Sanctions & Export Controls: EU Guidance on Dual-Use Export Control for Research, and Proposal for a harmonized European ceiling of EUR 5,000 in cash payments

In the Netherlands, Dutch Minister of Finance Hoekstra informed Parliament about a proposal to introduce a harmonized ceiling of EUR 5,000 in cash payments throughout the EU to combat money laundering. In Brussels, the European Commission published guidance on complying with dual-use export controls when conducting scientific and technological research. Furthermore, the European Parliament adopted new strategies on China and Russia, calling for stronger sanctions. In the Washington, President Biden signed an Executive Order establishing a sanctions regime in response to the growing conflict in northern Ethiopia. Moreover, the international community continues to calibrate its strategy towards Afghanistan. This, and more, in our newsletter.

1. The Netherlands

  • Netherlands (Proposal for limits to cash payments) – On 17 September 2021, Dutch Minister of Financial Affairs Hoekstra sent a non-paper to Parliament about the proposal to introduce a harmonized ceiling of EUR 5,000 in cash payments throughout the EU. The non-paper was submitted by the Netherlands, Belgium, France, Italy and Spain in the context of recent proposals by the Commission for a legislative package modernizing the EU’s anti-money laundering and anti-terrorism financing (“AML/CFT“) regime. In the non-paper, the Member States state that cash is the main source of money laundering and terrorist financing in Europe. Therefore, the minister advocates an EU-wide cash limit of EUR 5,000 per transaction with discretionary room for Member States to set a lower national limit. Domestically, Minister Hoekstra is, for example, preparing legislation to prohibit cash payments above EUR 3,000 for AML/CFT purposes. The proposal for a national cap has in 2019 been received with mixed reactions. Retail associations have commented that the proposed limit is overly burdensome. The Dutch Banking Association has, on the other hand, welcomed the proposal.

  • Netherlands (Nord Stream 2) – On 20 September 2021, Dutch Minister for Foreign Trade and Development Cooperation De Bruijn answered Parliamentary questions about the Energy Working Group and Nord Stream 2. Reason for the questions is the Follow the Money article, which revealed that Dutch prime minister Mark Rutte has provided Parliament with incorrect and incomplete information about gas contacts with Russia. According to minister De Bruijn, the Dutch-Russian Energy Working Group is established to explore the possibilities for knowledge exchange in the field of the energy transition, namely energy storage, energy efficiency and waste-to-energy. The working group is by no means a forum for the discussion or negotiation on specific energy projects, such as Nord Stream 2, Minister De Bruijn writes. He further explicitly indicates that no agreements have been made by the Dutch government that in any way contradict the formal (European) sanctions against Russia imposed in the wake of the MH17 disaster and the Russian annexation of the Crimean Peninsula.

  • Netherlands (Application of US sanctions to Dutch Volksbank)– On 13 September 2021, Dutch newspaper Het Financieele Dagblad reported Parliament was insufficiently informed about risks relating to the potential application of US sanctions to Dutch publicly owned Volksbank. The risk emerged as Volksbank’s CEO Gribnau was a US green card holder, triggering the application of US sanctions to Volksbank. While the news article primarily addresses the insufficient provision of information to Parliament, for BenninkAmar the episode clearly illustrates the far-reaching character of US sanctions. Under US law, green card holders are considered “US persons” who must accordingly comply with sanctions imposed by the US Department of the Treasury’s Office for Foreign Asset Control (“OFAC”). More precisely, the definition of “US persons” includes “all US citizens and permanent resident aliens (i.e. green card holders) regardless of where they are located”. Accordingly, European companies directed by US persons, such as Volksbank, may also fall within the scope of US sanction regimes. After a series of hick ups due to covid restrictions, CEO Gribnau eventually managed to abandon his green card at the US consulate in the Netherlands, ending the application of US sanctions.

2. European Union

  • EU (Second consultation on revising the EU Blocking Statute) – On 9 September 2021, the European Commission opened a second public consultation on a possible amendment of Council Regulation (EC) No. 2271/96 (“EU Blocking Statute”). The EU Blocking Statute aims to protect European companies and individuals from the extraterritorial application of third-country measures. As Sebastiaan Bennink, partner at BenninkAmar, mentioned in an article recently published by the Association of Certified Sanctions Specialists, the current wording of the statute places businesses in the difficult position of ensuring compliance with EU law, while trying to minimize their risk of enforcement measures under US extraterritorial sanctions. Through an online questionnaire, the public consultation provides citizens and organizations with the opportunity to express their views and interests regarding a potential revision of the EU Blocking Statue. The feedback period elapses on 4 November 2021.

  • Germany/Iran (Alleged violation of sanctions against Iran) – On 14 September 2021, a German-Iranian man was arrested for being suspected of exporting laboratory equipment to Iran that was intended to be used in Iran’s nuclear program. More specifically, the man is suspected of exporting spectrometers which can be used to analyse the magnetic field around atomic nuclei. The man allegedly exported EUR 1,1 million of equipment to a company which is owned by a sanctioned Iranian individual, thereby violating EU Regulation No. 267/2012 concerning restrictive measures against Iran and the German Foreign Trade Act. The arrest takes place amidst rising tensions over Iran’s nuclear program. In August, France, Germany and the UK (“E3”) had, for example, voiced “grave concern” over Iran’s nuclear programme. The increased frictions further complicate negotiations on the future of the Joint Comprehensive Plan of Action” (“JCPOA”), the international agreement pursuant to which nuclear-related economic and financial sanctions against Iran are lifted when Iran limits its sensitive nuclear activities.

  • EU (Guidance on dual-use export control for research) – On 15 September 2021, the European Commission published its guidance on internal compliance programmes (“ICP”) for controls of research involving dual-use items. The guidance states that amidst genuine and meaningful scientific and technological research, there can be foreign entities seeking access to research involving dual-use items for other malign purposes. Researchers and research organisations may then inadvertently breach export regulations. In this context, the guidance aims to assist research organisations in identifying, managing, and mitigating risks associated with dual-use export controls and facilitating compliance with EU Regulation No. 821/2021 on the export control of dual-use items (“EU Dual-Use Regulation”). Amongst other things, the guidance lists research areas and activities that could trigger dual-use export controls and sets out the core elements of ICPs. Regarding the latter, the document for example elaborates on how different responsibilities are to be allocated according to the organisational structure of research institutions and other entities performing sensitive research.

  • EU (Parliament adopts China strategy) – On 16 September 2021, the European Parliament adopted a resolution on a new EU-China strategy. In the new strategy, Members of European Parliament (“MEPs”) call on a wide range of measures to be introduced and/or strengthened. These include, amongst others, a more stringent EU FDI (Foreign Direct Investments) Screening Regulation; new legislation on foreign subsidies that distort the internal market; the swift adoption of an assertive and effective international procurement instrument; measures on the export of dual-use technology; an effective anti-coercion instrument to deter and counteract coercive practices by non-EU countries; a package of sustainable corporate governance legislation; and supply chain legislation with mandatory due diligence requirements, which should also provide for an import ban on forced labour goods. Moreover, Parliament believes that sanctioning new persons and entities under the EU Global Human Rights Sanctions Regime should be considered, in particular regarding the human rights situation in Xinjiang and Hong Kong.

  • EU (Parliament calls for new direction in EU-Russia relations) – On 16 September 2021, the European Parliament adopted a resolution on the direction of EU-Russia political relations. In the resolution, MEPs stress the EU must “increase its ability to prepare and adopt sanctions against the Russian authorities, Russian oligarchs, President Putin’s acolytes and members of their families for human right violations”. To that end, the Parliament proposes that Member States should, for example, consider introducing a qualified majority voting rule in the Council for adopting sanctions. Sanctions are currently adopted by consensus, decelerating the EU’s ability to adequately adopt new sanctions. The EU should also urgently adopt an EU anti-corruption sanctions regime, the resolution states.

3. United States of America

  • US /China (Conviction for export controls violation) – On 9 September 2021 a Chinese national, Shuren Qin, was convicted by the US Department of Justice (“DOJ”) for illegally procuring and exporting at least 60 hydrophones to military end-users in China. Mr. Qin exported US-origin hydrophones, devices that may be used to detect and monitor sound underwater, to Northwestern Polytechnical University. This Chinese military research institute has been listed on the US Department of Commerce’ (“DOC”) Entity List since 2001. Northwestern Polytechnical University was listed because of its close ties with the People’s Liberation Army in improving its military capabilities and involvement in the improvement of unmanned vehicles, missile proliferation projects and autonomous underwater vehicles. Mr. Qin was found guilty of the following offences: failing to obtain the required export licenses from DOC prior to exporting military goods to China, committing visa fraud, making false statements to law enforcement agents about customers and the types of parts he was having exported, and money laundering. The DOJ sentenced Mr. Qin to two years in prison and a fine of USD 20.000 for the alleged violations of US export regulations. This case concisely illustrates once more the far-reaching consequences of non-compliance with US trade laws for an individual exporter and the importance of conducting a thorough investigation into the end-use and end-user of a product.

  • US / Ethiopia (New sanctions regime) – On 17 September 2021, US President Biden signed an Executive Order (“E.O.”) establishing a sanctions regime in response to the growing conflict and humanitarian crisis in northern Ethiopia, particularly in the Tigray region. The E.O. “Imposing Sanctions on Certain Persons with Respect to the Humanitarian and Human Rights Crisis in Ethiopia” provides OFAC with the authority to impose a wide range of sanctions on individuals and entities in connection with the conflict, including asset freezes and visa restrictions. Targeted entities may, for example, include those in the government of Ethiopia, the government of Eritrea, the Tigray People’s Liberation Front, and Amhara regional government. Concurrent with the issuance of the new E.O., the US Department of Treasury issued three general licenses (“GLs”) regarding Ethiopia, which inter alia authorize activities related to the provision of humanitarian aid and the (re)export of agricultural commodities and medical items.

4. Around the Globe

  • Afghanistan (International community takes further action) – It has been over a month since the Taliban seized power over Afghanistan. Since then, the Taliban has initiated a quest to see its government formally recognized by other countries. However, governments around the world remain hesitant to formally recognise the Taliban’s regime and have taken steps to further calibrate their strategy vis-a-vis Afghanistan. In the closing remarks of this newsletter, we want to bring you up to speed with several major developments in this regard:
    • On 16 September 2021, Dutch Minister of Foreign Affairs Kaag resigned after the Dutch Parliament adopted a motion of censure against the government condemning it for the chaotic evacuation process in Afghanistan. Following Minister Kaag her decision to step down, Dutch Minister of Defence Bijleveld decided to resign a day later, taking responsibility of the government’s handling of the withdrawal from Afghanistan.
    • On 16 September 2021, the European Parliament adopted a resolution on the situation in Afghanistan, threatening the Taliban with potential sanctions. In its resolution, MEPs voice their grave concern about the appointment in the all-male interim government of individuals which are sanctioned by the UN and linked to terrorist activities. MEPs warn that a failure by the Taliban to crack down on terrorist activities on its territory will lead to “international sanctions and the isolation of the Taliban”. Moreover, the Parliament states it supports the adoption of new sanctions under the EU GHRSR in case of serious human rights violations.
    • On 21 September 2021, the European Council also adopted a set of conclusions regarding Afghanistan. Amongst others, European leaders call on the Taliban to establish an inclusive and representative government through negotiations. Similar to the European Parliament, the Council also raised “serious concerns” about participation of persons sanctioned by the UN in the current caretaker cabinet.
    • On 23 September 2021, Chinese Foreign Minister Wang Yi has called for the lifting of economic sanctions and the defreezing of Afghanistan’s foreign exchange reserves. Minister Wang Yi made his statements at a virtual G20 meeting on Afghanistan, emphasizing that the freezing of assets by inter alia the US may not be used as a bargaining chip. US President Biden has frozen nearly USD 9 billion in foreign currency reserves and Afghan central bank assets. According to the Financial Times, the statement by Minister Wang Yi illustrates the deepening rift between the western and Chinese response to the situation in Afghanistan.
    • On 24 September 2021, OFAC issued two GLs regarding Afghanistan. GL No. 14 authorizes humanitarian activities and GL No. 15 allows for the (re)exportation of agricultural commodities, medicine, medical devices, replacement parts and components, or software updates in Afghanistan. Strikingly, GL No. 14 authorizes the US government, NGOs and certain IOs to provide humanitarian assistance to Afghanistan even if that may involve the Taliban or the Haqqani Network that would otherwise be prohibited by the US Global Terrorism Sanctions Regulations.


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