EU introduces unified penalties for sanctions violations, Poland adds more formalities

On 19 May 2024, Directive 2024/1226 entered into force, which introduces significant changes to the application and enforcement of EU sanctions imposed in connection with Russia’s aggression against Ukraine. Until now, EU Member States had full discretion in determining penalties for violations of existing sanctions. The differences resulting from the different legislation of EU countries in terms of the penalties to be imposed led to situations that undermined the integrity of the EU internal market.

The European Commission, in order to ensure fair treatment of EU entrepreneurs, introduced common minimum standards. These relate both to the definition of offences related to the violation of EU restrictive measures and the availability of effective and proportionate penalties. Below are the key aspects that EU traders should pay attention to.

Offences related to the breach of sanctions

The Directive harmonizes the range of activities that should be considered offences if committed intentionally and in breach of EU sanctions. These include, for example:

• making funds or economic resources available to persons or entities subject to sanctions.
• failing to freeze funds or economic resources belonging to such persons or entities.
• enabling entry or transit through the territory of a Member State of persons subject to an entry ban.
• entering into transactions with third countries or their entities in breach of sanctions.
• trading in sanctioned goods and services, including the provision of brokering, technical assistance and other services.

Sanctions and penalties

The Directive also introduces a differentiated catalogue of penalties for violations of sanctions imposed in connection with Russia’s aggression against Ukraine:

(a) for natural persons:

• imprisonment – from one to five years, depending on the value of the financial or economic resources involved,
• fines, withdrawal of business licences, disqualification from holding managerial positions, temporary prohibition from seeking public office or publication of all or part of a court decision relating to the offence committed,

(b) in the case of legal persons:

• fines which, depending on the offence committed, can be up to EUR 40,000,000
• exclusion from entitlement to public benefits or aid,
• exclusion from access to public funding, including tendering procedures, grants and concessions,
• disqualification from carrying out economic activities and withdrawal of authorizations to carry out activities,
• placing under judicial supervision,
• judicial winding-up,
• closure of establishments used for committing the criminal offence,
• publication of all or part of the judicial decision relating to the offence committed and the sanctions or measures imposed, without prejudice to legislation on privacy and the protection of personal data.

Obligations of Member States

As a result of the Directive, Member States are obliged to:

• enact national legislation to ensure effective enforcement of sanctions.
• ensure international and internal cooperation between all competent authorities.
• collect and report statistical data on offences related to sanctions violations.

Amendments to the Polish legislation

In Poland, proposals to implement the Directive have not yet been presented. However, on 30 April 2024, a draft regulation was presented introducing significant amendments to the Act on Countering Support for Aggression against Ukraine and the Act on the National Fiscal Administration (KAS). The amendment aims to strengthen the anti-circumvention provisions of the sanctions imposed on Russia and Belarus, ensuring more effective control over international trade in particular through:

• verification and declaration in the transit procedure – exporters will have to declare under penalty of criminal liability that the goods will not be processed, stored or resold on the territory of Russia or Belarus,
• presentation of proof of customs clearance within 45 days of the exit of the goods from the customs territory of the EU from the country of destination, if these countries have been identified as being involved in the circumvention of the restrictive measures or the goods are transiting via Russia or Belarus,
• the presentation by importers of evidence of the country of harvest and information on the region of origin of the timber when importing sanctioned timber goods.

Significance for traders

Entrepreneurs should read the new regulations carefully and adapt their actions to avoid serious legal consequences. Above all, the new rules imply the need to:

• monitor and comply with EU sanctions in order to avoid the severe penalties foreseen by the Directive.
• adapt internal procedures to the new legal requirements, including appropriate compliance controls.
• be aware of the new reporting obligations and potential risks of circumventing sanctions.