Sanctions Enforcement in Jeopardy Due to Lack of Harmonization
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The implementation of sanctions against Russia is facing significant challenges due to a lack of harmonization among European countries on what constitutes “control” of a company. This gap in understanding has created an opportunity for companies to exploit the system and continue business with Russia despite the sanctions.
The Problem: Lack of Harmonization
Switzerland, known for its financial secrecy, has been criticized for not joining the G7’s REPO (Russian Elites, Proxies, and Oligarchs) task force aimed at freezing and seizing Russian assets. Experts warn that Switzerland’s lack of cooperation is damaging its reputation and creating a blind spot in sanctions enforcement.
The Swiss Approach
Definition of Control
The issue of control vs. ownership has been a point of contention among European countries. While some countries, like Germany, define control as owning more than 50% of a company’s shares, others, such as Switzerland, use a more nuanced approach that takes into account other factors like voting rights and management structure.
The Consequences
Uncertainty for Companies
“This lack of harmonization creates uncertainty for companies operating in the region,” said Thomas Kohler, a sanctions expert. “Companies may argue that they are complying with local laws, but this does not necessarily mean they are adhering to international sanctions.”
The Solution: Stricter Regulations and Greater Transparency
Kohler emphasized the need for stricter regulations and greater transparency in company ownership structures. “We need to get the private sector to be smarter about thinking about what they are doing rather than just looking at the laws,” he said.
Recommendations
- Stricter regulations on company ownership structures
- Greater transparency in beneficial ownership
- Harmonization of definitions of control vs. ownership among European countries
The Swiss Government’s Response
The Swiss government has imposed new sanctions on the Russian Wagner Group and RIA FAN news agency. While this move is seen as a positive step, experts warn that more needs to be done to address the broader issue of sanctions enforcement.
Conclusion
As the global community continues to grapple with the challenges of implementing effective sanctions against Russia, it is clear that a harmonized approach to defining control vs. ownership is essential for success. Until then, companies and governments alike will continue to navigate the complex landscape of sanctions enforcement.