Clifford Chance

On 6 July 2020, Foreign Secretary Dominic Raab announced the first set of autonomous UK sanctions to be imposed since the country left the European Union. Marking a potential divergence in approach between the UK and the EU towards tackling human rights abuses, this latest step adds to the growing complexities businesses face when conducting international trade. Particularly UK financial institutions.

Global Human Rights Sanctions Regulation 2020

Nicknamed a 'Magnitsky'-style sanctions regime, for its similarities with the American regime imposed in 2013 in response to the death of auditor Sergei Magnitsky in Russian police custody, the Global Human Rights Sanctions Regulation 2020 is designed to target those who have been involved in some of the gravest human rights violations and abuses around the world.

Under these Regulations, designated individuals can have their assets frozen and a travel ban imposed preventing them from entering into the UK.

Those found to be in breach of the new sanctions face the risk of both criminal and civil penalties.

In the accompanying press statement, the Foreign Office announced that this "ground-breaking global regime means the UK has new powers to stop those involved in serious human rights abuses and violations from entering the country, channelling money through UK banks, or profiting from our economy".

Who has been designated?

On Monday 6 July, forty-nine individuals and organisations were sanctioned under the new regime, namely:

• 25 Russian nationals implicated in Magnitsky's mistreatment and death in 2009;
• 20 Saudi nationals allegedly involved in the death of journalist Jamal Khashoggi in 2018;
• Two high-ranking Myanmar military generals for their alleged involvement in the repression of the Rohingya people; and
• Two organisations allegedly responsible for North Korean gulags.

What does this mean for businesses?

As many commentators have already noted, the majority of individuals designated this week are already sanctioned by the United States. As a result, the impact of this first wave of designations on UK financial institutions (particularly those with an active US presence) may well be minimal in practice – these names will already form part of existing sanctions screening processes.

For those firms (including financial institutions) which suddenly find themselves tied to newly designated entities, the Regulations impose reporting obligations requiring firms to notify Her Majesty's Treasury. There is also a licensing procedure allowing applicants to continue to deal with sanctioned individuals in certain circumstances.

Whilst the initial impact of the new regime may be political and (some may suggest) largely symbolic in nature (attracting praise from the US and criticism from China and Russia in equal measure), it does introduce the potential for future differences in the sanctions policies adopted in key financial markets in what is plainly already a complex area.

The UK Government has announced its hope that the new sanctions unveiled this week will allow the UK to work independently with allies free from the shackles of the EU, to tackle human rights violations. Time will tell, however, whether this new regime will garner the collective backing of the other nations needed to achieve its intended objective – namely deterring, and providing accountability for, such egregious activities.

It is clear that sanctions are increasingly prevalent on the UK government's agenda. Recently, OFSI (the body responsible for sanctions enforcement in the UK) imposed the first material penalty on a financial institution for sanctions breaches in connection with EU and UK measures against Russia. With potential for increased divergence from the EU on its sanctions policy, the risks in this area are likely only to increase.