In 2012 the US Congress passed the Magnitsky Act, as a means of US legislative protection against human rights abuses. This was followed up by a more international, cross-border version of the initial Act, called the Global Magnitsky Act, in 2017.
Human rights abuses represent one of the cornerstones of the US integrated Sanctions and AML program, and are one of the core US Sanctions offences. The origins of the Magnitsky Acts related to the incarceration and subsequent death of Sergei Magnitsky in a Russian jail, who was the former tax advisor of Bill Browder, CEO of Hermitage Capital.
Since the US came out with ground-breaking extra-territorial measures designed to combat human rights abuses, other jurisdictions have looked to emulate this approach.
UK Foreign Secretary Dominic Raab commented in September 2019 that the UK would aim to come up with Magnitsky-type legislation, and the European Union is also known to be keen to favour passing similar legislation – with this initiative initiated by the Dutch Government.
Unlike non-US counterparts, however, few jurisdictions have the extra-territorial reach of the integrated US Sanctions and AML program. The Global Magnitsky Act extends to cross-border human rights abuses, and as a result many potential links to human rights abuses involving non-US designated entities and individuals or governments may be overlooked by non-US actors.
One clear example is the alleged illicit transactions of some $230bn at Denmark’s Danske Bank, or similar issues allegedly facing other Nordic banks such as Swedbank, Nordea, SEB for their activities in Baltic states where it is alleged that potentially illicit transactions involving US-designated parties were carried out.
In cases of US Sanctions breaches, often involving money laundering type issues, mere “apparent violations” are all that are sufficient for a US Sanctions breach to be established. With known rogue actors and US-designated parties from Eastern Europe and Russian allegedly involved in illicit transactions with Nordic banks, it is inevitable that US Sanctions offences and related fines will come into play. US Sanctions fines constituted 56% of all global AML, KYC and Sanctions offences in terms of size from 2008-2018.
Magnitsky-type sanctions which target human rights abuses are just one of the many policy tools available to the integrated US Sanctions and AML regime – and with penalties as high as $8.9bn for BNP Paribas in 2014, sanctions tools which include designated entire jurisdictions or entities as of “prime money laundering concern” under Section 311 of the USA PATRIOT Act. The latter has routinely led to banks being closed down. With US investigations ongoing, the potential existential threat to Nordic banks via US Sanctions fines, US Sanctions penalties and related US stakeholder class action lawsuits is very real indeed.