In the second part on sanctions and their effects, attorney Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm present further cases – from the Russian sanctions via Cuba and Turkey to the acquisition of real estate by terrorists.
Anti-terrorism lists or ordinances could also be (or are they) null and void?
Regulations 881/2002 and 2580/2001 have been cashed by the
European Court of Justice (ECJ)
in its second-instance ruling of September 3, 2008 (Ref. C-402/05 and C-415/05) concerning the plaintiffs there. The fundamental right of defence had been infringed by inclusion in the list of sanctions without notification of the reasons for this, in particular the right to be heard and the right to effective judicial review. The freezing of funds violated property rights.
Whoever is on such an “anti-terrorism list” may not receive payment – funds are to be frozen, § 34 IV No.2 AWG. You could rely on software alone for the legal review of sanctions, and later on you might get the chance to think about whether this negligence was a good decision while in custody. The Advocate General had considered freezing the funds of terror suspects alone to be null and void.
The mass sanction lists worldwide, the susceptibility of software to errors, the uninsurability due to the invalidity of corresponding contracts in case of doubt – all this will dampen “globalization and free trade”, but hardly the international transfer of money. Nevertheless, numerous international sanctions lists and embargo lists must be observed.
Since 2017 there is a new “terror list” of Egypt, Saudi Arabia, UAE and Bahrain – which includes persons and organizations with connections to Qatar: This includes, for example, account suspensions and a collapse of air traffic.
Germans have also already been placed on the UN sanctions list, for example for promoting the IS, with the result that assets are frozen, access to the financial system is denied and a travel ban is to be imposed.
What is legal at home and in the EU may be punishable elsewhere abroad
Several very large German credit institutions had to pay billions of Euros in penalties in the USA, and dismissed selected employees (“Termination”) because they (allegedly) did not know or did not want to know which transactions are punishable under US sanctions. From 2014 at the latest, a German medium-sized company was put on the US terror list and remained on it – despite the Bundesbank’s audit finding that the person concerned had not been involved in prohibited business with Iran.
Information from BAFA and customs authorisations do not protect against the criminal judge
The information of the
Bundesamt für Wirtschaft und Ausfuhrkontrolle (BAFA)
on the scope of an EU trade embargo, as well as the export licence issued by the customs administration did not protect exporters of fish roe (caviar substitute) and liquor from conviction by the
Chemnitz district court
. For the second criminal court, it was questionable what in the end could be exported with impunity as “not yet a luxury good”: the
(Judgement of 20.03.2017, Az. 4 Ns 910 Js 11214/13), an embargo regulation seemed too vague for a conviction due to the lack of a value limit: This leads to the conclusion that already at the EU level, the staff formulates the embargo regulations too nebulously.
European Court of Justice (ECJ) confirms Russia sanctions as effective
The European Court of Justice (judgement of 28 March 2017, case no. C-72/15) decided that the EU sanctions against Russian oil companies are not objectionable and are therefore effective. In these proceedings, it was also criticised that “the terms used by the Council of the EU” had not been clarified; in particular, there was a contradiction between the wording of EU Decision 2014/512/CFSP and 2014/872/CFSP and that of EU Regulation No 833/2014 and No 1290/2014. The ECJ clarified that the execution of payments does not constitute “financial assistance” within the meaning of the Regulation.
GB has to comply with EU sanctions as long as the brexite has not been implemented.
Violation of US-Iran sanctions cost major German bank 1.45 billion euros
US authorities pursue sanctions violations as well as money laundering. Since 2014 at the latest, several listed German companies have already agreed on corresponding penalty payments. Sanctions lists list not only individuals but also groups, companies and organisations. It is not always easy to identify the members of these bodies (see EU Regulations No. 2580/2001, 881/2002, 83/2011). Violations are not only punishable by fines and imprisonment, but also the good prospect of landing on a sanctions list.
This also applies to trade in prohibited “dual-use” economic goods. Sanctions and embargoes can be person- and country-specific. In addition, the provisions of the
US Office of Foreign Assets Control (OFAC)
which address citizenship, residence and assets. Many US sanctions lists apply de facto extraterritorially, with sanctions such as exclusion from the US financial or goods market.
Fortunately, there is compliance
LG Munich I
, judgment of 10.12.2013, Ref. 5 HKO 1387/10). After the conviction in the amount of 15 million euros, the Chief Financial Officer concerned voluntarily retired from life. The reversal of the burden of proof in the case of organ liability was recognized too late by the convicted ex-management board. According to § 130 OWiG, a lack of a compliance system, even for medium-sized GmbHs, should be a punishable offence in Germany. EU companies that do business in Syria also have problems with ransom and protection money as well as road tolls.
(judgement of 09.05.2017, Az. 1 StR 265/16) already decided that an employee who bribes a foreign buyer can act in indirect perpetration, especially as a tax evader, because even disguised bribes are not deductible with us, just like extorted protection money.
Many a German manager has been arrested in Miami on entering the country, or his holiday abroad ended with extradition to the USA: according to the principle of “minimum contacts”, no residence or company headquarters, citizenship or branch office is required.
Executive orders can be irrelevant
EU branches of a US credit institution are only bound by European law – they cannot invoke an executive order of the US President (
OLG Frankfurt/Main, judgment of 09.05.2011, Ref. 23 U 30/10). As a result the
(Judgement of 03.12.2014, file no. 401 HKO 7/14), on the obligation of the subsidiary of a US insurer to regulate transport damage, concerning a purely civil Iranian delivery of goods (no dual use).
The EU regulation 961/2010 postulates in Art. 35 narrow exceptions from the insurance ban concerning Iran (similar to the EU regulation 36/2012 concerning Syria); regularly, corresponding insurance contracts are null and void, § 134 BGB. Any attempt to conclude such contracts should be reported to the Bundesbank. Even so-called sanction clauses do not provide legal certainty that the risk carrier will actually pay in the event of a loss.
The normative force of the factual reached the Latvian ABLV Bank, because US accusations of money laundering in favour of Russian and Ukrainian clients led within days to the withdrawal of client funds, and then to the drying up of funds. In addition, there was contact with North Korean business in contravention of UN sanctions. Due to a lack of “system relevance”, the ABLV was wound up.
Legal advisors are only considered as assistants if the client is recognisably inclined to act (BGH, decision of 20.09.1999, Az. 5 StR 729/98). For a money laundering report to be filed against one’s own client, it is necessary to have explicit positive knowledge that the services were used for this purpose or to promote terrorism – suspicion is not enough.
Cuba and Turkey as examples of disobedient allies
After Fidel Castro identified himself as a socialist, President Eisenhower imposed his first embargo, a “Law on Trade with the Enemy” (TWEA of 19 October 1960) against Cuba. The EU, Mexico and Canada reacted to the Helms-Burton Act of 12.03.1996 from Clinton by “blocking statutes” (EU regulation 2271/96 of 22.11.1996), which prohibited their own companies from following the US embargo. However, these statutes did not prevent a criminal conviction for violation of the TWEA in the USA. And in this country, some banks were more likely to be impressed by potential US fines than by the EU anti-boycott regulation (2271/96) – for example when it came to remittances to Cuba. After all, no one can be forced to conclude certain commercial transactions if they do not want to – for reasons other than the US embargo, of course.
Violations of Iran sanctions, bank fraud, money laundering and gold smuggling are accused of some Turks (“Operation Midas”), who were arrested on entry into the USA from 2015. Iran also found business supporters in China, UAE, Russia, Uzbekistan, Malaysia, France, Switzerland and Germany. After Iran was cut off from data traffic with SWIFT on 17.03.2012, they were looking for payment methods without data traces: Hence the gold, and traditionally perhaps rather precious stones.
No visa for potentially dangerous persons
The ECJ (ruling of 04.04.2017, ref. C-544/15) underlined in its decision that authorities have a wide margin of discretion when assessing whether a person poses a threat to public security. A mere potential threat is sufficient to deny an Iranian woman a study visa (EU Directive 2004/114/EC of 13.122004).
Citizens have been wrongly placed on a terrorist list for years
Legally binding findings by European courts have already led to repeated annulments of the formally continuing listing of persons on sanctions lists, as in the case of Moallem Insurance CO (Case T-182/13) or Naser Bateni (Case T-45/14).
A well-known example is Youssef Nada, who since 2006 was imprisoned in the Italian enclave “Campione d’Italia” surrounded by the Swiss Ticino, as he was not allowed to travel through Swiss territory. It was not until 12 September 2012 that the ECtHR (Case No 10593/08) ruled in favour of the person concerned, who was wrongly placed on a sanctions list.
Acquisition of real estate by terrorists and other money launderers
The European Court of Justice (judgement of 11.10.2007, case no. C-117/06) already decided that persons on sanctions lists against, among others, Osama bin Laden, do not have to be registered as owner in the land register after a property sale. If an entry is nevertheless made, the land register is incorrect and an objection would be appropriate “ex officio”, § 53GBO. The absolute restriction on disposal is to be noted in the basic file on the land register (BayObLG, DNotZ 1988, 784). For officials at the land registry and notaries, checking all sanctions lists is tedious, also because there is usually hardly any software that works well. Whether the payment of the purchase price will be “arrested” by oligarchs, for example, has not yet been clarified in court, but it is conceivable under § 74c StGB.
When it comes to money laundering and terrorist financing, the 2015 mantra “We can do it” seems inappropriate. The Federal Court of Justice (decision of 28 April 2011, file no. V ZB 194/10) made it easier with its decision “Proof of the existence, the identity and the representation relationships of this GbR are not required vis-à-vis the land registry office” also in Germany via shareholder relationships to camouflage a perhaps only apparently completely legal real estate acquisition.
by Dr. Johannes Fiala and Dipl.-Math, Peter A. Schramm
by courtesy of
www.experten.de (published on 18.06.2018)
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About the author
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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