In the Netherlands, the Dutch Central Bank released sanctions compliance guidelines for crypto currency transactions. At a European level, the ECJ further defined “frozen funds” in EU Iran sanctions regulations. Also in Europe, findings on improving export controls and foreign investments were published. In the US, the use of ASML’s Dutch chip machines in China was banned. This, and more, in our newsletter.
1. The Netherlands
- Netherlands (Dutch Central Bank Releases Sanctions Compliance Guidelines for Crypto Currency Transactions) – On 19 November 2021, the Dutch Central Bank (DNB) released a draft Q&A document for sanctions compliance in crypto transactions. Crypto transaction providers must conduct thorough screenings of their clients to ensure that none of their clients are placed on a sanctions list, as individuals and entities who are placed on a sanctions list are not allowed to receive financial support of any kind, including any form of digital currency. Through this Q&A, the DNB aims to further clarify the duties of crypto transaction providers in verifying the legitimacy of their clients, by elaborating on when and how a party to a transaction needs to be screened, and on characteristics that could indicate a high or low risk client and transaction. The Q&A is currently open for public consultation until December 17th and can be found here.
- Netherlands (Dutch MFA to establish a dedicated sanctions-unit) – On 17 and 18 November 2021, the 2022 budget for the Ministry of Foreign Affairs (‘’MFA’’) was debated in Dutch Parliament. Members of Parliament Sjoerdsma and Van der Lee stressed the importance of having a sufficient capacity at the MFA to effectively impose and implementing sanctions and in this regard, the Dutch Parliament made available EUR 1 million for the establishment of a dedicated ‘sanctions-unit’ within the MFA. The sanctions-unit aims to structurally reinforce the MFA’s sanctions capacity, enabling it to, for example, proactively contribute to the designation of new sanctions listings at an EU-level. Outgoing Minister for Foreign Affairs Knapen responded that the establishment of the sanctions-unit is indeed urgently needed and explained that the budget would also be used to efficiently coordinate sanctions policy with other ministries and government agencies such as the Ministry of Finance.
- Netherlands (Calls for secondary sanctions on Belavia) – On 18 November 2021, Member of Parliament Brekelmans called on the Dutch government to advocate for the introduction of secondary sanctions against entities doing business with Belarusian airliner Belavia. This comes as a response to its role in the migrant crisis at the European border with Belarus (see our last newsletter). ‘Secondary sanctions’ impose restrictive measures on persons and entities in third countries which are not directly subject to the jurisdiction of the sanctioning state. While Minister for Foreign Affairs Knapen responded that he would not advocate for secondary sanctions as these are considered contrary to international law by the EU, he assured Brekelmans that he would continue to insist on taking further targeted sanctions against Belarus.
- Netherlands (Levelling the EU playing field on trade in strategic goods) – On 24 November 2021, trade in strategic goods was debated in Dutch Parliament. Member of Parliament Van Haga called for the playing field as to the licensing of trade in strategic goods to be levelled within the EU. Minister Knapen confirmed that this was a key policy priority of the Netherlands and supported the motion accordingly. On 30 November, Dutch Parliament voted in favour of the motion, implying that the Minister will most likely raise the issue at a European level.
2. European Union & United Kingdom
- Europe (EU could impose sanctions on secessionist entities in Bosnia and Herzegovina) – On 15 November 2021, the EU Foreign Council met to discuss the situation in Bosnia and Herzegovina, where the Republika Srpska Serbian-majority government has threatened to secede the Republika Srpska from Bosnia and Herzegovina. Milorad Dodik, member of the Presidency of Bosnia and Herzegovina, is planning to remove responsibilities from the federal government to the Republika Srpska. During their meeting, the EU Foreign Affairs Ministers expressed the EU’s commitment to a unified Bosnia and Herzegovina and called upon Bosnian leaders to resume dialogue and restart work on key reforms.
In a press conference following the meeting, the lead spokesperson for EU Foreign Affairs and Security Policy further elaborated that the EU was considering all options to support Bosnia and Herzegovina, including potential sanctions against secessionist individuals and entities within Republika Srpska. Since 2011, the EU has a framework in place which would allow it to impose sanctions on persons and entities which undermine the security and sovereignty of Bosnia and Herzegovina. These sanctions could include the freezing of assets and travel restrictions for said persons and entities.
- Europe (Findings on improving export controls and foreign investments in the EU) – On 23 November 2021, the European Commission presented key findings in its report related to EU interests regarding export controls and foreign investments in the EU. The Commission has screened above 400 foreign investments notified by Member States since the new Foreign Direct Investment (FDI) screening legislation entered into force, of which 80% did not justify further investigation FDI screening and export controls are part of the EU’s renewed trade strategy, that seeks to better enforce EU rights, and the European Commission expects all Member States to adopt national screening mechanisms, namely to ensure a comprehensive EU approach to tackle risks related to security or public order. The report also shows that dual-use exports represent about 2.3% of total EU exports. Out of 30.292 applications for and notifications of exports under licenses, 603 transactions (exports) were denied (in 2019), amounting to approx. 0.02% of total exports. This is the last report on export controls before the entry into force of the Dual-Use Regulation recast.
- Europe (ECJ further defines “frozen funds” in EU Iran sanctions regulations) – On 11 November 2021, the ECJ has given judgment on a request for a preliminary ruling from the French Cour de Cassation on questions that arose in Bank Sepah v Overseas Financial Ldt and Oaktree Finance Ltd. It explained the concepts ‘freezing of funds’ and ‘freezing of economic resources’, first recalling that Article 7(1) of Regulation No 423/2007 provides that all funds and economic resources belonging to, owned, held, or controlled by the persons, entities and bodies listed in Annex IV to that regulation are to be frozen.
The ECJ then stressed that it was apparent from this definition and the use of the word ‘any’ that the purpose of freezing funds is to limit as much as possible the transactions that may be carried out with frozen funds. The ECJ concludes that the freezing of funds and economic resources provided for in Article 7(1) of Regulation No 423/2007, read in conjunction with Article 1(h) and (j) of that regulation, precludes the implementation of protective measures in respect of frozen assets which establish a right to be paid on a priority basis in favour of the creditor concerned in relation to other creditors, even if such measures do not have the effect of removing assets from the debtor’s estate.
Additionally, the fact that the grounds for the claim for recovery from the person or entity whose funds or economic resources are frozen are unrelated to Iran’s nuclear and ballistic programme and pre-date Resolution 1737 (2006) is not relevant to the answer to the first question.
- Europe (Public Consultation Statistics on Blocking Statute Amendments) – On 26 November 2021, the European Commission released statistics regarding the public consultation on the proposed amendment to the EU Blocking Statute, which concluded earlier this month. While the Blocking Statute was enacted by the EU in 1996, to protect EU persons and companies from the extraterritorial application of third country laws and measures, the Commission has recently sought, by means of a public consultation, to obtain the opinion of EU citizens and organisations on adding deterrence mechanisms and streamlining of the application of the Blocking Statute. The most recent public consultation received 86 responses, which is 81 more compared to the public feedback received in August on the published Roadmap for the amendment. Most respondents are indicated to have been private entities, followed by approximately a dozen EU citizens and NGO
’s. The complete statistics can be found below. Next, a draft version of the amendment will be published and subject to another round of public feedback in Q2 2022.
3. United States of America
- US (New sanctions against entities involved with Nord Stream 2) – On 23 November 2021, the Secretary of State Antony Blinken stated that a vessel and a “Russian-linked entity” called Transadria Ltd were being sanctioned by the US. The sanctions are said to be in line with the requirements of the Protecting Europe’s Energy Security Act of 2019. Nord Stream 2 is one of several pipelines that Russia has laid underwater in the Black Sea and Baltic Sea to replace pipelines that run through Eastern Europe. Analysts and lawmakers have raised concerns because the new system allows Russia to create different gas flows for Eastern and Western Europe and could allow Moscow to selectively target countries such as Ukraine with energy cut-offs. The Administration has now sanctioned 8 persons and identified 17 of their vessels as blocked property pursuant to PEESA in connection with Nord Stream 2.
- US (More export restrictions on ASML due to US sanctions) – On 19 November 2021, the US announced the blocking of the use of ASML’s Dutch chip machines in China, with serious consequences for all stakeholders. South Korean producer of memory chips SK Hynix must now build a new production line elsewhere, and this considering the already scarce global supply of memory chips. Dutch company ASML, risks losing customers. This ban also has an impact on chip manufacturing worldwide, which may be moved to other countries. The US has pressured ASML and the Dutch government in the past to reduce its export to China, because the US suspect that the Chinese are using the chips for military purposes. The Trump administration had already put pressure on the Dutch government not to grant ASML an export license for the delivery of one EUV machine to the Chinese SMIC. The Biden administration appears to be in line with this policy.
- US (US Adds Dozens of Tech Firms to Entity List) – On 24 November 2021, the US Bureau of Industry and Security (BIS) added a total of 27 new individuals and undertakings to its Entity List. Among these new additions are entities which have assisted Pakistan in its nuclear and ballistic missile program, Iran in its space program and various North Korean front companies. Furthermore, eight Chinese technology firms were also added due to assistance brought by them to the Chinese military in advancing their quantum computing technology. The full list of added entities can be found here. The consequences of being added to the Entity List include license requirements for US entities who wish to export, reexport or transfer items listed in the Export Administration Regulations (EAR). In this way, the US aims to prevent (US) technology from being used for purposes which it considers to be contrary to its national security or foreign policy interests.
4. Around the Globe
- Nicaragua (Nicaraguan Officials Face Sanctions from the US, UK and Canada) – On 15 November 2021, the United States, United Kingdom and Canada all imposed sanctions on several members of the Nicaraguan government, including ministers and mayors, in response to the re-election of President Ortega on 7 November 2021. The conduct of these officials leading up to these elections was heavily criticised by the EU and the and the Organisation of American States. The current Nicaraguan government is accused of systematic incarceration, harassment and intimidation of opponents, journalists, and activists. These new sanctions aim to put further pressure on Ortega and his allies to implement democratic reforms and refrain from oppressing his political opposition. The sanctioned officials are subject to the freezing of their assets and travel bans.
- Denmark (Sanction Compliance Inspection at Danske Bank A/S) – On 16 November 2021, the Danish Financial Supervisory Authority (“DFSA”) released a statement regarding an inspection of Dankse Bank A/S which was conducted at the end of 2020 in the Anti-Money Laundering area as part of the ongoing supervision of the bank. The DFSA highlighted that the international nature of the bank, the significant number of international transactions, investment activities and customers result in a high inherent risk of the bank’s customers breaching applicable regulations on financial sanctions. It provided some further risk information:
– Breaches of sanctions may go undetected on account of the lack of cooperation procedures between the bank’s sanction screening, customer due diligence and transaction monitoring units.
– Employees in the customer due diligence and transaction monitoring units do not receive training and therefore may not detect or escalate breach of sanctions to the bank’s Sanction & Embargo team.
– The increased risk of employee error and abuse when dealing with sanction compliance is related to issues with internal controls in the sanctions area, such as the lack of application of the four-eyes principle for customer screening, the manual processes for escalation of cases and the organisational embedding of the Sanction & Embargo team.
Dankse Bank A/S responded in a statement by acknowledging the observations from the DFSA. It aims to address the findings of the investigating by taking comprehensive actions, implementing control enhancements and improving sanction risk management through a multi-year programme.
- Iran (Iran Nuclear Deal Talks Make Slow Progress) – On 29 November 2021, a new round of negotiations started regarding the Iran nuclear deal. Leading up to the event, there was little expectation that real progress would be made, as parties accused each other of making unrealistic demands and appeared willing to walk away from negotiations. However, Iran has agreed to discuss steps comply with the 2015 agreement, while continuing to press for immediate relief of sanctions which were re-imposed by the US in 2018 when it left the agreement. While US president Joe Biden has stated that he aims to revive the 2015 nuclear deal, the US government remains concerned about a possible lack of Iranian compliance with nuclear limitations and other Iranian activities, such as the development of ballistic missiles. Iran is also seeking further guarantees that the US will not breach the agreement again and re-impose sanctions as it did in 2018. The result of these new negotiations therefore remains to be seen.
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