A diversified trading group holds equity stakes, open contracts, and banking lines touching sanctioned exposure across two jurisdictions: the European Union and Switzerland. Brussels has tightened the Council regulations. Berne has moved in a parallel direction through SECO, the State Secretariat for Economic Affairs (Switzerland's sanctions authority under the applicable SECO ordinances). The compliance team must act. But acting under the wrong regime's rules – or treating both regimes as identical – creates its own liability. That is the risk this analysis addresses.
Winding down sanctioned exposure under EU and SECO rules follows a broadly similar logic – freeze, notify, apply for authorisation, document – but diverges critically on the licensing gateway, the notification timeline, the ownership-and-control test, and the treatment of pre-existing contractual obligations. As of January 2026, both regimes require prior authorisation for most wind-down activity touching designated persons; the stricter prohibition governs where both apply to the same transaction.
This analysis maps the key divergences regime by regime, identifies the practical pressure points for a cross-border business, and sets out the decision sequence that compliance counsel should follow before a single position is unwound.
What is the governing legal architecture for each regime?
EU financial sanctions are imposed by Council decisions and given direct legal effect through Council regulations that apply uniformly across all EU member states. No national transposition is required. The regulations are administered and enforced at member-state level, but the legal text is the same in Frankfurt, Paris, and Warsaw. The instrument most relevant to winding down sanctioned exposure is the applicable Council regulation for the relevant thematic programme, which sets out the prohibitions, the derogations, and the competent-authority licensing route.
SECO administers Switzerland's autonomous sanctions regime under the applicable SECO ordinances, which are enacted by the Federal Council and amended by executive action. Switzerland is not an EU member state. It does not automatically adopt EU sanctions. Where Switzerland chooses to align with EU measures – which it frequently does for financial-sanctions packages – SECO issues a corresponding ordinance. The alignment is substantive but not automatic, and there are gaps. Programmes where Switzerland has not followed the EU remain solely an EU matter for purposes of Swiss-nexus business.
The critical preliminary question for any wind-down exercise is therefore whether SECO has, in fact, enacted a corresponding measure. If it has, both regimes apply in parallel. If it has not, only the EU regulation governs – unless the transaction or counterparty also has a US, UK, or UN nexus, in which case OFAC, OFSI, or Security Council measures may also bite independently. In our cross-border practice, we regularly advise clients who have assumed equivalence between EU and SECO positions where no equivalence in fact exists.
How does each regime define the frozen-asset and wind-down perimeter?
Both regimes apply an asset freeze to all funds and economic resources owned or controlled by, or available to, a designated person. The freeze is not limited to direct holdings. It extends to entities that the designated person owns or controls – and that extension is where the EU and SECO regimes display their first significant divergence.
Under the EU Council regulations, ownership and control (the test for whether a non-listed entity is caught through a listed person) is assessed on both a quantitative and a qualitative basis. Ownership at 50 percent or more triggers the freeze automatically. But a listed person who holds less than fifty percent can still cause an entity to fall within the freeze if that person exercises control through other means – voting rights, board appointment rights, veto powers, or dominant influence in fact. The EU test is therefore two-limbed.
SECO's ordinances employ a conceptually similar test, but the guidance on what constitutes control below the ownership threshold is thinner and less developed than the EU's practice. In our experience, the EU General Court's case law on what constitutes control – developed through annulment actions – provides a richer body of reference than the SECO administrative practice. A business assessing whether a Swiss-nexus entity falls inside the SECO perimeter because of a sub-fifty-percent stake held by a listed person is working with less prescriptive guidance than its EU-facing counterpart.
The wind-down perimeter is therefore not identical. An entity that the EU treats as frozen may not fall within SECO's corresponding freeze if SECO's application of the control test yields a different result. The practical consequence: a business holding an interest in that entity may be free to act under Swiss law while remaining prohibited under EU law. Where both regimes apply, the stricter prohibition governs. That is not a convenient shortcut; it requires a jurisdiction-by-jurisdiction analysis before any position is moved.
What authorisation process applies to a wind-down under each regime?
Neither the EU nor SECO permits a party simply to unwind a sanctioned position without prior authorisation where the unwinding involves funds or resources moving to or from a designated person. Both regimes provide derogations and licensing routes, but the mechanics differ.
Under the EU regulations, the relevant derogation for winding down pre-existing contracts is typically a specific authorisation granted by the competent authority of the member state in which the funds, the institution, or the transaction is located. The competent authority in the EU context is a national body – OFSI is the UK body, but within the EU each member state designates its own authority. Where the wind-down involves multiple EU member states, the question of which competent authority to approach – and whether multiple applications are needed – is itself a source of practical complexity. The EU's legal framework does not establish a single EU-wide licensor for specific authorisations.
SECO acts as the sole licensing authority for Switzerland. An application goes to one body, under one procedural framework, with one review timeline. For a business whose sanctioned exposure is primarily Swiss-nexus, the single-authority model is operationally simpler. The substantive assessment, however, remains rigorous: SECO will require evidence that the wind-down is genuine, that the proceeds do not benefit the designated person in a prohibited way, and that the derogation conditions in the relevant ordinance are met.
A common misconception in our experience is that a wind-down derogation granted by one regime's authority is automatically recognised by the other. It is not. An EU competent-authority authorisation does not give the holder permission to act under SECO's ordinances, and a SECO licence does not authorise conduct that the EU regulations prohibit. Each licence must be sought from the relevant authority for the relevant nexus. Where the transaction has both EU and Swiss elements, two parallel applications may be required, running to different bodies on different timetables.
The position above covers the standard case. Your facts – the counterparty structure, the contractual position, the payment route, the currencies involved – change the analysis materially. For a confidential review of your exposure, contact Calder & Vance at info@caldervance.com.
How do the reporting and notification obligations differ?
Both the EU and SECO regimes impose reporting obligations on persons who hold or control frozen assets, or who become aware of a match against a designated person. The substance of those obligations is similar; the timing and the recipient differ.
Under the EU Council regulations, a person holding frozen assets must notify the relevant competent authority without delay. The exact notification window is set by the applicable national implementing rules, which vary modestly across member states. Financial institutions regulated in the EU are also subject to anti-money-laundering obligations that run in parallel – a suspicious-activity report to the relevant financial intelligence unit may be required in addition to the sanctions notification to the competent authority. These are two distinct reporting streams, each with its own deadline and recipient.
Under SECO's ordinances, the notification obligation runs to SECO directly. Swiss financial institutions are also subject to AMLA obligations that may require a parallel report to the Money Laundering Reporting Office Switzerland. Again, two streams. The difference from the EU position is that SECO is both the sanctions authority and the licensing body, so the notification and the licensing application go to the same organisation.
What does a cross-border business face if it identifies a match mid-way through a wind-down? It must notify simultaneously in each jurisdiction of nexus. A financial institution with EU-domiciled accounts and a Swiss branch conducting the same transaction cannot stagger notifications to manage workflow. The obligations are triggered by the same event and run concurrently. Missing one notification while meeting the other leaves a compliance gap that enforcement authorities in either jurisdiction may treat as a separate breach.
Where do pre-existing contractual obligations fit under each regime?
Pre-existing contracts – signed before the relevant designation – are treated by both regimes as capable of authorisation under a derogation, but the conditions are not identical and the available authorisations are framed differently.
The EU Council regulations typically contain a derogation permitting the competent authority to authorise the release of funds or economic resources necessary to fulfil obligations under contracts concluded before the date of designation, provided that the funds are paid into a frozen account and do not directly or indirectly benefit the designated person in a prohibited manner. The key phrase is "does not benefit" – and that phrase generates the most difficult judgement calls in a wind-down. A payment under a terminated supply agreement that technically flows to a frozen account may still constitute an indirect benefit if the designated person can call on those funds once restrictions are lifted.
SECO's framework contains analogous derogations, but the practice on what constitutes an indirect benefit has been applied to a narrower body of fact patterns than the EU's. For complex multi-party contracts – project-finance structures, commodity supply chains, long-term service agreements – the EU's more developed administrative and judicial practice provides more reference points. The EU General Court's analysis of "indirect benefit" in annulment proceedings, though directed at a different question, has informed competent-authority guidance in several member states on this very point.
In a recent matter, a commodities trading business held a long-term supply agreement with a counterparty that was designated part-way through a delivery schedule. The contract pre-dated the designation. The business faced simultaneous EU and SECO exposure. We assessed eligibility under both derogation frameworks, prepared coordinated applications to the relevant EU competent authority and to SECO, and managed the regulatory queries from each body. The matter concluded without enforcement action. Outcomes depend on specific facts and are never guaranteed.
What are the critical risk flags in a wind-down exercise?
The most dangerous moments in winding down sanctioned exposure are not the obvious ones – screening a buyer against a published list is routine. The risks that produce enforcement action are subtler and arise precisely at the intersection of the two regimes.
The first risk is the aggregation gap. A business maps direct ownership and concludes the wind-down counterparty is not itself designated. It does not map indirect holdings. Two designated persons each hold minority stakes that together reach or exceed the ownership threshold. The entity is caught. The wind-down is a prohibited transaction. This pattern is not hypothetical; it is one of the most common sources of inadvertent breach that compliance counsel encounter.
The second risk is the payment-route misalignment. A business obtains an EU competent-authority authorisation to make a contractual payment. It routes the payment through a Swiss correspondent. The payment triggers SECO's freeze obligations. The EU licence provides no cover for the Swiss nexus. The payment is both authorised and unlawful simultaneously, in different jurisdictions.
The third risk is the timing of notifications. A wind-down uncovers a previously undetected designated-person connection midway through settlement. The business continues to settlement while preparing notifications. Continuing after identification – even briefly – may constitute a violation under both regimes. The notification window does not pause for operational convenience.
The fourth risk is the documentation failure. Both regimes place the burden of proving that a wind-down was properly authorised on the person conducting it. Records must be maintained, organised, and available for inspection. Under the EU regulations and SECO's ordinances, record-keeping obligations can extend for a significant period after the transaction. If a business cannot demonstrate the authorisation chain, the derogation conditions met, and the payment flows, it faces enforcement exposure regardless of whether it intended to comply.
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 assessment.
How do the two regimes interact with OFAC, OFSI, and the UN?
A wind-down that is cleanly addressed under both EU and SECO rules may still face US, UK, or UN obstacles – and those obstacles can close the transaction entirely regardless of what Brussels and Berne permit.
US secondary-sanctions risk is the most acute cross-regime exposure. OFAC's secondary-sanctions programmes impose consequences on non-US persons who conduct significant transactions with certain designated persons, even where those transactions have no direct US nexus. A European or Swiss business winding down an equity stake or a credit facility in a designated entity may fall within OFAC's secondary-sanctions perimeter if the designated person or the programme in question attracts secondary measures. Neither an EU competent-authority licence nor a SECO authorisation provides any protection against OFAC's secondary-sanctions regime. The US has its own jurisdictional reach, and it is not bounded by European licensing decisions.
OFSI, the UK's Office of Financial Sanctions Implementation, enforces UK sanctions under SAMLA and the relevant thematic regulations. Post-Brexit, the UK maintains its own designations list. A UK-incorporated subsidiary of an EU business conducting a wind-down under EU authorisation must separately assess its UK obligations; the EU licence does not bind OFSI. Divergences between EU and UK designations – which have developed since the UK's autonomous sanctions programme matured – mean that a person designated under the EU programme may not be designated under the UK programme, and vice versa. A wind-down that is prohibited under EU law may be freely conducted under OFSI's rules.
UN Security Council measures occupy the top of the hierarchy. Where a designation is made under Chapter VII resolutions, it is binding on all UN member states. Both the EU and Switzerland implement Security Council measures; both are UN member states. A wind-down touching a person designated at UN level requires compliance with the Security Council measure as a floor, regardless of what EU or SECO rules say. More permissive national or regional rules do not displace UN obligations.
We regularly advise on the four-regime interaction – EU, SECO, OFAC, OFSI – in a single wind-down exercise. The analysis requires mapping each regime's perimeter, identifying the most restrictive combined position, and structuring the wind-down around it.
Is there a common misconception about which regime governs a wind-down?
The most persistent myth we encounter is that Switzerland's close relationship with the EU means SECO and EU sanctions are effectively the same instrument administered in different offices. They are not. Switzerland retains autonomous authority over its sanctions programme. The decision to align with any given EU measure is made independently by the Swiss Federal Council. Timing, scope, and derogation conditions can all differ.
A business that assumes it needs only one licence – either an EU competent-authority authorisation or a SECO licence – to cover a cross-border wind-down will, in a material number of scenarios, be wrong. That assumption has produced enforcement exposure for businesses that were trying to comply. The correct analysis is regime-specific, transaction-specific, and conducted before any position is moved rather than after.
A second misconception is that winding down exposure is inherently lower-risk than maintaining it. From a pure sanctions-liability perspective, the act of unwinding – payments, transfers, asset releases – is itself a series of potentially licensable events. A poorly executed wind-down can create more exposure than the original position.
Related practices
- Correspondent banking and de-risking under OFAC – practical guidance on managing financial-institution exposure across US sanctions rules
- Winding down sanctioned exposure: OFAC vs Canada – regime comparison for businesses with North American cross-border exposure
- Winding down sanctioned exposure: OFAC vs OFSI – US and UK divergences in the wind-down process for cross-border transactions