In 2020, the Council of the European Union adopted a Decision and Regulation implementing a new sanctions regime that would enable the EU Council to take restrictive measures against natural persons and entities involved in serious human rights violations, including travel bans and asset freezes.
In 2021, the Council imposed restrictive measures on fifteen individuals and four entities responsible for serious human rights abuses in several countries to demonstrate the EU’s commitment to stand up for human rights and take tangible action against those responsible for violations.
The violations that were targeted included the detention of Uyghurs in China, repression in the Democratic People’s Republic of Korea, the killings and disappearances in Libya, the torture of LGBTI people in Russia, and executions in South Sudan.
The framework followed the adoption of the Global Magnitsky Human Rights Accountability Act in the United States, which also authorized targeted sanctions on individuals responsible for human rights abuses. The UK introduced the Global Human Rights Sanctions Regulations in 2020 as well, and Australia is expected to introduce human rights-based sanctions in the near future.
It’s important to take these new sanctions into account when assessing the risk profile of new customers during onboarding and for the duration of the relationship.
What Are Human Rights Violations and Abuses, and How Are They Enforced?
Human rights are the basic and inherent rights and freedoms that belong to every person in the world, from birth until death, regardless of race, nationality, sex, ethnicity, religion, sexuality or any other status.
Human rights include the right to a fair trial, the protection of physical integrity and against enslavement, freedom of expression, and the right to education.
Under the EU Council Regulation 2020/1998, restrictive measures may be applied against individuals or State and non-State actors who are involved in genocide, human rights violations, crimes against humanity, and abuses including torture, slavery, arbitrary executions and arbitrary arrests or detentions.
The sanctions regime also tackles abuses that are systematic or of serious concern as regards the objectives of the common foreign and security policy set out in the Treaty of the European Union, including:
- Human trafficking
- Gender-based and sexual violence
- Abuses of freedoms (including the freedom of peaceful assembly and association, freedom of expression or freedom of religion).
Under the new regulation, sanctions of listed entities may include travel bans that prohibit listed individuals from entering or transiting through the Member States, the freezing of funds and economic resources which belong to or are held by listed individuals, bodies and entities and a prohibition against persons and entities in the EU making funds or resources available to listed individuals/entities.
The UK Global Human Rights Sanctions Regime
Following its withdrawal from the European Union, the UK implemented the Global Human Rights sanctions regime, which can impose asset freezes and immigration restrictions on persons that violate human rights laws in any territory. The new regime is designed to deter violations of the right to life, the right not to be subjected to torture or punishments of a cruel, inhumane or degrading nature, and the right to freedom from slavery, servitude and forced labor.
Under the new regime, the UK government can act unilaterally rather than acting with the United Nations or EU. Sanctioned persons will not be able to move through the UK, move money through UK banks or use the UK financial system for profit.
The human rights sanctions regime in the UK is overseen by the Office of Foreign Sanctions Implementation (OFSI). The government imposed sanctions against forty-nine people immediately after its implementation, including sanctioning twenty-five Russian nationals involved in the death of Sergei Magnitsky, twenty Saudi nationals involved with the death of Jamal Khashoggi, two North Korean organizations and two generals in the Myanmar military involved in violence against the Rohingya people.
Entities or persons who contravene the UK’s human rights sanctions will be subject to prison terms of up to seven years or a potential fine (or both. It is possible for sanctioned people to apply to OFSI for financial sanctions licenses to access frozen funds or assets. Licenses are sometimes granted for the provision of basic needs or prior obligations.
Challenges Arising from Human Rights Sanctions
The increasing number of human rights sanctions and growing sanctions lists pose challenges for financial entities and other businesses, who may need to invest in systems to meet the new regulatory requirements in the various jurisdictions for which they are responsible.
Regulations can be complex and varied, and not understanding the sanctions in different territories may expose organizations to serious legal risks, the possibility of fines and even imprisonment. Even inadvertent violations have severe consequences, and risks can vary between regions.
All firms should take care, for example, to integrate the new human rights sanctions regime into their AML/CFT compliance program. Appropriate screening measures must be put in place, including checking customer names against relevant sanctions lists.
They should also bear in mind that lists change frequently. Names are added and removed regularly. Businesses who operate in other territories also need to keep up-to-date with relevant Sanctions lists.
Conclusion
Firms have an obligation to adhere to human rights sanctions by putting appropriate KYC (or Know Your Customer) measures in place to establish customer identities, gather relevant data and monitor customers’ transactions on an ongoing basis. Smart, automated sanctions screening software can help facilitate the entire process quickly and easily, eliminating time-consuming false positives and manual checks. Speak to sanctions.io if you would like to know more.
