SIFMANet Helsinki Report

In late November 2024, the Sanctions and Illicit Finance Monitoring and Analysis Network (SIFMANet), which is led by RUSI’s Centre for Finance and Security (CFS) and supported by the National Endowment for Democracy, held a workshop in Helsinki to discuss the challenges and successes of sanctions implementation and enforcement in Finland. The meeting brought together representatives from Finnish national authorities and financial institutions (FIs), as well as compliance experts and private sector stakeholders. Discussions underscored Finland’s evolving role as a key player in European sanctions policy, particularly in response to Russia’s ongoing aggression in Ukraine.

This report synthesises insights from the workshop to provide an overview of Finland’s sanctions journey, the private sector’s perspective, the country’s unique challenges, and the practical steps taken to ensure compliance and enforcement. It also captures recommendations made by the representatives of Finnish public authorities and the private sector attending the roundtable discussion that are more broadly applicable across the EU.

Finland’s Sanctions Journey

All participants underlined throughout the meeting that Finland has been proactive in adapting to the EU’s stringent sanctions regime against Russia, a process accelerated by the geopolitical urgency stemming from the war in Ukraine. The country’s geopolitical and economic situation has been profoundly influenced by Russia’s illegal war. The invasion heightened security concerns, prompting Finland to abandon its longstanding military non-alignment and join NATO in 2023, marking a historic shift in its defence policy. Economically, Finland has reduced reliance on Russian energy and trade, diversifying its energy sources. Participants noted that the number of companies importing goods from Russia has fallen from about 2,000 to only several dozen, one of the biggest decreases in trade with Russia in the EU. This pivot has bolstered ties with Western nations and incentivised Finnish businesses to search for new partners to compensate for the challenges posed to Finnish industries by the loss of Russian markets. Regardless of the incurred losses, the views of private sector participants were encapsulated by one participant, who noted that Finnish industry stands for Ukraine and sees Ukraine’s victory as in its vital interest and a prerequisite for Finland’s long-term economic development.

Before Russia’s invasion of Ukraine in 2022, Finland had relatively limited experience with sanctions enforcement, with only one to three cases annually. This has since increased to nearly 900 cases under investigation, reflecting the sheer scale of the sanctions regime and its impact on trade patterns.

A participant representing the Ministry for Foreign Affairs (MFA) noted that in building Finland’s sanctions capacities, Finnish authorities had leaned on prior expertise, including frameworks established in response to earlier sanctions, such as those following Russia’s annexation of Crimea in 2014. However, the magnitude of recent sanctions necessitated a steep learning curve, especially in the MFA, which serves as Finland’s national competent authority (NCA) for sanctions implementation. In response, the MFA has rapidly expanded its sanctions advisory and enforcement capabilities. As noted by one participant, it was clear to the MFA from the early days of the EU sanctions rollout that it needed to provide advice and guidance to Finnish companies to empower the private sector to achieve effective implementation. With this in mind, the MFA undertook reforms and offered practical services, such as an “Infoline” and an online training programme. Participants also noted that due to limited exposure to other sanctions regimes, such as UN Security Council designations against North Korea, the legal expertise of law firms in Finland about sanctions was limited. Representatives of the private sector noted that this gap was promptly bridged by the MFA and now is increasingly filled by chambers of commerce that are taking over the advisory role and assisting Finnish industries in understanding the sanctions framework and compliance challenges. For example, one representative of industry shared that one of the chambers provides Dow Jones screening services to its members, which is particularly valuable for Finnish small and medium enterprises (SMEs).

To coordinate national efforts and facilitate the implementation and enforcement of sanctions on Russia, the MFA coordinates three working groups:

1. The Financial Sanctions Taskforce, which is focused on cooperation with the banking sector and regulatory bodies such as the Finnish Financial Supervisory Authority.

2. The Sanctions Circumvention Prevention Taskforce, which was established in 2023, involves 10 public authorities, and analyses trends to pre-empt circumvention.

3. The Public-Private Cooperation Working Group, which is a forum for dialogue between the public and private sectors, including the Confederation of Finnish Industry and FIs.

Limitations

The high degree of ongoing and well thought out coordination does not entirely resolve the challenge of constrained resources. Many Finnish authorities faced significant resource limitations in scaling up enforcement efforts. One participant noted that the FCA identified over 30,000 anomalies in trade flows since 2022, yet conducted checks on only 10% of these cases, due to staffing constraints. Similarly, participants representing Traficom shared that they had to reprioritise existing resources to address sanctions-related challenges in aviation and logistics without receiving additional funding.

Representatives from the private and public sectors noted that deficiencies posed by constrained resources are in part mitigated by excellent cross-sectoral cooperation. As one participant noted, Finland is a small country, and stakeholders know each other very well, therefore communication is direct. There is a shared understanding that all sectors are in the same boat and this joint motivation has a highly positive impact on the national sanctions community.

Participants highlighted that sanctions on Russia have had a significant impact on Finland’s transportation sector, particularly in aviation and railways. A representative of Traficom emphasised that aviation faced significant hurdles due to airspace restrictions and the lingering impact of Covid-19, necessitating the reprioritisation of resources, and collaboration with military and border authorities. The agency has played an important role in the implementation of sanctions, as it has issued flight exemptions and ensured compliance and enforcement despite limited resources.

For railways, the customs authorities have been responsible for enforcing sanctions that caused a sharp decline in Russian cargo transit through Finland (as a representative of customs noted, for some goods, such as stones and fertilisers, this reduced from 50% of the total EU cargo to less than 1%). Participants from all national agencies responsible for the implementation of sanctions in the transportation sector underlined the importance of the effective inter-agency cooperation taking place in Finland, and the valuable support they received from the MFA.

Asset Freeze and Confiscation

During the workshop, the unique Finnish asset freeze laws were discussed, particularly in the context of sanctions against Russia. In Finland, the National Enforcement Authority has extensive powers to investigate and freeze various types of assets. This includes not only real estate but also company shares and other financial holdings. The authority operates by receiving substantial information from FIs to identify sanction violations and asset concealment. Additionally, it provides guidance to businesses to ensure compliance with the sanctions regime.

On the sidelines of the workshop, participants commented on a recent asset confiscation case in Finland, where the court had ordered $4.25 billion in assets owned by Russia in the country to be confiscated at the request of Ukrainian state firm Naftogaz. Media reported that the National Enforcement Authority was executing the order in connection with an April 2023 judgment from a Hague tribunal related to compensation for Moscow’s seizure of Naftogaz property when Russia annexed Crimea in 2014. This decision is an interesting precedent, and may trigger further reaction against Russian assets across the EU.

Private Sector Perspective and Challenges

While the sanctions against Russia reinforced Finland’s alignment with EU policies and reduced its economic vulnerability to Russia, they also necessitated increasing sanctions compliance capacities across FIs and industry, as well as the restructuring of export strategies and supply chains to minimise economic fallout.

Participants noted that, after almost three years of unprecedented roll-out of the EU sanctions on Russia, bigger companies have a solid overview and understanding of their clients, and therefore of sanctions risks. Finnish banks and other FIs swiftly adjusted to comply with EU sanctions and mitigate exposure. However, despite national efforts, gaps remain in SME preparedness. As highlighted during the workshop by representatives of both the public and private sectors, the MFA has taken a proactive role in advising Finnish businesses, responding to 600–700 inquiries annually and providing tailored guidance, targeted outreach initiatives and press releases summarising each new EU sanctions package.

However, in light of the constraints on national resources, private sector representatives advocated for the establishment of an EU-level SME sanctions due diligence helpdesk and enhanced end-user checks to support compliance.

Participants discussed the impact on Finnish key industries, such as forestry, machinery and technology, of the loss of the Russian market, which had been a substantial trading partner. The energy sector, in particular, experienced challenges as Finland moved swiftly to end its dependency on Russian energy imports, leading to increased costs in securing alternative supplies. Finnish industry now complements public efforts to mitigate the economic consequences of Russia sanctions for Finnish businesses through organisations such as EastCham Finland (renamed from the Finnish–Russian Chamber of Commerce), which has reoriented its focus towards Central Asia to help companies diversify trade routes away from Russia. One participant representing Finnish industry noted that not all trade with Central Asia was related to sanctions circumvention and therefore bad. Before 2022, Finnish companies had exported goods to this region via Russia, but they are now actively seeking direct partnerships through the offices of EastCham in Almaty and Kyiv. The chambers have been actively supporting its members in knowledge and expertise to prevent circumvention, which remains a key consideration for Finnish corporates when trading with Central Asian countries.

Participants also discussed the pivotal role that the FCA and the FIU have in sanctions enforcement. A participant representing the FIU noted his institution has encouraged obliged entities to adopt a low reporting threshold for suspicious activity reports related to sanctions, enabling the collection of comprehensive data. With over three years of data, Finnish authorities are now building typologies to detect circumvention patterns.

Circumvention remains a significant challenge, particularly in trade with the Central Asia region. Even though Finnish companies have adapted by reconfiguring supply chains to avoid Russia, FIs have increased due diligence with key clients, and the national authorities actively provide guidance, participants agreed that gaps in EU-level guidance on ownership, control and end-use verification persist. To mitigate this, representatives of banks pointed to the need for automated systems to detect circumvention of sectoral sanctions, similar to those used in anti-money laundering processes but tailored to the unique dynamics of sanctions compliance.

Addressing Gaps and Bolstering Effectiveness

The roundtable discussion addressed questions about how to improve the implementation of sanctions in Finland and the EU. Foremost, participants stressed the importance of: incorporating implementation feasibility into sanctions design; cross-border cooperation; and enhanced support from the European Commission.

Representatives from the private sector said Finland could further bolster its sanctions regime by updating the guidance on ownership control and increasing resources for enforcement agencies. Additionally, publishing anonymised findings from non-criminal investigations into sanctions compliance failings provides valuable learning opportunities for businesses. As one participant pointed out, to make sanctions more effective, it is necessary to make them more understandable.

Participants from government bodies and the private sector expressed a strong stance on a need for the European Commission to accelerate the assistance it offers to member states. The key request from participants was for the Commission to publish guidance and impact assessments concurrently with new sanctions legislation, as well as enhance transparency through codified changes to legislation. The Commission highlighting changes would ease the burden on the public and private sectors of investigating novelties in each EU package, which is especially challenging for SMEs that do not have an in-house compliance team.

Representatives of the FCA suggested simplifying regulations to facilitate implementation, particularly for SMEs. FCA officials noted that the technical complexity of export control regimes and the reliance on intricate tariff codes hindered effective compliance. One participant suggested adopting simpler frameworks, such as a blanket ban on trade with Russia with specified derogations, to enhance clarity and reduce circumvention risks. Participants agreed that currently, the fragmented nature of EU sanctions regulations poses interpretative challenges for Finnish authorities and businesses, and that the European Commission should be more proactive in advancing the EU framework and mitigating the challenges.

As an example of one area where the European Commission could provide more guidance, one participant outlined the challenges for the private sector around navigating the TARIC, the integrated Tariff of the European Union database. According to the participant, whose opinion was echoed by other attendees, the database is difficult to use; they recommended that relevant codes be flagged as high risk to help companies identify risks quickly and easily.

Participants also pointed to challenges related to the cross-border nature of the implementation of sanctions. Discussions highlighted disparities in sanctions enforcement across EU member states, with interpretations seen as becoming less stringent the further one is from Russia’s borders. On a positive note, Finland has actively collaborated with Baltic neighbours to align practices, leveraging pre-existing information-sharing mechanisms tested during the Covid-19 pandemic.

There was a consensus among participants that detecting circumvention at the international level requires effective communication with not only other EU member states, G7 countries and partners from the Global South, but also domestically, between national authorities and the private sector (corporations and FIs). Effective data exchange between all of these parties is also key. To develop comprehensive models and typologies to address circumvention, all institutions need to understand the broader context through comprehensive datasets. One participant pointed out that there is often a delay between the investigation of cases and their public disclosure, which can hinder timely learning and adaptation. In terms of communication and information sharing, one representative of the FIU noted that Finnish authorities exchange information with other EU member states via Europol and FIU.net, and underlined that the communication between FIUs has been an effective vehicle and gateway to other national authorities that otherwise might be difficult to engage with.

Finally, one workshop participant representing the Finnish private sector opened a discussion on the requirement for unanimity in EU decision-making on sanctions and the significant challenges it poses to the adoption of a robust and unified sanctions regime against Russia. Any member state can block or delay decisions, which, the participant said, can lead to prolonged negotiations and watered-down measures. It also creates opportunities for states with closer economic or political ties to Russia to exert disproportionate influence, potentially undermining the EU’s collective stance. Participants noted that the unanimity requirement often obscures the effectiveness of the sanctions regime by fostering compromises that weaken the measures’ scope and enforcement, reducing their impact on Russia’s economy and war capabilities. Participants representing the private sector agreed that Finland, as a country which has a strong commitment to supporting Ukraine, and where the geopolitical and economic situation has been profoundly influenced by Russia’s illegal war, would benefit from departing from unanimity and embracing other options, such as the qualified majority.

Conclusions

The discussions at the workshop demonstrated Finland’s remarkable adaptability in responding to the EU’s expanded sanctions regime against Russia. Through proactive engagement with the private sector and collaboration across public agencies, the country has established itself as a leader in sanctions enforcement and dynamic and collaborative thinking. However, challenges related to resource allocation, regulatory complexity and EU-wide harmonisation remain.

The Helsinki workshop underscored the importance of aligning sanctions design with practical implementation, and fostering trust between public authorities and private stakeholders. As sanctions evolve, Finland’s experience offers valuable lessons for other EU member states, especially small industrial countries, navigating similar challenges.

Kinga Redlowska is the Head of CFS Europe. She leads the Centre for Finance and Security’s activities in Brussels that centre around the intersection of illicit finance and security, and are focused on the EU and its neighbourhood.