- Publication type
- Article
- Thematic area
- Sanctions compliance & due diligence
Introduction
Sanctions are a tool used by the European Union to promote peace, security, and respect for international law. They are not meant to punish populations but to influence the behaviour of governments, organisations, or individuals. For small businesses engaged in international trade, understanding EU sanctions is essential to avoid legal and financial risks.
What are EU sanctions?
EU sanctions, officially known as restrictive measures, are decisions made under the EU’s Common Foreign and Security Policy. They are adopted by the Council of the EU and apply to all EU member states.
The EU currently has over 40 sanctions regimes affecting over 30 different countries. You can find out more information about these by visiting the EU Sanctions Map.
Who must comply with EU sanctions?
These measures are legally binding and must be followed by EU nationals, companies, and anyone conducting business within the EU. EU sanctions are not extraterritorial and do not apply to non-EU companies or individuals that do business entirely outside the Union.
Types of sanctions
Sanctions can take various forms, each designed to target specific activities or entities. The main types include:
- Asset freezes: Prevent targeted individuals or companies from accessing their financial resources or property within the EU.
- Trade restrictions: Restrict the export or import of certain goods – often those with military or dual-use applications, but also commodities that are critical to the targeted country’s economy.
- Financial restrictions: Impose restrictions on finance and investments in certain industries or countries.
- Travel and transport restrictions: Prohibitions on individuals entering or transiting through EU countries, bans on port stops, and restrictions on aircraft overflights.
Who can be targeted?
EU sanctions can apply to a wide range of actors. These include governments of non-EU countries, companies that support harmful policies, individuals involved in terrorism, human rights violations, or cyber-attacks, and groups such as terrorist organisations. The goal is to exert pressure while minimising harm to civilians and legitimate businesses.
What this means for small businesses
Small and medium-sized enterprises (SMEs) involved in international trade must be vigilant. They need to ensure that their business partners, suppliers, and customers are not subject to EU sanctions. Failure to comply can result in fines, reputational damage, and legal consequences. Due diligence is critical, especially when exporting goods, transferring funds, or entering into contracts with foreign entities. Although national authorities handle enforcement, businesses themselves are responsible for ensuring compliance.
What your small business can do
With the basics of sanctions now clear, we reach the key question: what can your SME do to ensure compliance? Small businesses should carry out sanctions due diligence by gathering information on transactions, spotting red flags, and using those initial checks to ask questions of customers, suppliers, or partners when needed. This means assessing the “who, what, where, and why” of your business activity, and our article here is a good place to start. The aim is to identify and address risks, ensuring that you can be confident that your business is not inadvertently engaging in unlawful or prohibited activity.
Finally, it’s also a great idea to build your own sanctions compliance programme.
Where to get help
Navigating EU sanctions can be complex, but help is available.
The EU Sanctions Compliance Helpdesk, an initiative carried out on behalf of the European Commission, provides free, tailored guidance for small businesses. It helps SMEs understand their obligations and conduct proper due diligence. It can also undertake due diligence where an SME needs help. Explore this website or attend one of our future training events to find out more.
You can submit a question or due diligence request through our Support Service.
In addition to this free resource, EU businesses can also contact the National Competent Authority (NCA) in their Member State. Contact details are available here.
Conclusion
EU sanctions are an important part of foreign policy and international law. For small businesses, understanding and complying with these measures is essential to avoid risks and maintain trust. By using official resources and seeking expert guidance, SMEs can ensure they operate responsibly and legally in the global marketplace.