Increased EU focus on enforcement of EU sanctions

The European Commission has published a new strategy to strenghten the EU’s economic and financial system which includes the Commission taking a more active role in enhancing an uniform implementation and enforcement of EU sanctions. This newsletter highligts important elements of the new strategy. Businesses should prepare for increased EU focus on enforcement of EU sanctions.

One of the three pillars in the strategy presented by the European Commission is to promote openness, strength and resilience of the EU’s economic and financial system, which relates to the promotion of an uniform implemention and enforcement of the EU sanctions regime. In order to do so the Commission has presented a range of actions seting out a more active involvement by the Commission in the implementation and enforcement of EU sanctions.

In order to promote the uniform implementation and enforcement of EU sanctions the Commission has set out a number of actions, including the following^[1]:

• In 2021, the Commission will develop a database for the purpose of reporting and exhange of information between EU Member States and the Commission on the implementation and enforcement of sanctions.
• The Commission will work with Member States to establish a point of contact for enforcement and implementation issues.
• To strengten the harmonised enforcement of sanctions, the Commission will set up an anonymous reporting system, which includes a whisteblowing scheme.
• The Commission will work with Member States to ensure that national penalties for breaching EU sanctions are effective, proportionate and dissuasive.
• The Commission will streamline the processing of authorisation requests.

Furthermore, the European Commission will ensure a broader EU response to unlawful extra-territorial application of unilateral sanctions by a third country and develop tools to counteract the effect on EU operators of the unlawful extra-territorial application of unilateralet measures by a third country.^[2]

By engaging with financial-market infrastructure companies to map out their vulnerabilities as regards the unlawful extra-territorial application of unilateral sanctions by third countries the Commission will asses the need for issuing related communications. On this basis, the Commission will contribute a range of tools to prevent and counter the interference with EU-based financial market infrastructures.^[3] Together with the relevant authroities such as the European Central Bank (ECB) and the European Supervisory Authorities (ESA), the Commission may issue new guidelines on a continued basis as required to prevent breaches of the sanctions imposed.

The European Commission will additionally ensure that the flow of financial services deemed essential to the markets and institutions – such as transactions – will continue to function as normal with regards to specific entities of the EU and or persons directly targeted by the extra-territorial application of third-country unilateral sanctions.

In light of the increased focus of the European Union on enforcement of sanctions, businesses should review their internal compliance framework to ensure that relevant EU sanctions regimes are complied with in the day-to-day business in order for the business to detect potential future compliance issues whilst staying up to date on compliance with current sanctions.