Transferring funds to a designated person
In the Commission’s view, the EU operator that entered into a contractual relationship and initiates the related transfer of funds bears primary responsibility for such transfers.
Nonetheless, each EU operator must meet its own obligations under EU restrictive measures and conduct the appropriate checks. Consequently, EU banks must apply due diligence mechanisms to ensure that processing a payment linked to an underlying transaction does not result in the indirect making available of funds to a designated person. By failing to comply with this obligation, the EU bank in question can be in breach of Article 2(2) of the Regulation. In addition, the EU bank should inform the NCA and the Commission immediately, as required by Article 8 of the Regulation.
EU banks must apply the appropriate due diligence procedures to avoid that a payment made to a certain non-designated entity results in the indirect making available of funds to a designated person.
Crediting accounts of a designated person
If a financial institution discovers that it runs an account belonging to a person or entity whose identification details match those of a designated person or entity, it must immediately freeze the funds, i.e. prevent any access to or dealing with the funds. The discovery should be notified to the NCA.
Processing payments from the national accounts of EU operators to the accounts of the mentioned non-EU entities, if these transactions are based on invoices issued for the products of Entity B controlled by the designated person?
Should an EU bank be aware, or have reasonable grounds to believe, that a transaction it is processing would amount to making funds or economic resources directly or indirectly available to a designated person, it must refrain from processing the transaction, freeze the amount and inform the NCA and the Commission immediately, in order not to violate Articles 2(2) and 8 of the Regulation.
If the products in question were purchased by an EU operator from an operator in another Member State that, in its own right, had acquired them from another non-EU entity, would this represent a breach of the Regulation by the purchasing operator? Similarly, would the processing of the underlying transactions by an EU bank represent a breach of the Regulation?
Article 2(2) and Article 9 of the Regulation do not refer in any way to the location of the party receiving the funds. Therefore, all EU operators, including banks, are prohibited from making payments to any entity, irrespective of where it is based, if this would entail making funds or economic resources available, directly or indirectly, to or for the benefit of a designated person
Must banks separately assess whether the designated person has control over each asset (e.g. bank account) of the controlled entity in order to freeze them?
In the Commission’s view, if the designated person is determined to have control over the Entity, it can be presumed that the control extends to all assets nominally owned by the latter.
The Entity may obtain the lifting of the freeze on some or all of its assets by demonstrating that these are in fact not “controlled” by the designated person, for instance because safeguards are put in place preventing the designated person from having access to them
If EU economic operators find indications that their clients or counterparts, although non-designated, may be controlled by a designated person, they are required to provide such information immediately to the NCA and the Commission, and to cooperate with the NCA in any verification thereof.
Must EU economic operators block all financial transactions only to bank accounts of the Entity, or both to and from said bank accounts?
All transfers to (by EU persons) and from the frozen accounts of the designated Entity must be blocked, unless otherwise authorised by the NCA pursuant to one of the applicable derogations provided for in the Regulation.
However, financial or credit institutions may credit frozen accounts in the event of transfers from third parties, provided that any such additions are also frozen. The NCA must be duly informed about any such transactions without delay.
prohibition extends to payments made to any account of the Entity, including those not frozen, unless (a) the payments are authorised in advance by the NCA pursuant to one of the derogations provided for in the Regulation, or (b) it is reasonably determined that such payments will not be made available to the designated person. As mentioned above, EU banks may credit frozen accounts insofar as the incoming funds are also then frozen