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Writer's pictureArne Mielken

EU Sanctions: ‚Best Efforts‘ Obligations

Understand the "best efforts" obligations to prevent Russia and Belarus from circumventing EU sanctions to ensure your business aligns with them.


What Questions I Will Answer in this blog

  • How Important is Employing ‚Best Efforts‘ in Sanctions Compliance?

  • What are the new "best efforts" obligations under EU sanctions against Russia and Belarus?

  • How can businesses ensure compliance with these requirements?

  • What actionable steps should you take to mitigate risks and align with EU expectations?


Introduction

In the summer of 2024, the EU broadened its sanctions on Russia and Belarus, introducing new "best efforts" obligations to prevent sanctions evasion. These obligations mandate that EU-based organisations exert considerable control over their non-EU subsidiaries to ensure adherence to these restrictive measures.


On November 22, 2024, the European Commission published its much-anticipated guidance in Frequently Asked Questions (FAQs), which clarified the scope and expectations of these "best efforts" obligations. This blog explains the notion of ‚Best Efforts‘ and provides practical tips to manage this in your company.


How Important is Employing ‚Best Efforts‘ in Sanctions Compliance?


Sanctions compliance isn’t just a box to tick—it’s an ongoing commitment to integrity, professionalism, and accountability. Compliance became more challenging with the EU's recent expansions to sanctions against Russia and Belarus. Introducing “best efforts” obligations places heightened expectations on EU businesses to ensure their non-EU subsidiaries comply with restrictive measures. The November 2024 Guidance on what constitutes "best efforts" is vital information regarding ensuring that sanctions are not circumvented.

“Your commitment to compliance reflects your business's integrity. Staying informed and proactive is your strongest asset.”— Arne Mielken, Managing Director, Customs Manager Ltd

Abbreviations I Use in this Blog

To make this blog clear, I’ll explain key abbreviations:

  • EU: European Union

  • FAQs: Frequently Asked Questions

  • ICP: Internal Compliance Programme

  • AML: Anti-Money Laundering


What Are the ‚Best Efforts‘ Obligations?

Introduced in the summer of 2024 and updated on November 24, the EU's best efforts obligations demand that EU-based companies ensure their non-EU subsidiaries comply with EU sanctions obligations as best as possible. The focus is on preventing the circumvention of restrictive measures targeting Russia and Belarus.


The key points:

Key Points of the Obligations

  1. Extended Responsibility: EU companies must exert "significant influence" over non-EU subsidiaries.

  2. Risk Awareness: Businesses are expected to identify high-risk activities prone to sanctions evasion.

  3. Clear Communication: Companies must ensure their policies on sanctions are understood and implemented across their global operations.


This guidance aims to close loopholes exploited by non-compliant entities, reinforcing the EU's commitment to accountability and fairness in international trade.


Top Tp: Read our deep dive on ‚Best Efforts‘ explores the nuances of the guidance, its business implications, and actionable steps EU Operators can take for compliance, answering key questions on who is affected, what activities fall under "best efforts" obligations, when action is required, compliance expectations, and when liability may arise.?

How Can Businesses Ensure Compliance?

The European Commission’s FAQs clarify, but implementation falls on your shoulders. Here’s what you need to know:


  • "Best efforts" obligations require EU Operators to establish a compliance framework for their non-EU subsidiaries, including policies, controls, and procedures tailored to the operator's nature, size, and resources.


  • Operators must be aware of activities that could undermine EU sanctions and take measures like compliance programs, training, and mandatory reporting.


  • They must block transactions that undermine sanctions, including halting the use of intellectual property to prevent sanctioned goods from reaching Russia.


  • Liability can arise if the EU Operator knowingly allows activities that undermine sanctions, fails to block such transactions, or neglects due diligence.


What Actionable Steps Should You Take?

Taking proactive measures ensures compliance while safeguarding your business’s reputation.


  • Implement Training and Awareness Initiatives

    Your team must be equipped with knowledge. Regular training enhances risk awareness, enabling your staff to identify and prevent breaches.


  • Monitor and Audit Your Processes

    Regular audits of your sanctions and export control processes are crucial. This ensures your procedures adapt to changes in restrictive measures.


  • Collaborate Across Borders

    Open communication channels between EU-based companies and their non-EU subsidiaries. Encourage a culture of transparency and shared accountability.


Arne’s Takeaway

The “best efforts” obligations elevate the EU’s sanctions framework, promoting a culture of compliance that prioritises integrity and risk awareness. By implementing robust internal processes, fostering collaboration, and staying informed, you can ensure your business thrives without jeopardising its reputation.


Expert Recommendations

  • Read our Deep-Dive: This deep dive explores the nuances of the guidance, its business implications, and actionable steps EU Operators can take for compliance, answering key questions on who is affected, what activities fall under "best efforts" obligations, when action is required, compliance expectations, and when liability may arise.

  • Develop or Revise Your ICP: Ensure it incorporates the EU’s clarified guidance.

  • Engage Experts: Work with sanctions consultants to navigate complexities.

  • Leverage Technology: Use AI-driven tools for AML, export control screening, and sanctions compliance.


Fancy a Call?

COMPLIANCE QUESTIONS? I offer comprehensive support for export controls, sanctions compliance, and due diligence. Let’s discuss your challenges and find tailored solutions. Book your free expert call now at www.customsmanager.org.


Sources That I Base Our Information in This Blog On

Where To Find More Information On Topic

To dive deeper into sanctions compliance, subscribe to The Export Control & Sanctions Watch, or visit our Knowledge Hub at www.customsmanager.info.


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Learn With Me

I offer training on sanctions compliance, ICP development, and due diligence. Explore and book our courses at www.customsmanager.org/events.


Connect With Me & My Team

You can learn more about me and connect on LinkedIn. Follow my channel for tips and advice on export controls and sanctions.


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