By Ella Rosenberg
Issuing sanctions by the EU has never been an easy task. Furthermore, issuing sanctions on a neighboring state of the EU entails grave consequences not just on the state itself, but also on the EU.
Hence, the decision that the EU Council took on October 1st 2020 has not been taken lightly. It was under the pressure of Ms. Von der Leyen that the sanctions on Belarus have been passed by a regulatory acrobatic performance of the EU Commission’s legal team, by using Council Implementing Regulation (EU) 2020/1387, implementing Article 8a(1) of Regulation (EC) 765/2006, and Council Implementing Decision (CFSP) 2020/1388, implementing Decision 2012/642/CFSP.
EU Sanctions are divided to arms export, arms procurement, asset freeze, export and import, financial measures, travel, inspections, investments, ports and vessels, vigilance, training and education and crude oil. Currently the sanctions that have been imposed on Belarus are asset freeze and travel ban on forty officials that have been linked to the political unrest in the former Soviet country.
This move may seem to have an effect on only forty individuals, but this is hardly the case. EMIs, cryptocurrency exchanges and banks will have to take extra care and diligence with their on-boarding practices.
Depending on the jurisdiction in which the financial license is regulated, Belarus is been seen as a high-risk country, in which it is not possible to on-board clients from. Yet, depending on the jurisdiction in which the financial institution is licensed, certain regulators enable on-boarding from Belarus, dependent on the risk appetite and risk management of the institution.
This means that financial institutions which have been on-boarding clients from Belarus, will now have to increase their enhanced due diligence practices, review their risk assessment and management, and will also have to review their red flags and politically exposed persons (PEPs) documentation and risk analysis.
EMIs and crypto exchanges which have on-boarded clients from Belarus will have to review their conduct with their respective regulatory experts, as FIUs will be more diligent in identifying Belarus now.
Financial institutions which fail in their duty not to on-board the forty individuals, but also in their diligence with Belarus customers may experience increased questioning from the respective FIUs which they are licensed under, and might be called in for a client audit, especially institutions licensed in Estonia and Lithuania.
Ms. Von der Leyen may have pressured to issue these sanctions in a slight delay, yet the mere act stabilizes are term into a no-tolerance reign, especially for financial institutions. She may have found a right partner in Joseph Borell, which has seconded her opinion, but this Elizabeth I- Captain Francis Drake duo will only be able to transform their term from a page in history to actual consequence, if ESMA, the ECB, Member State Regulators and the regulated financial institutions pay attention to the message they are trying to convey, for the majority of their term, with certain success- Money laundering and terrorist financing will not be tolerated.
The real test is whether the EMIs and crypto exchanges will follow suit.
Ella Rosenberg, an EU Law Regulatory Consultant, is CEO of the Israel-EU Chamber of Commerce and Industry.