This week in our Sanctions Enforcement Around the World series, we bring you the view from Sweden, an EU member state that is currently seeing increased sanctions enforcement activity.
- What are the recent sanctions enforcement trends in Sweden?
In Sweden, but also in the Nordic region, the enforcement of sanctions violations has historically been rather low with a handful of criminal enforcement cases. However, during the past 12 months enforcement has been increased significantly, including a number of ongoing criminal investigations mainly driven by an increased scrutiny and enforcement by Swedish Customs and other Nordic customs authorities. Based on our recent observations, there is a clear increase of ongoing investigations throughout the region. The enforcement trend is however especially clear in Sweden.
We have further seen a number of court cases between Swedish companies and the Swedish authorities, where the courts have clarified that it is the authorities that ultimately have the burden of proof in demonstrating that a party is owned or controlled by an EU Designated Person and thus subject to the same sanctions. These cases have provided interesting insights into how Sweden interprets and enforces the sanctions, including the application and interpretation of EUs Best Practices and FAQs. There are also a number of cases pending in the Swedish Supreme Administrative Court which are expected to be determined in the near future.
- What are the maximum penalties for violations?
If sanctions breaches are found, Swedish courts may impose fines or imprisonment up to two or four years for the responsible individuals (typically the CEO and/or executive directors of the entity). For individuals, the maximum fine to be imposed is SEK 200 000 (approximately EUR 18 000).
The maximum corporation fine to be imposed for sanctions violations is SEK 10 000 000 (approximately EUR 890 000) for medium size companies and 500 000 000 (approximately EUR 45 000 000) for larger companies. However, in order for a company to be fined, an individual needs to be found guilty of criminal offence.
- Is there a mechanism by which companies can submit a voluntary self-disclosure of possible violations to mitigate penalties?
On 4 March 2022, the European Commission announced the introduction of the EU Sanctions Whistleblower Tool. According to the Commission, the Tool can be used to report on “past, ongoing or planned” EU sanctions violations, as well as attempts to circumvent these. Reports to the Commission can be made either directly by email or on an anonymous basis via the online platform provided through the Tool. There is no local voluntary self-disclosure tool available in Sweden or the Nordic region.
- Do you anticipate increased coordination on enforcement matters with allies?
As an EU Member State, Sweden is taking part of the enforcement efforts which have taken place in the last year. EU is in the process of harmonising enforcement of the EUs sanctions in order to streamline enforcement on EU level. The aim of the proposal is to make it easier to investigate and prosecute individuals in a uniform manner in all Member States.
The complexity that has followed the Russia-related sanctions require coordination not only on EU level but also with international counterparts. We believe that the creation of the G7 Enforcement Coordination Mechanism and other multi-national enforcement efforts will facilitate this transition to increased international cooperation and increased sanctions enforcement against those not complying with the sanctions or attempting to circumvent them.
- What is one thing that you would recommend companies do now to get ready for increased enforcement?
Companies should prepare for a sanctions environment with increased enforcement on a multi-jurisdictional level. Not complying with the sanctions will be costly for companies and, in many cases, a matter of personal liability for management and the Board of Directors.
In order to be prepared, we recommend that companies should carry out a pre-emptive investigation into their business and/or exits out of Russia and Belarus, to identify possible issues and especially if decisions and actions taken have been properly documented. Based on our recent experience, there have been a lot of urgent and critical decisions taken during the previous 12 months and these decisions have often not been properly documented which in case of a regulatory investigation would pose a significant risk to the company and the individuals whom took such decisions.
Companies should also identify and closely monitor the increased circumvention risks related to countries neighboring Russia and Belarus. It is more important than ever to ensure that proper trade compliance clauses is used so that businesses may be suspended or terminated in the event that performance is hindered by the sanctions or through circumvention risks. Companies carrying out trade in neighboring countries to Russia and Belarus may consider audit right-clauses as well as actual in-person audits in order to mitigate circumvention and enforcement risks. Lastly, our recommendation is to regularly conduct screenings of all business partners, including banks, when conducting business that may have connections to Russia and Belarus.