After leaving the European Union, the UK announced its new sanctions regime in the Sanctions and Anti Money Laundering Act 2018 (SAMLA). As part of the Sanctions Act, the Global Human Rights Sanction Regulations came into effect on 6th July 2020, setting out the UK’s autonomous sanctions policy for dealing with human rights violations and abuses around the world.
SAMLA represents the first example of a UK-only sanction program and means that UK firms or firms that do business in the UK must reexamine their own sanctions screening measures and ensure that their AML/CFT controls remain compliant with the new regulatory landscape. With that in mind, to comply with the new human rights sanctions regime, UK banks, financial institutions, and other obligated entities should understand what the legislation entails and how they might affect their AML/CFT response.
The Global Human Rights sanctions regime replaces the existing European Convention on Human Rights that was implemented in the UK prior to its withdrawal from the European Union. The new human rights regime imposes asset freezes and immigration restrictions on persons (including state and non-state actors) that seriously violate human rights laws in any global territory. The UK’s autonomous human rights sanctions regime is intended to ‘champion human rights, good governance and the rule of law’ and specifically deter violations of the following fundamental individual rights:
- The right to life
- The right not to be subjected to torture or punishments or treatment of a cruel, inhuman, degrading nature
- The right to freedom from slavery, servitude, and forced labor.
‘Magnitsky’ style sanctions: Under the new regime, rather than targeting nations, the UK government has the power to sanction human rights violations perpetrated by individuals and organizations and can do so unilaterally rather than acting with the United Nations or the EU. The regime is similar to the US’ Magnitsky sanctions legislation that was enacted in 2012 after the death of Russian accountant Sergei Magnitsky following his mistreatment in prison.
The move towards individually targeted sanctions is intended to help the UK address more specific human rights crimes and violations such as the assassination and killing of journalists, political campaigners, and other media workers, by oppressive regimes, or to prevent other forms of targeted abuse and violence motivated by religions or ideologies. Sanctioned persons will no longer be able to move money through UK banks, use the UK financial system for profit, or enter the UK.
The new human rights sanctions regime is overseen by the UK government’s Office of Foreign Sanctions Implementation (OFSI). When the regime came into effect, the government immediately imposed sanctions against 49 individuals who were involved in a range of human rights violations and abuses. That first wave of UK sanctions involved the following designations:
- 25 Russian nationals involved in the death of Sergei Magnitsky.
- 20 Saudi nationals involved in the death of Jamal Khashoggi.
- 2 organizations involved in the slavery, torture, and murder carried out in North Korean gulags.
- 2 generals in the Myanmar military involved in brutal violence against the Rohingya people and other minorities in the country.
The UK government has suggested that more human rights sanctions designations will be forthcoming.
Penalties: Contraventions of the UK’s human rights sanctions will be considered a criminal offense and be punishable by a prison term of up to 7 years or a potential fine (or both).
Licenses and exceptions: The UK’s sanctions regulations set out exceptions to the regime under certain defined circumstances such as national security issues or for the prevention of serious crime. Individuals that are designated under the new sanctions may also apply to OFSI for financial sanctions licenses to access and use their frozen funds or assets. Licenses may be granted for circumstances including the provision of basic needs or humanitarian assistance, for prior obligations, or for other types of extraordinary situations.
UK firms must integrate the new human rights sanctions regime into their AML/CFT compliance programs by ensuring appropriate screening measures are in place. In practice, this means checking customer names against the relevant sanctions lists: the UK’s global human rights sanctions will be published as part of the UK Sanctions List while asset freezes and other financial restrictions will also be added to the OFSI consolidated list.
When new sanctions designations are made or names are removed from the OFSI list, OFSI will send out an email alert. It is worth bearing in mind that the new global human rights regime is applicable in addition to the UK’s existing sanctions obligations which include the United Nations Security Council Consolidated List and the EU consolidated list.
Know Your Customer: In order to ensure accurate and effective sanctions screening, UK firms must put appropriate Know Your Customer (KYC) measures in place to establish and verify their customers’ identities and understand their transactional behavior. Effective KYC means gathering identifying information during the customer due diligence process and monitoring customers’ transactions on an ongoing basis in order to detect attempts to circumvent international sanctions.
Smart technology: Firms should seek to integrate automated smart technology tools in order to manage their UK human rights sanctions compliance obligations. Smart technology allows firms to add speed, efficiency, and accuracy to sanctions screening processes, reducing false positives and noise and the inevitable errors of manual screening. Firms may also take advantage of artificial intelligence (AI) and machine learning tools that work with historic sanctions information to inform and enhance the process going forward.