Sergei Magnitsky was a Russian accountant who had the audacity to claim that large-scale theft from the Russian government was carried out by Russian officials. Shortly after making these allegations, he was arrested and spent a year in prison in Russia without being charged for any crime. Ultimately, Magnitsky died in prison of various health ailments. An investigation authored by the Kremlin itself found that he had been given inadequate medical care and was assaulted shortly before his death.
Magnitsky died in 2009. In 2012, the United States Congress passed the Magnitsky Act in response to concerns related to Magnitsky’s death, which barred any Russian officials involved in Magnitsky’s death from entry into the United States, involvement in activities related to U.S. banking matters, and maintaining any business relations with U.S. citizens. Not much happened following this enactment other than the Russian government retaliated by enacting a law that denied U.S. citizens the ability to adopt Russian children.
In 2016, buried in the 2017 National Defense act, Congress expanded the Magnitsky Act to apply not just to Russians, but to all non-U.S. citizens found to be involved in international human rights abuses. Again, little resulted from this action. Early in his presidency, President Trump stated that he intended to strongly enforce the Magnitsky Act. As I recall, the response was generally “sure, we’ll believe that when we see it.”
Well, on December 20th we saw it. President Trump, by executive order pursuant to the Magnitsky Act, listed 13 individuals who he found to have committed international human rights violations and therefore barred those individuals from entering the U.S., using the U.S. banking system, and doing business with U.S. citizens. The breadth of this order would appear to indicate that it will not be the last time that President Trump bars individuals under the expanded Magnitsky Act.
For those companies familiar with sanctions issued by the Office of Foreign Assets Control (OFAC), this will be familiar territory. However, instead of corruption, the President has taken action against those involved in international human rights abuses. This in many ways is a big step for the current administration, and the U.S. Corporations that do business around the world, particularly in areas where international human rights violations are frequently found, should take note: doing business with individuals involved in international human rights abuses is becoming an increasingly risky proposition. Failing to do proper due diligence on who you do business with around the world is equally as risky. Magnitsky’s death is a tragedy to be mourned, but the silver lining may be a legacy that changes the world.