In 2023, Finnish courts saw a significant increase in regulation offence cases, particularly related to violations of EU sanctions against Russia. This increase marks a departure from the limited Finnish case law on such matters until now.
It is evident that violations of EU sanctions will continue to be brought before courts also in 2024, as Finnish Customs announced already in October 2023 that it had opened more than 660 preliminary investigations into violations of EU sanctions against Russia since the beginning of Russia's war of aggression in Ukraine. Approximately 10% of these cases are being investigated as aggravated regulation offences. The expected judgments will provide further clarity on criminal liability associated with violations of EU sanctions.
In this blog post, we will explore this criminal liability with a particular focus on preventing the associated risks through due care and diligence in companies' operations.
REGULATION OFFENCE AND ITS CRIMINAL SANCTIONS
The Finnish Criminal Code establishes criminal liability for violations of EU sanctions, classifying them as a regulation offence. A regulation offence carries a maximum penalty of four years of imprisonment, and an attempt to commit the offence is also subject to punishment.
In practice, any act conflicting with EU sanctions regulations can constitute a regulation offence. Typical cases in Finland involve the transportation of goods subject to export or import restrictions across the border between Finland and Russia or attempts thereof.
In Finnish case law, the violations of EU sanctions have often been relatively clear. However, more complex conduct that circumvents the sanctions, such as making payments on behalf of a sanctioned person or otherwise making funds or economic resources available for the benefit of sanctioned persons, may also constitute a regulation offence.
Finnish case law places emphasis on the economic benefit sought by the offence in determining the seriousness of a regulation offence. The courts assess factors such as the value of the goods subject to the export or import restrictions. It is worth noting, however, that a regulation offence does not inherently require the pursuit of economic gain, rendering the illegal export or import of a product even with a low economic value punishable if EU sanctions are violated.
Furthermore, in determining the seriousness of a regulation offence, consideration will also be given to the societal danger, such as the danger to economic activities, resulting from the crime, the level of premeditation involved and other relevant factors. For instance, specific premeditated actions, such as using two sets of transportation documents to circumvent EU sanctions, are recognised in legal practice.
COMPANIES MAY FACE CRIMINAL SANCTIONS AS WELL
If a regulation offence has been committed in their operations, companies may also face corporate criminal liability. The applicable penalty is a corporate fine ranging from 850 to 850,000 euros.
In practice, corporate criminal liability can be established in two ways. Firstly, if a member of the management is an accomplice to an offence or allows the offence to occur, corporate criminal liability can be attributed to the company.
Secondly, corporate criminal liability can be based on a failure to exercise the due care and diligence necessary for preventing the offence in the company's operations. The assessment of this includes factors such as:
- whether the company had up-to-date and adequate procedures and policies
- whether the responsibilities and tasks within the company were clearly defined
- whether the monitoring and reporting procedures corresponded to the scope and risks of the company's operations
- whether the company's operations were adequately resourced.
Finally, it is essential to note that even if the prosecutor decides not to press charges against the company or if the court later dismisses the charges, the company still faces significant reputational risk due to public scrutiny during the preliminary investigation and, in particular, during a potential trial.
DUE CARE AND DILIGENCE MINIMISE RISKS
Since Russia started the war in Ukraine in February 2022, the EU has imposed 12 packages of economic and individual sanctions against Russia. Although the pace of changes in EU sanctions regulations has slowed down, compliance with sanctions has become an increasingly important aspect of business for companies, especially those engaged in international trade.
In the new business environment, company management must ensure that the company implements appropriate procedures and policies that take into account EU sanctions regulations. For instance, companies should screen their business partners for individual and company sanctions and be aware of export bans in sales and import bans in purchases. However, mechanical checks are not sufficient and do not replace a comprehensive overall assessment. In more complex cases, it is advisable to consider whether the contemplated transaction is 'what it seems'. Companies need to be vigilant to identify and prevent attempts to circumvent sanctions.
The companies' procedures and policies should be defined in relation to the specific business operations of each company. Risks can vary widely depending on factors such as the scope of business, target markets and products. While, from a Finnish perspective, the EU's sanctions against Russia may currently be considered the most significant, risks relating to circumventing sanctions and sanctions imposed against other countries should also be assessed. The company's personnel should be trained according to the requirements of their tasks in order to effectively implement the procedures and integrate the guidelines into daily operations.
If there is a suspicion of a possible irregularity in the company's operations, the company's management must ensure that the matter is thoroughly investigated. Sufficient information about the events must be gathered to assess the necessary actions appropriately and consistently. It is advisable to carefully document the internal investigation so that the company can prove its due diligence also with respect to management liability. It is often good practice to engage external expertise during the internal investigation – an external advisor can support the investigation work and increase its efficiency and objectivity. At the same time, it is recommended to critically evaluate the effectiveness of internal procedures and guidelines. Procedures and policies should be clear, up-to-date and properly implemented in the company's operations. The company should also prepare for a potential preliminary investigation.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
