Australia: Australian Sanctions Laws slated for a broad review: joining the global Magnitsky movement and beyond

The Australian Government has committed to a review of the Australian autonomous sanctions regime in the next 12 months, as well amend the current regime to include a Magnitsky-style legislation by the end of this year. What does this mean for the future of sanctions legislation in Australia?

Central to the Government's commitment to amend Australia's autonomous sanctions regime is to include a framework for imposing sanctions on persons involved in human rights abuses and serious corruption by the end of this year. 

This will be followed by a broader review of the Australian autonomous sanctions regime in the next 12 months which is likely to be the most comprehensive review of the current Australian sanctions framework since its inception. 

Given the rapidly changing regulatory environment and the trend in Australia towards more legislation and greater enforcement to address key international concerns, organisations should monitor the upcoming sanctions review and consider taking steps to prepare for the resulting changes.  

The report by the Joint Standing Committee on Foreign Affairs, Defence and Trade can be found here and the Government's response can be found here. 

Australia's sanctions regime

The Australian sanctions framework is found in: 

• the Charter of the United Nations Act 1945 (Cth), which implements the United Nations Security Council sanctions regime; and
  
  
• the Autonomous Sanctions Act2011 (Cth) (the Autonomous SanctionsAct), which implements the Australian autonomous sanctions regime.  

Through these, Australia imposes economic, financial and trade restrictions on entities and individuals from countries specified as being involved in situations of international concern.  Sanction measures include restrictions on trade in goods and services, restrictions on engaging in commercial activities, targeted financial sanctions on designated entities and persons, and travel bans.  

Parliamentary review and the Government's response

In December 2020, the Joint Standing Committee on Foreign Affairs, Defence and Trade (Committee) released its report after completing a Parliamentary inquiry into the Australian sanctions regime (the Report). In its Report, the Committee recommended that the Government enact a Magnitsky-style legislation to impose sanctions on persons involved in serious human rights abuses and violations and serious corruption.

 
The Government's response

In August 2021, the Australian Government made a commitment to implementing the Committee's recommendation to establish an issue-based human rights and corruption sanctions regime.  

The key Government responses to the Report are: 

• Issue-based sanctions program  - The human rights sanctions regime will be introduced by amendment to the existing Autonomous Sanctions Act, rather than as a new standalone legislation. These amendments will provide for 'thematic' sanctions programs in addition to the existing state-focused programs.
  
  
• Targeted conduct  -  The sanctions will target the 'most egregious situations of international concern'.  Rather than applying to human rights violations or corruption broadly, they will apply to serious corruption, and violations of the right to life, the right to be free from slavery, and the right not to be subjected to torture or cruel, inhuman or degrading treatment.
  
  
• Targeted persons - Sanctions will be applicable to individuals (and their immediate family and direct beneficiaries), corporate entities, state and non-state organisations.   The Minister for Foreign Affairs will publish names of sanctioned people, the reason for their listing and an annual report on sanctions.
  
  
• Oversight - The Minister for Foreign Affairs will be the ultimate decision maker with power to impose, vary or remove the specified sanctions. It rejected the recommendation to create an independent advisory body that would publicly receive, consider and make recommendations regarding sanctions.
  
  
• Broader review  - The Government has committed to conduct a comprehensive review of the sanctions framework within 12 months of the new sanctions framework. The review will also focus on ensuring efficacy in the sanctions processes and alignment with foreign policy objectives.¹  Further, the Government has accepted the recommendation to provide regulatory guidance on how businesses can meet their obligations under the reformed sanctions regime.     

Interim referrals framework?

The Government has yet to introduce a bill reflecting the above amendments. In the interim, the Human Rights (Targeted Sanctions) Bill 2021 (Bill) has been presented to Parliament with the objective of creating a framework of referral which is yet to pass. 

Under it, the Parliament would pass resolutions nominating particular individuals that have committed human rights violations or serious corruption, and the Minister would then be required to make statements on whether to impose sanctions on them. This Bill explicitly includes a provision to review the interim referral provisions when the amendments to the Autonomous Sanctions Act implementing the Joint Committee's recommendations are passed, so as to maintain coherence in the sanctions framework. 

What should organisations expect going forward?

The proposed reforms to the sanctions regime are reflective of a broader shift in the Australian financial crime and human rights regime to stricter rules entrenched in legislation in line with the shift occurring in other countries such as the EU, UK and US.  

In addition to the proposed sanctions reforms, a recent Senate report has recommended various reforms including a review of the Australian modern slavery regime and restrictions on the import of any goods made wholely or in part with forced labour, regardless of geographic region.  

The extent to which the Senate Committee's recommendations will be implemented remains to be seen. However, it is clear that more reforms to sanctions and other regimes that involve addressing key international concerns such as human rights violations, corruption and cybercrime should be expected. 

Greater monitoring and enforcement may also be expected specifically in relation to sanctions. In December 2020, the Government established the Australian Sanctions Office (ASO), a dedicated regulator, to monitor and enforce sanctions laws.  

Accordingly, businesses will need to ensure their current compliance frameworks are consistent with their obligations under the rapidly changing regulatory environment. 

What can organisations do to prepare?

Organisations should monitor these reforms and depending on the nature of any amendments: 

• review their financial crime and sanctions policies;
  
  
• review any internal checklists and training materials for staff relating to financial crime and sanctions laws;
  
  
• consider whether the changes will have an impact on compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006  (Cth) and other financial crime laws; and
  
  
• consider whether its current due diligence processes are sufficient for transactions with customers and suppliers.  

What happens next?

The Government is likely to introduce a bill to implement its responses to the Report by the end of the year, followed by a broader review of the Australian sanctions regime in the next 12 months. 

Given the magnitude and importance of these reforms, the Government is likely to undertake consultation on exposure drafts of the relevant bills. 

Organisations operating in various industries will be impacted by these reforms and should consider making submissions.  

Footnote

¹ Australian Government Response to the Joint Committee on Foreign Affairs, Defence and Trade Human Rights Sub-Committee Report: Criminality, Corruption and Impunity: Should Australia Join the Global Magnitsky Movement? (Report, 5 August 2021) 13.

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