About Hilary Hurd

Hilary Hurd is a J.D. candidate at Harvard Law School. She previously worked for Transparency International's defense program, where she managed global advocacy and helped pioneer the first US post. She was a 2013 Marshall Scholar and speaks five languages.

Getting People Off the Sanctions List: A Process that Doesn’t Support the Policy

Individually-targeted “smart sanctions”—not to be confused with country-wide sanctions, such as trade or arms embargoes—are garnering increased attention as a potentially powerful tool in the anticorruption toolkit, particularly in the United States. Such sanctions typically prohibit persons or entities on the list of those under sanction (known in the U.S. as the Specially Designated and Blocked Person (SDN) list) from accessing the sanctioning country’s financial system. They can also impose travel bans and/or prohibit third parties subject to the sanctioning country’s jurisdiction from doing business with the targeted individuals. These individually-targeted sanctions, particularly the asset freezes, are a powerful instrument, and may be an especially effective deterrent in the context of venal crimes like corruption, given that those motivated principally by greed might also be more sensitive to severe financial penalties. (According to a 2016 study by the US State Department, a sanctioned or associated company loses, on average, over half of its asset value and one-third of its employees and operating revenues.) While the United States had previously used individually-targeted asset freezes to punish individuals responsible for acts of public corruption in places like Venezuela (pursuant to Executive Order (EO) 13692), Syria (pursuant to EO 13460), and Zimbabwe (pursuant to EO 13469), the 2016 Global Magnitsky Act (GMA) has made individually-targeted asset freezes a more prominent piece of the US anticorruption arsenal. Pursuant to this Act, last December President Trump authorized sanctions against 15 individuals and 37 entities for human rights abuses and acts of grand corruption; in June, the Office of Foreign Asset Control (OFAC) added two more entities and five more individuals to the list.

In the months since OFAC released the first tranche of GMA names, there has been extensive discussion about how civil society organizations (CSOs) can add more names to the Global Magnitsky list. Former Deputy Assistant Secretary of State Rob Berschinski, for example, is spearheading efforts through Human Rights First to coordinate CSOs endeavouring to submit names for consideration, while the Helsinki Commission organized a special “how-to” event for CSOs to help them be more effective in lobbying to add names to the list.

Yet for all this attention on how to get names on to the GMA list, little ink has been spilled addressing the question of how sanctioned individuals might get off that list. It’s not surprising that CSOs would not devote their scarce resources to getting individuals who have engaged in acts of grand corruption off of a sanctions list. Yet the de-listing issue is important—even in contexts where it’s unlikely that a name would be added to the list erroneously. The main reason has to do with incentives. As the US Treasury Department acknowledges, the “ultimate goal with sanctions is not to punish, but to bring about a positive change in behavior of illicit actors.” And it is the prospect of getting off the sanctions list that can encourage bad actors to change their behavior and/or to cooperate with the US government investigations into wrongdoing. Continue reading

What Is “Beneficial Ownership”? Why the Proposed TITLE Act’s Definition Is Sensible and Appropriate

“Vague, overly broad, and unworkable.” Those were the words ABA president Hilarie Bass used in her February letter to Congress to criticize the definition of “beneficial ownership” that appears in the TITLE Act – a proposed bill that would require those seeking to form a corporation or limited liability company to provide information on the company’s real (or “beneficial”) owners to state governments. The TITLE Act defines a beneficial owner as “each natural person who, directly or indirectly, (i) exercises substantial control over a corporation or limited liability company through ownership interests, voting rights, agreement, or otherwise; or (ii) has a substantial interest in or receives substantial economic benefits from the assets of a corporation or the assets of a limited liability company.” Ms. Bass and other critics assert that this definition is unprecedented, unfair, and unduly vague, making it impossible for regulated entities to understand the scope of their legal obligations and rendering them vulnerable to arbitrary, unpredictable prosecutions.

But Ms. Bass is incorrect: The TITLE’s Act definition of “beneficial ownership,” though “vague” in the sense that it is flexible rather than rigid, is perfectly workable, and aligns with other US laws, European laws, and the G20’s 2015 principles on beneficial ownership. Moreover, the alleged “vagueness” is necessary to prevent the deliberate and predictable “gaming” of the system that would inevitably take place to circumvent a more precise numerical ownership threshold. Continue reading

Applying Anti-Money Laundering Reporting Obligations on Lawyers: The UK Experience

Anticorruption advocates and reformers have rightly been paying increased attention to the role of “gatekeepers”—bankers, attorneys, and other corporate service providers—in enabling kleptocrats or other bad actors to hide their assets and launder their wealth through the use of anonymous companies. An encouraging development on this front are the bills currently pending in the U.S. Congress that would require corporate formation agents to verify and file the identity of a registered company’s real (or “beneficial”) owners, and also would extend certain anti-money laundering (AML) rules, particularly those requiring the filing of suspicious activity reports (SARs) with the US Treasury, to these corporate formation agents.

Not everyone is thrilled. The organization legal profession, for example, is crying foul. American Bar Association (ABA) President Hilarie Bass wrote to Congress that the proposed expansion of SAR obligations to corporate formation agents, many of whom are attorneys or law firms, would compromise traditional duties of lawyer-client confidentiality and loyalty. As Matthew pointed out in a prior post, it’s not clear that this assertion is correct, as the proposed bills contain express exemptions for lawyers. But even putting that aside, it’s worth recognizing that applying SAR obligations to attorneys wouldn’t be unprecedented. Many European countries have had similar requirements in place since the early 2000s, when the European Commission issued directive 2001/97/EC, which required states to adopt legislation imposing obligations on non-financial professionals, including lawyers, to file suspicious transaction reports (STRs, essentially another term for SARs). As in the US right now, that aspect of the 2001 EC directive was extremely controversial. One EU Commission Staff Working Document went so far as to say it was “the most controversial element of the Directive” because it represented “a radical change to the principle of confidentiality that the legal profession has traditionally observed.” Some EU states and national bar associations launched an ultimately unsuccessful legal challenge to the requirement that attorneys file STRs, on the grounds that it violated the right of professional secrecy guaranteed by the Charter of Fundamental Rights of the European Union.

Yet in the end, the imposition of the STR obligations on lawyers does not seem to have radically altered the legal profession in Europe. Countries appear to have developed safeguards that preserve the essential aspects of attorney-client confidentiality, even while implementing the EC Directive. Consider, for example, how this all played out in the United Kingdom. Continue reading

Getting the Right People on the Global Magnitsky Sanctions List: A How-To Guide for Civil Society

Last December, pursuant to the 2016 Global Magnitsky Act, President Trump issued Executive Order 13818, which declared that “the prevalence and severity of human rights abuse and corruption that have their source, in whole or in substantial part, outside the United States … threaten the stability of international political and economic systems,” and authorized the Treasury Secretary to impose sanctions against (among other possible targets) a current or former government official “who is responsible for or complicit in, or has directly or indirectly engaged in: (1) corruption, including the misappropriation of state assets, the expropriation of private assets for personal gain, corruption related to government contracts or the extraction of natural resources, or bribery; or (2) the transfer or the facilitation of the transfer of the proceeds of corruption.” Pursuant to this Executive Order, the Treasury Department imposed powerful economic sanctions against 37 entities and 15 individuals, including Chechen warlord Ramzan Kadyrov, Israeli billionaire Dan Gertler, and Artem Chaika, the son of Russia’s Prosecutor General.

This was big news, for a couple of reasons. Most obviously, Trump doesn’t exactly have a reputation as a “human rights guy,” let alone a Russia hawk. Given that the 2016 Global Magnitsky Act (unlike its predecessor, the 2009 Magnitsky Act) enables but does not require the imposition of sanctions, it was far from inevitable that the Trump Administration would make use of it. Perhaps just as newsworthy was where the specific names on the list came from: nearly half of those names were provided to the Administration by civil society organizations (CSOs) or by Congress (and in the latter case, it was likely CSO efforts that brought individual names to the attention of Congressional staffers).

The Global Magnitsky Act and EO 13818, then, seem to create promising opportunities for anticorruption CSOs to impose consequences on kleptocrats and their cronies. Because the process is so new, it’s not yet clear how it will develop, yet it is nevertheless useful to draw lessons from the first round of Global Magnitsky sanctions for how CSOs can be maximally effective in using this new tool. The Committee on Security and Cooperation in Europe (also known as the Helsinki Commission) hosted a workshop in early March 2018 to discuss this issue. I was fortunate enough to attend this gathering, and in this post I’ve attempted to distill a handful of key lessons that the participants discussion identified. I’ve framed the lessons as a “how-to” guide addressed to members of a hypothetical anticorruption CSO: that would like to take advantage of this powerful tool.

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