Chapter 1Background
Introduction
1.1Sanctions are restrictive measures governments and multinational bodies use to influence the strategic decisions taken by those who violate international law and threaten global stability. They are a foreign policy lever in the pursuit of objectives relating to conflicts of concern, economic stability, counterterrorism, anticorruption, cybersecurity, and the values underpinning Australia’s democracy and our role in the world.
1.2Sanctions work by withdrawing financial and trade relations with the country imposing them. They can be comprehensive and long-standing, such as the United States (US) embargo on the Republic of Cuba in place since 1962, or be targeted towards specific entities and individuals in response to specific actions. Recent years have seen a pronounced shift towards the latter form of sanctions, which target perpetrators of malign activity more precisely and in doing so aim to reduce impact on civilians.
1.3Sanctions are often employed in tandem with other forms of pressure and are most effective when applied in concert with like-minded global partners. This optimises the leverage sanctions exert, thereby increasing the likelihood of altering the behaviour of targeted state and nonstate actors. Governments generally treat sanctions as a policy option between diplomacy and war, as they are a punitive intervention but do not include military action.
1.4It is difficult to make a broad statement about whether and to what extent sanctions work, as individual situations involve a range of variables and political dynamics. This means that sanctions are best seen as one of a suite of policy measures available in a rapidly evolving geopolitical environment.
1.5Australia’s sanctions regime, like those of its allies, has evolved with these shifting geopolitical circumstances. However, the ways in which sanctioned individuals, states and entities seek to work around sanctions have evolved as well, at times undermining the effectiveness of sanctions regimes. This ability of hostile states to circumvent Western sanctions, seen most recently in Russia’s mitigation of the impact of the considerable economic sanctions applied in response to its invasion of Ukraine, necessitates an appraisal of existing sanctions regimes.
1.6Stakeholders engaging with this inquiry submitted their views on a variety of perceived shortcomings within Australia’s sanctions regime. While most of these addressed specific global situations of concern, they highlighted macro issues around consistency of application, the underutilisation of available frameworks and improvements which could be made to better align Australia’s sanctions regime with those of its like-minded global partners.
1.7The committee concludes that, while imperfect, sanctions remain an essential foreign policy tool.
Overview of Australia’s sanctions regime
1.8The Department of Foreign Affairs and Trade (DFAT) states that sanctions are used to achieve a range of objectives, including:
preventing, limiting or ending the adverse impacts of a situation of international concern
deterring or disrupting those who may consider future destabilising or otherwise egregious actions, and
condemning behaviour and sending a wider message about Australia’s values, principles, norms and what we consider appropriate behaviour or conduct.
1.9They are imposed in response to specific situations of concern and may take several forms, including:
targeted financial sanctions prohibit designated persons or entities from accessing assets, and others from using their assets
travel bans prohibit designated persons from entering or transiting through Australia
trade sanctions prohibit the provision of specified goods or services to specified targets
commercial activity sanctions prohibit certain kinds of commercial activities.
1.10Sanctions may be imposed on individuals, entities, countries, groups or vessels and do not involve the use of armed force.
1.11DFAT states that Australia’s sanctions laws form a regulatory framework which applies to all Australians and Australian entities. Failure to comply with Australian sanctions laws attracts criminal penalties. DFAT reports that each sanction has a regulatory life cycle which includes:
sanctions design: amending sanctions laws and creating new frameworks, identifying sanctions targets (individuals, entities, vessels) and measures (trade or commercial activity sanctions, targeted financial sanctions, travel bans)
applying sanctions, through a legislative instrument
adviceand guidance to the regulated community on their sanctions obligations
monitoring and enforcing sanctions compliance
evaluating the impact of sanctions, including issuing permits to allow certain Australian individuals and entities to continue engaging in activities with sanctioned foreign individuals or entities, if in the national interest or otherwise supported by legislation
reviewing sanctions, and deciding whether to maintain, remove or alter them. Individuals and entities subject to sanctions can apply to have sanctions revoked at any time.
1.12DFAT advised that monitoring and enforcement of sanctions compliance received a $26.4 million boost in the Australian Government’s 2024–25 Budget, reflecting the fact that circumvention trends have grown in complexity since 2022, which saw a sharp increase in Australian sanctions following Russia’s invasion of Ukraine. This is illustrated by the figure below, supplied by DFAT.
Source: Department of Foreign Affairs and Trade, Submission 9, p. 9.
Legislative framework
1.13Australia’s sanctions regime is governed by a legislative framework based on furthering Australia’s foreign policy objectives, upholding regional and international security and fulfilling international obligations. Australia currently implements two sanctions regimes, each under its own (complementary and mutually reinforcing) legislation:
(1)Sanctions decided by the United National Security Council (UNSC) and its sanctions committees. UN member states are required to implement UNSC sanctions, which Australia does through the Charter of the United Nations Act 1945 (COTUNA) and its Regulations.
(2)The Autonomous Sanctions Act 2011 (the AS Act) and its Regulations, which allow the Foreign Minister to impose autonomous sanctions as a matter of foreign policy in response to issues of international concern.
United Nations Security Council Sanctions
1.14The Charter of the United Nations (the Charter) allows the UNSC to respond to issues of concern without the use of armed force. As explained by the Australian Centre for International Justice:
Although the term sanctions is not defined expressly in the United Nations Charter, the use of sanctions as a mechanism for addressing international concern is derived from Article 41 measures. Article 41 provides for measures not involving the use of armed force , and may include a complete or partial interruption of economic relations'.
1.15The UNSC can only impose sanctions where it has determined ‘the existence of any threat to the peace, breach of peace, or act of aggression’. Nine or more members need to have cast an affirmative vote supporting the imposition of sanctions, with none of the five permanent members of the UNSC using their veto power.
1.16Article 25 of the Charter requires member states to implement UNSC decisions. Until 1993, Australia implemented UNSC sanctions resolutions by making regulations under several Acts. The Australian Government amended the Charter of the United Nations Act 1945 (COTUNA) in 1993 to specifically allow Regulations giving full effect to UNSC sanctions regimes, including those relating to specific countries.
Autonomous sanctions
1.17Autonomous sanctions are highly targeted punitive measures applied as a matter of foreign policy in situations of international concern. They may include targeted financial sanctions and asset freezes, visa restrictions and travel bans, and trade and commercial limitations. Autonomous sanctions can be independent of or supplementary to UNSC sanctions. They can also be specific to a particular country or region, apply to a certain group, or be thematic. Thematic sanctions are outlined below.
Magnitsky-style thematic sanctions
1.18On 21 December 2021, the Autonomous Sanctions Amendment (Magnitsky-style and Other Thematic Sanctions) Regulations 2021 came into force. It enables the Minister to impose targeted sanctions against individuals or entities which have:
been engaged in, responsible for, or complicit in serious violations or abuses of three human rights relating to physical integrity (rights to life; not to be subjected to torture or cruel, inhuman or degrading treatment or punishment; and to be free from slavery, servitude or forced or compulsory labour);
been engaged in, responsible for, or complicit in serious corruption, defined as bribery or misappropriation of property; or
caused, assisted with causing, or been complicit in, a cyber incident or an attempted cyber incident that is significant or which, had it occurred, would have been significant.
1.19In implementing Magnitsky-style sanctions, the Minister must be satisfied of thematic sanctions criteria as outlined in the legislative framework.
1.20The diagram below shows the sanctions regimes the Australian Government currently implements under UNSC and/or autonomous sanctions laws:
Permits for exemption
1.21Under certain circumstances, the Minister is able to grant a sanctions permit authorising activity otherwise contravening Australia’s sanctions laws. The criteria which need to be satisfied for the authorisation of such a permit differ between sanctions regimes, and the Minister of the Minister’s delegate can attach conditions to a sanctions permit.
Role of key government agencies
1.22Implementation and enforcement of Australia’s sanctions policy involves several agencies.
Department of Foreign Affairs and Trade
1.23DFAT is the key agency supporting Australia’s sanctions regime. The department is responsible for the design, implementation and administration of sanctions policy, including drafting regulations and monitoring effectiveness, as well as advising the government on possible reforms to ensure that sanctions policy and laws are clear and effective.
Australian Sanctions Office
1.24The Australian Sanctions Office (ASO) sits within DFAT’s Regulatory Legal Division in the Security, Legal and Consular Group and is Australia’s chief sanctions regulator. The agency’s key role is to ensure compliance with sanctions. As the sanctions regulator, the agency:
provides guidance to regulated entities, including government agencies, individuals, business and other organisations on Australian sanctions law;
processes applications for, and issues, sanctions permits;
works with individuals, business and other organisations to promote compliance and help prevent breaches of the law;
works in partnership with other government agencies to monitor compliance with sanctions legislation; and
supports corrective and enforcement action by law enforcement agencies in cases of suspected non-compliance.
1.25The ASO works closely with other agencies, including the Department of Defence, the Department of Home Affairs, the Australian Transaction Reports and Analysis Centre and the Australian Federal Police, as well as the Attorney-General’s Department (AGD).
Attorney-General’s Department
1.26The AGD is involved in the enforcement of UNSC-imposed sanctions, however its primary role concerns autonomous sanctions imposed by the Australian Government. While the Minister for Foreign Affairs (the Minister) is responsible for imposing autonomous sanctions, the process for applying thematic sanctions requires consultation with, and written agreement from, the Attorney-General, as well as consultation with other ministers with relevant portfolios, as determined by the Minister:
This decision-making process ensures that listing decisions take into account legal considerations and other national interest considerations, alongside foreign policy interests. This recognises that, while sanctions decisions are primarily based on foreign policy considerations, thematic sanctions may raise issues relevant to matters within the Attorney-General’s broader portfolio responsibilities which should also be considered, such as international law, human rights and criminal justice matters relating to corruption or cyber activity. It also ensures that other Ministers with policy interests relevant to the situation of international concern are consulted.
1.27The Minister must also obtain the Attorney-General’s agreement prior to continuing or revoking a thematic sanctions listing.
1.28The range of criteria relevant to the AGD portfolio which the Minister must be satisfied of when seeking to impose thematic sanctions incudes considerations relating specifically to significant cyber incidents, human rights and corruption.
1.29The legislative framework underpinning Australia’s sanctions regime also allows the Attorney-General to seek injunctions from the Federal Court of Australia or a Supreme Court of a state or territory if an individual has engaged, is or proposes to engage, in conduct which contravenes the Regulations.
Department of Home Affairs
1.30The Department of Home Affairs facilitates the movement of legitimate trade and travel, whilst simultaneously undertaking enforcement activity for goods which are restricted or prohibited. The department works closely with other agencies on initiating trade prohibitions, which give effect to Australia’s obligations under UNSC-imposed sanctions as well as Australia’s autonomous sanctions.
Australian Border Force
1.31The Australian Border Force (ABF) sits within the Department of Home Affairs and is Australia’s lead border law enforcement agency and customs service. The ABF administers sanctions-related import and export prohibitions under Commonwealth legislation which gives effect to aspect of Australia’s obligations under both UNSC-imposed and autonomous sanctions, such as the Customs Act 1901, the Customs (Prohibited Imports) Regulations 1956 and Customs (Prohibited Exports) Regulations 1958.
1.32The ABF works with domestic and international stakeholders to deter and disrupt the movement of sanctioned goods through coordinated intelligence and enforcement actions. The agency is now responsible for border-related sanctions activity ‘across the enforcement lifecycle, including targeting, analysis and criminal investigations.’
1.33The ABF also engages in community outreach across multiple sectors to ensure that border obligations are understood by the community.
Australian Federal Police
1.34The Australian Federal Police (AFP) contributes towards ensuring the effective implementation of Australia’s sanctions regime by gathering information about assets relating to sanctions and, together with the ABF, conducting criminal investigations concerning alleged breaches of laws underpinning the sanctions regime.
1.35The AFP is also Australia’s representative to INTERPOL, the world’s largest international police organisation, which provides access to a global network of law enforcement agencies, databases and associated intelligence.
1.36Together with the Australian Signals Directorate (ASD), the AFP also leads on intelligence and enforcement matters relating to Australia’s cyber sanctions. The information these agencies gather informs the Minister’s decisions on whether criteria for imposing sanctions are met (subject to the agreement of the Attorney-General and other relevant Ministers).
Terms of reference
1.37On 3 July 2024, the Senate referred an inquiry into Australia’s sanctions regime to the Foreign Affairs, Defence and Trade References Committee (the committee) for inquiry and report by 11 February 2025.
1.38The inquiry’s terms of reference are as follows:
(a)an assessment of the consistency in application of Australia’s sanctions regime and in coordination with key partners and allies, including the identification of any gaps and time lags in their application;
(b)consideration of the evidence on how sanctions regimes are targeting and addressing behaviour of designated individuals and entities;
(c)consideration of specific measures to coordinate, collaborate, and harmonise sanctions with partners and allies, and multilaterally, including how different interests can be taken into account;
(d)consideration of mechanisms to freeze and confiscate assets belonging to sanctioned persons/entities and how the proceeds can be used to benefit peoples and countries impacted by the behaviour of sanctioned individuals and entities;
(e)consideration of opportunities for engagementby the Australian community, civil society, financial institutions and other organisations in Australia’s sanctions regime;
(f)consideration of methods to assess the effectiveness of sanctions decisions and/or the extent to which sanctions are having the intended impact, and recommend any improvements;
(g)consideration of how Australia’s sanctions regime could better align with Australia’s existing anti-corruption and crime measures, including to better target Australians involved in designated actions;
(h)consideration of the role of sanctions in an increasingly complex global context, where geo-strategic competition is re-shaping our region; and
(i)any other matters that are relevant to the effectiveness of Australia’s sanctions framework.
Conduct of the inquiry
1.39The committee sought written submissions from a number of individuals and organisations by 6 September 2024. Details of the inquiry were also made available on the committee’s website.
1.40The committee published 45 submissions, as listed in Appendix 1.
1.41A public hearing was held in Canberra on 15 November 2024. A list of witnesses is in Appendix 2.
Note on references
1.42References to Committee Hansard are to proof transcripts. Page numbers may at times differ between proof and official transcripts.
Acknowledgement
1.43The committee thanks those individuals and organisations who contributed to this inquiry by making submissions or appearing at the public hearing.