The European Parliament supported the criminalization of circumvention of sanctions: this will allow the confiscation of assets of the Russian Federation

The EU voted to support the criminalization of sanctions evasion. Violators may face fines or confiscation of assets.

The European Parliament, with 543 votes in favor, 45 against and 27 abstentions, adopted a directive agreed with member states to criminalize the violation and circumvention of EU sanctions. It will introduce a general definition of violations and minimum penalties for them.

It is noted that EU sanctions may include freezing of funds and assets, travel bans, arms embargoes and restrictions on the business sector.

“Although sanctions are adopted at EU level, their enforcement depends on member states, whose definition of violation of sanctions and associated penalties differs,” writes the European Parliament.

Details of the new law

The new law establishes consistent definitions of violations, in particular:

• no freezing of funds;

• failure to comply with travel bans or arms embargoes; transfer of funds to persons under sanctions;

• doing business with state-owned enterprises of countries;

• under sanctions.

“Providing financial services or legal advice in violation of sanctions will also become a punishable offense,” the European Parliament added.

The law also defines circumvention of sanctions and ensures that it is a punishable offense. Examples include hiding or transferring funds that should be frozen, hiding the true owner of property, and failing to provide required information. The law specifies that humanitarian assistance or support for basic human needs should not be considered a violation of sanctions.

Asset confiscation

The Directive provides a deterrent effect to punish violations and circumvention of sanctions, making them criminal offenses punishable by up to five years’ imprisonment in all Member States.

The European Parliament noted that when companies violate or circumvent sanctions, judges should be able to impose deterrent fines. At the same time, Member States can choose whether a judge can impose a maximum fine based on a company’s worldwide annual turnover or based on absolute maximum amounts.

The new law will give judges a wide range of tools to punish violators. In addition to willful violations, trafficking in weapons or dual-use items will also be criminalized in cases of serious negligence.

Speaker Sophie In’t Veld said that the Russian invasion benefits from scammers breaking the law in Europe.

"They need to be caught and the forum shopping needs to stop. We need this law because divergent national approaches have created weaknesses and loopholes, and it will allow frozen assets to be confiscated," she said.

Further fate of the law

The law still needs to be formally approved by the EU Council before it can become law.

It will come into force twenty days after its publication in the Official Journal of the EU, after which member states will have one year to transpose it into national law.