Following the EU’s adoption of its 13th package of individual and economic sanctions, we aim to offer a succinct overview of the critical consequences arising from the European Union’s 13th Sanctions Package, alongside the most recent enforcement actions by the United States’ Office of Foreign Assets Control (OFAC).
This crucial update highlights the broad international scope of these sanctions, affecting a wide range of businesses from China, Kazakhstan, India, Serbia, Thailand, Sri Lanka, to Turkey. Central to managing these intricate challenges are the strengthened compliance requirements for dual-use goods and technologies, emphasizing the essential demand for effective anti-circumvention strategies in the EU’s 11th, 12th, and 13th sanctions packages.
Are there any EU sanctions with respect to non-Russian companies for the EU sanctions circumvention?
With the adoption of the 13th package, the European Commission has added 10 companies registered in China, Kazakhstan, India, Serbia, Thailand, Sri Lanka and Turkey to the sanctions list of Annex IV of the EU Regulation 833/2014. The EU will impose export restrictions towards these companies regarding dual-use goods and technologies.
How can EU companies comply with the recent anti-circumvention measures regarding dual-use goods and technologies: EU 11, 12 and 13th sanctions packages?
On 7 September 2023, as part of the 11th EU sanctions package, the European Commission published a Guidance for EU operators on the circumvention of sanctions. The Guidance has outlined the essential components for a company’s compliance program to prevent circumvention of the EU sanctions. 12th EU sanctions package has adopted Article 12g of the EU Regulation 833/2014, which requires EU companies, when selling certain sensitive goods and technologies to a third country, to contractually prohibit their re-export to Russia or for use in Russia.
On 22 February 2024, the European Commission in its FAQ (Section 13 of “Trade and Customs”) on Article 12g of the EU Regulation 833/2014, proposed the wording for the “No re-export to Russia clause”. The clause applies to contracts with operators based in any non-EU country (other than in a partner country, for example, Switzerland) in respect of certain sensitive goods and technologies. The clause must contain adequate remedies to be activated in case of its breach and can include, for example, termination of the contract and payment of penalties.
Did the U.S. adopt measures with respect to the US sanction circumvention?
On 23 February 2024 the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the U.S. State Department adopted the largest number of sanctions imposed since Russia-Ukraine conflict under the Executive Order 14024, including sanctions on over 500 individuals and entities.
The sanctions target both Russian and non-Russian individuals and entities. More than two dozen individuals and entities in third countries which were involved in the US sanction circumvention, including Germany, Finland, Ireland, China, Kazakhstan, Kyrgyzstan, Turkey, Serbia, the UAE, and Vietnam, were designated. As a result, the property and interests in property within the US or within the possession or control of any US person of the sanctioned individuals or entities must be blocked.
Do Swiss/Liechtenstein or EU banks need to “block” the assets of the companies that were designated by the U.S. under the EO 14024 on 23 February 2024?
Swiss and EU banks often on their own freeze assets of clients who are designated under EO 14024 and are listed in the Specially Designated Nationals list (SDN list). This, however, does not constitute “asset blocking” because the latter implies US legal authority. For the assets in question to be “blocked” under U.S. law, U.S. jurisdiction is required. If the assets are physically located outside of the U.S. (e.g. in Liechtenstein or Switzerland), U.S. jurisdiction would need to attach by way of a U.S. person (e.g., an asset manager or property owner), or otherwise involve some connection to the U.S., including U.S. dollar-clearing. If there is no U.S. nexus, the OFAC cannot assert its authority.
Are there any sanctions that the U.S. applies directly to foreign financial institutions?
On 22 December 2023 the Office of Foreign Assts Control (OFAC) issued an amendment to Executive Order 14024 that provides OFAC with new authorities to target foreign financial institutions (FFIs) for engaging in the evasion of U.S. sanctions. These sanctions apply with respect to certain transactions and SND designated persons.
FFIs may be sanctioned for engaging in certain transactions involving Russia’s military-industrial base. For example, FFIs may be sanctioned for processing any significant transaction(s) for persons that have been designated for operating or having operated in the technology, defense and related materiel, construction, aerospace, or manufacturing sectors, or additional sectors as may be determined to be part of the military-industrial base. FFIs may also be sanctioned for maintaining accounts, transferring funds, or providing other financial services to persons, either inside or outside Russia, that operate in the specified sectors of the Russian Federation economy.
Why LINDEMANNLAW?
LINDEMANNLAW assists clients in de-freezing of their assets in Swiss and EU banks and helps banks with their sanctions compliance.
- At LINDEMANNLAW we have experience with EU, Swiss and US broad variety of sanctions matters as we employ EU, Swiss and US lawyers.
- We have Russian speaking lawyers in our team who work on sanctions cases and work with Russian speaking clients for more than 12 years.
- We have a specialized litigation team.
- Alongside with human expertise, LINDEMANNLAW utilizes custom-tailored AI technology.
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Register for our upcoming free WebWorkshop “International Sanctions: Challenges for Business & Banks in Switzerland and Worldwide” presented in collaboration with Joint Chamber of Commerce.
Join us for an insightful exploration into navigating the complexities of operating businesses amidst Swiss, EU, and US sanctions. Our esteemed speakers will shed light on crucial topics pertinent to both business owners and financial institutions alike.
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