Commission proposes EU-wide ‘criminalisation’ of sanctions evasion and asset confiscation plans

The European Commission has announced that it is to introduce proposals which, say observers, could radically tighten sanctions enforcement in the EU, including by adding the violation of sanctions rules to the list of ‘EU crimes’ – currently Member States have the discretion to treat violations as administrative breaches, criminal acts, or both – and by putting forward a proposal for a Directive on Asset Recovery and Confiscation.

As regards an EU-wide criminalisation of sanctions evasion, the Commission says that adding the offence to the list of EU crimes would create a ‘common basic standard on criminal offences and penalties across the EU,’ making it easier to ‘investigate, prosecute and punish violations of restrictive measures in all Member States alike.’

It points out that the violation of restrictive measures ‘meets the criteria set out in Article 83(1) TFEU, as it is a crime in a majority of Member States. It is also a particularly serious crime, since it may perpetuate threats to international peace and security, and has a clear cross-bordercontext, which requires a uniform response at EU level and global level.’

As regards the proposal on asset recovery, the Commission says that under the new rules it would:

• Extend the mandate of Asset Recovery Offices ‘to swiftly trace and identify assets of individuals and entities subject to EU restrictive measures,’ adding,‘These powers will also apply to criminal assets, including by urgently freezing property when there is a risk that assets could disappear.’
• Expand the possibilities to confiscate assets ‘from a wider set of crimes, including the violation of EU restrictive measures, once the Commission proposal on extending the list of EU crimes is adopted.’

It also intends to establish ‘Asset Management Offices’ in all EU Member States, ‘to ensure that frozen property does not lose value, enabling the sale of frozen assets that could easily depreciate or are costly to maintain.’

Explaining the necessity of the move, the Commission said, ‘The Union has put in place a series of restrictive measures against Russian and Belarusian individuals and companies, as well as sectoral measures some of which date back to 2014. The implementation of EU restrictive measures following the Russian attack on Ukraine shows the complexity of identifying assets owned by oligarchs, who hide them across different jurisdictions through complex legal and financial structures. An inconsistent enforcement of restrictive measures undermines the Union’s ability to speak with one voice.’ Sanctions, it says, ‘are only effective if systematically and fully enforced, and violations punished,’ and that while ‘Member States are already required to introduce effective, proportionate and dissuasive penalties for violations of restrictive measures…some Member States use much broader definitions, others have more detailed provisions in place…This patchwork enables persons subject to restrictive measures to circumvent them.’

Paris-based sanctions and trade lawyer Jan Dunin-Wasowicz, counsel at law firm Hughes Hubbard & Reed, told WorldECR that the profession would be working through the proposals very carefully, but that there is much that needs clarification. For example, he said, ‘Who is this trying to target exactly – is it EU operators, those who have been designated, or others involved in circumvention?

‘Concerning the listed individuals,’ he said, ‘if they have not been actually charged or alleged to have committed other crimes, such as laundering money or corruption, will the predicate for confiscating the assets be their designation or their suspected acts of evading EU measures?’

‘In any event,’ he added, ‘if the Council agrees to add the violation of EU sanctions to the list of crimes in Article 83(1), then the Commission will be able to present a Directive with common EU-wide definitions and sanctions. This has the potential to be very broad and include several criminal offences related to violations of EU sanctions, impacting a wide spectrum of operators, as the draft presented on 25 May 2022 suggests.’

https://ec.europa.eu/commission/presscorner/detail/en/ip_22_3264