Targeted sanctions are international in scope and emanate from international bodies and governments such as the United Nations, the European Union and the United States. The international sanctions regime is wide ranging and relates to financial and trade matters. Sanctions are introduced to exert pressure and influence on individuals and entities in order to curtail certain activities such as terrorism or military activity. There have been recent high profile cases, where the U.S. authorities fined a financial institution several billion U.S. dollars, as a penalty for the institution’s transfer of funds on behalf parties located in countries which were blacklisted by the U.S.
While sanctions are international by nature, they are also implemented at a national level. Therefore, individuals and companies operating in Ireland should be aware of the restrictions imposed under Irish law which implement international sanctions.
The EU often imposes targeted financial sanctions, which may apply to specific persons, groups and entities responsible for objectionable policies or behaviour. Financial institutions are required to adhere to financial sanctions regulations. For example, they have an obligation to freeze all funds and economic resources of the targeted persons and entities, and prohibit the making of funds or economic resources available directly or indirectly to or for the benefit of those persons and entities.
In Ireland, financial sanctions and related asset freezing restrictions are a matter for the Department of Finance and, at an operational level, are handled by the Central Bank of Ireland. The Minister for Finance makes Regulations under domestic legislation to give effect to the various EU Regulations relating to financial sanctions. In turn, the Central Bank enforces the financial sanctions. The Central Bank may, in the exercise of these powers, give directions or issue instructions to financial institutions as it sees fit. The financial institution is then required to comply with such measures. This is separate to the Administrative Sanctions Procedure which is usually invoked by the Central Bank for alleged breaches of financial services regulations.
Ireland is required to apply sanctions to individuals and entities prescribed by the EU. For example, the European Union (Afghanistan) (Financial Sanctions) Regulations, 2013 enforces financial sanctions against certain persons and entities associated with the Taliban in Afghanistan. The European Union (Syria) (Financial Sanctions) (No.4) Regulations, 2011 and Financial Transfers (Syria) (Prohibition) (No.4) Order, 2011 provide for sanctions which include a prohibition on financial assistance related to the provision of military equipment or equipment which could be used for internal repression in Syria.
For the vast majority of these Regulations, penalties imposed on financial institutions include a direction to pay the Central Bank a monetary penalty not exceeding the greater of €10m, or 10% of turnover where the financial service provider is a body corporate, and not exceeding €1m where the financial service provider is a natural person.
Customers should also note that where they operate a bank account in a manner which contravenes the targeted sanctions regime (for example, by receiving payments into the account from a prohibited organisation), they risk having their account frozen. In such cases, there is also a risk that the customer’s bank will refuse to provide them with financial services going forward.
The Department of Jobs, Enterprise and Innovation (“DJEI”) is responsible for implementing trade related sanctions issued by the United Nations and EU. Export businesses in Ireland must export goods in accordance with a DJEI licence. The Export Licensing Unit of the DJEI is responsible for managing controls on exports of military items and items destined for countries to which trade sanctions apply. The Control of Exports Act, 2008 places controls on the export of such prohibited goods. Any entity which is convicted on indictment for a contravention of the 2008 Act could be fined up to €10m and/or imprisoned for 5 years (for management of the entity).
All individuals and entities involved in financial services or an export business in Ireland should ensure that their sanctions ‘watch list’ is constantly updated, to include individuals, organisations and nations which are subject to the sanctions regime. They should also fulfil their obligations under the sanctions regime when dealing with an individual or entity who appears to be connected with an entry on that watch list.