European Parliament approves new rules to crack down on evasion of EU sanctions

Members of the European Parliament voted on March 12 to approve new rules to harmonise the enforcement of EU sanctions across member states.

With 543 votes in favour, 45 against, and 27 abstentions, the European Parliament has adopted a directive, agreed with EU member states, on criminalising the violation and circumvention of EU sanctions. It will 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. While sanctions are adopted at the EU level, enforcement relies on member states, among which definitions of sanction violation and associated penalties vary.

The new law sets consistent definitions for violations, including not freezing funds, not respecting travel bans or arms embargoes, transferring funds to persons subject to sanctions, or doing business with state-owned entities of countries under sanction. Providing financial services or legal advisory services in violation of sanctions will also become a punishable offence.

The law also defines the circumvention of sanctions and ensures this is a punishable offence. Examples include concealing or transferring funds that should be frozen, hiding the true ownership of property, and not reporting necessary information. The law specifies that humanitarian assistance or supporting basic human needs should not count as sanctions violations.

The directive ensures punishment for violating and circumventing sanctions is dissuasive by making them criminal offences carrying prison sentences of a maximum of five years in all member states.

When companies violate or circumvent sanctions, judges must be able to issue dissuasive fines, although member states can choose whether a judge can impose a maximum penalty based on the worldwide annual turnover of the company, or based on absolute maximum amounts.

Currently, varying penalties can lead to forum shopping – the practice of seeking out the member states with the weakest enforcement. The new law would give judges a wide variety of means to punish violators. In addition to intentional violations, the trade in arms or dual-use items would be also be criminalised in cases of serious negligence.

The law still needs to be formally approved by the Council of the EU as well, before it can become law. It will enter into force 20 days after its publication in the Official Journal of the EU, after which member states will have one year to transpose it into national legislation.

(Photo: EC Audiovisual Service)

The Sofia Globe staff

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