The UK Foreign Secretary, Dominic Raab, has finally introduced a long awaited equivalent to the US Magnitsky Act.
The new Sanctions regime created by the The Global Human Rights Sanctions Regulations 2020 allows the government to impose travel bans and freeze the assets and economic resources of listed individuals. This is a new departure for UK Sanctions law, independent of the EU and UN regimes, and heralds the coming into force of an autonomous UK sanctions regime at the close of the Brexit transition period.
The Regulations, made under the Sanctions and Anti-Money Laundering Act 2018 are for the stated purposes of deterring, and providing accountability for, activities which, if carried out by or on behalf of a State, would amount to serious violations of certain human rights by that State.
Unusually, the avowed policy purposes form the backbone of the legislative scheme. Persons may only be listed (designated under paragraph 5) where the Secretary of State decides that they are or have been "involved" in an activity which if carried out by or on behalf of a State within the territory of that State, would amount to a serious violation by that State of an individual’s—
(a) right to life,
(b) right not to be subjected to torture or cruel, inhuman or degrading treatment or punishment,or
(c) right to be free from slavery, not to be held in servitude or required to perform forced or compulsory labour, whether or not the activity is carried out by or on behalf of a State.
An “involved person” means a person who—
(a) is or has been involved in an activity falling within regulation 4(2),
(b) is owned or controlled directly or indirectly (within the meaning of regulation 7) by a person who is or has been so involved,
(c) is acting on behalf of or at the direction of a person who is or has been so involved, or
(d) is a member of, or associated with, a person who is or has been so involved.
Therefore, while the discretion to designate, (once the underlying activity is established), is very broad, so too is the scope for legal challenges to designation.
Liability to designation is subject to an activity carried out outside the UK by nationals of any state including the UK, but excludes UK nationals where the activity occurred in the UK.
The scope of the Regulations
The Regulations operate consistently with other targeted sanctions supervised by OFSI. Restrictions on asset freezes extend to making funds and economic resources available to or for the benefit of designated persons, or circumventing the prohibitions. There are likewise reporting obligations on FSMA regulated persons who may be required to respond to requests for information or to produce documents.
Licensing arrangements will also be familiar and OFSI directs using the existing form. Schedule 2 provides that the use of a designated person’s frozen funds or economic resources may be authorised to meet legal expenses and basic needs extending to mortgage and utility payments as well "humanitarian assistance activity".
The Regulations provide that conduct in the Isle of Man, the Channel Islands and British Overseas Territories is subject to the local licensing permissions.
Regulated businesses should also take note of the power of the Secretary of State to inform only certain persons of a designation. This covert process allows for asset freezes to be effective prior to the publication of a person's designation. Breach of these confidential designations is itself an offence.
Mimicking the reach achieved by United States sanctions regimes, the Regulations create liability for conduct by UK nationals outside the UK. Proceedings for offences committed outside the United Kingdom may be prosecuted in any of the UK's three legal jurisdictions.
Paragraph 33 extends liability to corportates and partnerships, as well as to officers of bodies corporate. Regulated businesses should note that there will be liability under the Regulations where the offence is attributable to "any neglect" on the part of a director or officers.
Offences under Part 3 (Finance) or regulation 23 (licensing offences) are punishable by up to 7 years imprisonment or a fine. Offences under regulation 9(6) (confidentiality) carry up to two years imprisonment.
Paragraph 36 creates an unusually long limitation period of 3 years for the prosecution of summary offences under the Regulations, with the requirement that summary offences be brought within the period of 12 months beginning with the date on which evidence sufficient in the opinion of the prosecutor to justify the proceedings comes to the prosecutor’s knowledge. This appears to be an rather contrived departure from standard limitation periods. Given the sensitivities attaching to these regulations, it is not expected that a Magistrates' Court would readily take the view that the proceedings would be suitable for summary jurisdiction, unless that view were strongly supported by the Crown.
The criteria for designating an “involved person” under the regulations focus on individual conduct rather than the responsibility of states. Whilst the purpose of the regulations is to restrict the activities of those listed, these sanctions allow the UK to exert diplomatic pressure incrementally and in a targeted way.
It was a bold move for the Foreign Secretary to list 20 Saudi nationals involved in the murder of Jamal Khashoggi. An even greater test of the FCO’s resolve (which will increasingly be the subject of political pressure), will be whether these measures are used in response to the crisis in Hong Kong.