International Sanctions in Estonia and the EU. The Subject.

Basic principles

International sanctions are an essential tool of foreign policy aimed at supporting the maintenance or restoration of peace, international security, democracy, and the rule of law, following human rights and international law, or achieving other objectives of the UN Charter or the Common Foreign and Security Policy of the European Union and the Government of the Republic of Estonia.

In a narrower sense, the aim of imposing international sanctions is to direct countries, entities, groups, or persons to comply with the rules and principles of international law, to make the continuation of sanctioned activities as costly and inconvenient as possible, or to prevent the unacceptable actions of the subject of the sanctions. Such restrictive measures are usually subject to various prohibitions (such as access to funds, resources, business, travel, diplomatic relations, or cultural cooperation), which, having a negative nature, should impact the sanctioned persons and their behavior.

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The fight against terrorism and combating proliferation financing form a part of the international sanctions and these fields are governed by the Financial Intelligence Unit's (FIU’s) AML/CFT guidelines and recommendations.

International sanctions must be applied by all persons (both natural and legal) operating in Estonia's territory and judicial area upon entry into force of the relevant legal act implementing the international sanctions. Concerning the sanctions imposed by the EU, the obligation extends to the entire territory and judicial area of the EU. This obligation is universal, i.e. it applies to all persons established in the region or judicial area of the EU, and it does not matter whether the person is a resident or a non-resident. This obligation arises from the UN Security Council resolutions and EU regulations, which are directly applicable to Estonia. According to Article 249 (2) of the Treaty on the Functioning of the European Union, all natural and legal persons in Estonia shall comply with their obligations arising from the entry into force of the EU Council regulation imposing the sanctions. EU regulations imposing sanctions provide that the regulation shall apply to all natural persons inside or outside the territory of the European Community who are nationals of a Member State, and to all legal persons, entities, and bodies established or registered under the laws of a Member State.

Development of AML documentation, FIU regulatory requirement

Development of AML documentation according to FIU regulatory requirements is a process that should be carried out by professionals with a positive background of interaction with the financial inspection and other government agencies.

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Provisional implementation of UN sanctions

Estonia shall implement the sanctions imposed by the UN Security Council resolutions until the persons that are subjects of the sanction are included in the Annexes to the EU Council regulations or until the relevant legal acts of the EU Council are adopted. It is a domestic measure aimed at ensuring the immediate implementation of the resolutions of the UN Security Council. With the provisional implementation of the resolutions of the UN Security Council, the restrictions set out in the resolutions shall be imposed, including the imposition of financial sanctions on the property of the persons involved in the proliferation of weapons of mass destruction. Targeted sanctions may include, for example, financial sanctions, a prohibition on the provision of technical assistance related to military activities, and a prohibition on financing military activities or providing financial assistance. More information on the sanctions imposed by the UN Security Council is available on the website of the UN Security Council.

Implementation of EU Council decisions

In the EU Member States, the sanctions imposed by the resolutions of the UN Security Council are implemented through the decisions of the EU Council and under the directly applicable regulations of the EU Council. First, the EU Council adopts a decision, and, thereafter, it will be able to adopt a regulation directly applicable to the Member States. The subjects of sanctions who are added to the lists drawn up according to the UN Security Council resolutions shall first be listed in the Annexes to the decisions of the EU Council, and subsequently, of the regulations.

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The subject of international sanctions

The subject of international sanctions may be a state, a territory, a territorial unit, a regime, an organization, association, or grouping, a natural or legal person, body, association, or any other entity identified as a subject in a legal act imposing or implementing international sanctions. It is important to know that the subjects of international sanctions may not necessarily be involved in criminal activities but may be individuals who are fully aware that their actions are in line with the legal order and may not even be aware of the restrictions imposed on them.

Subject of sanctions

Countries should prohibit their nationals or any persons and entities within their jurisdiction, from making any funds or other assets, economic resources, or financial or other related services available, directly or indirectly, wholly or jointly, for the benefit of designated persons and entities, entities owned or controlled, directly or indirectly, by designated persons or entities, and persons and entities acting on behalf of, or at the direction of, designated persons or entities unless licensed, authorized or otherwise notified following the relevant legislation (The FATF Recommendations).

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Ownership and control must be assessed following clauses 63–68 of the EU guidelines (EU Best Practices). These criteria are derived from Regulation No. 2580/2001 of the EU Council. However, care needs to be taken because, in part of the legislation on sanctions, the circle of persons subject to sanctions may differ.