Skip to main content

Office of Foreign Assets Control List

Volume 465: debated on Thursday 25 October 2007

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Watts.]

I am very grateful to have the opportunity to raise the case of my constituent Mr. Ricks and the operation of the OFAC list. It may be that, during the course of my remarks, the Minister will wonder why I have not decided that this is a Treasury issue, but in fact I believe that the only action that can now be taken to assist my constituent has to be through the Foreign Office and the American embassy. At the end of my remarks, I shall also ask the Minister to widen this matter beyond Mr. Ricks and to consider the position in general of British nationals on the OFAC list.

In May 2007, Mr. Ricks, a constituent of mine, decided to do what millions of people do every year—sell his house and downsize. There was nothing particularly unusual in such a decision, and he sold his house, realising the sum of £800,000. He was not yet ready to buy the house into which he wished to downsize, so he very sensibly did what millions of people do when they have money that they are not going to use immediately, and decided to put this very considerable sum on deposit in order that it should earn him money until such time as he came to use it to buy a house. There is nothing at all unusual in that; as I say, millions of British citizens will be doing the same thing in any given year.

Mr. Ricks looked around for the best deals. His own bank was the National Westminster, where the £800,000 was held at that time. He decided that Abbey had the best deal, so he wanted to transfer his money from the National Westminster to Abbey. Again, most people would say, “So what?” Such a transfer is also something that millions of people do every year. They switch money between one financial institution and another in order to get a better deal.

In May 2007—I repeat that this took place in May—Mr. Ricks authorised the National Westminster to transfer to Abbey £800,000. That was done through a method called a CHAPS—clearing house automated payment system—transfer, which he was assured was the most secure method. The money never arrived at Abbey. Seemingly, it had disappeared into the ether. I ask how people would feel if all their money—our houses are where most of us have our money—which is their security in retirement and their only means of equipping themselves with another house, disappeared into the ether.

Much worse was to follow. Mr. Ricks assumed, as I, and I think the Minister too, would have done if it had happened to us, that there had been a mistake and the money had been lost in transfer, that it was okay and that either NatWest or Abbey would find it, and it would come back. That is a perfectly reasonable attitude for him to take, but in fact he could not find out what had happened to his money. The transfer was completed on 15 May, but nobody could explain where the money had gone. Abbey could not, and I have to say that I consider that it treated Mr. Ricks rather poorly, because it more or less shrugged and said that it could not explain it; the money had never arrived, and it could not say what had happened.

However, it transpired—under some pressure—that the money could not be transferred directly from the National Westminster into Abbey, as my constituent had quite reasonably assumed and as I would have assumed; Abbey did not have the necessary clearing arrangements to deal with the CHAPS transfer, so Citibank dealt with it. Again, one might think that there is nothing very odd about that; it was just that a third financial institution had become involved. Naturally, representations were made to Citibank—where was the money?

Eventually, Abbey told my constituent the not-wholly-correct information that the money was being held by Citibank—that much was true—and that it was being checked for evidence of money laundering because it was such a large sum. At that stage, I intervened with the chairman of Abbey and discovered that the money was being held by Citibank because Mr. Ricks was on the OFAC list. OFAC has no legal force in this country, only in the United States, but because Citibank is US-owned, it froze a transfer of money within Britain from one British bank to another and it took many weeks for my constituent even to find out why it had done that. To be fair to Citibank, when it told the NatWest in May that it could not process the money, it said why, but that information was not passed to my constituent.

So at that point, the money is arbitrarily frozen by Citibank. My constituent employs a solicitor and goes to the ombudsman. After 10 weeks, the ombudsman says that he cannot help; a barrister contests that, and it goes back to the ombudsman, who again insists that he cannot help. Meanwhile, what is happening to my constituent? He has no money; it has been arbitrarily taken from him. He is homeless—well, he is in a bedsit.

Why did Citibank take his assets? It was because 20 years ago—not last year or the year before—my constituent had had business dealings in Iraq. I have supplied the Minister confidentially with the details of that involvement, which certainly had nothing to do with helping Iraq, but a lot to do with helping the British Government at the time. Be that as it may, he has not had involvement in Iraq for a long time.

By July, we got the first instruction, which was that an application to be removed from the OFAC list should be completed by my constituent. He did that right away, as one would imagine. Here we are in October, and my constituent has still not been taken off the OFAC list and still does not have his money—let alone the interest that should have accrued while he held it at Abbey. On 18 September, I received what I regard as a not terribly helpful, if not dismissive, letter from a Treasury Minister telling me that this was a matter for the US embassy. I had already managed to work that out; I had written to that embassy on 3 August. No reply was ever received. I have to say that on the not very many occasions—although there have been some—when I have had to deal with the US embassy, its reaction has been characterised by, to say the very least, a failure of alacrity; I hope that the Minister was listening to that.

On 26 September, we wrote a chasing letter to the embassy, which said that it had no record of the first letter. In October, the ambassador finally replied. He told us what we already knew: the money was held in Citibank and the only way to get it back was for my constituent to come off the OFAC list. The ambassador also said that it was a matter for the US Treasury Department and not for him. That was it. I have to say that I am running out of excuses for America. It seems to me that it is extremely high-handed and arrogant, and does not care too much for individual citizens who do not happen to be US citizens. There has been absolutely no positive result from my contact with the embassy.

That is why I am asking the Minister if she will do two things. I will be most interested in her response to this situation. First, will a Minister—because the embassy is not taking any notice of me—make urgent and direct representations to the United States ambassador on Mr. Ricks’s behalf. I think that the Foreign Office, together with the Treasury, should consider whether we are prepared to tolerate a situation in which money transferred between one British bank and another can be impounded on the say-so of the United States Government. I also think that we should ask the US Government if they will contact all British citizens on the OFAC list; ensure that they are aware—as Mr. Ricks was not until this happened—that they are on the OFAC list; ensure, in turn, that they are aware that if any of their assets, even from house sales, should fall into the hands of any American institution, they could be impounded; give each and every one of them the opportunity to apply for discharge from the OFAC list; and do so without having to wait for any further cases of this sort.

I also think that the Treasury and the regulators should look very carefully at the operation of Citibank in this country, and at why money that was simply passing from one British bank to another should be under the control of anybody except the regulators and the law of this country. I appreciate that the Minister’s Department is only half of this story, because the Treasury is the other half—I am sure that she will pass my comments on to her colleagues there—but I would be grateful if she would promise me that really serious representations will be made to the embassy and to the US Government, first, on behalf of Mr. Ricks, and secondly, on the propriety of that Government’s controlling money passing lawfully between institutions in this country.

I congratulate the right hon. Member for Maidstone and The Weald (Miss Widdecombe) on securing this debate on an issue that affects her constituent. She asked several questions, and I will do what I can to answer them.

As the right hon. Lady outlined, someone who is on an Office of Foreign Assets Control sanctions list and whose funds have been frozen by a US bank has two possible remedies. First, they, or the bank holding their funds, can apply for a licence from OFAC permitting their funds to be released. There is guidance on the OFAC website about how to apply for a licence. Secondly, if the individual believes they have been incorrectly or unjustly designated by the US, they are able to apply to OFAC and request that they be de-listed, as the right hon. Lady’s constituent has done.

Supporting the UK economy and business through an open and expanding global economy is one of the Foreign Office’s key strategic priorities. We firmly support an international rule-based system within which to conduct business. The challenge for the Government is to assist British nationals coming into contact with foreign businesses and Governments.

The concept of extraterritorial jurisdiction relates to the wider issues that the right hon. Lady mentioned. It raises important questions about state sovereignty and the limits that international law places upon the reach of domestic law. In order to prevent conflicts between jurisdictions, international law has developed widely accepted grounds on which a state may exercise its jurisdiction by prescribing and enforcing its laws. The primary basis of jurisdiction under international law is territorial and states may also extend their laws to their own nationals wherever they may be. In certain circumstances, states may exercise their jurisdiction to regulate the conduct of non-nationals abroad when their own vital security interests are threatened. In some areas, the US has adopted a broader view of the extent of its own domestic jurisdiction, taking the view that it is entitled to exercise jurisdiction over the activities of non-nationals abroad merely because they have effects within US territory. For example, in the anti-trust field, the US has assumed jurisdiction over transactions, wherever and by whoever they take place, that have effects in the US.

Over the years, the UK has repeatedly disputed the proper extent of US jurisdiction in this field. The US also assumes broad extraterritorial jurisdiction in other areas, such as the Foreign Corrupt Practices Act, which permits criminal suits in respect of corrupt activity where only an element of it takes place within the US. The jurisdictional reach is very broad, as it encompasses acts committed by non-US nationals outside the US, regardless of any US security interest or effect within the US. The British Government have a strong commercial and legal interest in challenging broad assertions of extraterritorial jurisdiction by US courts, including under the alien tort statute, but currently intervene only on a case-by-case basis. I can tell the right hon. Lady that the Government have recently intervened in the US courts to express our concerns about the assertion of extraterritorial jurisdiction under US law.

The US is, of course, a key partner in our mission to support effective and fair international economic rules and standards. The Foreign Office understands why the US Office of Foreign Assets Control has put in place the kind of measures it has for trade sanctions based on US foreign policy and national security goals. Equally, in the UK, binding United Nations embargoes are implemented by the refusal of export licences for the export of the relevant goods and technology on the “military list” that forms part I of schedule 1 to the Export of Goods, Transfer of Technology and Provision of Technical Assistance (Control) Order 2003. In addition, the supply of such items from the UK, or supply abroad by UK-registered companies and nationals is prohibited by various Orders in Council made under the United Nations Act 1946. It appears that the right hon. Lady’s constituent’s funds have been frozen under US legislation of a similar nature.

On the principles for Government intervention in extraterritoriality cases, the right hon. Lady raised very important issues that the Foreign Office is considering. In conjunction with other Departments, we are close to approving a set of guiding principles, drafted in September 2007, for dealing with extraterritorial cases, which will further clarify the Government’s position.

In relation to the right hon. Lady’s constituent, I am sure that she agrees that it is important that the Government are able to track the international flow of money as an essential tool in combating terrorism and international crime. I understand that the right hon. Lady’s concerns relate to something that appears to have happened solely in the UK, but there are a number of questions to which I would need the answers in order to assist the right hon. Lady and her constituent. Were the constituent's funds transferred to the US or did they remain within the UK at all times? Which entity is holding the funds? Is it a UK or US-registered company?

I am grateful to the Minister, but my constituent cannot answer those questions. He does not know where his money is. It was last seen in his account in the NatWest. He does not know whether it has been here all the time or whether it has been whizzed out to the US. He transferred money from the NatWest to the Abbey. That could not have been more British, and the transfer went via Citibank. He does not know where it is; I do not know where it is; the American Government know where it is. All I want the Minister to do is to shake them into giving it back to him.

I understand the right hon. Lady’s frustration and that of her constituent. Clearly, I would expect the banks to answer the questions. After all, the right hon. Lady’s constituent is a customer of the bank and the bank should respond to such matters.

However, the right hon. Lady recently wrote to the Foreign Office about the matter and I am wary of saying more on the Floor of the House without having all the relevant facts. On that basis, I invite the right hon. Lady to come and see me and discuss in more detail her constituent’s case and the transfer of the funds. I will try to do whatever I can to assist.

Question put and agreed to.

Adjourned accordingly at twenty-five minutes to Six o’clock.