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Tax accountant Sergei Magnitsky, who died in a Moscow prison in 2009. He had reported a $230 million tax fraud allegedly perpetrated by high-ranking public officials. Courtesy of Voice of America

A UK Magnitsky Act: Would it Work?

Anton Moiseienko
Commentary, 3 April 2018
AML/CTF, UK, Organised Crime
In 2016, the Global Magnitsky Act was adopted in the US to redress the impunity of human rights abusers and kleptocrats around the world. In the wake of the Salisbury poisonings, would it work for the UK?

Following the nerve gas attack in Salisbury on former Russian spy Sergei Skripal and his daughter Yulia last month, the UK has been considering ways to stem the flow of cash from abroad. Much of these funds are tainted by corruption or gains from human rights abuse.

Part of the money laundering debate  in the House of Commons before the Easter break concerned the inclusion of a so-called ‘Magnitsky clause’ in the Sanctions and Anti-Money Laundering Bill.

This would have enabled the government to freeze UK-based assets of foreign citizens, and deny entry to those suspected of ‘gross human rights abuse’. It was, however, rejected by ten to nine votes in the Public Bill Committee. Notwithstanding this defeat, Minister for Security and Economic Crime Ben Wallace and Shadow Chancellor John McDonnell both spoke in favour of the concept. But why does the ‘Magnitsky clause’ debate matter and why is it proving so divisive?

The informal title of the provision refers to Sergei Magnitsky, a Russian lawyer who died behind bars in Moscow after reporting a $230 million tax fraud allegedly perpetrated by high-ranking public officials. An energetic campaign, led by his employer Bill Browder, led to the US, Canada, Estonia, Latvia and Lithuania sanctioning foreigners suspected of gross human rights abuse and/or corruption.

A minister would be able to impose such sanctions if there are ‘reasonable grounds to suspect’ that the targeted individual is involved in gross human rights abuse

Although the scope of such laws is not limited to Russian citizens  – with the exception of the 2012 US Magnitsky Act that was later supplemented with a ‘global’ version – their origin serves as a constant reminder of Russian corruption and, as such, they invariably provoke Moscow’s anger.

Should it ever be adopted, a similar UK provision would authorise the imposition of financial and immigration sanctions based on what is an allegation of serious criminal misconduct in the absence of a criminal conviction.

A relevant government minister would be able to impose such sanctions if there are ‘reasonable grounds to suspect’ that the targeted individual is involved in gross human rights abuse (see section 11(2)(a) of the current text of the bill).

Legal challenges to Magnitsky sanctions would be inevitable; claimants would almost certainly contest the evidence against them and argue that it does not meet the basic ‘reasonable grounds to suspect’ standards. Depending on the circumstances, other points of law might arise, such as whether the freezing a targeted individual’s assets is a permissible interference with the right to property under the Human Rights Act 1998 or even whether the accusation of involvement in gross human rights abuse violates the presumption of innocence.

Until now, the UK has mostly negotiated financial sanctions at the EU or UN level rather than acting unilaterally, except for sanctions against suspected terrorists

None of these challenges is novel. The EU sanctions regimes have generated a substantial body of judgments by the Court of Justice of the European Union, and British courts have dealt with some aspects of the domestic implementation of EU and UN sanctions. However, once the UK enacts sanctions of its own accord rather than in compliance with its international obligations, judicial review by UK courts will play a central role.

Until now, the UK has mostly negotiated financial sanctions at the EU or UN level rather than acting unilaterally, except for sanctions against suspected terrorists under the Terrorist Asset-Freezing etc. Act 2010.

From time to time, the UK has also denied entry to foreign officials suspected of human rights abuse or corruption, but without disclosing their names, and this confidentiality continues to be maintained. So when Dominic Raab MP – now Minister of State for Housing and Planning – sued the Information Commission and the Home Office to force the disclosure of whether 60 Russian public officials allegedly involved in Magnitsky’s murder were allowed to enter the UK, the First-Tier Tribunal (Information Chamber) dismissed the claims. The tribunal produced a confidential annex setting out why the publication of such information could jeopardise UK immigration controls (case UKFTT EA/2014/0051, judgment of 17 November 2014).

Any imposition of Magnitsky-like measures would require the release of evidence that has to stand up to judicial scrutiny

However, secrecy works only for immigration sanctions, and is inapplicable in financial sanctions because financial institutions need to know whose assets they are supposed to freeze. Therefore any imposition of Magnitsky-like measures would require the release of evidence that has to stand up to judicial scrutiny.

Still, the near-certainty of litigation is by no means a compelling argument against the adoption of a Magnitsky clause. The experience of using security-vetted Special Advocates in certain proceedings involving matters of national security can be drawn upon. And a rigorous legal framework that ensures government accountability can be created.

The Parliamentary arguments against the Magnitsky clause focused largely on several perceived inconsistencies between the definition of ‘gross human rights abuse’ in the proposed amendment and the use of the same term in the existing Proceeds of Crime Act 2002.

But a more serious objection to the Magnitsky clause, albeit not one discussed on the floor of the Commons, stems not from legal, but from policy, considerations. With its global reach and the number of potential targets, any meaningful application of the law is destined to be selective.

And since government ministers rather than law enforcement agencies will control the UK sanctions regimes, their actions will no doubt be informed by political considerations.

So, yes, the credibility of such an approach will depend on how the Magnitsky clause will be applied in practice. If adopted and conscientiously implemented, it may serve as a further symbol of the UK commitment to the rule of law and human rights, and act as another stepping stone in the government’s often-stated ambition to create a hostile environment for criminals and their assets.

But to really convince foreign kleptocrats that there is a price to pay for their misdeeds, a systemic and consistent response to the influx of tainted money is necessary, of which the Magnitsky sanctions are but one part.

Banner image: Tax accountant Sergei Magnitsky, who died in a Moscow prison in 2009. He had reported a $230 million tax fraud allegedly perpetrated by high-ranking public officials. Courtesy of Voice of America

The views expressed in this Commentary are the author’s, and do not necessarily reflect those of RUSI or any other institution.

Author

Anton Moiseienko
Research Analyst, Centre for Financial Crime and Security Studies

Anton is a Research Analyst at RUSI’s Centre for Financial Crime and Security Studies. His current research covers a range of financial... read more

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