This is how UN, EU and national sanctions are applicable in the ordinary course of business.
To what extent are sanctions applicable in the non-financial sector?
A Maltese businessman chartered a vessel he owned and agreed to hand over the vessel without delving into what was going to be transported. Following further documentation requested by the bank that was handling the inward payment, it transpired that the goods on board the vessel were in violation of EU sanctions.
The bank informed the Sanctions Monitoring Board (SMB) and the police were brought in. The businessman was charged with breach of sanctions and had all his assets frozen. He is facing criminal action punishable with either imprisonment or a fine or both.
In another case, a foreign resident in Malta who collects military items bought an accessory to a weapon on eBay and paid through an online purchase using his credit card.
Malta customs withheld his purchase since it was from an EU sanctioned country from which imports of military items and their accessories were prohibited.
He was charged with breaching EU sanctions, his bank account was frozen and risks incurring a hefty fine.
If you are exercising a trade or business in Malta but are not a subject person in terms of the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR) or even making online purchases for yourself you still need to ensure full compliance with United Nations (UN), European Union (EU) and national sanctions or risk falling foul of the National Interest (Enabling Powers) Act, chapter 365 of the Laws of Malta.
Which international sanctions are applicable under Maltese law?
UN, EU and national sanctions have direct applicability under Maltese law in terms of chapter 365.
While national sanctions are enacted following regulations issued by the minister responsible for foreign affairs under the said act, UN or EU sanctions are directly applicable in Malta without the need of any further local legislation and are immediately enforceable.
Although UN sanctions are implemented under EU sanctions, the EU often goes beyond that stipulated under UN sanctions through parallel autonomous measures or through the establishment of new sanctions regimes.
Are sanctions only applicable to subject persons in terms of the PMLFTR?
Chapter 365 applies to all persons in Malta irrespective of their nationality, status or reason for being in Malta.
The law also applies to Maltese persons wherever they may be including all Maltese registered vessels, aircraft and other means of transport, even though they may not be in operation in Malta.
In case of subject persons conducting a relevant activity as defined under the PMLFTR, there is an added obligation to have systems in place as defined under article 17(6) of the National Interest (Enabling Powers) Act and to check the client database against the sanctions list on a regular basis.
Which penalties may one be subjected to for breach of sanctions under Maltese law?
Chapter 365 envisages hefty penalties for breaches of sanctions. Upon conviction, a person is liable to an imprisonment from a minimum of 12 months to a maximum of 12 years and/or a fine of not less than €25,000 and not exceeding €5 million.
In the case of legal entities, the fine envisaged stands at a minimum of €80,000 up to a maximum of €10 million.
Moreover, jurisdiction is also granted to Maltese courts when part of the offence took place in Malta or was committed for the benefit of a legal entity in Malta or when the offence was committed abroad but the gain from the offence was received in Malta.
Which restrictions do sanction regimes typically impose?
Every sanctions regime is different and each one needs to be considered on its own merits.
It may be prohibited to export proliferation sensitive goods, cultural artefacts, precious metals, goods connected to drilling or even food.
Moreover, any financial transaction or insurance services related to the movement of such goods are automatically included in the prohibition.
Apart from restrictions on goods and services, sanctions regimes typically include a list of natural and legal persons to whom it is prohibited to make any economic resources available directly or indirectly.
Therefore, it is important for a trader to know who he is dealing with and more so since a lot of trade is being conducted online without the benefit of the physical interaction between buyer and seller.
What checks need to be carried out?
In the trader’s case, it is important that checks be carried out on whether there are any sanctions against the country where the buyer is situated and where the goods will be delivered.
Should the buyer come from a sanctioned country, the necessary due diligence needs to be carried out to ensure that the goods are not included under the particular sanctions regime.
Checks need also be undertaken on the buyer of the goods lest he is a listed person or acting on behalf of another sanctioned person.
If, for example, we take Libya, there are prohibitions related to arms and military material.
If the buyer is in the DPRK [North Korea], however, the sanctions regime applicable is extensive and the prohibitions include common items such as food as well as luxury items.
Owners and operators of Maltese-registered vessels also need to keep up to date with applicable sanctions given that certain sanctions regimes impose restrictions on goods and their carriage as well as restrictions on vessels to call in certain ports.
Where can information on applicable sanctions be accessed?
Sanctions as a tool used in international relations and changes to the sanctions regimes are ongoing and, hence, the importance of keeping oneself up to date with the latest sanctions updates.
A good source to find out which sanctions are applicable and in which countries is the EU sanctions map.
A person may become liable for a breach of sanctions even for actions committed out of carelessness or lack of awareness of applicable sanctions.
The SMB sends out regular updates regarding UN, EU and national sanctions to its list of subscribers and invites all interested persons to subscribe to this mailing list on firstname.lastname@example.org.
The board is available to answer any queries from the public on the applicability of sanctions and may be contacted on the same e-mail address.
Neville Aquilina is chair of the Sanctions Monitoring Board.