What’s happened?
Two years after the enactment of the Russia Sanctions Act 2022 (RSA), the Ministry of Foreign Affairs and Trade (MFAT) commenced a mandatory statutory review to assess the Act's effectiveness and functionality. As part of this review, MFAT has published a Consultation Document [1], which invites interested parties to make submissions on 70 questions. These questions aim to determine what is and is not working with the RSA, and how New Zealand’s wider Russia Sanctions Regime (RSR) can and should be improved. Submissions are due by 5pm on Monday, 16 December.
We see this public consultation as a valuable opportunity for stakeholders to shape the RSR’s further development and, indirectly, guide the Government’s broader consideration of expanding New Zealand’s autonomous sanctions framework.
This alert provides context, a summary and insights on MFAT's Consultation Document, which will assist parties interested in making submissions.
Who needs to read it and why?
This alert should interest lawyers, compliance and risk professionals, government affairs advisors and directors of companies impacted by the RSR and New Zealand’s sanctions laws more generally. The sectors most affected include: banking and finance; trade and logistics; defence and aerospace; technology and telecommunications; energy and natural resources; agri-food; and professional services.
New Zealand’s current sanctions laws
New Zealand implements all United Nations Security Council (UNSC) sanctions but, unlike its Five Eyes partners, lacks a general legislative authority to impose sanctions without an authorising UNSC Resolution. Legislative efforts to establish a broader autonomous sanctions regime were unsuccessful in 2020 [2] and 2021 [3]. However, in March 2022, the Government enacted the RSA to enable the imposition of autonomous sanctions in response to Russia's invasion of Ukraine. A May 2023 Advisory Group report recommended creating a comprehensive sanctions framework enabling the imposition of autonomous sanctions in response to human rights and security threats [4]. This recommendation remains under Government consideration.
New Zealand’s Russia Sanctions Regime
New Zealand’s RSR, established under the RSA, empowers the Foreign Affairs Minister (Minister) to make regulations creating prohibitions and restrictions on New Zealand entities’ and individuals’ dealings with
sanctioned persons, assets and services [5]. These sanctions measures – which include asset freezes, service prohibitions, securities restrictions, export bans, import restrictions, travel bans, and transport bans - ensure that New Zealanders do not support, whether inadvertently or not, Russia’s illegal invasion of Ukraine.
MFAT’s Consultation Document
Section 29 of the RSA requires the Minister to review the operation and effectiveness of the Act within two years of its commencement and to present a report on the review to Parliament as soon as possible after completion. To inform the review, MFAT has published its 28-page Consultation Document, which seeks feedback on 70 questions spanning eight topics, which are summarised below:
| Topic | Questions Summarised |
|---|---|
|
General questions |
Feedback is requested on the RSR’s effectiveness in achieving its purpose, managing risks, and addressing compliance challenges, as well as suggestions for improvements and additional objectives that could enhance the RSA. |
|
Institutional arrangements |
These questions examine the coordination between New Zealand's Regime, Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act, and Customs and Excise Act. Key questions include whether AML/CFT supervisors should assist with RSA compliance, the need for additional RSA guidance, and the potential expansion of reporting obligations to address sanctions evasion risks. Additionally, they query the alignment of the New Zealand Customs Service’s procedures for seized goods with the RSA and the necessity for procedural changes in applications concerning sanctioned goods. |
|
Clarity of scope |
This topic examines the clarity of reporting requirements for duty holders under the RSA, the appropriateness of reporting timelines and thresholds, and the adequacy of the framework for identifying and managing 'associates' of sanctioned individuals. It also questions whether designation notices effectively serve their purpose and provide clear secondary guidance. |
|
Extraterritoriality |
This topic queries the clarity and appropriateness of the RSR’s extraterritorial application, which mandates sanctions compliance for all New Zealanders and businesses regardless of location. It assesses the effectiveness of current exceptions and exemption processes and considers whether entities should require a connection to New Zealand to be subject to enforcement action under the RSA. Feedback is sought on the implications of enforcing the RSR beyond New Zealand's borders. |
|
Investigation and enforcement |
These questions examine whether the RSR clearly defines the roles of enforcement agencies in investigating sanctions breaches, if MFAT should have information-gathering powers, and whether rules applicable to Suspicious Activity Reports made under the AML/CFT Act and RSA should be interchangeable between the two regimes. |
|
Review and oversight |
These questions address the need for clarity and improvement in the sanctions review process, including whether the Minister should be able to initiate reconsiderations. They also explore the potential for external oversight bodies, such as the Banking Ombudsman Scheme, to monitor duty holder compliance and their interaction with MFAT and the New Zealand Police. |
|
Prohibitions |
These questions address prohibitions under the RSA, including the need for explicit obligations to freeze assets and services, and the clarity of terms in export and import prohibitions. They also assess the suitability of using Harmonised System (HS) codes for regulating prohibited goods and consider whether to include an explicit prohibition on sanctions evasion. Feedback is sought on the clarity and applicability of existing exceptions for asset dealings, exports, imports, and humanitarian organisations, along with suggestions for improvements or new exceptions. |
|
Definitions and terminology |
These questions examine the clarity and adequacy of definitions in the RSA and its Regulations, specifically focused on the phrases "dealing with assets", "dealing with services", "for the benefit of", and "designated" persons, assets, and services. Feedback is sought on the effectiveness of current definitions and any uncertainties concerning the terms "sanction" and ‘sanctioned person’. These questions also enquire about other ambiguous terms or concepts in the legislation that may need clarification or formal definition. |
What’s next?
Interested parties can make a submission by completing the response form on MFAT’s website and emailing it to [email protected]. Submissions are due by 5pm on Monday, 16 December 2024. Confidential submissions are accepted. After the consultation period, officials will review feedback received and prepare a report presenting findings and recommendations, which will be referred to Parliament for consideration in early 2025.
Our view
MFAT’s Consultation Document asks thoughtful and appropriate questions, which are clearly informed by the many interactions its officials have had with the business community and other stakeholders during the past 2.5 years. By asking non-leading questions and avoiding preconceived notions, MFAT shows that the Government is open to exploring how the RSR can and should evolve in the future.
While the Consultation Document does not ask whether New Zealand should adopt a broader autonomous sanctions regime and if so, what that should look like, we are confident that this public consultation will significantly impact the Government's consideration of these questions.
For parties impacted by New Zealand’s Regime, making a submission to this Public Consultation is likely to be their primary means to influence the future of New Zealand’s sanctions laws in for foreseeable future.
How we can help?
We can help you prepare and present a robust submission to MFAT’s public consultation.
We have extensive experience of advising on sanctions compliance and enforcement-related matters, including sensitive matters relating to Russia, Iran, China, Cuba, Myanmar, North Korea, Syria, and Venezuela. We routinely assist clients to:
- develop or refine sanctions compliance programmes;
- produce obligations registers;
- conduct compliance assessments;
- undertake customer and transaction due diligence and screening processes; and
- structure low risk transactions.
Members of our team have represented clients in sanctions investigations undertaken by the New Zealand Customs Service, the UN, and the UK and US governments. We have also represented clients in contentious sanctions matters, including Banking Ombudsman Scheme disputes, Human Rights Commission mediations, and litigation. Team members represented the Respondent in Targa Capital Limited v Westpac New Zealand Limited [2023] NZHC 230 and the Defendant in New Zealand Customs Service v Pacific Aerospace Ltd [2018] NZDC 5034).
Footnotes
- MFAT, Consultation Document: Russia Sanctions Act Statutory Review, October 2024.
- In late 2020, the National and New Zealand First parties’ initial Autonomous Sanctions Bill dropped-off the Parliamentary Order Paper after languishing near the bottom since its introduction in May 2017 by Foreign Minister Peters.
- In September 2021, the New Zealand Parliament voted against progressing National MP Hon Gerry Brownlee’s Autonomous Sanctions Bill past the first reading stage. The National and ACT parties voted in favour and the Labour, Green and Māori parties voted against. The New Zealand First Party was not represented in this Parliament. See our earlier alert: Parliament drops the Autonomous Sanctions Bill, once again.
- Advisory Group, Report to the Secretary of Foreign Affairs on Foreign policy tools available to respond to grave international situations of concern involving human rights and peace and security including the advantages and disadvantages of a future role for autonomous sanctions, May 2023. See our earlier alert: Is fundamental sanctions reform on the cards?
- These are incorporated in the Russia Sanctions Regulations 2022.
