Is the Global Magnitsky Sanctions Program Working?
Posted on December 21, 2020 by Laurel Zigerelli
The 2016 Global Magnitsky Human Rights Accountability Act (GMA), inspired by the imprisonment and death of Sergei Magnitsky in Russia after his discovery of $230 million in tax fraud orchestrated by the Russian government, stands as the boldest authorization of U.S. economic sanctions in the fight against corruption. Executive Order 13818, issued in December 2017, designated the first sanctioned parties under GMA, enabling asset freezes and travel bans.
Since then, approximately 150 individuals and entities worldwide have been sanctioned for corruption under the GMA. (The GMA also allows for sanctions against human rights violators, and such authority was exercised to target 75 more individuals and entities.) The list includes current and former government officials—or those acting on their behalf—in Cambodia, China, Cyprus, Democratic Republic of the Congo, Dominican Republic, Equatorial Guinea, Gambia, Iraq, Latvia, Lebanon, Mexico, Nicaragua, Serbia, South Africa, South Sudan, Uganda, and Uzbekistan, among others. The designations include familiar names in the anticorruption community such as Gulnara Karimova, former Uzbek first daughter convicted of embezzlement and other corruption totaling more than $1.3 billion, Dan Gertler, the Israeli billionaire who earned millions of dollars through underpriced mining contracts in the Democratic Republic of the Congo, and Angel Rondon Rijo, a Dominican lobbyist central to Brazilian construction firm Odebrecht's $4.5 billion Latin America-wide bribery-for-contracts scheme. Other sanctioned parties include the former Gambian president and first lady for misappropriating $50 million in state funds, a former Mexican judge and a former Mexican governor who took bribes from drug cartels, and a Sudanese businessman who, along with senior South Sudanese government officials, embezzled millions of dollars from a government food program.
The GMA represents a new era of so-called "smart sanctions." Instead of limiting transactions with an entire country—as in the case of U.S. sanctions programs targeting Cuba, Iran, North Korea, and Syria—these individualized sanctions are designed to maximize harm and minimize collateral economic damage by restricting only bad actors' access to global commerce, not that of entire populations. This approach is catching on outside the United States, with Canada, the United Kingdom, and the European Union recently announcing their own GMA-esque sanctions, while other countries, like Australia and Japan, are actively considering adopting similar programs.
Yet, a fundamental question remains: is the GMA working?
While a key measure of success for a program like this should be how effectively it deters misconduct, it's very hard to measure such things in the context of the GMA—even harder than measuring deterrence in other contexts. It's virtually impossible to measure, or even know about, corrupt acts that don't take place. Furthermore, targeted sanctions programs tend to focus on a relatively small set of potential offenders, making quantitative statistical analysis of changes in offense rates infeasible.
Still, there are other ways of measuring the effectiveness of the GMA, principally in how countries have reacted to sanctions against their officials or citizens. These reactions—both the degree of resistance and criticism from some countries, and the extent to which the GMA seems to have inspired genuine reform efforts in others—support the proposition that the GMA is making a real difference.
Ongoing Opposition: Russia and China, two jurisdictions teeming with sanctioned parties and persistent corruption allegations, both strenuously oppose the GMA. Russia has fought the GMA and its predecessor, the Sergei Magnitsky Rule of Law Accountability Act of 2012, from the beginning, even approaching then-candidate Trump in 2016 to petition for repealing the sanctions (a meeting which itself sparked corruption allegations). To this day, Russian sanctioned parties continue to lament the sanctions' restrictions on their ability to engage in global commerce. (U.S. jurisdiction for sanctions extends not only to all U.S.-based assets but also to all U.S.-dollar denominated transactions.) At the same time, Russian opposition figures are already calling on President-elect Biden to use the GMA more broadly to sanction, among others, the Kremlin officials involved in the August poisoning of opposition leader Alexei Navalny. China stepped up its own criticism of the GMA in October after the United States imposed sanctions on a Chinese state-owned company in Cambodia following that company's abuse of local property regulations and collusion with the Cambodian military to seize residential and protected land for a $4 billion luxury development. (The sanctions, in turn, discouraged foreign banks from participating in the project.) China is also trying to prevent other countries from adopting their own sanctions programs, perhaps out of fear that sanctions could disrupt Chinese developments in Africa obtained through similar schemes. Russia and China would have few incentives to engage in such robust opposition if the GMA did not have real bite.
Domestic Anticorruption Enforcement Efforts: Other jurisdictions with GMA-sanctioned officials or citizens have responded quite differently. In these countries, the sanctions seem to have to inspired domestic anticorruption efforts, for example in the area of public procurement reform. After multiple GMA designations targeting Mexican officials and their businesses, Mexico introduced legislation for key reforms to public tender processes. Likewise, South Africa announced a vigorous pursuit of procurement reform after GMA designations targeted a series of corruption schemes abusing the country's public procurement system. GMA sanctions also seem to have prompted domestic reforms to anticorruption investigation systems and judicial processes. For instance, following the GMA's targeting of an infamous Serbian illegal arms dealer, Serbia passed a new anticorruption law granting the domestic anticorruption enforcement agency greater authority to investigate anticorruption through more streamlined procedures. Additionally, after a Latvian mayor was sanctioned for bribery, money laundering, and abuse of office, Latvia passed its own GMA and pledged to work with the OECD to undertake extensive judicial reforms to promote anticorruption initiatives. There is even evidence that the GMA is spurring reforms in countries yet-untouched by the sanctions: Latvia's neighbors Estonia and Lithuania also passed their own GMA-like laws, and Serbia's Balkan neighbors are pursuing their own anticorruption efforts. The fact that the GMA is prompting anticorruption efforts abroad is a positive signal that the program is working to curb corruption.
Contrary to predictions that the Trump administration would dismantle the GMA, over the past three years the United States has repeatedly wielded the sanctions sword in the fight against corruption. And there are already calls for the Biden administration to expand the program, for example by imposing sanctions on individuals from additional jurisdictions—such as Cuba, Egypt, Libya, and Turkey—and by coordinating U.S. efforts with similar sanctions programs being developed around the world. While we may not be able to measure the GMA's deterrent effect, other indicators—principally the fierce opposition from targets, and an increase in domestic anticorruption efforts from countries directly and indirectly affected by the sanctions—indicate the program is making a difference. Continued use and expansion of the GMA will reinforce its central message that corruption doesn't pay.
This entry was posted in Commentary and tagged China, Executive Order 13818, Global Magnitsky Act, Joe Biden, Latvia, Mexico, Russia, sanctions, Serbia, Sergei Magnitsky, targeted sanctions, Trump by Laurel Zigerelli. Bookmark the permalink.
5 thoughts on "Is the Global Magnitsky Sanctions Program Working?"
Anton Moiseienko on December 21, 2020 at 11:00 am said:
Thanks for an interesting post. I think there are multiple ways of conceptualising the effectiveness of GMA sanctions, including viewing them as means of (a) punishing alleged perpetrators; and (b) signalling US commitment to fighting corruption and human rights abuse. Of course, the first of these runs contrary to the orthodox view of sanctions as intended to change the target's behaviour, but in many if not most cases of GMA sanctions one does have to wonder whether influencing the target's behaviour is a realistic and genuine objective (and if one reads Bill Browder's account of how the original Magnitsky Act 2012 came to be it is very difficult indeed not to see it as a way of redressing impunity for a crime that had already taken place).
Note also the way in which GMA sanctions are imposed by the US, namely several designations per country scattered across a very wide geography. This seems to be more consistent with selecting the most egregious cases and making a statement that behaviour of that kind will not be tolerated by the US than pushing the countries of targets' nationality towards some sort of meaningful reform (which would arguably be better served by imposing multiple designations related to a single country, akin to the original Magnitsky Act 2012, which as you note is focused on Russia).
Vincent Wu on December 29, 2020 at 8:36 pm said:
Thanks for the great post Laurel! I'm curious as to the decision-making process for who to sanction and from which country. For example, why hasn't the GMA sanctions been expanded to Cuba and Turkey but a mayor in Latvia has already been sanctioned for bribery and money laundering? While I'm sure Latvia has its fair share of corruption and troubles, it is not a country that would immediately capture my attention versus a country like Turkey, which has a long and significant relationship with the U.S. and well-publicized accounts of corrupt individuals. I wonder to what extent, if any, political reasons may factor into decisions on who to sanction as well.
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