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Proposed reforms to Australia’s sanctions regime to target corruption, cyber-crime, human rights violations

Australia
Legal Briefings – By Jacqueline Wootton, Christine Wong and Shannan Casey

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The Australian Government has announced plans to implement a targeted, Magnitsky-style sanctions regime by the end of 2021.

What are the implications of the proposed reforms?

The proposed reforms would expand Australia’s current country-based autonomous sanctions framework to include targeted sanctions focused on themes of conduct. This includes proliferation of malicious cyber activity, gross human rights violations, grand corruption and weapons of mass destruction. This follows similar regimes that exist in the United States (which in recent times have seen increasing focus on cyber-crime), Canada and the UK. The regime was introduced in the United States following the death of Sergei Magnitsky (a Russian tax lawyer) in prison and has since been used to sanction individuals and entities involved in serious human rights abuses such as Myanmar military officials, and more recently companies and individuals associated with the Belarus Government.

The Australian Government has indicated that it will consult with business to issue guidance in order to minimise the compliance burden.

In view of the foreshadowed changes, we expect that this will:

  • Increase sanctions risk for some companies. Companies that do not deal with sanctioned countries still may be faced with sanctions risks in dealings with persons and entities connected to particular types of conduct, that are independent of country wide sanctions. Without comprehensive sanctions screening and risk assessment processes, these risks can be more difficult to spot.
  • Require a re-examination of sanctions compliance programs to ensure they support compliance with thematic sanctions. This is critical given sanctions breaches are strict liability offences, with companies having to establish that they took reasonable steps and exercised due diligence in order to make out a defence.

Businesses should take steps now to ensure their sanctions compliance programs are ready for when these reforms are implemented.

Government’s response to the current reform recommendations

On 5 August 2021, the Government released its response to the report released in December 2020 by the Parliamentary Joint Standing Committee on Foreign Affairs, Defence and Trade (Committee) which recommended the Government enact Magnitsy style targeted sanctions laws.

While the Government has agreed to a number of the recommendations, it has not wholly committed to the Committee’s recommendations, particularly those relating to the process for imposing new sanctions.

Our overview of the key recommendations and the Government’s response is set out below:

Committee Recommendation

Government Position

Introduction of targeted standalone sanctions legislation similar to the US Magnitsky Act 2012 implemented through existing processes and legislative schemes.

Will be introduced via amendments to existing legislation and regulations (not through standalone legislation) as part of broader reforms to existing legislation (which will focus on clarifications).

Review of legislation three years after commencement.

Broader review of sanctions framework 12 months after commencement against foreign policy objectives.

How thematic sanctions will apply: targeted conduct and persons

Sanctioned conduct should include serious human rights abuses and serious corruption.

Human rights and corruption based criteria will be introduced. Human rights abuses will focus on rights to: life, be free from slavery and not to be subjected to torture or cruel, inhuman or degrading treatment. Serious corruption will also be a focus.

Sanctions should include visa and travel restrictions, limited access to assets, and restricted access to Australia's financial systems.

 

Sanctions should be capable of applying to all entities (including natural persons, corporate entities and state and non-state organisations) and extend to the immediate family, direct beneficiaries and associated entities of human rights abusers. 

 

Sanctions should not be imposed on Australian citizens.

Regime will not explicitly exclude Australian citizens / residents, although sanctions are not typically imposed on citizens / residents.

Process for imposing sanctions

The Minister for Foreign Affairs should be the decision maker with broad discretion as to whether or not to impose sanctions (in consultation with the Attorney-General). The Minister should also have the power to vary or remove sanctions.

 

An independent advisory body should be established to receive and consider nominations for sanctions targets and make recommendations to the decision maker (the Minister for Foreign Affairs).

Decision making power should rest with the Minister for Foreign Affairs.

Enquiries by the independent advisory body can be conducted in public.

As above. The Government also noted that conducting enquiries in public could damage international relations.

Nominated parties for sanctions have rights of reply before sanctions are imposed. Similarly, a public “watch list” of people being considered for sanctions be maintained.

Such procedures could undermine the effectiveness of sanctions by giving advance notice to targets and movement of assets to other jurisdictions.

Guidance to business

The new sanctions regime be accompanied by a public diplomacy strategy to provide guidance to those affected, including Australian businesses.

The strategy will be developed in consultation with stakeholders.

 

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