Sanctions and anti-money laundering bill: a crucial step for NGOs and developing countries

Parliament yesterday passed a bill which gives the UK government new powers to respond to gross violations of human rights overseas and clamp down on tax avoidance in British Overseas Territories.

The Sanctions and Anti-Money Laundering Bill will provide the UK with the ability to implement sanctions on individuals, companies and states, and tackle money-laundering once it leaves the EU.

At first glance, it is a dry, technical piece of legislation, but it has the potential to make a real difference to the lives of millions of people around the world. This is because the bill:

• Enables the UK to issue sanctions in response to gross human rights violations through the introduction of a so-called Magnitsky clause.
• Makes it easier for NGOs to deliver humanitarian aid and resolve conflicts in countries such as Syria and Yemen by giving the government the power to issue exceptions and general licenses for actions that may otherwise be subject to sanctions.
• Reduces money laundering and tax avoidance in British Overseas Territories through the introduction of public registers of beneficial ownership.

While there is still much work to be done, the bill is a crucial step in the right direction. This progress would not have happened without the support and action of peers and parliamentarians from across the political spectrum, and tireless campaigning of civil society groups (including several Bond members), who have worked hard over many years to raise awareness of these issues and advocate for change.

Public registers of beneficial ownership

Tax havens cost developing countries an estimated $170 billion in revenues every year. The introduction of public registers of beneficial ownership are an important tool for improving transparency in these jurisdictions, which makes it easier for poor countries to claim their fair share of these revenues, i.e. money that can be spent on public services such as education and health care.

A cross-party alliance of backbench MPs, led by Dame Margaret Hodge (Labour) and Andrew Mitchell (Conservative), secured an amendment at Report Stage, which requires British Overseas Territories, such as the British Virgin Islands and Cayman Islands, to publish open, public registers of company ownership by the end of 2020.

The measure will play an important role in the fight against money laundering and tax avoidance by helping civil society, journalists and the general public to understand who owns companies registered in these territories and track where the money is flowing.

Magnitsky clause

Named after Russian lawyer Sergei Magnitsky, who was tortured in police custody in Russia and then died from his injuries, Magnitsky clauses allow governments to issue sanctions in response to gross human rights abuses.

The UK government announced that it would amend the bill so that it would include a Magnitsky clause following the attack on Sergei and Yulia Skripal in Salisbury earlier this year. The government had previously voted down amendments to introduce similar powers at previous stages of the bill.

This new clause enables the government to place sanctions on individuals implicated in gross violations of human rights, and has the potential to become an important tool in the fight against human rights abuses around the world if used properly.

Exceptions and licenses for humanitarian and peacebuilding action

The bill also contains provisions which allow the government to issue exceptions and general licenses for humanitarian and peacebuilding activities in countries subject to sanctions. This will make it easier for NGOs to deliver life-saving assistance and work to tackle the root causes of conflict in countries such as Syria and Yemen.

While the bill marks an important step in the right direction, much of the hard work to create a new framework for exceptions and licenses still needs to be done through the production of guidance and secondary legislation in the coming months and years.

In a letter to Bond, the government said that it intends to build exceptions and general licenses for humanitarian, peacebuilding, development and reconstruction activities in to sanctions regimes when they are created or amended, where the need for such provisions is anticipated. The government will continue to issue individual licenses for NGOs on a case-by-case basis to allow them to respond to situations as they arise.

Bond and others from across civil society will work with the government to ensure that they deliver on this commitment.