Most accounting offices do not have a sanctions screening service utilising registry databases.
The European Union imposed economic sanctions against Russia shortly after its invasion of Ukraine. Since then, public procurements from Russian actors have been prohibited. Economic sanctions are governed by EU Council decisions and regulations. The Council regulations bind both the authorities and private actors of the Member States.
In connection with the financial audits of 2023, the National Audit Office of Finland (NAOF) examined whether the central government accounting offices have followed the economic sanctions against Russia. The NAOF also examined whether adherence to the sanctions has been ensured particularly in procurement and payment transactions. According to the audit, the central government accounting offices, such as the ministries and agencies, comply well with the EU provisions governing sanctions.
The ministries have steered processes that are significant for the state’s financial management, such as the consideration of sanctions in the procurement and government grant processes. Guidance on the implementation of sanctions has been added to the key guidelines for the management of central government finances.
“However, the adequacy of the guidance should be reviewed as sanctions regulation increases. For example, it may be necessary to include economic sanctions-related content in the financial rules,” says Riku Stengård, Principal Financial Auditor.
Need for a sanctions screening service
The audit found that the centralised sanctions-related controls in the central government cover the need for oversight only partly. The Ministry of Finance should therefore assess whether it would be necessary to specify the central government’s common guidelines for carrying out sanctions compliance checks.
Some accounting offices had not examined in which processes the sanctions should be implemented, if necessary.
“We recommend the accounting offices to verify which processes the sanction provisions may impact and organise their internal control so that it corresponds to the actual risks,” says Stengård.
Most accounting offices do not have a sanctions screening service that utilises registry databases. This means that sanctions compliance checks may be carried out based on an insufficient information base and that sanctions against different actors may remain unidentified.
The implementation of sanctions against Russia is examined in the 2023 summary report of financial audit (in Finnish only).
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