Labour and Co-operative Member of Parliament for Kemptown and Peacehaven

Sanctions and Anti-Money Laundering Bill [Lords]

by Lloyd on 01.05.18 in Uncategorised
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For £12, disreputable individuals can register UK companies and begin trading arms internationally through a network of subsidiaries. For £12, they receive the legitimacy of a trading company and a respectable business. We know that this is the case because it has been happening for 10 years, and it could well be happening right now.
For £12, disreputable individuals can register UK companies and begin trading arms internationally through a network of subsidiaries. For £12, they receive the legitimacy of a trading company and a respectable business. We know that this is the case because it has been happening for 10 years, and it could well be happening right now.

We know that this has been happening thanks to the investigative work of Amnesty International and other non-governmental organisations. In 2014, Ukrainian-based S-Profit Ltd, which was registered here in the UK, was named by the South Sudanese Government as brokering a £44 million small arms deal. The South Sudanese Government are subject to sanctions; yet, astonishingly, S-Profit Ltd is still a registered British company.

In 2009, the Committees on Arms Export Controls found that a company called Hazel UK had been brokering arms to Libya, Syria and Sri Lanka, which violated sanctions against those countries at the time. This company is still registered. I could go on. For example, System Use Contract Ltd brokered arms to Rwanda. I have a long list.

Despite this wealth of evidence, these companies are engaged in sanctions busting but are still registered as British companies. Why? Well, it is partly in the name. They are brass-plate companies: they have no staff, no real office buildings and no real assets based here. Today, I received a letter from the Minister himself, recognising that it is

“difficult for investigators to collect the necessary evidence to reach the threshold for prosecution.”

Those are the Minister’s words, not mine. If we wanted to conduct criminal investigations into these companies, we could not bring in suspects for questioning, raid offices and buildings, or seize assets. Equally, the current sanctions are mainly freezing assets and travel bans, which have no impact on these companies.

In the Minister’s letter to me, he also said that current sanctions are as temporary measures, not as long-term measures. Well, the Customs and Excise Management Act 1979, from which this Bill derives many of its enforcement powers, allows for the destruction and resale of goods. These are permanent acts; we cannot un-destroy a good. New clause 18 would allow for a seven-year appeal for any company that were shut down, compensation if a company were shut down incorrectly and the reversal of a temporary measure if the wrong decision were made.

This is not about tracing. These companies use British registration but undertake activities through a set of subsidiary companies or other companies ​that they are linked to abroad to take part in the nefarious activity. The individuals might be directors of both companies, for example.

The current threshold of requirement to disbar individuals or strike off a company is at the criminal level of responsibility, but that level is just far too high. If it were brought down to the civil level of responsibility, the Minister would be able to take action. Now, the Minister may feel that he would not want to take action and I am not compelling him to do so. I am simply giving him the powers, if need be, that already exist in the Insolvency Act 1986. This is not about extending powers that have never been used before.

The Government say that there is no information about these companies at all. Well, let us look at S-Profit Ltd, a UK-registered company that brokered arms to the South Sudanese Government. This Government have received copies of the contracts involved. The Ukrainian directors of the company have even admitted that the contracts were genuine, as did the Ukrainian state company responsible for brokering the weapons. It is not enough for a criminal action, but it is clearly enough for a Minister to invoke the public test—that is, to ask whether the company is acting against the public interest and breaching sanctions. Such companies should be struck off, so that they cannot use the brand Britain as a front for their activities.

When Sir John Stanley was in this place, he recommended the same powers in the Committees on Arms Export Controls. I am not trying to bring in something that is hugely controversial. The Government have already said today, in general, that they would like to take action on these things. I was really disappointed that we were not able to get the Government to support this. I tried to meet the Government a number of times, even coming up in recess time to do so, with the meeting being cancelled 20 minutes before it was due. It is a real shame, and I would like the Government to give way. However, I will not press the amendment to a vote on this occasion if they make a commitment to look at this further and to take it on, as I think they have done today. I hope we can work together on this.

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Labour and Co-operative Member of Parliament for Kemptown and Peacehaven

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