Dan Dowen, Commercial Contracts Senior Associate Solicitor at Berry Smith Lawyers considers the UK’s new Global Anti-Corruption Sanctions Regime: what is it and what does it mean for my business?
Corruption and the exploitation of both citizens and the economy is a worldwide concern as, among other things, it undermines global trade, threatens national security and damages the economy.
Corruption is the cause of a 2% loss per year of the global GDP and can increase the cost of doing business for companies by as much as 10%.
The UK has been increasingly concerned with the effects of corruption and, following it’s exit from the EU, has taken the opportunity to depart from the EU approach to anti-corruption regulations and shape its sanctions framework in an attempt to take further steps to combat corruption, both domestically and globally. The UK has done this particularly through the recent introduction of the Global Anti-Corruption Sanctions Regulations 2021 (“the Regulations”).
The Regulations were introduced under the UK’s Sanctions and Anti-Money Laundering Act 2018 which contains a broad range of powers for the UK Government to create new sanctions. The UK Government issued a press release (link can be accessed here) stating that this new Global Anti-Corruption sanctions regime is intended to “promote effective governance, robust democratic institutions and the rule of law”, demonstrating the UK’s power as a “force for good around the world”
The Regulations focus particularly on the misappropriation of property and bribery and work to prevent individuals involved in corruption from moving money through the UK’s financial system, entering the UK freely, opening bank accounts in the UK and doing business with UK businesses.
The Regulations therefore act as a formidable tool to hold the corrupt to account but also to prevent UK businesses from doing business with such individuals.
So far, 22 individuals from 6 different countries have been included in the list of individuals subject to sanctions.
Such sanctions include a travel ban as well as financial sanctions such as asset freezes, the prohibition of both financial resources and making funds available to individuals subject to sanctions.
The Regulations make it a criminal offence to contravene the sanctions or to enable/ facilitate the contravention of any of the prohibitions under the Regulations.
It is important to note that involvement in serious corruption is defined widely, including a person who engages in serious corruption but also the person who facilitates, provides support for, conceals or fails to make monetary funds available to those involved in serious corruption.
Offences under the Regulations can be enforced and the consequences of committing them can lead to imprisonment, in some cases for up to 7 years and/or a large fine.
Impact on business
UK businesses will need to make sure that their due diligence processes are watertight. Business must consider the risk of overseas clients or business partners and ensure that they are not associating or contracting with anyone sanctioned under the Regulations.
The Regulations do, of course, pose an additional compliance challenge which will get more intense as the list of sanctioned individuals is likely to grow.
The UK’s foreign secretary has made it clear that the UK intends becoming a global leader in tackling corruption and the application of the Regulations is therefore going to be heavy and ongoing.
Regular due diligence checks should therefore be undertaken, on both new and existing clients, and businesses should be on the lookout for possible risk related areas in the course of commercial negotiations and due diligence. For example, it would be prudent for businesses to ensure that any distributors/customers/agents of theirs are also under contractual duties to not sell or market to any individuals included in the sanctions list.
Our commercial team have already been advising clients on the implications of the Regulations and how they can look towards to their contractual processes and arrangements as a way of minimising the risk of falling foul of the Regulations. We therefore have the knowledge and experience to help your business navigate its challenges in relation to such regulations.
For further information or assistance, please contact Dan Dowen at firstname.lastname@example.org or alternatively call 02920 345 511.