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OFAC Sanctions Under Magnitsky Act + U.S. Anti-corruption Laws

The United States tackles systemic corruption and gross violation of human rights in foreign countries by holding corrupt public officials accountable, enforcing money laundering laws and employing the cross-jurisdictional U.S. mighty legal tools, such Global Magnitsky Human Rights Accountability Act, to meet said goals worldwide. 

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Global Reach. The US Department of the Treasury's Office of Foreign Assets Control (“OFAC”), and other U.S. Agencies, have and use their regulatory authorities to sanction individuals and entities located practically in any country in the world. Example: The United States sanctioned (Magnitsky designations) three Bulgarian individuals (a businessman, member of parliament and government official), and their network of 64 companies, for their roles in corruption in Bulgaria in an effort to dissuade and disrupt international corruption. 

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Reasons for Designation.  The Magnitsky designation of foreign businessmen may be based on: 

  • The individuals’ abuse of public/ government institutions for their own gain and profit  

  • Being a person who has materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of corruption 

  • 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  

  • Use of influence peddling and bribes to protect oneself from public scrutiny 

  • Exertion of control over key institutions and sectors in the country’s society  

  • Negatively influencing the national political process and municipal elections   

  • Negotiation with politicians to provide them with political support and positive media coverage in return for receiving protection from criminal investigations. 

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Legal Authority. The foreign corruption target individuals and related entities are designated pursuant to: 

  • 2017 Executive Order (E.O.) 13818, Blocking the Property of Persons Involved in Serious Human Rights Abuse or Corruption 

  • The Global Magnitsky Human Rights Accountability Act, 22 U.S.C. §2656  

  • International Emergency Economic Powers Act (IEEPA), 50 U.S.C § §1701-1706 (Unusual and extraordinary threat; declaration of national emergency) 

  • Section 7031(c) of the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2019, 8 U.S.C. 1182 (a visa ban making foreign officials and their immediate family members ineligible for U.S. entry if there is credible evidence of such individuals’ involvement in corruption related to the extraction of natural resources, or a gross violation of human rights, etc.). 

 

Designation Outcome. These sanctions / measures for blocked persons include: 

  • Blocking target individuals from accessing the US financial system.  

  • All property of the individuals and entities placed on the list is blocked and  

  • Reported to OFAC, even if in the possession of US citizens.  

  • Prohibition on making any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person or receiving said funds, goods, or services from any such person. 

  • Prohibition of all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or otherwise blocked persons. 

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Exemption from transaction prohibition: OFAC issued authorizations by a general or specific license, or otherwise exempted, to wind down the company’s business activity or other reasons. Business executives of every company must be aware of U.S. sanctions regulations affecting business transactions with blocked countries, individuals and entities. 

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Wrongful conduct: the U.S. Treasury Department imposed sanctions / blacklisted former and current Bulgarian public officials for supporting what the State Department called “significant corruption acts” by using their political influence and official power for personal benefit: 

  • As a member of parliament, Peevski used Zhelyazkov, an official in the National Bureau for Control on Special Intelligence-Gathering Devices, as an intermediary and accomplice to peddle influence and pay bribes to protect himself from public scrutiny and to exert influence over key institutions and sectors in Bulgarian society. 

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Sanctions/ Penalties: "the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) sanctioned three Bulgarian individuals for their extensive roles in corruption in Bulgaria, as well as their networks encompassing 64 entities. 

  • Designated (as the Global Magnitsky action) three individuals (a businessman, member of parliament and former State Agency for Technical Operations Deputy Chief) and 64 entities owned by two oligarchs for abusing public institutions for their own gain. 

  • Blocked the targeted individuals and companies from accessing the U.S. financial system. 

  • Freezed all assets in the U.S.  

  • Barred Americans from having any business dealings with them. 

  • Encouraged other governments to implement similar measures to address corruption. 

  • All property of the individuals and entities is placed on the list, blocked and reported to OFAC, even if in the possession of US citizens.  

  • Prohibited making any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person or the receipt of any contribution or provision of funds, goods, or services from any such person. (ANI/Sputnik). 

  • All property and interests in property of the persons above that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC.  

  • Any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.   

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These sanctions coincide with complementary actions taken by the US Department of State to publicly designate the targeted individuals.  

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Exemptions: OFAC-issued general or specific license, or other exemptions, authorizing (exempting from OFAC regulations’ general prohibiting) all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or otherwise blocked persons.   

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Examples of Sanctions on Foreign Individuals and Companies  

Wrongful Conduct / Charges against: 

A Bulgarian businessman, ex-MP and oligarch was charged with bribery of government officials and plan to provide a sum of money to a former Bulgarian politician to create a channel for Russian political leaders to influence Bulgarian government officials and $6,220 daily payments to revoke the competitors’ gambling licenses.  This businessman was accused of: 

  • Corruption, using influence peddling and bribes to protect himself from public scrutiny and exert control over key institutions and sectors in Bulgarian society.   

  • Negative influence on the Bulgarian political process in 2019 municipal elections by negotiating with politicians to provide them with political support and positive media 

  • Conducting a bribery scheme involving Bulgarian residency documents for foreign persons 

  • Bribing government officials in exchange for their information and loyalty to provide information, embezzle funds, sell Bulgarian residency documents so the clients wouold receive them immediately rather than making the $500,000 deposit or waiting the five years for a legitimate request to be processed. 

  • Blackmailed a potential Bulgarian government minister with criminal charges from Bulgaria’s Prosecutor General’s office if the minister did not provide him further assistance upon appointment. 

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Legal Basis for Sanctions:  

  • Implementing the Global Magnitsky Human Rights Accountability Act targeting perpetrators of serious human rights abuse and corruption around the world.   

  • For being a person who has materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of 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.  

    • The Global Magnitsky Human Rights Accountability Act, for being foreign persons who are current or former government officials, or persons acting for or on behalf of such an official, who are responsible for or complicit in, or who have directly or indirectly engaged in, 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.  

    • Section 7031(c) of the Department of State, Foreign Operations, and Related Programs Appropriations Act due to their involvement in significant corruption. 

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The United States Treasury works with foreign countries to address money laundering reforms that lead to financial transparency and accountability and seeks to impose tangible and significant consequences on those who commit serious human rights abuse or engage in corruption, as well as to protect the financial system of the United States from abuse by these same persons. 

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REFERENCES 

 

  • Code of Federal Regulations: 31 CFR Part 583 - Global Magnitsky Sanctions Regulations 

  • 2017 Executive Order (E.O.) 13818 

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