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Introduction of the UK Global Anti-Corruption Sanctions Regulations 2021

  • United Kingdom
  • Financial services disputes and investigations
  • Fraud and financial crime
  • Litigation and dispute management

27-04-2021

 

On 26 April 2021, the Foreign, Commonwealth and Development Office (“FCDO”) together with the Office of Financial Sanctions Implementation (“OFSI”) published the Global Anti-Corruption Sanctions Regulations 2021 (the “Regulations”), which replace the Misappropriation (Sanctions) (EU Exit) Regulations 2020. Guidance on the Regulations has also been published. 

Since Brexit, the UK has implemented its autonomous sanctions regime in accordance with the Sanctions and Anti-Money Laundering Act 2018 (“SAMLA”). Pursuant to SAMLA, the UK can now implement regulations with purposes other than implementing UN obligations, by which the UK is still bound.

The purpose of the Regulations is to combat serious corruption, which is defined by the Regulations as  bribery or misappropriation of property involving foreign public officials (“FPO”). The FCDO provided that the focus on combatting bribery and misappropriation of property is in line with the United Nations Convention Against Corruption’s requirements to criminalise corruption offences and provides a clear, targeted and unambiguous regime.

What are the key points?

  • Focus of the Regulations: The Regulations target those involved in bribery or the misappropriation of property.

    Misappropriation of property is considered to occur where a FPO improperly diverts property entrusted to them in their official role, to benefit either themselves or a third party.

    Bribery is defined in the Regulations as when a person gives a financial or other kind of advantage to a FPO, or a FPO requests or agrees to accept an advantage, with the intention to induce or reward improper performance of a public function, either by that FPO or another. The definition of bribery used in the Regulations differs significantly from the definition used in section 6 of the UK Bribery Act 2010 which creates the criminal offence of bribing an FPO and requires only the intention to use the advantage to influence the FPO.
  • The Regulations target designated persons, not countries: most UK sanctions regulations target specific countries or individuals within specific countries. By contrast, the Regulations (as well as the Magnitsky human right sanctions) focus on individuals and entities who through corrupt practices impact the economy of a country, and as such target individuals/entities around the world (with yesterday’s designations targeting individuals connected with Russia, South Africa, South Sudan and Latin America).  Preventing designated persons from accessing the UK’s financial system aims to reduce the impact of corruption on the UK’s domestic institutions and deter corrupt actors from doing so.
  • Financial sanctions: Individuals and entities subject to sanctions pursuant to the Regulations face a travel ban and/or financial sanctions. The financial sanctions include (i) an asset freeze, (ii) the prohibition to deal with a designated person’s funds and economic resources (non-monetary assets) and (iii) the prohibition to make funds or economic resources available to or for the benefit of a designated person (either directly or indirectly).
  • Reinforcing the UK’s anti-corruption strategy: the UK started reforming its anti-corruption regime when it implemented the Bribery Act 2010 which was followed by the publication of the UK’s first Anti-Corruption Plan in December 2014, replaced in 2017 with the five year Anti-Corruption Strategy, and introduced measures including Unexplained Wealth Orders, and Account Freezing Orders. The Regulations represent a further step in this strategy, and a clear signal of the UK’s zero-tolerance to international corruption.
  • First wave of designations: At the time of publication of the Regulations, the UK announced that it was imposing sanctions pursuant to the Regulations on 22 individuals: 
    • The 14 Russian officials who were involved in a multi-million dollars tax fraud scheme which was uncovered by Sergei Magnitsky in 2009, resulting in his death and the implementation of the Magnitsky human rights sanctions in both the US and the UK;
    • 4 individuals involved in long-running corruption in South Africa;
    • 3 officials from Honduras, Nicaragua and Guatemala involved in facilitating bribes to support a drug trafficking cartel; and
    • 1 businessman from South Sudan for misappropriation of significant amounts of state assets.

Comments

In the post-Brexit era, the UK has the opportunity to depart from the EU approach to sanctions. The UK took its first steps towards shaping its sanctions framework by mirroring the US approach by implementing the Magnitsky human right sanctions. It has now taken a step further to combat corruption globally, furthering its partnership with the US and positioning itself as a leader in the global fight against corruption.

In the past decade, the UK has taken strong and efficient steps to develop, reform and modernise its domestic strategy to tackle corruption and bribery. By implementing the Regulations, the UK has furthered its national and international anti-corruption strategy which according to the Foreign Secretary Dominic Raab is to become a global leader in tackling corruption and illicit finance. Mr Rabb stated that the Regulations send the clear message to those involved in international serious corruption that “You can’t come here. You can’t hide your money here.”

The main purpose of the Regulations is to uphold the rule of law and ensure respect of human rights. The Regulations provide the UK with extended powers to sanctions individuals and entities around the world. The UK must ensure that the application of the Regulations worldwide is fair, proportionate and transparent. It will be interesting to monitor how the current designations are received and dealt with, future designations that may be imposed pursuant to the Regulations, and whether the EU takes steps to align with the US and the UK.