The UK adopts new Anti-Corruption Sanctions Regulations 2021
On 26 April 2021, the UK launched a new sanctions regime targeting persons involved in serious corruption and authorising the UK Secretary of State to designate persons by name who will be subject to financial sanctions such as asset freeze. The sanctions regime constitutes a new important compliance undertaking for firms with a connection to the UK.
The purpose of the novel Anti-Corruption Sanctions Regulations 2021 (in the following the "Regulation") is to prevent and combat serious corruption, defined in the Regulation as bribery or misappropriation of property, by preventing persons involved in corruption from channelling money through the UK.
Specifically, the Regulation grants the UK Secretary of State the authority to designate persons by name who are believed to be involved in serious corruption. Such designated persons will be subject to several financial sanctions, including asset freeze and prohibitions to make funds or economic resources available. Further, an immigration ban is imposed, preventing sanctioned persons from travelling into the UK.
Key takeaways from the Regulation include:
- The sanctions distinguish themselves from most other European sanction regimes by not targeting specific countries or individuals within specific countries, but rather targeting specific individual persons (with no specific consideration of their domicile) based on their participation in corruption.
- Persons subject to sanctions under the Regulation will be met with financial sanctions, including i) asset freeze and ii) prohibitions against making funds or economic resources available to or for the benefit of a designated person.
- The Regulation imposes a reporting obligation on "relevant firms" to inform the HM Treasury as soon as practicable if they know or have reasonable cause to suspect that a person i) is a designated person, or ii) has committed an offence under the financial prohibitions, i.e. if the person has made funds or economic resources available to a designated person. "Relevant firms" are further defined in the Regulation and include (among others) undertakings operating with financial services, currency exchange, money transmittance, auditing, accountancy services, real estate agencies, casinos and persons trading with articles made of gold, silver, platinum, palladium, or precious stones or pearls.
- The list of persons subject to sanctions under the Regulation already comprises 22 persons, including 14 Russian nationals involved in a 230 million dollars tax fraud uncovered by Sergei Magnitsky in 2009, members of the South African Gupta family, certain Central American officials, and a South Sudan businessman involved in misappropriation of significant amounts of state assets.
Violations of the Regulation are penalised with both criminal charges (including imprisonment) and fines. Firms with operations in, or a connection to, the UK should consider this new regime carefully and implement initiatives securing compliance with the new sanctions and reporting obligations in their general compliance setup, including due diligence and KYC procedures.