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This briefing note is only intended as a general statement of the law and no action should be taken in reliance on it without specific legal advice.

Sanctions and Anti-Money Laundering Bill
 Briefing 
Author
Shaistah Akhtah and Richard Stopford
Date
31 October 2017

Sanctions and Anti-Money Laundering Bill

The Sanctions and Anti-Money Laundering Bill will receive its first significant parliamentary scrutiny on 1 November 2017. The purpose of the Bill is to enable the UK to implement sanctions after Brexit. It will allow the UK to impose those sanctions that it is obliged to implement as a member of the UN as well as sanctions that the UK Government might choose to impose in order to further its own foreign policy objectives. We set out below a brief overview of the next steps for the Bill as well as its intended objectives.

Next Steps

The Bill started in the House of Lords. First reading took place on 18 October. This stage is a formality that signals the start of the Bill's journey through the House of Lords.

The second reading of the Bill is due to take place on 1 November 2017.

At present, the current peers listed to speak at second reading are: Lord Ahmed (Minister), Baroness Bowles, Lord Collins, Lord Hain, Lord Hope, Baroness Northover, Lord Paddick, Lord Pannick, and Viscount Waverley. We will listen particularly carefully to the comments of Lord Hope, former Deputy President of the Supreme Court, and Lord Pannick, a leading public law QC.

In terms of next steps, if the Bill has support at second reading, it will then move on to committee stage, report stage and then third reading and (if approved) it will follow the same procedure in the House of Commons. Please see the image below:

 

UK Government's Objectives

The UK Government's current power to implement sanctions flow from the European Communities Act 1972 which is due to be repealed as part of the Brexit process. Whilst the UK has some limited domestic powers to impose sanctions (e.g. the Terrorist Asset Freezing Act 2010), these are not sufficient to implement the full range of sanctions currently in force at the UN and EU level.

Without a domestic legal framework to implement sanctions after the European Communities Act 1972 is repealed, the UK would be in breach of its international legal obligations. The UK will therefore need new powers to meet its international obligations as a UN member state. The UK Government therefore wishes to pass the Sanctions and Anti-Money Laundering Bill in order to give itself the necessary powers.  

The Bill aims to allow the UK Government to impose sanctions in two circumstances. First, to comply with UN or other international obligations (for example, any resolution passed by the UN Security Council Resolution or any arms embargo suggested by the Organisation for Security and Co-operation in Europe). Second, for one or more of the following purposes – the prevention of terrorism, the interest of national security, in the interests of international peace and security and to further the foreign policy of the UK Government.

The UK currently implements 6 UN only sanctions regimes (which are binding and all UN member states implement them). The UK Government does not envisage substantive changes to these regimes when the UK leaves the EU.

The UK currently implements 18 EU only regimes. The UK Government intends to operate with greater flexibility in this area. The current process is as follows:

(a) the EU proposes sanctions;

(b) the UK Representation to the EU consults with the relevant UK Government department (e.g. HM Treasury on financial sanctions);

(c) the UK Representation to the EU participates in EU negotiations until EU agreement;

(d) the EU produces a regulation;

(e) the UK implements the regulation through a statutory instrument.

The proposed post-Brexit process under the Bill is more streamlined:

(a) UK Government proposes sanctions;

(b) the FCO coordinates with the relevant UK Government department

(c) the UK Government implements a statutory instrument.

In deciding whether to designate an individual or entity, the UK Government will use the evidential test of a Minister having "reasonable grounds to suspect" that the relevant individual or entity is involved in prohibited activities. This is currently the standard used when considering designations at the UN and the EU. The UK Government claims it is broadly equivalent to the "sufficiently solid factual basis" standard applied by the EU Courts.

Whilst the Bill is at the early stages of its passage through parliament and may be subject to amendment and further scrutiny, the above is an initial guide to the status of the Bill and the UK Government's intentions. Should you have any queries in relation to the Bill or its possible implications for you or your business, please contact Shaistah Akhtar  and Richard Stopford.