Across the EU, almost every aspect of enforcement of sanctions varies from member state to member state. The EU publishes regulations, but then it is up to each member state to implement those into domestic law. The EU’s regulations do not deal with most aspects of enforcement; penalties, limitation periods, defences, ancillary offences, even the necessary mental element for the offence are all left to the domestic law of each member state. Indeed, in some member states the breaching of sanctions is not even a criminal offence, while in others the prosecution can choose between criminal or administrative enforcement.
The result is a legal patchwork across the EU. To address this,on 25 May 2022 the EU Commission issued a proposal that would add sanctions to the list of so-called “EU crimes.” The effect of this would be to place sanctions on the same level as crimes such as money laundering and mean that the EU itself could legislate via directives.
The European Parliament, the Council and the Commission are involved in the legislative process to adopt this proposal. In the coming weeks it is expected that the various required steps will be taken, and likely follow the Commission’s far-reaching proposals to bring about a fundamental change to almost every aspect of the enforcement of EU sanctions including:
- Reporting obligations.
- Adding the violation of Union restrictive measures to the areas of crime.
- Directive on criminal penalties for the violation of Union restrictive measures.
- Requirement to supply immediately any information which would facilitate compliance with this regulation, such as information on accounts and amounts frozen.
- Create new failure to report offences for (amongst others) not reporting a sanctions breach, or not reporting activities that seek to circumvent sanctions. This would align the EU with the position in the UK where, since 2017, there has been a positive reporting obligation in relation to breaches of sanctions, and since Brexit a wider reporting obligation in relation to frozen assets and to entities owned or controlled by a designated person.
- Offences for Legal Persons - The Commission’s proposal also includes wholly new criminal offences for legal persons which would significantly expand the exposure for companies and other businesses. The proposal appears to be designed to address issues of criminal attribution to companies. If implemented, it could create a “failure to prevent” offence. A company would commit this offence if, through a lack of supervision or control by those in leading positions within the company, an offence was committed by others.
- Penalties and Sentencing Powers - The proposal would also mean the imposition of standardised penalties, and the adoption of a broad range of significant sentencing powers; penalties could potentially be calculated as an unspecified percentage of worldwide turnover in the previous financial year. More wide-ranging still are some of the proposed non-monetary penalties which range from the winding-up or liquidation of the defendant, through the temporary or permanent closure of local subsidiaries or branches that were involved in the commission of the particular offence, to the temporary or permanent disqualification from continuing a business line involved in the offence, and public procurement and public funding debarment.
- Limitation Periods - The Commission’s proposal seeks to standardise the limitation periods for the commencement of a prosecution and for the enforcement of penalties.
- Jurisdiction - The proposal would also see a significant expansion of the jurisdictional reach of the EU’s sanctions, as well as giving to member states the option to expand their jurisdiction yet further. Currently EU sanctions regulations apply to a non-EU business “in respect of” any part of that business done within the EU. Under the proposal, member states would be “required to extend their criminal jurisdiction to non-EU persons outside EU territory insofar as their business has an EU nexus (which may, by extension, also concern their assets).” This would mean that an Omani company could be prosecuted for breaches of EU sanctions committed say, in Thailand, if the Omani company has assets in the EU. This would be a significant change. Moreover, the proposal also states that criminal jurisdiction could be exercised if an offence was committed “in whole or in part” within the EU. Again, this would be a significant extension of EU jurisdiction where despite some part of the offence being committed outside the EU, the member state would still have jurisdiction. The proposal would also allow member states to further expand their criminal jurisdiction over offences committed globally by those habitually resident in a member state (as opposed to the current rules which are limited to nationals), as well as over offences committed globally for the benefit of an EU legal person.
- Asset Confiscation - The EU proposal also seeks to ensure that asset seizure powers are more readily available for sanctions breaches. The Commission’s proposal seeks to achieve this by use of the existing confiscation and civil recovery powers under the relevant anti-money laundering legislation, with any funds obtained or retained through sanctions breaches being “criminal property.” In addition, however, the Commission has put forward a proposal for a separate directive on asset recovery and confiscation.
