A trading group active across Europe and Switzerland learns that one of its counterparties has been designated under the relevant EU Council regulation. Existing contracts are mid-performance. Goods are in transit. Outstanding receivables sit on the balance sheet. The legal question is immediate: can the group wind down its exposure in an orderly way, or does every act of completion now require a licence?
Both the EU and the Swiss regime administered by SECO (the State Secretariat for Economic Affairs, Switzerland's sanctions authority) permit wind-down activity under certain conditions, but they differ materially on who authorises it, how long they allow, and what triggers an obligation to block rather than merely to exit. The analysis that follows sets out those differences in terms that bear directly on a compliance team's next action.
This analysis covers the governing authority in each regime, the wind-down procedure and the tests that apply at each stage, the cross-border complications a business operating between Switzerland and an EU-member state is likely to face, the risk flags that our practice regularly encounters, and the point at which an orderly exit requires specialist counsel.
What governs wind-down activity and who administers it?
Under the EU regime, the legal basis for wind-down activity derives from the relevant Council Regulation imposing the applicable sanctions programme. The Council regulation is supplemented by Council Decisions and, where a general authorisation exists, by a derogation clause that may permit limited completion of pre-existing obligations. The competent authority for licensing and authorisation is in each EU member state – each state designates its own national authority – though the underlying regulation applies uniformly across the bloc. In practice this means a business with offices in France, Germany, and the Netherlands may be dealing with three separate national authorities, each applying the same regulatory text but potentially with different procedural expectations and timelines.
SECO administers Swiss autonomous sanctions through ordinances issued under Swiss legislation. Its remit covers both the financial-sanctions and the trade-sanctions dimensions. Where Switzerland has adopted measures that mirror EU positions, SECO functions as the single point of contact for authorisations, and the absence of a multi-state competence question makes the procedural path somewhat more concentrated. That simplicity is not the same as permissiveness: SECO exercises independent judgment and does not automatically follow EU licensing outcomes.
In our cross-border practice, clients operating in both Switzerland and the EU frequently underestimate the independent character of SECO's analysis. Obtaining an EU national-authority authorisation for a wind-down transaction does not mean SECO will follow suit. A transaction that moves through an EU jurisdiction into Switzerland – or vice versa – may require parallel submissions to both authorities.
How does the wind-down procedure differ between the EU and SECO?
The EU's wind-down procedure turns on whether a derogation clause in the relevant Council Regulation permits the completion of a contract that was concluded before the designation or before the relevant sanctions measure entered into force. Where such a derogation exists, it generally requires the business to notify the competent national authority, demonstrate that the contract was pre-existing, and confirm that no funds or economic resources will flow to a designated person beyond what is strictly necessary to close out the obligation. The competent authority may require supporting documentation and, in some regimes, will issue a formal no-objection or a specific licence before the transaction may proceed.
SECO's approach to pre-existing contracts is structurally similar but operates through its own ordinance provisions. SECO may issue individual authorisations for transactions that would otherwise be prohibited, and it applies its own proportionality assessment. The scope of what counts as a permissible wind-down varies between the EU and SECO because the two regimes do not maintain identical prohibited-activity lists, nor do they always designate the same counterparties at the same time. A designation made by the EU Council may not yet have been mirrored in a Swiss SECO ordinance, or conversely, SECO may have retained a measure that the EU has eased.
One critical procedural difference concerns the blocking obligation. Under the EU regime, once funds or economic resources are identified as belonging to, owned, held, or controlled by a designated person, the obligation to freeze is immediate. Wind-down activity does not suspend the freeze obligation; it may only proceed where a specific derogation or authorisation permits it to co-exist with the freeze. Under SECO's ordinances, the same principle applies, but the interaction between the freeze obligation and an authorisation to complete a pre-existing contract can differ in detail. In our experience, the window between identifying a designated counterparty and taking a defensible action is very short in both regimes – and the decisions made in that window carry significant legal consequence.
The position above covers the standard procedural pathway. Your facts – the specific ordinance in play, the transaction structure, the route of funds, and whether the counterparty is designated under one regime but not both – change the analysis materially. To discuss your situation, contact Calder & Vance at info@caldervance.com.
What is the ownership and control test in each regime?
The ownership and control test (the analysis used to determine whether a non-listed entity is nevertheless caught through a listed person's interest in it) operates differently across the two regimes. Under EU sanctions, the relevant Council Regulations apply an ownership and control standard that looks at both direct and indirect ownership. Where a designated person owns more than 50 percent of an entity, or otherwise controls it, that entity is generally treated as caught by the prohibition, even if it does not appear on the list itself. The control limb extends beyond the mechanical ownership percentage and requires an assessment of whether the designated person can exercise a determining influence over the entity's decisions.
SECO's ordinances apply a comparable analysis, but the language and the administrative practice are not identical to the EU standard. SECO has historically looked at ownership stakes and at the capacity to exercise decisive influence. For a business winding down a relationship, the practical consequence is that identifying the immediate counterparty as non-designated is insufficient. The entire ownership chain above that counterparty must be interrogated, and the analysis must be repeated for both regimes independently if the transaction touches both jurisdictions.
The control limb is the point most often underweighted. A counterparty may sit below the ownership threshold. It may nonetheless be controlled by a designated person through board composition, veto rights, or contractual dependency. In a wind-down context, this matters because proceeding to complete a contract with a controlled entity is as prohibited as dealing with the designated person directly, absent an applicable authorisation. We regularly advise businesses that have screened the named entity correctly but have not mapped the beneficial ownership and governance structure above it.
Where do the two regimes diverge most sharply in practice?
Four areas of divergence are particularly consequential for a business managing an active wind-down across both regimes.
Scope of the autonomous sanctions programme. Switzerland adopts autonomous sanctions that broadly align with EU positions but not automatically and not simultaneously. There are periods – sometimes short, sometimes extended – when a person or entity is designated under EU measures but has not yet been included in a SECO ordinance, or vice versa. A transaction that is prohibited from the EU side may remain technically permissible under Swiss law during that gap, and the reverse can also arise. This asymmetry does not create a lawful route through one regime for a transaction prohibited by the other; each regime must be satisfied on its own terms, and the stricter prohibition governs the conduct of a business that touches both jurisdictions.
The authorisation process. EU national authorities in different member states operate different timelines, documentation requirements, and decision-making cultures. SECO processes applications centrally. For a cross-border wind-down involving, say, a Swiss parent and a German subsidiary, the business faces one SECO process and one BaFin process – run in parallel, with no guarantee of synchronised outcomes.
Notification and reporting obligations. Under EU sanctions, businesses are required to provide information to their national competent authority about holdings of funds or economic resources belonging to designated persons. The obligation to report and the obligation to freeze arise simultaneously. SECO's reporting obligations similarly require prompt notification. The timelines and the level of detail required can differ, and a business that calibrates its reporting to the EU standard may fall short of SECO's requirements, or the other way round.
Penalties and enforcement posture. EU sanctions penalties are a matter for each member state's enforcement authority, and the range of civil and criminal consequences varies significantly between jurisdictions within the bloc. SECO has its own enforcement powers under Swiss law and applies them independently. For a business weighing the risk of acting without a formal authorisation against the cost of delay in completing a wind-down, the enforcement posture of the relevant authority in each jurisdiction is a material input. A disclosure-friendly approach in one jurisdiction does not replicate itself in the other.
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.
What are the primary risk flags in a cross-border wind-down?
Several risk patterns recur in wind-down matters involving both the EU and Swiss regimes. Each warrants active management before the business proceeds.
Incomplete ownership mapping. The single most common failure we encounter is reliance on a first-layer screen. The relevant question is not whether the immediate counterparty is designated but whether a designated person owns or controls it, directly or indirectly, through any chain of ownership. In a wind-down context, a business that proceeds on an incomplete ownership analysis is not protected by its good-faith intention. The prohibition operates on the legal position, not on what the compliance team knew at the time.
Asymmetric designation timing. As noted above, the EU and SECO do not always designate at the same moment. A business executing a wind-down should run the ownership-and-control analysis against both regimes' current lists, not only the list relevant to the primary relationship. Failure to do so creates exposure in the jurisdiction whose list the business did not consult.
Embedded payment obligations. Many commercial contracts embed payment obligations – release of retentions, settlement of disputed invoices, payment of service fees – that the main relationship had been carrying forward. Each of those embedded obligations is a separate transaction for sanctions purposes, and each requires its own analysis. A general authorisation or derogation that covers the main contract may not extend to ancillary payment flows.
Third-party intermediaries. A wind-down executed through a bank, a freight forwarder, or a logistics provider does not transfer the compliance obligation to that third party. The business remains responsible for ensuring that any transaction it originates or controls does not breach the applicable regime. Where the intermediary is itself located in a different jurisdiction, the multi-regime analysis applies to the intermediary's role as well.
Documentary trail. Both regimes expect businesses to be able to demonstrate, if questioned, that a wind-down was authorised and that the funds or goods involved were handled consistently with the authorisation. The documentary record – contract date, notification to the authority, authorisation received, disbursement records – must be preserved and held in a form that can be produced to the regulator. Record-keeping obligations are not a formality; they are the evidentiary foundation of any enforcement defence.
Is one regime materially stricter than the other?
The question of relative strictness is less useful in practice than the question of which obligations are triggered first and which offer fewer derogations. Neither the EU nor the SECO regime is uniformly more permissive across all sectors and transaction types, but several structural features of each regime point toward areas of comparative stringency.
The EU regime, applied across 27 member states with varying enforcement cultures, can produce a more restrictive outcome in jurisdictions whose national competent authorities apply a narrow interpretation of derogation clauses or whose processing timelines are long. A wind-down that a national authority in one member state would authorise promptly may be treated more cautiously by an authority in another, even though the underlying regulation is identical. The lack of a centralised EU licensing authority for most sectoral sanctions means the effective stringency of the EU regime is, in part, a function of which member state's authority the business is dealing with.
SECO, as a single central authority, offers predictability of process that the EU multi-state model does not. However, SECO has demonstrated a willingness to take a rigorous view of transactions that it considers to involve material economic benefit to a designated person, and its autonomous programme may extend to parties not yet captured by EU measures. For businesses in the financial sector and for commodities traders, SECO's commodity and financial-sector restrictions can operate as an independent source of exposure even where the EU position has been resolved.
A myth commonly encountered in our practice is that SECO alignment with EU positions means the EU authorisation is sufficient for Swiss-law purposes. This is incorrect. SECO applies its own legal analysis and its own authorisation process. An EU national authority's no-objection letter has no legal effect in Switzerland. A business that relies on it for cross-border transactions touching Swiss counterparties, Swiss banks, or Swiss logistics providers does so at its own risk.
When does a wind-down require specialist counsel?
Early involvement of sanctions counsel is indicated whenever the wind-down involves one or more of the following conditions.
The counterparty has been designated within the past few weeks or the designation is recent relative to the wind-down timeline. Newly designated parties present the highest ambiguity on which obligations apply to which acts of completion, and the interaction between the freeze obligation and any derogation is at its most uncertain immediately after designation.
The contract has embedded payment flows, retention releases, or contingent obligations that could be argued to constitute new economic benefit to a designated person rather than completion of a pre-existing obligation. The distinction between a permissible wind-down transaction and a prohibited payment is not always clear on the face of the contract, and the characterisation matters for both the authorisation application and any subsequent enforcement inquiry.
The transaction crosses from an EU jurisdiction into Switzerland, or involves counterparties, intermediaries, or banks in both regimes. The multi-regime analysis – ownership mapping under two sets of rules, potential parallel authorisation filings, divergent notification deadlines – requires coordinated management from the outset.
An intermediary such as a correspondent bank has flagged the transaction or declined to process it. This is frequently a signal that the bank's own compliance analysis has identified an issue that has not yet fully surfaced in the client's internal review. Acting on that signal promptly, and before the bank formally terminates the relationship, preserves the ability to respond constructively.
The business has already completed one or more transactions in the wind-down before identifying the sanctions issue. Where acts of completion have already occurred, a retrospective analysis is needed to determine whether any of those acts require disclosure to a regulator. The applicable regime's treatment of voluntary disclosure – and the procedural consequences of a late or incomplete disclosure – varies between the EU national-authority context and SECO's own framework.
In a recent matter, a commodities trading firm identified mid-way through a contract that the ultimate beneficial owner of its counterparty had been designated under the applicable EU measure. The counterparty itself was not listed. We mapped the ownership and control structure under both the EU and SECO regimes, identified that the transaction was caught under both, prepared parallel authorisation submissions, and advised on the notification obligations in the relevant EU member states. The matter was managed to a position in which the firm had a defensible record before both authorities.
Related practices
- Correspondent banking and de-risking – sanctions-driven relationship exit and OFAC exposure management for financial institutions
- EU wind-down analysis – extended regime guidance – deeper procedural treatment of EU authorisation routes for complex positions
- OFAC vs Canada: winding down sanctioned exposure compared – parallel analysis of wind-down obligations across the US and Canadian regimes