1. Serious corruption crimes and the sanctions list.
Under the Regulations, the UK Secretary of State is authorised to designate persons involved in serious corruption, i.e. bribery of foreign public officials or misappropriation of property by foreign public officials.
In this context, under the Regulations bribery of foreign public officials occurs where:
- a person directly or indirectly offers, promises or gives a financial or other advantage to a foreign public official, and where:
- the person intends to induce that official or another foreign public official to perform improperly a public function, or
- the person intends to reward that official or another foreign public official for improperly performing a public function, or
- the person knows or believes that the acceptance of the advantage by that official would constitute improperly performing a public function; or
- a foreign public official directly or indirectly requests, agrees to receive or accepts a financial or other advantage, and where:
- that official intends, in consequence, that the official or another foreign public official should improperly perform a public function, or
- the advantage is a reward for that official or another foreign public official improperly performing a public function, or
- that official knows or believes that the request for, agreement to receive or acceptance of the advantage by the official would constitute improperly performing a public function; or
- in anticipation of or in consequence of requesting, agreeing to receive or accepting a financial or other advantage, a foreign public official, or another person at that official’s request or with their assent or acquiescence, improperly performs a public function.
According to the Regulations, misappropriation of property occurs where a foreign public official has been entrusted with property, or has a role in the grant or allocation of property, by virtue of their position, and improperly diverts, grants or allocates that property for the benefit of the official or for the benefit of another person.
For the purposes of the Regulations, a person is involved in serious corruption if:
- the person is responsible for or engages in serious corruption;
- the person facilitates or provides support for serious corruption;
- the person profits financially or obtains any other benefit from serious corruption;
- the person conceals or disguises, or facilitates the concealment or disguise of serious corruption, or any profit or proceeds from serious corruption;
- the person transfers or converts, or facilitates the transfer or conversion of any profit or proceeds from serious corruption;
- the person is responsible for the investigation or prosecution of serious corruption and intentionally or recklessly fails to fulfill that responsibility;
- the person uses threats, intimidation or physical force to interfere in, or otherwise interferes in, any law enforcement or judicial process in connection with serious corruption;
- the person contravenes, or assists with the contravention of, any provision of the Regulations;
- as well as the person that:
- is owned or controlled directly or indirectly by a person who is or has been so involved;
- is acting on behalf of or at the direction of a person who is or has been so involved;
- is a member of, or associated with, a person who is or has been so involved.
At present, the sanctions list includes 22 persons involved in serious corruption in Russia, South Africa, South Sudan and Latin America.
2. Sanctions imposed in the event of serious corruption.
According to the Regulations, the following sanctions may be imposed on the designated persons.
The financial measures provide for freezing of assets of designated persons and prohibiting the third parties from dealing directly or indirectly with the funds or economic resources (e.g. real property or vehicles) owned, held or controlled by designated persons.
In this context a person “deals with” such funds and resources if the person:
- uses, alters, moves, transfers or allows access to the funds;
- deals with the funds in any other way that would result in any change in volume, amount, location, ownership, possession, character or destination;
- makes any other change, including portfolio management, that would enable use of the funds;
- exchanges the economic resources for funds, goods or services;
- uses the economic resources in exchange for funds, goods or services (whether by pledging them as security or otherwise).
At the same time, a number of transactions involving funds/economic resources are subject to exceptions from the prohibitions established by the Regulations. In particular, the prohibitions are not contravened by a relevant institution crediting a frozen account with interest or other earnings due on the account (in such a case the interest and other earnings will be frozen in accordance with the applicable law), as well as by the transfer of funds, where those funds are transferred in discharge (or partial discharge) of an obligation which arose before the date on which the person became a designated person.
The prohibition is also not contravened if a third party who is not a designated person and is not controlled directly or indirectly by the designated person transfers lawfully to the latter a legal or equitable interest in funds or economic resources where, immediately before the transfer, the interest is held by the third party and is not held jointly with the designated person.
The body responsible for imposing financial sanctions will be the Office of Financial Sanctions Implementation of HM Treasury (OFSI).
Restrictions on entry
Under the Regulations, the designated persons shall be refused to enter or remain in the United Kingdom, and any application for the UK visa, including transit one, shall be declined. The designated person who is in the territory of the United Kingdom at the moment of the adoption of the Regulations loses the permission to stay in the country and is subject to an immediate expulsion.
In exceptional cases the restrictions on entry and/or stay in the United Kingdom can be lifted by a decision of the Home Office, for instance, if the travel in/via the United Kingdom is motivated by the participation in a UN event.
3. Penalties for offences.
The Regulations provide for the liability of not only the persons who committed a serious corruption crime or made ill-gotten gains from its commission, but also of those who do not respect the sanctions imposed on these wrongdoers, in particular, by creating conditions for offences or assisting in offences or circumvention of the sanctions imposed.
The UK citizens and bodies corporate, incorporated or set up in accordance with the UK legislation, including the subsidiaries of the UK companies conducting their activities abroad, who break the sanctions shall be liable on conviction on indictment, to imprisonment for a term not exceeding seven years or a fine (or both).
Proceedings for an offence under the Regulations may be brought within the period of 12 months beginning with the date on which evidence sufficient in the opinion of the prosecutor to justify the proceedings comes to the prosecutor’s knowledge, but not later than three years after the commission of the offence.
4. Exceptions from the Regulations and the obligation to disclose information about offences
At the same time, the Regulations provide for the possibility to obtain a licence authorising the violation of the sanctions regime. To this end, the respective person or his/her representative may apply for the licence authorising the use of the funds/resources of the designated person if this is necessary for:
- enabling the basic needs (including those of the dependents if the licence is issued to an individual), such as food, payment of insurance premiums and tax, mortgage payments, etc.;
- paying legal services;
- maintaining frozen funds and economic resources;
- covering extraordinary expenses;
- addressing extraordinary situations;
- implementing or satisfying a prior judicial, administrative or arbitral decision;
- satisfying prior obligations (whether arising under a contract, other agreement or otherwise);
- carrying out the functions of a diplomatic mission or consular post, or of an international organisation enjoying immunities in accordance with international law;
- performing humanitarian assistance activity.
In addition, the Regulations stipulate that a number of organisations providing financial, audit, accountancy and legal services, carrying out estate agency work, casinos and companies selling articles made from precious metals and stones must inform the Treasury if they know that a person is involved in serious corruption or has violated the Regulations.