Guidance about regulations under section 1

Sanctions and Anti-Money Laundering Bill [Lords] – in a Public Bill Committee at 3:00 pm on 1st March 2018.

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Photo of Helen Goodman Helen Goodman Shadow Minister (Foreign and Commonwealth Affairs) 3:00 pm, 1st March 2018

I beg to move amendment 28, in clause 37, page 29, line 39, at end insert—

‘(d) reporting obligations;

(e) licensing requirement provisions.

(3) Where civilian payments and humanitarian activity are exempt from any prohibitions and requirements imposed by the regulations, the appropriate Minister must issue guidance.

(4) The guidance under subsection (3) must include—

(a) best practice for complying with the processing of civilian and humanitarian activities to reduce the risk of funds benefiting designated individuals, entities or organisations;

(b) mechanisms to limit the impact of prohibitions and requirements on a permissible civilian and humanitarian activity;

(c) circumstances where the prohibitions and requirements may be relevant in the context of the otherwise permissible delivery of a humanitarian activity; and

(d) options setting out effective banking and payment corridors for the processing of payments in support of a civilian and humanitarian activity which is not subject to any prohibitions or requirements.’

This amendment would require that the guidance issued about regulations under section 1 includes guidance on reporting obligations and licensing requirements. It would also require the Government to issue guidance on civilian payments and humanitarian activity exempt from prohibitions and requirements imposed by regulations.

Photo of Steve McCabe Steve McCabe Labour, Birmingham, Selly Oak

With this it will be convenient to discuss amendment 27, in clause 37, page 29, line 39, at end insert—

‘(3) Where regulations under section 1 make provision as to the meaning of any reference in the regulations to a person “owned” or “controlled” by another person pursuant to section 50(3), the appropriate Minister must issue guidance.’

This amendment would require the Government to issue guidance setting out the meaning of a person “owned” or “controlled” by another person when regulations are issued to make provision for this purpose under section 50(3).

Photo of Helen Goodman Helen Goodman Shadow Minister (Foreign and Commonwealth Affairs)

The amendments relate to the importance of having guidance. There is considerable concern in the voluntary and financial sectors that the regulations as provided for under clause 36—

“an appropriate Minister may make regulations”— are a piece of volunteerism and not an obligation on the Minister. That is causing some anxiety and confusion among those actors who have to implement the sanctions, whether NGOs or the financial sector. I will give a slightly more detailed description of this, because it is a bit complicated.

Last year Chatham House looked at the issue in some detail. It concluded that a number of UN Security Council sanctions regimes authorise the imposition of targeted sanctions against non-state armed group parties to armed conflicts. Of particular relevance to humanitarian action are financial sanctions such as asset freezes, which, among other things, require member states to ensure that funds, financial assets or economic resources are not made available to or for the benefit of designated entities. Asset freezes can be problematic for humanitarian action. There is a risk that the obligation not to make assets available to designated groups will be interpreted as covering incidental payments that must be made to such groups—for road tolls or locally purchased fuel, for example—so that humanitarian relief reaches civilians in need. It may also be interpreted as covering humanitarian goods or equipment that are diverted to such groups or otherwise benefit them, directly or indirectly. The scope of potential liability for violating asset freezes is very broad, and no intent or knowledge is required for that to be an offence, which is harsher than the bar for other kinds of breaches.

Although asset freezes are most likely to have an adverse impact on humanitarian action and, consequently, they have received the greatest attention, other forms of sanction may have a similar impact. In Syria, the problem was oil and petrol. Broader financial crimes risks arising from the Financial Action Task Force have also complicated humanitarian work.

The role of the UK financial sector in implementing sanctions is also relevant. It is not clear whether, when assessing the impact of sanctions, the UK intends to borrow the EU’s 50% rule for ownership and control. UK Finance states that

“the clarity of the ownership and control structures becomes of paramount importance and can be one of the most complex elements of ensuring sanctions compliance. If ownership or control is established in accordance with set criteria, the making available of funds or economic resources to non-listed legal persons or entities which are owned or controlled by a listed person or entity will in principle be considered a sanctions breach. The EU, and indeed many other jurisdictions, tend to apply a 50 percent rule and criterion to establish the ownership and control of an entity…if a listed individual has 50 percent or more ownership of a non-listed entity, EU persons/entities are prohibited from making available funds”.

There is no reference in the Bill to existing EU standards. The purpose of amendment 27 is to clarify that.

Photo of Alison Thewliss Alison Thewliss Shadow SNP Spokesperson (Cities), Shadow SNP Spokesperson (Treasury)

I am concerned about the use of the word “may” in the clause, which states that the guidance “may include guidance” about certain things. I am concerned that that is not sufficiently well developed. I very much support the hon. Member for Bishop Auckland’s amendments, which would add a wee bit more clarity, detail and guidance. The clause is worth while, but the Government would do well to listen to the detail that she laid out.

Photo of John Glen John Glen Minister of State (Treasury) (City), The Economic Secretary to the Treasury

I am grateful for those questions. I am a little confused, because both hon. Members referred to clause 36, which states, “An appropriate Minister may,” but I thought these amendments were pursuant to clause 37, which states in subsection (1) that

“the appropriate Minister who made the regulations must issue guidance”.

I acknowledge that these amendments are about guidance. We have just agreed clause 36, which states, in subsection (1),

“An appropriate Minister may make regulations”.

The two amendments as tabled by the hon. Member for Bishop Auckland are on clause 37, subsection (1) of which states

“the regulations must issue guidance”.

Photo of Alison Thewliss Alison Thewliss Shadow SNP Spokesperson (Cities), Shadow SNP Spokesperson (Treasury) 3:15 pm, 1st March 2018

We seem to be at cross purposes. The amendment is about the line further to that; subsection (2) states, further to “regulations must issue guidance”, that

“guidance may include guidance about”.

It is about the expansion of what that guidance may be.

Photo of John Glen John Glen Minister of State (Treasury) (City), The Economic Secretary to the Treasury

I am very grateful for that clarification. I hope that I will be able to address that in my remarks and give sufficient reassurance about the Government’s plan.

I should make clear from the outset that the Government are in favour of good guidance and we intend to produce it. It is in the Government’s interest to produce thorough guidance, to improve sanctions implementation and to ensure that sanctions can be enforced robustly. It was clearly set out that amendment 27 would require Government to provide guidance on the definition of ownership and control on the face of the Bill.

Photo of Hannah Bardell Hannah Bardell Shadow SNP Spokesperson (Trade and Investment)

Further to the points made by my hon. Friend the Member for Glasgow Central about the efficacy of these amendments, Governments come and go, and I fully appreciate that the Minister is committed to giving proper guidance, but with the greatest respect, his party may not always be in power. Is it not important that if they have the intention, they should put these things on a statutory footing?

Photo of John Glen John Glen Minister of State (Treasury) (City), The Economic Secretary to the Treasury

I will address those points in my remarks, and I will be happy for the hon. Lady to come back if she is not content at the end.

Amendment 28 would broaden the scope of guidance to areas such as providing best practice on compliance with financial sanctions and establishing effective banking and payment corridors. As I said at the start, the Government are committed to producing clear and accessible guidance on sanctions implementation and enforcement. Clause 37 requires Ministers to issue guidance about any prohibitions and requirements imposed by sanctions regulations. There is already a mandatory requirement to provide comprehensive guidance for all those affected by sanctions and implementation.

The Government have been consulting extensively; across Whitehall, they have been meeting with NGOs and financial institutions that have asked for this guidance. I can reassure the Committee that we will give them what they have asked for. The Government do not believe that further amendments to clause 37 are needed to provide the type of guidance sought on “owned” and “controlled” in amendment 27. Where sanctions regulations contain prohibitions or requirements about entities that are owned and controlled by a designated person, we are already under a duty to issue guidance. I can reassure hon. Members that the Government already provide guidance on ownership and control and will continue doing so.

The additional guidance sought in amendment 28 would greatly extend the scope of the guidance to specific areas such as mechanisms to limit the impact of prohibitions and requirements on civilian and humanitarian activity, and establishing effective banking and payment corridors. Although I can understand the concerns of NGOs that lie behind this amendment, some of them clearly are beyond the remit of the Government to provide. For example, the Government do not have the powers to require banks to make payments on behalf of particular customer or to open new payment channels. Although I appreciate the spirit of the amendments, the Bill already caters for them in so far as it addresses matters within the Government’s control. Adding extra text to the Bill will only create confusion.

Photo of Alison Thewliss Alison Thewliss Shadow SNP Spokesperson (Cities), Shadow SNP Spokesperson (Treasury)

Does the Minister not agree that it is in the public interest for the Government to support payment channels being created? If, for example, there is a Disasters Emergency Committee emergency appeal and the NGOs gather lots of funds, but those funds cannot reach the beneficiaries because there is no appropriate payment channel that gives everybody reassurance, surely it is in the Government’s interest to make that happen.

Photo of John Glen John Glen Minister of State (Treasury) (City), The Economic Secretary to the Treasury

I acknowledge what the hon. Lady says, but this is a non-exhaustive list. We intend to issue guidance on those issues listed in the Bill and more, as new issues evolve. We may also not need guidance in some areas that the sanctions do not cover. Where we are at cross purposes here is that people think the list is exhaustive when it is enabling and allows the Government to give the necessary guidance as required and as circumstances evolve.

We understand the concerns behind the amendments and have worked closely with NGOs to understand their needs, and we will continue to do so.

Photo of Hannah Bardell Hannah Bardell Shadow SNP Spokesperson (Trade and Investment)

I appreciate the Minister’s response to my hon. Friend the Member for Glasgow Central, but if he does not think it is the Government’s role to create those channels, whose role is it?

Photo of John Glen John Glen Minister of State (Treasury) (City), The Economic Secretary to the Treasury

I am not necessarily denying the role of Government in issuing guidance in a whole range of areas. What I am dealing with here is the necessity of adding the provision into the Bill when the need to give guidance is sufficiently catered for in the text of the Bill.

The Bill will put the requirements in a better place because of the new flexibility on exemptions, licensing grounds and the ability to provide general licences. We are therefore unable to agree to the level of guidance sought, and I ask the hon. Member for Bishop Auckland to withdraw her amendment.

Amendment, by leave, withdrawn.

Clause 37 ordered to stand part of the Bill.

Clause 38 ordered to stand part of the Bill.

Clause 39