The European Commission presented on Wednesday a package of legislative proposals to reinforce the EU-wide rules for freezing and confiscating assets linked to organised crime and for prosecuting the violation of sanctions against the oligarchs linked to Kremlin.
The Commission refers to the Russian aggression against Ukraine and the need to ensure that the assets of individuals and entities that violate sanctions or restrictive measures can be effectively confiscated in the future. However, the main objective of the package is to close the loopholes in the current patchwork of legislation while also confronting the oligarchs.
Available statistics speaks for itself. With over €139 billion in revenue every year, criminal groups constitute a very serious threat to Europe's security, according to the Commission. Powerful transnational criminal organisations conduct illicit traffic, commit murders, bribe officials and take over legitimate businesses to cover up illegal activity.
Despite existing rules on asset recovery and confiscation, only 2% of criminal assets are frozen and only 1% confiscated. In other words, the current system is very ineffective. No breakdown of the figures by member state was published on Wednesday but Didier Reynders, Commissioner for Justice and Consumer, expected that it would be available soon.
As regards freezing assets controlled by oligarchs and other individuals linked to the Russian aggression the Commission underlined that it is key to disrupt the Russian war machine. So far restricted measures have resulted in ca € 10 billion in frozen assets and €196 billion in blocked transactions.
In April, the Commission published a much higher figure after announcing the fifth package of restricted measures. According to its ‘Freeze and Seize Task Force', almost €30 billion of assets of Russian and Belarussian oligarchs and entities had been frozen by the EU, based on figures reported from more than half of the member states.
The package of new measures does not mention the possible use of confiscated assets to rebuild Ukraine after the war but does not exclude it. When visiting Sweden on Wednesday, Ukraine’s minister for municipalities and regions, Oleksij Tjernysjov. estimated the costs to rebuild the infrastructure in Ukraine to more than €100 billion.
“We must ensure that persons or companies that bypass the EU restrictive measures are held to account,” said Commissioner Didier Reynders at a press briefing when presenting the new proposals. “Such action is a criminal offence that should be sanctioned firmly throughout the EU.”
The Commissioner for Home Affairs, Ylva Johansson, focused on the overall objective of the new legislation. “Crime bosses use intimidation and fear to buy silence and loyalty. But usually, their greed means embrace of a rich lifestyle. That always leaves a trail. Now the European Commission is proposing new tools to fight organised crime by following this trail of assets.”
From freezing to confiscating assets
Firstly, Commission is putting forward a proposal for a Directive on asset recovery and confiscation. The core objective is to ensure that crime does not pay by depriving criminals of their ill-gotten gains and limiting their capacity to commit further crimes. The proposed rules will also apply to the violation of restrictive measures.
The proposal reinforces the situations where assets can be confiscated without a conviction, such as in cases of death or immunity of the accused. It also enables the confiscation of unexplained wealth linked to criminal activities to make sure that no illegal assets remain in the hands of criminals when they have been able to cover their tracks and hide the illegal origin of their properties.
The new powers to freeze assets will make sure that they do not disappear before the criminal proceeding is finalised. The revised directive will also require member states to establish an Asset Management Office, which will make sure assets are well managed.
The whole recovery process consists of a number of phases:
(1) Investigators follow the trail of illicit gains to identify property of suspected criminal origin. (2) Suspected assets are seized to make sure that the do not disappear before trial. (3) The assets are managed to preserve their value. (4) Assets are confiscated following a court ruling. (5) Assets are disposed of and the income reverted to the state, crime victims or to other purposes.
Violation of sanctions and other EU crimes
Secondly, the violation of restrictive measures is already a crime in a majority of member states but the rules criminalising violation vary between them. Adding it to the list of EU crimes will allow EU to set a common basic standard on criminal offences and penalties across the Union. This is described in more detail in a Communication with an Annex describing a new directive.
There are currently 10 areas of crime at the EU level: terrorism, trafficking in human beings and sexual exploitation of women and children, illicit drug trafficking, illicit arms trafficking, money laundering, corruption, counterfeiting of means of payment, computer crime and organised crime.
Besides violation of restrictive measures, the new scope will include crimes such as computer crime, environmental crime, migrant smuggling and other serious criminal activities linked to organised crime (trafficking in firearms, counterfeiting and piracy of products, trafficking in cultural goods, robbery or murder).
While the proposed directive does not provide for an automatic confiscation of all assets of persons under the EU restrictive measures' list, it would allow for the confiscation of assets related to sanction violations. The proposal will enable confiscation of the assets of Russian oligarchs who try to violate the restrictive measures, for example by moving their yachts outside the EU.
Whistle-blowing plays an important role in disclosing crimes and mismanagement at EU level and in the member states. In 2019, a directive was adopted on the protection of persons who report breaches of Union law. The Commission proposes now that the protection granted under the directive is also applicable to those who disclose violation of the restrictive measures and other EU crimes.
Can confiscated money be used for Ukraine’s reconstruction?
As long as assets are frozen, they cannot be used by suspected criminals and oligarchs. They might be confiscated if it will be proved that they are linked to criminal activities. What will happen after a ruling on confiscation is another matter. The proposal maintains the current provision encouraging member states to provide for the social reuse of confiscated assets.
The large majority of member states have enacted this provision in national legislation. The Commission writes that social reuse projects send a strong signal to society that crime does not pay, and, most importantly, restores the damage done to the communities affected by organised crime-infiltration and, in doing so, prevents further crimes in disadvantaged areas.
At the press briefing, Commissioner Reynders mentioned the possibility of a common fund for the victims of the war in Ukraine. Member states would be asked to contribute to the fund from the proceeds of confiscated assets. This was however more of a political statement than a concrete proposal, a Commission spokesperson told The Brussels Times.
It will be up for the member states to decide what to do with the confiscated money as in principle it goes into their national budgets. Whether the money can be used for the reconstruction of Ukraine after the war is also a political matter. Some cooperation on freezing and possible confiscation is already taking place.
In March, representatives of the US, the EU, EU member states and other countries launched a special task force and issued a statement committing to “take all available legal steps to find, restrain, freeze, seize, and, where appropriate, confiscate or forfeit the assets of those individuals and entities that have been sanctioned in connection with Russia’s premeditated, unjust, and unprovoked invasion of Ukraine”.
The Brussels Times