UK Draws Up New Sanctions, Anti-Money Laundering Bill

Law360, London (October 19, 2017, 7:29 PM BST) — British lawmakers on Thursday published details of a new bill designed to give the U.K. legal powers to impose, update and lift its domestic sanctions and anti-money laundering regimes upon leaving the European Union.

The Sanctions and Anti-Money Laundering Bill was put before the upper chamber of the British Parliament, the House of Lords, on Wednesday, with accompanying paperwork now published.

A second reading will take place on Nov. 1.

The bill has been drawn up to aid compliance with United Nations and other international obligations regarding the prevention of money laundering and terrorist financing.

Many of the current sanctions regimes are established via powers in the European Communities Act 1972. However, upon Brexit, the U.K. will need new legal powers to replace them.

The European Union (Withdrawal) Bill currently going through Parliament and designed to replace existing law will not provide the powers necessary to update, amend or lift sanctions after exit day in response to fast-moving events.

“This would leave us in breach of our international obligations and unable to work effectively with our European and international partners to tackle shared challenges,” the government said.

Experts from the Foreign and Commonwealth Office, HM Treasury, Department for International Trade, Home Office and the Department for Transport currently administer sanctions and oversee anti-money laundering regimes.

Financial sanctions include restricting market access for individuals, entities or sectors; imposing asset-freezes on specific individuals or entities; and preventing the movement of suspected misappropriated funds until their rightful owner has been determined.

The bill is intended only to create the powers that the U.K. will use to implement, impose and lift sanctions in the future, and lawmakers are keen that costs for banks and financial services firms are kept to a minimum.

Officials drawing up the legislation do not quantify those costs, but argue that they would be small on the grounds that there is no intent to change the government’s actual approach to money laundering supervision or sanctions. However, that may change in the future.

Britain’s Foreign Office said it will issue guidance to accompany the legislation before March 2019, when the U.K. is scheduled to exit the European Union.

An impact assessment released on Thursday said that if the U.K. does not have relevant laws in place by that time, it will be in breach of its international obligations and international law.

“If the U.K. wishes to continue being a global leader in these areas, we need to ensure that we have the power to act in the public interest in the face of terrorist groups or individuals, repressive regimes and other threats to our security, both at home and abroad,” the government said. “Legislation is also necessary to continue to tackle money laundering and other financial crime.”

Britain is already reshaping financial sanctions enforcement with an eye to the post-Brexit landscape, and its newly appointed watchdog has been busy turning up the pressure on banks to clamp down on dodgy transactions.

Figures revealed by Law360 this week show that the Office of Financial Sanctions Implementation has opened 125 investigations, with 60 focusing on breaches of financial sanctions laws by U.K. regulated financial services firms, from the OFSI’s creation in March 2016 to July 2017.

New European Union laws to tackle money laundering took effect in July and are applicable in the U.K. However, policymakers are already seeking to beef up the measures and pile extra pressure on the bloc’s financial services sector to identify and root out dirty money.

The long-awaited fourth Anti-Money Laundering Directive amps up the fight to clean up finance and stop flows of illicit cash by increasing risk and compliance obligations on banks, lawyers, and accountants.

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