In May 2025, the Directive (EU) 2024/1226 introduces stricter penalties, standardized enforcement, and enhanced compliance requirements across all EU member states. The Directive is being introduced to address the inconsistent application of sanctions among member states and legal ambiguities that have allowed entities to exploit loopholes, undermining the effectiveness of EU sanctions. By introducing these measures, the Directive aims to close enforcement gaps and deter violations.
Key Takeaways
- The Directive introduces harmonized and stricter penalties across the EU, eliminating enforcement inconsistencies and increasing liability for violations.
- Individuals and organizations face heightened accountability with personal liability for compliance failures and corporate responsibility for employees’ actions.
- Key challenges include managing cross-border regulations, dual-use goods, reporting requirements, and rigorous screening of business partners.
- Automation tools are essential for streamlining compliance processes, reducing errors, and ensuring adherence to evolving regulatory demands.
- Proactive compliance strategies can help organizations mitigate risks and turn regulatory obligations into a competitive advantage.
What Does Directive (EU) 2024/1226 Aim to Accomplish?
The Directive aims to establish minimum rules to enhance the effectiveness of restrictive measures, ensure uniform application across all member states and close current any known gaps that may allow entities to circumvent sanctions.
For organizations engaged in international trade this means stricter regulatory scrutiny, increased number of penalties for non-compliance and a greater demand being placed on trade compliance teams. Businesses must begin to act now to align their processes to meet the new requirements.
Provisions in the Directive
- Offering prohibited services which are restricted under EU sanctions
- Failure to freeze assets which belong to sanctioned individuals or entities
- Breaching trade restrictions such as importing or exporting restricted goods
- Circumventing sanctions, for example, by providing false information to hide funds or assets is considered a criminal offense. The Directive expands criminal liability to include acts of serious negligence involving items on the EU’s Common Military List or Dual-Use Goods List
- Organizations can be held liable if an individual in a leadership position or due to lack of supervision, commits an offence for the company’s benefit
Penalties for Violations
The Directive standardizes the penalties for individuals and organizations. This harmonized approach means that both individuals, especially executives and compliance officers, and organizations can no longer evade liability due to lack of enforcement.
For Individuals
- Imprisonment with maximum terms ranging from one year to five years depending on the severity of the offence
- Proportionate and dissuasive fines
- Disqualification from certain professional activities
For Organizations
- Depending on the offence, fines calculated as a percentage of global turnover or a fixed amount
- Exclusion from public funding, disqualification from business activities, loss of permits and judicial supervision/ winding up orders
Why This Directive Matters for Trade Compliance Professionals?
Whether you are vetting business partners or managing import/ export controls, the increased accountability the Directive places on individuals and organization has raised the stakes to ensure you and your organization are compliant.
With extraterritorial enforcement provisions, ensuring compliance across multiple jurisdictions has become more complicated and proper classification and licensing of dual-use items remain a major pain point, especially with evolving regulations.
The Directive explicitly holds individuals accountable for intentional or negligent violations of sanctions. Trade compliance officers, managers, and even employees can face personal liability, including fines and imprisonment, if they fail to adhere to regulatory requirements.
Companies are also liable for offenses committed by individuals acting on their behalf. This means that even unintentional violations—like failing to freeze assets or facilitating prohibited transactions—can result in severe penalties for the entire organization.
How Should a Trade Compliance Team Adapt?
Trade compliance professionals must ensure robust internal controls are in place to foster a culture of accountability to protect both themselves and their organizations from legal risks. With harmonized enforcement, trade compliance professionals now have a more predictable regulatory environment. However, this also means there’s less room for ambiguity—compliance expectations are higher than ever therefore trade compliance teams must align their processes.
Trade Compliance Challenges
Establish clear roles and responsibilities within your compliance team. Ensure everyone understands their obligations, from sanctions screening to reporting incidents. Automating denied party screening not only reduces manual errors but also creates audit trails, demonstrating due diligence during inspections.
- Challenge #1: Increased Accountability: Establish clear roles and responsibilities within your compliance team. Ensure everyone understands their obligations, from sanctions screening to reporting incidents. Automating denied party screening not only reduces manual errors but also creates audit trails, demonstrating due diligence during inspections.
- Challenge #2: Complexity of Cross-Border Operations: One of the biggest challenges in cross-border trade is ensuring alignment with multiple regulatory frameworks, such as EU sanctions, U.S. export controls, and UK trade restrictions. Effective sanctions screening is essential to identify high-risk transactions and ensuring compliance with all applicable regulations, avoiding severe penalties. Exporting or importing goods across borders can require specific licenses, permits, or documentation. Misclassification or missing paperwork can lead to delays, fines, or even criminal charges under the Directive.
- Challenge #3: Stricter Reporting Requirements: Reporting will be a key insurance policy to ensure there was no intentional or negligent violations of sanctions. Reporting must be created, managed, and submitted digitally and stored in one secure, unified, accessible location. By digitizing and centralizing data, all relevant information becomes readily available to authorized users. This will reduce administrative burdens and minimize the risk of non-compliance due to incorrect or incomplete documentation.
- Challenge #4: Managing Dual-Use Goods: Establish clear roles and responsibilities within your compliance team. Ensure everyone understands their obligations, from sanctions screening to reporting incidents. Automating denied party screening not only reduces manual errors but also creates audit trails, demonstrating due diligence during inspections.
- Challenge #5: Robust Screening of Business Partners: One of the most critical responsibilities for trade compliance teams under Directive (EU) 2024/1226 is ensuring that all business partners such as customers, suppliers, distributors, and intermediaries are thoroughly vetted to prevent prohibited transactions. This involves implementing a rigorous business partner screening process to identify any entities or individuals that may be subject to sanctions, export controls, or other restrictive measures. This is why using advanced denied party screening tools is not just a best practice—it’s a necessity for organizations aiming to grow in an era of heightened regulations.
Navigating Trade Compliance with Confidence
For trade compliance professionals, this Directive represents both a challenge and an opportunity. On one hand, the stricter regulatory scrutiny, increased penalties, and extraterritorial reach demand unprecedented vigilance and precision. It also provides a clear framework for compliance, enabling organizations to align their processes and mitigate risks more effectively.
To adapt to this new landscape, trade compliance teams must embrace proactive strategies and leverage advanced tools to meet the Directive’s rigorous requirements. By establishing robust internal controls, automating critical workflows, and fostering a culture of accountability, organizations can not only ensure compliance but also turn these obligations into competitive advantages.
