Who does it apply to and what does it prohibit?
The Act provides for sanctions regulations to be made by the Minister of Foreign Affairs.
In principle, the sanctions regulations could impose travel restrictions on anyone in New Zealand or travelling to New Zealand. They could also impose restrictions and prohibitions on anyone dealing with assets or services inside New Zealand as well as restrictions on New Zealand citizens, ordinary residents and companies dealing with assets or services outside New Zealand.
The Act defines “dealing with assets” and “dealing with services” broadly to include “using, receiving, providing, or otherwise exchanging, trading, or controlling” the assets or services “in any way and by any means (whether commercially or not)”.
The Ministry of Foreign Affairs and Trade (MFAT) will be empowered to issue designation notices that give further details of the particular persons, assets or services subject to the sanctions.
Persons will be able to apply to the Minister of Foreign Affairs for an exemption from a sanction for a specific situation. These requests can be based on humanitarian need or “any other reason”.
Public sanctions register
Under the Act, MFAT is required to maintain a public online register that lists all current sanctions and exemptions made under the Act, including descriptions of any designated person, designated asset and designated service (or any classes of person, asset or service). Importantly, a failure to publish a sanction on the online register will not render the sanction invalid or unenforceable.
Duty to report suspicions
The Act introduces a reporting regime that has some parallels to the suspicious activity reporting regime under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009.
Designated “duty holders” include AML/CFT Reporting Entities and other persons prescribed by regulation. These duty holders will be required to file a report with the Commissioner of Police when they suspect on reasonable grounds that they are in possession or immediate control of assets that are or may be designated assets or assets owned or controlled, directly or indirectly, by a designated person. Duty holders will also have an obligation to report dealing with designated services or services in relation to a designated person in similar circumstances.
Any report will need to be made as soon as practicable and no later than three working days after the relevant suspicion being formed.
Protections for compliance
The Act provides immunity from civil or criminal liability for any act done in compliance with any sanctions obligations. It also provides that a contract has no effect to the extent that it requires somebody to deal with assets or services in violation of a sanction.
Penalties for non-compliance
The Act provides the Attorney-General with a number of civil remedies to enforce sanctions breaches. These include the issue of formal warnings, entry into enforceable undertakings, and/or injunctions to restrain actual or anticipated sanctions breaches.
There are also a range of criminal offences for non-compliance with the sanctions regime. Criminal penalties could include fines of up to NZ$1 million for a company or up to seven years' imprisonment or a NZ$100,000 fine for individuals. Any criminal prosecution would require the consent of the Attorney-General.
Companies and individuals with dealings concerning Russia or Russian counterparties should remind themselves of those relationships, familiarise themselves with the Act and pay close attention to the detail of the regulations.
Contingency planning could be undertaken to enable a rapid response when sanctions regulations are ultimately implemented. Relevant steps could include screening third party relationships against the MFAT sanctions register and adopting processes to enable the freezing of assets. It could also include the suspension of services, the reporting of relevant suspicions, and having access to relevant contracts and legal advice in the event that decisions to terminate relationships need to be made.
Depending on the circumstances, New Zealand companies and individuals may need to give consideration to the application of offshore sanctions regimes that could have extra-territorial impact in particular cases. This could include those of the United States, United Kingdom and European Union.
If you have questions about the implications of these developments for your business, or would like our assistance to prepare for or respond to the new regime, please get in touch with the contacts listed or your usual Bell Gully adviser.