UK launches new Global Anti-Corruption sanctions regime
On April 26, 2021, the UK launched a new sanctions regime, aimed at preventing and combatting serious corruption.
The new Global Anti-Corruption Sanctions Regulations 2021 (the "Regulations") provide authority for UK government ministers to designate on the UK sanctions list persons involved in serious corruption (an "involved person"). Such designated persons may be subject to an asset freeze and/or travel ban. The Regulations also prohibit making funds and/or economic resources available to or for the benefit of designated persons, either directly or indirectly.
The term "corruption" comprises "bribery" and "misappropriation of property", as further defined in the Regulations. As noted above, only an "involved person" may be designated under the Regulations. An "involved person" is broadly defined in section 4 to encompass any person who:
- "is or has been involved [as further defined in the Regulations] in serious corruption,
- is owned or controlled directly or indirectly [as further defined in the Regulations] by a person who is or has been so involved,
- is acting on behalf of or at the direction of a person who is or has been so involved, or
- is a member of, or associated with, a person who is or has been so involved."
Accompanying the launch of the new anti-corruption sanctions regime was a policy paper with guidance for the consideration of designations. The paper provides a non-exhaustive list of six factors likely to be relevant when the UK government decides to designate an individual as a person involved in serious corruption, namely:
- the long term outcomes set out in the UK Government's anti-corruption policy priorities;
- the scale, nature and impact of the serious corruption;
- the status, connections and activities of the involved person – it seems likely, for instance, that individuals with assets in the UK are more likely targets than other allegedly corrupt individuals without a UK connection;
- whether any collective international action has been taken by the UK's international partners;
- where other relevant jurisdictions' law enforcement have been unable or unwilling to hold the relevant persons accountable; and
- risk of reprisals – particular attention may be given to potential negative impacts of a potential designation, such as reprisals or harm to journalists, civil society organisations, human rights defenders or whistle-blowers.
These factors are in different ways reflected in the 22 designations already made under the new regime. Designations include inter alia 14 Russian nationals involved in the USD $230m fraud case uncovered by the Russian lawyer Sergei Magnitsky, certain members of the South African Gupta family, who have been at the centre of a South African corruption scandal involving former president Jacob Zuma, as well as certain Central American officials alleged to have engaged in bribery, misappropriation of property and/or aiding drug cartels.
Notably, part 6 of the new Regulations imposes reporting obligations on "relevant firms" to inform the Treasury "as soon as practicable" if the firm "knows, or has reasonable cause to suspect" that a person is a designated person or has breached the Regulations' financial prohibitions (i.e. made funds and/or economic resources available to a designated person etc.). "Relevant firms" is further defined in section 25 and includes businesses within sectors typically exposed and susceptible to risks of corruption and money-laundering, including businesses providing regulated financial services , currency exchange offices, real estate agencies, casinos and persons involved with articles made from precious metals, precious stones or pearls.
It is clear from the UK anti-money laundering reporting regime ("SAR reporting") – which also requires reporting on the basis of "reasonable cause to suspect" – that this standard sets a low threshold for reporting. Affected firms with operations in, or a connection to, the UK would therefore be well advised to include the new reporting obligations in their KYC- and due diligence procedures.
The new regime provides the UK with a useful tool to prevent and combat corrupt acts and pursue its strategic foreign policy goals, in circumstances where jurisdictional challenges or higher evidentiary thresholds (e.g. requiring a prior criminal conviction and/or a court order to effect asset confiscations ) might otherwise have prevented similar outcomes. As such, the new regime builds on, and provides similar mechanisms to, the Global Human Rights Sanctions Regulations 2020. The two regimes will likely work in tandem, in the mould of other sanctions legislation primarily targeted at individuals involved in corruption and human rights abuses, such as the US Global Magnitsky Act.
See also our previous Sanctions Alert from January, where we expand further on some of the key terms mentioned above.
WR Sanctions Alerts provide you with updates on material developments in the country-specific sanctions programmes implemented by the US, the UN, the UK, the EU and Norway. We will not provide updates on mere prolongations, without material changes, of existing sanctions programmes, nor on any listings or de-listings of individuals/entities placed on implemented sanctions lists . Please note that the WR Sanctions Alerts are provided as general information and do not constitute legal advice.