Finnish sanctions authorities remind companies of the importance of sanctions

This week, the Finnish sanctions authorities will send a letter to companies cautioning them that they may be used as platforms or targets for circumventing trade sanctions. The purpose of this letter is to draw attention to the sanctions in force and to provide assistance in complying with them.

Dear business executive,

As we all know, Russia goes on with its illegal war of aggression in Ukraine. European products, including Finnish goods, continue to be used by the Russian war economy. Compliance with sanctions imposed on Russia is today increasingly a matter of national and European security, and a breach or a knowing circumvention of them constitutes a criminal offence. We would now like to inquire whether you have ensured that your company is not being used to circumvent any restrictive measures against Russia.

The EU and like-minded countries have imposed extensive sanctions against Russia and Belarus. These restrictive measures have an impact on Russia, eroding its economy and restricting its access to goods and technology. The sanctions imposed will weaken Russia’s potential to continue its war of aggression and they strengthen Ukraine’s negotiating position. They will also serve to respond to the long-standing threat against Europe posed by Russia. In the long term, the cost of Russia’s war of aggression and the sanctions will have significant impacts on Russia's economic development.

No sanctions are fully effective, as the parties subject to sanctions are constantly finding new ways of circumventing them. In foreign trade, export and import sanctions are circumvented through third countries (notably Asian countries and the Middle East), or through European intermediaries. Products are still being transported through Russia so that some items subject to sanctions may remain there. Prohibited import products may be imported from Russia on behalf of another country and through it. Actual ownership or control is concealed by complicated arrangements in tax havens, for example, and therefore a Finnish company may unknowingly export products for a party subject to sanctions or for the Russian military industry. A company may also provide services for an enterprise whose actual owners or controlling owners are subject to sanctions. One should also be attentive to unconventional payment methods, because the use of cash, cryptocurrency services or various intermediaries may in certain circumstances indicate an attempt to make it more difficult to identify the final recipient of the funds.

Finnish companies are well placed to detect and prevent the circumvention of sanctions. It requires that companies thoroughly know their partners, their distribution and supply chains and their own products and business operations. They must also work on their own business processes and practices, and, when appropriate, collaborate with the authorities. While it is important to obtain information about new business partners, it is also essential to ensure that products subject to sanctions will not end up in Russia via one’s standard customer base. Sanctions may also be circumvented through subsidiaries or representatives located in other countries.

Many companies are well advanced in their sanctions-related work. Identifying a potential sanctions issue and ensuring that a company does not break any sanctions is likely to require input by several experts. A company with major or regular business operations beyond the European Economic Area should consider making a specific sanctions risk assessment. Some business actors may even be required to do so by their business partners. The purpose of such risk assessment is to identify and understand the sanctions risks related to the company’s operations so that it can design the necessary means to manage the risks.

Even in intra-European trade, it is advisable to verify the identity of the end user of the product or service. While the Russian war economy needs a wide range of goods that currently are subject to sanctions, certain items involve particular risks in terms of sanctions. Companies manufacturing or selling high-priority goods, so called battlefield items, or economically critical goods, listed in the sanctions against Russia, must verify the end use with particular care. Exporters of such products must take appropriate steps to assess the risks and specify in writing the procedures for risk management. The Common High Priority Items List (CHP Items List) and the List of Economically Critical Goods (ECG List) can be found on the websites of the European Commission and the Ministry for Foreign Affairs of Finland.

In the sales contracts on certain critical items, the EU requires the use of the “No re-export to Russia clause”, making it easier for companies to prevent them from ending up in Russia. This clause should also be included in contracts made with possible non-EU subsidiaries and distributors. Applying it is also recommended on any other occasions that may give rise to suspicions of sanctions circumvention.

Moreover, companies should be attentive to international delivery terms (Incoterms) due to substantive increase in the use of delivery terms such as Ex Works for the export of products that previously were commonly delivered to Russia and also for exports of battlefield goods. This development indicates that control over supply chains has increasingly been taken over by Russian procurement networks. In the case of Ex Works deliveries, a buyer outside the EU may use the seller company as an exporter on the export declaration. In extreme cases, goods subject to restrictions are supplied to undesirable recipients on behalf of a seller of good repute.

It should be remembered that breaching or circumventing sanctions is a punishable act, and the suspected enterprise may be subject to investigations by the authorities. Legal consequences may also be imposed on the company’s management in person. Identifying sanctions issues inadequately may also result in legal consequences for companies in maintaining their banking relationships.

Where to find assistance in sanctions compliance?

We, the sanctions authorities, recommend that you familiarise yourself with the online training “Introduction to Sanctions”, which contains instructions for companies on how to comply with sanctions and recognise the circumvention of restrictive measures. The course is available on the eOppiva online platform in Finnish and in English. The course materials contain a link to the expert guidelines for companies on identifying and preventing the circumvention of sanctions, published on the website of the Ministry for Foreign Affairs.

If you wonder how to interpret and apply sanctions, please contact the Ministry for Foreign Affairs at Sanctions e-service. The European Commission’s new advisory service for SMEs, the EU Sanctions Helpdesk offers tailored assistance to companies performing sanctions due diligence checks. You can also find plenty of useful materials on the Helpdesk website.

In sanctions issues you will be assisted in Finland by experts at the Ministry for Foreign Affairs, the Finnish Customs, the National Bureau of Investigation, the National Enforcement Authority (Ulosottolaitos), the Finnish Security and Intelligence Service, the Financial Supervisory Authority and the Finnish Tax Administration. Breaches and circumvention of sanctions must be reported to these authorities. You will find links to useful websites and the contact details of the sanctions authorities at the end of this letter.

Yours faithfully,
Ministry for Foreign Affairs of Finland
Finnish Customs
Finnish Security and Intelligence Service
Financial Supervisory Authority
National Bureau of Investigation                                               
National Enforcement Authority Finland
Finnish Tax Administration

Useful information online

• Ministry for Foreign Affairs: International sanctions

• European Commission: Sanctions adopted following Russia’s military aggression against Ukraine

• European Commission: No re-export to Russia clause

• European Commission: Common High Priority Items

• European Commission: List of economically critical goods

• Online course: “Introduction to Sanctions”

• EU Sanctions Helpdesk