The importance of human rights for corporate risk had a new development earlier this month when the UK published the UK Global Human Rights Sanctions Regulations 2020 (the “2020 Regulations”) – its first autonomous sanctions regulations, which aim to deter and provide accountability for serious violations of an individual’s right to life, right not to be subjected to torture, and right to be free from slavery, carried out by state and non-state actors. The 2020 Regulations are made under the Sanctions and Money Laundering Act 2018 (“SAMLA”), enacted in anticipation of the UK’s EU exit (“Brexit”) to enable the creation of a national sanctions framework, for the UK to impose its own sanctions as well as continuing to implement UN sanctions previously adopted by the EU and thereby by the UK as a member state. As required under SAMLA, the Government has provided guidance to assist in the implementation of and compliance with the 2020 Regulations.
In fact the UK has always had the ability to impose its own sanctions (as long as it continued to comply with its obligations under EU law) but SAMLA provides structure and process previously provided by the EU.
The 2020 Regulations come as no surprise, as the UK government expressed its intent to adopt and implement an international human rights sanctions regime, or “Magnitsky sanctions” – similar to the Global Magnitsky sanctions program adopted by the United States – during what is known as the Brexit “Implementation Period” (the period between the UK’s exit date and 31 December 2020). Included in the list of designated persons under the 2020 Regulations are 25 Russian officials said to have been involved in the torture and death of Sergei Magnitsky[1].
Under the 2020 Regulations, the persons designated by the Secretary of State as being responsible for or involved in serious violations of human rights are subjected to asset freezes and travel bans, to ensure that funds and economic resources are not made available to them, either directly or indirectly, and that they are refused leave to enter or remain in the UK.
The 2020 Regulations provide for certain exceptions to the financial and immigration sanctions regime. These exceptions apply automatically (no licence required) within certain defined circumstances, including the crediting of a frozen account with interest or other earnings, or allowing actions for the purpose of national security or the prevention of serious crime. The 2020 Regulations also confer powers on UK’s Office of Financial Sanctions Implementation (“OFSI”) to issue licences in respect of activities that would otherwise be prohibited under the 2020 Regulations, including, covering basic needs and reasonable legal fees, and providing humanitarian assistance.
Breach of the financial sanctions imposed under the 2020 Regulations is a serious criminal offence which carries a maximum sentence of 7 years’ imprisonment or a fine (or both). Similar to the rest of the financial sanctions regimes, OFSI remains responsible for monitoring compliance with financial sanctions imposed under the 2020 Regulations and has the power to impose monetary penalties for such breaches. Further to the 25 “Magnitsky” Russian officials, mentioned above, the current list of designated persons also includes 20 Saudi Arabian officials involved in the killing of journalist Jamal Khashoggi, two commanders of the Myanmar Armed Forces accused of human rights violations against the Rohingya people and two North Korean entities said to have played a central role in North Korea’s prison camp system, allegedly involved in the murder, torture and subjection to forced labour of the people in those camps. It is anticipated that these persons represent only the first wave of designations under the regime, with the expectation that more designations will follow before the end of 2020.
To this end, the Government has released a policy paper, providing a non- exhaustive list of factors which need to be considered when designating a person under the 2020 Regulations. These factors include:
The introduction of its first autonomous sanctions goes some way to signaling the seriousness of the UK’s intentions to develop its own effective and robust sanctions regime and enforcement framework. Given that the UK is likely to diverge from EU sanctions policy, international businesses may find themselves subject to additional hurdles, on top of the existing UN, EU and US sanctions regimes. In order to address this uncertainty, businesses should conduct regular checks on the OFSI lists of designated individuals. Businesses should also regularly monitor whether they need to update their compliance policies and/or amend any existing licences to comply with the new UK sanctions regime.
[1] Magnitsky was an auditor at a law firm in Moscow who discovered the alleged theft of approximately $230m by Russian tax officials. After reporting it to the authorities, he was detained in 2008 on suspicion of aiding tax evasion, and died in custody on 16 November 2009. Although he was said to have died of acute heart failure and toxic shock, it had been alleged that he was subjected to torture and beatings in prison. His death prompted action by human rights activists and in December 2012, the US Congress adopted the Magnitsky Act, which enables the US to sanction Russian officials thought to have been involved with human rights violations.