The European Commission (EC) issued an opinion in response to questions from EU national competent authorities (NCAs) on Article 2 of Council Regulation (EU) No 269/2014 (restrictive measures related to Russia and the Ukraine). This guidance reinforces the criteria used to identify "control" by a designated person. Companies must continue to undertake appropriate due diligence to determine whether counterparties are owned or controlled by designated persons.
Referring to a decision by the Court of Justice, EU Best Practices Guidance and responses to FAQs, the opinion reiterates that:
- making funds or economic resources available to a non-designated entity, which is owned or controlled by a designated person, entity or body, amounts to making them indirectly available to the DP.
The Commission lays out criteria which it notes "while not identical, reflect in substance those identified in paragraph 63 of the EU Best Practices" for NCAs to determine whether the designated person has control over the Entity.
If the designated person is determined to have control over the Entity, the Commission states that it:
- "can be presumed that the control extends to all assets nominally owned by the latter."
- To overcome this presumption and lift asset freezing, the Entity may demonstrate that it has put in place safeguards to keep the designated person from accessing the funds.
Therefore, making payments to any bank account of the Entity is prohibited, unless authorised by the NCA pursuant to one of the derogations provided for in the Regulation or unless it is reasonably determined that the funds will not be made available to the designated person. EU banks may credit frozen accounts as long as the incoming funds are then frozen.
Additionally, the prohibition on providing economic resources to a designated person extends to the provision of labour and services to entities controlled by designated persons.
NCAs and EU companies are reminded to provide information to the Commission if they have reason to believe "clients or counterparts" are controlled by designated persons.
[T]he Commission clarified that the assets of an entity controlled by a listed person must be frozen, even if the entity as such is not listed. However, the controlled entity may obtain the lifting of the freeze on some or all of its assets if it provides evidence that they are in fact not controlled by the listed person. The text further clarified that funds and economic resources cannot be made available to entities controlled by listed persons, except in specific cases foreseen as derogations in the sanctions regime. It also specified that the provision of labour or services to entities controlled by listed persons can amount to making economic resources indirectly available to the listed persons, insofar as it enables the latter to ultimately obtain an economic benefit.