EU states agree on draft law to criminalize evasion of sanctions

European Union countries have agreed on a draft law to facilitate the freezing of assets of Russian oligarchs and other individuals or institutions accused of circumventing the bloc’s sanctions against Moscow over the war in Ukraine.

In a move that could sway European financial institutions, justice ministers on Friday criminalized the act of helping sanctioned individuals to bypass travel restrictions, trade in banned goods or conduct transactions with sanctioned states or entities. approved the measures.

It would “give member states new tools to comply with the sanctions”, Swedish Justice Minister Gunnar Stromer told the Financial Times.

The measures will affect banks that have dealings with approved individuals, entities or states. Stromer said that “financial institutions in member states” were the target, adding that sanctioned individuals would also be affected.

The European Union is working to find ways to use frozen Russian assets to help Ukraine with its war effort and finance its reconstruction. “Discussions are also underway on the use of Russian sovereign assets to generate resources for Ukraine,” EU Justice Commissioner Didier Randers said on Friday.

“To date, member states under the 10th sanctions package have reported stable Russian central bank assets of more than 200 billion euros,” Randers said. This was on top of “€24.3bn in assets held by listed individuals and entities frozen to date”.

One option the EU is considering is using proceeds from assets held in clearing houses, which act as pipelines to the financial system. Institutions such as EuroClear reinvest and profit from the cash generated by the assets that the authorities are considering dishonestly siphoning off. EU officials said representatives of member states would discuss it next week ahead of a summit of EU leaders at the end of the month.

Meanwhile, the European Union is still sparring over an 11th package of sanctions against Moscow, but the 27 members have so far failed to reach a unanimous agreement despite weeks of debate.

Hungary and Greece are pausing support for the package in response to Kiev’s move to add some of its companies to a list of entities considered “sponsors” of Russia’s war effort.

Many countries are also uneasy about a proposed mechanism that could allow the EU to target companies in third countries that are understood to be acting as middlemen to send sanctioned goods to Russia. To ease concerns that it could harm diplomatic relations with those countries, a proposed settlement would create a step-by-step process, giving targeted companies fair warning to change their practices before being punished.

Ministers also backed rules on Friday to facilitate the freezing of assets related to criminal offences, including sanctions circumvention, but also organized crime, money laundering, fraud and other offences.

“It will be a very important tool for fighting organized crime in general,” Stromer said.

Europol estimates that only about 2 percent of criminal proceeds are withheld in the EU and about 1 percent is fully confiscated.

It still needs to be negotiated with the EU Parliament before the rules can come into force. A spokeswoman for parliament said talks are due to begin before August.

Member state representatives are keen to agree a package ahead of a summit of EU leaders on 29 June.

Additional reporting by Henri Foy in Brussels