Stephen Clark, Dept of Foreign Affairs and Trade - A look at sanctions

Sanctions

Anti-Money Laundering Conference

Stephen Clark

Sanctions Section

Department of Foreign Affairs and Trade

September 2014

What are sanctions?

‘Measures not involving the use of armed force’, including ‘complete or

partial interruption of economic relations.’ (Charter of the United Nations, Article 41.)

‘Measures not involving the use of armed force’ imposed ‘in situations of

international concern’, including ‘the grave repression of the human rights

or democratic freedoms of a population by a government, or the

proliferation of weapons of mass destruction (WMD) or their means of

delivery, or internal or international armed conflict.’ (Autonomous Sanctions Bill

2010, explanatory memorandum.)

What are the aims of sanctions?

‘To limit the adverse consequences of the situation of international concern

(for example, by denying access to military or paramilitary goods, or to

goods, technologies or funding that are enabling the pursuit of programs of

proliferation concern).

To seek to influence those responsible for giving rise to the situation of

international concern to modify their behaviour to remove the concern (by

motivating them to adopt different policies).

To penalise those responsible (for example, by denying access to

international travel or to the international financial system).’

(Autonomous Sanctions Bill 2010, explanatory memorandum.)

The two types of sanctions regimes

United Nations Security Council (UNSC) sanctions regimes

• Imposed by the UNSC in response to a threat to the peace, breach of

the peace, or act of aggression. (Charter of the United Nations, Article 39.)

• Implemented by all United Nations Member States, including Australia,

as a matter of international law. (Charter of the United Nations, Article 25.)

Autonomous sanctions regimes

• Imposed and implemented by a country as a matter of foreign policy.

• May supplement UNSC sanctions, or be separate from them.

Current sanctions regimes

UNSC sanctions• Al Qaida• CAR• Cote d’Ivoire• Counter-terrorism• DRC• Eritrea• Guinea-Bissau• Iraq• Lebanon• Liberia• Somalia• Sudan• The Taliban• Yemen

Australian autonomous sanctions• Burma• Fiji• Former Yugoslavia 1

• Syria• Ukraine• Zimbabwe

1 Targeted against persons associated with the former Milosevic regime.

Both

• DPRK

• Iran

• Libya

Australian sanction laws

UNSC sanctions

• Primarily implemented under the Charter of the United Nations Act 1945

(CotUNA) and its regulations.

• There is a separate set of regulations for each UNSC sanctions regime.

• CotUNA is administered by DFAT.

Australian autonomous sanctions

• Primarily implemented under the Autonomous Sanctions Act 2011 and

the Autonomous Sanctions Regulations 2011.

• There is only one set of regulations which implements all Australian

autonomous sanctions regimes.

• The Autonomous Sanctions Act 2011 is administered by DFAT.

Types of sanctions measures

Different sanctions regimes impose different sanctions measures.

CotUNA, the Autonomous Sanctions Act 2011 and their regulations

use common terms to describe sanctions measures.

Sanctions measures of particular relevance to financial institutions

include general prohibitions on

• dealing with a ‘designated person or entity’

• using or dealing with a ‘controlled asset’;

• providing a ‘sanctioned service’; or

• making a ‘sanctioned supply’ of ‘export sanctioned goods’.

While not formally a sanctions measure, there is also a general

prohibition on financial transactions of $20,000 or more with Iran.

Iran: Dealing with designated persons

UNSC and Australian autonomous sanctions in relation to Iran

A person is generally prohibited from directly or indirectly making an asset

available to, or for the benefit of

• a ‘designated person or entity’;

• a person or entity acting on behalf of, or at the direction of, a

‘designated person or entity’ (UNSC sanctions only); or

• an entity owned or controlled by a ‘designated person or entity’ (UNSC

sanctions only).(Charter of the United Nations (Sanctions – Iran) Regulations 2008, regulation 15. Autonomous

Sanctions Regulations 2011, regulation 14.)

An ‘asset’ is an asset or property of any kind, whether tangible or

intangible, movable or immovable.(Charter of the United Nations Act 1945, section 2. Autonomous Sanctions Act 2011, section 4.)

Iran: ‘Designated person or entity’

UNSC sanctions in relation to Iran

Persons or entities designated by the UNSC 1737 Iran Sanctions

Committee, of which Australia is the Chair in 2013 and 2014.(Charter of the United Nations (Sanctions – Iran) Regulations 2008, regulation 4.)

Australian autonomous sanctions in relation to Iran

Persons or entities that the Minister for Foreign Affairs is satisfied have

contributed to Iran’s nuclear or missile programs, or assisted Iran to breach

UNSC resolutions.(Autonomous Sanctions Regulations 2011, regulation 6.)

DFAT maintains a Consolidated List of all designated persons and

entities in relation to all UNSC and Australian autonomous sanctions.

• The Consolidated List and LinkMatchLite data-matching software is

available on the DFAT website.

Iran: Using a ‘controlled asset’


A person who holds a ‘controlled asset’ is prohibited from using or dealing

with it, or allowing or facilitating it to be used or dealt with.(Charter of the United Nations (Sanctions – Iran) Regulations 2008, regulation 16. Autonomous


A ‘controlled asset’ is an asset that is owned or controlled by

• a ‘designated person or entity’;

• a person or entity acting on behalf of, or at the direction of, a

‘designated person or entity’ (UNSC sanctions only); or

• an entity owned or controlled by a ‘designated person or entity’ (UNSC

sanctions only).(Charter of the United Nations (Sanctions – Iran) Regulations 2008, regulation 4. Autonomous


Iran: ‘Sanctioned service’


Of particular relevance to financial institutions, a ‘sanctioned service’ includes

• the provision of

– financial assistance; or

– a financial service

• if it assists with, or is provided in relation to

– a military activity; (autonomous sanctions only)

– a ‘sanctioned supply’;

– the manufacture or use of ‘export sanctioned goods’; or

– gold, precious metals and diamonds (autonomous sanctions only)

in Iran.(Charter of the United Nations (Sanctions – Iran) Regulations 2008, regulation 8. Autonomous


Iran: ‘Sanctioned supply’


A person makes a ‘sanctioned supply’ if

• the person supplies, sells or transfers goods to another person;

• the goods are ‘export sanctioned goods’; and

• as a direct or indirect result of the supply, sale or transfer the goods are

transferred to Iran.(Charter of the United Nations (Sanctions – Iran) Regulations 2008, regulation 7. Autonomous


Iran: ‘Export sanctioned goods’


• ‘Export sanctioned goods’ are goods mentioned in specified UNSC and

International Atomic Energy Agency documents.

• In essence goods related to Iran’s nuclear and ballistic missile

programs.(Charter of the United Nations (Sanctions – Iran) Regulations 2008, regulation 5.)

Dual-use goods are included.

Iran: ‘Export sanctioned goods’


‘Export sanctioned goods’ include, but are not limited to

• ‘arms or related materiel’, which is defined broadly;

• goods related to chemical and biological weapons;

• specified goods related to the oil, gas and petrochemical industries;

• specified graphite, raw metals and semi-finished metals; and

• specified software for integrating industrial processes.(Autonomous Sanctions Regulations 2011, regulation 4. Autonomous Sanctions (Export

Sanctioned Goods – Iran) Specification 2012. Autonomous Sanctions (Export Sanctioned

Goods – Iran) Amendment Specification 2013.)

Dual-use goods are included.

Iran: Financial transactions

Transactions involving money or property valued at $20,000 or more are

prohibited if a party to the transaction is

• an individual who is physically present in Iran; or

• a corporation incorporated in Iran.(Anti-Money Laundering and Counter-Terrorism Financing (Iran Countermeasures) Regulation

2014, regulations 7, 8.)

Australia only implements this measure in relation to Iran.

• It gives DFAT visibility of a wide range of transactions with Iran.

• We then check those transactions for compliance with UNSC and

Australian autonomous sanctions.

Sanctions permits

The Minister for Foreign Affairs, or in some circumstances her

delegate, may grant a permit authorising an activity that would

otherwise contravene a sanctions measure.

• The Minister or her delegate may attach conditions to a permit.

• A permit may cover several similar activities over a period of time.

Different sanctions regimes and different sanctions measures have

different criteria which must be satisfied before the Minister or her

delegate can grant a permit.

• The criteria for UNSC sanctions regimes are determined by the UNSC.

While not formally a sanctions measure, the DFAT Secretary or his

delegate may grant a permit authorising a financial transaction of

$20,000 or more with Iran.

Iran: Sanctions permit criteria


The Minister may issue a permit authorising the making available of an

asset to a ‘designated person or entity’, or the use of or dealing with a

‘controlled asset’, including if the permit application is for

• a ‘basic expense dealing’;

• a ‘legally required dealing’; or

• a ‘contractual dealing’;

and she has

• for a ‘basic expense dealing’, notified the UNSC Iran Sanctions

Committee and the Committee has not advised against granting the

permit after five working days; or

• for a ‘legally required dealing’, notified the Committee before granting

the permit.(Charter of the United Nations (Sanctions – Iran) Regulations 2008, regulation 17.)

A ‘contractual dealing’

These types of dealings are defined in similar ways in

• the Charter of the United Nations (Dealing with Assets) Regulations 2008

for all UNSC sanctions regimes which refer to them; and

• the Autonomous Sanctions Regulations 2011 for all Australian

autonomous sanctions regimes which refer to them.

Of most relevance to financial institutions, a ‘contractual dealing’ includes a

payment to a ‘designated person’, or a use of or dealing with a ‘controlled

asset’, if it is a payment

• to apply interest or other earnings due on accounts holding ‘controlled

assets’; or

• required under contracts, agreements or obligations made before the date

on which those accounts became accounts holding ‘controlled assets’.(Charter of the United Nations (Dealing with Assets) Regulations 2008, regulation 5(5).

Autonomous Sanctions Regulations 2011, regulation 20(5).)

Iran: Sanctions permit criteria


The Minister may issue a permit authorising the making available of an

asset to a ‘designated person or entity’, or the use of or dealing with a

‘controlled asset’, if

• she is satisfied that it would be in the national interest to do so; and

• the permit application is for a ‘basic expense dealing’, a ‘legally required

dealing’, or a ‘contractual dealing’.(Autonomous Sanctions Regulations 2011, regulations 18, 20.)

Iran: Financial transaction permit

The DFAT Secretary or his delegate may authorise a transaction with Iran

valued at $20,000 or more if he considers it appropriate to do so, having

regard to whether the transaction is

• necessary for the provision of a basic expense;

• legally required because it is necessary to satisfy a judicial,

administrative or arbitral judgment made before 1 March 2012;

• contractually required under a contract made before 1 March 2012;

• a significant trade transaction that, if not completed, would have an

adverse effect on Australia’s trade relationship with Iran or the viability

of an Australian business; or

• related to the provision of aid or humanitarian services.(Anti-Money Laundering and Counter-Terrorism Financing (Iran Countermeasures) Regulation

2014, regulation 8.)

Sanctions offences

Contravening a sanctions measure or a condition of a sanctions permit

is a serious offence.

• Punishable for individuals by up to 10 years in prison and/or a fine the

greater of $425,000 or three times the value of the transaction.

• Punishable for bodies corporate by a fine the greater of $1.7 million or

three times the value of the transaction.

• The offences are strict liability offences for bodies corporate, meaning that

it is not necessary to prove any fault element (intent, knowledge,

recklessness or negligence) for a body corporate to be found guilty.(Charter of the United Nations Act 1945, section 27. Autonomous Sanctions Act 2011, section 16.)

Sanctions offences

Giving false or misleading information in connection with the

administration of a sanction law is also a serious offence.

• A sanctions permit is taken never to have been granted if false or

misleading information was contained in the application for the permit.

• Punishable by up to 10 years in prison and/or a fine of $425,000.(Charter of the United Nations Act 1945, sections 13A, 28. Autonomous Sanctions Act 2011,

sections 15, 17.)

These offences apply broadly.

• To any activity in Australia.

• To any Australian anywhere in the world.

• To any person using an Australian flagged vessel or aircraft.(Various sets of regulations made under the Charter of the United Nations Act 1945. Autonomous

Sanctions Regulations 2011, various regulations.)

Sanctions offences

While not formally a sanctions measure, providing services in relation

to an unauthorised financial transaction of $20,000 or more with Iran is

an offence for a financial institution.

• Punishable by a fine of $8,500.(Anti-Money Laundering and Counter-Terrorism Financing (Iran Countermeasures) Regulation

2014, regulation 7.)

Sanctions investigative powers

DFAT may issue a notice requiring a person to give information or

documents, including under oath, for the purpose of determining

whether a sanction law has been or is being complied with.

• The person must comply with the notice despite any other law of the

Commonwealth, a State or a Territory.

• A person is not excused from complying on the ground that the

information or documents might tend to incriminate him or her.

• Failure to comply is an offence punishable by 12 months in prison.(Charter of the United Nations Act 1945, sections 30-33. Autonomous Sanctions Act 2011,

sections 19-22.)

We can issue such a notice at the request of a person who wants

legal coverage to share information or documents with us.

Defences to sanctions offences

It is a defence for a body corporate if it proves that it took reasonable

precautions, and exercised due diligence, to avoid contravening a

sanctions measure or a condition of a sanctions permit.

• What constitutes ‘reasonable precautions’ and ‘due diligence’ depends on

the circumstances.

• A body corporate would have to demonstrate that it thoroughly considered

sanctions issues before undertaking an activity.

• Consider including terms related to sanctions in any contract related to an

activity.

• Inform us immediately of any changes to an activity that may raise

sanctions issues.(Charter of the United Nations Act 1945, section 27. Autonomous Sanctions Act 2011, section 16.)

This is in addition to defences that are generally available for

individuals and bodies corporate under the Criminal Code.

What do I need to do?

When planning an activity, consider whether it may involve any

country, good or service, or person or entity subject to sanctions.

• Details of UNSC and Australian autonomous sanctions regimes are

available on the DFAT website at www.dfat.gov.au/sanctions.

• Check the Consolidated List of all persons and entities subject to all

UNSC and Australian autonomous sanctions regimes.


If you have any concerns that an activity may contravene a sanctions

measure in an Australian sanction law, consider seeking legal advice

to assess whether the activity is prohibited without a sanctions permit.

• The onus to comply with Australian sanction laws rests on you.

• In contentious cases, you may submit an informal inquiry to DFAT

relating to whether you require a sanctions permit.

– Using the Online Sanctions Administration System (OSAS) available

on the DFAT website at www.dfat.gov.au/sanctions.

• You may also need to consider the sanction laws of other countries.

– DFAT can only provide information on Australian sanction laws.

– The US, in particular, implements broad financial sanctions

measures administered by the Office of Foreign Asset Control in the

US Treasury.


If you assess that an activity would be prohibited by an Australian

sanction law without a sanctions permit, consider whether the

activity satisfies the relevant criteria for a sanctions permit.

If you assess that an activity does satisfy the relevant criteria for a

sanctions permit, you may submit a formal application for a

sanctions permit to DFAT using OSAS.

• Please do not apply for a permit until you’ve undertaken these steps.

• Please submit an application as early as possible.

• Please include as much information as possible.

What does DFAT then do?

We will consider your application for a sanctions permit as soon as

possible, subject to our current caseload.

• We may need to consult other Australian Government agencies, other

countries, or a UNSC Sanctions Committee.

We generally require complete information about an activity.

• Including the full path for any goods or services from you, through any

intermediaries, to the end-user.

• And the full path for any payment you receive, from the end-user,

through any intermediaries, to you.

DFAT implements Australian sanction laws diligently, but also in a

way that facilitates trade and other activities wherever possible.

• We seek to avoid putting Australian businesses and other entities at a

disadvantage vis-à-vis counterparts from countries with similar laws.

Further information

DFAT website: www.dfat.gov.au/sanctions

• Find details of all UNSC and Australian autonomous sanctions regimes.

• Check the Consolidated List of all designated persons and entities

subject to all UNSC and Australian autonomous sanctions regimes.

• Download LinkMatchLite data-matching software to assist you to check

the Consolidated List.

• Access OSAS to make an informal inquiry or a formal application

relating to a sanctions permit.

• Subscribe to our sanctions e-mail list.

E-mail: [email protected]

• Please use OSAS to contact us in relation to a sanctions permit.

• Please use e-mail to contact us in relation to any other matter, including

if you have information relating to a possible contravention of an

Australian sanction law.

Stephen Clark, Dept of Foreign Affairs and Trade - A look at sanctions

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