Magnitsky Act

Me. Janick Harrouk

The Magnitsky Act is a bill that obtained the support of both the Democrat and Republican Parties and that was passed by the U.S. Congress and signed into law by President Barack Obama in December 2012.

The object of this law was to sanction Russian officials responsible for the death of Russian tax lawyer Sergei Magnitsky in a Moscow prison in 2009 by prohibiting their entrance to the United States and their use of its banking system.

In 2016, the U.S. Congress enacted the Global Magnitsky Human Rights Accountability Act (Global Magnitsky Act), which applies globally and allows the U.S. government to impose visa bans and to sanction those who are considered responsible for committing human rights violations or acts of significant corruption anywhere in the world.

What kind of activities are sanctioned by the Global Magnitsky Act?

The Global Magnitsky Act is a weapon that the US Foreign Affairs uses in its international relations with other countries and individuals.

It authorizes the US president (upon suggestions made by the State Department and Treasury Department) to carry out economic sanctions on human rights abusers (individuals and/or entities) and corrupt government officials anywhere in the world.

The sanctions can consist in visa bans and/or revocation of the visa of the persons convicted, in addition to freezing their assets (bank accounts and/or real estate).

Foreign individuals and/or entities can be sanctioned if:

(a) they are responsible for “extrajudicial killings, torture, or other gross violations of internationally recognized human rights,” or

(b) if they are accomplices in “acts of significant corruption” for individuals ranging from senior officials to low-level officers and even nongovernment associates.

How does the Global Magnitsky Act work?

The Global Magnitsky Act is a warning to all foreign officials: the use of unlawful violence and/or corruption can expose the offenders to U.S. sanctions.

Since the world economy is dollarized, the United States uses economic sanctions to implement its foreign policy and national security goals and imposes sanctions on countries, governments or individuals that are hostile to U.S. interests.

The administration and enforcement of these sanctions are delegated to the Office of Foreign Assets Control (OFAC), a financial intelligence agency that operates under the US Department of the Treasury. OFAC regulates activity within the Global Magnitsky Act and Magnitsky Act under 31 C.F.R. Parts 583 and 584, respectively.

An administrative investigation is conducted towards any foreign person suspected of unlawful violence and/or corruption. A black list is prepared by OFAC called the Specially Designated Nationals and Blocked Persons (SDN) List that includes any individual or entity sanctioned under the Global Magnitsky Act. Any individual on this list will be banned from entering the U.S. territory and will have his assets frozen. Moreover, it will be prohibited to deal with this person in the US territory as well as outside the US territory. The OFAC can also sanction individuals and/or entities that do not abide by the said sanctions and continue their business with a foreign person subject to Magnitsky sanctions.

The sanctions will also apply to any entity directly or indirectly owned, 50% or more in the aggregate, by a sanctioned individual or entity. Even if the blacklisted individual or entity does not have an ownership interest in another entity, the representation by a sanctioned individual or entity of a non-sanctioned entity (although in a non-personal capacity) may lead to a violation.

One of the most famous examples of the sanctions taken under the Global Magnitsky Act is the Iran nuclear-related sanctions. More recently the OFAC added 17 Saudis to the SDN list following the killing of Washington Post journalist Jamal Khashoggi.

The U.S. administration has many tools to identify industries and companies that are subject to Global Magnitsky Act violations amongst them the FCPA (Foreign Corrupt Practices Act) compliance. The FCPA is applicable worldwide and prohibits U.S. citizens and entities from bribing foreign government officials to assist in obtaining or retaining business. FCPA compliance is usually used to identify risky businesses; it is more likely to concern activities into oil and gas, telecommunications, and pharmaceuticals products.

With the tools mentioned above, the U.S. administration has the ability to track bribery, corruption and other illegal acts. However, and as mentioned before, the U.S. sanctions obey to a foreign policy decided by the U.S. government. It is worth mentioning that the said sanctions are subject to the sole discretion of the U.S. government.

Are the sanctions decided according to  the Global Magnitsky Act final?

Prior to imposing any sanction, OFAC investigators collect all the information and documents needed and prepare a memorandum evidencing that the foreign person has committed acts of violence and/or corruption. The said memorandum is then submitted to review by the Departments of Treasury, Justice, State, and other U.S. agencies as warranted.

Once a person name is added to the SDN List, the President or the Secretary of Treasury, in consultation with the Secretary of State and the Attorney General, can decide to terminate sanctions if certain conditions are reunited.

Sanctions may be terminated for the following reasons:

  • providing reliable information that the person didn’t commit any of the activities for which the sanctions were required;
  • the person has already been duly prosecuted for the activities subject to the rendered sanctions;
  • the person has paid an appropriate consequence for the activity for which sanctions were imposed, and has given reliable warranties not to commit or to take part in any acts of violence and/or corruption in the future;
  • the national security interests of the United States is at stake.

 

There is no limit to the number petitions that individuals are permitted to file to contest the addition of their name to the SDN list.

Each year, OFAC removes hundreds of names of foreign individuals and entities from the SDN List. Prior to any removal, OFAC proceeds to a deep investigation and evaluates every request for removal individually on its merits and applies consistent standards to all of them.

The procedure to request the removal from any OFAC sanctions list, including the SDN list, is quite easy since the request for removal can be presented directly from the listed person (no need for an attorney) to OFAC by postal mail or email. The said petition should include information about the listed person and an elaboration of the reasons that may result in delisting.

Though each case is unique, OFAC applies the same standards in reviewing the petitions. The time needed for OFAC to give its final answer might vary depending on how fast the petitioner answers the questionnaire and provides the requested information and documents.

The process might be delayed due to the incomplete responses obtained to the questionnaires or incomplete documentation provided by the petitioner, and to the additional information or clarification sent by OFAC to the petitioner.

Even if a petition for removal is rejected by OFAC, the petitioner has the right to present a new one if he has new evidences and/or arguments that can change the decision. In case the petitioner submits a new petition with the same evidences and arguments than the first one, OFAC will again deny the application.

In a Democratic country like the USA, everyone has the right to defend himself. The sanctions that the foreign office decides against foreign individuals and entities are based on serious investigations and evidences. However, U.S. national security prevails and the OFAC might decide not to pursue sanctions if it is in the interest of the nation.