The Commission had already planned to revise its tools on freezing and confiscating the assets of organised crime groups, but the war in Ukraine and the sanctions against Russian oligarchs have added a particular dimension.
The Commission proposed, on 25 May, with a proposal for a Council decision and a directive, to criminalise the attempt to circumvent European sanctions and to make it possible, in this context, to confiscate assets already frozen by the authorities of the Member States. It will later propose a further directive setting out the level of penalties for crimes of sanctions violations.
These new tools could, in any case, have the effect of confiscating part of the €10 billion of Russian assets frozen so far in the EU, if its holders try by various means to continue to profit from their assets by making transactions.
The Directive on Asset Recovery and Confiscation goes beyond Russian oligarchs and extends to all criminal groups, 70% of which are now active in at least three Member States. Only 1% of their assets are currently confiscated in the EU and 2% are frozen, despite the fact that these groups make an estimated €139 billion in profits per year.
Violating sanctions, a new European crime
The Commission proposes, as a first step, to include the violation of sanctions in the list of European criminal offences (“euro-crimes”), as described in Article 83 TFEU. This list covers ten types of offences such as terrorism, trafficking in human beings, illicit drug trafficking, etc. To do so, Member States must adopt a decision to this effect. The Commission has therefore published a proposal for an EU Council Decision to add the violation of sanctions to the list of “euro-crimes”.
“The offence of circumventing sanctions may have different penalties and levels of enforcement in the Member States. There is therefore a risk of ‘forum shopping’ by those on the lists to go where the risks are lowest in terms of criminal prosecution” said the EU Commissioner for Justice, Didier Reynders.
Only twelve Member States currently consider the violation of EU sanctions as a criminal offence. Maximum prison sentences range from 2 to 8 years, and fines from €1,200 to €500,000. “This fragmentation weakens the implementation of sanctions”, said Didier Reynders.
The proposed decision is likely to be discussed at the Justice and Home Affairs Council of the EU on 9-10 June. The heads of state and government are also expected to discuss the issue when they meet on 30-31 May. According to draft conclusions obtained by EUROPE, dated 24 May, they call on “the EU Council to act swiftly on the Commission’s recent proposal on criminal measures for breaches of EU sanctions”.
Standards to punish sanction violations
Once the decision is adopted by the EU Council and approved by the European Parliament, the Commission will have a legal basis to propose a directive that will set standards for minimum penalties for violations of European sanctions. It has also published a Communication providing an overview of what the Directive could contain.
This will have to describe precisely which offences are concerned. The circumvention of sanctions via third parties, for example, is targeted by the text. Making funds available to sanctioned persons, engaging in economic and commercial activities with them would be considered punishable. The directive would also target non-compliance with the conditions imposed by the Member States to implement the sanctions (declarations, authorisations, etc.)
As regards the penalties to be applied in these different cases, the Commission makes suggestions such as: fines, ban on access to public funds, withdrawal of authorisations to carry out economic activities, judicial supervision or judicial liquidation.
New tools to confiscate more criminal assets
The proposal for a directive aims to improve and facilitate the confiscation of the property and assets of oligarchs or criminal groups by harmonising the practices of the Member States, with countries such as Italy being considered more advanced because of the presence of mafias. Some countries also already go further by allowing the re-use of confiscated goods for social purposes, but the directive does not propose anything new in this respect.
The new rules will in any case allow Member States to accelerate the confiscation of property or assets even in the absence of a conviction and not to have to pay the cost of the management of these assets which will be borne by their owners.
New emergency freezing powers will be given to Asset Recovery Offices to ensure that assets do not disappear before a freezing order is made. An emergency freezing order may be issued for 7 days.
The possibilities for confiscation in the Member States without conviction are also extended, for example in the case of death or immunity of the accused, but also for serious crimes where the authorities are convinced that substantial profits are generated.
In these cases, the facts would have to amount to offences punishable by at least 4 years in prison. The text also requires Member States to create specific safeguards for the rights of the persons concerned.
The directive adds as well a possibility to confiscate property and assets in case of “unexplained wealth” not linked to a specific crime.
Member States will also have to set up an Asset Management Office to ensure that assets are well managed and retain their value. A frozen property may be sold as well before it is confiscated. The owners will have the right to be heard.
Finally, the scope of application now also covers migrant smuggling, environmental crime and trafficking in arms, counterfeit goods and cultural property. The old 2014 directive, on the other hand, covered terrorist crimes or income related to human trafficking.
The subject will also be discussed by the EU27 at the Summit. They are expected to support the exploration of additional options to help rebuild Ukraine, including those considering “the use of frozen Russian assets”.
Transparency International called it “a good step forward”. But the Commission does not go “far enough in setting out clear procedures and guidelines for Member States to return assets to victim populations”.
Link to documents and EU Council conclusions: https://aeur.eu/f/1tc; https://aeur.eu/f/1t7; https://aeur.eu/f/1t1 (Original version in French by Solenn Paulic and Léa Marchal)