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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
Australia | Publication | October 2022
This article was co-authored with Madeleine Barr and Dania Ibrahim.
The Australian Government’s willingness to use sanctions measures should no longer be viewed as a ‘theoretical risk’, rather as an emerging and ongoing legal and operational challenge for businesses globally. Since our last sanctions briefing, the Australian Government continues to impose additional sanctions measures in response to the Russian invasion of Ukraine. Notably, there have been other Australian autonomous sanctions developments in relation to Myanmar and the DPRK over the past year.
As at 4 October 2022, the most recent targeted financial sanctions designations and travel ban declarations have targeted 28 individuals acting as ‘officials’ in faux proxy administrations in areas of Ukraine that are, or have been, illegally occupied, or supported by, Russian armed forces.
Since their adoption in December 2021, inaugural designations and declarations under Australia’s thematic autonomous sanctions in relation to serious violations or serious abuses of human rights or serious corruption were also issued earlier this year.
There has also been an extension of the type of goods and sectors subject to Australia’s sanctions against Russia, as follows:
Although Russia is not viewed as a significant trading partner with Australia, Australian individuals and companies have not been immune to the effect of sanctions imposed by the Australian Government and other nations. Targeted financial sanctions designations of Russian financial institutions and high profile Russian business persons in particular, have already demonstrated the wide scope and application of Australia’s sanctions.
On 28 March 2022, the Autonomous Sanctions Amendment (Myanmar) Regulations 2022 (Cth) amended the Autonomous Sanctions Regulations 2011 (Cth), amending the listing criteria available to Australia’s Minister for Foreign Affairs (Minister) to designate and declare a person or entity for targeted financial sanctions or travel bans.
While there have been no designations issued since these amendments, this amended listing criteria confers on the Minister the power to designate a current or former member of any of the following:
Australia continues to impose autonomous sanctions on the DPRK in connection with the DPRK’s violation or evasion of certain United Nations Security Council Resolutions. Australia’s recent sanctions in particular should serve as a reminder of the risks that sanctioned persons and entities may not necessarily reside within a target country subject to other comprehensive sanctions.
Such risks may for example be managed by ensuring appropriate transaction monitoring systems which factor in their searches, individuals and entities that are in proximity to geographic locations or countries subject to sanctions.
These cross-border sanctions risks were also recently highlighted in the Australian Transaction Reports and Analysis Centre’s (AUSTRAC) update on the US sanctions imposed on two virtual currency mixers connected to money laundering and sanctions evasion by the DPRK. Financial crime guides published by AUSTRAC have made particular reference as to how high risk jurisdictions – including sanctioned jurisdictions can be assessed across various sectors.
Undertaking regular risk assessments and ongoing monitoring of dealings with foreign governments, state owned enterprises and associated private entities are just some of the measures businesses should consider in managing and mitigating risks of increasing sanctions.
Norton Rose Fulbright’s global network and experience ensures practical legal advice in relation to sanctions risk issues. We offer clients a ‘one-stop’ global service comprising multi-jurisdictional international trade controls and sanctions regimes experience including Australian, UK, EU, US and Canadian sanctions, embargoes and export controls.
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Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
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