European Union: Sanctions And Anti-Money Laundering Act 2018

Last Updated: 25 July 2018
Article by Anthony Hanratty

On 23 May 2018, the Sanctions and Money Laundering Act was given Royal Assent. Currently the ability of the UK to impose domestic sanctions is set out in the Anti-Terrorism, Crime and Security Act 2001 which only provides the power to impose freezing orders against persons who have taken action to the detriment of the UK's economy or who have committed an act constituting a threat to the life of a UK national or resident of the UK. All other sanctions are imposed by either the adoption of a decision by the Council of the European Union or through the United Nations Security Council. The Sanctions and Money Laundering Act 2018 was enacted to enable sanctions to be imposed following the UK's departure from the EU and is one of a raft of 'Brexit legislation' being brought in to 'plug' the gaps left by EU law.

Under the Act, sanctions may be imposed where an appropriate Minister considers that it is appropriate to do so for the following reasons:

  1. for the purposes of compliance with an UN obligation,
  2. for the purposes of compliance with any international obligation, or
  3. for a purpose within subsection 1(2) of the Act which includes the prevention of terrorism, in the interests of national security, in the interest of international peace and security and to further a foreign policy objective of the government of the United Kingdom. The full list is set out in the Act.

One of the key changes made to the Bill before it was enacted was the inclusion of a 'Magnitsky clause'. Section 1(2)(f) of the Act permits sanctions to be imposed to 'provide accountability for or be a deterrent to gross violations of human rights', or otherwise promote (i) compliance with international human rights law, or (ii) respect for human rights. The Act further states that any reference to a gross violation of human rights is to conduct which constitutes, or is connected with, the commission of a gross human rights abuse or violation; and whether conduct constitutes or is connected with the commission of such an abuse or violation is to be determined in accordance with Section 241A of the Proceeds of Crime Act 2002. Section 241A states that conduct constitutes the commission of a gross human rights abuse or violation if each of the following three conditions are met:

  1. The first condition is that—

    1. the conduct constitutes the torture of a person who has sought—

      1. to expose illegal activity carried out by a public official or a person acting in an official capacity, or
      2. to obtain, exercise, defend or promote human rights and fundamental freedoms, or
    2. the conduct otherwise involves the cruel, inhuman or degrading treatment or punishment of such a person.

  2. The second condition is that the conduct is carried out in consequence of that person having sought to do anything falling within subsection (2)(a)(i) or (ii).
  3. The third condition is that the conduct is carried out—

    1. by a public official, or a person acting in an official capacity, in the performance or purported performance of his or her official duties, or
    2. by a person not falling within paragraph (a) at the instigation or with the consent or acquiescence—

      1. of a public official, or
      2. of a person acting in an official capacity, who in instigating the conduct, or in consenting to or acquiescing in it, is acting in the performance or purported performance of his or her official duties.
  4. Conduct is connected with the commission of a gross human rights abuse or violation if it is conduct by a person that involves—

    1. acting as an agent for another in connection with activities relating to conduct constituting the commission of a gross human rights abuse or violation, directing, or sponsoring, such activities, profiting from such activities, or materially assisting such activities.
  5. Conduct that involves the intentional infliction of severe pain or suffering on another person is conduct that constitutes torture for the purposes of subsection (2)(a).
  6. It is immaterial whether the pain or suffering is physical or mental and whether it is caused by an act or omission.

  7. The cases in which a person materially assists activities for the purposes of subsection (5)(d) include those where the person—

    1. provides goods or services in support of the carrying out of the activities, or
    2. otherwise provides any financial or technological support in connection with their carrying out.

Where sanctions are imposed for the purpose of compliance with an UN obligation or for the purpose of compliance with any other international obligation, the test is whether the appropriate Minister considers it appropriate to do so. Where, however, sanctions are imposed for one of the 'discretionary' purposes within Section 1(2) there are additional requirements which must be satisfied.

Section 2(2) states 'an appropriate Minister may not decide that it is appropriate to make regulations to which this section applies unless, in respect of each discretionary purpose stated in the regulations, that Minister –

  1. has considered whether there are good reasons to pursue that purpose and has determined that there are, and
  2. has considered whether the imposition of sanctions is a reasonable course of action for that purpose and has determined that it is.'

Whilst it is impossible to determine in what circumstances Section 1(2) will be relied upon or how freely Ministers are willing to use it, it arguably gives the UK a greater ability to tackle corruption and human rights violations through sanctions. The present system is undesirable to some as it requires either a resolution of the UN Security Council or an agreement by all EU member states. It is no great secret that the 'Magnitsky clause' was an addition made with Russia in mind (although it could apply to any number of public officials involved in suppressing 'whistle-blowers' or the torture and/or mistreatment of human rights defenders). As Russia is a member of the UN Security Council, it effectively curtails the power of the Council. The current system of EU sanctions is not one without problems either. As it requires agreement of all member states, there will no doubt be resistance and disagreement. Italy, for example, appears to be aligning itself more closely with Russia than the rest of the EU. To date, the only sanctions imposed on Russia by the EU are in response to the Russian annexation of Crimea.

In its recent report 'Moscow's Gold: Russian Corruption in the UK', the House of Commons Foreign Affairs Committee recognised the significant impact of the newest US sanctions on Russia which demonstrated the potential value in targeting Kremlin-linked individuals as a way of putting pressure on the regime to change its aggressive and destabilising behaviour. It also welcomed the (then) Bill's broad definition of the purpose of the sanctions regulations. It further states that human rights abusers and their money are not welcome in the UK and applauded the inclusion of the Magnitsky clause.

It is clear from the Committee's report that it sees the Act as a powerful tool by which sanctions can be used to exert pressure on governments involved in corruption and human rights abuses. Whilst the wide-ranging powers of the Act do appear to give the UK the opportunity to effect change through sanctions, the broad definitions of the purposes set out in Section 1(2) could be open to potential abuse, therefore close scrutiny of its application will be required.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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