New laws have expanded the government’s remit for asset freezes, and firms will have to be careful who they do business with
Newly beefed up powers for the foreign secretary to impose sanctions on individuals and entities over involvement in serious corruption represents progress in the UK’s fight against global kleptocrats who stash assets in Britain.
Until the introduction of the Magnitsky sanctions law, the UK typically imposed asset freezes as part of a range of measures targeting particular countries in line with a foreign policy objective. Before Brexit, this was usually done pursuant to EU legislation.
Thus, when the EU and UK imposed an asset freeze on President Assad of Syria in 2011, it was done as part of a wider sanctions programme against Syria in response to the violent suppression of protests which marked the beginning of the civil war.
Last year the UK established a new mechanism for asset freezes to be imposed in response to human rights abuses. Importantly, these measures — which are known as Magnitsky sanctions after the lawyer who was tortured and killed in 2009 at the hands of the Russian state — need not be anchored in any country-specific sanctions regime. This enabled the designation of individuals from a number of countries — including Saudi Arabia and the Gambia — against which the UK maintains no overarching sanctions regime.
Now the government has the power to impose these free-standing asset freezes for corruption as well as human rights abuse. Similar powers already existed in the US and Canada; by contrast, the EU’s Magnitsky regime is still confined to human rights abuses.
The UK designated 22 individuals when introducing the legislation last month. Although the majority are Russians, several are from countries not subject to UK sanctions, such as South Africa and Honduras.
At first blush the powers may be thought to have limited impact on businesses. After all, the immediate practical consequence is the addition of a number of names to a list of sanctions targets that a company with screening systems will already be checking.
However, businesses with links to politically exposed people will want to tread even more carefully in the future. Companies with operations in sanctioned countries are already used to thinking about the possibility of sanctions disrupting their activities. Now, though, no matter where a company is doing business, if a local business partner or counterparty is linked to a politically exposed person — such as being wholly or partly owned by one — and if that individual has a record of corruption, the risk of the UK imposing sanctions means that the company will be need to have done its due diligence properly.
Rob Dalling is a partner at the London office of US law firm Jenner & Block
The Times by Rob Dalling