Law Firm: Italian Proposals Could Overhaul Country's Sanctions Compliance Landscape
Rome's legislative body is reviewing two initiatives that should "reshape the compliance landscape" for companies operating in Italy, including one that would make sanctions violations a criminal offense and another that would change how companies are held liable for trade violations committed by employees, law firm McDermott Will said in a client alert this month.
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"Taken together, these developments will significantly change the Italian corporate compliance environment," the firm said, adding that compliance with international sanctions will "become even more critical" to avoid serious penalties.
Under the first change, Italy would adopt an EU change from 2024 that criminalized violations of the bloc's sanctions. Although McDermott Will said Italy already punishes export control breaches under criminal law, the country is looking to more closely align with "EU sanctions’ enforcement objectives." If adopted, any violation of an EU sanction can lead to two to six years in prison and a fine of up to 250,000 euros (about $290,000), the firm said. If the violator cooperates with Italian authorities, such as helping to gather evidence, identify other participants, or to seize funds, the penalty may be reduced.
"The provision is clearly designed to incentivize cooperation and enhance the effectiveness of enforcement by encouraging individuals to support the authorities in uncovering violations and identifying other perpetrators," the law firm said.
The second change would revise Italy's standard for corporate liability, which holds companies liable if they fail to "implement an adequate compliance program or internal control system suitable to prevent" a violation by one of its employees, McDermott Will said.
The legislative change being reviewed would "revise the foundations of corporate liability" so it applies only to "collective entities," excluding "sole proprietorships" and certain small entities, the firm said. It also includes language that would prevent "dual proceedings for the same conduct where an entity has been definitively acquitted or convicted in the country where it is headquartered," and it states that parent companies may face liability for violations committed at the subsidiary level, "where the conduct serves a specific interest or advantage of the controlling company."
The proposal also removes a distinction between senior management and employees, the firm said, adding that entities would be held liable if they fail to implement "adequate oversight duties on the functioning, enforcement, and updating" of its compliance program. Other changes are meant to better reward voluntary disclosures, introduce a new "probation mechanism" to encourage cooperation with Italian authorities, and more.
McDermott Will said the proposal to criminalize sanctions violations is still being reviewed and may be tweaked before the final text is approved. The proposal to revise Italy's broader corporate liability laws could also undergo changes before final approval, the firm said, which is expected "by mid-2026, but the timing could be significantly impacted by a number of factors."