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Clifford Chance

Clifford Chance

Regulatory Investigations and Financial Crime Insights

Australia joins the fray on Magnitsky-style sanctions – what businesses should know

On 29 March 2022, Australia's Minister for Foreign Affairs, Senator the Hon Marise Payne, designated 39 individuals under the Australia's thematic sanctions framework, marking the first time the Australian Government has implemented sanctions under the recently introduced Magnitsky-style laws, and imposing sanctions on the individuals who were the very trigger behind the reforms.

The Magnitsky reforms

Sergei Magnitsky was a Ukrainian-born Moscow lawyer and tax auditor who uncovered widespread corruption within the Russian government. Mr Magnitsky was imprisoned and subjected to serious human rights abuses. He was beaten by prison guards, refused family visits, and died in custody in November 2009 at the age of 37 after being refused medical treatment.

A global movement followed aimed at implementing sanctions reforms which would work in concert to exert pressure on the individuals involved in Mr Magnitsky's arrest and eventual death. In Australia, following a 12-month Parliamentary Inquiry, the Autonomous Sanctions Amendment (Magnitsky-style and Other Thematic Sanctions) Act 2021 commenced on 8 December 2021, shortly followed by the Autonomous Sanctions Amendment (Magnitsky-style and Other Thematic Sanctions) Regulations 2021 which came into force on 21 December 2021 (together, the Reforms).

The Reforms were enacted to honour Mr Magnitsky and expand Australia's existing Autonomous Sanctions regime by empowering the Australian Government to carry out "thematic sanctions" to address conduct of international concern. While Australian sanctions could previously only be imposed on a country or sector-specific basis, restrictions can now be placed on individuals and entities arising out of their involvement in serious violations or serious abuses of human rights, serious corruption, significant cyber incidents, or the proliferation of weapons of mass destruction (as well as the individuals' immediate family members or beneficiaries of the relevant conduct).

The first listings target 14 Russian individuals identified by the Government as being responsible for the corruption uncovered by Mr Magnitsky, together with a further 25 Russian individuals identified as being complicit in his mistreatment and death.

A rapidly expanding sanctions landscape

These designations were announced in the midst of considerable and fast-paced activity in the sanctions space. Hundreds of individuals and entities in Russia and Belarus have been designated separately under Australia's autonomous sanctions laws in response to the conflict in Ukraine, including senior politicians and oligarchs close to President Putin, propagandists, and entities considered of strategic and economic importance to Russia.

These sanctions are complex, multilateral and continue to change incrementally in real-time in response to the situation on the ground in Ukraine. Australian sanctions often come into effect with as little as a day's notice. For the latest developments, see Clifford Chance's Sanctions Briefing, available here.

What this means for businesses

Contraventions of sanctions laws in Australia by body corporates are strict liability offences. However, a due diligence defence is available to body corporates if they can prove that they took reasonable precautions, and exercised due diligence, to avoid a breach.

Businesses should ensure their screening tools incorporate the most recent updates to the Consolidated List (which will also include the names of those designated pursuant to the Reforms) maintained by the Australian Sanctions Office, and ensure any transactions and supply chain decisions continue to comply with the rapidly changing sanctions landscape.

Further, with the introduction of the Reforms, the Australian Government can now add sanctions to its toolkit in addressing human rights abuses and serious corruption in a way that is no longer constrained on a country or sector-specific basis.

Businesses should ensure they respond appropriately to the implementation of the first round of thematic sanctions and anticipate the implementation of further thematic style sanctions. Sanctions risk frameworks that may have previously focused on country and sector risk should be reviewed, and compliance systems prepared for further developments in this space.