By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She now spends most of her time in Asia researching a book about textile artisans. She also writes regularly about legal, political economy, and regulatory topics for various consulting clients and publications, as well as writes occasional travel pieces for The National.
Embedded in the 3,000-page National Defense Authorization Act, passed by both houses of Congress by veto-proof majorities earlier this month and sent to the President on December 14, the Global Magnitsky Human Rights Accountability Act provides new authority for the executive branch to impose visa bans or revocations, or sanctions (including property seizures) on individuals accused of committing human rights violations or engaging in gross corruption.
As Sarah A. Altshuller has written on law firm Foley Hoag’s Corporate Social Responsibility and the Law blogThe Act may be part of a paradigm shift in the way U.S. sanctions law is utilized. Unlike most U.S. sanctions regimes that target issues in specific countries by sanctioning entire governments or groups of individuals and entities, the Act would apply sanction to individuals anywhere in the world who have engaged in activities deemed to violate certain international human rights standards. The Act could offer an expanded scope to the Treasury Department’s Office of Foreign Assets Control (“OFAC”) in promoting U.S. policies globally, much as the 2015 sanctions on malicious cybersecurity undertakings expanded the group of activities, including drug trafficking and terrorism, that are global targets of OFAC sanctions. Under the terms of the Act, the State Department’s Bureau of Democracy, Human Rights, and Labor (“DRL”) would be given authority to determine who is placed on the sanctions list, which will presumably be implemented by OFAC. In making these determinations, the Administration is required to consider “credible information obtained by other countries and nongovernmental organizations that monitor violations of human rights” as well as information provided by certain committees of Congress.”>Corporate Social Responsibility and the Law blog:
The Act may be part of a paradigm shift in the way U.S. sanctions law is utilized. Unlike most U.S. sanctions regimes that target issues in specific countries by sanctioning entire governments or groups of individuals and entities, the Act would apply sanction to individuals anywhere in the world who have engaged in activities deemed to violate certain international human rights standards. The Act could offer an expanded scope to the Treasury Department’s Office of Foreign Assets Control (“OFAC”) in promoting U.S. policies globally, much as the 2015 sanctions on malicious cybersecurity undertakings expanded the group of activities, including drug trafficking and terrorism, that are global targets of OFAC sanctions.
Under the terms of the Act, the State Department’s Bureau of Democracy, Human Rights, and Labor (“DRL”) would be given authority to determine who is placed on the sanctions list, which will presumably be implemented by OFAC. In making these determinations, the Administration is required to consider “credible information obtained by other countries and nongovernmental organizations that monitor violations of human rights” as well as information provided by certain committees of Congress.
The measure has been lauded by Alexandra Schmitt, advocacy coordinator for Human Rights Watch:
The Global Magnitsky Human Rights Accountability Act fills an important gap in the US sanctions toolkit by preserving the flexibility to target individual human rights abusers without punishing entire countries. This new tool will allow the US to more easily go after known abusers in a smart, targeted way without interrupting larger bilateral engagement.
The law borrows its name from the Sergei Magnitsky Rule of Law Accountability Act, passed in 2012, in honor of the late Russian human rights lawyer who was tortured and found dead in his jail cell in Moscow. Magnitsky was targeted for his role in exposing huge levels of corruption and the largest tax fraud scheme in Russian history. A version of this bill was introduced early last year by Senator Ben Cardin, a long-time advocate of human rights and anti-corruption efforts. The bill quickly garnered bi-partisan support, with five Republicans – Senators McCain, Rubio, Wicker, Kirk, and Cruz – and five Democrats – Senators Shaheen, Durbin, Markey, Blumenthal, and Coons – signing on as co-sponsors. A House version followed and a coalition of human rights groups, including Human Rights Watch, have been active supporters ever since.
The original Magnitsky Act applied solely to Russia and was heavily opposed by Secretary of State Hillary Clinton and the Obama Administration, as it was thought this legislation might thwart the then-intended reset of relations with Russia. It provoked a vociferous response from Russian President Vladimir Putin, who continues to oppose the measure and its expansion.
Implementation Paramount: What Will Trump Do?
President-elect Donald Trump’s choice of Rex Tillerson, CEO of ExxonMobil, who has had wide experience in Russia, combined with Trump’s own comments suggests an intention of pursuing a more cooperative, less adversarial relationship with Russia during his administration. That suggests little tendency to apply Magnitsky provisions to Russian officials, a conclusion Altschuller also reaches here.
How widely or narrowly the provisions will be interpreted is a matter for the executive branch to determine. And it is ultimately within the President’s discretion to decide whether or not to impose sanctions. The ultimate impact of this statute will depend on how aggressively the incoming administration casts its implementation net. Schmitt suggests– bit overoptimistically, in my opinion– that this could be a bipartisan priority:
The strong endorsement by senators on both sides of the aisle sends a vital message to the incoming administration that accountability for human rights abuses is a bipartisan priority and may provide an opportunity for future collaboration if president-elect Donald Trump is willing to make good on what could be a rare opportunity.
But this does not mean that the Trump administration would be blind to possibilities the measure opens up. In particular, the administration might choose to target human rights violations not necessarily out of concern for these issues per se, but as a means to pursue a wider foreign policy agenda. Again to quote Schmitt:
One place to start could be China. Trump has written in his book in 2000 that he is “unwilling to shrug off the mistreatment of China’s citizens by their own government” and that Chinese leaders are keen to overlook “the human rights situation.” A new Human Rights Watch report documents a raft of abuses by Chinese Communist Party authorities who oversee a secretive detention system, including torture and deaths, in the name of combating corruption. Trump could demonstrate his willingness to address this concern by directing his secretary of state to examine possible senior Chinese officials who could be sanctioned under the Magnitsky law.
Foreign Corrupt Practices Act and Other Anti-Bribery Provisions
It would be to easy to suggest that this new statutory tool will have a profound impact, as its effectiveness depends so crucially on implementation. In this respect, the history of the Foreign Corrupt Practices Act (FCPA) serves as a cautionary tale. The US took the lead in promoting statutory anti-corruption measures in the 1974 FCPA. And the current Department of Justice (DoJ) has targeted bribery and foreign corruption as enforcement priorities. Yet as I have previously written here, the focus of the Department of Justice on FCPA violations, when coupled with the lack of an aggressive enforcement policy, has led to some perverse effects. Allow me to quote from that previous post:
“We have to act sometimes as shoe salesmen, flogging competence in FCPA violations, that occur in subsidiaries or with foreign suppliers,” says my white collar defense specialist contact. “This work leads us to countries and legal systems we don’t know well, to uncover chickenshit violations that occur far from home.” Far better, he believes, would be for the DoJ to focus on law-breaking that occurs in the United States, as that could be effectively deterred by the agency refocusing its enforcement priorities.
The United Kingdom has also targeted foreign bribery and passed its own Bribery Act in 2011, which contains some provisions more extensive than the US statue. Interestingly, similar concerns have been raised over that legislation’s impact and effectiveness, tied in part to enforcement concerns (hat tip to Richard Smit for drawing this link to my attention).
UK Magnitsky Amendment
The UK is currently considering its own Magnitsky Amendment, a measure added to the Criminal Finance bill that targets terrorist finance, money laundering, and tax issues, as reported by the Financial Times:
It would enable the government and private parties to apply to the High Court to freeze UK assets belonging to those involved in or profiting from gross human rights abuses in any country.
That includes people who have targeted whistleblowers, journalists or human rights activists with retaliatory action after they uncovered corruption.
“People with blood on their hands for the worst human rights abuses should not be able to funnel their dirty money into the UK,” said Dominic Raab, the Conservative MP who tabled the amendment. He added that the proposal would prevent Britain from being a “safe place for despots and dictators” to hide their money.
If passed, the amendment could help London counter its reputation as a safe haven for kleptocrats’ and corrupt officials’ wealth. It comes months after moves to create a register of the real owners of British properties.
The Guardian echoed the FT’s analysis in its own optimistic assessment:
The initiative enjoys unusually wide cross-party support. Labour’s Chris Bryant said the chances of it becoming law were “quite positive”.
The bill, which could come into force as early as spring 2017, is designed to clean up London’s reputation as a haven for “dirty money”. Its existing provisions target corrupt politicians and international criminals who launder money through the capital’s banks and plough stolen cash into high-end real estate.
The National Crime Agency estimates that up to £100bn of dubious money passes through the UK a year. …
Both the United States and the United Kingdom are at separate stages of considering new forms of Magnitsky measures that would improve each state’s respective ability to punish individuals who have committed human rights violations or engaged in gross corruption. In the UK case, the scope of this authority will depend on what, if any measure, Parliament ultimately passes.
As with existing anti-corruption and anti bribery frameworks– e.g., the US FCPA and the UK Bribery Act– the ultimate effectiveness and deterrent effect of new statutory authority depends on vigorous implementation and enforcement. In the US, the incoming Trump administration might well opt to use the enhanced authority to pursue its wider foreign policy priorities, as opposed to being primarily motivated by human rights concerns. This implies that the Global Magnitsky Human Rights Accountability Act might be aggressively but inconsistently enforced.