The Australian Government has amended its sanctions laws to enable declaration of cyber hackers, human rights abusers, corrupt officials as ‘designated persons or entities’
On 2 December 2021, the Australian Parliament passed the Autonomous Sanctions Amendment (Magnitsky-style and Other Thematic Sanctions) Act 2021 (Cth) (Act) which is partly based on the United States’ Magnitsky Act1, and similar laws already in place in the UK, Canada and the European Union. The Act is designed to sanction individuals and entities responsible for certain “thematic” categories of “egregious conduct”. The Act came into force on 7 December 2021.
The Act amends the Autonomous Sanctions Act 2011 (Cth) (Autonomous Sanctions Act) to:
- enable the imposition of autonomous sanctions2 to address particular issues (called thematic sanctions), as opposed to being only country-specific; and
- set out the decision-making process for imposing targeted financial sanctions and travel bans on designated persons and entities.
The Government has also released an exposure draft for related amendments to the Autonomous Sanctions Regulations 2011 (Cth) (Regulations), which will see four new thematic sanctions regimes established for the proliferation of weapons of mass destruction, malicious cyber activity, serious violations or serious abuses of human rights, and serious corruption.
- The Act expands Australia’s existing autonomous sanctions framework to allow the Australian Government to establish “thematic” sanctions regimes in particular areas of concern.
- Under the new thematic sanctions regimes, designated persons and entities will not be confined to particular countries against which Australia has imposed autonomous sanctions.
- Businesses should be mindful of increasing sanctions-related risks and should screen persons and entities they propose to do business with (and their owners) against Australia’s consolidated list of designated persons and entities.
- Businesses should extend their sanctions compliance and due diligence screening policies beyond jurisdictions in relation to which sanctions have been imposed, to certain types of conduct.
These new laws build on Australia’s response to matters of international concern, including serious human rights abuses, and will supplement the reporting obligations imposed on large companies by the Modern Slavery Act 2018 (Cth). The due diligence processes implemented as part of those companies’ modern slavery programs will need to be expanded to cover a broader range of human rights issues and, in particular, sanctioned individuals/entities. For further information about Australia’s modern slavery legislation see here and here.
Australia’s sanctions laws
Australia has two types of sanctions: United Nations Security Council sanctions imposed as a consequence of Australia’s membership of the United Nations (through the Charter of the United Nations Act 1945 (Cth)), and autonomous sanctions imposed by the Australian Government under the Autonomous Sanctions Act and the Regulations.
Autonomous sanctions are punitive measures imposed by a government as a matter of foreign policy in situations of international concern. They can be applied to a foreign government entity, a member of a foreign government entity, or any person or entity outside Australia.
The new laws
The Act extends autonomous sanctions beyond a particular country by creating new thematic categories of conduct to which these sanctions can be applied. A person or entity that meets the criteria under a thematic regime can be sanctioned regardless of where the relevant conduct occurred. Without limiting what the sanctions can address, they can extend to:
- the proliferation of weapons of mass destruction;
- threats to international peace and security;
- malicious cyber activity;
- serious violations or serious abuses of human rights;
- activities undermining good governance or the rule of law, including serious corruption; and
- serious violations of international humanitarian law.
The Australian Government is increasingly focused on the above issues, and in particular, in supply chains. The Act was introduced to allow a more flexible and targeted response to certain conduct which is not limited by national borders, and responds to the concerns of some stakeholders that the existing regime was not sufficient for targeting, deterring and punishing human rights violations. Significantly, by allowing autonomous sanctions to be imposed on persons and entities for malicious cyber activity, the new laws go further than comparable sanctions laws in other countries.
The Act also sets out how the Minister for Foreign Affairs and Trade will make decisions when imposing targeted financial sanctions and travel bans on designated persons and entities under thematic sanctions regimes.
Thematic sanctions regimes
The proposed changes to the Regulations include four new thematic sanctions regimes. An entity or individual can be declared a designated person or entity if it is determined that they:
- contributed to proliferation of weapons of mass destruction;
- caused, assisted with or were complicit in significant cyber activity;
- engaged in serious violations or serious abuses of human rights; or
- were involved or complicit in serious corruption (including bribery).
The Minister for Foreign Affairs and Trade will be able to designate a person or entity under the above categories after following the consultation and decision process set out in the Act.
It is effectively an offence under the Autonomous Sanctions Act to do business with a designated person or entity other than in accordance with a permit. That is, it is an offence to directly or indirectly make an asset available to or for the benefit of a designated person or entity, or to deal with a designated person’s or entity’s assets (other than in accordance with a permit).
There is no change to the existing penalties under the Autonomous Sanctions Act, which include imprisonment or a fine of the greater of three times the value of an infringing transaction and 2,500 penalty unit for individuals (AUD 555,000), or 10,000 penalty units for corporations (AUD 2,220,000). A contravention of the Act is a strict liability offence for a company. Defences include proving that reasonable precautions and appropriate due diligence were undertaken.
Businesses should screen persons and entities they propose to do business with (and their owners) against Australia’s consolidated list of designated persons and entities, which will include those designated by the new thematic sanctions regimes.
Businesses should also be mindful that their sanctions compliance and due diligence screening policies should not be limited to particular jurisdictions, but should be framed around types of conduct.
Given the new thematic sanctions apply to serious human rights violations, supply chains are a particular risk area. It will be important to screen all relevant parties in the supply chain against the designated party list. Companies should consider creating a suitable risk assessment framework to ensure appropriate management oversight, establish necessary internal controls, set up training for employees responsible for managing sanctions risks, and determine any contractual implications.
1 The Global Magnitsky Human Rights Accountability Act.
2 Autonomous sanctions are punitive measures not involving armed force and which are not applied under international obligations arising from United Nations Security Council decisions.