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UK General Election call puts proceeds of crime legislation in doubt.

Yesterday, Theresa May, the UK's Prime Minister, took pretty much everyone by surprise by announcing that she was calling a "snap election." This means that, today, Parliament will vote for its own dissolution (not, of course, abolition - the two are entirely different) and that this Parliament will end on 3rd May, assuming a two-thirds majority vote in favour. After that date, no parliamentary business, which includes passing of primary and secondary legislation, can occur until the new session. Amongst the measures affected are those relating to EU driven counter-money laundering law and regulation, unless a massively truncated system can, in some way, be applied. Nigel Morris-Cotterill takes us into the world of Washing Up and the importance of lost debate.

The big question is whether implementation of MLD IV and creation of Money Laundering Regulations 2017 is cast into doubt. But that is not the most urgent question. We'll get to that later in this article.

The word "parliament" is used in several different ways. For an explanation see this article

There are dozens of Bills and Regulations pending before Parliament, and several draft Bills. There are also zombie Acts which have been passed but for which no in-force date has been set. While those zombie Acts will remain on the statute books, they cannot be brought into effect during the period where Parliament is dissolved.

Theresa May has already made it clear: she does not intend to call upon the Queen to immediately dissolve Parliament. That means that not all pending business will be lost. There will be a short period, just 14 days, during which everyone has three things on their mind :

- whether to declare themselves to stand and, if not, can they make a living after 3rd March
- what platform to stand on - will they be 100% behind a "follow the leader" campaign or will they present their own, individual case to their own constituencies
- what will the whips demand in order to get deals done to get what the two main parties to allow legislation to pass.

In the case of minority parties, such as the Scottish Nationalists, they have a fourth question: what can they obstruct in order to press their own agenda?

What happens now is called "the wash-up period." In English, the term "wash up" means to clean the dirty dishes, a different use of the term to that common in American.

During the wash-up period, MPs quickly sort out what measures are agreed and they are either passed individually or bundled into a composite, messy, Act. The danger is that some Bills are rushed through without sufficient scrutiny as lobbyists (no less powerful in Westminster than in Washington) urge that the interests of their clients are of national importance or urgency.

This is a mid-session dissolution without warning - and, seemingly, without even the Prime Minister herself knowing she was going to do it until a very short time before presenting her plan to Cabinet yesterday morning. This means that there are far more Bills pending than would be hanging around if there was a planned reduction.

In 2010, there were 18 Bills in Wash-Up.

Today, according to the Parliamentary schedule of pending Bills, there are a total of 193 in the House of Commons, in the House of Lords or awaiting Royal Assent. See the list

There are are dozens of Bills that are interesting but two that are of direct and specific importance in the context of financial crime.

1) Counter-Terrorism and Security Act 2015 (Amendment) Bill 2016-17

2) Criminal Finances Bill 2016-17

The Counter-Terrorism and Security Act 2015 (Amendment) Bill 2016-17 has reached its second reading in the House of Commons. It is therefore, in terms of process, a long way from being passed. Worse, its second reading started on 27 January and was adjourned until 12 May. It is a Private Member's Bill and stands little chance of being passed in this Parliamentary Session. The Bill's Preamble says that it is "A Bill to Repeal provisions in the Counter-Terrorism and Security Act 2015 requiring teachers, carers and responsible adults to report signs of extremism or radicalisation amongst children in primary school, nursery school or other pre-school educational settings; and for connected purposes." It is sponsored by a Conservative MP, Lucy Allan, who represents Telford in Shropshire and who sits on the Education Committee. She has a small majority which she won with a substantial swing in the 2010 election where, nationwide, the Labour vote collapsed. She may keep her seat in the new election but whether this Bill comes back remains to be seen.

Why is this Bill important to WMLR readers?

The matter of e.g. teachers reporting on extremist views amongst children is viewed, by Parliament, as a gateway discussion to the so-called "Prevent Strategy" in the 2015 Act. In short, it re-opens the debate on the development of a general "denouncement law" in relation to suspicions of radicalism or extremism that might breed terrorism.

That is a short hop from suspicious transaction reporting in financial crime.

This Bill, then, opens doors to a far wider range of debate on the extent to which personsshould be required to pay attention to those around them and to make reports to the police or other authorities.

At its heart, this debate is about the sort of society we want to live in and to what extent we allow the very real terrorist threat we face to interfere with our fundamental freedoms. Since its introduction in 2015, there has been increasing disquiet about the implementation of the statutory duty and the impact upon community cohesion.

- Lucy Allan, Second Reading, Counter-Terrorism and Security Act 2015 (Amendment) Bill, 27 January 2017

We might consider that this Bill, which will now fail during the Wash-Up period, was an important opportunity to consider the Boa Constrictor-like activity of turning citizen on citizen that started in the 1980s with the relatively benign idea that banks should report those they suspected of dealing in proceeds of drugs trafficking.

The Criminal Finances Bill is a far more heavyweight affair: Sponsored in the House of Commons by Amber Rudd in the Home Office and Baroness Williams of Trafford in the House of Lords, it has broad cross-party support in both Houses. It has passed the Committee stage in the House of Lords and the Report stage is set for 24 April 2017, that is before Parliament is dissolved. However, there remains the third H/L reading and the Royal Assent so it's passage is not a done deal.

This is absolutely not a minor piece of legislation. It introduces new concepts and it amends others. It includes the now infamous "unexplained wealth orders" and "failure to prevent facilitation of tax evasion offences" - including both UK and foreign tax. It also includes action in relation to assets of those who commit "gross human rights abuses or violations." Leaving aside the fact that the word "violations" is otiose and rather to Americanised for my taste, to say nothing of not being defined in the Bill, the section is, in fact, intended to punish state-sponsored torture or "cruel, inhuman or degrading treatment or punishment of a person." That's a dangerous door to walk through but this article is not the place to review that section.

Much of the Bill is a continuation of the UK's drive towards codification and the inclusion of lists, which, in my view, diminishes the power of the Courts to react to fast-changing criminal behaviour and presents a clear gap period during which criminals can exploit loopholes that Courts could quickly and cheaply close if legislation were more flexible.

It also includes much work on civil recovery, again, something that has become unnecessarily complicated. The 2002 Act was already a disastrous piece of legislation and non-stop amendment of it has only made it worse. We now have inserted sections running to letter Z and many subsections to that. It's ridiculous. As Baroness Bowles of Berkhamsted pointed out (https://hansard.parliament.uk/...) the Bill is poorly thought out in that it overlaps with the Bribery Act. What Parliament should do is throw this away and produce a properly structured, properly drafted, replacement for the 2002 Act and then leave it alone so the practitioners can work out where they stand and what they have to do.

Unfortunately, this Bill is likely to get pushed through in Wash-Up, appalling as it is.

The implementation of MLD IV is not, directly, in the hands of Parliament. Under EU law (which continues in force for, at least, the time being), Directives, once passed, are injected into national law and Parliament has, in theory, no say in them. In the UK (systems differ across the EU) that means that Directives are introduced as "Regulations" which are Statutory Instruments aka Secondary Legislation. It would, therefore, be reasonable to assume that the dissolution of Parliament has no effect. But that is not what, in fact, happens.

In the case of the Money Laundering Regulations 2017, these remain at a surprisingly early stage. For the current state of play, see https://www.gov.uk/government/.... The Regulations used to be a short, relatively simple, document. Now, although we will all continue to call it the MLR, it's got a new name: "The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017."

Reflecting its origins as a piece of actual legislation, albeit from the EU not national government, it is a major piece of legislation. It also follows the trend towards codification, as is traditional in Roman and Civil law jurisdictions. As a result, it changes the nature of English legal drafting.

In summary: HM Treasury closed its consultation on the new, huge, MLR on 12 April. HM Treasury is a government department, not a parliamentary function and therefore will continue its business even when there is no Parliament. The MLR2017 will therefore continue to be worked upon despite the dissolution of Parliament. There is no prospect of any move being made prior to 8 June and the new Parliament and so MLR2017 will not be delayed. Like all Affirmative Instruments, it will need to be expressly approved by Parliament (it can approve, reject but not amend an S.I.) and this is likely to be a formality regardless of who sits in Number 10.

The election has no material effect on the so-called brexit process, except as to timing and whether the PM can pack the House of Commons with sufficient supporters to make sure she does not lose votes en route.

The question for this S.I. is whether it can achieve its required in-force date of 26 June. The election should make no difference to that because the work is not done by Parliament. Although, of course, the Treasury does have ministers to answer to and they will be out of office for a few weeks, the fact is that this is not truly something Treasury ministers truly get a grip on and it is almost entirely done by civil servants . And, given the political will relating to this aspect of EU law, it is unlikely to meet any obstacles after the election.

There is one final, relevant to this subject, Bill that will be lost but which, unfortunately, stood no chance of succeeding.

The British Victims of Terrorism (Asset-Freezing and Compensation) Bill 2016-17 was introduced on 2 November 2016 as a Private Member's Bill under the Ten Minute Rule and received such support that it was listed for a second reading on 24 February, changed to 12 May. That will not, now, happen. It is a Bill that, do a degree, shadows a provision in the USA where victims of terrorism may seek redress. The preamble to the UK Bill says "A Bill to make provision about the freezing and seizing of assets belonging to states or organisations who sponsor or perpetrate acts of terrorism for the purposes of enabling compensation to be paid to the British victims of such terrorism; to provide a definition of British victims for the purpose of eligibility for such compensation; and for connected purposes. "

The Bill is not yet available in its entirety.

As a personal aside, it seems that the sponsor of that Bill, Andrew Rosindell, and I had remarkably similar escapes from the South Quay bomb: he by leaving the station a few minutes before it was detonated and me by a last minute change of plans with a friend to whose new restaurant, just a few hundred metres away, we were going to visit to see progress. https://hansard.parliament.uk/...(Asset-FreezingAndCompensation) . He does, however, also need in his speeches to point out that support for the IRA came not only from Libya but also from the USA.

There is just one small - actually not small at all - thing: May needs a two thirds majority on her motion to dissolve Parliament. But she has nowhere near two thirds of the House. She has challenged her opponents to vote in favour pointing out that it's their chance to vote against her policies. But she also pointed out, in the same speech, that the "brexit" plans face frustration because of her small majority. Surely, then, those that oppose her policies are best served by maintaining the status quo and undertaking guerilla actions to make her life difficult. It doesn't seem overly bright to put both of those in the same speech. So, all of this might be for nothing because it is entirely possible that no election will take place.


Nigel Morris-Cotterill is Head, The Anti Money Laundering Network,
the ultimate owners of Vortex Centrum Limited, publishers of
World Money Laundering Report and PleaseBeInformed.com.

He can be contacted via www.countermoneylaundering.com.


Nigel Morris-Cotterill is to conduct a series of seminars in the UK in June 2017. Details are at www.financialcrimeforum.com


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