Clause 13

Terrorist Asset-Freezing Etc. Bill [Lords] – in a Public Bill Committee at 11:45 am on 23rd November 2010.

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Question proposed, That the clause stand part of the Bill.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury) 12:00 pm, 23rd November 2010

I have a quick question for the Minister on a point of clarification about subsection (2), which introduces an additional test. Clauses 11 to 15 are all similar, in that they are about prohibitions on dealing with funds, or making funds, financial services or economic resources available to a designated person or for the benefit of a designated person. Only in clause 13 is there a subsection stating that the prohibition applies only if the designated person

“thereby obtains, or is able to obtain, a significant financial benefit”.

There is some vagueness about what a “significant financial benefit” would be, and it seems that it would very much be a matter of interpretation in particular circumstances. Will the Minister explain why the subsection is included in clause 13 and does not apply to the other prohibitions?

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

The hon. Lady is right in identifying the difference between clauses 12 and 13. Her point is that clause 12 is about making funds or financial services available directly to an individual, whereas clause 13 is about making funds or financial services available for the benefit of a designated person, where those funds or services are received by a third party. The question is whether they provide any benefit to the designated person.

The hon. Lady raised a point about what “significant” means. Paragraph 40 of the explanatory note states:

“Whether a financial benefit is ‘significant’ is dependent on the circumstances of each particular case.”

There is a judgment to be made there. “Significant financial benefit” is intended to mean a sum that would be significant in terrorist finance terms, bearing in mind—this is a crucial point—that the cost of financing terrorist attacks can be relatively small. On Second Reading, I cited an example of an attack that cost less than £10,000, so we are not talking about large sums.

What is significant will vary from case to case. Several factors should be taken into account, including the value of the payments and whether the transaction is a one-off or a repeated payment. Prohibition is not intended to be a blanket ban on making funds available to designated persons. Where there is any uncertainty about whether a particular transaction would be caught by the prohibition, the Treasury can provide guidance, and where a transaction is caught, a licence can be requested from the Treasury.

In practice, some transactions—making loan repayments or paying a small utility bill on behalf of a designated person—may not be deemed to confer significant financial benefit and therefore will not require a licence. Where a transaction might confer significant financial benefit, it may still be authorised by way of a Treasury licence, provided that the appropriate conditions can be applied to remove any risk of the divergence of such funds to support terrorism. I would say to the hon. Lady that the terms are widely couched, but we will look at the nature, frequency and amounts of payments. Where someone believes that they might be making a significant contribution available, the right step is for that person to raise the matter with the Treasury to see whether it should be covered by a licence.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

On a further point of clarification, the Minister mentioned paying a utility bill as an example of something that might not be caught by the notion of giving significant financial benefit. If there is a designated person in a household and such a designation causes financial hardship for the rest of the family, where is the boundary between somebody seeking to help the family through a difficult economic time and somebody providing assistance for the benefit of the designated person living in that household?

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

Let me give the hon. Lady an example, because we need to look at the circumstances of particular cases. She is right to say that there is a licence that enables, for example, benefits to be paid to such a family, in the same way that one would be available for meeting legal aid costs. Licences can, therefore, be put in place to ensure that reasonable funds are paid to alleviate hardship, but that is usually in cases where the state is giving benefits to an individual.

The prohibitions are not intended to prevent the receipt of legitimate payments, such as household benefits or wages. The payment of wages to another member of a designated person’s family would not be caught by the prohibition, unless the person making such funds available to that family member knew or suspected that the funds were being used for the designated person’s significant financial benefit. If third parties wish to makes funds or financial services available, including through meeting a financial obligation that the designated person would otherwise be wholly or partly responsible for, they should seek a licence from the Treasury. The architecture for ensuring that proper payments are paid to individuals has been well thought through.

Question put and agreed to.

Clause 13 accordingly ordered to stand part of the Bill.

Clauses 14 to 18 ordered to stand part of the Bill.