The Sanctions and Anti-Money Laundering Bill 2017-19

Towards the end of 2017, the UK Government drafted the new Sanctions and Anti-Money Laundering Bill. This was to provide a domestic legislative framework post Brexit.

This Sanctions and Anti-Money laundering Bill (“the Bill”) was intended to be a quiet piece of legislation providing the UK its own sanctioning rights after the withdrawal from the EU, indeed, one of many bills drafted to pass through parliament in efforts to future-proofing the UK’s legislative framework once it is outside the scope of EU Directives. Albeit given the latest developments around the world, the Bill has attracted more attention than it could have imagined.

Sanction rights the Bill suggests

As proposed, the Bill will give the government discretionary powers to impose a wide range of sanctions, within areas of information, finance, trade, aircraft, shipping and immigration from the outset. It will also enable the government to ensure that the UK keeps up with global measures to combat money laundering and terrorism. This includes the implementation of Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regimes from the United Nations (UN).

Who will have the power to impose sanctions regulations?

The bill as drafted, provides new powers to be afforded to an ‘appropriate’ minister (Secretary of State or Treasury) to make additional regulations and discretionary sanctions, effectively, allowing Ministers to have their say.

Where the Minister considers it necessary to act outside of a UN or international obligation, they will be required to submit good reasons to Parliament. Only after consideration will regulations be changed or updated. More about this can be read here. https://publications.parliament.uk/pa/bills/cbill/2017-2019/0157/en/18157en.pdf

Designated Persons

Designated Person (DP) status is central to sanctions legislation. The Bill defines a DP as the individual, group or organisation who is subject to a sanction.

DPs can be those who support poor regimes and us or production of Weapons of Mass Destruction (WMD) programmes, including ballistic, nuclear and chemical weapons. Ministers will also have authority to enforce sanctions based on the level of power held by an individual, group or organisation, and what that power will allow them to do, or by their suspected involvement in criminal, unjust or inhumane activities for example.

Types of sanctions

The Bill recognises several reasons to set sanctions. These are categorised as relating to; information, financial, trade, aircraft, shipping, immigration and a broader category allowing for sanctions that will fulfil UN obligations.

Information

Information transparency is a new addition to the sanctions regime which will allow the government to monitor compliance with the sanctions regime. Where sanctions regulations have been breached, firms will be legally bound to provide information they hold about a DP, including the funds and economic resources under their control, even where held by proxy. This will require firms to keep registers that can be used if required.

Financial Sanctions

Financial or international economic sanctions, will be used to restrict a DP from carrying out their governmental, organisational or personal affairs in the UK and/or in support of prohibiting them across different jurisdictions. Among other means these sanctions will work by freezing financial transactions, denying sources of finance and stopping the receipt of profits.

Trade Sanctions

Trade sanctions will be used to restrict imports and exports that involve DP’s, target countries, specific sectors within target countries or DPs. This will cover goods and technology that are owned, produced, procured, provided or transferred. Investments and company ownership will also be considered within this set of sanctions.

Aircraft

Aircrafts that originate from a sanctioned country, or those owned, chartered and operated by a DP, will be subject to strict terms and conditions. This will enable the UK Government to control movements of aircraft within UK airspace, as well as movements on land.

Shipping

Similarly, to aircraft sanctions shipping sanctions will allow for the UK government to control the movements of ships originating from sanctioned countries, or those owned, chartered, crewed, operated or controlled by a DP. This control will include preventing them from entering UK waters, detaining them if they do, and carrying out enforcement action.

Other sanctions for the purposes of UN obligations

So that the UK can ensure cooperation with global agencies and stay abreast of changes, the Minister will be able to make sanctions under other UN obligations.

Immigration

Immigration sanctions will provide for anyone subject to a travel ban to become an “excluded person” under section 8B of the Immigration Act 1971 [S8b, IA1971].  Any permissions to ‘leave’ (either leave to enter or leave to remain in the UK) will be cancelled under an immigration sanction, and any exemption from immigration control will no longer apply. Travel bans will be used to restrict the movement of a DP and those associated with regimes or groups, considered unacceptable by the international community. The Bill further amends S8b IA1971 to allow for a UK autonomous sanctions regime and for the UK to retain EU travel bans after it  has left the EU.

Anti-money laundering and counter terrorist financing

With respect to AML & CTF, the Bill proposes that a minister may make “provisions” for one or more of the following purposes.

  • To enable or facilitate the detection and investigation of money laundering, or to take direct action to prevent money laundering.
  • To enable or facilitate the detection or investigation of terrorist financing, or to take direct action to prevent terrorist financing.
  • When required, to implement standards issued by the Financial Action Task Force that combat threats to the integrity of the international financial system.

The Bill does not introduce any new AML related obligations further to those set out in MLR 2017. It will however, give the Minister power to make, amend and repeal secondary AML and CTF related legislation, after the UK withdraws from the EU. This means the Minister will have the legal power to transpose EU law with domestic regulations.

In summary

For the UK to play its part in anti-money laundering and counter-terrorism, it is critical to cooperate with global agencies and keep pace with evolving measures. It is equally important to allow a degree of control to enable the UK to respond quickly to emerging issues. The core purpose of the Bill is to provide the UK Government with the tools to do both, ensuring that the UK implements and maintains the highest standard of control, while managing withdrawal from European Directives.

In principle the framework has proposed a balanced approach, both robust and pragmatic. It will be interesting to see how this Bill is implemented into UK legislation and how it’s ‘allowances’ are operated by Whitehall. The main question on everyone’s mind is, ‘will the UK’s post-Brexit sanctions regime be giving the US Office of Foreign Assets Control (OFAC) a run for its money?