SECO recently published revised versions of the FAQs on the sanctions provisions in connection with the situation in Ukraine.
Flurin Kohler
Legal Associate
On May 16, 2024, and June 13, 2024, SECO published revised versions of the FAQs on the Ordinance on Measures in Connection with the Situation in Ukraine ("Ordinance"). This concerns, among other things, explanations on the concept of "ownership" and "control" of companies and organisations as well as on ring-fencing measures and crypto-based assets.
The term "ownership"
In connection with the freezing of funds and economic resources of sanctioned persons and companies or companies that are owned or controlled by sanctioned persons or companies, the Ordinance mentions the terms "ownership" and "control" in Art. 15. The FAQs now contain information on how ownership and control are understood.
SECO now explicitly states in the FAQs that ownership exists if someone directly or indirectly holds more than 50% of the ownership shares in a company or organisation. Ownership shares of several sanctioned persons, companies or organisations are generally cumulated. SECO is thus adopting the corresponding guidance from the EU Commission.
The term "control"
In the FAQs on the topic of "control", SECO now provides a non-exhaustive list of criteria (e.g. majority of voting rights, possibility of determining the majority of members of the management body) to assess whether a company or organisation is controlled by a natural person or a company alone or together with other shareholders or third parties.
Only one of the criteria listed must be met to assume that a company or organisation is controlled by such sanctioned person, company or organisation. However, it is possible to rebut this assumption by providing evidence that there is no factual control in specific cases.
In constellations of transfers of value to third parties (e.g. sale of company shares or gifts to family members), further criteria must be taken into account according to the FAQs. If there is a reasonable suspicion at the time of the assessment that funds or economic resources have been formally transferred to third parties, but the sanctioned natural person, company or organisation still exercises factual control over them, these funds or economic resources must be frozen. To assess whether this is the case, the FAQs provide a non-exhaustive list of criteria. From SECO's point of view, it does not appear to be relevant when the transfer of assets took place. Control can therefore still exist if a transfer of assets had already taken place before the sanctions were implemented.
Ring-fencing measures
SECO may take so-called ring-fencing measures against companies or organisations established in Switzerland that are assumed of being owned or controlled by a sanctioned person and hence indirectly sanctioned.
Such ring-fencing measures have two objectives. The first is to ensure that sanctioned persons cannot exercise their ownership rights or control over the Swiss company or organisations in question. The second is to prevent that economic resources are made available by the Swiss company to sanctioned persons. Ringfencing measures may include the implementation of a robust internal compliance process (ICP) combined with an independent sanctions audit report assuring full compliance of the company with the ICP. The implementation of a ring-fencing removes the assumption of indirect sanctioning of the Swiss company and allows the Swiss company to continue its business activities.
In principle, SECO applies its criteria in connection with the ring fencing measures in accordance with those of the EU Commission (Guidance Note - Implementation of Firewalls in cases of EU entities owned or controlled by a designated person or entity). SECO confirms the successful implementation of ring-fencing measures in individual cases.
According to SECO, ring-fencing measures are not open to all companies, but only to companies that are active in sectors considered essential (food production, pharmaceuticals, fertilisers, etc.).
Crypto-based assets
Article 20 para. 2 of the Ordinance prohibits the provision of services related to crypto wallets, crypto accounts or custody of crypto-based assets to Russian nationals, Russian residents and Russian-based companies.
The FAQs state that not only may the aforementioned services no longer be provided and existing accounts or wallets must be closed, but that it is also not sufficient to simply block crypto-based assets. Existing assets must either be returned to Russian customers or converted into fiat currency or other non-sanctioned assets.
MME Legal Tax Compliance will be happy to answer any questions and provide support in the application of the sanctions provisions.
