The Government has introduced the Sanctions and Anti-Money Laundering Bill (the Bill) into Parliament. It started its Parliamentary process in the House of Lords on 18 October and follows consultation and announcements from earlier in the year. In this article, Emma Radmore looks at its key provisions.
What does the Bill do?
The main, and urgent, purpose of the Bill is to give the UK the powers it needs to implement sanctions post-Brexit where those sanctions currently have effect through EU law. The Government has previously said that existing domestic legislation and EU legislation that will be converted into domestic legislation by the EU (Withdrawal) Bill would not provide the right powers.
However, the Bill goes further than merely replicating domestically the current EU sanctions process. It will also ensure the UK can introduce new measures against new threats.
Power to make sanctions regulations
The key power in the Bill gives "an appropriate Minister" (which is the Secretary of State and the Treasury) the power to make sanctions regulations. Sanctions regulations are widely defined, to catch financial, immigration, aircraft, shipping or other sanctions for the purpose of UN obligations. The Minister may make the sanctions where the Minister considers it appropriate:
- For complying with a UN obligation
- For complying with any other international obligation
- For further preventing terrorism, or if it is in the interests of national security or international peace or security, or would further a foreign policy objective of the UK government.
As a control on governmental powers, any Regulation must state which of these purposes they are made to fulfil.
The Bill describes what each type of sanction comprises – and this broadly reflects the scope of the current regime, but provides more legislative detail. For example:
- The defined term "designated persons", remains, and there is now a new concept also of a "prescribed country".
- Financial sanctions may impose prohibitions or requirements relating to:
- freezing funds or economic resources owned, held or controlled by designated persons
- preventing financial services from being (i) provided to, (ii) procured from, or (iii) made available to, or, in each case, for the benefit of, designated persons, persons connected with a prescribed country or a prescribed description of persons connected with a prescribed country (we will refer to these, collectively, as "sanctioned persons")
- preventing funds or economic resources being received from sanctioned persons
- preventing financial services from being provided where those services relate to all or specified products issued by designated persons;
- preventing trading in financial products issued by a designated person
- preventing persons from owning, controlling or having a "prescribed interest" in sanctioned persons
- preventing entering into or continuing commercial relationships with sanctioned persons.
An amendment to the Immigration Act would allow the Government to impose travel bans in Regulations it makes under s1 of the Bill.
"Funds" and "economic resources" retain their current meanings, to make the scope as wide as possible, including, for example, all cash drafts, payment instruments, interest, credit and financial commitments, export financing instruments and any other asset which is not "funds" but can be used to obtain funds, goods or services. "Freezing", and, in that connection "dealt with", refers to preventing funds being moved, used, altered or in any other way having their volume, location, ownership etc changed, or any other change is made that would enable their use – or, in relation to economic resources, their exchange for funds, goods or services.
"Financial services" are any services of a financial nature (the Bill includes a long list, but the list is not exhaustive). "Financial products" means money market instruments, fx, derivatives, exchange and interest rate instruments, transferable securities and other negotiable instruments and financial assets.
Further Regulations (made under what is known as a "Henry VIII power") can revoke or amend Regulations made under the Bill or authorise new Regulations that impose additional prohibitions or requirements, or to amend the definition of "sanctions regulations" provided they retain the same purpose.
The appropriate Minister will have power to designate persons by name or description, and to designate different persons for the purposes of different parts of a relevant regulation. Controls will operate to ensure a person cannot be designated unless the Minister both
- Has reasonable grounds to suspect the person is "an involved person" (someone who is or has been involved in an activity the regulations specify, or is a person who is owned or controlled (directly or indirectly) by, acting on behalf or at the direction of, or is a member of or associated with such a person)
- Considers it is appropriate to make the designation given the permitted purpose of the regulations.
Similar considerations apply where the designation covers a certain description of person. Separately, regulations may designate a person for the purposes of complying with UN Security Council Resolutions.
Exceptions and licences
The Bill allows the Minister to make regulations that create general or specific exceptions or licensing requirements to prohibitions or requirements and for any prohibition not to apply to activities done under licence from the appropriate Minister. As currently, licences can be general or specific, may contain conditions and be time-limited, and may include notification requirements. Grounds for licences and exceptions are likely to be based on humanitarian needs, or payments to fulfil contractual or other obligations.
Regulations may require specified persons to keep records or make reports of certain matters, and give authorities investigatory powers. The Government can use these powers to require reporting of suspected dealings with sanctioned persons, or where there are grounds to believe a designated person has breached sanctions.
Regulations may set out how breaches of bans or licenses may be enforced but there are controls on the punishments, so the strictest imprisonment term may not be longer than 10 years. Civil monetary penalties would also apply, in line with the Policing and Crime Act 2017, so could be up to £1m or, if higher, 50% of the estimated value of the funds or economic resources in question.
The Bill will not only allow Regulations to apply to any conduct by anyone in the UK or its territorial sea, but also allows for Regulations to be made imposing requirements on any UK person for conduct outside the UK. As with the current law, this includes any UK national or UK incorporated entity, as well as those regarded by the current Money Laundering Regulations as carrying on business in the UK.
The relevant Minister will have power to make, vary and revoke designations, and will be obliged to revoke a designation if at any time the relevant grounds for the designation being appropriate are not met, and all designations must be reviewed every 3 years.
While any designations are subject to a three year review period, the relevant Minister must review any Regulations annually to ensure they are still appropriate.
The Bill includes temporary powers to enable the addition or removal of names from sanctions lists made under EU law that are retained as of the date of Brexit.
A person who has been designated as a result of a UN decision or whose name appears on an EU list, has the right to request a review, and for the UK to try to get the name removed from the UN list. Once the request is made, the Secretary of State can decide whether or not to comply with the request. There are also provisions that allow appear to the courts, which will follow the principles of judicial review.
Once any Regulations are made, the relevant Minister must publish guidance about the prohibitions and requirements. The Bill says this may include guidance on best practice, enforcement and circumstances in which the requirements do not apply.
Compliance with requirements
The Bill introduces a protection against civil proceedings where a person has acted (or not acted) in the reasonable believe their behaviour has complied with relevant regulations or directions.
Other types of sanction
The Bill also addresses, in detail:
- Aircraft sanctions, which include the imposition of prohibitions or requirements relating to "disqualified aircrafts" (ie those owned, chartered or operated by sanctioned persons, or registered in or operating from a prescribed country), such as detaining them and not permitting them to fly over UK airspace
- Shipping sanctions, which impose similar prohibitions and requirements on the ownership, use and registration of ships and their entry into and presence in the UK
- Trade sanctions, including the purposes for which trade sanctions can be made, in terms of export, import and movement, and how the sanctions can relate to designated persons, prescribed countries or persons connected with prescribed countries.
Money Laundering and Terrorist Financing
The Bill also allows for a Minister to make Regulations for the detection, investigation or prevention of money laundering or terrorist financing (as defined in the Proceeds of Crime Act 2002 and relevant anti-terrorism legislation respectively) or for the purpose of implementing Financial Action Task Force standards. The restrictions can cover goods, technology, services, activities relating to land or military activities, and may cover a range of restricted persons or circumstances. The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) will be classed as "EU-derived domestic legislation" under the EU Withdrawal Bill, so will have effect post-Brexit. Any changes under the proposed fifth Money Laundering Directive that fall to be implemented before Brexit would probably be done by amending the MLR 2017. The Bill introduces provisions aimed at retaining the power to make changes to existing laws once the enabling provision in the European Communities Act 1972 is repealed, where those changes go further than the "corrective" changes the Withdrawal Bill proposes to allow for 2 years after Brexit.
Schedule 2 to the Bill set out an indicative list of what the regulations might cover, which includes:
- Requiring the carrying out of risk assessments
- Imposing requirements to have policies, controls and procedures in place
- Requiring certain measures to be taken in relation to customers
- Requiring provision and disclosure of information
- Providing for the creation of registers and records, including of people with significant control and beneficial owners
- Giving rights to supervisory authorities, including investigation and enforcement powers
- Allowing the creation of criminal offences with punishment of imprisonment of up to 2 years
Procedure for making statutory instruments
Any statutory instrument made under the Bill which is related to UN regulations and is not an instrument that makes regulations under section 1 (all the different types of sanctions regulation discussed at the beginning of this article); section 39 (additional sanctions); section 40 (regulations about immigration claims relevant to immigration designations) or section 41 (money laundering and terrorist finance) requires the approval of the draft regulation by each House of Parliament (unless, in the case of a money laundering regulation it relates only to the list of high-risk third countries). Any other instrument must be placed before Parliament after being made, and must be approved by both Houses within 28 days of the day on which it is made. If it is not so approved, it ceases to have effect at the end of that 28 day period (although will have been effective during the period).
Deferred Prosecution Agreements
The Bill adds offences under sections 1 or 41 to the list of offences that can be addressed through a DPA.
As at the beginning of November, the Bill had started its Parliamentary process in the House of Lords, and was due to be heard at Committee staged on 21 November. Once through the Lords stages, it will then need to be heard in the Commons, before a potential "ping pong" to agree amendments before the Bill can progress to Royal Assent.