Sanctions – Questions and Answers
- Who must comply with sanctions and which sanctions apply?
- What if our company has contacts with designated entities or our trade partner has newly become designated?
- Do we need funds transfer authorisation?
- Products, components and authorisations
- Notifications concerning funds belonging to designated individuals and entities (“sanction hits”)
Who must comply with sanctions and which sanctions apply?
1.1. We are planning on trading internationally. How do we know if sanctions will affect our plans?
Read the sanctions checklist for exporters.
1.2. Our company is planning on exporting products to Turkey, and I know they will end up in Iran. Is the company required to know about sanctions targeted at Iran?
Yes. When an exporter knows or has reason to believe that its product will end up in a sanctioned country via a third country, such export must be viewed in the same way as direct exports to a sanctioned country. All obligations provided by EU regulations apply, including restrictions the export of certain products as well as the prohibition of directly or indirectly making funds or economic resources available to designated persons and entities.
For example, if your trade partner who is based in a third country makes the product available to a sanctioned entity, it amounts to a prohibited case of indirectly making economic resources available to a sanctioned party, and you as the exporter could be liable.
Sanctions Regulations also prohibit the evasion of sanctions, i.e. participation in activities the purpose of which is to circumvent certain provisions of the Regulation.
1.3. We are about to export products to a country targeted by international sanctions. The recipient is not on an EU sanctions list, but it is targeted by U.S. sanctions, i.e. designated on the OFAC (Office of Foreign Assets Control) list. Can we still export products to them?
Sanctions imposed and supervised by authorities of non-EU States impose obligations on companies subject to the jurisdiction of that State, but as such they are not legally binding on European companies in operations that have no links to that State.
However, if the trade activity has any links to that State, its laws may be applicable. For instance, if the business activity in question has links to the United States, or if your exported product contains technology originating from the United States, U.S. sanctions must be complied with.
U.S. sanctions may also impose obligations on any U.S. citizens employed by your company, and of course any US companies involved in the business activity in question. If your trade activity does not involve any such links, the sanctions imposed by non-EU states are not legally binding on your company. However, they may have other implications in matters such as the availability of banking services, future access to the market of the third state in question, as well as PR implications.
1.4. We are about to become involved in international development activities in a country targeted by EU sanctions. This is not commercial activity, as we are going there to build schools. Could our activities be affected by sanctions?
Yes. Sanctions apply to all types of actors. Although international development and humanitarian aid are not restricted by sanctions per se, for instance the use of designated banks is also prohibited for non-profit organisations.
However, exceptions to certain sanctions may be granted in some cases by the Foreign Ministry; for example, if the activity involves a humanitarian aspect.
1.5. We have subsidiaries in Iran and in a third country. They trade with and within Iran. Are our subsidiaries required to comply with sanctions?
According to the provisions of EU sanctions regulations (for instance, Article 49(d) of the Regulation concerning restrictive measures on Iran), the regulations apply “(a) within the territory of the Union, including its airspace; (b) on board any aircraft or any vessel under the jurisdiction of a Member State; (c) to any person inside or outside the territory of the Union who is a national of a Member State; (d) to any legal person, entity or body, inside or outside the territory of the Union, which is incorporated or constituted under the law of a Member State; (e) to any legal person, entity or body in respect of any business done in whole or in part within the Union”.
When assessing the applicability of the regulation on the activities of a foreign subsidiary/branch/office or another foreign representative of a Finnish company, the most important consideration is whether the entity was incorporated or constituted under Finnish law. In other words, the regulation applies at least to any entity that is incorporated in Finland, or which must be considered part of a Finnish legal person due to its non-independent legal nature. A branch is a typical example of a non-independent part of a legal person.
In contrast, the Regulation does not directly apply to a legal person constituted under the law of country subject to sanctions, or a third country, even if it is a subsidiary in the direct ownership of a Finnish legal person.
However it should be noted that even in cases where the subsidiary is not considered Finnish, the Finnish parent company has the obligation to comply with the regulation at all times, and therefore it is prohibited from giving its subsidiary instructions or orders which are designed or may result in the evasion of any of the provisions of the Regulation.
In addition, when trade activity is conducted on behalf of a Finnish company, EU sanctions must be fully complied with, i.e. measures must be taken to ensure that the export does not include sanctioned products and that the trade partner is not named on a sanctions list or acting on behalf of a listed person or entity.
Furthermore, all Finnish citizens must comply with the regulation also in activities outside the EU.
1.6. Our university is actively searching for international opportunities. Could our plans be affected by sanctions?
Yes. In many cases, sanctions regulations restrict the provision of goods and technologies which are described in detail in the annexes to the regulation as well as the provision of “technical assistance” related to those goods and technologies to the country in question or for use in that country.
Technology includes information or skills which are needed in the development, production or use of the products specified in the sanctions list; technical assistance also includes activities such as teaching and consulting.
These bans may impose restrictions on research or educational cooperation with any institutions or researchers in certain sectors who have links with a sanctioned country.
However, in many regulations, “information in the public domain” as well as “basic scientific research” are excluded from the scope of the sanctions. Information in the public domain refers to information that is “available without restrictions on redistribution.”
Basic scientific research is “experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundation of phenomena and observable facts, without any particular application or use in view.”
It is always advisable to read the applicable sanctions regulation carefully when considering these forms of collaboration. In unclear cases, expert help may be needed in order to determine the legality of the collaboration.
What if our company has contacts with designated entities or our trade partner has newly become designated?
2.1. We have received a request for a quote from a company that is based in a country targeted by sanctions, and to our knowledge the company is state-owned. Are we permitted to send a quote and export the products if the quote is accepted?
Persons and entities, including public bodies, targeted by sanctions are named on the lists annexed to the regulation in question. Sanctions rarely target the country itself; instead, the targeted entities are usually political and financial leaders, ministries or companies with close links with the government.
Therefore, state-ownership in itself is usually not an obstacle to trade, unless the company or its owner is designated. However, if sanctions target the government of the country in question, the export activity could involve a heightened risk of indirectly making funds available to a designated entity, and the exporter should exercise caution.
Naturally, as in all cases, care must be taken to ensure that the products themselves are not subject to any export restrictions and that none of the other parties involved in the transaction, such as banks or transport companies, are on any sanctions lists.
2.2. We are planning on selling products to a North Korean company. The company is not designated, but one of the owners is. Can we proceed with the sale?
Sanctions regulations usually prohibit making available any funds or economic resources, whether directly or indirectly, to designated entities.
The prohibition of indirectly making available means that export is also prohibited in cases where the goods, technology or know-how being exported would end up being used or exploited by a designated person or entity through an intermediary.
The risk is particularly high if your customer is owned or controlled by a designated person or entity.
2.3. A month ago, we received a binding order from a partner who is based in a country targeted by EU sanctions. The EU has since expanded the sanctions on that country, and the export of the products ordered by our partner is now prohibited. What can we do?
When export restrictions are imposed, they usually provide protection for export companies that have acted in good faith. Therefore, new export restrictions usually have a transition period during which exports agreed on before the ban can be fulfilled.
The existence, conditions and length of a transition period varies in each case, which is why you should read the regulations carefully in order to determine the legality of your planned export.
2.4. We have made an agreement on the export of our products to a foreign company. The company has since been included on the EU sanctions list. Can we still export the products? If we refuse, our company will be exposed to a compensation claim.
In practice, the prohibition on making funds available to designated persons or entities means that all forms of economic activity with these persons and entities is prohibited.
The designation also means that any deliveries to the designated company which have been agreed on or are currently in progress must be halted immediately, even if it amounts to breach of a contract that is binding on the export company.
Sanctions regulations typically include provisions on the limitation of liability, which are designed to protect export companies from claims arising from breaches of contract caused by unforeseen changes in sanctions. Nevertheless, companies trading with entities based in sanctioned countries should always aim to protect themselves by contractual means against risks related to sanctions and their amendments.
2.5. We have sold products to a Zimbabwean company, and the company appeared on a sanctions list today. What does it mean in terms of our trade? Are we permitted to receive payment for products already delivered?
In practice, the prohibition on making funds available to named persons or entities means that all forms of economic activity with these persons and entities is prohibited.
The listing also means that deliveries to the listed company which have been agreed on or are already in progress must be halted immediately.
However, regulations typically include a provision that enables companies to receive payments on obligations that were created before the listing. The transfer of the funds requires prior authorisation from the Foreign Ministry.
2.6. We have purchased products from a foreign company. The agreement was made last year, and the company was listed on the sanctions list this year. Can we still make the payment we owe to the company?
The sanctions regulation prohibits making all types of funds available (i.e. any immovable or movable, material or immaterial property which has financial value) to a listed person or entity, either directly or indirectly.
Therefore, no payments to a listed entity are permitted. In some cases, an exception to the prohibition of the transfer of funds can be made with prior written authorisation by the Foreign Ministry.
Do we need funds transfer authorisation?
3.1. When do we need authorisation for transfer of funds?
A specific restriction imposed by EU sanctions on Iran was that a prior authorisation granted by the Ministry for Foreign Affairs was required for transfers of funds above a certain amount and a prior notification was required for all transfers of or above EUR 10,000.
Authorisation or notification was required if the payee, beneficiary or any of the persons or companies involved in the payment transfer is Iranian. These restrictions on transfers of funds were lifted as of 16 January 2016.
Products, components and authorisations
4.1. We are about to sell a production line which may include restricted components to a country targeted by sanctions. Can we export the production line?
This is determined on a case-by-case basis. Usually, the deciding factor is whether the restricted product is an integral part of the system and whether it can be reasonably (without damage) removed from the system. If that is the case, the banned component cannot be exported as part of the production line.
Furthermore, banned products must not be disguised for export purposes by exporting them as part of a bigger system. If there is a possibility that the product may include restricted components, the exporter should exercise extreme caution and obtain an expert opinion on the legality of the export.
4.2. We are about to export products to a country targeted by sanctions. We source some of the technologies and components from a partner who is based outside the EU. Do we need to take into account the export legislation of that country?
Certain countries, such as the United States, have restrictions in place on the re-exportation of components and technologies produced or developed in that country. Exporters are advised to ascertain whether any products and technologies sourced by it from other countries are subject to these types of restrictions.
4.3. Is it possible to get export authorisation for any product?
All products covered by the Dual-Use Regulation or sanctions regulations require export authorisation.
However, the Foreign Ministry does not have the authority to grant export authorisation for products which are not specifically subject to authorisation. The exporter is ultimately responsible for compliance with export legislation and sanctions.
Notifications concerning funds belonging to designated individuals and entities (“sanction hits”)
5.1. How do I find a list of all persons and entities subject to sanctions?
The lists of designated persons and entities are published as annexes to each regulation governing the sanctions targeted at the relevant State or group.
Additionally, the European External Action Service publishes an electronic consolidated list of all persons and entities subject to EU sanctions (see the Consolidated list).
5.2. We have discovered an account belonging to a designated entity in our bank. What should we do?
If a financial institution discovers an account belonging to a person or entity whose identification details match those of a designated person or entity, it must immediately freeze the funds, i.e. prevent any access to or dealing with the funds. The discovery should be notified to the National Enforcement Authority.
5.3. How do I report a “sanctions hit” to the authorities?
Notifications are to be made to the National Enforcement Authority.
Propose a question by emailing it to firstname.lastname@example.org