The Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg has imposed fines of €109,000 and €17,200 for compliance failings on abrdn Investments Luxembourg S.A.
The fine of €17,200 related to failings in relation to AML/CFT, and included in these failings was failure to “perform initial name screenings controls against international and European financial sanctions lists”.
The CSSF had conducted on-site inspections in 2020.
Lithuania’s Financial Crimes Investigation Service has imposed a fine of €8.23m for breaches of the EU’s sanctions and a fine of €1.06m for breaches of Lithuania’s Law on the Prevention of Money Laundering and Terrorist Financing.
The company fined is UAB Payeer. The press release notes that the company did not cooperate with the investigation and did not provide responses to questions raised.
The investigation commenced after an inspection in 2023 that was conducted after Payeer commenced its operations in Lithuania.
Payeer operated a crypto exchange at Payeer.com which allowed customers to make transfers to or from Russian banks that were designated under EU sanctions.
The AML fine relates to the failure to conduct KYC and the failure to report suspicious transactions.
The press release notes that Payeer had revenues of more than €164m during the 1.5 years of its breaches, but does not note what proportion of this came from prohibited activity.
The Latvian State Forest Service (VMD) has fined a company €10,000 in relation to timber which may have been sourced from Russia.
The fine was imposed on the basis of the EU’s Timber Regulation and the failure of the company to properly conduct due diligence on timber that may have been Russian in origin which would render the timber as illegally sourced.
It is being reported that the VMD has taken the view that the importer needs to be able to positively exclude the possibility that the timber is of Russian, or Belarusian, origin.
Further to our earlier posts about the detention and subsequent release of the vessel the Atlantic Navigator II which carried, amongst other cargo, birch timber of Russian origin into the German port of Rostock.
It is now being reported that the Captain of the vessel has received a fine which he was directed by the Public Prosecutor’s Office to pay to the charity Human Rights Watch.
The fine was €8,000, which no doubt reflects the fact that the vessel only entered German waters after experiencing technical difficulties.
As part of the press article (behind a paywall) on the recent fines against Novatek Green Energy and Geleo (see our post here), the Polish authorities have also provided an update on their enforcement activity more broadly.
Certainly the figure for total fines does not include the fine against Novatek Green Energy (which was 12 million zloty), but it is also a little unclear whether or not the figure includes the fine against Geleo (which was 4m zloty).
The report also notes that most of the 20 penalties have been imposed in 2024, with only two imposed by the end of 2023 for a combined total of 71,000 zloty (c. $17,700).
These enforcement actions appear to relate to a mix of EU and the separate Polish sanctions.
No information has been provided as to the conduct which gave rise to the fines, or who the fines were imposed on.
Now updated from the post first published on 28 June.
It is being reported (behind a paywall) that the Malopolska Customs and Tax Office of Krakow has imposed fines of 12 million zloty (c. €2.78m) against Novatek Green Energy and 4 million zloty (c. €927,000) against employee-owned company Geleo.
The fine against Geleo was imposed on 31 May. It was for breach of the relevant asset freeze and for circumvention of Polish sanctions. The transaction in question was the purchase, for €1, of 100% of the shares in Novatek Green Energy from the Swiss company Novatek Gas and Power GmbH, which in turn is a direct subsidiary of the Russian company OAO Novatek.
The fine against Novatek Green Energy was imposed on 25 June, and was imposed for multiple transactions in breach of the imposed asset freeze.
With particular thanks to Dr Marcin Łukowski who provided a copy of the relevant article.
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.
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.
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.
The Lithuanian Customs Office has announced in a press release the imposition of a fine of € 329,944 imposed upon an unnamed Lithuanian company.
The fine was for purchasing goods from the Russian companies which are designated under the EU’s sanctions.
Lithuanian Customs noted that this was the first enforcement by them of the EU’s sanctions on Russian designated persons.
