SanctionsAlert.com Sanctions Round Up
February 9, 2018

E.U. (Almost)Mirrors U.S. Sanctions by Designating Seven Venezuelan Officials

On January 22, 2018, the E.U. Council placed 7 officials onto its Venezuela sanctions list. The officials have been designated for allegedly being involved in the “non-respect of democratic principles or the rule of law as well as in the violation of human rights”. The E.U., following suit with U.S. sanctions issued in August 2017, originally imposed their own economic sanctions and arms embargo against Venezuela in November 2017.

A closer look at the E.U. list shows that all but one of the officials designated by the E.Uhavealready been designated by the U.S. This one exceptionis Diosdado Cabello Rondón, member of the Constituent Assembly and First Vice President of the United Socialist Party of Venezuela.

Mr. Cabello is not currently designated by OFAC, but has been designated by Canada. According to a 2015 Wall Street Journal article, he is under investigation by U.S. authorities for allegedly being a narco-trafficking kingpin and the leader of Venezuela’s Cartel de los Soles.

The U.K., as a (still) member of the E.U., has applied the E.U.Venezuela designations into its law. The U.K. Office of Financial Sanctions Implementation (OFSI) notes that a business must check whether it maintains any accounts or hold any funds/economic resources for those designated, and if so, freeze the funds, and report any findings to OFSI.

Two CAATSA Lists, but No Public Roll Out of Sanctions (Yet)

Last August, President Trump signed the Countering America’s Adversaries Through Sanctions Act (CAATSA), which imposed sweeping new sanctions on Russia, Iran and North Korea. Two Sections in the Act, namely Section 231 and 241,impose a January 29, 2018 deadline to provide certain lists – one naming those individuals that are part of the Russian defense and intelligence sector (s231), and the other a list of “oligarchs and parastatal entities” close to the Russian government (s241) – that serve as a starting point for further sanctions against those individuals named. Thus far, though both lists have been provided, sanctions against those named have yet to be implemented,

Under Section 231, January 29 served as a starting point for potentially imposing new sanctions on the Russian Intelligence or Defense Sector. In October 2017, as part of the implementation of this section, the State Department issued a list of persons that they determined to be part of the defense and intelligence sectors of Russia. This list however, was not a sanctions list, but rather an informational list of entities that State Department sees as comprising these two sectors of Russia.Nevertheless, the U.S. government has not rolled out any new sanctions against those named despite the passing of January 29th, a date some see as an unwillingness by the current Administration to clamp down on Russia.

Spokeswoman for the State Department, Heather Nauert, said in a statement, “if the law is working, sanctions on specific entities or individuals will not need to be imposed because the legislation is, in fact, serving as a deterrent.”

Nevertheless, the State Department clarified that “January 29thwas the start of the race. It was the day on or after which we could start imposing sanctions if we make the determination here at the State Department of activity that falls under the provision”, they said.

Similarly, under Section 241 of CAATSA, the Trump administration faced a deadline on January 29, 2018 to provide a report on “Senior Foreign Political Figures and Oligarchs in the Russian Federation.” Shortly before the midnight deadline, the Treasury Department released an unclassified “oligarchs” list, including 114 senior Russian political figures and 96 business people.

The Section 241 report states clearly that it “is not a sanctions list,” and that inclusion on the list “does not, in and of itself, imply, give rise to, or create any other restrictions, prohibitions, or limitations on dealings with such persons by either U.S. or foreign persons.” OFAC confirmed this with an FAQ on the topic.

Treasury Secretary Mnuchin said in a testimony before the Senate on January 30 that “there will be sanctions that come out of this”. As such, there seems to be at least a possibility of sanctions being imposed against at least some of the individuals or entities on the Section 241 list, whereas it remains unclear whether the White House will issue secondary sanctions under Section 231.

UK Post-Brexit Sanctions Bill Passes House of Lords; EU Tells Businesses To Prepare for Withdrawal

On January 24, 2018, in the U.K, the Sanctions and Anti-Money Laundering Bill successfully passed the House of Lords and was introduced to the House of Commons for review. This new Bill offers the prospect (though not yet the certainty) of OFSI and/or the U.K.’s Export Control Joint Unit (ECJU) having a wider discretion as to the granting of licenses after Brexit.

The Bill will be given its ‘second reading’ in the House of Commons on February 20th. If the Bill succeeds, it will define how the U.K. plans to impose, implement and enforce sanctions once it leaves the E.U. in 2019.

Further, in order to underscore that “Brexit” is not just an issue for E.U. and U.K. lawmakers, but also for private parties, the European Commission issued a “notice to shareholders” on January 25 about the impact of U.K. withdrawal from the E.U. as it pertains to import/export licenses:

“Stakeholders engaged in shipments of goods which are subject to import/export licences or which may become subject to import/export licenses as of the withdrawal date are reminded of legal repercussions, which need to be considered when the United Kingdom itself becomes a third country.”

Businesses engaged in shipment of goods such as military equipment, firearms, dual-use goods, drug precursors and other goods, may want to consider taking the necessary steps in order to prepare for possible changes due to Brexit.

UK Government Passes ‘Magnitsky-Style’ Sanctions

On January 31, 2018, the U.K.’s Criminal Finances Act 2017 (Commencement No. 4) Regulations 2018 (SI 2018/78) became effective which, among other things, brings section 13 of the Criminal Finances Act 2017 into force.

Section 13 implements the U.K.’s ‘Magnitsky-style’ sanctions provisions by expanding the definition of “unlawful conduct” under Part 5 of the U.K.’s Proceeds of Crime Act 2002 (POCA) to include conduct occurring outside of the U.K., as long as that conduct “constitutes, or is connected with, the commission of a gross human rights abuse or violation”. Currently under Part 5 of POCA, an enforcement authority can apply for a recovery order (section 243), as well as seek a property freezing order (section 245A), in relation to property that is, or represents, property obtained through “unlawful conduct” through civil recovery proceedings.http://www.legislation.gov.uk/ukpga/2017/22/section/13

In practical terms, the new regulation means that the U.K. government can impose sanctions against corrupt government officials and human rights abusers, including freezing their assets.  “The new Magnitsky Sanctions Legislation is going to cause perceptible fear for kleptocrats in Russia and other authoritarian regimes. They all have expensive properties in London and think they are untouchable,” said William Browder, leader of the global Magnitsky Justice Campaign on the Organized Crime and Corruption Reporting Project website.

The new regulation also marks the U.K. coming in line with the four??other countries that have incorporated ‘Magnitsky-style’ sanctions into their law– USA (December 2012,Estonia (December 2016), Canada (October 2017), and Lithuania (November 2017).

In December 2016, the U.S. Congress extended the scope of its original 2012 Magnitsky sanctions, which originally only included Russian citizens, to encompass all human rights violators globally.

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