Sanctions are restrictive measures imposed pursuant to international public law.
Sanctions are imposed by an international organisation or a state and are applicable against natural or legal persons or other identifiable subjects.
Sanctions seek to bring about change in the conduct of states, regions or other subjects so as to ensure or restore peace, security and the rule of law. Consequently, the aim of sanctions is not to punish but to prevent a possible deterioration of the situation.
Types of sanctions:
- Financial restrictions
- Civil legal restrictions
- Restrictions on admission
- Restrictions on the circulation of goods of strategic significance and other goods
- Restrictions on the provision of tourism services
The legal framework:
- European Council Regulations
- European Council Decisions
- Law On International Sanctions and National Sanctions of the Republic of Latvia (The Law on Sanctions)
- Law on the Prevention of Money Laundering and Terrorism Financing
- Cabinet Regulation of 9 July 2019 No. 327 "Procedures for the Proposition and Enforcement of International and National Sanctions"
- Cabinet Regulation of 8 March 2016 No. 138 “On countries and international organisations that have prepared lists of persons that are suspected of participating in terrorist activities or creating, holding, moving, using or distributing weapons of mass destruction”
The imposition, application and enforcement of sanctions is also regulated by other laws and regulations in the field of customs, immigration and the movement of strategic goods, by the Civil Procedure Law, and others.
The Law on Sanctions
The Law on Sanctions governs the imposition and implementation of international and national sanctions in Latvia.
The purpose of the Law on Sanctions is to ensure peace, security, and rule of law in accordance with the international obligations and national interests of Latvia.
The Law on Sanctions applies to all natural and legal persons. Everyone is under the obligation to comply with and enforce international and national sanctions.
Certain persons listed in the Law on Sanctions must establish an internal control system for the management of the sanctions risk. Although businesses in general are not under such an obligation, the Ministry of Foreign Affairs recommends all businesses to establish internal control systems and conduct risk assessments based on their type of activity to ensure compliance with sanctions.
Who has the right to adopt sanctions?
- The United Nations Security Council (UNSC)
- The EU
- Other international organisations, such as the Organisation for Security and Cooperation in Europe
- Individual states.
What sanctions are binding in Latvia?
- UNSC sanctions
- EU sanctions
- National sanctions of Latvia
- Though not binding, in certain situations the national sanctions of EU and NATO member states are applied
Sanction lists and information on sanctions:
- EU sanctions
- UN sanctions
- Sanctions of the United States Office of Foreign Assets Control (OFAC)
The aim of the sanctions applicable in the EU is to pursue security and peace. Sanctions (also referred to as “restrictive measures”) are always part of the EU's Common Foreign and Security Policy that the Member States have agreed upon to address certain conflicts and threats. The EU Council can impose sanctions to react to a particular matter within a state or region and to address certain thematic matters e.g. terrorism.
The legal basis for EU sanctions is Chapter 2 of Title V of the Treaty on European Union and Article 215 of the Treaty on the Functioning of the European Union. EU sanctions are implemented through EU Council Regulations and Decisions.
Information about sanctions applicable in the EU is available in the interactive Sanctions Map. It specifies concrete types of sanctions, contains direct links to relevant legal acts, and provides a comprehensive search mechanism and detailed explanations of the restrictive measures in place.
The EU also publishes the Consolidated Financial Sanctions List. The Consolidated List and the Sanctions Map are advisory tools, with only the publications of legal acts in the EU Official Journal being legally binding.
As all the sanctions adopted by the UN are transposed into EU law, the EU Consolidated List includes financial restrictions set both by the EU and the UN that are binding throughout the entire EU jurisdiction.
Further information on EU restrictive measures is available on the websites of the EU Commission, the EU Council and the European External Action Service.
The purpose of UN sanctions is to address threats to international peace and security, such as terrorism, the proliferation of weapons of mass destruction, and other grave breaches of international law. Sanctions are imposed by the UN Security Council under Chapter VII of the UN Charter.
UN sanctions are binding upon Latvia from the moment they are imposed. Within the EU, UN sanctions are transposed into EU law through implementing legal acts.
Further information is available on the Security Council website.
Although sanctions imposed by OFAC are not legally binding in Latvia, the Law on Sanctions provides for the application of the national sanctions of EU and NATO member states, where breach of these sanctions would affect significant interests of the financial and capital market. Compliance with OFAC sanctions is of vital importance for financial institutions to be able to operate in the US market. Non-compliance with OFAC sanctions can result in access being denied to transactions in USD and to deals and transactions being suspended, which can damage the reputation of a company, bank or state and lead to other negative consequences.
The Financial and Capital Market Commission (FCMC) has issued binding recommendations, as well as non-binding guidance regarding sanctions risk management to participants of the financial and capital market. The recommendations and guidance are relevant for international as well as OFAC sanctions.
Information about OFAC sanctions can be found in its database, as well as on its website.
Sanctions Imposed by the Republic of Latvia
The Cabinet of Ministers may impose national sanctions upon its own initiative or on the basis of a proposal from the Minister for Foreign Affairs or from the National Security Council. Currently national sanctions have been imposed against one legal and two natural persons for their involvement in the nuclear programme of the Democratic People’s Republic of Korea.
These sanctions are regulated by Cabinet Regulation No. 419 of 25 July 2017, and implemented by Cabinet Order No. 390 of 31 July 2017 and Cabinet Order No. 137 of 29 March 2018.
Competent Authorities regarding National and International Sanctions:
The Ministry of Foreign Affairs (MFA) is the coordinating institution in all sanctions related matters in Latvia. The MFA coordinates the circulation of information with international organisations and competent authorities abroad on the imposition and introduction of sanctions and on the application of exemptions in Latvia.
The MFA is also responsible for measures of control over export of strategic goods (arms embargo), namely, each transaction with strategic goods – military and dual use – requires a licence issued by the Committee for Control of Goods of Strategic Significance. The licence is not issued if the recipient country is subject to an arms embargo.
Other competent authorities:
- The Ministry of Economics
- The Ministry of Finance
- The Ministry of Foreign Affairs
- The Ministry of the Interior
- The Ministry of Transport
- The Agricultural Data Center
- The Bank of Latvia
- The Civil Aviation Agency
- The Consumer Rights Protection Centre
- The Courts Administration
- The Financial and Capital Market Commission
- The Financial Intelligence Unit
- The Land Registry office of a district (city) court
- The Latvian Association of Certified Auditors
- The Latvian Council of Sworn Advocates
- The Latvian Council of Sworn Notaries
- The Lotteries and Gambling Supervisory Inspection
- The Maritime Administration of Latvia
- The National Cultural Heritage Board
- The National Electronic Media Council
- The Office of Citizenship and Migration Affairs
- The Patent Office
- The Road Traffic Safety Directorate
- The Register of Enterprises
- The State Revenue Service
- The State Security Service
- The State Technical Oversight Agency
When imposing national sanctions, the Cabinet of Ministers may also designate other competent authorities besides those indicated above.
Liability for the violation of sanctions:
The violation of sanctions has both civil and criminal liability.
Under Article 84 of the Criminal Law violation of sanctions imposed by international organisations or the Republic of Latvia is a crime with a maximum custodial sentence of 8 years.
If a person breaches the requirements regarding the internal control system and risk assessment the relevant competent authorities can impose administrative penalties ranging from a warning, to fines up to €5,000,000.
Public Entities and Sanctions
Section11.1 of the Law on Sanctions provides for the application of sanctions in public procurement and a public-private partnership.
All persons, including public entities, must comply with and enforce international and Latvian national sanctions. Public entities must in addition comply with and enforce the national sanctions of EU and NATO member state, which affect significant interests of the financial and capital market. As such public entities must observe OFAC sanctions in the fields of public private partnership and public procurement. In practice this means refusing any direct or indirect dealings with sanctioned persons.
Entities governed by public law are also prohibited from concluding contracts with or making payments to persons subject to sanctions.
Foreign Financial Assistance and Sanctions
If the promoter of a project seeking financial assistance from European or other foreign funds is subject to international of Latvian national sanctions or national sanctions of EU or NATO member state, which affect significant interests of the financial and capital market, that promoter must be excluded from the selection of projects.
Guidelines for the interpretation of sanctions:
- EU Best Practices for the effective implementation of restrictive measures
- New elements on the notions of ownership and control and the making available of funds or economic resources
- MFA Guidelines for the Effective Implementation of Sanctions in Latvia (in Latvian)
- The Wolfsberg Group Guidance on Sanctions Screening
Sanctions factsheet (in Latvian)
Guidelines for the effective implementation of sanctions in Latvia (in Latvian)
FAQs published by the EU Commission
FAQs published by the Financial and Capital Market Commission
What Businesses Should Know About Sanctions (in Latvian)
Sanctions in Public Procurement (in Latvian)
Monthly sanctions newsletter published by the MFA (in Latvian)
Discussion "Application of the Law On International Sanctions and National Sanctions of the Republic of Latvia in organising public procurement by local authorities" (in Latvian)
Informative material on the terms used in the field of Targeted Financial Sanctions