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Introduction
Sanctions are punitive measures imposed by a country, international organization, or group of countries on another state, organization, or individuals to influence certain behavior or impose penalties.Sanctions may be imposed at a global level by the United Nations (UN) or by the European Union (EU). These measures target countries, organizations, or individuals. Sanctions are often part of a broader, cohesive policy approach, including political dialogue, supplementary measures, and other instruments. The goal of sanctions is to induce behavioral changes in the targeted entities. The EU aims to minimize the impact on the civilian population and non-sanctioned activities or persons.
What are sanctions?
Sanctions are typically considered in response to international events such as human rights violations, military aggression, or breaches of international law. Often, sanctions result from a specific situation in a country or are established following calls from international organizations like the UN.Sanctions may apply to goods. For sanctioned goods, the import or export without an authorisation of such items is prohibited. These may include "high-risk" items, such as military goods or dual-use items. However, sanctions could also target other, non-high-risk goods to affect the economy of a particular country.
Sanctions imposed by the EU may target third-country governments, non-state entities (e.g., companies), or individuals (e.g., terrorist groups or terrorists). Most sanctions regimes include measures such as freezing assets and travel bans for targeted individuals and entities. An End-User Statement often clarifies whether a party is sanctioned. The EU may also impose diplomatic sanctions (e.g., breaking diplomatic relations), sectoral measures (e.g., economic and financial restrictions like import/export limitations or restrictions on banking services), or arms embargoes. Many sanctions regimes also include exceptions, such as those facilitating humanitarian aid.
Although EU legislation establishes sanctions, enforcement occurs at the national level by member states. Member states are responsible for implementation and monitoring, such as freezing assets or inspecting cross-border goods flows.
What does this mean for me?
Businesses intending to trade in goods or services subject to a sanctions regime must first determine whether a general prohibition applies. If so, export is not permitted. In other cases, it may be possible to apply for an authorisation or exemption from the designated authority. To apply for an authorisation, the exporter must have in-depth knowledge of the product, know the recipient of the goods, and maintain an internal compliance program. In other words, the exporter must ensure robust export control measures.What are the consequences?
Failure to comply with sanctions laws can have severe consequences. Under the Wet op de economische delicten, violating sanctions legislation constitutes an economic offense and is therefore a criminal act. In cases of intent of gross negligence, the public prosecutor's office (also referred to as Openbaar Ministerie, OM in short) may initiate criminal proceedings. This could result in substantial fines for the company, and depending on the circumstances, the board or an individual employee may also be held personally accountable.Non-compliance could also affect the retention or application for customs-related authorisations. Furthermore, it is not uncommon for the public prosecutor to employ "naming and shaming," which can lead to reputational damage.
Although prosecution for violations is primarily a national matter, the EU is also involved. The EU has specific guidelines for the implementation and evaluation of sanctions to ensure that they are applied effectively and proportionally.
What are the risks?
Sanctions are a critical component of European policy and target individuals and entities alike. For businesses trading with sanctioned countries, entities, or individuals, compliance with sanctions legislation is crucial. It is essential to conduct a risk assessment for each transaction, focusing on the type of goods, end user, and destination country. This does not mean every transaction or customer needs to be screened in depth. However, if it is discovered years later that goods have ended up in the wrong hands and authorities raise questions, a fully documented and well-maintained file is indispensable.More information?
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