Corruption sanctions are the new political weapon of the EU to thwart kleptocratic behaviour and illicit money flows globally. The continuing trend towards values-based sanctions, such as corruption sanctions, shows a strong inclination on the part of like-minded governments to pursue an interconnected due diligence approach. Ursula von der Leyen, President of the European Commission, announced that the EC will prioritise defending European values abroad by introducing corruption sanctions. This calls for European companies, including Swiss ones, to ensure that their Sanctioned Party List (SPL) screening and Business Partner Due Diligence (BPDD) set-ups are up to date, interdisciplinary, complete, and reliable. Companies may have to rethink their country risk ratings.

In February 2022 the European Parliament called for the adoption of an EU corruption sanctions regime, following the examples set by the UK and the U.S.

In her recent State of the Union Address in September, Von der Leyen announced that the European Commission (EC) will soon introduce measures to amend the EU anti-corruption legislative framework to tackle corruption within the EU. To fight corruption abroad the Commission will propose that corruption sanctions be included in the Human Rights Sanctions Regime. As a result it would be prohibited to make any funds or economic resources available to persons, entities or bodies named on the EU Global Human Rights (and anti-Corruption) Sanction regime. 

According to Von der Leyen, standards will be raised not only for traditional corruption offences such as bribery, but also for less obvious offences such as illicit enrichment, influence trafficking and abuse of power.

Traditionally EU sanctions were reactive: responses to critical events and concrete actions by specific governments and criminal organisations that could be located in a specific territory. The change of direction in EU political strategy began with the implementation of the EU Global Human Rights Sanctions Regime in 2020. The recent announcement of corruption-based sanctions is consistent with the general trend towards more values-based sanctions. Anti-corruption measures will help the EU position itself as a global leader in normative values, combatting human rights violations and endemic corruption.

However, the idea of curbing global corruption through sanctions is not new. The UK implemented corruption sanctions as an extension to the UK Bribery Act (2010) within the Sanctions and Anti-Money Laundering Act in 2018. The U.S. introduced  corruption sanctions as part of the Global Magnitsky Human Rights Accountability Act and the Executive Order 13818 of 2017 (“Blocking the Property of Persons Involved in Serious Human Rights Abuse or Corruption”). Canada established the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law) in 2017, which empowers it to impose unilateral sanctions against foreign nationals involved in corruption and human rights offences. Finally, Australia established an autonomous sanctions regime against serious corruption in 2021, allowing the Ministry of Foreign Affairs to designate a person or entity for targeted financial sanctions and impose a travel ban if the person or entity is found guilty of serious corruption.

Against this background, adopting a robust anti-corruption sanctions regime would enable the EU to work in tandem with close allies such as the U.S., the UK, Canada, and Australia, to push forward its foreign policy ambitions.

The Swiss sanction regime does not provide for corruption-based sanction regulations (yet). Nevertheless, it would be advisable  for Swiss businesses to comply with the (extended) EU value-based sanctions due to the interconnectivity of the Swiss and EU economies (the EU is Switzerland’s biggest trading partner), the fact that EU sanctions are applied internationally for all EU citizens (even when located in Switzerland), as well as for general compliance rating considerations.

Deloitte's view 

A “simple” Sanctioned Party List (SPL) screening process will no longer suffice. The SPL are ever changing and it is imperative for businesses operating internationally to work with up-to-date lists and IT solutions. Having the right framework in place will minimise the risk of engaging with an entity that does not comply with EU anti-corruption standards and that therefore finds itself listed on the EU SPL. It is also advisable to make corruption a high priority criterion in the BPDD process in order to avoid engaging with problematic potential or current business partners that are not on the SPL (yet) but which do not comply with anti-corruption measures. Furthermore, as risk profiles have changed, the different screening processes should be interconnected. In particular, the following key factors need to be considered:

Firstly, the country and BPDD risk ratings have to be re-examined. In the past it might have been acceptable to look at an embargo list and make sure your potential and current business partners do not operate in regions that were subject to embargos. In today’s world that is not nearly enough. It is crucial to include sources like the Transparency International Corruption Perception Index and the United Nations Human Rights Index when determining the risk profile of a business partner.  

Secondly, corporations should see the changes as a chance to benefit from synergies resulting from the increased interconnectivities between corruption laws, human rights laws, anti-money laundering laws and sanction regulations. By building up a holistic screening process, factoring in sanctions, politically exposed person(PEP) screenings, SPL screenings and Adverse Media Checks into one interconnected system, companies can benefit from increased efficiency and accuracy in their due diligence process.

Lastly, the concept of value-based sanction regimes nicely demonstrates the increasing complexity of SPL screening requirements. Facing a constantly aggravated risk of circumvention, companies need to be more diligent in their background checks. 

In conclusion, the shift towards more values-based sanctions in the EU calls for action to improve due diligence processes. It is vital to stay on top of the game when it comes to knowing your current and potential business partners. Furthermore, the shift in political strategy leaves room for speculation on what might be included next in the EU sanction regimes. It is probably right to assume that sustainability-related sanctions may follow calling for further enhancements to a company's BPDD process and risk rating.

If you would like to discuss this topic, please do reach out to our key contacts below:

Key contacts

Hevin Demir - Partner, Global Trade Advisory

Hevin is Partner with a legal background (attorney at law) and she is head of Deloitte Switzerland’s Customs & Global Trade Practice. She gained experience in various customs topics in consultancy as well as industry for many years. Her focus is on utilizing free trade agreements and obtaining efficiency and transparency by automation of customs and compliance processes.

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Philipp Weber-Lortsch - Senior Manager, Global Trade Advisory

Philipp is an international trade lawyer specialized in all matters of trade compliance with a specific focus on international sanctions, embargos and export controls on the one hand and customs matters on the other hand. He regularly designs, reviews and optimizes (Trade) Compliance Management Systems (CMS) including Business Partner Due Diligence (BPDD/ CDD) processes based on international standards.

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Saleh Naas - Trainee, Global Trade Advisory

Saleh joined Deloitte as a working student in the Global Trade Advisory team. He is working part-time while completing his B. Sc. in International Management. At Deloitte, Saleh is conducting research and analysis on topics such as trade policy trends, sustainability in trade, human rights due diligence, sanctions, and sanctions enforcement. Before he joined Deloitte, he spent one year at Chung-Ang University in Seoul where he developed a broad understanding of the Korean economy, society, and political environment.

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