Following from the recent geopolitical developments in Ukraine, there has been a heightened interest in sanctions, specifically, those sanctions being imposed against Russia. Through this series of articles, we aim to provide a general overview of the notion of sanctions, consider the local framework through which sanctions function in Malta, illustrate the general obligations which subject persons are required to observe vis-à-vis sanctions and discuss a general overview of the sanctions imposed by the EU against Russia.
In this second article, we shall consider sanctions from a Maltese law perspective.
The main legislation applicable to sanctions in Malta is the National Interest (Enabling Powers) Act, Chapter 365 of the laws of Malta. This Act, which applies to any natural and legal persons in Malta, allows for the implementation of certain treaties and measures, the restriction of trade and travel, and to enable effect to be given to certain provisions of the Charter of the United Nations. Chapter 365 also allows for the direct applicability of European Union (EU) and United Nations (UN) sanctions in Malta. The National Interest (Enabling Powers) Act also sets up the Sanctions Monitoring Board (SMB), under Article 7. The SMB is the competent authority charged with monitoring the implementation and operation of sanctions and other restrictive measures.
Chapter 365 grants the Minister responsible for foreign affairs with the power to issue Malta-based sanctions. The powers which are granted to the Minister include the designation of any person or entity, and that any natural or legal person in Malta may be directed to freeze all property of a designated person or entity. These powers are granted to the Minister upon the recommendation of the SMB and if he considers that these measures would be within the national or international interests of Malta.
Under Article 7 of Chapter 365, a representative of the Ministry for Foreign Affairs shall act as Chairman of the SMB. The members include various representatives of key offices, ministries or authorities such as the Attorney General, the Commissioner of Police, the Office of the Prime Minister, the Financial Intelligence Analysis Unit, the Malta Security Service, and the Ministry responsible for home affairs.
Section 7(5) of the Act also stipulates the functions vested to the Board. Some of these powers include that of monitoring the implementation and operation of sanctions imposed by regulations under this Act, Regulations of the Council of the EU and the UN Security Council, as well as empowering the SMB to issue restrictive measures, sanctions and asset freezing orders. It is to be noted that the SMB shall have such other functions as may be assigned to it by the Prime Minister.
Article 11 of Chapter 365 allows any person to request the SMB to issue a ruling on whether an action is prohibited by any particular regulation made under this Act, or by any Regulations of the Council of the EU or by any UN Security Council Resolutions. This request is to be made in writing and such request shall not attach any liability where that person has acted in conformity with any such ruling. Chapter 365 also empowers the SMB to request information or data from any person and introduced the concept of personal liability of officers of a body corporate, which breaches any applicable sanction.
Given that the applicability of Chapter 365 falls to any natural or legal person in Malta, there is a duty on all persons to be aware of the applicable sanction and to carry out the necessary checks and screening to ensure compliance with all sanctions. Where there is a direct or indirect violation of a sanction, there is an obligation to stop a transaction from going through, freeze any assets and to immediately inform the SMB of the violation. Furthermore, persons should adopt internal procedures to screen, stop transactions, freeze assets of designated persons/entities and submit reports to the local SMB in relation to its businesses based in Malta.
It is important to note that in terms of Regulation 6 of National Interest (Enabling Powers) Act, Chapter 365 of the laws of Malta, any person who acts in violation of any regulations made under Chapter 365, or of a regulation of the Council of EU or of a UN Security Council Resolution shall be guilty of an offence. The consequences of such a conviction would result in a term of imprisonment of a term between twelve months to twelve years, and/or a fine of not less than € 25,000 and not exceeding € 5,000,000.
Where a breach is committed by an officer or body corporate and that officer or body corporate benefitted from such breach or the breach was a result of a lack of control or supervision, that officer or body corporate may be subject to a fine of between € 80,000 and € 10 million and either a suspension or withdrawal of license or the closure or mandatory winding up of that entity. Furthermore, where the breach is committed by a body corporate, there is also the personal liability of the officers of that body corporate which would be considered, unless it can be proven that such breach was committed without knowledge and that the officers has exercised all due diligence to prevent the breach.