The Australian Government has announced plans to implement a targeted, Magnitsky-style sanctions regime by the end of 2021.
What are the implications of the proposed reforms?
The proposed reforms would expand Australia’s current country-based autonomous sanctions framework to include targeted sanctions focused on themes of conduct. This includes proliferation of malicious cyber activity, gross human rights violations, grand corruption and weapons of mass destruction. This follows similar regimes that exist in the United States (which in recent times have seen increasing focus on cyber-crime), Canada and the UK. The regime was introduced in the United States following the death of Sergei Magnitsky (a Russian tax lawyer) in prison and has since been used to sanction individuals and entities involved in serious human rights abuses such as Myanmar military officials, and more recently companies and individuals associated with the Belarus Government.
The Australian Government has indicated that it will consult with business to issue guidance in order to minimise the compliance burden.
In view of the foreshadowed changes, we expect that this will:
- Increase sanctions risk for some companies. Companies that do not deal with sanctioned countries still may be faced with sanctions risks in dealings with persons and entities connected to particular types of conduct, that are independent of country wide sanctions. Without comprehensive sanctions screening and risk assessment processes, these risks can be more difficult to spot.
- Require a re-examination of sanctions compliance programs to ensure they support compliance with thematic sanctions. This is critical given sanctions breaches are strict liability offences, with companies having to establish that they took reasonable steps and exercised due diligence in order to make out a defence.
Businesses should take steps now to ensure their sanctions compliance programs are ready for when these reforms are implemented.
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