Clamping down: the UK’s GHR sanctions regime starts to bite

December 2020 | FEATURE | RISK MANAGEMENT

Financier Worldwide Magazine

December 2020 Issue

“Those with blood on their hands will not be free to waltz into the UK to buy up property or siphon dirty money through British banks or financial institutions,” warned Dominic Raab, UK secretary of state for foreign, commonwealth and development affairs, upon the unveiling of the Global Human Rights (GHR) Sanctions Regulations 2020.

The first UK standalone sanctions regime, the GHR legislation is for the purpose 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.

“It is not surprising to see the UK taking this step, having indicated as far back as January 2020 that it intended to introduce this legislation,” says Harriet Territt, a partner at Jones Day. “The main focus has been on which countries or individuals would be targeted. The expectation was that Russia, Libya and North Korea would be key targets for the initial set of UK sanctions.”

Among the penalties the UK government can now impose are asset freezes and travel bans in order to punish and prevent rogue countries and individuals guilty of serious human rights violations and abuses throughout the UK and Europe.

“Without doubt, the UK government is taking a strong stance on implementing sanctions,” asserts Andrew Pimlott, senior managing partner at FTI Consulting. “Immediately after the implementation of the GHR, sanctions were imposed on 49 parties, and more are expected to follow.”

Provisions

The GHR regime is, in fact, a secondary piece of legislation, introduced in the wake of the UK’s Sanctions and Anti-Money Laundering Act 2018, which gave authorities the power to impose sanctions, a deterrent to gross violations of human rights.

Drilling down, the legislation gives the UK government the power to impose sanctions for serious violations or abuses of three human rights: (i) an individual’s right to life; (ii) the right not to be subjected to torture or cruel, inhuman or degrading treatment or punishment; and (iii) the right to be free from slavery, not to be held in servitude or required to perform forced or compulsory labour.

“As with any fresh legislation, particularly a regime with the scope and intent of the GHR sanctions, its full effectiveness can only be measured in time, despite the successes already recorded.”

Furthermore, the GHR regulations apply to all UK nationals and any body incorporated or constituted under the law of any part of the UK. They also have extraterritorial effect – so that they apply to conduct by persons both inside and outside the UK – with those sanctioned at liberty to challenge a decision in court or request a ministerial review of the designation (which is subject to review every three years).

The GHR regime is similar in approach to that taken by the US government’s Magnitsky Act and Global Magnitsky Act sanctions programme – legislation named after the Russian lawyer Sergei Magnitsky who died in police custody in Moscow following his uncovering of large-scale theft from the Russian state, sanctioned and carried out by Russian officials.

“Forty-seven individuals and two entities have been targeted by the UK with an asset freeze and travel ban,” observes Ms Terriett. “Among those targeted are a number of Russian nationals accused by the UK government of aiding and abetting in the death of Mr Magnitsky and certain Saudi nationals accused by the UK government of allegedly facilitating the death of journalist Jamal Khashoggi. Sanctions were also imposed on two high-ranking generals from Myanmar, as well as North Korean organisations involved in the running of its prison systems and labour camps.”

Yardstick

As with any fresh legislation, particularly a regime with the scope and intent of the GHR sanctions, its full effectiveness can only be measured in time, despite the successes already recorded.

“The impact of the regulations will be heavily influenced by the extent to which the Office of Financial Sanction Implementation (OFSI) takes action against financial institutions and other related entities that have either attempted deliberate non-compliance with the regulations or have negligently failed to have the appropriate due diligence, screening and control frameworks in place,” suggests Mr Pimlott.

“Given recent, significant OFSI fines, it is important that financial institutions not only have the necessary controls in place, but that they also have appropriate protocols relating to investigation, remediation and self-reporting to regulators when and if breaches occur,” he continues. “The true yardstick in future years will be the extent to which those targeted by the regulations has resulted in successful designation or, alternatively, been overturned through litigation or judicial review.”

In Ms Territt’s view, the UK’s sanctions legislation is part of a broader global trend toward upholding human rights in a trade context. “The UK is now aligned with the US and Canada, while the European Union’s (EU’s) own plans for a similar human-rights related sanctions programme are well underway,” she explains. “As with other global sanctions regimes, the greatest impact comes when many countries are broadly aligned on the types of behaviour that should be grounds for sanctioning. So, while the UK has historically played a very active role in helping develop EU sanctions policy, going forward, the government’s message is that the UK will continue to play an active, global role on its own account.”

Fraser Tennant