Situation in the European Union (EU)
On 12 April 2024, the European Council adopted a law covering EU-wide minimum rules for the prosecution of violation or circumvention of EU sanctions in Member States. Certain actions will now be considered criminal offences in all Member States, for example helping to bypass a travel ban, trading in sanctioned goods or performing prohibited financial activities. Inciting, aiding and abetting these offences can also be penalised.
Member States must ensure that violating EU sanctions is punishable by effective and proportionate criminal penalties, which vary depending on the offence. However, intentional violation of sanctions must give rise to a prison sentence as the maximum penalty. Those who have violated EU restrictive measures may additionally be subject to fines.
Legal persons (i.e. companies) can also be held liable when an offence has been committed by a person with a leading position in the organisation. In such cases, sanctions may include the disqualification of business activities and the withdrawal of permits and authorisations to pursue economic activities.
Note that the directive will enter into force on the 20th day following publication in the Official Journal of the EU. Member States will have 12 months to incorporate the provisions of the directive into their national legislation.
Action required
- Companies operating in the EU or dealing with third countries, entities or individuals subject to EU restrictive measures should be aware of the new legal framework and the potential criminal and non-criminal consequences of violating or circumventing those measures.
- Companies should also ensure that they comply with the EU sanctions legal obligations and monitor the implementation of the directive by the Member States and the evaluation of its impact and effectiveness by the EU Commission.
In this context, we support you with the strategic definition of the derived requirements and the operational implementation.
Outlook
When should you start thinking about export controls and sanctions?
- Basically, whenever you buy, export, lend or conduct any kind of provision of items (economic resources), including the provision of technology, know-how or services outside your country of domicile.
What are the goals of export control and sanctions management?
- Business continuity through a flexible and resilient supply chain and efficient, compliant transactions
- Protection of the company’s reputation and its position as a trustworthy business partner against bad image and irreparable damage
- Automation and optimisation of processes
- Enabling of traceability and reporting
- Improving governance
- Avoidance of sanctions (blacklisting, import/export restrictions and withdrawal of permits)
- Avoidance of fines as well as contractual penalties and imprisonment (personal liability)
Basically, all types of economic operator are affected, especially in international trade. Whether a permit is required depends in particular on the following four questions:
- Where do you deliver to?
- Is the delivery or final destination country subject to an embargo?
- Or is it an atypical destination that could be related to an attempt to circumvent a sanctioned country/region?
- Who is involved in the transaction?
- Do you know all parties (including banks, service providers, subcontractors) involved in the transaction?
- Are any of these direct or indirect business partners on any of the sanction lists?
- Why are you delivering your items?
- What is the intended use and end use? Are the goods connected in any way with ABC weapons?
- What items are you supplying?
- Are the goods on any goods control or sanction lists?
- Catch-all: Checking unlisted goods for approval requirements. If there is positive knowledge of a critical end use or if the responsible authority has informed it , must approval requirements be observed?
Economic operators should continuously check what effects the existing sanctions have on their business relationships, as misconduct will be punished with severe sanctions.
Depending on the company structure, it may be that in addition to the Swiss export control regulations, other regulations – such as those of the EU, the USA or other third countries – also must be taken into account.
Export controls – your key to compliance, corporate growth and success
Our services and how we can support you:
- Export controls compliance ‘Health Check’: gap analysis, review of existing structure, documents and processes
- Introduction into export controls: creation and provision of general checklist(s) as for the daily guidance, basic training and workshop
- Swiss e-licensing system (ELIC) registration/communication: guidance, assistance, support with communication with authorities as well as applying to obtain binding information and licences from authorities
- Internal Compliance Program (ICP): review of existing documents and processes, setting up and provision of an ICP framework based on the minimum requirements of the authorities and according to ‘best practice’, guidance, assistance and review in developing/writing the content
- Export control classification of items: guidance, assistance, plausibility review of results, support with communication with authorities as well as applying to obtain binding information and licences from authorities
- Embargo and sanctions screening: guidance, assistance, plausibility review of results and the derivation of possible resulting requirements, restrictions and measures
- KYC and red flag screening: guidance, assistance, plausibility review of results and the derivation of possible resulting requirements, restrictions and measures
This blog post reflects the status as of 12 April 2024. We would like to point out that the political situation is extremely dynamic and there may be short-term changes in the law.
