New UK Sanctions Bill following post-Brexit consultation

Following the UK Government’s consultation earlier this year on the future legal framework for imposing and implementing sanctions post-Brexit (the Consultation), the Sanctions and Anti-Money Laundering Bill (the Bill) was recently introduced to the House of Lords on 18 October 2017. The Bill is expected to enter the Committee stage on 21 November 2017.This briefing explains the purpose of the Bill and highlights some of the more notable points.

The framework proposed in the Bill for dealing with powers to implement sanctions remains similar to that expected from the Government’s responses during the Consultation. The Bill seeks to maintain the UK’s commitment to upholding its international obligations with respect to sanctions. As anticipated in our briefing from earlier this year, consistency with current sanctions regimes remains a priority and, at least initially, we are set to see a framework largely similar to sanctions laws already in place.

The primary purpose of the Bill is to provide the UK with the necessary legal powers to continue to implement sanctions post-Brexit and aims to achieve consistency by allowing the UK to: (1) continue to implement sanctions and new measures post leaving the European Union (EU); (2) maintain EU law imposed by sanctions regimes; and (3) ensure that the UK has independence to decide when and how to action new threats in line with its foreign policy objectives, which in practice may go beyond simply adopting United Nations (UN) and EU sanctions in their entirety.

In relation to some of the sanctions-related points highlighted in our previous briefing:

Primary and secondary legislation

The Bill proposes the utilisation of similar prohibitions to those currently in place through EU legislation. Put simply, it creates wide-ranging discretionary powers in respect of the following types of sanctions: financial, immigration, trade, aircraft, shipping and other sanctions for the purposes of upholding UN obligations.  Details of such sanctions will be prescribed in secondary legislation.  Separately, the Bill also proposes a broad range of powers to supplement the UK’s existing anti-money laundering (AML) regime without providing for any specific additional AML-related requirements.

Flexibility

As envisaged, the Bill reflects the Government’s stated intention to allow for a flexible and responsive approach to sanctions. In addition to wide-ranging powers in respect of the imposition and suspension of sanctions, the powers to create exceptions and grant licences are broadly drafted, which signals the potential for a more flexible approach when compared with the standard exceptions and licensing grounds contained in current underlying EU legislation.

Role of financial institutions

The Bill seeks to maintain the UK’s approach to sanctions in line with international obligations. The Government has stated it wishes to preserve the integrity and credibility of the UK financial sector. Accordingly, the roles and obligations of financial institutions are envisaged to remain parallel to those already in place.

Review and challenge

In line with the Consultation, the Bill implements an obligation for the Government to conduct annual reviews of sanctions similar to reviews currently conducted by the UN and the EU. Periodic reviews of certain designations are required at three year intervals.

The Bill includes certain rights for individuals and entities designated under sanctions, including the right to challenge their inclusion on sanctions lists by making an application to the High Court (in England). The required basis for the designation of an individual or entity (or “person”) is that the Government has reasonable grounds to suspect that the person has been involved in activity specified in the relevant sanctions instrument, or is connected to such a person (e.g. owned or controlled by such person), and that the designation pursuant to the applicable sanctions would be an “appropriate action” to take.

Enforcement

The Bill seeks to preserve the current enforcement regime and applicable legislation, including under the Customs and Excise Management Act 1979 (for trade-related sanctions) and the Policing and Crime Act 2017 (for financial sanctions).

Interestingly, the Consultation proposed a new power to allow the Government to manage temporarily infrastructure assets where entities responsible for the projects become subject to sanctions. This has not been reflected in the Bill and it is unclear what is now intended in respect of the proposed new power.

While the proposals in the Bill are largely as expected, it remains to be seen how the UK will approach sanctions and utilise the broad powers at its disposal post-Brexit. Current indications from the Government are that the UK will not seek to diverge from EU policy and will continue to coordinate with the EU and other international partners, including the United States.

The Bill is of course a necessity given the volume of EU sanctions that will no longer be directly applicable in the UK following the UK’s withdrawal from the EU, but it is the interest of UK regulators and enforcement authorities sparked by the impending sanctions framework which may be of most concern to businesses. Corporates and financial institutions should take precautions by preparing for increased scrutiny as matters develop.