European Commission Steps Up Due Diligence Criteria

European Union operators and banks are being urged to reassess and amend all due diligence and risk management practices to ensure compliance with important new requirements set forth by the European Commission. These council regulation updates were issued on December 11, 2024 and encompass a broad range of subjects, falling under their Consolidated FAQs section. Here’s a breakdown of the new requirements.

Updates target trade with Russia & Belarus

Trade and transactions involving Russia and Belarus as well as their bordering countries are the main focus of the commission’s updates. These jurisdictions are considered high-risk and call for additional measures and heightened due diligence to mitigate any potential liability. The new recommendations and criteria set forth put the responsibility on operators as well as banks to fine tune their internal procedures accordingly. 

The European Commission’s most notable update includes a new chapter devoted to heightened due diligence for operators manufacturing or trading common high priority or CHP items. This new addition unpacks the reasoning behind the augmented measures and lists the items that are considered CHP and the appropriate guidelines to follow for each. The chapter also qualifies which EU operators are most likely to be implicated, namely manufacturers, traders, and suppliers of high risk goods. 

Ensuring no stone is left unturned, the updates also include specific guidelines for due diligence performed on transportation, logistics, the flow of funds, counterparties, and passport and shipping controls. The commission also communicates whether goods are likely to be reexported to Russia or Belarus.     

EU wide due diligence & circumvention tightened

Big picture updates, intended to be implemented across the EU and not specific to Russia and Belarus trade, include a new responsibility placed firmly on the shoulders of banks. While banks have not historically been considered within the subset of operators since they don’t explicitly participate in the trade of goods, they do carry out the payments that make these transactions possible and therefore must be held to the same standard of risk management. Under the new updates, banks will now be required to monitor any open account transactions for potential EU trade restriction violations and are advised to put customized compliance programs in place to target specific risks connected to particular parties or transactions on a case by case basis. 

To ensure nothing gets lost to interpretation, the commission has also spelled out exactly what the language “knowingly and intentionally” means when it comes to practical application of the law. According to the National Law Review, “the commission confirms that the requirement of knowledge and intent is satisfied not only when a person deliberately seeks to circumvent sanctions, but also when a person is aware that their actions may lead to such an effect and willingly accepts that possibility.”     

Does your business trade, manufacturer or supply goods with the EU? Intelligo’s global due diligence services are always performed with the latest compliance updates and regulation requirements in mind. With so many details and nuances regulating each jurisdiction, it can feel impossible to keep up. Schedule your free demo today and let Intelligo protect your global transactions from potential risk or breach of compliance.