Terrorist Asset-Freezing etc. Bill [HL]

My Lords, as the amendments in this group enjoy a similar theme, it is perhaps not surprisingly that the Government’s position on the amendments also is similar. Amendments 38 and 42 relate to Clauses 8(1) and 10(1) respectively. These clauses prohibit the making of funds, financial services and economic resources available directly or indirectly to a designated person where the person providing the funds, financial services or economic resources knows or has reasonable cause to suspect that the ultimate recipient is a designated person and, additionally, in the case of economic resources, knows or has reasonable cause to suspect that the designated person would be likely to exchange them or use them in exchange for funds, goods and services. As for my noble friend’s initial question on the import of the word ““indirectly””. Quite simply, it means that the benefit is directed through a third party and not made party with the designated person. The amendments would mean that a person could be prosecuted for breaching these prohibitions only if it could additionally be proved that that person intended the funds, financial services or economic resources to benefit the designated person. There is a concern that that would add a layer of complexity to the prohibitions and make it much more difficult effectively to enforce them. In these circumstances any prosecution would require proof beyond reasonable doubt that the person harboured the intention that the designated person should benefit from such funds, financial services or economic resources. The Government do not support these amendments for two reasons. First, the amendments increase the difficulty with which the prohibitions can be enforced. Secondly, the Government do not believe that they achieve what is believed to be their intended effect, which is to provide a further protection to parties who unwittingly make funds, financial services or economic resources available directly or indirectly to a designated person. The prohibitions are already drafted so that persons who do not know or have no reasonable cause to suspect that they are breaching them, are not caught. It is therefore somewhat superfluous to require further that the prohibitions should apply only to those who intend that the funds, financial services or economic resources provided should benefit the designated person. The prohibitions in Clauses 9(1) and 11(1) are designed to prohibit making funds, financial services and economic resources available to a third party where the designated person does not receive the funds, financial services or economic resources respectively but nevertheless derives some sort of significant financial benefit from their provision. A person commits an offence under these prohibitions only if he knows or reasonably suspects that the designated person will enjoy such a benefit. Amendments 41 and 44 would narrow the circumstances in which a person may be found to have breached the prohibitions in Clauses 9(1) and 11(1) on making funds, financial services or economic resources available. The amendments would narrow the circumstances in which the financial benefit might be conferred by stating that only the discharge of financial obligations owed wholly, and not just partly, by the designated person would constitute a financial benefit. I fully understand where my noble friend is coming from on this, but this would allow a third party to meet a financial obligation partly owed by a designated person and would therefore provide a benefit for that designated person. We believe that the purpose of these amendments is to provide protection from prosecution to persons who may be seeking, for example, to discharge the financial obligation of a designated person’s wife—her rent, for example, whether by paying funds to the landlord or providing the landlord with an economic resource that can be used to obtain funds—which would have the incidental effect of discharging a financial obligation partly owed by the designated person, obviously, if the rent was in respect of premises which they both leased. As drafted, the prohibitions in Clauses 9(1) and 11(1) would prohibit this if the benefit derived by the designated person was significant. However, we believe that the prohibitions, as currently drafted, provide a sufficient safeguard for those who discharge a financial obligation partly owed by the designated person. To commit the offence, the person needs to have known or had reasonable cause to suspect that the offence was being committed, and this requirement would not be met if they do not know or have reasonable cause to suspect that the financial obligation is shared by the wife and the designated person. Even when the person knows that the financial obligation in question is shared—this is the crucial issue—it is open to such a person to apply to the Treasury for a licence to allow the discharge of that obligation on behalf of the designated person and the person with whom the obligation is shared. The purpose of the Clauses 9(1) and 11(1) prohibitions is in part to give the Treasury oversight of how the designated person is financially supported so that appropriate licences can be drawn up that authorise the designated person to have appropriate access to funds. We believe that the licensing system has the flexibility to deal with the kind of concerns quite properly raised by my noble friend. By a similar token the purpose of Amendment 9 would appear to require the Treasury to grant a licence where an asset is jointly owned by a designated person and another person who is not a designated person, so the latter can use the asset as long as it does not contravene the prohibitions set out in Clauses 7 to 11. We readily recognise concern about the effect that the prohibitions can have on spouses and family members of designated persons and have sought to minimise them wherever possible. A jointly owned asset would ordinarily be caught by the prohibitions, and if the asset fell within the definition of funds there would be a prohibition against dealing with it. But where the dealing would create no terrorist-financing risk, the policy of the Treasury is to grant a licence to the non-designated person. We very much believe that prompt licensing, taking into account the considerations but allowing Treasury oversight of the funding of the designated person, is the best way of addressing the noble Baroness’s genuine concerns and retaining oversight in dealing with any assets which the designated person controls. With that explanation and reassurance with regard to the flexibility and use of the licensing scheme, I hope that my noble friend will withdraw her amendments.