Photograph Credit: Transparency International
Who Oversees Enforcement of The Magnitsky Act and Dan Gertler’s Payments from Glencore Belie Enforcement
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This current interest comes at the heals of recent violence in the DRC: “The Congolese army has arrived at Glencore’s largest copper and cobalt mine following the deaths of over 40 informal miners on the site.” (The Financial Times) “The latest tragedy struck at a site owned by Kamoto Copper Company, a subsidiary of FTSE 100 giant Glencore. The company has reported incursions of up to 2,000 people a day on its giant mining concession, which, at 5,200 acres, is difficult to secure.” (The Telegraph)
For the purposes of the Global Magnitsky Act in the US, it is unclear within the context of the United States enforcement mechanisms who enforces the Global Magnitsky Act within the branches of US Government. The Sanctions against Dan Gertler, a former partner of Glencore, were issued by the Department of Treasury and Foreign Assets (OFAC); but Glencore’s announcements in 2018 that it would pay Gertler in a currency other than US Dollars to avoid triggering the sanctions or asset seizures was announced with a measure of glee in 2018. It would seem, therefore that even though the US has enacted the Global Magnitsky Act it lacks teeth or in the alternative, those with teeth are easily bought.
“Glencore said it believed payment of the royalties in a currency other than U.S. dollars to Africa Horizons Investments Limited and Ventora without the involvement of U.S. entities would address applicable sanctions obligations. It added it had discussed the matter “with the appropriate U.S. and Swiss government agencies”. [Reuters]
Based upon Glencore’s own comments, it would appear that they colluded with US and Swiss government agencies to avoid compliance, or rather to find loopholes in which payment would comply. Either way, this means that Gertler continues to get wealthier off the backs of the Congolese people and The Magnitsky Sanctions, intended to prevent exploitation of human rights are meaningless.
We believe that there is a connection to Gertler with high ranking officials in the United States government or with people who have the ear of US officials and with that, a means of guaranteeing that those who would be overseeing the sanctions simply look the other way.
We take the general position that the are no coincidences, everything is political and nearly everyone has a price.
The case for corruption criteria in EU global human rights sanctions
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The EU must join the US and include corruption in its own sanctions regime on human rights, argue Sarah Gardiner and Rachel Owens.
Rachel Owens is the head of EU Office at Global Witness. Sarah Gardiner was an Investigative Analyst at The Sentry.
In kleptocracies around the world, elites control the majority of state institutions and economic sectors and derive personal profit, often using violence and repression. Their ill-gotten gains are often stashed abroad with the help of international business partners and networks.
The lack of sanctions targeting their financial interests and networks mean looters and human rights abusers have little incentive to relinquish power or allow for genuine reform.
In December 2018, the Netherlands formally put forward an initiative for the enactment of an EU global sanctions regime for perpetrators of serious human rights violations and abuses, regardless of their country of origin.
But while the Dutch initiative draws heavily from a similar program in the U.S., known as ‘Global Magnitsky,’ and is a welcome step toward increasing international accountability for human rights violations, it is unclear if it will also sanction corrupt actors.
Given the interconnected nature of corruption, conflict, and human rights violations, failure to include corruption as a criterion would largely degrade the effectiveness of an EU global human rights sanctions program.
Furthermore, the resulting gap between the U.S. and EU sanctions programs, with the former including corruption, raises the risk that the EU financial systems could be exploited to move money to the West by perpetrators of serious human rights violations.
Until recently, sanctions programs under U.S., EU, and United Nations authorities contained listing criteria for human rights violations, but not for the acts of grand corruption that enable perpetrators to turn a profit from violence.
The new notable exception is the U.S. Global Magnitsky sanctions program, which empowers the U.S. government to apply asset freezes and travel restrictions to individuals responsible for significant human rights abuses or acts of grand corruption.
It has been lauded by human rights and anti-corruption activists around the world because it fills two critical gaps in existing sanctions regimes.
First, its international reach enables the U.S. government to enact sanctions designations without relying on country-specific programs that typically guide sanctions by executive action.
Second, it empowers regulatory authorities to target the financial facilitators of human rights abuses. Since the issuance of the U.S. Global Magnitsky Executive Order in December 2017, more than 69 individuals and entities representing at least 16 nationalities have been sanctioned under its authorities.
The case of Israeli tycoon Dan Gertler is a powerful example of the importance of financial facilitators of a kleptocratic system, but also of how the EU has left itself open to exploitation.
Gertler is widely regarded as one of former Congolese President Joseph Kabila’s most important financial facilitators and an intermediary between the Congolese state and private sector investors.
While Gertler, Kabila, and an inner circle of political, commercial, and foreign elites allegedly profited from a series of opaque deals, the Democratic Republic of Congo (DRC) itself remained mired in poverty and conflict, state security forces violently repressed pro-democracy activists, and its officials repeatedly delayed the organisation of elections.
One of Gertler’s business deals involved purchasing an oil license from the Congolese state and later re-selling it back to the government at hundreds of times what he originally paid.
According to a report by Global Witness, the Congolese state lost out on over $1.36 billion in potential revenues from 2010-2012 due to the sale of underpriced mining assets to or via offshore companies linked to Gertler.
In December 2017, Gertler’s deals caught up with him, as he was included in an Executive Order issued by the White House implementing the Global Magnitsky Act.
This Executive Order sanctioned Gertler, one of his business associates and 19 of his companies for “hundreds of millions of dollars’ worth of opaque and corrupt mining and oil deals”. In June 2018, the Treasury Department announced sanctions against 14 additional entities in Gertler’s network.
The efficacy of U.S. sanctions toward Gertler, however, has been challenged by the lack of a comparable enforcement mechanism in Europe.
In June 2018, Glencore, the multinational mining and commodity trading giant and long-time Gertler business partner, announced that the company would continue to pay multi-million dollar royalty fees to Gertler. Skirting U.S. sanctions, Glencore said it would simply pay Gertler in euro-denominated accounts.
The U.S. Justice Department has since subpoenaed Glencore for information relating to its business in DRC, as well as Nigeria and Venezuela. As Glencore and the U.S. government continue what looks to be a protracted legal battle, Gertler is able to continue to receive and move money through the international financial system.
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Treasury Sanctions Fourteen Entities Affiliated with Corrupt Businessman Dan Gertler Under Global Magnitsky
Washington – Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned 14 entities pursuant to Executive Order (E.O.) 13818, which targets serious human rights abuse and corruption, for being affiliated with designated Israeli businessman and billionaire Dan Gertler. As previously noted in the December 2017 action, Gertler is an international businessman and billionaire who has amassed his fortune through hundreds of millions of dollars’ worth of opaque and corrupt mining and oil deals in the Democratic Republic of the Congo (DRC). Gertler has used his close friendship with DRC President Joseph Kabila to act as a middleman for mining asset sales in the DRC, requiring some multinational companies to go through Gertler to do business with the Congolese state. Gertler and his company Fleurette Properties have used offshore companies to facilitate such deals. As a result, between 2010 and 2012 alone, the DRC reportedly lost over $1.36 billion in revenues from the underpricing of mining assets that were sold to offshore companies linked to Gertler. In late December, the President included Gertler in the Annex to E.O. 13818, while OFAC simultaneously designated 19 companies and one associate for their ties to him. With today’s action, the number of sanctioned entities and individuals in Gertler’s network now totals 34.
“Treasury is sanctioning companies that have enabled Dan Gertler to access the international financial system and profit from corruption and misconduct. We are using our tools to change the behavior of those engaged in the looting of natural resources and the humanitarian consequences that follow,” said Sigal Mandelker, Under Secretary of the Treasury for Terrorism and Financial Intelligence. “A financial toll will be imposed on individuals and companies that exploit innocent people and vulnerable jurisdictions for their own personal gain.”
Building upon the Global Magnitsky Human Rights Accountability Act, in E.O. 13818 the President found that the prevalence of human rights abuse and corruption had reached such scope and gravity to threaten the stability of international political and economic systems. The United States seeks to impose tangible and significant consequences on those who commit serious human rights abuse and corruption, which undermine the values that form an essential foundation of stable, secure, and functioning societies; have devastating impacts on individuals; weaken democratic institutions; degrade the rule of law; perpetuate violent conflicts; facilitate the activities of dangerous persons; and undermine economic markets. To that end, as of today, 73 individuals and entities have had their assets blocked under E.O. 13818. The United States will continue to take appropriate actions, including designating persons for sanctions, to respond to serious human rights abuse and corruption around the globe.
GERTLER AFFILIATED ENTITIES
The 14 Gertler-affiliated entities OFAC designated today are: Moku Mines D’or SA, Moku Goldmines AG, Fleurette Energy I B.V., Fleurette Africa Resources I B.V., African Trans International Holdings B.V., Fleurette African Transport B.V., Oriental Iron Company SPRL, Iron Mountain Enterprises Limited, Sanzetta Investments Limited, Almerina Properties Limited, Interlog DRC, Kitoko Food Farm, Karibu Africa Services SA, and Ventora Development Sasu.
This list of 14 companies owned or controlled by Gertler or his companies, and those previously designated, should not be viewed as exhaustive. The regulated community remains responsible for compliance with OFAC’s 50 percent rule.
For more information on the connection between corrupt senior foreign political figures and their enabling of human rights abuses, descriptions of a number of typologies used by them to access the U.S. financial system and obscure and further their illicit activity, and red flags that may assist financial institutions in identifying the methods used by corrupt senior foreign political figures, see FinCEN Advisory FIN-2018-A003, Advisory on Human Rights Abuses Enabled by Corrupt Senior Foreign Political Figures and their Financial Facilitators.
As a result of today’s action, any property, or interest in property, of those designated by OFAC within U.S. jurisdiction is blocked. Additionally, U.S. persons are generally prohibited from engaging in transactions with blocked persons, including entities 50 percent or more owned by designated persons.