EU sanctions are directly applicable law and apply to every undertaking in the EU, every EU citizen and every transaction carried out wholly or partly in the EU. Since 2022 their scope has multiplied – above all with regard to Russia and Belarus. In Germany, intentional violations are criminal offences under the Foreign Trade and Payments Act (Außenwirtschaftsgesetz, AWG); negligent violations are administrative offences carrying high fines.
Two types of sanctions
Person-related sanctions
A comprehensive prohibition applies to listed persons, companies and organisations: their funds and economic resources are frozen, and no one may make funds or economic resources available to them – neither directly nor indirectly. This concerns not only payments, but also deliveries of goods, the provision of services or the transfer of rights.
Goods-related and sectoral sanctions
In addition, there are prohibitions on supplying certain goods to certain countries, importing them from there or providing certain services there – irrespective of who the customer is. For Russia they now cover large parts of mechanical engineering, electronics and chemicals, as well as a list of particularly critical goods that experience shows turn up in Russian weapon systems.
Ownership and control: the blind spot
In the EU's view, the prohibition on making available also covers companies that are more than 50 per cent owned or controlled by a listed person – even if these companies are not on any list. A mere name check will not find them. Anyone screening their customers, suppliers and payees must therefore also know who owns them and who actually controls them.
Circumvention and third countries
It is also prohibited to participate in transactions by which sanctions are circumvented – knowingly or by accepting the possibility of circumvention (conditional intent, bedingter Vorsatz). With the tightening of the AWG, reckless violations involving dual-use items and the concealment of transactions are also covered more extensively. In practice, such transactions rarely run directly, but via traders in third countries – for example in Central Asia, the Caucasus, Türkiye or the United Arab Emirates. Typical red flags are:
- new customers from these regions who suddenly order goods they have never bought before,
- order quantities that do not match the customer's business,
- unusual delivery routes, payments from third parties or cash payment,
- evasive answers to questions about end use and final destination.
For certain goods, the EU also requires exporters to expressly prohibit re-sale to Russia in contracts with partners in third countries – the so-called no-Russia clause. And parent companies must use their best efforts to ensure that their subsidiaries outside the EU do not undermine the sanctions either.
The United States also has a say
US sanctions and US export controls can also apply to businesses in Europe – for example where US goods, US technology or US dollars are involved. Anyone trading with a US nexus must keep both sets of rules in view. EU and US law may also conflict with each other.
What effective screening looks like
- Screen all business partners: customers, suppliers, freight forwarders, banks, end recipients – not only new ones, but regularly existing ones too, because the lists change constantly.
- Clarify ownership: For partners from risk countries, asking about the beneficial owners is standard practice.
- Check the goods: Are the goods subject to a goods-related restriction for the country of destination?
- Handle hits properly: Who decides whether a hit is genuine? How is this documented?
- Be able to prove it: When it matters, what counts is what is documented. Screening that no one can evidence has, for the authority, not taken place.
If something has happened
Negligent violations can also be punished with a fine. Whether and in what amount can be influenced, for example if the violation is reported and remedied in good time. However, a decision not to prosecute under section 22(4) AWG cannot be relied on for sanctions violations. Where there is intent, it becomes dangerous. In any case: act quickly, investigate the facts properly and take advice before making any statement to an authority.
Markus Bitzer investigated violations of embargoes and export controls himself while serving with the Customs Investigation Service (Zollfahndung). We know where investigators start – and how to build screening that will withstand scrutiny.