Sanctions are a crucial tool in the security and foreign policy of the European Union. Their significance has increased with the outbreak of the conflict in Ukraine. Unfortunately, not all companies adhere to the prescribed sanctions, with some prioritising their business interests and resorting to circumventing or violating these sanctions. This is why the EU's patience has run out, leading to the approval of a directive that establishes minimum rules for prosecuting crimes against or circumventing EU sanctions.

The legal act was adopted by the EU Council in April, came into force in May with its publication in the EU Official Journal, and now individual member states must implement it into their national law by 20 May 2025.


How will the new regulation look?

Under this directive, activities such as trading in sanctioned goods (even through third countries), conducting prohibited financial activities, aiding in circumventing travel bans, and inciting, aiding, and attempting to circumvent sanctions will be criminal offences. The new regulation will apply to both legal and natural persons. For legal entities, sanctions will not only target the entity as a whole (e.g., by revoking licenses or banning activities) but also individuals in leadership positions responsible for decisions leading to the breach or circumvention of sanctions. Each member state must establish proportionate and effective penalties consistent with national criminal laws, including imprisonment for intentional offences and a catalogue of fines for specific crimes.


How should your company prepare?

In theory, every company in the EU should already be prepared for the new directive and should now ensure that their legal obligations are effectively met and that there are no deficiencies in their internal regulations. Currently, there is already a requirement to perform due diligence, and failure to do so constitutes a sanctions violation.
Simply put, you must not export sanctioned goods to Russia or Belarus or supply them to sanctioned persons, nor can you circumvent this ban by creating complex supply chains or structures and exporting goods through other non-sanctioned countries such as the UAE, Cyprus, Turkey, Singapore, China, Hong Kong, the UK, or other Asian countries. Intentional conduct is not necessary; negligence, such as failing to perform adequate due diligence, is sufficient to hold you accountable.


What exactly should your company do to avoid problems?

Your company should have a written strategic risk assessment. Even if you are a small company, all parts of the risk assessment procedure should be documented, regularly updated according to applicable legislation, and all processes and responsible persons should be described. This way, in case of an inspection or dispute, it will be easy to determine where the problem lies. Due diligence is your obligation even if you are a small company and even if exports make up a small part of your activities. If you lack internal specialists on this issue, you can hire external help. However, be aware that this is not a one-time document preparation but a regular activity!


How does strategic risk assessment specifically proceed?

Typically, strategic risk assessment involves four steps: identification of risks, analysis of how to mitigate these risks (e.g., by hiring qualified personnel), implementation and testing of measures, and regular updates.

For your better understanding, in cases of sanctions violations and circumventions, we specifically recommend:

  • Check all business partners and their customers, representatives, and beneficial owners, i.e., all directly involved parties. Also, check indirectly involved parties, such as intermediaries or banks.
  • Verify all transhipment points and transactions flows. If you find that you are trading with high-risk third countries, require signed end-user certificates. These should state the intended use in the third country and confirm that the goods will not be supplied, sold, or exported to Russia or Belarus.
  • With third-country trading partners, include contractual clauses in all agreements prohibiting the re-export to Russia and Belarus and further sales.
  • Refer to the "red flags" lists issued directly by the EU, which can help you identify risks.
  • Hire qualified personnel to monitor and update contracts and the end use of products. Regularly educate all other employees on this issue (and keep proper records of this education), and conduct training exercises.