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Expertise

Sanctions legislation

Sanctions are in force both in the Netherlands and internationally to protect and promote human rights, public safety and the rule of law. Sanctions are coercive, non-military, political instruments that can take the form of national and international obligations, recommendations and agreements on law enforcement and the restoration of the national or international rule of law, or the prevention of unacceptable transactions, money laundering and terrorism. In the Netherlands, the Sanctions Act 1977 provides the legal basis for imposing national or international sanctions. At present, the interpretation and application of sanctions legislation is extremely relevant because of the current sanctions against Russia.

Dutch Sanctions Act 1977

Under Dutch sanctions legislation, sanctions can be imposed only with the aim of complying with treaties, resolutions or recommendations of bodies of international organisations, or international agreements . In practice, these are usually resolutions and recommendations of the UN Security Council or of the Council and the Commission of the EU. By their very nature, sanctions are typically temporary; they can be put into effect quickly if needed. Sanctions can be imposed on any person having legal rights in the Netherlands (organisations, natural persons and legal entities) and Dutch people outside the Netherlands.

Types of measures and sanctions

There are roughly three categories of sanction measures: (i) sanction measures against a specific state (in the event of obvious violations of human rights or an armed conflict); (ii) thematic sanction measures (to prevent unacceptable transactions, money laundering and terrorism); and (iii) sanction measures against human rights violations. In addition, there are different types of sanctions: (a) financial sanctions; (b) trade restrictions; (c) arms embargoes; and (d) travel and visa restrictions.

The financial sanctions (link to page in Dutch) that fall within our area of expertise are fairly wide-ranging. They would include asset freezing and restrictions or bans on specific trade transactions, on the direct or indirect provision of funds and on the provision of specific or all financial services. An example of a trade restriction would be that a party is required to obtain a licence before being permitted to sell or export goods. In practice, this typically concerns criminal or customs proceedings about non-compliance with the licence requirements for shipping strategic goods, dual-use goods or chemicals. Sanctioned countries or regimes include Russia, Iran, Iraq, Libya and Syria.

Sanctions lists

Under Dutch sanctions legislation, anyone is banned from doing business with entities, organisations or persons who are on the Dutch, EU or UN sanction lists. These persons or entities cannot be provided, either directly or indirectly, with money or other financial or economic resources.

Monitoring and reporting obligation – financial institutions and other entities subject to AML/CTF legislation

A number of specific financial institutions, such as banks, insurers and trust offices, are subject to additional requirements regarding their compliance with sanctions legislation in the normal course of business. In the Netherlands, the Dutch Authority for the Financial Markets (AFM) and the Dutch Central Bank (DNB) are responsible for exercising administrative compliance supervision.

One of the additional requirements is that these institutions are expected to make a report as soon as they establish that the identity of a new or an existing client corresponds to that of a person or an entity on a sanctions list. Once they have established this, they are banned from facilitating any financial transactions for this client. If the matter involves an existing client, their assets must be frozen and no new funds can be provided to them.

Under Dutch sanctions legislation, a client is taken to mean anyone who is involved in a financial service or transaction. In other words, unlike the reporting requirement under the Dutch Money Laundering and Terrorist Financing (Prevention) Act, the obligation to investigate matters stretches beyond the client. The ultimate beneficial owner (UBO) or the counterparty involved in a financial transaction should be investigated too.

Other entities subject to AML/CTF legislation should similarly make due allowance for the sanctions lists in their client due diligence procedures as they are also required to report unusual and/or suspicious transactions.

Enforcement of sanctions legislation

In the Netherlands, sanctions violations are subject to the provisions of the Dutch Economic Offences Act. Violations of the supervisory provisions can be settled with an administrative fine. Violations of the rules and requirements of Sections 2 and 7 of the Dutch Sanctions Act 1977 qualify as major offences if committed intentionally. Intentional violations of these rules and requirements are punishable by a prison sentence of up to six years, community service or a fine of up to the fifth category. Unintentional violations are punishable by a prison sentence of up to one year, community service or a fine of up to the fourth category.

Please do not hesitate to contact us if you have any questions about sanctions legislation. We are here to help.

 

[1] For more information, see 'Leidraad Financiële Sanctieregelgeving' (guidance for financial sanctions legislation) in Dutch.

 

 

Dutch Sanctions Act 1977

Sanctions lists

Monitoring and reporting obligation – financial institutions and other entities subject to AML/CTF legislation

Enforcement of sanctions legislation

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A.A. (Anke) Feenstra

J.N. (Judith) de Boer

G.M. (Mariëlle) Boezelman

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