The UK government has adopted the Sanctions and Anti-Money Laundering Act 2018 (Commencement No. 1) Regulations 2018 (SI 2018/1213), which brings into force today (22 November) the vast majority of the remaining sections of the Sanctions and Anti-Money Laundering Act 2018.
Some of the anti-money laundering sections are still not in force (sections 49 and 51), as well as provisions dealing with the repeal of certain existing UK sanctions legislation (see section 59).
The Draft UK Withdrawal Agreement provides for a transition period (until 31 December 2020) during which EU law, including the Common Foreign and Security Policy (CFSP), will continue to apply to and in the UK. This means the UK will continue to implement EU sanctions during this period (see Part 4, Articles 126 and 127(1) of the Agreement, and Section IV of the EU press release).
If the EU and UK reach an agreement governing their future relationship in the area of CFSP which becomes applicable during the transition period, then the EU’s CFSP provisions and the sanctions adopted on the basis of those provisions will cease to apply to the UK from the date of that new agreement (see Part 4, Article 127(2) of the Agreement).
The EU and UK have outlined the political declaration setting out the framework for their future relationship, saying there will be a “[c]onsultation on sanctions, with intensified exchange of information where foreign policy objectives are aligned, with the possibility of adopting mutually reinforcing sanctions.” See UK Government Explanatory Slides.
Following last month’s adoption of a new EU chemical weapons sanctions regime, the UK will ask for the first listings to include a number of individuals said to be involved in the Novichok poisoning of Sergei and Yulia Skripal in Salisbury, including the two Russian military intelligence officers Anatoliy Chepiga and Alexander Mishkin.
The House of Commons European Scrutiny Committee has cleared from scrutiny the EU’s decision to adopt a new sanctions regime targeting the use and proliferation of chemical weapons (see previous blog). The Committee said:
- After 29 March 2019, the UK will cease to be bound by the EU’s Common Foreign and Security Policy (CFSP) of which this new chemical weapons sanctions regime forms part;
- The UK will lose its current veto over most new EU foreign policy measures and its current significant degree of influence over the general direction of the CFSP;
- The EU would benefit from a close relationship with the UK in the field of foreign policy, especially in the field of sanctions (see the House of Lords EU Committee Report stating that the UK “currently plays a leading role in developing EU sanctions policy, is most active in proposing individuals and entities to be listed, and is home to the largest international financial centre of the bloc”);
- In the event of a ‘no deal’ Brexit, day-to-day foreign policy cooperation – coordinated, for example, via the weekly meeting of the EU’s Political & Security Committee – would be severely disrupted from March 2019;
- If the UK imposes sanctions under the Sanctions and Anti-Money Laundering Act 2018 which the EU-27 does not, that is likely to reduce their overall effectiveness (the Lords’ Report notes that “while informal engagement with the EU on sanctions… can be very valuable, it is no substitute for the influence that can be exercised through formal inclusion in EU meetings”); and
- The Committee will continue to monitor the discussions on the UK’s future relationship with the EU closely, as well as consider any proposals for listings under the new chemical weapons sanctions framework, or for parallel sanctions regimes for human rights abuses or cyber-attacks.
The UK Foreign Affairs Committee has launched an Inquiry to explore and evaluate the different options for the UK’s approach to sanctions policy after Brexit – see Global Britain: The future of UK sanctions policy inquiry.
The Committee is inviting written submissions which address the following areas (deadline, 14 December 2018):
- The effectiveness of sanctions as an instrument of foreign policy, including examples of both successful and unsuccessful use of sanctions to influence the behaviour of foreign actors.
- The advantages and disadvantages of the EU’s approach to the use of sanctions, both generally and in specific cases e.g. Russia.
- How the USA sets and uses sanctions as an instrument of foreign policy, and the advantages and disadvantages of its approach particularly where that differs from the EU.
- How the UK might best make use of the Magnitsky powers included in the Sanctions and Anti-Money Laundering Act 2018.
- The extent to which the UK should seek to align with the EU in sanctions policy post-Brexit, versus areas in which it may wish to diverge or seek stronger sanctions.
- The FCO’s record in:
- Identifying individuals, companies and regimes that should be sanctioned;
- Linking specific sanctions recommendations to broader foreign policy goals; and,
- Working with other departments, agencies and the private sector to share intelligence and implement sanctions effectively.
- The use of sanctions alongside other tools designed to combat dirty money, such as unexplained wealth orders.
Last month, the EU Commission recommended the introduction of Qualified Majority Voting (QMV) instead of unanimity in (inter alia) sanctions policy, on the grounds that requiring unanimity “slows down progress and in some cases prevents the EU from adjusting to changing realities”. Two EU sanctions regimes (Belarus and Venezuela) were given as examples to “demonstrate that unanimous voting in the Council hampers the ability of the European Union to react quickly and firmly to international developments”.
Commission President Jean-Claude Juncker has requested EU leaders to discuss whether the EU will adopt the Commission’s recommendation at the Council meeting on 9 May 2019 in Romania.
The UK’s preference is for unanimity: “The UK is seeking a deep and special partnership with the EU following our withdrawal. It is therefore in our interests that the EU continues to be an effective foreign policy actor in the way it chooses. We recognise some of the frustrations highlighted by the Commission. However, we think that EU foreign policy decisions made by consensus carry considerable weight because all Member States agree them.” See Minister for Europe’s Explanatory Memorandum and European Scrutiny Committee’s Conclusions.
The House of Commons Treasury Committee took oral evidence as part of its Economic Crime Inquiry from OFSI Director Rena Lalgie, Simon York (HMRC Fraud Investigation Service Director), and Alison Barker (FCA Director). The main sanctions points (transcript here) are:
- In 2017 OFSI received 133 reports of suspected sanctions breaches, estimated value £1.4 billion (see February 2018 blog).
- OFSI’s new civil monetary penalty powers may be used in cases where sanctions breaches occurred after 1 April 2017. OFSI guidance says it “will use [those powers] for the most serious breaches of financial sanctions. Those cases are starting to come through. Where we see them coming through, we will not hesitate to use [those powers].”
- In response to the suggestion of “inadequate” enforcement of sanctions breaches (103 of the 133 reported breaches had been reported to OFSI since it gained its powers to impose civil monetary penalties), OFSI Director Rena Lalgie said that did “not mean those breaches occurred within that particular year, and we have not assessed all of those as being actual breaches”. And “at a glance, it is easy to infer that, because we have not issued one of those [civil monetary] penalties yet, we are not enforcing the system. I do not think that is right. We are taking some form of action in every case of non‑compliance that we see, but it has to be proportionate to the facts of the case.”
- OFSI has powers to “share information with anybody as long as it is to further compliance with the regulation. That means [it does] share information with other regulators: the FCA, the [SRA] and others.”
- OFSI works “very closely with colleagues in the Foreign Office and with colleagues across the EU who are thinking about the sanctions regime. There is a richness to the information that we see through our implementation, which can really support and help to inform future policy. We have seen examples where the experience of the trickiness around implementing financial sanctions has therefore informed the way in which sanctions regimes have been revised and updated.”
The UK has passed the Chemical Weapons (Asset-Freezing) and Miscellaneous Amendments Regulations 2018, SI 2018/1090, which comes into force on 7 November 2018.
The Regulations make provision for UK enforcement, licensing, penalties etc in respect of Council Regulation (EU) 2018/1542, the EU’s new chemical weapons sanctions regime (see previous blog).