Guidance on due diligence

The European Commission has issued guidance concerning the implementation of enhanced due diligence in relation to Russia sanctions circumvention risks. The guidance document refers to Council Regulation (EU) No 833/2014 and Council Regulation (EU) No 269/2014 and underlines the prohibition for EU actors to knowingly engage in activities designed to circumvent these sanctions. The guidance acknowledges the evolving sophistication of techniques used by Russian sanctions targets to evade EU sanctions. Therefore, EU operators are advised to adopt a risk-based approach encompassing risk assessment, multi-level due diligence, and ongoing monitoring to ensure compliance with EU sanctions.
Key components of sanction circumvention risk assessments include identifying at-risk products, transactions, and economic activities, evaluating sector-specific risks, designing mitigation measures, and regularly updating assessments due to the dynamic nature of circumvention techniques. Enhanced due diligence is recommended for activities most exposed to sanctions circumvention risks, such as indirect transactions using intermediaries, transit through circumvention hubs, complex corporate structures, and more.
Furthermore, the guidance stresses the need for due diligence at the stakeholder, transaction, and goods or services levels. This includes identifying and verifying business partners, examining transaction details, and scrutinising goods subject to export/import restrictions.
To prevent diversion of goods subject to sanctions to Russia, EU operators are advised to implement anti-diversion prevention procedures, including sanctions compliance clauses in contracts and ex-post verification. Vigilance is also necessary regarding the use of correspondent accounts, with financial institutions urged to monitor transactions to detect and prevent potential sanctions breaches.