International sanctions, also known as restrictive measures, are primarily issued by the United Nations Security Council and by the European Union. There are different types of sanctions, the most common of which are diplomatic sanctions, economic sanctions (which include financial sanctions) and military sanctions.
International sanctions may have different purposes. Some are designed to force a country, regime or organisation to comply with international law while the scope of others may be to contain a threat to regional or global peace. Sanctions may also condemn the actions or policy of a particular government. Sanctions are therefore issued for a number of reasons. These may include the situation in certain countries (often relating to deteriorating political situations, serious threats to democracy, illegitimate or totalitarian regimes, violation of constitutional and human rights, repression and the use of force against civilians), to combat terrorism and terrorist groups such as Al Qaida, to impose measures against the Taliban, and to control the proliferation of weapons of mass destruction.
Sanctions normally put in place various restrictive measures affecting the countries concerned and often target specific individuals, companies, other entities and organisations which are identified as being involved or connected with the situation or activities triggering the sanctions. Sanctions may include restrictions on trade affecting the purchase and supply of specified goods, products and materials, restrictions on travel, restrictions on the provision of financial services, the requirement to freeze funds, assets and economic resources and restrictions on making available funds and economic resources. Sanctions may also impose arms embargos, no fly zones, naval blockades and even military intervention.
Implementation of Sanctions in Malta
In Malta sanctions are implemented in terms of the National Interest (Enabling Powers) Act (the Act). The Act provides that United Nations Security Council Resolutions imposing sanctions are immediately and directly applicable and enforceable in Malta. EU Council and Commission Regulations concerning restrictive measures are directly applicable in Malta as a Member State of the European Union. Furthermore, implementation regulations, regulations for the imposition of penalties and regulations imposing national sanctions may also be made under the National Interest (Enabling Powers) Act. Acting in contravention of sanctions is a criminal offence and is punishable by imprisonment and, or a fine.
The Sanctions Monitoring Board is established by the National Interest (Enabling Powers) Act. The Board has a number of functions and has the overall function of monitoring the implementation and operation of sanctions legislation in Malta. The Board may propose persons or entities to be designated by the United Nations Security Council or by the Council of the European Union; propose the delisting of any designated person or entity; propose the unfreezing of property of any person or entity; receive, consider and make recommendations on applications from designated persons or entities for delisting or unfreezing of property and from persons or entities who have been erroneously or inadvertently designated; authorize access to frozen funds or other assets which the Board determines to be necessary for basic expenses, the payment of reasonable costs and fees for legal, medical, professional or other essential services, or for documented extraordinary expenses. The Board is also empowered to give a ruling on whether any action falls to be prohibited by any regulation made under the Act, or by any Regulation of the Council of the European Union, or by any United Nations Security Council Resolution. The Board is also empowered to request from any person, physical or legal, and any authority or entity, any information it deems necessary, relevant and useful for the purpose of pursuing its functions under the Act.
When regulations are made under the Act or when a United Nations Security Council Resolution or a Regulation of the Council of the European Union is published imposing freezing measures on property of a person or entity, such measures shall immediately upon publication become a freezing order having the force of law in Malta. Any person that freezes funds, assets or economic resources in accordance with the requirements of any sanctions is required to notify the Sanctions Monitoring Board in writing. MFSA Licence Holders are also required to notify the MFSA of any action taken and any freezing made.
International sanctions, particularly financial sanctions, are relevant primarily to the financial services sector. However, they are also binding on any person, company or entity, including practitioners such as lawyers and accountants and individual citizens, who may hold funds, financial assets and economic resources affected by the sanctions. In most cases financial sanctions impose the duty to freeze the funds, financial assets and economic resources belonging to, owned, held or controlled by designated individuals and entities, or by individuals or entities acting on their behalf or at their direction, or by entities owned or controlled by them; and prohibit the making available of funds, financial assets or economic resources to or for the benefit of designated individuals and entities. Financial sanctions may also prohibit the provision of certain financial services and certain financial transactions or the provision of financial assistance to designated individuals and entities.
Obligations of MFSA Licence Holders
The MFSA requires its Licence Holders to take note of all international sanctions as issued from time to time (including new designations of individuals and entities) and to exercise caution and vigilance in order to ensure that they do not in any way support activities, individuals or entities which are subject to sanctions or other restrictive measures. Licence Holders have a legal obligation to comply with international sanctions and to take all steps as may be required for their immediate implementation. They are therefore required to monitor their business relationships and to verify their records on an on-going basis for any information or transactions known or suspected to be connected or related in any manner whatsoever with designated individuals and entities and to identify and freeze any funds, financial assets and economic resources in accordance with the requirements of the sanctions.
Licence Holders are required to report the findings of their verifications to the Sanctions Monitoring Board and to the MFSA and to inform the MFSA of any action taken. In particular, Licence Holders are to report and give all relevant details to the Board and the MFSA about any funds, financial assets and economic resources which they have identified as belonging to, owned, held or controlled by designated individuals and entities and which they have frozen in terms of sanctions.
Sanctions and restrictive measures on a number of countries, individuals and entities (as in the case of Iran) are also in effect as a result of unilateral action by the United States of America. Unlike United Nations and European Union sanctions. MFSA Licence Holders and the public in general are encouraged to take US sanctions into consideration when conducting business activities in view of the wide ranging applicability of these measures and the risk of significant financial actions which may have serious implications on their business activities.
US sanctions legislation provides for various types of action that can be taken by the US Government and contains a number of very significant financial provisions. These include measures targeted at foreign persons or entities, including banks that knowingly carry out transactions in breach of US sanctions laws and regulations. The US Treasury Department, through the Office of Foreign Assets Control (OFAC) may impose measures against any non-US bank which it determines having engaged in prohibited transactions such as providing financial services to designated persons or entities. Such measures include directing US banks to terminate US correspondent banking relations with non-US banks and blocking their access to the US financial system.
As stated above, the Sanctions Monitoring Board is the Competent Authority for sanctions related matters, information on international sanctions is available via their website.
The information provided by the MFSA aims to assist Licence Holders and other interested persons to be aware of and to comply with international sanctions. Licence Holders and interested persons are urged to consult the appropriate Sanctions Monitoring Board, United Nations and EU websites for complete and up-to-date information and to seek professional advice as may be necessary to ensure that they do not in any way support activities, individuals or entities which are subject to sanctions or become unwittingly involved and possibly implicated in the violation of sanctions.