EU Looks to Target Profits Made from Sanctions Evasion

Zulfi Meerza outlines European Union moves to seize the illegal gains made by those breaching sanctions.

The European Union (EU) is drafting rules to confiscate assets linked to sanctions violations and other crimes.

A draft directive that has been agreed is set to see organised crime facing tougher EU-wide rules regarding profits made through illegal activities, such as the breaching of sanctions.

The directive is an attempt to harmonise relevant laws. If passed after talks with the EU parliament and the Commission, it will update the minimum set of rules relating to the tracing, identification, freezing, confiscation and management of criminal property.

In a statement, the Council of the European Union said: "The proposed rules will apply to a wide range of crimes, including the violation of sanctions.
"People profiteering from doing business with persons or companies on EU sanction lists will see their yields being seized the same way as traffickers in human beings or drug cartels."

The EU law enforcement agency Europol estimates that criminal organisations generate revenues of at least 139 billion euros every year.

Unexplained Wealth

The new law will introduce rules governing the confiscation of "unexplained wealth". Such confiscation will not require criminal conviction – in the same way as the UK’s unexplained wealth orders regime does not require a successful prosecution. But such confiscation will only be possible if a court is convinced that the property in question is derived from criminal conduct.

The new law will place obligations on EU member states to ensure that their agencies dealing with the tracing, freezing and managing of criminal assets have qualified staff and appropriate resources.

Despite the existence of a number of EU laws relating to the tracing and confiscation of illegal assets, there have been calls in recent years from both the European Council and the European Parliament for a stronger asset recovery legal framework.

In principle, this method could prove to be an effective way of securing illicit wealth. However, similar obstacles may arise as has been the case with UK unexplained wealth orders, which have had little or no success before the UK courts to date.

Harmonisation of legislation across EU member states will be important in accelerating the identification, tracing, freezing and confiscation of assets generated by criminal activities. It is also important that enforcement agencies are given adequate resources to properly investigate and seize assets, thereby resulting in effective enforcement.

This approach, however, may well be too late in many cases, as perpetrators are likely to have already diverted relevant assets / funds or managed to conceal their criminal origins.