The regulations will enable the UK government to impose sanctions in response to serious corruption around the world.
By Charles Claypoole, Amaryllis Bernitsa, and Robert Price
On 26 April 2021, the United Kingdom implemented the Global Anti-Corruption Sanctions Regulations 2021 (the Regulations). The legislation sets out a new Global Anti-Corruption Sanctions Regime to combat serious corruption, pursuant to the Sanctions and Anti-Money Laundering Act 2018 (SAMLA).
The Regulations allow the UK government to designate as sanctions targets (i.e., the targets of asset-freeze sanctions and travel restrictions) persons who are or who have been involved in “serious corruption” around the world, defined as (i) “bribery” or (ii) “misappropriation of property”. These terms are defined broadly as follows:
- Bribery includes both providing a financial or other advantage to a foreign public official and a foreign public official receiving a financial or other advantage.
- Misappropriation of property includes if a foreign public official improperly diverts or allocates property (include anything of value, including contracts or licenses or concessions) entrusted to them in their official role (whether the property is intended to benefit them or a third person).
The Regulations allow the UK government (through the Foreign Secretary) to designate persons as asset-freeze targets or to impose restrictions on their entry to the UK, or both. This approach is similar to other UK asset-freeze sanctions, such as the Global Human Rights Sanctions Regulations 2020.
Under the asset-freeze sanctions, it is prohibited for persons to:
- “Deal with” “funds or economic resources owned, held or controlled by a designated person”
- Make “funds” or “economic resources” available, directly or indirectly, to or for the benefit of designated persons
- Engage in intentional activities designed to circumvent or to “enable or facilitate” contraventions of the asset freeze
In parallel with its announcement of the Regulations, the UK published a list of 22 individuals designated under the Regulations on the basis that the UK government has reasonable grounds to suspect that they have been involved in serious corruption.
Becoming a Designated Person Under the Regulations
The Regulations provide a number of criteria for determining whether a person may be considered “involved” in serious corruption — including if they are responsible for or engage in serious corruption within the scope of the Regulations. In addition, a person may become a designated person under the Regulations if they:
- Facilitate or provide support for serious corruption
- Profit financially or obtain any other benefit from serious corruption
- Conceal or disguise, or facilitate the concealment or disguise of, serious corruption or any profit or proceeds from such corruption
- Transfer or convert, or facilitate the transfer or conversion of, any profit or proceeds from serious corruption
- Fail, intentionally or recklessly, to carry out their responsibility to investigate or prosecute serious corruption
- Use threats, intimidation, or physical force to interfere in, or otherwise interfere in, any law enforcement or judicial process in connection with serious corruption
- Contravene, or assist with the contravention of, the asset freeze and travel ban restrictions in the Regulations
The Regulations entitle the Foreign Secretary to designate persons if:
- There are reasonable grounds to suspect that the person is or has been involved in serious corruption, as set out above, but also if they are (a) owned or controlled directly or indirectly by, (b) acting for or on behalf of, or (c) a member of, or associated with, a person involved in serious corruption.
- It would be appropriate with regards to the purposes of the Regulations and the likely significant effects on that person of designating them.
As with the Global Human Rights Sanctions Regulations, the UK’s Foreign Commonwealth & Development Office has released a policy paper containing a non-exhaustive list of factors that the UK government regard when considering designation, including:
- The UK government’s anti-corruption policy priorities: These priorities include the damage caused to countries outside the UK (focusing on the impact on their governance, economic growth, and development), and the UK’s national security and business interests. Particular focus is likely to be on corruption that meets any of the following conditions: (a) is linked to crime, security, and terrorism threats, (b) impedes economic growth and poverty reduction, and/or (c) undermines governance and public institutions, and deprives citizens of vital resources (including natural resources).
- The scale, nature, and impact of the corruption: For example, the UK government should consider whether: (a) the conduct is systemic (e.g., involving senior officials or political figures), (b) the conduct is systematic and/or sophisticated, (c) the financial value of the benefit derived is significant relative to the local context, and (d) the conduct involves external actors destabilising the countries affected.
- The status, connections, and activities of the “involved person”: The UK government should consider the position of the person in the hierarchy of an organisation, and whether that person has particular links to the UK, including whether such person would be particularly affected by travel or financial restrictions under the Regulations.
- Collective international action: The UK government should consider whether international partners have adopted sanctions and whether any action by the UK is likely to increase the effect of the designation in addressing the corruption in question.
- Interaction with law enforcement activities: For example, the UK government should consider whether: (a) the relevant jurisdiction’s law enforcement authorities have been unable or unwilling to hold those persons involved in acts of serious corruption to account, and/or (b) enforcement bodies have been unable to pursue a case against those persons or their property (e.g., because a person is located outside the UK and a foreign government does not provide the necessary cooperation).
- Risk of reprisals: The UK government should consider whether there is any potential negative impact a designation may have, such as any potential reprisals or physical or mental harm to journalists, civil society organisations, or whistle-blowers.
The Regulations mark the next stage of the UK’s journey to forge an autonomous sanctions regime post-Brexit, and build on the Global Human Rights Sanctions Regulations announced last year. As noted in the explanatory memorandum, the Regulations also demonstrate that the UK government is committed to upholding good governance and the rule of law, and promoting open societies — all of which are undermined by serious corruption.
The government is prepared to use a variety of tools to combat serious corruption. In particular, the possibility of a sanctions designation and the use of the asset-freeze restrictions under the Regulations as part of the UK’s broader anti-corruption strategy will be a significant deterrent, while also complementing other instruments, such as the UK Bribery Act 2010.
Businesses subject to the UK sanctions regime must continue to take care to comply with the prohibitions on doing business with designated persons, including those newly designated persons targeted by the Regulations. Businesses operating globally that have adopted a policy not to engage in activities with persons subject to international and national sanctions regimes should update their policies and procedures to reflect this new regime. Failure to do so would likely cause reputational harm, and could also bring legal consequences.
Submit a comment about this post to the editor.