Given that the restrictions imposed by targeted financial sanctions should be applied not only directly to persons on the sanctions list, but also to other persons owned or controlled by the sanctioned person, the Financial Intelligence Unit of Latvia (FIU) has published a document on assessment of control by designated public officials.
In practice, the assessment of the element of control is one of the most difficult aspects of the implementation of targeted financial sanctions. Additional ambiguity may arise in situations where potential control is exercised by designated public officials, particularly within state regimes such as Russia and Belarus.
Latvia's geographic location and historical economic ties may bring persons in Latvia into contact with Russian and Belarusian public authorities and state–owned companies. Therefore, it is essential to clarify the aspects of assessing the element of control to ensure legal certainty and a common approach to the implementation of sanctions.
In assessment of the justification of asset freezes in Latvia, FIU concluded that a number of asset freezes were not carried out in accordance with the sanctions laws and regulations. Most of these cases involved the assessment of the element of control in relation to Belarusian state-owned companies or public authorities where the alleged control is exercised by a high-level Belarusian public official subject to targeted financial sanctions.
The purpose of this document is to inform on the approach of the FIU to date in assessing control in situations where a non-sanctioned person is allegedly controlled by a public official subject to targeted financial sanctions. The FIU explains the aspects of the assessment of the element of control and the cases where, in the view of the FIU, an asset freeze is unjustified and a public official exercises control over a public authority and state-owned companies within the meaning of the sanctions.
The FIU constantly follows the clarifications and practices on sanctions implementation issued by the European Union (EU) authorities. However, at the current EU level, there are no guidelines or further clarifications on the assessment of the element of control in situations where there is the alleged control of a state-owned company or public authority. If the EU authorities were to publish a clarification on the assessment of the element of control in relation to public officials, the FIU, in the light of current circumstances and the need, would consider revising the position taken in this document. At the same time, it must be noted that the FIU is not empowered to formally interpret legal provisions.
The document published by the FIU in Latvian language can be viewed here.
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