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Global Anti-Corruption Sanctions

Volume 811: debated on Tuesday 27 April 2021


The following Statement was made in the House of Commons on Monday 26 April.

“With permission, Madam Deputy Speaker, I should like to make a Statement on our new global anti-corruption sanctions regulations.

Corruption has an immensely corrosive effect on the rule of law and trust in institutions. It slows development, drains the wealth of poorer nations and keeps their people trapped in poverty. It poisons the well of democracy around the world. Whistleblowers and those who seek to expose corruption are targeted, and some have paid the ultimate price with their lives, including, of course, Sergei Magnitsky himself, the inspiration for our human rights sanctions regime. But his courage was not in vain. The framework of sanctions that we are launching today, shared by some of our partners around the world, flows directly from his decision to take a brave stance against injustice, and that will not be forgotten.

This country has an important role to play in the fight against corruption. Our status as a global financial centre makes us an attractive location for investment, and we are proud of that and welcome it. But it also makes us a honey pot—a lightning rod—for corrupt actors who seek to launder their dirty money through British banks or British businesses. That is why we have already taken steps to become a global leader in tackling corruption and illicit finance. Our law enforcement agencies are recognised as some of the most effective in the world. The National Crime Agency’s international corruption unit and its predecessors have restrained, confiscated or returned well over £1 billion of assets stolen from developing countries since 2006. My department continues to provide funding for this vital work.

The Bribery Act 2010 criminalises bribery and the failure of businesses to prevent bribery from happening in the first place. In April 2016, the UK was the first in the G20 to establish a public register of the beneficial owners of companies and similar legal entities. That was an important first step in tackling the use of anonymous shell companies to move corrupt money around the world. I can tell the House that more than 4.5 million companies are now listed on that register.

In 2017, we adopted the ambitious five-year anti-corruption strategy, bringing in measures such as unexplained wealth orders, account freezing orders and the like, and that year, we also established the International Anti-Corruption Co-ordination Centre in London, which has helped to freeze more than £300 million of suspected corrupt assets worldwide and led to dozens of arrests. According to Transparency International’s corruption perceptions index, those actions—our commitment to tackling corruption—have seen the UK rise from a global ranking of 20th in 2010 to 11th place in 2020, out of a total of 180 countries.

Against that backdrop, the new sanctions regime that I am announcing today will give us an additional powerful tool to hold the corrupt to account. It will prevent corrupt actors using the UK as a haven for dirty money, while combating corruption around the world. As honourable Members across the House will recall, this follows the launch of our global human rights sanctions regime, which I introduced to the House in July 2020. Since then, the UK has imposed human rights sanctions on 78 individuals and entities involved in serious human rights violations, including in Russia, Saudi Arabia, Venezuela, Pakistan, Myanmar, North Korea, Belarus, the Gambia, Ukraine and, most recently, in relation to Xinjiang in China. Now, we have an equally powerful weapon in the fight against corruption.

As with our global human rights sanctions approach, the anti-corruption sanctions are intended not to target whole countries or peoples but, rather, the individuals who are responsible, and should be held responsible, for graft, and the cronies who support or benefit from their corrupt actions. These regulations will enable us to impose asset freezes and travel bans on individuals and organisations who are involved in serious corruption. Our approach is grounded in and based on the UN Convention against Corruption and related instruments. It has a clear focus on bribery and misappropriation of property, and that includes embezzlement.

Bribery is well understood. It is defined in the regulations. It includes both giving a financial or other kind of advantage to a foreign public official, and a foreign public official receiving a financial or other advantage. Misappropriation of property occurs when a foreign public official improperly diverts property entrusted to them in their official role, and that may be intended to benefit them or a third party. For example, it could be, or include, siphoning off state funds to private bank accounts. It could include the improper granting of licences for the exploitation of natural resources, but whatever the particular circumstances, at the heart of this lies the same debilitating cycle of behaviour: corrupt officials ripping off their own people.

These powers will also enable us to target those who are either facilitating or profiting from such corrupt acts—those who conceal, those who transfer the proceeds of serious corruption and those who obstruct justice relating to serious corruption, and that will not be limited to state officials. For additional clarity in all this, we have published a policy note today that sets out how we will consider designations under these regulations. I know that, across the House, there is always interest in the legal criteria as well as the evidence base that we have to accumulate. It is right to say that we will also ensure due process and the rule of law, so that the rights of others are respected. Those designated will be able to request that a Minister reviews the decision, and they can also apply to challenge the decision in court, which is an important check in the system.

As well as introducing the legal basis for this regime, today, I can tell the House that we are also making the first designations under these new regulations, which include some of the most notorious cases of corruption in recent history. Each designation is underpinned by evidence and meets the test set out in the Sanctions and Anti-Money Laundering Act 2018 and the regulations. So today, I can tell the House that we are imposing sanctions on individuals who have been involved in serious corruption from six countries. First, we are imposing sanctions on 14 individuals involved in the $230 million tax fraud in Russia perpetrated by an organised crime group and uncovered by Sergei Magnitsky. Next, we are imposing sanctions on Ajay, Atul and Rajesh Gupta and their associate Salim Essa for their roles in serious corruption. Those individuals were at the heart of a persistent pattern of corruption in South Africa that caused significant damage to its economy and directly harmed the South African people.

We are also designating three individuals involved in serious corruption in Honduras, Nicaragua and Guatemala, including facilitating bribes to support a drug-trafficking cartel. Finally, we are imposing sanctions on the Sudanese businessman Ashraf Seed Ahmed Hussein Ali, also known as Al-Cardinal, for the misappropriation of significant amounts of state assets in one of the very poorest countries in the world. That diversion of resources, in collusion with South Sudanese elites, caused serious damage to public finances in South Sudan and has also contributed to the ongoing instability and conflict there.

Let us be clear about this: corruption is not a victimless crime—far from it. By enriching themselves, these people have caused untold damage and hardship to their countries and communities, which they exploited for their own predatory greed. So today we send a clear message: those sanctioned today are not welcome in the UK. They will not be able to use British bank accounts or businesses to give their illicit action some veneer of respectability, because their assets will be frozen. I can tell the House that more designations will follow in due course, based on the policy note as well as on the legal criteria that we have set out, and assessed against the evidence.

As with all targeted sanctions, they are most effective when they are backed up by co-ordinated international action, and of course that is particularly important when it comes to corruption, given the fluid, complex and global nature of modern illegal corruption schemes. We will continue to work with our friends and partners, including the US and Canada, who are equipped with the legal framework to take similar action. Today, I hope that the whole House will unite and join me in standing up for the values of democracy, good governance and the rule of law as Britain sends out the clearest message to all those involved in serious corruption around the world: you cannot come here, and you cannot hide your money here. I commend this Statement to the House.”

My Lords, the Opposition warmly welcome the announcement. Corruption costs the global economy billions each year and hands power and influence to the undeserving and dishonest. It must be confronted by a united front of willing national Governments and multilateral institutions. I am pleased that these regulations have now been laid, following the sustained calls by many noble Lords on these and other Benches across the House.

I hope that this legislation marks a turning point for the Government in relation to taking corruption seriously, but for these regulations to be meaningful they must properly resource and support those tasked with investigating and enforcing against corrupt individuals. On this issue, can the Minister confirm what steps the Government will take to provide agencies such as the National Crime Agency with any additional resources that they may need? Given the need for the sanctions to target most effectively those for whom they are designed, can the Minister confirm whether the Government will allow Parliament to put forward names to be considered for designation?

There can be no ignoring the fact that, if the Government are truly determined to tackle global corruption, they must begin at home by adhering to rules and transparency. For a start, when will the Government come clean and publish the long-delayed list of ministerial interests? We must also face up to the fact that while the FCDO sanctions Russian individuals—I welcome the corruption designations contained in the report—MPs continue to accept donations from Russian sources. Of course, as I have repeatedly stated in this House, the Government failed to implement the Russia report recommendations.

One specific point that I ask the Minister to explain is the report in the Times on why Conservative MPs have accepted funding from Aquind, an energy company apparently controlled by Viktor Fedotov. Bob Seely, a Tory member of the Foreign Affairs Committee, told the Times:

“For something as important as this—supplying a large chunk of the UK’s energy needs—it is uncomfortable and somewhat bizarre that elements of its ownership are opaque.”

Of course, its main project—the interconnector project—is subject to a planning application worth £1.2 billion. I hope that there is no link between those two things. Of course, this is why there is absolutely a need for greater transparency.

Turning to the regulations themselves, I am sure the whole House will hope that this statutory framework helps the Government to isolate and deter corrupt individuals, but I would appreciate clarification on a number of areas. I know that the Minister had attempted to conduct a briefing with Members of the House; I hope that he will able to do that at some point in the future. However, first, he will be aware that, under the penalties listed in Part 7, those convicted of contravening these regulations will face up to only 12 months imprisonment or a fine, even in the most severe circumstances. Does the Minister think that this is a sufficient deterrent?

Secondly, the House may recall that I have previously called on the Government to allow greater parliamentary scrutiny of sanctions and designations. As part of these regulations there are many exemptions, which mean that the Government do not have to publish details of individual sanctions. Can the Minister explain what circumstances these refer to, and can he guarantee that this will not be used to avoid parliamentary scrutiny?

Finally, given that the regulations do not include any specific reference to military officials under the definition of “foreign public official”, can the Minister confirm that this legislation will allow sanctions against those who use their role in the armed forces for corrupt purposes?

My Lords, I too thank the Minister for bringing us this Statement. I welcome the introduction of this new sanctions regime and pay tribute to the extraordinary courage of Sergei Magnitsky, after whom these sanctions are named. I also pay tribute to Bill Browder, who is not resting until liberal democracies put these into place, whatever the clear risks to himself.

As the Statement says, corruption has an extremely “corrosive effect”. It undermines development and traps the poorest in poverty; we have all seen extensive evidence of that. I am glad to see sanctions on the 14 individuals involved in the tax fraud in Russia that Magnitsky uncovered. Surely, though, we need to sanction those at the very highest levels in Russia, who have raided its economy to create their extraordinary wealth while most Russians live in poverty. I am pleased to see the sanctions on the Guptas in South Africa, and I am sure that the noble Lord, Lord Hain, will be very pleased—he has fought a doughty campaign against them.

It is clearly vital that we work with others if these sanctions are to be most effective. We had been working on this area with our EU partners before we left the EU, so I ask: what progress is being made in this regard given our departure and, therefore, the reduction of our influence within our continent?

The Statement notes that the UK is a leading “financial centre”, and we certainly hope that this will continue, but that means that there is a risk of money laundering here. Last year, Transparency International said that it had identified more than £5 billion of property in the UK bought with suspicious money, one-fifth of which came from Russia; in its view, half of all the money laundered out of Russia is laundered through the United Kingdom. What of the Russia report and political donations, as the noble Lord, Lord Collins, has just mentioned? Much more clearly needs to be done here.

The Statement notes the UK’s public register of “beneficial owners”, but does not address the situation in the overseas territories or the Crown dependencies. Can the Minister comment on the vital need for progress here? Efforts will also need to be made to ensure that cryptocurrencies are not a new route to hide corruption—could he comment on this? Does he agree that it would make sense if the Government set up an independent commission to consider where and against whom sanctions should be used? This would be less likely to be swayed by the political considerations of any Government and to be fair, effective and transparent.

Talking of transparency, the Government need to make much progress themselves in relation to donations and influence. The Statement notes the importance of the National Crime Agency’s international corruption unit and its predecessors, and that the NCA has, over the last 15 years, stopped £1 billion from going astray. Although I am glad to hear that, does the Minister agree that this is a paltry sum when we consider the funds washing around corruptly?

I am not overly impressed by the International Anti-Corruption Coordination Centre in London, which has helped to freeze only about £300 million of suspected corrupt assets worldwide. In 2017 alone, the then head of the Angolan sovereign wealth fund channelled £500 million through London, which was intercepted and returned to Angola, with the head being held to account. These figures therefore indicate that we are simply scratching the surface. The UK Anti-Corruption Coalition, whose work in this area is hugely to be welcomed, is surely right when it says that the Government must ensure that corruption and human rights sanctions regimes are “properly resourced”, including by providing significant additional resources in this area.

This brings me to my last point. I trust that the Minister is aware—I am sure he is—that ODA funding has gone into supporting such work. Can he tell us whether it will be affected by the ODA cuts? The Statement says that the department “continues to provide funding”, but does not say if this will now be reduced. The integrated review has been undermined by the actions of the Government, particularly through their cuts to ODA. Are we in the same situation here? We clearly need to beef up enforcement agencies, not cut them back. Which are the Government doing?

My Lords, I thank the noble Lord, Lord Collins, and the noble Baroness, Lady Northover, for their support of the Government’s steps. They will both recall that we have often debated the importance of bringing forward global anti-corruption sanctions. I am pleased that we have been able today to bring forward the first set of such designations. Equally, I am grateful to the noble Lord and the noble Baroness for their support regarding the individuals who have been sanctioned.

The noble Baroness rightly mentioned Magnitsky, and if one looks back at recent history, through those tragic events we have seen a strengthening of action in this area, not just by the United Kingdom but by other key partners. I am sure that, in the coming months, we will see further evolution of the work we do in this respect. Therefore, the 14 individuals sanctioned, within the Russian scope of the sanctions, are particularly poignant at this moment. On Bill Browder’s work, I fully align myself with the noble Baroness’s remarks.

The noble Baroness also mentioned the noble Lord, Lord Hain. I pay tribute to his tenacity and persistence in the particular areas and the names that he often raised—such as the Gupta family who have been sanctioned within the South African scope of these sanctions—and I am sure he will be pleased to see that progress has been made.

The noble Lord, Lord Collins, talked, as did the noble Baroness, of the kind of support the Government are extending in challenging the whole issue of economic crime capacities. Last year’s spending review allocated an additional £63 million for the Home Office to fund the continued expansion of the National Economic Crime Centre and other initiatives. Companies House has also been allocated £20 million to support register reform and transformation work. The Government have further announced proposals for an economic crime levy on firms regulated for money laundering purposes, which we hope will raise up to £100 million per year for money laundering prevention and law enforcement efforts.

The noble Lord and the noble Baroness both mentioned the agencies that are responsible for the enforcement of sanctions. This includes the NCA and the Office of Financial Sanctions Implementation, which enforces financial sanctions. We should also acknowledge the work of HMRC in enforcing trade sanctions in particular. Let me assure both the noble Lord and the noble Baroness that there are robust mechanisms in place to ensure that sanctions are adhered to. These include financial and custodial penalties and other powers, such as the seizure and forfeiture of goods.

The noble Lord and the noble Baroness mentioned the importance of law enforcement and due process. Of course, the UK uses sanctions to change unacceptable behaviour, such as constraining and coercing as a means of sending political signals. The purpose of these sanctions is to prevent and combat serious corruption. The Sanctions Act, as the noble Lord and the noble Baroness will recall, contain rigorous due process protections and, in this regard, safeguards as well.

The noble Lord, Lord Collins, asked about parliamentary scrutiny. Of course, I welcome Members’ interest. There is an important role for your Lordships’ House, as well as for Members of the other place and various committees of the House, in scrutinising UK sanctions. We are open to receiving information and evidence in relation to possible future designations; I am sure that that has been demonstrated from the Government’s actions over the last year or so, since we brought in the global human rights sanctions regime. We have sanctioned over 78 individuals and organisations, and we will continue to remain focused in this respect.

The noble Lord and the noble Baroness also raised issues around the Russia report. As I have said before from the Dispatch Box, the Government have published their response immediately on publication of the ISC’s Russia report on 21 July 2020. We have taken multiple actions against the Russian threat. We have, for example, already repeatedly exposed the reckless and dangerous activity of Russian intelligence services. We have called out Russia’s malicious cyberactivity, and sanctioned individuals responsible for hostile and malign activity against the UK and our allies. Specifically, we have also introduced a new power in the Counter-Terrorism and Border Security Act 2019 to stop individuals at UK ports and the Northern Ireland border area to determine whether they have been involved in hostile state activity.

As I have said before, we are going further. We are introducing new legislation to provide security services with additional tools to tackle the evolving threat of hostile activity by foreign states, including a complete review of the Official Secrets Act. The Bill will also modernise existing offences to deal more effectively with the espionage threat and create new offences to criminalise other harmful activity conducted by, and on behalf of, states. We have already implemented the NSC-endorsed Russia strategy and established a cross-government Russia unit that brings together our various equities. I note the noble Baroness’s important point about the evolving nature of cryptocurrencies. I think we are all seized by the importance of how this currency is emerging, and issues of the lack of regulation.

The noble Baroness also raised the issue of the UK overseas territories. Let me assure her that we are working very closely, as we have done previously, with our overseas territories on the importance of transparency and effective access for both tax authorities and crime agencies such as the NCA. We have received very good co-operation already. As the noble Baroness and the noble Lord will be aware, all overseas territories have committed to establishing public registers by 2023.

The noble Baroness talked of funding and support through the ODA. We will continue to support the important work of the NCA, in part through the ODA contributions that the noble Baroness referred to. She raised the importance of working with partners, including the European Union. Indeed, when it comes to specific designations in this area of anti-corruption sanctions regimes, just ourselves, the United States and Canada have such regimes. The European Union have some specific regimes for particular countries. However, we will continue to work across the scope, with our colleagues and friends in the European Union, as well as the United States and Canada, in strengthening our work on our sanctions policy to ensure the maximum impact on those who are sanctioned under these different regimes. As we all agree, the best impact is when we work in tandem with our key partners.

The noble Lord referred to a few additional matters, including ministerial interest. I know that that is due for publication shortly. I am sure that all Members of Her Majesty’s Government who hold ministerial responsibility have duly complied. I am sure that that will be published in the very near future. He raised some specific matters on individuals and Russia. If I may, I will go through the detail of that and respond accordingly to the noble Lord.

Finally, I am seeking in advance, as I normally do, to arrange an appropriate briefing with some of our key officials. I will certainly seek to convene such a meeting at the earliest opportunity.

My Lords, we now come to the 20 minutes allowed for Back-Bench questions. I ask the Minister and the questioners to be pithy, if they can.

My Lords, I congratulate the Government on this Statement to fill the gap in the UK sanctions regime. I join in tributes to the noble Lord, Lord Hain, and Bill Browder. Sadly, victims of corruption rarely receive any justice, so I congratulate the Government on introducing the global anti-corruption sanctions. I encourage my noble friend to consider clamping down on cryptocurrencies, particularly given the environmental damage involved. I ask him specifically: what plans do the Government have for reform of Companies House and the foreign property ownership register?

My Lords, first, I thank my noble friend for her support. I agree with her, and have already made the point about cryptocurrencies. As these currencies emerge, there is a need to evaluate both their regulation and their impact. I know that people across the piece are being impacted by this evolution. As I already indicated in my original answer, we have provided extra money to Companies House for register reform and transformation work. This will continue to be a key focus in strengthening our work. But I accept the premise of my noble friend’s question and that there is more to be done to strengthen the environment in which we operate, including here in the United Kingdom. We will continue to act, both domestically and internationally, to strengthen regulation in this respect.

My Lords, I very much welcome this Statement. The regulations specifically allow for the designation of those associated with those engaged in serious corruption. Could the Government make clear that this includes family members if they benefit from the corruption? In that context, would it be worth reviewing Section 25 and including schools and universities in the list of firms?

On the second question, I will need to take that back and will write to the noble Baroness on the scope. On the specific actions we have brought forward, there are two key elements: bribery and misappropriation. They relate specifically to individuals, whether it is a person who is working to the advantage of a foreign public official or a foreign public official receiving such an advantage. Misappropriation of a property occurs where a foreign public official improperly diverts property entrusted to them in their official role. This may, in answer to the noble Baroness’s question, be intended to benefit them or a third party. “Property” can include anything of value. As to the scope and how that would be seen, each individual case will be assessed on its individual merits and considerations.

My Lords, I declare my interest as a member of the advisory board of Transparency International UK, which, together with Global Witness, is part of the UK’s anti-corruption coalition. A stand-alone global anti-corruption regime in the UK will be welcomed, and an active sanctions regime will be a powerful tool in supporting democracy, the rule of law and good governance. The Statement mentions the improvement of the UK’s position in Transparency International’s Corruption Perceptions Index, from 20th to 11th. It points out that the system to prevent dirty money from entering the UK is failing, with an excess of £100 billion in illicit funds impacting the UK each year. Will the Government take note of and act on Transparency International’s recommendations for reforming the anti-money laundering supervisory regime?

My Lords, we take the recommendations seriously and will ensure that, as has been suggested, they are fully evaluated to see how we can further our own domestic regime to ensure that the issue of money laundering can be tackled head on.

My Lords, I congratulate the Minister on the Statement being open in acknowledging the attraction of the City of London to

“corrupt actors who seek to launder their dirty money through British banks or through businesses.”

As welcome as the individual sanctions announced on Monday are, they are very much one-sided. They target those who take the money, robbing poor communities and global south nations. But of course the ultimate robber barons in the sadly common case of bribery, and those who profit most from the transactions, are those who pay over the money for the favours purchased —they would not pay unless it paid them, often handsomely. So will the Government be actively seeking to identify and sanction those on both sides of these transactions?

The noble Lord, Lord Collins, asked about parliamentary nominations of possible sanctions. Beyond that, will the Government implement a system whereby non-governmental actors, be they from civil society, the private sector or beyond, can submit information about potentially listing targets for consideration, including by creating a secure portal and adequate safeguards to mitigate any risk for those submitting that information?

The noble Baroness makes some practical suggestions, which I will of consider. On her second point, we are already working with civil society organisations, as well as other actors beyond Parliament. If people put forward the names of certain individuals who should be designated under either the global anti-corruption sanctions regime, which we have just introduced, or the global human rights sanctions regime, we will give them due consideration.

I note what the noble Baroness says about creating portals. The challenge will remain, with increasing cyberthreats and cyberattacks, to ensure not just the robustness of the system provided but that, for anyone being looked at to be designated, an early warning does not result in them being able to abscond or avoid being subject to the sanctions that are intended to be applied to them. Therefore, we keep quite a tight rein on individuals or organisations that will be sanctioned in the future. But I note the noble Baroness’s practical suggestions and will take those back.

I add that we are going through an evolutionary process on the whole concept of sanctions. Two years ago, we did not have anything in this space on the specifics of the framework of sanctions. We now have two distinct sanctions regimes, and I am sure we will see the strengthening of both over the coming months and years.

Sitting suspended.