Sanctions & Export Controls: Dutch bank to charge high-risk customers for due diligence costs and US publishes annual sanctions review

In the Netherlands, Dutch Minister of Foreign Affairs Knapen informed parliament about the implementation of the EU Dual-Use Regulation in the Netherlands. Moreover, Dutch bank ABN AMRO has announced it will charge fees for high-risk customers to account for increasing due diligence costs. In Pittsburgh, the EU and the US convened for the inaugural meeting of their bilateral Trade and Technology Council. In the US, Cameron International Company reached a settlement agreement of almost 1,5 million USD for supplying goods to a Russian energy firm subject to restrictions under Executive Order 13662 “Blocking Property of Additional Persons Contributing to the Situation in Ukraine”. In Norway, a German Iranian professor is being prosecuted for giving guest researchers access to a restricted laboratory, thereby allegedly violating Norwegian sanctions on Iran.This, and more, in this newsletter. 

1. The Netherlands

  • Netherlands (National implementation of EU Dual-Use Regulation) – On 6 October 2021, Dutch Minister of Foreign Affairs Knapen sent a letter to parliament about the implementation of the new EU Regulation 2021/821 on the control of exports of dual-use items (“EU Dual-Use Regulation”).  While the EU Dual-Use Regulation is directly applicable in all EU Member States, the regulation also provides EU Member States with room to manoeuvre to adopt more far-reaching national measures. In this regard, the minister writes he will consider whether further national legislation is necessary or desirable.  According to the minister, this mayinclude a potential extension of the validity period of certain export licenses and the creation of export authorization requirements for non-listed cybersurveillance items (a so-called “catch-all” authorization requirement). Regarding the latter, the minister furthermore shares a report by the Institute of Information Law about bringing certain (cyber)surveillance technologies under the scope of export controls.  Amongst other things, the report concludes that the protection of human rights should play a central role in deciding whether, and if so which, cybersurveillance items should fall under national license requirements. In the upcoming period, the Ministry of Foreign Affairs will assess which cybersurveillance items will require an ad hoc license. 

  • Netherlands (Dutch ministers criticize China’s Anti-Foreign Sanctions Law) – On 6 October 2021, Minister of Foreign Affairs Knapen and Minister for Foreign Trade De Bruijn provided an answer to written questions by Dutch Member of Parliament Simone Kerseboom regarding the Dutch strategy towards China. In their response, the ministers address China’s new Anti-Foreign Sanctions Law (“AFSL”), which was approved on 10 June 2021. The AFSL prohibits entities from complying with measures that discriminate against China. It also creates a legal framework that allows the Chinese government to impose countermeasures, such as asset freezes, in response to measures targeting Chinese citizens or organizations or otherwise interfering with China’s domestic affairs. Although the AFSL has not yet been put into practice since its introduction, the Dutch government is concerned about the uncertainty that the broad wording of the AFSL creates for foreign companies operating in China.

  • Netherlands (ABN AMRO to charge high-risk customers for high due diligence costs) – On 28 October 2021, Dutch newspaper Het Financieele Dagblad reported that ABN AMRO will start charging “high-risk customers” additional fees to account for the high costs of due diligence measures. ABN AMRO will initially raise the fees for so-called coffeeshop holders (shops where the sale of softdrugs is tolerated in The Netherlands), as this sector is particularly risk exposed. The Dutch social liberal party D66 responded critically to the decision of ABN AMRO. “This should not be possible”, said D66 Member of Parliament Alexander Hammelburg. “It is extremely important to tackle money laundering, but banks must treat entrepreneurs equally according to law”, Hammelburg elaborated. ABN AMRO is the first Dutch bank to pass on compliance costs to clients. According to Het Financieele Dagblad, it is becoming increasingly challenging for banks to finance the payment system as compliance costs are rising. In this regard, European banks top the charts as they, for example, spend four times as much on customer due diligence as the EUR 27.5 billion that US banks spend on due diligence. Passing on money laundering risks with higher costs to the customer is not undisputed, as Dutch banks have previously agreed with each other not to let the costs of payment transactions get out of hand, as high bank account fees are seen as a barrier to trade ABN AMRO’s decision could, for example, inspire other banks to follow suit. The measure could, on the other hand, also trigger legal action by high-risk customers who are negatively affected by the decision, potentially challenging the legality of the measure. Moreover, the decision may lead to spill-over effects as banks may decide to charge similar fees to other high-risk sectors (e.g. car dealers, sport clubs, and cryptocurrency exchange platforms) or even exclude entire industries from a bank account.

2. European Union & United Kingdom 

A. European Union 

  • EU / US (First session of Trade and Technology Council) – On 29 September 2021, the EU and US Trade and Technology Council (“TTC”) convened for the first time in Pittsburgh. Through the TTC, the EU and the US strive to coordinate approaches to key global technology, economic, and trade issues and to deepen transatlantic trade and economic relations. The TTC is supported by ten technical working groups that focus on issues ranging from the misuse of technology and investment screening to data governance and secure supply chains. In Pittsburgh, the TTC furthermore reached a joint statement on future cooperation in the area of export controls. Accordingly, the US and EU will cooperate on the development of convergent control approaches, will deepen the exchange of information and start capacity building activities regarding third countries. On 27 October 2021, the TTC will host a virtual outreach event for interested stakeholders about cooperation in the policy area of export controls. 

B. United Kingdom

  • UK (Guidance for international non-government organisations) – On 11 October 2021, HM Treasury’s Office of Financial Sanctions Implementation (“OFSI”) published updated guidance for international non-government organisations (“INGO’s”) on complying with counter-terrorism legislation. The guidance, amongst others, elaborates upon the counter-terrorism elements of sanctions and export control that may be of relevance to INGOs delivering development and humanitarian assistance in high-risk jurisdictions. In the guidance, a number of updates have been made to account for the introduction of the UK’s new sanctions framework under the Sanctions and Anti-Money Laundering Act 2018 (“SAMLA”). Additionally, the Office of Financial Sanctions Implementation has published both general guidance on financial sanctions as well as charity sector guidance for INGOs. Moreover, the UK´s Charity Commission has published several guidance documents on the UK´s counter terrorism legislation. These documents contain information on key aspects of the UK´s counter terrorism legislation, how these may affect INGO´s and their activities, and practical guides for checking the UK consolidated list and another country’s sanctions list..

  • UK (2020-2021 Annual Sanctions Review) – On 14 October 2021, OFSI published its 2020-2021 annual review on the implementation of sanctions. The report concludes that OFSI added 278 new designated persons to its sanctions list in the financial year 2020 to 2021. 159 of these individuals were designated according to implemented EU and UN legislation, and 119 were designated pursuant to SAMLA. OFSI also reported that UK firms approximately held £12.2 billion of frozen funds and economic resources. In the upcoming period, OFSI will consider issuing general licences where it may be appropriate to help ease any unintended consequences on stakeholders. On counterterrorism, the Treasury has furthermore commissioned Jonathan Hall QC under Section 31 of SAMLA to write a report reviewing the operation of asset-freeze provisions under the Counter-Terrorism (Sanctions) (EU Exit) Regulations 2019.

3. United States of America

  • US /Russia (Penalty for providing goods to Gazprom-Neft Shelf) – On 27 September 2021, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announced a USD 1,423,766 settlement with Cameron International Corporation (“Cameron”) for violating US sanctions. Specifically, a US-person senior manager approved contracts for its subsidiary, Cameron Romania S.R.L. to supply goods to Gazprom-Neft Shelf. This Russian energy firm is subject to the restrictions of Directive 4 of Executive Order 13662 “Blocking Property of Additional Persons Contributing to the Situation in Ukraine”. OFAC considered it an aggravating factor that Cameron is a large and commercially sophisticated firm, with an extensive global presence that operates in an industry and in locations with significant sanctions risk exposure. According to OFAC, Cameron should have recognized the risk involved in a US-person senior managers’ approval of a contract with an entity subject to sanctions under Directive 4 of Executive Order 13662. The case illustrates how involvement of a US-person can trigger the application of US sanctions to business activities outside the US. 

  • US / Russia (Conviction for conspiracy to violate export controls on Russia) – On 29 September 2021, the US Department of Justice announced that Oleg Vladislavovich Nikitin, owner of a Russian energy company, has been sentenced to 28 months in prison. The reason was that he pleaded guilty to conspiracy to violate the International Emergency Economic Powers Act, the Export Control Reform Act and the Export Administration Regulations. According to the Department of Justice, the conspiracy began in 2016, when a Russian government-controlled business accepted a proposal by Nikitin to provide a US manufactured power turbine. The power turbine was intended for use on a Russian arctic deep water drilling platform and the transaction amounted to approximately USD 17.3 million. Nikitin subsequently concealed the true end user by submitting false documentation. Thereby he violated the Russian Industry Sector Sanctions pursuant to which it is required to apply for an export licence for items used in exploration for, or production of, oil or gas in Russian deep water (greater than 500 feet) or Arctic offshore locations.

  • US (Virtual Currency Sanctions Compliance Guidance) – On 15 October 2021, OFAC published the Sanctions Compliance Guidance for the Virtual Currency Industry. This industry-specific brochure is especially designed for technology companies, miners, wallet providers, exchangers, as well as the more traditional financial institutions that may be exposed to virtual currencies. The guidance helps all companies in the virtual currency industryto navigate through and comply with US sanctions. In the guidance, OFAC emphasizes that there is no such thing as a single compliance program suitable for each business or every circumstance. Therefore, a risk-based approach to sanctions compliance is recommended to virtual currency members, which will depend upon a variety of factors, such as: the size and type of business involved, its products and services provided, its customers and stakeholders and the geographical locations served. OFAC further updated several of its frequently asked questions. OFAC added, among others, definitions of ‘digital currency, ‘digital currency wallet’ and ‘virtual currency’. This is in line with the fact that the virtual currency sector has recently received increasing attention from a US compliance and enforcement perspective. On 21 September 2021, OFAC issued the first sanction designation against a virtual currency exchange responsible for laundering ransoms. Besides, on 5 October 2021, Principal Associate Deputy Attorney General John Carlin noted that the United States Department of Justice (“DOJ”) is scrutinizing the use of cryptocurrency platforms as the payment modality of choice for criminals across the globe. Carlin noted that to limit the ability of ransomware groups and other criminal actors to profit from their unlawful activity, DOJ is paying increased attention to identifying and seizing such funds.      

  • US (New export controls on cybersurveillance items) -On 20 October 2021, the US Commerce Department’s Bureau of Industry and Security (“BIS”) issued an interim rule establishing controls on the export, reexport, or transfer (in-country) of certain items that can be used for malicious cyber activities. The rule also creates a new License Exception Authorized Cybersecurity Exports allowing the export, reexport and transfer (in-country) of ‘cybersecurity items’ to most destinations, while retaining a license requirement for exports to countries of national security or weapons of mass destruction concern.  In addition, BIS states that a license will also be required for exporting cybersurveillance items to countries subject to a US arms embargo.

  • US (Treasury 2021 Sanctions Review) – On 18 October 2021, the US Department of the Treasury published the results of a broad review of its economic and financial sanctions policy. The review concluded that the US faces a range of new challenges regarding the implementation of sanctions. These include the risks from new payments systems, the growing use of digital assets, and the potential negative impact of sanctions on the flow of legitimate humanitarian aid. Amongst other things, the report recommends to better calibrate sanctions to mitigate unintended economic, political and humanitarian impacts. The Treasury notes that small businesses may, for example, lack the resources to bear the costs of sanctions compliance while competing with large companies at home and abroad. Uncalibrated sanctions could unnecessarily lead them to turn down business opportunities to avoid these costs. Better tailored sanctions can help avoid these costs and maintain the competitiveness of US businesses, the report concludes. However, the report does not mention any concrete action in this regard.

4. Around the World

  • Norway / Iran (Professor prosecuted for violating sanctions on Iran) – On 29 September 2021, Norwegian news agency NRK reported that a German Iranian professor at Norwegian technical university NTNU is being prosecuted for inter alia violating sanctions against Iran. According to the public prosecutor, the professor invited four guest researchers from Iran, giving them access to knowledge that could be useful for Iran’s nuclear program. Public prosecutor Frederik Ranke told NRK that it “issued charges against a person for violating the sanctions, including violations of the regulations related to Iran, the export control regulations, and a data breach”. In case the suspect is convicted, he could face up to 10 years imprisonment. 


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