03 Aug 2020
After much speculation about its post-Brexit role in the fight against financial crime, the United Kingdom took the surprising step in early July of becoming something of a sanctions hawk—at least on paper, that is.
In its first divergence from EU sanctions since leaving the bloc in January, the UK imposed asset freezes and travel bans on 49 individuals and organisations from Myanmar, Russia, Saudi Arabia and North Korea for their purported roles in human-rights abuses that took place beyond Britain’s borders.
The designees include more than two dozen Russian nationals believed to be responsible for the death of Muscovite attorney Sergei Magnitsky, 20 Saudi nationals involved in the murder of journalist Jamal Khashoggi, two military generals linked to violence against the Rohingya people and organisations behind forced labour and torture in North Korea’s prison system.
The sanctions, the UK said, represent only the “first wave” of countermeasures under its new Global Human Rights regime, with additional targets to be named “in the coming months” under the direction of a special unit tasked with ensuring the legality of the prohibitions.
How aggressively London intends to assert its financial strength going forward remains to be seen, though the acclamation the move has received at this early stage is not without merit.
For one, the UK has managed to adopt and make use of so-called “Magnitsky-style” sanctions—a goal that the 27-member European Union has so far found to be blocked by an impasse. In contrast to EU sanctions, the UK measures explicitly call for asset freezes on any entity owned or controlled by a designee, without exceptions, even if such are funds are not used by, or for the benefit of, a Listed Person.
For banks and other covered firms, the UK sanctions will likely necessitate reviews of existing screening procedures, with an eye on whether designated entities are directly or indirectly in control of the companies linked to them. The expectation for covered firms is that they discern when it’s reasonable to believe a company is acting in accordance with a blacklisted individual’s wishes.
That compliance burden may prove negligible for some, in large part because Britain’s most recent blacklist mirrors designations previously imposed by the United States. Since the US Treasury Department enforces its measures with secondary sanctions, the UK designees have already been effectively banned by British banks.
Another question raised by the move is how aggressively the UK will enforce its blacklist. While the government’s Office of Financial Sanctions Implementation (OFSI) has had a relatively light touch historically when it comes to doling out fines, it levied its first multi-million-pound penalty in April, when Standard Chartered agreed to pay £20.5 million for breaching EU sanctions targeting Russia.
Signs that the UK could take a more aggressive sanctions posture over the long-term were separately bolstered in mid-July, when parliamentarians pressed British Foreign Minister Dominic Raab on potential prohibitions in response to Hong Kong’s new national security law.
Raab, who had just announced the UK’s suspension of its extradition treaty with Hong Kong and the extension of an arms embargo to the former British colony, said financial sanctions were under consideration but that a decision would take months to reach.
Whatever the outcome, it’s clear that UK sanctions are on the table to stay, whether the European Union backs them or not.
Read more: UK government’s full press release: UK announces first sanctions under new global human rights regime
RiskScreen: Eliminating Financial Crime with Smart Technology
Advance your CPD minutes for this content, by signing up and using the CPD WalletFREE CPD Wallet