A Swiss-resident asset manager receives notice that a portfolio company's controlling shareholder has been added to a Swiss asset-freeze list administered by the State Secretariat for Economic Affairs (SECO – Switzerland's primary sanctions authority). The manager holds an equity stake in the same company. Can it sell that interest? Must it? What happens to the proceeds? These questions are not hypothetical. As of January 2026, Switzerland maintains asset-freeze and investment-restriction measures under ordinances that impose binding obligations on all persons and entities within Swiss jurisdiction – and, in certain cases, on Swiss persons operating abroad.
Divesting a sanctioned interest under SECO rules requires navigating a set of interlocking obligations: asset-freeze provisions that may prohibit disposal without prior authorisation, reporting duties that attach the moment a frozen asset is identified, and – depending on the applicable country regime – possible investment prohibitions that restrict acquiring or extending an interest in the first place. The governing instruments are Switzerland's sectoral sanctions ordinances adopted under the Embargo Act (EmbG). SECO administers those ordinances and is the competent authority for exemption requests and reporting.
This briefing addresses how the SECO regime operates, where it diverges from OFAC, OFSI, and EU positions on divesting a sanctioned interest, the procedural steps a cross-border business must follow, and the risk flags that most frequently arise in our practice.
Who administers SECO sanctions and what is the legal basis?
SECO administers Switzerland's autonomous and UN-aligned sanctions under ordinances issued pursuant to the Federal Act on the Implementation of International Sanctions (the Embargo Act). Each sanctioned-country or sanctioned-thematic programme has its own ordinance, issued by the Federal Council and published in the Official Compilation of Federal Law. The ordinances are the primary source of obligations; they supersede general civil-law rules on contractual performance to the extent of any conflict.
Switzerland's sanctions are partly autonomous – meaning Switzerland adopts measures on its own legislative initiative – and partly aligned with UN Security Council resolutions adopted under Chapter VII. Where alignment is the basis, the operative text of the UN Consolidated List feeds into the relevant Swiss ordinance. Where Switzerland adopts autonomous measures, the Federal Council's ordinance defines the list of designated persons and the scope of prohibitions independently.
For a cross-border transaction, the first question is always which ordinance applies. The answer depends on the regime in scope, the nature of the counterparty, and the location of the assets or activity. In our cross-border practice, we regularly advise clients who assume that a single UN-list check is sufficient for Swiss purposes. It is not. Swiss autonomous lists and UN lists do not always overlap, and obligations under each track can differ in their exact scope and in the available exemption routes.
What does the asset-freeze obligation mean for an existing holding?
An asset freeze under a SECO ordinance prohibits the holder of a frozen asset from making funds or economic resources available to, or for the benefit of, the designated person. It also prohibits disposal in a manner that confers value on the designated person. That means a straightforward sale of the holding to a third party at arm's length may be permissible in principle – but only if the sale proceeds are not remitted to or for the benefit of the designated person, and only if no other prohibition in the ordinance applies.
The analysis is more demanding than it first appears. Consider a scenario where the designated person holds the remaining shares in the same entity. A sale by the non-designated investor on the open market does not automatically freeze the non-designated investor's shares – but it may trigger questions about whether the sale increases the value of the designated person's residual holding, whether any distribution on exit passes through a vehicle the designated person controls, or whether the sale proceeds, even if paid to a non-designated account, are subject to a transfer prohibition under the relevant ordinance.
What must a business do when it identifies frozen assets in its portfolio? The answer, under Swiss law, is to report to SECO promptly. Reporting obligations attach to financial intermediaries and, under some ordinances, to any person who holds, manages, or controls assets subject to a freeze. The report must identify the assets, the designated person, and the basis of the freeze. Failure to report is itself a sanctionable offence independent of any underlying prohibited transaction.
How does the SECO divestiture procedure differ from OFAC and EU approaches?
Under OFAC, disposing of a blocked asset generally requires either a specific licence or reliance on a general licence that expressly covers divestiture transactions. The proceeds must be placed in a blocked account in the name of the designated person pending OFAC authorisation for further transfer. The governing standard is set by IEEPA and the relevant programme-specific rules; the licence-or-block structure is mechanically clear even when the outcome is commercially difficult.
The EU approach under the relevant Council regulations similarly prohibits making funds or economic resources available to designated persons. An exemption from the competent national authority is required for any transaction that would benefit a designated person. EU regulations include categories of exempt transactions – for example, prior-obligation exemptions for contracts concluded before a designation – but these are narrowly construed by national authorities and have been tested before the EU General Court in annulment proceedings where the designation itself is challenged.
SECO's procedure does not map precisely onto either model. Switzerland does not maintain a general-licence architecture comparable to OFAC's standing authorisations. Exemptions under Swiss ordinances are case-specific, applied for in writing to SECO, and assessed against criteria that vary by ordinance. In our experience, applicants who approach SECO with the expectation of a US-style general licence find that the Swiss regime requires a more individualised justification and that the processing time is determined by the complexity of the transaction and the volume of requests at the time.
Where Switzerland differs most sharply from the EU is in the role of judicial challenge. The EU General Court offers a direct annulment route for designated persons and, in limited circumstances, for affected third parties. In Switzerland, challenges to the Federal Council's designation decisions follow Swiss administrative-law channels, which operate on a different procedural timeline and with different standing criteria. A business holding a sanctioned interest in Switzerland cannot rely on an EU-General-Court annulment to unblock its position under a Swiss ordinance; the two processes are formally independent.
The position above covers the standard case. Your facts – the counterparty, the nature of the holding, the routing of proceeds, the regime in play – change the analysis significantly. For questions about correspondent-banking exposure and cross-border payment routing in sanctioned-interest scenarios, see our OFAC de-risking service page.
What are the investment prohibitions and how do they interact with divestiture?
Some SECO ordinances go beyond the asset-freeze by imposing investment prohibitions – measures that restrict acquiring, extending, or refinancing an interest in entities connected to a particular regime. These prohibitions apply prospectively but interact with divestiture decisions in two ways that cross-border businesses frequently underestimate.
First, a business that holds an interest acquired before the investment prohibition entered force may be required to divest within a transition period specified by the ordinance. Not all ordinances include such a wind-down window; where one exists, it is typically short and its expiry is not notified individually to affected holders. Tracking the entry-into-force date of each amending ordinance is therefore a compliance task in its own right.
Second, a business planning to restructure a holding – for example, by converting debt to equity, exercising a call option, or participating in a rights issue – must assess whether the restructuring step constitutes a new investment prohibited by the ordinance, even if the overall position is moving toward divestiture. We regularly advise on precisely this point: a step that looks like divesting can trigger an investment-prohibition problem if it increases the investor's economic exposure before the final exit is complete.
Does the investment prohibition extend to Swiss persons abroad? Under some SECO ordinances, the territorial scope includes Swiss persons and entities incorporated under Swiss law wherever they operate. The analysis requires reading the specific ordinance carefully; it cannot be resolved by reference to general Swiss jurisdictional rules. Where a Swiss parent holds an interest through a non-Swiss subsidiary, the question is whether the parent's control of the subsidiary's actions brings those actions within the Swiss prohibition – a question that has no single answer across all ordinances.
Risk flags most frequently encountered in SECO divestiture matters
The most persistent risk in our cross-border practice is the assumption that a clean UN-list screen clears the Swiss position. Switzerland's autonomous lists include designations that do not appear on the UN Consolidated List; conversely, a UN-list designation may trigger Swiss obligations under a different ordinance from the one the client has been monitoring. The starting point is always to identify every Swiss ordinance that could apply to the counterparty, the asset, and the transaction structure.
A second risk is the treatment of indirect holdings. Where a sanctioned interest is held through a chain of entities, the question is whether each link in the chain is independently subject to Swiss obligations. Financial intermediaries in Switzerland are required to apply the asset-freeze to assets they hold or manage for designated persons, regardless of the legal form of the chain. A non-Swiss investor holding an interest through a Swiss custodian, fund administrator, or depository may find that the Swiss intermediary's obligations effectively freeze the position even if the investor itself is outside Swiss jurisdiction.
Third: timing. An ordinance amendment adding a new designation takes effect on publication. There is no grace period for positions that were compliant the day before. The interval between a Federal Council decision to designate and the publication of the amending ordinance is often short – sometimes a matter of hours. A business that monitors only weekly or monthly is operating with a structural gap. If a transaction has already been flagged, or a filing has been refused, an early review can preserve options that narrow with time. For questions that span the SECO and OFAC regimes in joint-venture structures, our analysis of joint-venture sanctions structuring under OFAC addresses the structural parallels and divergences in detail.
Fourth risk: proceeds management. Even where the divestiture transaction itself is lawful, the routing of proceeds can create a new problem. If the proceeds pass through an account or an intermediary that is itself subject to a prohibition – or if the proceeds are attributed to a designated person under the applicable country regime – the remittance creates a separate potential violation. Proceeds should be mapped through the payment chain before the transaction closes, not after.
When and how to apply for a SECO exemption
A SECO exemption – the Swiss equivalent of a specific licence – is a written authorisation granted by SECO to conduct a transaction that would otherwise be prohibited by an ordinance. Applications are submitted to SECO in writing, in German, French, or Italian, with supporting documentation that demonstrates the purpose of the transaction, the parties involved, the basis for the exemption, and – where applicable – confirmation that no benefit accrues to the designated person.
What categories of exemption are available? The ordinances typically provide for humanitarian exemptions, exemptions for transactions required to satisfy prior contractual obligations, and exemptions for the payment of legal and administrative costs. Divestiture of a sanctioned interest may fall within the prior-obligation category if the obligation to sell or exit was entered into before the designation; it may also be structured as a no-benefit-to-designated-person transaction where the sale proceeds are demonstrably withheld from the designated person. Neither category is automatic; each requires a factual showing tailored to the specific ordinance and the specific transaction.
Processing time at SECO is determined by case complexity and the volume of pending applications. Applicants should not assume a rapid turnaround in the same way they might calculate timelines for a well-resourced agency. Practical planning requires building a SECO exemption window into the transaction timetable from the outset, not as an afterthought once the commercial terms are agreed.
For matters that require exemptions from multiple regulators – for example, a divestiture requiring both SECO authorisation and an OFAC specific licence because the asset has a US nexus – the sequencing of applications matters. The two agencies do not co-ordinate their reviews. An approval from OFAC does not bind SECO and vice versa. We have acted for clients who received an OFAC licence before the Swiss position was clarified and who found that the Swiss timeline then governed the commercial deal. Multi-regime applications should be filed in parallel, not sequentially, wherever the rules permit. For a comparative analysis of OFAC joint-venture structuring obligations relevant to divestiture sequencing, see this supplementary regime briefing.
Cross-border considerations: secondary-sanctions risk and multi-regime obligations
A business divesting a sanctioned interest under SECO may simultaneously face obligations under OFAC, OFSI, and the relevant EU Council regulation, depending on the nature of the asset, the location of the parties, and the currencies and payment systems involved. The regimes do not operate as alternatives; all that apply must be satisfied, and where they conflict, the stricter prohibition governs the permissible action.
OFAC secondary-sanctions risk is material for non-US businesses that use US correspondent banks, settle in US dollars, or involve US persons in any step of the transaction. A Swiss entity divesting an interest in a company linked to a US-designated person must assess whether any part of the divestiture – including the payment of advisory fees, the use of a US-dollar settlement account, or the involvement of a US-person director or escrow agent – triggers OFAC jurisdiction. The answer to that question must come before the deal is structured, not after it closes.
The UK OFSI regime and the EU regime both operate their own ownership-and-control tests. Under UK and EU rules, a non-listed entity may be caught if a designated person owns or controls it. The test under both regimes extends beyond bare ownership and includes situations where a designated person can exercise controlling influence over the entity's decisions. This is a broader test than OFAC's mechanical 50 percent rule (which treats any entity owned 50 percent or more by blocked persons as itself blocked). A transaction that passes the OFAC threshold analysis may still require assessment under the OFSI or EU control standard before it can proceed without risk.
For businesses with Swiss operations that also hold assets reportable to OFSI, parallel reporting obligations may arise. OFSI requires that persons in the UK who know or have reasonable cause to suspect that they hold frozen assets report that information within a defined period. SECO has its own reporting obligation on a separate timeline. Meeting both, without conflating the two reporting channels, requires clear internal co-ordination and, in complex cases, advice from counsel with coverage of both regimes.
Common myths and objections in SECO divestiture matters
One myth we encounter regularly is that Swiss neutrality translates into a lighter-touch sanctions regime. It does not. Switzerland's autonomous sanctions have expanded materially in recent years, and the obligations on asset holders under SECO ordinances are substantive and enforceable. Penalties for breach can include criminal sanctions under the Embargo Act, not merely administrative fines. Businesses that treat the Swiss regime as less demanding than the EU or US position are mis-calibrating their risk.
A second myth is that a divestiture decision made on purely commercial grounds – the investor simply wants out – automatically resolves the sanctions position. It does not. The manner of exit, the routing of proceeds, the identity of the buyer, and the timing all remain subject to the applicable ordinance's prohibitions. A commercially motivated exit that places value in a designated person's hands is a prohibited transaction regardless of the seller's intent.
A third objection, heard particularly from private-equity and fund clients, is that the fund's investment documentation already provides a sanctioned-investor removal mechanism and that this mechanism governs the divestiture. It does not substitute for a SECO exemption where one is required. The contractual mechanism between fund and investor operates under Swiss private law; it does not alter the public-law obligations imposed by the ordinance. Both must be satisfied, and they must be satisfied in a sequence that the ordinance permits.
Related practices
- Correspondent Banking and De-risking – OFAC Service – managing OFAC exposure in payment and banking relationships involving sanctioned-interest counterparties
- JV Sanctions Structuring – OFAC Regime Briefing – comparative analysis of how OFAC governs joint-venture structures with a sanctioned-interest dimension