Upcoming Amendments to Criminal Offences and Penalties for Sanctions Violations

The government proposal (HE 202/2024 vp) related to the reform of criminal offences and penalties for violations of EU sanctions was submitted to Parliament on 12 December 2024. The proposal includes new provisions in the Finnish Criminal Code applicable to violations of EU sanctions. These new provisions would replace the existing provisions on regulation offences that are currently applied to sanctions violations.

The proposed amendments are based on Directive (EU) 2024/1226, which defines criminal offences and penalties for violating EU sanctions. The proposed legislation will implement the Directive's obligations at the national level. The proposed amendments to the law are scheduled to enter into force on 20 May 2025.

As the enforcement of EU sanctions is a matter of national competence within the EU, it is ultimately the responsibility of Member States to adopt penalties applicable to sanctions violations. EU sanctions law requires that violations of sanctions be subject to effective, proportionate, and dissuasive penalties.

However, there are currently significant differences among Member States regarding the intensity of investigations and prosecution of sanctions violations. These divergences can ultimately result in the inefficiency of sanctions. The Directive aims to ensure that national provisions on penalties meet a commonly agreed minimum standard.

In addition to approximating criminal liability, the Directive establishes rules on administrative cooperation and obligates Member States to ensure that those responsible for investigating or prosecuting offences have effective means of investigation at their disposal.

The goal of the amendments proposed in the Government Proposal is to ensure that sanctions offences are punished with more comprehensive provisions than the current regulation offences. To this end, separate provisions are to be introduced in the Criminal Code for sanctions offences, aggravated sanctions offences, negligent sanctions offences, and sanctions violations.

Sanctions violations are often related to cross-border economic activities that involve multi-jurisdictional aspects. Importantly, from the point of view of sanctions enforcement, the new provisions will also apply to violations committed by a Finnish person outside Finland, even if the offence is not punishable under the law of the jurisdiction where it is committed.

For natural persons, the amendments include more nuanced and fine-tuned criminalisations compared to current legislation. The range of penalties for sanctions offences would include fines or imprisonment, depending on the severity of the offence, with imprisonment of up to five years for aggravated offences.

The proposal includes a significant scaling-up of penalties applicable to legal persons. Currently, the maximum corporate fine is EUR 850,000, which, according to the proposed provisions, will become the minimum corporate fine applicable to sanctions violations. The maximum amount of the corporate fine, in turn, is proposed to be 5% of the annual turnover of the legal person, with a cap of EUR 40 million.

The significant sanctions imposed on Russia over the last three years since the invasion of Ukraine in February 2022 have had a substantial impact on companies' compliance obligations. Although many Finnish companies have ceased their commercial activities in Russia, sanctions remain an important part of compliance obligations for all export companies and operators engaged in cross-border activities.

To counter Russian sanctions evasion, companies are under a legal obligation to prevent sanctions circumvention. For example, EU companies are required to include a mandatory contractual clause in supply agreements that prevents counterparties in third countries from re-exporting goods to Russia (the so-called no-Russia export clause). In addition, sanctions regulations require "best efforts" from EU companies to ensure that activities undertaken by their non-EU subsidiaries do not undermine EU sanctions targeting Russia.

The aforementioned requirements are examples of wide-reaching legal obligations adopted to ensure the effectiveness of the EU’s sanctions against Russia. It is important to note that failure to comply with these legal requirements could also result in criminal liability, including more severe penalties in the future. As efforts against sanctions circumvention will play a major role in future EU sanctions packages, it is crucial that companies have the tools to ensure compliance with these obligations, including sufficient resources and up-to-date compliance policies and procedures.

If you have any questions about this Legal Alert, please feel free to contact the undersigned or your regular Borenius contact.