Jul 14, 20244 min read

EU Sanctions: Law change to combat Circumvention

EU strengthens sanctions rules: No tolerance for evasion, even unintentional.

Introduction

In a move to bolster its sanctions' framework against Russia, the European Union has expanded Article 12 of Council Regulation (EU) No 833/2014. This amendment aims to prevent inadvertent participation in activities that could undermine EU sanctions, reflecting a proactive approach to enhancing regulatory compliance and maintaining international security.

Background

Previously, Article 12 prohibited intentional engagements in activities designed to circumvent EU sanctions. Now, the revised article also encompasses situations where individuals or entities participate in such activities unintentionally but with awareness of their potential effects. This update underscores the EU's commitment to closing loopholes and ensuring strict adherence to its sanctions regime.

Understanding the Amendment

The amendment to Article 12 of Council Regulation (EU) No 833/2014 now explicitly prohibits participating in activities that circumvent EU sanctions, even if done without the intention of achieving that outcome but with awareness of the possibility. This expanded scope is designed to prevent any form of indirect support for sanctioned entities or activities.

OLD Article 12

“It shall be prohibited to participate, knowingly and intentionally, in activities the object or effect of which is to circumvent prohibitions in this Regulation.”

NEW Article 12

“It shall be prohibited to participate, knowingly and intentionally, in activities the object or effect of which is to circumvent prohibitions in this Regulation, including by participating in such activities without deliberately seeking that object or effect but being aware that the participation may have that object or effect and accepting that possibility.”

What is means

This new law outlines that it is strictly forbidden to engage in activities that are intended to or have the effect of bypassing the prohibitions specified in the Regulation. In simple words we could say "Participating in any activities that aim to bypass the regulations in this Regulation is strictly forbidden. This includes being aware that your participation might lead to such bypassing, even if you did not actively seek it out but accepted the possibility".

Knowingly and intentionally: This emphasizes that participating individuals or entities must be aware and purposeful in their actions.
Object or effect to circumvent: Any activities that are designed or result in avoiding or undermining the prohibitions set forth in the Regulation are prohibited.
Including by participating without deliberately seeking: Even if a person or entity joins such activities without actively intending to circumvent the regulations, but they are aware that their involvement could lead to circumvention, and they accept this possibility, it is still considered a violation.

In essence, the statement broadens the scope of prohibited actions to cover both intentional efforts to evade sanctions and situations where individuals or entities are complicit in activities that indirectly support circumvention, even if they did not initiate or actively seek out such actions.

Examples of Circumvention Offences

Financial Transactions: A European bank facilitates transactions for a Russian company involved in the energy sector, unaware that the company is a front for a sanctioned entity. Despite not intentionally supporting sanctions evasion, the bank is now liable under the amended Article 12 for facilitating indirect financial support to a sanctioned entity.

Trade of Goods: A European distributor imports goods from a supplier in a sanctioned country, believing the goods to be compliant with EU regulations. However, it is discovered that the supplier is using deceptive practices to conceal the origin of the goods, which actually originate from a sanctioned entity. Despite the distributor's lack of deliberate intent to breach sanctions, they are held accountable under the expanded Article 12 for indirectly supporting sanctioned activities through trade.

Implications for Businesses and Individuals

For businesses and individuals operating within or across EU member states, this amendment carries significant implications:

Heightened Compliance Requirements: Entities must exercise greater diligence to avoid any activities that might indirectly support sanctioned entities or contravene EU regulations, even if unintentional.
Enhanced Regulatory Scrutiny: Regulatory bodies within EU member states are likely to increase scrutiny and enforcement measures to ensure compliance with the expanded sanctions regime.
Broader Legal Liability: The expanded scope increases the potential for legal repercussions, including fines and sanctions, for those found to be indirectly aiding sanctioned entities.

Conclusion

The EU's amendment to Article 12 reflects its proactive stance in strengthening sanctions enforcement to uphold peace and security objectives. By expanding the definition of prohibited activities, the EU aims to maintain the effectiveness of its sanctions regime and safeguard against attempts to undermine it. Businesses and individuals must stay vigilant and proactive in adapting to these regulatory changes to avoid potential penalties and maintain ethical business practices within the EU and globally.

Stay informed and compliant with the latest EU sanctions developments. For expert guidance on navigating EU sanctions compliance and regulatory updates, contact Customs Manager Ltd at +44 7914650183 or visit www.customsmanager.info.

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