A Swiss-headquartered private equity fund has identified an acquisition target with operations across three European Union member states. The deal team has run the target through its standard screening tool. No direct hits. Green light? Not necessarily. The fund's advisers now face a harder question: has the diligence captured the full ownership chain under the EU's ownership and control test (the principle that a non-listed entity may itself be caught if a designated person owns or controls it), and does the Swiss SECO (State Secretariat for Economic Affairs) regime impose any additional or divergent obligations that could re-open the analysis?
As of January 2026, sanctions due diligence in M&A under the EU regime and the Swiss SECO regime share a common architecture – both apply an ownership-and-control standard rather than a purely mechanical threshold – but they diverge materially on the instruments that trigger the obligation, the specific ownership tests they impose, the licensing routes available to close a deal in scope, and the consequences of a missed designation. A clean screen under one regime is not a clean screen under both.
This analysis maps the divergences that matter most for a cross-border deal team, identifies the points at which a SECO exposure can arise even when EU diligence appears complete, and sets out the risk flags that most often surface in our cross-border practice.
What governs sanctions due diligence in M&A – and why both regimes bite
EU sanctions diligence in M&A is grounded in the relevant Council Regulations implementing the EU's autonomous measures, together with the corresponding Council Decisions. The regulations apply to any person or entity within EU territory, to EU nationals wherever they are, and to transactions conducted or cleared in euros anywhere in the world. That last point matters: a deal structured outside the EU, between non-EU parties, that clears or settles in euros can still engage EU prohibitions.
SECO administers Swiss autonomous sanctions through a set of ordinances adopted by the Swiss Federal Council. Switzerland has, over successive cycles, aligned closely with EU measures but has done so as a matter of national policy, not automatic adoption. The result is that the Swiss list tracks the EU list in many programmes but does so on its own timetable and with its own definitional rules. A designation added in Brussels may not appear in Bern on the same day, and a Swiss-connected transaction that clears days after an EU designation – but before the Swiss ordinance is updated – may face an asymmetric legal position depending on where the parties are domiciled.
For a deal team, the practical implication is immediate. Diligence cannot be run against one list alone. The two regimes must be screened in parallel, and the timing of any updates must be tracked through to closing.
How do the ownership and control tests compare under the two regimes?
Both the EU and SECO apply an ownership-and-control standard: an entity that is owned or controlled by a designated person is itself subject to the prohibitions, even if it does not appear on any list. But the tests are not identical, and the differences create practical gaps.
Under the EU regime, the Council Regulations set out an ownership test and a control test as alternatives. Ownership is assessed by reference to shareholding. Control is assessed more broadly and can be established through governance rights, contractual arrangements, or other means that give a designated person decisive influence over an entity. The EU approach does not anchor exclusively on a single percentage threshold: ownership above a defined level creates a presumption, but control can be established even at lower ownership levels if other governance indicators are present. In our experience advising on EU-regime diligence, the control limb is the one that deal teams most consistently underweight.
SECO's approach under the applicable ordinances is similarly dual-track, but the thresholds and the indicators used to assess control are set out in Swiss national instruments, not in EU texts. Where the EU regime has been interpreted through EU General Court judgments and Commission guidance, the Swiss position develops through Federal Council practice and SECO's own administrative guidance. Those interpretive streams are independent of each other. A control analysis that satisfies EU requirements may not satisfy SECO's, if the ordinance in question uses a different threshold or a different list of governance indicators.
Does your deal team have a view on which analysis is the more demanding for the specific target? In our cross-border practice, we regularly find that the answer varies by programme and by year.
Where do the regimes diverge on sanctions due diligence in M&A?
The most significant divergences between EU and SECO sanctions diligence in M&A fall under four headings: list coverage, timing of adoption, sectoral scope, and the position of connected persons.
List coverage. The EU Consolidated List is maintained by the European External Action Service and updated in real time. SECO maintains a separate Swiss list, updated by Federal Council ordinance. The two lists overlap heavily for the major programmes but are not identical. SECO has adopted some EU programmes in full, others partially, and a small number not at all. A target with a minority shareholder who appears on the EU list but not yet on the Swiss list presents a clean Swiss screen but a live EU concern – and the reverse can also occur in transitional periods.
Timing. When the EU adds a designation, the relevant Council Regulation takes effect on publication in the Official Journal. The Swiss ordinance update follows a Federal Council decision, which requires its own procedure. In practice, the gap between an EU designation and a corresponding Swiss measure can range from days to several weeks, depending on the programme. For a deal that is in the signing-to-closing window, that timing gap can determine which set of obligations the parties bear at the critical moment.
Sectoral scope. Some EU sanctions programmes include sectoral restrictions: prohibitions on transactions in defined sectors such as energy, finance, or transport with entities connected to a particular programme, irrespective of designation status. Those sectoral measures are EU-specific. SECO's approach to sectoral restrictions differs; Swiss ordinances have not always replicated EU sectoral measures in the same terms. A target operating in a sector subject to EU sectoral restrictions may clear a SECO screen but remain subject to EU prohibitions simply by reason of its sector and the nationality of its counterparties.
Connected persons. Both regimes prohibit making funds available to designated persons, including indirectly. The concept of "making available" has been interpreted broadly under EU law to cover transactions that economically benefit a designated person, even if the direct counterparty is not listed. SECO's interpretation of the equivalent prohibition follows Swiss administrative practice, which in some respects tracks the EU position and in others diverges. Where a seller in an M&A transaction is not itself designated but a beneficial owner of the seller is, the analysis under each regime as to whether the transaction "makes available" resources to that beneficial owner can produce different answers.
Which regime is stricter on sanctions due diligence in M&A?
There is no single answer: the relative stringency depends on the programme, the transaction structure, and the timing. That said, several observations from practice are consistent.
For the major programmes where both regimes are active, the EU regime is typically more prescriptive in its sectoral measures and has a more developed body of interpretive guidance from the Commission and the EU General Court. The EU's blocking regulations and its framework for enforcing ownership-and-control determinations are well-tested. An entity caught under EU ownership-and-control analysis faces a body of case law that is harder to argue around than the equivalent Swiss administrative practice.
SECO, on the other hand, administers a smaller number of programmes and has not adopted every EU sectoral restriction. For a Swiss-domiciled entity transacting in a programme where SECO has adopted a narrower measure, the Swiss obligation may be lighter. That can create a perception that Swiss compliance is sufficient. In our experience, that perception is the single most common error we see in cross-border M&A diligence – the assumption that SECO clearance covers the EU exposure.
The correct approach is to treat the two regimes as parallel tracks that each require independent analysis. Where they reach different results, the stricter prohibition governs for any party operating within that regime's jurisdictional reach. A EU-domiciled buyer cannot take comfort from a clean SECO analysis; a Swiss buyer cannot ignore EU prohibitions that apply to a euro-denominated closing payment.
The position above covers the standard case. Your specific facts – the domicile of the parties, the currency of the transaction, the sector of the target, the ownership structure of both buyer and seller – change the analysis materially.
For a structured review of how the two regimes apply to a specific transaction, contact Calder & Vance at info@caldervance.com.
The diligence process: a practical decision sequence
Effective sanctions diligence in M&A under both the EU and SECO regimes follows a sequenced approach. Each stage gates the next.
Stage 1: Scope the applicable regimes. Identify the regimes that bite based on the nationality and domicile of the parties, the currency and clearing mechanism of the transaction, and the sector and location of the target. A deal between a Zurich-based buyer and a Paris-based target, closing in euros, with a seller whose beneficial owners include persons connected to a sanctioned programme, will engage both EU and SECO instruments – and potentially others.
Stage 2: Build the ownership map. Ownership and control analysis requires a full picture of the target's beneficial ownership chain, not only the first legal layer. For both regimes, the relevant question is whether any designated person, directly or indirectly, owns or controls the target. In practice, this means requesting corporate structure charts, shareholder registers, and ultimate beneficial ownership declarations as early as possible in the diligence process. Gaps in this documentation should themselves be treated as a risk flag.
Stage 3: Run parallel list screens. Screen against the EU Consolidated List and the SECO list simultaneously, using the most current versions of each. Note the date of each screen and the version of each list used; this is important for the documentary record if the diligence is later reviewed by a regulator. Where a hit appears on either list, the analysis moves immediately to the ownership-and-control question for each entity in the chain.
Stage 4: Assess sectoral exposure. For programmes where EU sectoral measures apply, assess whether the target or any counterparty in the transaction chain operates in a restricted sector. This is an independent analysis from the list screen: a target may be clean on the list but subject to sectoral prohibitions by reason of its business activity and the nationality of the other parties.
Stage 5: Identify whether a licence or authorisation is required. Where the diligence identifies a potential prohibition, the question is whether an authorisation is available that would permit the transaction to proceed. Under the EU regime, specific licences are available from the competent authorities of member states for defined categories of otherwise prohibited transactions. Under SECO, a separate Swiss authorisation process applies. The two licensing processes are independent; a licence obtained in one regime does not substitute for an authorisation in the other.
Stage 6: Document the process and conclusions. Both regimes require that parties maintain records sufficient to demonstrate compliance. In our cross-border practice, we regularly find that deals are completed with adequate substantive diligence but inadequate documentation of how that diligence was conducted. A well-documented process is the first line of defence in any subsequent regulatory inquiry.
Risk flags that cross-border deal teams miss
Several patterns recur in the M&A sanctions diligence matters we advise on. Each represents a point at which a gap between the EU and SECO regimes – or a gap in the deal team's process – has created exposure.
Assuming list equivalence. As noted above, the EU and SECO lists are not identical and are not updated simultaneously. A diligence process that screens only against one list – typically whichever is considered the "primary" regime for the deal – will miss designations that appear on the other. Both screens are required, every time.
Static screening in a dynamic deal. A clean screen on day one of diligence does not remain valid through signing, closing, and completion. Both regimes update their lists regularly, and a designation added between sign and close can create a new prohibition on a transaction that was clean when the diligence was done. Deal teams should re-screen at signing and again immediately before closing, and should build a contractual mechanism that addresses what happens if a new designation appears in the window between the two.
Treating indirect ownership as remote risk. Both regimes apply their prohibitions to entities owned or controlled by designated persons, not only to the designated persons themselves. A target with a clean direct-ownership structure may still be caught if a designated person holds an indirect interest through an intermediate holding company. In our experience, the most significant ownership exposures in cross-border M&A are found at the second or third level of the ownership chain, not the first.
Ignoring the seller side. Diligence teams routinely screen the target and its beneficial owners. They less consistently screen the seller and the seller's beneficial owners. Under both EU and SECO law, a transaction that results in funds flowing to a designated person, even indirectly, may be prohibited. If the seller's proceeds will benefit a sanctioned beneficial owner, the transaction may be caught regardless of the status of the target.
Missing the euro-clearing trigger. EU prohibitions apply to transactions conducted in euros anywhere in the world, by reason of the clearing and settlement infrastructure. A deal between non-EU parties that does not obviously engage EU law at the entity level may nonetheless engage EU law at the payment level. This is a point where SECO and EU positions diverge most sharply: a Swiss franc-denominated transaction between Swiss parties may clear SECO analysis cleanly but still engage EU law if any payment in the transaction chain routes through euro-clearing infrastructure.
Omitting post-closing monitoring. The obligations do not end at closing. Where a business acquires a target that later becomes connected to a sanctioned person – through a post-closing change of ownership in the target's supply chain, for example – the acquirer may face a new compliance question. Both regimes impose ongoing obligations, and a diligence process that treats closing as the endpoint is structurally incomplete.
If a transaction has already been flagged, or a filing has been refused, an early review can preserve options that narrow with time. Contact Calder & Vance at info@caldervance.com for a confidential review.
Common misconceptions about EU and SECO sanctions diligence in M&A
One of the most persistent myths we encounter in cross-border M&A practice is that Switzerland's close alignment with the EU on sanctions policy means that SECO diligence is, in effect, a subset of EU diligence – so that an adviser who has done the EU work has automatically done the Swiss work as well.
The reality is the opposite. Because Switzerland aligns with EU measures through a separate national process rather than by automatic incorporation, the two analyses are always formally distinct. They will usually reach the same result for the core designations, but it is the exceptions – the timing gaps, the programmes SECO has not adopted, the definitional differences in the control test – that create the legal exposure. In cross-border M&A, it is precisely the edge cases that are most likely to be litigated or scrutinised by regulators.
A second misconception is that sanctions diligence in M&A is primarily a pre-signing exercise. In fact, the obligation runs through the full transaction lifecycle: from initial target identification, through signing and closing, to post-closing integration. A designation that arises after signing but before closing may require a re-assessment of whether the transaction can proceed, whether a licence is available, and what contractual mechanisms the parties have to manage the situation. Deals that do not include appropriate representations, warranties, and termination rights around sanctions are structurally exposed to exactly this scenario.
A third misconception is that a "no-hit" on a commercial screening database is equivalent to a legal conclusion. Screening tools are essential, but they are not sufficient. They do not assess control (as opposed to ownership), they do not always reflect the most recent list updates, and they do not address sectoral prohibitions. Legal analysis of the ownership chain and sectoral position is required in every cross-border M&A transaction with any exposure to EU or SECO-programme counterparties.
How the EU Blocking Regulation affects the M&A analysis
For deals with a US nexus, the EU Blocking Regulation adds a further layer of analysis. The EU Blocking Regulation prohibits EU operators from complying with certain US secondary-sanctions measures and requires them to report to the European Commission if those measures affect their interests. Its practical impact on M&A is most visible where a target has a US-person shareholder, a US-dollar-denominated obligation, or counterparties subject to US secondary-sanctions exposure.
The tension is structural. An EU-domiciled buyer may be prohibited under US secondary-sanctions rules from proceeding with a transaction that involves a target connected to a US-designated programme, while simultaneously being required under the EU Blocking Regulation not to comply with that US prohibition. Managing this tension requires careful analysis of the jurisdictional scope of both sets of rules and, in practice, often requires separate counsel in both regimes.
SECO does not have an equivalent to the EU Blocking Regulation. A Swiss buyer in the same position faces only the question of whether the transaction is prohibited under SECO's own ordinances – there is no Swiss equivalent obligation to "block" compliance with US measures. This creates an asymmetry between a Swiss buyer and an EU buyer pursuing the same target, which can affect deal structure and transaction risk allocation in a joint-bidder scenario.
Is your deal team aware of this asymmetry? In our experience, it surfaces late in the process – often after the bid structure has already been fixed.
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