMLA, the principal act of 2018.

This is a major scourge: the Panama papers, for example, illustrate the extent of the problem, as does Misha Glenny’s work. Progress has been made—I can see it in the overseas territories. I noticed what was said about the British Virgin Islands, which did rather well out of their secrecy in the past; they have been leaned upon to act more responsibly.

To conclude, I welcome the Government’s follow-up to SAMLA, the 2018 principal act. I hope that they will now go out and encourage other Governments to follow this precedent and provide, perhaps with the USA and Canada, advice and assistance to those Governments, where necessary.

Photo of Lord Garnier Lord Garnier Conservative 2:39, 26 May 2021

My Lords, I begin by declaring an interest in that some of the casework I do in my private practice at the Bar involves acting for the Serious Fraud Office, which deals with cases involving complex financial crime, not least corruption. From time to time I have also advised others who may have thought about behaving corruptly or have been accused of it.

I have a small procedural point on these regulations, which, as my noble friend clearly and carefully explained at the outset of our debate, came into force just a month or so ago. Is there some magic in that they came into force before this House had an opportunity to discuss them? I fully accept that politically and in practical terms they are wholly uncontroversial, but I wonder whether there is some magic in our receiving them a month after the other place, or whether that is just one of those things.

These sanctions are designed to capture individuals or entities profiting from bribery or misappropriation of state funds from any country outside the United Kingdom, as well as colluding with terrorists and drug traffickers. Those who are caught by these sanctions will be prevented from entering the United Kingdom, opening bank accounts here or doing business with any United Kingdom businesses. Any assets they hold in this country are also frozen.

My noble friend mentioned the 22 designations that have already been made. They are very welcome in themselves but also because, as the noble Lord, Lord Anderson of Swansea, indicated—perhaps my noble friend the Minister did as well—they create a form of alignment and demonstrate that our sanctions regime, underpinned by the 2018 Act, is moving closer to those of the United States and Canadian, which, I think it is fair to say, are a great deal more effective than what we used to have in this country. This shift of approach is to be welcomed, and I hope that the European Union as an institution and its nation states will look carefully at what is being done in this country and in the United States and Canada to see whether there is room for closer alignment between their regimes and what is now in force here.

One benefit is that, unlike most United Kingdom sanctions regulations, which target specific countries or individuals within specific countries, this set of regulations, along with the human rights sanctions that came into force in 2020, focuses on individuals and entities who impact the economy of a country through corrupt practices. As the noble Lord, Lord Anderson, said, this mirrors the approach taken by the American global Magnitsky programme. It is hardly surprising that most, if not all, of the 22 individuals caught by the new announcement on 23 April are already impacted by the American Magnitsky programme.

The noble Lord, Lord Anderson, also mentioned serious corruption. I hope it is not too tedious or lawyerly a point, but Regulation 4(1) says:

“The purposes of the regulations contained in this instrument are to prevent and combat serious corruption.”

So far, so good. Regulation 4(2) then defines corruption as

“bribery; or … misappropriation of property”,

but it does not seek to define “serious corruption” and how it differs, if at all, from any other sort of corruption. All sorts of rather silly jokes were made about serious organised crime and why it had to be “serious”. What was wrong with simply talking about organised crime?

Corruption clearly has a terrible effect, particularly on third-world economies; my noble friend the Minister mentioned this in his opening remarks. It also impacts the cost of doing business for our own businesses within this economy, so I hope I am not making a facile or light point. I think that greater clarity needs to be provided by the Government in relation to the expression “serious corruption”, which is used quite a lot throughout the regulations. Of course corruption is defined, but I wonder whether there is any particular magic, as far as the policy behind these regulations is concerned, in the use of the adjective “serious”.

Finally, I will touch on the Office of Financial Sanctions Implementation. This body will be needed, and is needed, to reinforce or underpin the sanctions that these regulations describe. But in the last four years, the Office of Financial Sanctions Implementation has handed down civil penalties on just four occasions, only two of which exceeded £10,000 in value. I do not know the facts of those cases, but we want to be taken seriously, both in this country and internationally, and to create a regime that deters kleptocrats and international corruption, be it serious or otherwise, and certainly the sort of serious corruption that adversely affects particularly the economies of poor countries. South Sudan was one of the examples; I am not sure about the economies of the South American states that were covered by the examples. If these regulations are to have a deterrent effect on the leaders of Belarus or other kleptocracies, for example, we need to be sure that these new sanctions will be properly underpinned by action by the Office of Financial Sanctions Implementation and that this body is given the teeth, or uses the teeth it has, to enforce our anti-corruption policies. I hope my noble friend the Minister can reassure us of that today.

As I say, these are wholly uncontroversial regulations. I see that I have gone well over my allotted time, for which I apologise. With these few brief remarks, even if they were longer than they should have been, I hope that my noble friend will be encouraged by the support he has and is able to provide us with a few brief explanations at the end of the debate.

Photo of Baroness Wheatcroft Baroness Wheatcroft Crossbench 2:47, 26 May 2021

My Lords, it is a pleasure to follow the noble and learned Lord, Lord Garnier, who brings his lawyerly expertise to the issue. Like him, I welcome these regulations, which are already being put to use.

Outside the EU, the UK needs its own regime to deal with corruption on the global stage, and we are getting there. Being able to freeze the assets of guilty parties and prevent them travelling to the UK has the capacity to inflict real pain on those guilty of corruption. We know that those who amass fortunes from corrupt behaviour enjoy displaying their wealth via lavish London homes, expensive public school educations for their offspring and the best private health treatment when required. Preventing them having access to that will cause genuine pain.

The instrument covers people deemed to be involved in the most harmful types of corruption. I applaud the intention but have a couple of specific questions, apart from the one raised already about the definition of serious corruption. For instance, I wonder whether the Minister can help me with Regulation 6(2)(d), which says that those covered by the regulations include a person who is

“a member of, or associated with, a person who is or has been … involved” in serious corruption. The term “associated with” is very loose. Is there a clearer definition that could be applied?

Similarly, in Regulation 6(3)(c), a person is deemed to be

“involved in serious corruption if … the person profits financially or obtains any other benefit from serious corruption”.

I can envisage scenarios in which somebody benefits without being aware of the corruption involved in bringing that financial benefit to them. Can we not be a little more specific?

Otherwise, I welcome these regulations. There was an impassioned debate in this House following the death of Sergei Magnitsky in a Russian jail. As others have commented, he had been uncovering a massive financial fraud in his capacity as a lawyer for Bill Browder. After his death the US instituted the Magnitsky law, and I am delighted that the UK has moved to implement similar legislation. As the Minister pointed out, the anti-corruption regulations have already been used against 14 Russians implicated in the $230 million fraud that Magnitsky uncovered.

Corruption and human rights abuses often go hand in hand. The UK’s global human rights sanctions of last year are already being used against around 80 individuals and entities, including four Chinese officials and one Chinese state-run entity for the appalling abuse now taking place in Xinjiang province. These are the first sanctions that the UK has imposed on China since 1989; they should not be the last.

The regulations that we are debating today are designed to penalise those guilty of corruption. Of course, those people are well schooled in money laundering, but I wonder whether we are doing enough to combat money laundering in the UK. In 2018, the National Crime Agency estimated that more than £100 billion a year in illicit funds made its way through the UK every year. Are we doing enough to catch that or to penalise those involved in the process?

The noble and learned Lord, Lord Garnier, pointed out that the Office of Financial Sanctions Implementation was established in 2016, and yet, up to February last year, it had levied only four fines, three of which were miniscule. The fourth fine was a whopping £20 million-plus against Standard Chartered for violation of EU sanctions rules involving a Russian bank. That sum is enough to make even one of our big banks think hard about their practices and maybe examine them more closely. I do not believe that the crooks have stopped trying to launder their funds, so I wonder whether the Minister can tell the House whether the Office of Financial Sanctions Implementation has been a bit more active in the last year. The war against corruption has to be pursued with vigour. Could we do more to combat it?

Photo of Lord Rooker Lord Rooker Labour 2:52, 26 May 2021

My Lords, I want to be crystal clear: Dominic Raab deserves considerable praise for his actions leading to this statutory instrument, and I have no problems with it at all. Unlike his two predecessor Foreign Secretaries, he actually understood the process and the need for the Magnitsky sanctions, having been a leading MP in the Commons campaigning to get Bill Browder’s suggestions on to the statute book. Indeed, I was present when he received a reward for this work from my noble friend Lady Kennedy of The Shaws.

Bill Browder, a one-man human rights sanctions corporation, has now secured such sanctions around the world; hardly a month goes by without some new country adopting them. As he said earlier today, in an interview on the BBC’s “Today” programme, the need is to go after the officials and oligarchs via their money; it is much more effective than sanctioning a country and its people. I am in total support of this view and this statutory instrument.

There was no problem in finding out about this instrument, by the way, if you googled it. The legal brief from the legal companies in London—experts in this area, on both sides, I regret to say—was majestic in its numbers.

I want to raise one issue that Nick Cohen raised in the Observer on 9 May, in his column. I will not go over it all—it is just one paragraph on the use of London courts by foreign perpetrators campaigning against investigative journalists. He wrote:

“One official, Pavel Karpov, sued Browder for libel in London. Browder won, but Karpov stayed in Moscow and refused to pay Browder’s costs of £600,000. In other words, Russia, an actively hostile foreign power, appeared able to use the English legal system to impose the punishment of a huge fine on one of its most effective critics.”

Furthermore, at the end of his column, he makes the point that the Foreign Policy Centre has described the UK as

“‘the most frequent country of origin’ for foreign legal threats against investigative journalists.”

I give notice that I intend to raise this in an Oral Question on 14 June, so I will not go any further now.

I have a couple of detailed questions about the regulations. Can we be assured that the National Crime Agency has been given the necessary resources, at least in line with the paragraph in the de minimis form, which as I understand it was almost a doubling of the existing funds of almost £300,000 and 4.5 full-time staff up to nearly £500,000 and eight full-time staff? This is expensive, but it has to work, and without resources it will not.

Finally, can I ask for an assurance that the sanctions and regulations cover the UK as a whole? I would like to be certain that it is UK-wide and covers UK people involved in efforts that we would want to sanction in UK waters around the islands—and that the extent of it goes offshore slightly. I want an assurance that there is full co-operation with the Scottish Government, given the different legal arrangements in Scotland. As I say, these are UK-wide; it is a reserved matter, but clearly to be operationally successful they must have the support of the UK Government. Can I have an assurance that that is forthcoming?

Photo of Baroness Altmann Baroness Altmann Conservative 2:56, 26 May 2021

My Lords, it is a pleasure to follow the noble Lord, Lord Rooker, and I echo his support for these measures. I thank my noble friend for his clear explanation of this instrument, and congratulate the Government on this new sanctions regime, specifically targeting corruption. The way in which the measures will enhance the UK’s standing in the community of global democracies is most welcome. They complement the UK’s global human rights sanctions regime and our 2020 regulations, as has already been noted, and the UK will be able to take a targeted approach to combating serious corruption.

Will my noble friend join with me in echoing the words of so many other noble Lords in congratulating Bill Browder on his tireless and fearless determination to pursue justice for his lawyer and friend, Sergei Magnitsky, and to fight corruption around the world? This will result in 14 Russian individuals, allegedly involved in a major fraudulent tax scheme involving Russian state property, which was discovered by Mr Magnitsky, having sanctions imposed on them but giving them potentially the chance to defend themselves. Does my noble friend agree that Bill Browder deserves the highest national honour? His single-handed work has been an inspiration for many campaigning for an improvement in human rights and against global corruption.

I am delighted to see that the regulations are drawn widely to capture many types of corrupt behaviour, which is such a risk to individuals around the world—and, of course, in this country. The serious corruption that should be captured by this legislation includes bribery and misappropriation of assets where there are good grounds for suspicion. I would echo the questions asked of my noble friend as to whether any of this could be amplified somewhat, not least as my noble and learned friend Lord Garnier requested.

It is possible with this legislation to impose asset freezes on entities, but also travel bans and asset freezes on individuals, which can be so much more powerful in deterring this type of activity. This includes both direct and indirect involvement, which again I am delighted to see, because those who facilitate, support, conceal, disguise or fail to prosecute perpetrators, or who interfere with law enforcement, would appear to be covered. So, this covers not just those who profit or benefit from serious corruption. The harm caused by corruption, often to innocent citizens, deprives them of resources and, potentially, the right to a better life that could otherwise be enjoyed. This is profound.

I am also delighted that these measures follow the US Biden Government’s use of Executive Order 13818 and the Global Magnitsky Human Rights Accountability Act, with its global sanctions programme. I congratulate the Government too on the fact that US Treasury Secretary Janet Yellen warmly welcomed our new regime, which complements the US regime and Canada’s Justice for Victims of Corrupt Foreign Officials Act. This, again, should enhance our global standing.

I welcome these measures, but I have a couple of questions for my noble friend. Given that the April policy paper identifies some of the factors to be considered under these regulations, and that serious corruption will be assessed, perhaps, by the scale, nature and impact of the corruption, its sophistication and the risks of reprisals or harm to civil society, organisations, whistleblowers, human rights defenders and journalists, can my noble friend provide any further clarification, as requested by my noble and learned friend Lord Garnier and my noble friend Lady Wheatcroft? Is there a monetary amount or type of fraud, or does it depend on international co-operation? Are any more designations for serious corruption expected to follow soon, or plans for further sanctions in the near term? Finally, can my noble friend detail any further plans for widening collective international action and the UK co-operating globally on this matter?

Photo of Lord Sikka Lord Sikka Labour 3:02, 26 May 2021

My Lords, it is a great pleasure to follow the noble Baroness, Lady Altmann. I have three broad questions for the Minister.

As previous speakers have pointed out, the SI does not define “serious corruption”, although I suspect the term is likely to be interpreted by the seven categories specified in the Government’s paper, Global Anti-corruption Sanctions: Consideration of Designations, published on 26 April 2021. One of these states that serious corruption is something that

“undermines a country’s democratic governance, the rule of law and human rights”.

I mention this because the Government have themselves colluded to protect organisations engaged in criminal conduct. During the passage of the Financial Services Act, I provided an example relating to HSBC which, by its own admission, was engaged in “criminal conduct” in the US. The Bank of England, the financial regulator and the then Chancellor secretly intervened and urged the US authorities to go easy on HSBC. This was done without any statement to Parliament, then or subsequently. I cannot see anything in the SI that will check this kind of corruption and its threat to democratic governance and the rule of law. Can the Minister say whether UK Ministers covering up corrupt practices are subject to this legislation?

Secondly, I am concerned about the poor enforcement already referred to by some previous speakers. The Financial Conduct Authority has yet to secure a criminal conviction. The SFO continues to flounder, and there have been no corporate prosecutions under the Criminal Finances Act 2017. Under the Bribery Act 2010, the Crown Prosecution Service secured one corporate conviction. The SFO has secured just one conviction under that Act and six deferred prosecution agreements. The future prospects of law enforcement in this area are also poor. The City of London Police has now received £1.5 million from Lloyds Bank for combating economic crime. This does not inspire any confidence in the police’s independence.

Numerous government and NGO reports have shown that accountants, lawyers, bankers and other professionals profit from corrupt practices, including money laundering, yet 22 of the 25 anti-money laundering regulators are accountancy, law and other trade associations. The director of the Office for Professional Body Anti Money Laundering Supervision, OPBAS, has publicly said that

“the accountancy sector and many smaller professional bodies focus more on representing their members rather than robustly supervising standards. … they believe that their memberships will walk if they come under scrutiny.”

This reliance on multiple regulators and trade associations is not helpful at all. I see no clarity in the SI on enforcement or independence of regulators. Who will be enforcing this SI and prosecuting: the FCA, the Serious Fraud Office, the Crown Prosecution Service, the National Crime Agency, the police, the Office of Financial Sanctions Implementation, the Foreign Commonwealth and Development Office, or somebody else? How will all these organisations, working to different standards and benchmarks, be co-ordinated and resourced? I hope the Minister can provide some answers.

The regulations are also being introduced without reform of company formation. Anyone from any part of the world can register a company in the UK without any authentication of their identity. Numerous UK- registered companies have fronted bribery, corruption, money laundering and other crimes, and the beneficiaries continue to escape retribution. No checks are made, even when the identity of the criminals is known. A well-known convicted Mafia criminal was once a director of a company called Magnolia Fundaction UK Ltd. Its filings at Companies House show that the name of one of its officers, when translated from Italian into English, was “The Chicken Thief”. The occupation given was “fraudster”, and the address given was “Street of the 40 Thieves in the town of Ali Baba”. Companies House routinely accepted all such returns.

On 14 September 2017, in response to a Written Question from Kelvin Hopkins MP, the Business Secretary answered:

“No action has been taken at this time against the promoters and officers of Magnolia Fundaction UK Ltd for filing inappropriate information in Italian at Companies House.”

In May 2018, I discovered that the same criminal was also a director of Business Bank Italy Ltd, which had a website inviting people to invest. A quick scrutiny of the accounts showed that the whole thing was a sham and a fraud. The matter was raised in the House of Commons by Anneliese Dodds MP. The company was dissolved only in August 2019. The Government’s consultation paper, Corporate Transparency and Register Reform: Powers of the Registrar, does not tackle any of these problems. I very much hope that the Minister will make a statement on this deficiency and how it may obstruct the fight against global corruption.

Photo of Baroness Jones of Moulsecoomb Baroness Jones of Moulsecoomb Green 3:09, 26 May 2021

My Lords, I was going to stand up and say I was going to take a slightly different tack from the presentations other noble Lords had given, but in fact the noble Lord, Lord Sikka, has completely upstaged what I was going to say and I very much look forward to the Government’s response to what he said; I am sure it will take quite a few letters to clear all that up.

I am particularly concerned that we as a nation are pontificating about global corruption when it is clear we have inherent local corruption. When I say “local”, I mean “national”. In a sense, it is brilliant timing, with the evidence Dominic Cummings has been giving today. I have not heard all of it, and it does seem that he is talking more about incompetence than corruption—but we can look at that after this debate. So this does seem a strange piece of legislation to be coming through this House while details are still being released about the Government’s VIP-lane contracts to friends of Ministers and the dubious funding of the Prime Minister’s living arrangements.

These are global anti-corruption sanctions, which the Explanatory Memorandum says are to

“prevent and combat serious corruption.”

I have got the same queries as the noble Lord, Lord Anderson of Swansea, and the noble and learned Lord, Lord Garnier—and I think the noble Baroness, Lady Wheatcroft, mentioned it as well—on the definition of “serious”. That is going to be something I hope the Minister can be helpful on. The Memorandum helpfully defines corruption as

“bribery and misappropriation of property.”

That is very useful, but it is something we see a constant stream of in our media about our Government, so perhaps we should be thinking about how to sort that out as well.

Those were the right words to be using—not the desensitised word “sleaze”, which we see more associated with corrupt behaviour from the British elite. The word “sleaze” is to “corruption” what the word “expat” is to “immigrant”. The words “sleaze” and “expat” are slightly acceptable and not terribly worrying, whereas “corruption” and “immigrant” are things Brits do not do, and therefore we can all take the moral high ground—which of course is complete nonsense. It is what allows the Government to claim, as they do in the Explanatory Memorandum:

HMG is committed to tackling serious corruption, upholding good governance and the rule of law and promoting open societies.”

This is clearly not true when you look at what they are doing in Britain at the moment. The Explanatory Memorandum also recognises that “serious corruption”

“has a range of corrosive effects on states, markets and societies and wherever it occurs”— and it is occurring in Britain, and it will have a corrosive effect.

This sort of doublespeak actually leads to doublethink. The same Ministers who have been behind VIP contracts to their donors and friends—sleazy behaviour, at best—can see themselves as anti-corruption heroes taking on all the other countries doing exactly the same thing, only we label it “corruption” for them. Domestic law ought to be dealing with this here and clearly it is not. Perhaps the Minister could tell us why. Sleaze becomes just a public reputational thing—public relations, to be dealt with by press officers and spin doctors, with a couple of Ministers perhaps going on the Sunday news shows repeating buzzwords.

Corruption is a serious issue and we ought to be serious about it. The double standard—the way we think about ourselves as being free of corruption, with just a bit of sleaze, yet see other nations as indulging in corruption—is unacceptable. Corruption is corruption, whether it is here in the UK, via Ministers, or anywhere else by some sort of awful regime. So, personally, I look forward to all corrupt politicians facing justice for their misappropriation of public resources and their “corrosive effects” on public life and our respect for democracy.

Photo of Lord Jones Lord Jones Labour 3:14, 26 May 2021

My Lords, it is instructive to follow the committed, spirited and very relevant remarks of the noble Baroness, Lady Jones—Wales and the Joneses indeed. I thank the Minister for his informed introductory remarks, including on human rights, and one is glad to note the experience and safe hands on our Front Bench of my noble friend Lord Collins.

The FCO has prepared a helpful, detailed Explanatory Memorandum, and surely we can all support the Government’s anti-corruption policy. There are moral hazards, and the Government are facing them; we are all against sin. The Secondary Legislation Scrutiny Committee and the Joint Committee on Statutory Instruments have given these regulations a fair wind, too.

In paragraph 7.1 of the Explanatory Memorandum, references are made to

“terrorism, serious and organised crime,” as well as “national security”, “the rule of law” and “trade and investment.” Can the Minister confirm that GCHQ, MI5, MI6 and Defence Intelligence, for example, were involved in the making of the regulations? At what level? Is it not the case that these highly professional, highly important agencies play their part in tackling serious corruption, and in upholding good governance and the rule of law? In another place, for the best part of the decade, one served on the Prime Minister’s Intelligence and Security Committee, where the economic well-being of the nation was certainly one of the priorities of the Joint Intelligence Committee. Surely, our agencies help our industries to win contracts abroad. Surely, our shrunken industrial base needs protective help. Serious corruption has a corrosive effect on both nation and markets. These regulations are, surely, welcome.

The Minister will know that the erstwhile committee of the noble and learned Lord, Lord Woolf, published an ethical business conduct report, Business Ethics, Global Companies and the Defence Industry. There had been a whiff of alleged corruption with a British company, the Middle East and the defence industry. The noble and learned Lord’s exceptional, wise and thorough report deployed phrases such as “moral hazards” and “moral justification”, and the word “secrets”. So, to what extent did this report inform the making of these regulations? Surely, it is a template, a sound reference point and an important compass for an ever-growing national and global problem.

In paragraph 4.1 of the Explanatory Memorandum we are told:

“The territorial extent of this instrument is the whole of the UK.”

I ask: were the Scottish Parliament, the Welsh Senedd and the Northern Ireland Assembly approached formally for discussions on anti-corruption sanctions? In what way were they consulted? Were there joint ministerial meetings, or was the business done at official level? In these national, devolved Parliaments, there are, for example, significant industries relating to defence that depend heavily on exports and are part of the defence market environment. Were the consultations conducted appropriately to the high status of, say, the Senedd?

In paragraph 3.1 of the Explanatory Memorandum, there are references to sanctions and money laundering—very topical in our newspapers and media. Is the Minister confident that money laundering is in decline, if not halted? Who is committing these subtle and collaborative crimes? Can he give any instances of success and of his Government’s suspicions? What extra efforts by law enforcement agencies are under way, by, for example, deploying more person power?

I conclude: do the Government not emphasise the seriousness of these issues with reference to Russia, Iran and North Korea? In this respect, Her Majesty’s Government should gain credit for the publication of their policy paper, Consideration of Designations. In this, they consider the status, connections and activities of the involved person. Can the Minister furnish an example? In these matters, he might write.

Photo of Baroness McIntosh of Pickering Baroness McIntosh of Pickering Conservative 3:19, 26 May 2021

My Lords, I am delighted to follow the noble Lord, Lord Jones, and I thank and congratulate my noble friend the Minister on bringing forward these much-needed regulations today.

The noble Lord, Lord Anderson, referred to the guidance; it has indeed been published but, as he might imagine, it is not incredibly clear because, I understand, it has to be read together with a number of other guidance documents from other departments issued at the same time in April.

I entirely support the point made by my noble and learned friend Lord Garnier on how “serious corruption” should be defined. It is interesting to note that the guidance—where you might expect a broader definition of “serious corruption”—says in the first line:

“The Regulations enable Ministers to designate persons involved in serious corruption”,

but then goes on simply to say that,

“For the purposes of the Regulations, corruption means: ... bribery; … or misappropriation of property”.

I am sure that it will come as a disappointment to the noble Baroness, Lady Jones, that her wish list does not appear there. But it is slightly disappointing, as we could have taken the opportunity to have a broader definition of serious corruption there, as I imagine that practitioners will be relying on the guidance.

I looked at the sanctions list, which is available from the most recent guidance, and it makes for very interesting reading. I notice that there are two references—I think it is on page 106, if that helps—one in particular to The Republic of Belarus (Sanctions) (EU Exit) Regulations 2019 and one relating to The Russia (Sanctions) (EU Exit) Regulations 2019. I take the opportunity to ask the Minister, in summing up, to say whether these regulations to which those two entries refer have now been replaced by the regulations before us this afternoon? It appears that these were regulations that already applied following our departure from the European Union which permit sanctions to be imposed on citizens of Belarus.

Obviously, I would be particularly interested to know, given the appalling incident of the hijacking of the Ryanair flight from Athens to Vilnius, whether there is a legal basis under these regulations. I welcome the report in the Financial Times today that the Chancellor of the Exchequer is minded to consider that sanctions be imposed pretty urgently on Belarus, in light of the fact that two private citizens were escorted off a plane—it was a civilian aircraft taken under duress, so effectively an international hijacking incident—and taken to the capital, Minsk. Do these regulations provide that legal basis, or would the Government have to look elsewhere?

I join with others in congratulating the Foreign Secretary and the Government on bringing forward the regulations before us today and the guidance that was issued at the same time. I hope that my noble friend will undertake to make sure that the guidance is updated regularly and perhaps made a little more user-friendly. With those few remarks and questions, I support the regulations before us in the strongest terms.

Photo of Baroness Smith of Newnham Baroness Smith of Newnham Liberal Democrat Spokesperson (Defence), Liberal Democrat Lords Spokesperson (Defence) 3:23, 26 May 2021

My Lords, last week in the debate on the hybrid Parliament, the noble Baroness, Lady McIntosh of Hudnall, explained to the House that she was, in effect, understudying for the leader of the Labour group, the other noble Baroness, Lady Smith. This afternoon, I feel as if I am understudying for my noble friend Lady Northover. As the noble Lord, Lord Anderson of Swansea, pointed out, my noble friend has worked very hard pushing the Government on Magnitsky sanctions over the years and she is very sorry not to be here this afternoon.

I am leading on the Liberal Democrat Front Bench, but my normal forays into probing the Government’s views on sanctions have been limited to sanctions associated with human rights abuses and, in particular, genocide. So I come to wind up from the Liberal Democrat Benches with similar questions to many other noble Lords. I welcome the statutory instrument but, like the noble and learned Lord, Lord Garnier, I wonder why we have to debate a statutory instrument under the affirmative procedure when it has already come into effect. It was laid on 23 April and came into effect on 26 April; we are meant to debate it within 28 days of its being laid. I realise that there was Prorogation, but there seems to be a practice of Members of your Lordships’ House being required to scrutinise statutory instruments after they have come into effect. I realise that it might not be the noble Lord the Minister’s job to give an answer on this today, but can he take back to the usual channels the question of whether the Government can look again at tabling statutory instruments in a timely fashion?

This statutory instrument has been broadly welcomed and it is clearly appropriate that the United Kingdom is able to impose sanctions for corruption, precisely for the reasons outlined by the Minister and the noble Lord, Lord Anderson of Swansea, at the outset: corruption undermines democracy, human rights and the rule of law. I am minded to ask the Minister whether he is able to opine on some of the comments raised by the noble Baroness, Lady Jones of Moulsecoomb, because we are looking at a statutory instrument that clearly has a territorial extent of the United Kingdom, but we are talking about global sanctions understood to be for third countries—that is how I have read the statutory instrument. Am I correct in that reading and, if I am, what thought have the Government given to similar legislation on corruption within the United Kingdom? Are we looking at double standards between what we say we want to support and advocate globally and what we have on the statute book domestically?

Overall, the statutory instrument is welcome. There are very few points that I want to raise specifically, but I do have one question about Regulation 9, “Confidential information in certain cases where designation power used”. This relates back to Regulation 8, which talks about a designation being made and, essentially, a restriction on anybody knowing that a person is a designated person. Given that a lot of the statutory instrument requires people who are not the designated person and businesses to act in particular ways if they believe that somebody is a designated person, is it not somewhat strange to have a provision that somebody is a designated person and it not be known to other people? How can they then act appropriately?

These provisions are welcome. There are some questions, as the noble Baroness, Lady McIntosh of Pickering, raised, about the extent to which we might also be looking at other sanctions. I had assumed that the statutory instruments on sanctions that came in in 2019 would be extant and that the statutory instrument brought forward today is an additional one. Are we expecting a suite of documents to be coming forward? Can the Minister explain to the House whether the Government envisage not just bringing forward sanctions for corruption but looking at how we deal with a country like Belarus?

Finally, apart from joining everybody else in asking what counts as “serious” in the context of corruption, there has been a lot of comment about the fact that this statutory instrument will bring the United Kingdom in line with the USA and Canada. What action have the Government taken to work with our neighbours in the EU 27 to ensure that, where possible, sanctions are done in co-ordination with the EU? Inevitably, the more countries that impose sanctions simultaneously, the more effective such sanctions are likely to be.

Photo of Lord Collins of Highbury Lord Collins of Highbury Opposition Whip (Lords), Shadow Spokesperson (Foreign and Commonwealth Affairs and International Development) 3:29, 26 May 2021

My Lords, I too join other noble Lords in welcoming these regulations. During the passage of the 2018 Bill we argued very strongly for these measures. Sadly, we got defeated in this House on Magnitsky sanctions, which we had pushed to a vote. Fortunately, colleagues down the other end, in a bit of a reversal of roles, stood firm and pushed for and agreed these sanctions. This was no doubt due in part not only to my friends down there but to the fact that it was done on a cross-party basis, and I certainly acknowledge that these regulations have full support across this House.

The Minister referred to the 22 persons who were initially mentioned in these sanctions. During the passage of the Bill and the subsequent Brexit regulations, my noble friend Lord Hain pushed hard for sanctions on the Gupta brothers in South Africa. He made numerous speeches—perhaps even against the rules of the House —on that subject. But at least he has now been rewarded with these sanctions, which is very welcome.

The noble Baroness, Lady Smith, raised the point that these regulations also revoke the Misappropriation (Sanctions) (EU Exit) Regulations 2020. Those Brexit regulations included sanctions in relation to Tunisia, Egypt and Ukraine. The Minister himself mentioned that working with others is vital: can he confirm that the Government will work closely with our allies in the European Union on future sanctions, to ensure that our targets are absolutely covered and that the sanctions are effective?

I know that the Minister will not be drawn on future designations but, during questions in this House on the Oral Statement announcing these sanctions, I encouraged the Government to work closely with Parliament on future designations and to be open to suggestions from Members of both Houses. In his response at the time, the Minister told me that they were

“open to receiving information and evidence in relation to future designations”.—[Official Report, 27/4/21; col. 2200.]

Do the Government intend to open a formal channel for Parliament to put forward information, and how will they encourage NGOs and others involved in the fight against corruption to put forward information?

During the passage of the original Bill, we also put forward amendments on the need for greater transparency on designations. It is not actually that easy to find out who is subject to sanctions; certainly there is an annual report. When I met NGOs a week ago, they were very keen to ensure greater transparency and reporting to Parliament on whom we designate and how the designations will continue. So I hope that the Minister will respond on that.

That the regulations allow designations in relation to corruption is, of course, extremely welcome, but the Government’s sanctions regime is still not as expansive as those of some of our closest allies. Unlike the US Magnitsky powers, our equivalent regime still allows only the sanctioning of officials involved in some—not all—human rights violations. Is the Minister able to confirm whether the Government intend to bring forward further legislation on these powers?

As I said earlier, and as my noble friends Lord Anderson and Lord Rooker highlighted, for sanctions to be effective we must—as the Minister said —work in co-operation with others. Unfortunately, not all of our closest allies have provisions for Magnitsky-style sanctions. Here I join with others in congratulating Bill Browder on his commitment and hard work in achieving so much progress on the implementation of these sanctions. Like my noble friends, I would like the Minister to update us on how the Government are encouraging other nations to introduce such a regime.

I will make one final point. The fight against corruption has to go beyond sanctions. Sanctions are not the only tool. Good governance, the involvement of civil society and how we support civil society in the fight are vital. One element of course is the United Nations Convention against Corruption, which came into force in 2005. Despite being ratified by almost every member state, most Governments are still not yet participating in the implementation review mechanism. So what steps are the Government taking to promote the convention and encourage all UN member states to support its implementation?

Photo of Lord Parkinson of Whitley Bay Lord Parkinson of Whitley Bay Lord in Waiting (HM Household) (Whip) 3:35, 26 May 2021

My Lords, I am very grateful to all noble Lords who have taken part in the debate on these regulations. Like the noble Baroness, Lady Smith of Newnham, I feel rather like the understudy here. I hope I will be able to rise to the occasion, as she did.

It would be appropriate to start, as my noble friend Lady Altmann did, by paying tribute to Sergei Magnitsky, who was, I believe, the same age as me when he died at the end of the ordeal he went through. Like many noble Lords, I also pay tribute to the long campaigning work of Bill Browder, which has brought about regulations such as these. The honours process is, of course, separate from government, but my noble friend’s point about it will have been well heard.

The noble Lord, Lord Anderson of Swansea, started off with a generous understanding of why we have taken the time we have to get these regulations right. This is a complex and important matter and I am grateful to the noble Lord for his understanding of that and for his congratulations to the parliamentary draftsmen who were involved in it. I am sure that they will have heard that with gratitude. I am also grateful for his tribute to the zeal and work of my right honourable friend the Foreign Secretary, who has taken a long-standing interest in this from the Back Benches through to the Cabinet table.

A number of noble Lords asked about the definition of “serious corruption”. It is not, as my noble and learned friend Lord Garnier said, a tedious or lawyerly point; it is an important one. These regulations focus on serious corruption in order to target the worst offenders and the most harmful cases of corruption. As is the case with the Global Human Rights Sanctions Regulations, the term “serious” is not defined in these regulations, but we have published a policy note which sets out factors that are likely to be relevant to the consideration of designations. I will not cite them all, but they include

“whether the conduct is systemic, for example involving senior officials or political figures with broad powers and responsibilities;” whether, in response to the point made by my noble friend Lady Altmann about financial value,

“the financial value of the bribe(s) or assets diverted or the benefit derived are significant relative to the local context” and also whether

“the conduct is sophisticated and/or systematic, requiring a degree of planning”.

So I hope noble Lords will feel that the policy document fleshes that out in the way they were seeking.

A number of noble Lords also asked about our engagement with the European Union. Although the EU does not currently have the powers to impose sanctions for corruption, we would welcome any co-ordination if it gained such powers in the future. The UK will, of course, continue to seek opportunities for international co-operation on sanctions, including with the EU, as well as with our close allies such as the US, Canada and Australia. As a number of noble Lords have said, sanctions are most effective when multiple countries act together to constrain or coerce a target’s ability to carry out unacceptable behaviour. In relation to the sanctions that I mentioned at the outset, 20 of the 22 individuals have also been sanctioned by the United States, which we welcome.

My noble and learned friend Lord Garnier and the noble Baroness, Lady Smith, asked about reasons for the delay in scrutinising these regulations under the affirmative procedure compared with another place. As the noble Baroness, Lady Smith, pointed out, we did have Prorogation before the start of the new Session—but I will take her point back to the usual channels.

My noble and learned friend Lord Garnier, the noble Baroness, Lady Wheatcroft, and others asked about resources for the OFSI. There is no target level for resources as such; rather, it is based on operational requirements and is continuously evaluated to make sure that they are being met.

The noble Baroness, Lady Wheatcroft, asked about Regulation 6(2)(d) and the term “associated with”. The use of that term is mandated by Section 11 of the sanctions Act; it is required to be included in all regulations, and has its usual legal meaning.

The noble Lords, Lord Rooker and Lord Sikka, among others, asked about resources for law enforcement agencies and those following up the sanctions. The Government are investing in their economic crime capabilities. Last year’s spending review allocated an additional £63 million to the Home Office to fund the continuing expansion of the National Economic Crime Centre and other initiatives; £20 million was also allocated to Companies House to support register reform transformation work. The Government have further announced proposals for an economic crime levy on firms regulated for money-laundering purposes, to raise up to £100 million a year for money laundering prevention and law enforcement efforts. So we have robust mechanisms in place to ensure that sanctions are adhered to.

The noble Lord, Lord Rooker, and others asked about co-operation with the devolved Administrations. This is a reserved matter for the UK Government but the regulations have force in the whole of the UK, including in Northern Ireland. We have no concerns about the co-operation of the devolved Administrations in implementing the regulations and tackling the corruption that they are aimed at.

The noble Lord, Lord Sikka, asked who in government has responsibility for this. The Foreign, Commonwealth and Development Office holds policy responsibility for sanctions, asset freezes are enforced by Her Majesty’s Treasury through the OFSI, and travel bans are enforced by the Home Office, but there are of course roles for the National Crime Agency, HMRC and others in enforcement.

In her rather wide-ranging speech, the noble Baroness, Lady Jones of Moulsecoomb, asked what the UK is doing more broadly to tackle corruption. The UK was the first G20 country to establish a public register of the beneficial owners of firms, so that secretive shell companies could not be used to hide the real owners of assets and companies. Now, 109 countries around the world have made commitments on beneficial ownership disclosure. We have some of the strongest anti-corruption law enforcement powers, including a gold standard Bribery Act and new powers such as account freezing orders, which enable investigators to freeze money quickly during complex financial investigations. London is home to the first ever International Anti-Corruption Coordination Centre, which was set up in 2017 to boost collaboration between our national law enforcement agencies to pursue the corrupt people who launder money across jurisdictions. We are taking serious action.

The noble Lord, Lord Jones, asked about engagement with the security and intelligence agencies and others. As noble Lords would expect, these regulations were developed in consultation with a range of departments and agencies with a stake in anti-corruption work, and we work across government to implement them.

My noble friend Lady McIntosh of Pickering asked about the situation in Belarus. As the Foreign Secretary said yesterday, the scenario as reported is a shocking assault on civil aviation and international law. The regime in Minsk must provide a full explanation for what appears to be a serious violation of international law. We have already a separate UK sanctions regime for Belarus and, as the Foreign Secretary said yesterday, we will not speculate on specific action in advance. We are, however, consulting our allies and seeing what evidence we have, which is of course needed for targeted sanctions. But we have done this before: we imposed 99 sanctions after the rigged elections in Belarus. The UK led the way on that occasion and we stand ready to do so again.

The noble Baroness, Lady Smith of Newnham, asked whether people or companies in the UK can be designated under these regulations. Yes, they can; they can be designated for involvement in serious corruption if the criteria are met, but involvement in corruption falling within the UK’s jurisdiction would of course be covered through our domestic law and law enforcement measures.

The noble Baroness and others asked what further steps we might take—what next? As my noble friend Lord Ahmad said in a Statement repeat on 27 April,

“we are going through an evolutionary process on the whole concept of sanctions. Two years ago, we did not have anything in this space on the specifics of the framework of sanctions. We now have two distinct sanctions regimes”.—[Official Report, 27/4/21; col. 2204.]

Of course, in implementing those regimes, we keep our minds open to what more can be done.

The noble Lord, Lord Collins of Highbury, paid tribute to his noble friend Lord Hain, as I do, in particular for his work on the Guptas. I hope that he will welcome the action that is being taken now. The noble Lord also asked about parliamentary engagement. I repeat what my noble friend Lord Ahmad said about our willingness to listen to Parliament. I hope that he and other noble Lords will also see that some of the sanctions we have brought in have responded to concerns raised in your Lordships’ House and in another place. Noble Lords and Members in another place can of course write if they wish to raise matters in further and more formal detail.

I am running close to my time limit. I hope that I have covered a number of the points made by noble Lords. I will of course consult the Official Report and make sure that I pick up any other questions and follow up with further details. With those answers, I thank noble Lords for their contributions.

Motion agreed.