On 29 March 2022, Australia’s Minister for Foreign Affairs (the Minister) designated 39 individuals, including a number of Russian individuals engaged in serious corruption and human rights abuses, using the new powers set out in the Magnitsky sanctions amendments. Targeted financial sanctions and travel bans will apply to these persons from 30 March 2022.
These new sanctions measures are in addition and separate to the other Russian sanctions recently imposed by the Australian Government under the Autonomous Sanctions Regulations 2011 (see our update here).
The use of thematic sanctions needs to be taken into account by companies during their sanctions due diligence and screening processes.
Magnitsky-style sanctions laws
Sergei Magnitsky was a Russian lawyer who exposed fraud and corruption involving Russian tax officials in relation to a $230 million tax rebate. Mr Magnitsky was imprisoned on allegations that he had assisted in the tax evasion and fraud, and later died in pre-trial custody in a Russian prison in 2009. He was convicted posthumously. According to a unanimous ruling of the European Court of Human Rights, Mr Magnitsky was subjected to serious human rights abuses including appalling detention conditions, deprivation of lifesaving medical care, and inhuman and degrading treatment.[i]
In 2012, the US Congress enacted legislation in honour of Mr Magnitsky to enable sanctions to be imposed in relation to individuals complicit in human rights abuses anywhere around the world. Other countries, including the UK and the EU, followed suit in implementing Magnitsky-style sanctions laws.
In December 2021, Australia introduced Magnitsky-style sanctions under its autonomous sanctions laws. Previously, Australia’s autonomous sanctions regimes had only applied country-specific sanctions, which targeted individuals and entities on the basis of a connection to a country or region.
Under the new laws, the Australian Government can enact thematic sanctions targeting individuals responsible for serious human rights abuses, serious corruption, malicious cyber activity or other activities that are of international concern.
The Minister designated 39 individuals for targeted financial sanctions and personal travel bans under the Autonomous Sanctions (Designated Persons and Entities and Declared Persons—Thematic Sanctions) Instrument 2022, in accordance with reg. 6A of the Autonomous Sanctions Regulations 2011.
The sanctions target 14 Russian individuals engaged in, responsible for, or complicit in the serious corruption that was uncovered by Mr Magnitsky and 25 Russian individuals engaged in, responsible for, or complicit in serious human rights abuses against Mr Magnitsky. The sanctions take effect from 30 March 2022.
Whilst these are the inaugural listings under Australia’s Magnitsky-style autonomous sanctions laws, in a media release on 29 March 2022, the Minister flagged that there may be further people designated in relation to Mr Magnitsky’s death:
“In this first tranche, the Government will honour Mr Magnitsky and all who defend the rule of law, with targeted sanctions and travel bans against 14 Russian individuals responsible for the serious corruption that he exposed and a further 25 Russian perpetrators and accomplices of his abuse and death.
These individuals will be subject to targeted financial sanctions, including asset freezes and travel bans. This will ensure that Australia does not become a safe haven for those already locked out of like-minded countries and their financial systems.”
Autonomous sanctions against Russia
These new Magnitsky-style sanctions are separate to the autonomous sanctions Australia has already imposed in response to the Russia-Ukraine conflict.
See our latest summary of the Australia’s sanctions in response to Russia’s invasion of Ukraine here.
Impact on risk and compliance
Sanctions laws are strict liability offences. While there is no Australian law requiring companies to undertake screening / sanctions checks, there is a corporate due diligence defence available under Australia’s autonomous sanctions laws. The ability to rely on this defence in the case of inadvertent sanctions breach is only as good as the compliance framework underpinning the business. The way in which the business transacts with customers, suppliers and other stakeholders needs to reflect the risk of sanctions breach.
With the Government actively implementing these Magnitsky-style sanctions for the first time, now is the time to assess your compliance framework. Businesses should be prepared for further thematic style sanctions which mean that standard sanctions risk frameworks (which focus on country/region risk) may need to be revisited. KYC/PEP screening tools should be assessed to ensure that they incorporate the most recent updates to the consolidated list that the Australian Sanctions Office maintains.
Clyde & Co is closely monitoring changes around the world. To keep up to date with the latest sanctions developments and to understand how they may affect your business, please visit our Geopolitical risks and sanctions hub.