In May 2018 the Sanctions and Anti-Money Laundering Act (the "Act") received Royal Assent. The Act was brought onto the statute books to allow the UK to introduce its own sanctions and anti-money laundering regime (which will be necessary once the UK leaves the EU). However, it was only on 6 July 2020 that the Global Human Rights Sanctions Regulations 2020 (the "Regulations") came into force and the powers under the Act were used for the first time.
At the same time as the Regulations came into force, sanctions were simultaneously imposed on 49 individuals and organisations. The majority of the sanctions are against nationals of Saudi Arabia (20) and Russia (25) allegedly involved in the deaths of Jamal Khashoggi and Sergei Magnitsky respectively. The remaining designations were imposed on two Myanmar military officials and two North Korean entities. The designations mean that these people are stopped from entering the UK, sending money into the country or profiting from the British economy, through property or other assets they own.
Introducing the Regulations, Dominic Raab told Parliament “if you’re a kleptocrat or an organised criminal you will not be able to launder your blood money in this country” or "siphon dirty money through British banks or other financial institutions". These were strong words to accompany the first actions which Britain has undertaken independently from the EU. However, these strong words may not be matched by the impact of the Regulations. All of the recipients of the designations, bar three of the Saudi nationals, are already subject to US designations and OFAC sanctions suggesting a cautious approach and the picking of uncontroversial targets rather than forging a new path. It is also notable in this regard that the Government has limited sanctions to human rights abuses and not imposed sanctions in respect of involvement in corruption (although it has indicated that the sanctions regime may be expanded to cover such issues in due course) despite the strong rhetoric used by Raab regarding organised crime, kleptocrats and dirty money.
It has historically been rare for the UK to impose unilateral financial sanctions and this first wave of designations combined with the message that accompanied them may be a sign that although the Government is starting cautiously it will build on this foundation. However, Russia has already indicated there will be repercussions, in the form of reciprocal measures. It is accordingly clear that if the UK really is determined to stem the flow of dirty money and put in place a robust sanctions regime, potentially wider than that of its neighbours, it will have to be willing to put some noses out of joint and face the consequences. Only time will tell whether it is willing and able to do so whilst entering the post-Brexit world and negotiating new trade deals. Where the UK's European neighbours have not imposed equivalent sanctions they may become the preferred destination for business from countries whose ruling class have become UK designated persons or, when negotiating deals or foreign investment with the Government, counterparties may insist on a carve-out from the sanctions regime for their loyal elite. The UK Government will therefore have to hold its nerve to ensure this new sanctions regime lives up to its promise and does not become watered down. It is certainly a step in the right direction but only a limited step in the ongoing fight against economic crime and money laundering.
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