Money laundering and terrorist financing etc

Sanctions and Anti-Money Laundering Bill [Lords] – in a Public Bill Committee at 4:00 pm on 1 March 2018.

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Photo of John Glen John Glen Minister of State (Treasury) (City), The Economic Secretary to the Treasury 4:00, 1 March 2018

I beg to move Government amendment 10, in schedule 2, page 53, line 32, leave out paragraph 15 and insert—

“15 Make provision—

(a) creating criminal offences for the purposes of the enforcement of requirements imposed by or under regulations under section 43, and

(b) dealing with matters relating to any offences created for such purposes by regulations under section 43, but see paragraphs 18 and 19.”

This amendment, read with Amendment 12, makes clear that any offences included in regulations under Clause 43 must be for the purposes of enforcing requirements imposed by or under regulations under Clause 43 or (while they remain in force) the Money Laundering Regulations 2017.

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

With this it will be convenient to discuss Government amendment 12.

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

Amendment 10 is a consequence of the proposed new paragraph 20A, which will be inserted by amendment 11. Paragraph 20A(1) refers to offences created for the purposes of the enforcement of requirements imposed by or under regulations under clause 43.

The amendment further narrows the powers for future regulations to make provision for new criminal offences, as I referred to in the discussion on the previous amendment, as compared with the Bill when it was first introduced in the other place. It would make the powers subject to the requirement for a report to Parliament, along the same lines as amendments to part 1 of the Bill. That report would identify the offences created and their respective penalties, and would confirm that the Minister has considered that there are good reasons for creating those offences and setting the penalties at the levels at which they have been set. It would ensure that the Minister does not use the power lightly and is fully accountable to Parliament for doing so.

I take the opportunity to remind hon. Members that these safeguards are contained in Government amendment 11, to which I will turn shortly. These amendments are part of the wider package that inserts safeguards on the use of this power, and have been designed to directly address the concerns raised by Lord Judge and others in the other place.

The amendment restricts the scope of the power to create future offences to offences created for the purposes of enforcing future anti-money laundering regulations. Amendment 12 ensures that references made to regulations made under clause 43, with respect to paragraph 15 of schedule 2, and requirements imposed by regulations made under clause 43, with respect to paragraph 20A of schedule 2, also include reference to, or requirements imposed by, the Money Laundering Regulations 2017. That ensures that the safeguards proposed by Government amendment 11 will also apply to possible future changes made to the 2017 regulations.

The amendment ensures that it is possible for new money laundering offences to be created by amending the 2017 regulations. It will therefore enable the Government to create new offences in order to respond to, for example, emerging risks identified by the national risk assessment of money laundering and terrorist financing, which was published in October 2017, or in response to the ongoing review of the financial action taskforce of the UK’s anti-money laundering and counter-terrorist finance regime. When the Government do so, using the powers contained in clause 43, the enhanced procedural protections set out in the amendment will apply.

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury)

I am grateful to the Minister for that explanation. First, in relation to Government amendments 10 and 11, the Opposition would like the accountability provisions to be much more extensive than they are. However, given that the Government just won the last vote on an amendment, it would be rather self-defeating for us to oppose these amendments at this stage.

I have a question on Government amendment 12; perhaps the Minister can enlighten us a little bit. I understood that the whole Bill, when it comes to its money laundering provisions, amends the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. I am therefore slightly confused about the timing and scheduling. Why are the Government bringing those regulations into the Bill when they were not there in the first place? I wonder whether the Minister can enlighten us.

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

This is an enabling measure that allows us to take the action necessary. I am not sure I quite grasped the hon. Lady’s point. I think I will need to write to her to clarify that so that I do not say anything that misrepresents the Government’s position.

Amendment 10 agreed to.

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

I beg to move amendment 11, in schedule 2, page 54, line 11 at end insert—

“20A (1) In this paragraph ‘relevant regulations’ means regulations under section 43 which create any offence for the purposes of the enforcement of any requirements imposed by or under regulations under section 43.

(2) The appropriate Minister making any relevant regulations (‘the Minister’) must at the required time lay before Parliament a report which—

(a) specifies the offences created by the regulations, indicating the requirements to which those offences relate,

(b) states that the Minister considers that there are good reasons for those requirements to be enforceable by criminal proceedings and explains why the Minister is of that opinion, and

(c) in the case of any of those offences which are punishable with imprisonment—

(i) states the maximum terms of imprisonment that apply to those offences,

(ii) states that the Minister considers that there are good reasons for those maximum terms, and

(iii) explains why the Minister is of that opinion.

(3) Sub-paragraph (4) applies where an offence created by the regulations relates to particular requirements and the Minister considers that a good reason—

(a) for those requirements to be enforceable by criminal proceedings, or

(b) for a particular maximum term of imprisonment to apply to that offence, is consistency with another enactment relating to the enforcement of similar requirements.

(4) The report must identify that other enactment.

(5) In sub-paragraph (3) ‘another enactment’ means any provision of or made under an Act, other than a provision of the regulations to which the report relates.

(6) In sub-paragraph (2) ‘the required time’ means the same time as the draft of the statutory instrument containing the regulations is laid before Parliament.

(7) This paragraph applies to regulations which amend other regulations under section 43 so as to create an offence as it applies to regulations which otherwise create an offence.”

This amendment requires that where regulations under Clause 43 are made which include offences, a report specifying the offences and giving reasons for any terms of imprisonment that apply to them must be laid before Parliament.

As I said earlier, amendment 11 provides for an important safeguard that will apply when powers are used to create criminal offences. It will require the Government to lay a report before Parliament explaining the Minister’s reasons for using the powers—amendments 10, 11 and 12 are really a package—whenever a criminal offence is created in new or amended anti-money laundering regulations under clause 43.

The amendment requires such a report to be laid at the same time as the draft statutory instrument containing the relevant regulations. Regulations under clause 43 will of course be made using the draft affirmative procedure, unless they update the UK’s list of high-risk jurisdictions in connection with which enhanced due diligence measures are required. The report will therefore facilitate effective parliamentary scrutiny of changes to the UK’s AML regime and will go further than the status quo in enabling Parliament to scrutinise the creation of criminal offences through money laundering regulations.

The amendment specifies that the following elements should be included in the report: the offences that have been created and the requirements to which they refer; the good reasons why those requirements need criminal offences; the maximum prison terms for any offences created that are punishable by imprisonment; the good reasons for setting the maximum prison terms at the levels at which they have been set; and, where the creation of an offence is justified by reference to an existing offence in another enactment, reference to that other enactment.

The requirement for the Minister to demonstrate that they have good reasons for using the power ensures that it cannot be used lightly. I hope hon. Members agree that such reports will provide increased transparency about the reasons for creating criminal offences and give Members a solid basis for holding the Government to account when debating anti-money laundering regulations made under the Bill.

Nevertheless, the Government remain very aware that creating criminal offences and setting penalties in regulations is a serious matter that is not to be undertaken lightly. I am therefore happy to repeat reassurances and existing safeguards that the Government introduced in the other place. As it stands, a criminal offence can be established under clause 43 only if regulations provide either a mental element necessary for the commission of the offence or a defence to it, or both. That will maintain the existing policy position under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and preserve the deterrent effect established by criminalising breaches of anti-money laundering and terrorist financing regulations.

The amendment is an additional safeguard to the changes the Government have already introduced in response to concerns raised in the other place by Lord Judge and others. We listened to those concerns, and the amendment addresses them. It will ensure that Ministers cannot create criminal offences or set penalties —up to a maximum of two years’ imprisonment—without good reasons, and that Parliament has all the information it needs to hold Ministers to account.

That contrasts starkly with current practice, in which new criminal offences are created through statutory instruments made under section 2(2) of the European Communities Act 1972 under the negative procedure, without any need to state reasons, with no information about such reasons being provided to Parliament, and with no requirement for a vote in Parliament to approve them. The measure is, therefore, a better way of ensuring that proper safeguards are placed in the Bill with respect to offences, rather than removing the ability to create them, and so weakening the UK’s anti-money laundering regime.

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury)

I am grateful to the Minister for his comments. I shall not dwell on the matter, because we have already talked about the amendment to an extent in a previous debate. I repeat our concern that the regime is not sufficiently accountable. Reference to the previous regime may be inappropriate, because the framework in that case was set at EU level, and it was a question of implementing it in the UK. Surely with the brave new dawn that some see coming as we leave the EU, we should be aiming at a system that is as accountable as possible.

In our previous discussions about offences in relation to sanctions, Ministers suggested that there could be a need for speed in the creation of new regimes or new types of criminal offence, because, for example, a human rights challenge could arise suddenly, or there could be gross violations of human rights in a particular country, and we might need to respond quickly. Surely such a situation does not apply to money laundering. It is peculiar that the same almost fast-track, post hoc style of system should be applied to criminal offences to do with money laundering. It would be helpful to have more information about why the Government believe that in the relevant category of criminal offence, there cannot be the same—or at least movement towards the same—degree of scrutiny as there would be in other contexts, when the question of speed surely does not apply. In fact, the Minister did not mention speed.

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

I take the hon. Lady’s concerns seriously. As my right hon. Friend the Minister said earlier, when we were discussing similar matters on Tuesday, we should be happy for hon. Members to meet officials to discuss outstanding concerns. I have set out in the amendments a clear affirmative process for laying a statutory instrument before the House, in a situation where Parliament will be able to discuss the requirement and its extent, the underlying rationale, and a mechanism for reporting to Parliament. If there are particular issues and specific cases that the hon. Lady wants to raise, I suggest that we convene a conversation with officials to deal with them. As we move forward, I am keen to secure the widest possible support and consensus about the Bill.

Amendment 11 agreed to.

Amendment made: 12, in schedule 2, page 54, line 39, at end insert—

‘( ) In paragraph 15 (offences), any reference to regulations under section 43 includes the Money Laundering Regulations 2017.

( ) In paragraph 20A (report in respect of offences)—

(a) the reference in sub-paragraph (1) to requirements imposed by or under regulations under section 43 includes requirements imposed by or under the Money Laundering Regulations 2017, and

(b) the reference in sub-paragraph (7) to other regulations under section 43 includes the Money Laundering Regulations 2017.”—

This amendment has the effect that, while the Money Laundering Regulations 2017 remain in force, offences may be created by regulations under Clause 43 for the purposes of enforcing requirements in the 2017 regulations.

Schedule 2, as amended, agreed to.

Ordered, That further consideration be now adjourned. —(Mike Freer.)

Adjourned till Tuesday 6 March at twenty-five minutes past Nine o’clock.