UK Parliament debates new sanctions bill
Following a UK Government consultation, the Government introduced a new sanctions and anti-money laundering bill (the Bill) to Parliament on 18 October 2017. The Bill aims to create a new legislative framework in the UK for imposing and implementing sanctions post Brexit. Whilst the Bill is not intended to bring about any substantive change to the existing sanctions regime, the original Bill contained broad powers to reform the UK’s sanctions, anti-money laundering and anti-terrorist financing (AML/ATF) legislative framework in future. A number of the key provisions in the Bill have since been watered down in response to concerns raised in the House of Lords.
What does the Bill mean for banks?
The Government has said that there is no overall policy change to the way the UK will approach sanctions after the UK leaves the EU and that the Bill will enable the UK to continue to comply with UN and other international sanctions regimes. The Bill itself is therefore not expected to bring about significant changes for financial institutions.
The original Bill conferred broad powers in respect of the UK’s sanctions and AML/ATF framework. The Bill came under fire from certain members of the House of Lords including the House of Lords Constitution Select Committee which raised concerns about aspects including the appropriateness of giving ministers a broad “Henry VIII power” to make sanctions regulations and create new sanctions, as well as creating new criminal offences by delegated legislation, without appropriate safeguards in place. Some concessionary changes have now been made to the Bill which provide that a minister may make new sanctions regulations where there is a good reason for making the regulation and the regulation is a reasonable course of action for that purpose. Minsters will be required to submit a report to Parliament justifying their reasoning. In addition new safeguards have been drafted into the Bill to address concerns raised about ministers’ ability to create new criminal offences using delegated legislation. For example, a provision giving minsters the power to create new offences with sentences of imprisonment of up to ten years and to create the rules to evidence and defend those offences has now been dropped.
Whilst the Government has said that it intends to continue working closely with the EU and other international partners on sanctions, the Bill’s broad powers also offer a potential for future divergence between the UK and its international partners which could lead to an increased compliance burden on financial institutions in future.
The Bill, which is the first Brexit-related Bill to face full scrutiny in the House of Lords, completed the House of Lords stage on 24 January 2018 and transferred to the House of Commons on 25 January 2018.
What does the Bill do?
The Bill aims to create a new domestic legal framework to give the UK powers to continue to impose sanctions after the UK leaves the European Union (EU). The Bill will enable the UK to maintain existing sanctions regimes such as United Nations (UN) sanctions that are currently imposed through EU law and allow the UK to introduce measures against new threats where necessary.
The Bill also creates powers to supplement or change the UK’s AML/ATF regime, which will need to be updated after Brexit, although the Bill itself does not include any new reforms to the existing regime.
The Bill gives Government ministers broad powers to make sanctions regulations where they consider it “appropriate” in specified circumstances:
- in order to comply with UN or other international obligations;
- for the purpose of preventing terrorism;
- in the interests of national security or international peace and security; or
- to further a foreign policy objective of the UK Government.
The Bill was amended in the House of Lords to include additional purposes for which a minister may make sanctions regulations such as to promote the resolution of armed conflict and to promote compliance with international humanitarian and human rights law.
The Bill allows financial, immigration, trade, aircraft and shipping sanctions to be imposed and also provides wide scope for ministers to add new types of sanctions in future.
The Bill includes powers to target sanctions at particular individuals or entities. Ministers will have the power to designate persons by name or description and, in the context of financial sanctions, to impose sanctions on persons connected with a prescribed country. Designation powers will be subject to certain conditions, for example, a person cannot be designated by name unless the relevant minister:
- has reasonable grounds to suspect that a named person was involved in an activity subject to sanctions regulations; and
- considers that is it appropriate for that person to be designated, having regard to the purpose of the regulation.
Additional protections apply to persons designated by description. Ministers’ powers to designate by description are limited to cases in which a reasonable person would know that a person meets that description and it is not practicable to name that individual.
Enforcement, challenge and review
The Bill largely maintains the current enforcement regime and relevant legislation such as the Policing and Crime Act 2017 for financial sanctions.
The Bill provides that designated persons will have the right to ask the appropriate minster to vary or revoke a designation and that any decision by the minster can be reviewed by the court under general judicial review principles. As a result of changes by the House of Lords, ministers must provide designated persons with a statement of reasons for the designation.
In addition, the Government will be required to conduct annual reviews of sanctions regulations to determine whether they remain appropriate as well as three-yearly reviews of individual designations.
Exceptions and licensing
The Bill allows for regulations to create exceptions and licences to permit activities to take place that would otherwise be prohibited or restricted by sanctions.
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