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The Law On International Sanctions and National Sanctions of the Republic of Latvia (the Sanctions Act) has been in effect since 1 March 2016, while substantial amendments to the law are expected to come into effect on 1 May 2019.
First, it should be noted that the obligation to comply with and enforce the sanctions applies to all natural persons and legal entities. Thus, the range of persons, which may incur adverse effects as the result of failure to enforce the sanctions, is not limited. The punishment for violation of sanctions, up to the deprivation of liberty, is prescribed in Article 84 of the Criminal Law. Moreover, if the current wording of Article 84 of the Criminal Law prescribes criminal liability for intentional violation of laws and regulations governing implementation of sanctions, then, according to the intended amendments to that article (adopted in the 2nd reading as at the time of drafting this information), criminal penalty will be prescribed for violation of the sanctions and the reference to the intentional infringement has not been included in the article. Thus, unintentional violation of sanctions should be avoided as well.
To be able to comply with that obligation imposed on every person, one should understand what the sanctions are and what needs to be done to be sure that the person does not commit a violation of law.
Sanctions are an instrument of foreign policy aimed at nonviolent prevention of violations of international law. Sanctions can also be defined as measures directed against the State, regime, unit or person (natural or legal) for violations of international law, the most often - against particular persons, groups, units aimed at changing their behaviour (the definitions provided in the guidelines for effective implementation of sanction in Latvia). Types of sanctions are laid down in Article 4 of the Sanctions Law, and they are as follows: 1) financial restrictions; 2) civil restrictions; 3) restrictions on admission; 4) restrictions on movement of strategic and other goods; 5) restrictions on provision of tourism services. A representative of the Ministry of Foreign Affairs, which is the coordinating body for communication on the determination, implementation of sanctions and application of exceptions in Latvia (interview published in March 2019 issue of magazine “Bilances juridiskie padomi” (Balance Sheet Legal Advice)) explained that, to determine the eligibility of sanctions, the first step would be to understand the substance of the type of sanctions, what are the restrictive measures, to which goods they relate, and then the next step would be to understand whether the natural person or legal entity, with whom the cooperation is being established, is “clean”. It is definitely hard to implement the above steps and other required activities aimed at verification of restrictions provided in the sanctions without due “preparation” and deliberate improvement of internal processes. There is no single, specific procedure suitable to everyone either, the adherence whereto would prevent the risk of violation of sanctions. Therefore, everyone should assess whether they know their cooperation partners and true beneficiaries, their risks of violation of sanctions, etc., and make ensure that the sanctions are complied with.
Such “assessment” will be determined as an obligation for a particular range of subjects. Namely, on 1 May 2019, amendments to the Sanctions Law will come into force, whereunder the persons under the supervision of the Financial and Capital Market Commission, the State Revenue Service and the Consumer Rights Protection Centre (specified in paragraphs 4, 42, and 43 of Article 13 of the law) will have to carry out and document the assessment of risks of international and national sanctions to identify, assess, understand and manage the risks of international and national sanctions inherent to their operations or customers; based on such assessment, the persons under supervision will have to establish an internal control system for the management of risks of international and national sanctions, including the development and documentation of relevant policies and procedures; the failure to comply with this obligation may be subject to administrative sanctions and imposition of a fine of up to 5,000,000 euros. Thus, there is no doubt regarding the above subjects - they will not get along without specific actions, developing/supplementing their internal procedures. However, other persons, both legal and natural, are also obliged to ensure compliance with the sanctions, and we would recommend establishing an internal procedure for carrying out certain research measures before entering into any transaction to verify the identity of the cooperation partner and its beneficiaries.
To achieve the purpose of the sanctions and to change the behaviour of the sanctioned person no “gaps” are permissible, and everyone is responsible for avoiding such “gaps”, namely, for compliance with the sanctions. The aforementioned penalties for the violation of sanctions and the laws and regulations related thereto prove the seriousness of the obligation to comply with the sanction regimes. Thus, it is important not to leave those matters unattended.
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