EU sanctions: deal on rules to crack down on violations

Violating EU sanctions, including those against Russia, should be punished

Circumventing and violating sanctions will include failures to freeze funds or enforce travel bans

EP and Council negotiators have reached a deal on new rules aiming to strengthen the uniform enforcement of EU sanctions across member states.

On Tuesday afternoon, MEPs and representatives of the Spanish EU Council Presidency reached an agreement on criminalising violations and circumvention of EU sanctions. The new directive would introduce a common definition of and minimum penalties for violations.

EU sanctions can consist of freezing funds and assets (including crypto-assets), travel bans, arms embargoes and restrictions on business sectors, among other things. According to the agreement, violations would include not freezing funds or not respecting travel bans as required by sanctions, or doing business with state-owned entities of countries subject to sanctions. Providing financial services or legal advisory services in violation of sanctions would also become a punishable offence.

Circumventing sanctions would also be punishable and would include practises such as concealing or transferring funds that should be frozen, hiding the true ownership of property, and not reporting sufficient information. According to the agreed text, humanitarian assistance or supporting basic human needs should not count as sanctions violations.

Stronger punishments for violations

According to the proposal, violating and circumventing the sanctions should be punishable criminal offences carrying prison sentences of a maximum of five years. When companies violate or circumvent sanctions, judges must be able to issue dissuasive fines, although Member States can choose whether the judge can impose a maximum penalty based on the world wide annual turnover of the company, or based on absolute maximum amounts.

In the negotiations, MEPs sought to harmonise the penalties for violations to prevent forum-shopping, or the practise of searching for regimes with the lowest penalties. Additionally, they wanted to make sure that the judges have a wide and harmonised toolkit available to punish violators of sanctions. It was agreed that in addition to intentional violations, trade in arms or dual-use items would be also be criminalised in cases of serious negligence.

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After the deal, rapporteur Sophie in ’t Veld (Renew, the Netherlands) said: “Today we wanted to send a strong signal to our Ukrainian friends by agreeing on the draft Directive. The criminalisation of the violation of restrictive measures will help us seizing the assets of persons targeted by sanctions and their helpers. However, we note that its aim of eliminating the uneven enforcement of sanctions leading to “forum shopping” has not been achieved, due to fierce resistance by the national governments. Let’s face it, this Directive will in itself not prevent violations as described in Cyprus Confidential.”

Next steps

The informal agreement now needs to be approved by both Parliament and Council in order to become law. It will enter into force twenty days after its publication in the Official Journal of the EU.

Background

The EU has adopted more than 40 sanctions regimes against third parties as part of its Common Foreign and Security Policy, most recently against Russia following its invasion of Ukraine. However, the Commission estimates that inconsistent enforcement of EU sanctions has undermined their efficacy.