Magnitsky Sanctions: A Global Stand Against Corruption

It’s been 6 years since the U.S. launched the Global Magnitsky Program.

During this time, the U.S. has designated around 450 individuals and entities worldwide for their involvement in human rights violations and corruption.

Sergei Magnitsky, after whom the Magnitsky sanctions are named, was a Russian auditor who uncovered a massive case of corruption within the Russian government. However, instead of being celebrated for his efforts, he was thrown into jail in 2008 and tragically died in custody in 2009 after enduring harsh conditions and alleged abuse. His case led to international outrage.

In light of Sergei Magnitsky’s story, using precise sanctions against corrupt officials, business leaders, and enablers emerges as a relatively new and promising strategy in the fight against corruption.

These sanctions, often referred to as “Magnitsky sanctions”, allow governments to target those directly responsible for corruption and human rights abuses, sending a powerful message that such actions will not go unpunished.

However, only a few countries, like the U.S., the United Kingdom, Canada, and Australia, have implemented their own versions of these corruption-related sanctions.

A few months ago, the European Commission proposed a new anti-corruption package , which includes an extension to the EU sanctions regime (beyond human rights violations) to also include corruption acts committed anywhere in the world.

Under the proposed package, foreign nationals involved in corruption could be prohibited from entering the EU and subjected to asset freezes, while EU nationals would be barred from engaging in any economic transactions with them.

Geographically, Magnitsky-style sanctions cover a wide range of places around the world. The people targeted include government officials, military personnel, and private citizens.

A formidable tool

Magnitsky-style sanctions are a unique tool for targeting corrupt officials for several reasons:

• Precision: Magnitsky sanctions allow for precise targeting of individuals involved in corruption and human rights abuses. Instead of imposing broad sanctions on entire countries, these measures pinpoint specific individuals and entities responsible for the wrongdoing.
• Accountability: By holding corrupt officials personally accountable, Magnitsky sanctions send a powerful message that corruption will not be tolerated. This can deter future misconduct and encourage greater accountability within governments.
• Global Reach: These sanctions have a global reach, allowing nations to collaborate in identifying and sanctioning corrupt individuals and entities, regardless of their location. This international cooperation can magnify their impact.
• Flexibility: Magnitsky sanctions are flexible and can be tailored to the severity of the misconduct. Sanctions may include asset freezes, travel bans, and restrictions on financial transactions, providing a range of measures to address different situations.
• Transparency: The process of identifying and imposing Magnitsky sanctions is often transparent and evidence-based. This transparency helps build public trust and legitimacy in the sanctions regime.
• Human Rights Focus: Magnitsky sanctions prioritize human rights abuses and corruption, making them a valuable tool for addressing these pressing global issues. They send a clear signal that the international community stands against such violations.
• Minimized Collateral Damage: Unlike broad sanctions that can harm innocent civilians, Magnitsky sanctions target wrongdoers directly, minimizing collateral damage to the general population.
• Accountability Beyond Borders: These sanctions empower countries to take action against corrupt officials, even if they are beyond the reach of domestic legal systems. This provides an avenue for justice when local authorities may be unwilling or unable to act.

Tangible Results

The International Lawyers Project (ILP), in partnership with the Australian National University, conducted the first of its kind empirical study on the impact of the U.S. Magnitsky sanctions.

ILP determined that sanctions under the Magnitsky Act can produce four outcomes:

• direct impact such as travel bans or asset freezes;
• pushback from private-sector entities;
• legal, political, or social impacts within the individuals’ home country;
• and change in behavior by individuals or networks

Compliance considerations

Compliance obligations under the Magnitsky sanctions typically include the following:

• Screening and Due Diligence: Individuals and entities, particularly financial institutions and businesses, must conduct due diligence to screen clients, customers, and partners against the Magnitsky sanctions lists. This helps ensure that they do not engage in transactions with sanctioned individuals or entities.
• Asset Freezing: If a sanctioned individual’s or entity’s assets are located within a country’s jurisdiction, financial institutions and relevant parties must freeze those assets, rendering them inaccessible.
• Travel Bans: Governments impose travel bans on sanctioned individuals, preventing them from entering their territory. Airlines, immigration authorities, and border control agencies are responsible for enforcing these bans.
• Reporting Obligations: Depending on the specific jurisdiction, entities may have reporting obligations when they encounter transactions or activities involving sanctioned individuals or entities. Reporting such encounters to relevant authorities is crucial for compliance.
• Record-Keeping: Organizations are often required to maintain records related to their compliance efforts, such as due diligence reports, transaction records, and correspondence with authorities.
• Compliance Training: Companies and institutions subject to Magnitsky sanctions are encouraged to provide training to relevant employees to ensure they understand the sanctions regime and their obligations.
• Continuous Monitoring: Sanctions lists are dynamic, entities must regularly update their screening and due diligence procedures to account for changes in the sanctions lists.
• Penalties for Non-Compliance: Failure to comply with Magnitsky sanctions can result in legal penalties, including fines and reputational damage.

It’s important to note that the specific compliance obligations may vary depending on the jurisdiction and the nature of the sanctions program.

Organizations and individuals subject to these sanctions should consult with legal or sanctions compliance experts or relevant authorities to ensure full compliance with the applicable regulations.