Is a Magnitsky Act a Good Idea?

The 2012 US Magnitsky Act cited 18 Russian citizens who were held to be culpable for the death in custody of Sergei Magnitsky, a Russian accountant who had been investigating a tax fraud on behalf of the anglo-american financier Bill Browder. The Act prohibited entry to the US and use of its banking system by the named individuals, and also froze their existing US assets. Magnitsky (posthumously) and Browder (in absentia) were tried and convicted in 2013 of tax fraud by the Russian courts, though this was widely seen (even in Russia) as a tit-for-tat political response to the US measures rather than a disinterested criminal prosecution. In 2014, the EU imposed sanctions on an expanded list of 32 Russian citizens. In 2016, the US passed the Global Magnitsky Act, which gave the government general powers to impose visa bans and property sanctions in cases of "gross violations of internationally recognized human rights" or "acts of significant corruption". At the same time the number of Russian citizens subject to bans and seizures in the US was increased to 44.

In the UK, the 2017 Criminal Finances Act was initially touted as an equivalent to the Magnitsky Act, though its focus was on domestic criminal proceeds and the funding of international terrorism. An amendment to the act to freeze the UK assets of human rights violators was seen as weak and non-specific in comparison to the US original and similar laws enacted by Canada and the Baltic states. In the wake of the recent Salisbury incident and the apparent murder of a former Russian citizen in London, the Sanctions and Anti-Money Laundering Bill (which is currently going through Parliament) is expected to be amended to provide a sharper focus on Russia, however the Labour Party's desire for more wide-ranging powers to investigate and penalise foreign money flowing through the UK banking system is likely to be resisted. The track record of the British government is one of delay and dilution in respect of anything that might imperil the status of those Russian (or indeed any other nation's) oligarchs who have substantial assets in the UK.

This pusillanimity reflects not just the leverage that certain oligarchs have achieved through party donations and longstanding relations with politicians, but an institutional reluctance to question the source of wealth too closely, which long predates the dissolution of the Soviet Union and is really an extension of the circumspection applied to the native rich from the earliest days of industrial and imperial exploitation; a delicacy that was famously raised to the level of art by Jane Austen. The unspoken rule has always been that questions won't be asked so long as foreigners, including state actors, conduct themselves with discretion while on British soil, a hypocritical convention whose compensatory anxiety can be found in much late 19th and early 20th century literature, from Joseph Conrad's The Secret Agent to John Buchan's The Thirty-Nine Steps. In the late 20th century, this indulgence was variously justified (unconvincingly) as the unavoidable corollary of globalisation (being "open for business"), an existential necessity for the City of London, or simply as the chief prop of top-end property prices in the capital.

The hoo-ha over Corbyn's reluctance to find Putin personally guilty on the say-so of various retired MI5 officers has obviously been promoted to avoid criticism of the government's past tardiness in confronting Russia, notably in the case of the Litvinenko murder when Theresa May was Home Secretary. Likewise, the claim that the Labour leader's stance is driven by Seamus Milne's unreformed Stalinism, rather than an objectively justified scepticism about Britain's secret services, is clearly just the latest round in the attritional campaign still being run by the party's right wing. The national security laager will remain the last redoubt of opposition to Corbyn because it allows his party critics to plead the higher cause of patriotism to justify their disloyalty while Tories can guarantee favourable media coverage thanks to the muscle memory of the press. But to suggest in response to this nonsense that Labour's calls for a Magnitsky law mean that it is more robust than the Tories in the defence of British interests would be to fall into the trap of assuming that sanctions against named foreign nationals are actually a worthwhile policy.

State-level economic sanctions are generally ineffective, either because they tend to be relatively modest or because most states are resilient enough to either weather them or flexible enough to circumvent them. Given that the objective of sanctions is usually to satisfy domestic demand that "something be done", or to signal solidarity in international relations, most countries have tended towards the gestural in recent decades. Sanctions against named individuals are trivial, but their very personalisation means they make good copy for the press: we name the guilty men etc. As globalisation has integrated more economies we might have anticipated that state-level sanctions would have more bite, but paradoxically this process has led to their weakening, in no small part because they now inconvenience multinationals and global investors with clout. The disinvestment campaign against South Africa in the 1980s - arguably a tactical hangover from the days of capital controls - would be much more difficult to implement nowadays (the ineffective BDS campaign against Israel is illustrative). The move towards personalised sanctions, such as the Magnitsky Act, is therefore partly a structural shift, reflecting both the increased global mobility of personal wealth and the opaqueness of cross-border business financing.

A sanction is an act of discipline. It should therefore come as no surprise that ever since the Athenian measures against Megara ahead of the Peloponnesian War, sanctions have tended to be imperialistic, with larger powers seeking to coerce smaller powers within their perceived sphere of influence short of military intervention. The US sanctions against Cuba are perhaps the most famous example in recent history, and also stand as a testament to the pointlessness of the tactic: they may have damaged the Cuban economy but they actually reduced the potential for regime change by encouraging critics to emigrate. Even when the asymmetry is reversed, sanctions are still part of an imperial narrative. For example, the Magnitsky laws passed by Estonia, Latvia and Lithuania were clearly intended to broadcast the independence of the Baltic States from Russian influence (and thus reassure foreign investors). The shift to personal sanctions and the seizure of foreign assets has often been justified on the grounds of rooting out corruption, however this has also provided an opportunity for states to discipline their own financial institutions, which again reflects the pressures of globalisation. For example, the French moves against Teodorin Obiang, which did little to improve the lot of the people of Equatorial Guinea, were notable for the reprimands issued against French banks.

In many ways sanctions against named individuals are the flipside of actions taken to penalise foreigners who have the temerity to "interfere" in domestic affairs, such as the Russian actions against Bill Browder and foreign NGOs or Hungary's demonisation of George Soros. That such actions in Russia have been more substantial than those in Hungary reflects differences in the pliability of the legal system to fulfilling political objectives, and specifically that Hungary as an EU member is subject to the European Court of Justice. This highlights a problem with sanctions against individuals: the burden of proof is likely to be lower than it would be in a court of law (the difference between probability and proof beyond reasonable doubt was exemplified by the responses of Theresa May and Jeremy Corbyn respectively this week). For example, the US Magnitsky Act, which is essentially a judgement of guilt, was the product of political lobbying, not a trial by jury, and there is no possibility of appeal. That the number of Russians cited by the US grew over time from 18 to 44 might suggest a dogged pursuit of the facts, but it might also suggest an increasing generosity of interpretation.

A second problem is that the individuals are rarely "names". Tribunals judging state-sponsored crimes, such as the Nuremberg trials and the International Criminal Court, have tended to focus on the most egregious offenders and make notorious examples of them. In contrast, the sanctioning of named individuals has tended to cast the net as wide as possible. Just as the expulsion of spies masquerading as diplomats may catch a few innocent trade delegates to make up the numbers, so the effectiveness of sanctions becomes a question of volume. A third, related problem is that the distinction between private sector rent-seekers (who exploit the state) and corrupt apparatchiks (who exploit their position within the state) is often vague. The American-born Bill Browder, who became a UK citizen partly to avoid paying US taxes, may not have been guilty of the fraud for which he was convicted by Russia in 2013, but he did make money out of the privatisation of Russian state assets in the late 1990s. He may not personally have beeen corrupt, but he probably dealt with corrupt people. Drawing the line can be tricky.

A better approach would be to apply tougher laws on transparency and taxation universally, rather than trying to make a special case for individuals who abuse the apparatus of foreign states, but that would mean giving UK authorities the forensic powers to investigate and potentially penalise the financial affairs of its own citizens. The British government's insistence that its powers should be focused on criminal proceeds (and thus only evasion in the case of tax) or the financing of terrorism is a plea to leave the rich in obscurity. Ultimately, it is the protection of domestic wealth that has provided the cover for Russian oligarchs and others to shelter their gains (whether ill-gotten or not) in the City of London. With the death of Boris Berezovsky after his failure to successfully sue Roman Abramovich, and the tortuously slow progress in the Litvinenko murder case, it looks like the Russian state considers the UK to be an essentially friendly territory. Given the gestural nature of the British government's response to the attacks on the Skripals, and its alacrity in shifting the domestic debate away from money power towards patriotism, they are probably justified in thinking this.