Government examines closure of Russian sanction loopholes

Sanctions or 'restrictive measures' include asset freezes, travel bans, arms embargoes, import and export restrictions, and banking restrictions.

The Government is examining how it can implement EU proposals aimed at closing legal loopholes that are thwarting efforts to bring to account Russian individuals and companies breaching sanctions over Ukraine.

The European Commission has told member states that while there is a multitude of sanctions in place targeting Russian and Belarussian people and businesses, “very few” of them are being held accountable for breaking sanctions.

The sanctions, known as “restrictive measures”, can include asset freezes, travel bans, arms embargoes, import and export restrictions, and banking restrictions.

An assessment drawn up by the Department of Justice on the proposed EU directive has said that a six-month implementation deadline, once the directive enters into force, is a “very ambitious timeline”.

It said work is under way to identify how the proposals could be transposed in practice here and that legal advice is being sought.

Outlining the proposals, the commission said: “Speaking with one voice has become particularly urgent in the current context of Russia’s military aggression against Ukraine.” 

It said the commission set up a ‘Freeze and Seize” taskforce to coordinate the work of member states as well as that of Europol, the EU police agency, and Eurojust, the EU judicial body.

Criminalisation of breaches

However, it said countries “differ significantly” on criminalisation of sanction breaches and that many member states place “insufficient priority” on investigating the matter.

The commission said penalty systems “differ substantially” between EU countries, both in relation to possible prison sentences and fines.

It said that even where assets are frozen, designated individuals and companies “may continue to be able to access their assets in practice and to support regimes” targeted by the sanctions.

“In practice, very few individuals or legal persons responsible for the violation of union restrictive measures are effectively held accountable," the commission said.

The proposal will allow properties and frozen assets to be confiscated.

The Department of Justice said the commission's analysis has revealed the “complexity of identifying assets” owed by those subject to sanctions, who hide their assets across different jurisdictions through complex legal and financial structures.

Those who wish to conceal their assets are helped by existing legal loopholes as the criminal law provisions on breaches of EU sanctions vary across member states.

"The inconsistent enforcement of restrictive measures undermines the EU’s ability to speak with one voice," the department said. 

The new proposal seeks to define criminal offences linked to breaching the sanctions, ensure effective penalties are in place, and foster cross-border investigation and prosecution.

The Department of Justice said the offences proposed cover violations of the sanctions and conduct intended to circumvent the sanctions.

It further noted that under the draft directive, member states would have to take the necessary measures to ensure that funds or assets subject to the sanctions are “considered the proceeds of crime”, which would mean countries would have more possibilities to confiscate the asset.

Department officials are engaging with other departments and agencies.