Switzerland – publishing the 10 fines for breaching sanctions imposed by SECO: Part 4 – cases 9-10

This is the fourth and final instalment of making public the final administrative criminal decisions imposed by SECO in relation to breaches of the Swiss sanctions against Belarus and Russia.

9. Final administrative criminal decision dated 20 November 2023

Original: 2023-11-20 – I.65 – Strafbescheid

Translation: 2023-11-20 – I.65 – Strafbescheid_Translated to English

The company in question imported a dismantled wooden sauna, and accompanying parts, from a Belarusian company via Kyrgyzstan valued at €3,000. Geneva Rive-Droite customs stopped the importation.

An investigation was commenced on the basis that the products met the criteria for wood products (customs code 4418.9900) rather than the customs code used by the importer which related to prefabricated building structures (customs code 9406).

SECO obtained a ruling from the Federal Customs Office that the goods did indeed fall under the code for wooden products with the other parts being irrelevant as they had no impact on price, and that the customs code for prefabricated buildings was not relevant to a sauna which was to be installed internally rather than as a stand alone structure.

SECO took the view that the breach was negligent and resulted from a breach of the duty to conduct “additional checks on the classification of products prior to the conclusion of a purchase contract with a company based in Belarus” rather than deliberate and given the low value of the goods imposed a fine of CHF 1,000 plus CHF 580 in costs.

Comment: The use of the prohibition against importing “wood products” from Belarus to cover finished items made from wood is noteworthy.

10. Final administrative criminal decision dated 15 January 2024

Original: 2024-01-15 – I.73 – Strafbescheid

Translation: 2024-01-15 – I.73 – Strafbescheid_Translated to English

The company in this case sought to export polyethylene products some of which were prohibited (customs code 3920.10) and some of which were not (*customs code 3916.10) from export to Russia. The value of the prohibited goods was €5,373.

The shipment was stopped by customs at Zürich airport. An investigation was started and the company admitted the facts stating that it had “not even considered that the delivery of polyethylene sheets could fall under the Ukraine Regulation“.

SECO accepted that the breach was negligent and not intentional, and in light of the early cooperation, the low value of the breach, and the provisions of Swiss law permitting the corporation to pay a fine of CHF 5,000 or less rather than investigators seeking to identify culpable individuals, the fine imposed was CHF 2,500 plus costs of CHF 1,260.

Comment: In this case the company gave the name of “the person responsible for the alleged facts”. SECO, however, took the view that this admission was insufficiently detailed to be relied upon for the purpose of imposing personal criminal liability and a fine on that individual.

United Kingdom – HMRC corrects/changes description of earlier fine to withdraw reference to Russian sanctions

Back in April we posted about a Compound Penalty imposed by HMRC on a company for breaching the UK’s Russian Sanctions Regulations.

The company was fined £1,058,781.79.

HMRC has today issued a changed Notice to Exporters about this fine. The changed description removes any reference to the UK’s Russian sanctions regulations and replaces it with:

March 2024 – £1,058,781.79 was paid relating to the unlicensed exports of dual use goods controlled by Retained Regulation 428/2009“.

No explanation for the change is given.

Switzerland – publishing the 10 fines for breaching sanctions imposed by SECO: Part 3 – cases 7-8

This is the third  instalment in our series of publishing the 10 final administrative criminal decisions reached by SECO in Switzerland. The examples below relate to Russian and Belarusian sanctions.

7.   Final administrative criminal decision dated 19 September 2023

Original: 2023-09-19 – I.60 – Strafbescheid

Translation: 2023-09-19 – I.60 – Strafbescheid_Translated to English

This final decision relates to a company which sought to export to Belarus an embossing roll used in the embossing of cigarette packaging. The value of the products was stated as €21,300. The products were stopped at Zürich airport customs and an investigation was commenced.

The company sought to argue that, while its product was covered by the customs code annexed to the Swiss regulation it was not “machinery” and so not covered by the wording of the export prohibition contained in art. 6 of the Belarus Ordinance.

SECO disagreed saying that if the product was covered by the customs code included in the Annex then it was covered by the prohibition in the Ordinance itself but invited the company to seek (if it wished) a ruling as to whether an embossing roll fell within customs code 8420.9120.

The company sought that ruling and the FOCBS confirmed that the rolls were properly covered by that number.

The company then communicated to SECO that based on the company’s own view that its product was a part and not itself machinery “the only criticism that can therefore be made of our company is its interpretation of the regulatory provisions“.

SECO disagreed and found that the company was in negligent, but not intentional, breach of the sanctions with the company having “a responsibility to carefully analyse the embargo orders imposed by Switzerland and to take the necessary measures to avoid contravening them [and that] additional checks on the classification of its products before the conclusion of new orders to Belarus were reasonably required“.

SECO, however, determined that the appropriate course was reliance on the provisions permitting a fine of CHF 5,000 or less in order to avoid a disproportionate investigation to determine individual culpability.

The company was also given credit for cooperation and was fined CHF 3,000 plus CHF 1,070 in costs.

Comment: Given that the company said it carefully analysed the regulations in question and that it sought to rely on what it saw as an inconsistency between the customs codes listed in the Annex which attached to their products, and the company’s narrow reading of the wording of the prohibition in the Ordinance, a regulator or prosecutor might have been entitled to conclude that the breach was intentional. The company knew that the product code attached to its goods was barred from export to Belarus.

There is also scope for querying the mitigation credit for cooperation in the circumstances of this investigation.

8.   Final administrative criminal decision dated 28 September 2023

Original: 2023-09-28 – I.71 Strafbescheid

Translation: 2023-09-28 – I.71 – Strafbescheid_Translated to English

The company sought to export 700 rubber seals (customs code 4016.93) and 3,750 valves (customs code 8481.20) to Russia. The products were stopped by customs at Geneva Airport in December 2022. The goods were valued at €69,315.

On 1 January 2022 the company had written to SECO to obtain advice on whether it could export its products to Russia. It was not until 2 June 2022 that SECO replied stating that the products were prohibited from export to Russia but that for contracts which pre-dated 28 April 2022 there was a sunset provision enabling export up until 29 July 2022.

Further, because the products were for use in prosthetic knees, there was a licence exception for medical goods that was available.

Nonetheless the company proceeded to try and export the products in December 2022 without applying for the available licence.

After the commencement of the investigation the company applied for, and obtained a licence permitting export of the goods.

SECO emphasized that “a request for a derogation must have been submitted to SECO prior to any sale, delivery and export, and SECO must have granted the necessary approval. It is not possible to legalize the sale, supply or export of goods listed in Annex 23 unlawfully by an authorization granted on a retroactive basis. … The fact that the goods in question were issued at the beginning of February 2023 for a use in accordance with the law is irrelevant to the question of the lawfulness of the sale, delivery and export of the goods in December 2022“.

Despite the company having been told in writing that the unlicensed export of the products to Russia would certainly be prohibited after July 2022, SECO proceeded on the basis that the breach was negligent and not intentional.

The company was fined CHF 1,000 with costs of CHF 1,270.

Comment: Practitioners will note the clarity of the view from SECO as to the impossibility of retrospective authorisation.

It is also seems likely, however, that the medical nature of the products in question played a role in the generous conclusion of a negligent rather than intentional breach in the circumstances of this case.



Switzerland – publishing the 10 fines for breaching sanctions imposed by SECO: Part 2 – cases 4-6

Below is the second in our series of publishing the 10 final administrative criminal decisions reached by SECO in Switzerland. The examples below relate to Russian and Belarusian sanctions.

The final instalment will be published on Tuesday.

4.   Final administrative criminal decision dated 15 May 2023

Original: 2023-05-15 – I.45 – Strafbescheid

Translation: 2023-05-15 – I.45 – Strafbescheid_Translated to English

The company in question sought to export a wrist watch valued at CHF275,766. The export was marked as being for a person with an address in the Russian Federation. The shipment was blocked at Geneva Airport as being potentially in breach of the Swiss prohibition against exporting luxury goods.

The company sought to argue that the sale had taken place in 2020, but could provide no evidence of this, and sought to argue that the customer was resident in Dubai, but the residency document dated several months after the attempted export.

SECO noted that the prohibition covers, “sale, delivery and export”, and so the fact of a sale in 2020 (even if that was the date) did not stop the offence having been completed by virtue of the blocked export.

SECO, however, accepted that the breach was not intentional but was rather negligent but that it was unable to determine whether the breach was the result of “non-compliance with internal guidelines by the responsible employee …, insufficient implementation of these guidelines in the internal process, absence of such guidelines, insufficient and inadequate compliance structures, lax application of internal guidelines by the employee in charge, insufficient control of that person by his or her supervisor or a combination of all of these”.

As with the other fines previously published SECO chose to use the mechanism of imposing a fine of CHF 5000 or less rather than seeking to investigate the responsible individuals. SECO imposed a fine of CHF5,000 with costs of  CHF 1,280.

Comment: Given the relatively high value of the watch in question, and the reliance on evidence that was not exculpatory, the company in question may have achieved a result at the lower end of the scale of what might have been expected. Under Swiss law a negligent breach can attract a fine of up to CHF 100,000.

5.   Final administrative criminal decision dated 22 June 2023

Original: 2023-06-22 – I.61 – Strafbescheid

Translation: 2023-06-22 – I.61 – Strafbescheid_Translated to English

The company sought to export 10,583.9 kg of food colouring valued at €47,000 to Russia. The goods were stopped at St Margrethen custom office and an investigation was commenced.

The company admitted the facts, but stated it “had assumed the sale of food colours to a company domiciled in the Russian Federation is permitted”. As stated by SECO: “It is not clear on what basis it came to that conclusion at the time”.

Nonetheless, SECO concluded that “the conduct of the accused constitutes imprudence in breach of duty and is to be qualified as negligent” rather than intentional conduct. SECO also noted that the “execution of the export transaction by the accused is due to a chain of unfortunate circumstances” but provides no further detail on this point.

SECO again used the mechanism of imposing a fine of CHF 5,000 or less noting that “it is hardly possible to reconstruct who ultimately authorized the transaction”. The fine was CHF 4,500 plus costs of CHF 1,260.

SECO noted the company’s co-operation and early admission of the facts.

Comment: one of the justifications cited by SECO for using the CHF 5,000 fine option and not conducting further investigations was that it would be “disproportionate in view of the penalty forfeited”. This is circular reasoning. The size of the fine should not be reason for the size of the fine.

Given that the company appears to have undertaken no due diligence or investigation of any sort before seeking to export to Russia it is, perhaps, a surprising result that SECO chose to impose the fine that it did.

6.   Final administrative criminal decision dated 4 September 2023

Original: 2023-09-04 – I.49 – Strafverfügung

Translation: 2023-09-04 – I.49 – Strafverfügung_Translated to English

This document takes a slightly different format as the company in question challenged the original penalty notice of CHF 7,810 and costs of CHF 1,290, which was then subsequently upheld.

The company was the authorized consignor for 10 shipments to Russia and one to Belarus. All but one of these were stopped by customs. After the opening of the investigation a further two shipments from this company which were due to be exported to Russia were stopped.

The total value of the goods was said to be CHF 15,619.18, but six of the exports were said to have the exact value of CHF 1,000 which permits some suspicion as to the declared values. The goods were a mixture of parts for luxury branded cars, and other luxury goods such as clothing, a musical instrument and a laptop.

The company sought to argue that no offence had been committed as all that it did was transport goods within Switzerland, and that at most all that could be said was that there was an attempt to export.

SECO disagreed and stated: “In order to complete the deed, it is not required that the goods must have reached the country of destination. Since consignments of goods destined for export and delivery to the Russian Federation or, in one case, to Belarus … constitutes prohibited transport within the meaning of” the respective regulations.

SECO alleged that the company had a “duty of care of a customs declarant to check whether there are any prohibitions, restrictions or conditions in relation to a consignment of goods” and that it had an “increased duty2 due to its status as a “Authorised Consignor”. Nonetheless, SECO did not alleged intentional breach of the regulations (even for those done after the commencement of the investigation) but rather negligent breaches. SECO also concluded that the breaches were not “outliers” as 12 of the breaches took place in just five months.

SECO imposed a fine of CHF 7,810 and costs of CHF 1,310.

Comment: The clarification on SECO’s views as to what constitutes “transport” and that this can be committed even through actions wholly internal to Switzerland is to be welcomed.

The lack of an allegation of deliberate breach is perhaps surprising in the circumstances, as is the giving of credit for cooperation given that conduct continued during the investigation and the initial fine was contested.

Switzerland – publishing the 10 fines for breaching sanctions imposed by SECO: Part 1 – cases 1-3

Below is the first in our series of publishing the 10 final administrative criminal decisions reached by SECO in Switzerland. The examples below relate to Russian and Belarusian sanctions.

The next instalment will be published on Monday.

1.   Final administrative criminal decision dated 21 November 2022

Original: 2022-11-21 – I.41 – Strafbescheid

Translation: 2022-11-21 – I.41 – Strafbescheid_Translated to English

The company in question attempted to export 1,850kg of a kind of lubricant (customs code 3403) included in the list of banned exports from Switzerland to Russia. The value of the products was €17,440.

The goods were stopped by Swiss customs at Mendrisio. An investigation was commenced.

The company cooperated and admitted the breach but submitted in writing that it was unaware that the product was included on the sanctions list.

SECO accepted this evidence and undertook its assessment of the penalty based on the fact that the breach was negligent and not intentional. This distinction gives rise to significantly different penalties under Swiss law.

A negligent breach can give rise to a maximum penalty of CHF 100,000 and/or a custodial sentence of up to three months.

Given the low value of the breach, and the accepted evidence of negligence rather than intent, SECO relied upon a provision of Swiss criminal procedure whereby if a fine is of no more than CHF 5,000 then the company can pay the fine without the need for further investigation to determine the specific individuals responsible. This was said to be proportionate compared to the time and cost of a full-blown investigation.

In light of this a fine of CHF 4,500 was imposed plus costs of CHF 1,260.

Comment: while the result may be proportionate to the value of the goods, it is unclear from the final decision whether the company in question received the payment of €17,440. It may be hoped that if such payment had been received that those funds would have been confiscated.

It is also noteworthy that the investigation was commenced on 5 September 2022 and finished by 26 October 2022, with the final decision issued on 21 November. As described the defendant was able to make written submissions but no person was interviewed and no documents or other evidence was sought. The submission of negligent ignorance of the sanctions appears to have been accepted without being tested.

2.   Final administrative criminal decision dated 18 January 2023

Original: 2023-01-18 – I.42 – Strafbescheid

Translation: 2023-01-18 – I.42 – Strafbescheid_Translated to English

The company in question sought to export pumps (customs code 8413.9130) to Belarus valued at €39,619.20. Such goods are prohibited from sale, delivery or export to Belarus under article 6 of the Swiss Ordinance dated 16 March 2022. The goods were stopped at Zurich airport and had been due to arrive in Belarus after first being transported through Turkey and Russia.

The company accepted the breach, but submitted that it had obtained SECO clearance when the order was first placed in January 2022, but that it had mistakenly failed to re-check the tariff code against the Ordinance at the time of export in June 2022. The company also undertook remediation measures and appointed a sanctions compliance officer.

SECO accepted that the breach was not intentional, but stated that “as a company active in international trade, it had a duty to carefully analyse the embargo ordinances imposed by Switzerland and to take the necessary measures to ensure that they were not contravened“.

As with the earlier final decision, SECO relied upon the provision whereby a fine of under CHF 5,000 could be paid by the company without having to investigate the culpability of individual employees.

SECO considered as aggravating factors the value of the intended export and the fact that “more thorough control and monitoring” was expected of such a company. Mitigation consisted of the company’s cooperation, the remediation undertaken, and the fact that the export was not completed.

In light of this a fine of CHF 2,000 was imposed plus costs of CHF 560.

Comment: The case is a noteworthy statement of SECO’s expectation of a trading company’s duty to ensure compliance. Also noteworthy is the credit received for cooperation and remediation.

While one may wonder whether an export routed to Belarus through Turkey and Russia was intended as circumvention it appears that it was the company’s own customs declaration which indicated accurately both the nature of the goods and the destination. Accordingly, it is understandable why SECO took the view that the conduct was not intentional especially when combined with the fact that the company had earlier sought (and obtained) clearance for the export.

3. Final administrative criminal decision dated 1 May 2023

Original: 2023-05-01 – I.63 – Strafbescheid

Translation: 2023-05-01 – I.63 – Strafbescheid_Translated to English

The company in question attempted to exporte a painting valued at CHF 1,500 (i.e. a prohibited luxury good) to Russia, with the painting seized by the customs office at Mülligen.

An investigation was commenced as part of which the company admitted the alleged facts. The company, however, also noted that the painting had first been shipped to Moscow on 22 February 2022 (prior to the prohibition on the export of luxury goods) but that it had been returned to Switzerland undelivered as the customer was not at home at the time of the attempted delivery. By the time of the second attempted export in September 2022, the prohibition had come into place.

SECO accepted the company’s submission of a negligent rather than intentional breach noting, however, that the company “was obliged to examine more closely whether the export of the said goods to or for use in the Russian Federation was permissible“.

SECO availed itself of the same provisions allowing a simplified investigation where a company is fined CHF 5,000 or less. A fine of CHF 700 was imposed plus costs of CHF 370.

Comment: SECO noted the early admission of fault and the company’s cooperation, as well as the mitigating circumstance that the sale (when first conducted) had been lawful and that if the customer had been home at the first attempt there would have been no breach. Also noted was the low value of the breach.

The case is, however, illustrative of the expectations of due diligence and compliance expected by SECO even on a company that “is a family business and very rarely exports to Russia“, and that even a one-off, low value breach may still be the subject of investigation, conviction and fine.

Switzerland – publishing the 10 fines for breaching Russian and Belarusian sanctions imposed by SECO: an introduction

Today we start a series of posts in which we will be publishing anonymized versions of the ten final administrative criminal decisions issued by SECO as part of proceedings for breaching Russian, and Belarusian, sanctions in Switzerland.

The details of these proceedings, the conduct giving rise to the fines, the process of the investigations, and the level of the fines are all not otherwise public.

These anonymized final decisions have been obtained through a Freedom of Information request to SECO, and SECO has confirmed that these anonymized versions may be published or otherwise made available.

The blog is grateful for SECO’s assistance.

We will publish the first three decisions today, three more on Monday and the final four on Tuesday of next week.

As well as the final decisions themselves (some of which are in German and some in French), we will be publishing machine translations into English for convenience. We make no representation as to the accuracy of these translations. The blacked-out redacted text in the originals is shown as “REDACTED” in the translations.

Germany – individual convicted for exporting luxury cars to Russia in breach of EU sanctions

On 24 April the Cologne District Court convicted a unnamed 52-year old individual of breaching the EU’s Russian sanctions by exporting 38 luxury cars and two motorcycles to Russia.

The cars were said to have totaled €4.7m in value, and were largely shipped to Russia via Belarus (where the goods are not prohibited exports). The prosecution was able to show through invoice addresses, the origins of payments and the ultimate Russian registrations of the vehicles that the individual was knowingly exporting to Russia.

The man was given a suspended two-year prison sentence, ordered to pay €20,000 and ordered to do 200 hours of community work.

It is unclear if the proceeds of the sales will be the subject of confiscation proceedings.

In terms of the sentence the court accepted as mitigating factors: i) that a previously legitimate business was made unlawful almost overnight; and ii) that the goods in question were not military or dual use. Given that these factors would be present in very many cases it is unclear why they were considered as mitigating.


Estonia – bank to contest FIU’s €300,000 fine for breaching sanctions

LHV Pank in Estonia has today issued a press release to say that it intends to challenge a fine of €300,000 imposed on it by the FIU for breaching EU sanctions.

According to the press release the fines were imposed in relation to three incidents (two in 2022 and one in 2023) where the bank is accused of insufficiently rigorous due diligence and of permitting a transaction in breach of sanctions.

The press release does not state which sanctions regime the conduct relates to.

The bank says it takes regulatory compliance seriously and will challenge the fine in court.

Malta – first published fine imposed by Sanctions Monitoring Board

Malta’s Sanctions Monitoring Board (the “SMB”) has, for the first time , imposed a fine for breach of EU sanctions.

The company in question was ArabMillionaire Limited. The SMB publishes the names of all company’s fined more than €800, but the size of the fine is otherwise unspecified.

Also unspecified is the conduct giving rise to the fine, but it was said to have been identified “at the time of supervisory examination conducted between June and August 2020”.

It is unclear when the fine was issued as this information is not specified on the website and the Sanctions Monitoring Board has confirmed that such information is confidential.

ArabMillionaire operated as an online casino (trading as Playfooz.com) based in Dubai. It’s licence from the Malta Gaming Authority was suspended in October 2022, and then cancelled in October 2023.

It has been reported that alongside other regulatory failings part of the reason for these actions by the Malta Gaming Authority was non-compliance with money laundering and counter terrorist financing.

© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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