Updated Mar 20, 2022
What is The European Union Sanctions?
What is European Union Sanctions?
Economic sanctions are an important component of the EU's Common Foreign and Security Policy (CFSP), and they are used as part of the international effort to combat money laundering, terrorism financing, and other financial crimes. To that purpose, the EU prepares and distributes a sanctions list to all member countries, which must be incorporated into the AML/CFT processes of all financial institutions in the EU.
What is the EU Sanctions List?
The EU Sanctions List is a unified list of countries, businesses, and persons engaged in or suspected of money laundering or terrorism financing — and hence subject to European Union economic sanctions. EU Sanctions are related to UN Security Council Resolutions, although the EU applies its autonomous sanctions — for example, against Russia and Iran – by its foreign policy objectives. EU sanctions could include:
- Freezing of financial assets
- Market access, trade, investment, or technical aid restrictions
- Weapons embargoes
- Travel restrictions
The European Council issues EU sanctions: each member of the council must unanimously agree on the sanction measures before legislation putting them into effect can be enacted. Some, such as financial asset freezes, are directly applied by EU governance. Other penalties, such as arms embargoes, are imposed by member states through domestic legislation, which means that sanction measures must be translated into local law.
Who Is Required to Obey EU Sanctions?
Sanctions imposed by the EU apply to financial organizations and people located inside the European Union's territory or authority. Sanctions also apply to EU citizens who conduct business outside of the EU.
To guarantee compliance, obligated financial institutions must include a search for EU sanctions as part of their AML/CFT procedure when onboarding new customers. Individuals who fail to comply may face financial penalties as well as criminal accusations. The EU does not carry out enforcement efforts itself but rather delegated them to the appropriate authorities in each member state.
What is the Importance of Having a Sanctions Screening Tool?
To comply with the EU's AML/CFT requirements, financial institutions from member countries must conduct EU sanctions screening on every new customer or client. However, because the list changes regularly, performing those checks manually can be time-consuming and inaccurate. Performing automated checks with a sanctions screening tool, on the other hand, reduces the dangers of the manual procedure while also lessening the administrative strain on staff and, significantly, assisting organizations in delivering the compliance performance that regulators need.
What is the nature of the EU's sanctions regime?
Sanctions imposed by the EU may be directed at governments of non-EU countries, as well as enterprises, groups, organizations, or persons. Economic and non-economic punishments are included.
The sanctions include, among other things, the freezing of cash and economic resources, limitations on entry (visa or travel ban), arms embargoes, embargoes on equipment that could be used for internal repression, other export and import restrictions, and flying bans. A prohibition on the provision of financial services, including prohibitions on the export of specific products, has also been utilized, as have investment prohibitions. Sectoral restrictions or measures have also been used to prevent the misuse of equipment, technology, or software for monitoring and interception of the Internet or other kinds of communication.
Within the context of the CFSP, the EU Council applies these restrictive restrictions. Under Article 29 of the Treaty on European Union ("TEU"), the Council first approves a CFSP Decision. The measures envisioned in that Council Decision are implemented either at the EU level (through Regulation) or at the national level.
Arms embargoes and travel restrictions are enacted directly by member states. Other measures, such as freezing funds and economic resources, are implemented through Regulation, which is adopted by the Council based on a joint proposal from the Commission and the Union's High Representative for Foreign Affairs and Security Policy under Article 215 of the Treaty on the Functioning of the European Union ("TFEU"). Any such Regulations must be communicated to the European Parliament. Regulations are legally binding and have immediate effect throughout the EU. Regulations and Council Decisions are both subject to judicial review in Luxembourg by the Court of Justice and the General Court. Restriction measures must adhere to the EU's and its member states' international responsibilities, particularly World Trade Organization agreements.
SANCTIONS REGIMES TYPES
The EU has three types of sanctions regimes in existence. First, there are UN sanctions, which the EU transposes into EU law ('UN sanctions'). Second, the EU may strengthen UN sanctions by imposing stricter and additional restrictions ('mixed sanctions regimes'). Finally, the EU may apply sanctions alone ('EU autonomous sanctions regimes').
Currently, the EU has approximately 40 sanctions regimes in existence. The vast majority of them are geographical, i.e. (e.g. Syria, Iran, or North Korea). The EU has also enacted horizontal regimes to combat terrorism, cyber-attacks, the proliferation and use of chemical weapons, and grave human rights breaches.
PROCESS OF ADOPTION AND IMPLEMENTATION
Sanctions decisions are generally made by agreement by the Council of the European Union, based on proposals by the High Representative of the Union for Foreign Affairs and Security Policy (High Representative) and following discussion in the relevant Council working groups.
Restrictive restrictions are enshrined in CFSP Council resolutions. If the Council resolution contains economic and/or financial measures, those measures must be executed by a Council rule. The High Representative and the European Commission (with DG FISMA in the lead) make a combined proposal for a Council rule based on the Council decision. The relevant Council working groups review and debate the combined proposal before it is adopted.
The CFSP Council decision and the Council regulation are enacted concurrently for both legal acts to take effect at the same time.
The EU Member States are largely responsible for implementing and enforcing EU sanctions. In its capacity as treaty guardian, the Commission supervises the implementation and enforcement of EU sanctions across the Member States.
SCOPE OF APPLICATION
EU sanctions apply only within the EU's jurisdiction. The responsibilities they impose are binding on EU nationals in any place, on corporations and organizations incorporated under a Member State's law, onboard aircraft or vessels within the authority of a Member State, and on any person or entity inside the EU. EU restrictive measures must be respected by the Commission while administering the EU budget as part of EU law. This applies to EU actors participating in humanitarian aid delivery. Furthermore, even though such operators are not directly bound by EU sanctions, they may be forced to comply with them due to contractual obligations.
Sanctions are a tool in the EU's Common Foreign and Security Policy (CFSP) that allows the EU to interfere when necessary to avert conflict or respond to developing or ongoing crises, as well as to promote peace, democracy, and respect for the rule of law, human rights, and international law.