To help businesses adhere to sanctions set by the European Union and United States against Russia and Belarus, as well as to help spot the risks of potential sanction evasion, Citadele has prepared five steps that every business should take for adhering to sanctions.
“In accordance with EU regulations and national normative acts, every business has the responsibility of adhering to sanctions set by the European Union in full. Businesses who do not adhere to sanctions risk refused payments, frozen assets, inability to deliver or receive goods, and even criminal liability. It is in the businesses’ own interests. However, we understand that is difficult to orient oneself in such a fast-changing environment, so we will continue to explain things and make it easier for businesses to adhere to sanctions,” explains Saiva Krastiņa, Citadele’s leading sanctions expert.
Evaluate your sanctions risks
First, you should take stock and answer these questions on whether the sanctions impact your commercial activities:
- Do you give and/or receive services, and/or manufacture, sell or purchase goods or raw materials, which are subject to sanctions (such as timber, IT technologies, oil products) from countries which are subject to sanctions? The list of sanctioned materials, goods and services is available on the EU sanctions map.
- Do you deliver goods or services to/from countries which are subject to sanctions, or to countries which border sanctions-risk countries (such as Kazakhstan or Uzbekistan), or do your deliveries transit through these countries?
- Are your business partners, their owners, board members or true beneficiaries linked with sanctions-risk countries or legal or private entities against whom sanctions are applied? Check this by using an internet search.
Complete sanctions checks based on the risks you find
If your company has links with any sanctions risks, the company must act to ensure that these risks are under control:
- if the company has links with companies in Russia or Belarus, you must research goods and services named in at least the EU, U.S. OFAC and national sanctions lists in detail;
- you must ensure whether your business partner is directly or indirectly named in the list of sanctioned persons, or linked to these persons (for example, as an owner or true beneficiary);
- as the list of sanctions is constantly expanding, you must keep up with updates to EU regulations, as there is a risk that any partner, goods or services may become sanctioned, thus preventing further collaboration.
- you should document your checks so that, if necessary, you can confirm the checks to the legal and financial authorities.
Train an employee and implement a sanctions process
If you already complete sanctions checks, ensure that the evaluation process and results are documented. The company should also name an employee who is responsible for this work. You don’t necessary need to hire a “sanctions specialist.” This process can be completed, for example, by your accountant or lawyer.
The bank’s expert recommends documenting how the evaluations are undertaken: what sanctions are checked, what technical tools are being used, how regularly business partners are checked (for example, monthly), and whether sanctions are checked before making a payment. It also maybe worth attending a seminar on sanctions.
Breaching sanctions is a serious crime, so you must notify the police without delay if you notice any breaches or attempts to involve your company in sanctions evasion.
Codify your actions in case of sanctions in any contracts
Just as agreements always contain a clause on cancellation in the case of force majeure, you should always include a clause affirming your company’s right to cancel the agreement unilaterally if the partners, goods or services involved become directly, indirectly, partially or fully subject to UN, EU, U.S. OFAC or national sanctions. You should also include a clause which covers how losses are covered and what actions are taken with goods and services which can no longer be delivered or received due to sanctions.
If there is any doubt, ask
Significant changes have occurred to sanctions in a very short period of time, impacting operations with business partners in Russia and Belarus. Therefore, if you have any doubts, customers should contact their bank to determine whether they are able to make or receive specific payments. At the same time, the bank emphasises that the information it gives you does not cancel out your individual responsibility to comply with sanctions in full.
Adhering to sanctions is in the interests of your company to protect you from financial and criminal risks, so we invite you to view our seminar for business owners: “International sanctions against Russia and Belarus. An explanation.”