House of Commons Amendments

House of Commons

Session 2007 - 08
Internet Publications
Other Bills before Parliament

27

      (5)
“Chemical weapon” means a chemical weapon as defined by section 1(1)

of the Chemical Weapons Act 1996 (c. 6), other than one whose intended

use is only for permitted purposes (as defined by section 1(3) of that Act).

      (6)
“Biological weapon” means anything within section 1(1)(a) or (b) of the

Biological Weapons Act 1974 (c. 6).

Part 2

Persons to whom a direction may be given

Persons to whom a direction may be given

3    (1)
A direction under this Schedule may be given to—

(a)
a particular person operating in the financial sector,

(b)
any description of persons operating in that sector, or

(c)
all persons operating in that sector.

      (2)
In this Schedule “relevant person”, in relation to a direction, means any

of the persons to whom the direction is given.

      (3)
A direction may make different provision in relation to different

descriptions of relevant person.

Persons operating in the financial sector

4    (1)
Any reference in this Schedule to a person operating in the financial

sector is to a credit or financial institution that—

(a)
is a United Kingdom person, or

(b)
is acting in the course of a business carried on by it in the United

Kingdom.

      (2)
This is subject to the exceptions in paragraph 6.

Meaning of “credit institution” and “financial institution”

5    (1)
“Credit institution” means—

(a)
a credit institution as defined in Article 4(1)(a) of the banking

consolidation directive, or

(b)
a branch (within the meaning of Article 4(3) of that directive)

located in an EEA state of—

(i)
an institution within sub-paragraph (a), or

(ii)
an equivalent institution whose head office is located in a

non-EEA state,


when it accepts deposits or other repayable funds from the public or

grants credits for its own account (within the meaning of the banking

consolidation directive).

      (2)
“Financial institution” means—

(a)
an undertaking, including a money service business, when it

carries out one or more of the activities listed in points 2 to 12 and

14 of Annex 1 to the banking consolidation directive, other

than—

(i)
a credit institution;

(ii)
an undertaking whose only listed activity is trading for

own account in one or more of the products listed in point

28

7 of Annex 1 to the banking consolidation directive where

the undertaking does not have a customer,


and for this purpose “customer” means a person who is not a

member of the same group as the undertaking;

(b)
an insurance company duly authorised in accordance with the

life assurance consolidation directive, when it carries out

activities covered by that directive;

(c)
a person whose regular occupation or business is the provision to

other persons of an investment service or the performance of an

investment activity on a professional basis, when providing or

performing investment services or activities (within the meaning

of the markets in financial instruments directive), other than a

person falling within Article 2 of that directive;

(d)
a collective investment undertaking, when marketing or

otherwise offering its units or shares;

(e)
an insurance intermediary as defined in Article 2(5) of Directive

2002/92/EC of the European Parliament and of the Council of

9th December 2002 on insurance mediation (other than a tied

insurance intermediary as mentioned in Article 2(7) of that

Directive), when it acts in respect of contracts of long-term

insurance within the meaning given by article 3(1) of, and Part II

of Schedule 1 to, the Financial Services and Markets Act 2000

(Regulated Activities) Order 2001 (S.I. 2001/544);

(f)
a branch located in an EEA state of—

(i)
a person referred to in any of paragraphs (a) to (e), or

(ii)
a person equivalent to a person within any of those

paragraphs whose head office is located in a non-EEA

state,


when carrying out any activity mentioned in that paragraph;

(g)
an insurance company (as defined by section 1165(3) of the

Companies Act 2006 (c. 46));

(h)
the National Savings Bank;

(i)
the Director of Savings, when money is raised under the auspices

of the Director under the National Loans Act 1968 (c. 13).

Exceptions

6    (1)
For the purposes of this Schedule the following are not regarded as

persons operating in the financial sector when carrying out any of the

following activities—

(a)
a society registered under the Industrial and Provident Societies

Act 1965 (c. 12), when it—

(i)
issues withdrawable share capital within the limit set by

section 6 of that Act (maximum shareholding in society);

or

(ii)
accepts deposits from the public within the limit set by

section 7(3) of that Act (carrying on of banking by

societies);

(b)
a society registered under the Industrial and Provident Societies

Act (Northern Ireland) 1969, when it—

(i)
issues withdrawable share capital within the limit set by

section 6 of that Act (maximum shareholding in society);

or

29

(ii)
accepts deposits from the public within the limit set by

section 7(3) of that Act (carrying on of banking by

societies);

(c)
a person within any of paragraphs 1 to 23 or 25 to 51 of the

Schedule to the Financial Services and Markets Act 2000

(Exemption) Order 2001 (S.I. 2001/1201), when carrying out an

activity in respect of which the person is exempt;

(d)
a person who was an exempted person for the purposes of

section 45 of the Financial Services Act 1986 (c. 60)

(miscellaneous exemptions) immediately before its repeal, when

exercising the functions specified in that section.

      (2)
A person who falls within the definition of “credit institution” or

“financial institution” solely as a result of engaging in financial activity

on an occasional or very limited basis is not regarded for the purposes of

this Schedule as operating in the financial sector.

      (3)
For the purposes of sub-paragraph (2) a person is regarded as engaging

in a financial activity on an occasional or very limited basis if—

(a)
the person's total annual turnover in respect of the financial

activity does not exceed £64,000,

(b)
the financial activity is limited in relation to any customer to no

more than one transaction exceeding 1,000 euro (whether the

transaction is carried out in a single operation or a series of

operations which appear to be linked),

(c)
the financial activity does not exceed 5% of the person's total

annual turnover,

(d)
the financial activity is ancillary and directly related to the

person's main activity,

(e)
the financial activity is not the transmission or remittance of

money (or any representation of monetary value) by any means,

(f)
the person's main activity is not that of a credit or financial

institution, and

(g)
the financial activity is provided only to customers of the

person's main activity.

Interpretation of this Part

7
In this Part of this Schedule—

“the banking consolidation directive” means Directive 2006/48/EC

of the European Parliament and of the Council of 14th June 2006

relating to the taking up and pursuit of the business of credit

institutions;

“the life assurance consolidation directive” means Directive 2002/

83/EC of the European Parliament and of the Council of 5th

November 2002 concerning life assurance;

“the markets in financial instruments directive” means Directive

2004/39/EC of the European Parliament and of the Council of

12th April 2004 on markets in financial instruments.

Power to amend

8    (1)
The Treasury may by order amend paragraphs 4 to 7.

      (2)
Any such order is subject to affirmative resolution procedure.

30

Part 3

Requirements that may be imposed by a direction

Requirements that may be imposed by a direction

9    (1)
A direction under this Schedule may impose requirements in relation to

transactions or business relationships with—

(a)
a person carrying on business in the country;

(b)
the government of the country;

(c)
a person resident or incorporated in the country.

      (2)
The direction may impose requirements in relation to—

(a)
a particular person within sub-paragraph (1),

(b)
any description of persons within that sub-paragraph, or

(c)
all persons within that sub-paragraph.

      (3)
In this Schedule “designated person”, in relation to a direction, means

any of the persons in relation to whom the direction is given.

      (4)
The kinds of requirement that may be imposed by a direction under this

Schedule are specified in—

paragraph 10 (customer due diligence);

paragraph 11 (ongoing monitoring);

paragraph 12 (systematic reporting);

paragraph 13 (limiting or ceasing business).

      (5)
A direction may make different provision—

(a)
in relation to different descriptions of designated person, and

(b)
in relation to different descriptions of transaction or business

relationship.

      (6)
The requirements imposed by a direction must be proportionate having

regard to the advice mentioned in paragraph 1(2) or, as the case may be,

the risk mentioned in paragraph 1(3) or (4) to the national interests of the

United Kingdom.

Customer due diligence

10  (1)
A direction may require a relevant person to undertake enhanced

customer due diligence measures—

(a)
before entering into a transaction or business relationship with a

designated person, and

(b)
during a business relationship with such a person.

      (2)
The direction may do either or both of the following—

(a)
impose a general obligation to undertake enhanced customer

due diligence measures;

(b)
require a relevant person to undertake specific measures

identified or described in the direction.

      (3)
“Customer due diligence measures” means measures to—

(a)
establish the identity of the designated person,

(b)
obtain information about—

(i)
the designated person and their business, and

31

(ii)
the source of their funds, and

(c)
assess the risk of the designated person being involved in

relevant activities.

      (4)
In sub-paragraph (3)(c) “relevant activities” means—

(a)
terrorist financing;

(b)
money laundering; or

(c)
the development or production of nuclear, radiological,

biological or chemical weapons or the facilitation of that

development or production.

      (5)
A direction may not impose requirements of a kind mentioned in this

paragraph on a person who is regarded as operating in the financial

sector by virtue only of paragraph 5(2)(g) (certain insurance companies).

Ongoing monitoring

11  (1)
A direction may require a relevant person to undertake enhanced

ongoing monitoring of any business relationship with a designated

person.

      (2)
The direction may do either or both of the following—

(a)
impose a general obligation to undertake enhanced ongoing

monitoring;

(b)
require a relevant person to undertake specific measures

identified or described in the direction.

      (3)
“Ongoing monitoring” of a business relationship means—

(a)
keeping up to date information and documents obtained for the

purposes of customer due diligence measures, and

(b)
scrutinising transactions undertaken during the course of the

relationship (and, where appropriate, the source of funds for

those transactions) to ascertain whether the transactions are

consistent with the relevant person’s knowledge of the

designated person and their business.

      (4)
A direction may not impose requirements of a kind mentioned in this

paragraph on a person who is regarded as operating in the financial

sector by virtue only of paragraph 5(2)(g) (certain insurance companies).

Systematic reporting

12  (1)
A direction may require a relevant person to provide such information

and documents as may be specified in the direction relating to

transactions and business relationships with designated persons.

      (2)
A direction imposing such a requirement must specify how the direction

is to be complied with, including—

(a)
the person to whom the information and documents are to be

provided, and

(b)
the period within which, or intervals at which, information and

documents are to be provided.

      (3)
The power conferred by this paragraph is not exercisable in relation to

information or documents in respect of which a claim to legal

professional privilege (in Scotland, to confidentiality of

communications) could be maintained in legal proceedings.

32

      (4)
The exercise of the power conferred by this paragraph and the provision

of information under it is not otherwise subject to any restriction on the

disclosure of information, whether imposed by statute or otherwise.

Limiting or ceasing business

13
A direction may require a relevant person not to enter into or continue

to participate in—

(a)
a specified transaction or business relationship with a designated

person,

(b)
a specified description of transactions or business relationships

with a designated person, or

(c)
any transaction or business relationship with a designated

person.

Part 4

Procedural provisions and licensing

General directions to be given by order

14  (1)
A direction given to—

(a)
a description of persons operating in the financial sector, or

(b)
all persons operating in that sector,


must be contained in an order made by the Treasury.

      (2)
If the order contains requirements of a kind mentioned in paragraph 13

(limiting or ceasing business)—

(a)
it must be laid before Parliament after being made, and

(b)
if not approved by a resolution of each House of Parliament

before the end of 28 days beginning with the day on which it is

made, it ceases to have effect at the end of that period.


In calculating the period of 28 days, no account is to be taken of any time

during which Parliament is dissolved or prorogued or during which

both Houses are adjourned for more than 4 days.

      (3)
An order’s ceasing to have effect in accordance with sub-paragraph (2)

does not affect anything done under the order.

      (4)
An order to which sub-paragraph (2) does not apply is subject to

negative resolution procedure.

      (5)
If apart from this sub-paragraph an order under this paragraph would

be treated for the purposes of the standing orders of either House of

Parliament as a hybrid instrument, it is to proceed in that House as if it

were not such an instrument.

Specific directions: notification and duration of directions

15  (1)
This paragraph applies in relation to a direction given to a particular

person.

      (2)
The Treasury must give notice of the direction to the person.

      (3)
The direction (if not previously revoked and whether or not varied)

ceases to have effect at the end of the period of one year beginning with

the day on which the direction is given.

33


This is without prejudice to the giving of a further direction.

      (4)
The Treasury may vary or revoke the direction at any time.

      (5)
Where the direction is varied or ceases to have effect (whether on

revocation or otherwise), the Treasury must give notice of that fact to the

person.

General directions: publication and duration of directions

16  (1)
This paragraph applies to an order containing directions under

paragraph 14 (general directions given by order).

      (2)
The Treasury must take such steps as they consider appropriate to

publicise the making of the order.

      (3)
An order—

(a)
revoking the order, or

(b)
varying the order so as to make its provisions less onerous,


is subject to negative resolution procedure.

      (4)
The order (if not previously revoked and whether or not varied) ceases

to have effect at the end of the period of one year beginning with the day

on which it was made.


This is without prejudice to the making of a further order.

      (5)
Where the order is varied or ceases to have effect (whether on revocation

or otherwise), the Treasury must take such steps as they consider

appropriate to publicise that fact.

Directions limiting or ceasing business: exemption by licence

17  (1)
The following provisions apply where a direction contains requirements

of a kind mentioned in paragraph 13 (limiting or ceasing business).

      (2)
The Treasury may grant a licence to exempt acts specified in the licence

from those requirements.

      (3)
A licence may be—

(a)
general or granted to a description of persons or to a particular

person;

(b)
subject to conditions;

(c)
of indefinite duration or subject to an expiry date.

      (4)
The Treasury may vary or revoke a licence at any time.

      (5)
On the grant, variation or revocation of a licence, the Treasury must—

(a)
in the case of a licence granted to a particular person, give notice

of the grant, variation or revocation to that person;

(b)
in the case of a general licence or a licence granted to a

description of persons, take such steps as the Treasury consider

appropriate to publicise the grant, variation or revocation of the

licence.