Switzerland’s Financial Sanctions Regime: A Growing Concern for Local Businesses

In recent years, Switzerland has faced increasing pressure from foreign sanction regimes, particularly from the United States, which have far-reaching implications for both financial and non-financial institutions operating in the country.

The Legal Basis for Implementing Sanctions Measures

The legal basis for implementing sanctions measures is the Embargo Act (EmbG), which provides a framework for the Federal Council to issue coercive measures. These measures aim to induce specific behaviors and prevent the endangerment of international security and peace.

Types of Coercive Measures

Possible coercive measures include:

• Direct or indirect restrictions on transactions involving goods, services, payments, and people
• Restrictions on trade in certain goods such as war material or military equipment

The Impact of Foreign Sanctions on Swiss Institutions

Foreign sanctions do not have automatic legal effect in Switzerland unless adopted by Swiss authorities. This means that institutions operating in Switzerland are not automatically subject to foreign sanctions. However, the Office of Foreign Assets Control (OFAC) has expanded its jurisdiction to include any US connection, making it easier for OFAC sanctions to apply extraterritorially.

Consequences of Violating OFAC Sanctions

The implications of OFAC sanctions on financial institutions are severe:

• Violators face significant financial penalties
• Exclusion from the US financial market is a possible consequence

A recent case involving a Swiss bank, which was found to have violated US sanctions law in 2020, highlights the risk of breaching foreign sanctions law for local financial institutions.

Risks for Non-Financial Institutions

Non-financial institutions, including those in industries such as aviation, are also at risk of violating OFAC sanctions. A recent case involving a Swiss IT company, which agreed to a $7.8 million settlement with the OFAC, demonstrates the potential consequences of violating US sanctions.

Mitigating Risks

To mitigate these risks, it is essential for financial and non-financial institutions operating in Switzerland to:

• Familiarize themselves with various sanctions regimes
• Establish strong compliance teams
• Implement compliance programs and IT solutions to detect possible sanctions breaches efficiently

At [Law Firm], we are committed to supporting businesses navigating the complex landscape of foreign sanctions law. Our experienced team provides expert advice on compliance, risk assessment, and mitigation strategies to ensure that your business remains compliant with all relevant regulations.

Contact Us

If you need guidance on how to navigate Switzerland’s financial sanctions regime or require support in developing a compliance program, please do not hesitate to contact us today. We are here to help you stay ahead of the curve and avoid potential legal consequences.