The European Commission has published proposals to tighten its rules on emergency freezing, return and confiscation of assets, including confiscating the wealth of unknown origin without a conviction.
The European Commission said the new asset recovery powers should be introduced to be used against Russian oligarchs who violate restrictive sanctions, as well as against individuals who commit criminal acts. Furthermore, the organisation intends to recognise the violation of restrictive EU measures as a pan-European crime with subsequent punishment, including confiscation of assets.
Potential criminal offences may include the use of actions or participation in activities aimed at direct or indirect circumvention of restrictive measures. Such offences include:
• Hiding assets.
• Failing to freeze funds owned or controlled by a designated person or entity.
• Engaging in trading activities such as importing or exporting goods subject to trade sanctions.
• Failing to comply with any obligation to provide information to authorities.
The European Commission notes that this is already an offence in most EU member states.
The new directive will apply to moving an asset outside the EU or changing ownership between different entities, for example, by transferring ownership of the sanctioned property to a non-sanctioned third party or through shell companies. “This will allow (setting) a common basic standard for criminal offences and penalties across the EU,” the European Commission said in a statement. “In turn, such common EU rules would simplify the procedures for investigating, prosecuting and punishing violations of restrictive measures in all member states.” The introduction of restrictive EU measures against Russia “demonstrates the difficulty of identifying assets owned by oligarchs who hide them in various jurisdictions through complex legal and financial structures… Moreover, the inconsistent application of restrictive measures undermines the EU’s ability to speak unanimously.”
"It is essential that the restrictive measures of the EU are fully implemented, and if these measures are violated, there should be no opportunity to pay off," the EU said in a statement. "The proposals aim to ensure that the assets of individuals and entities violating restrictive measures can be effectively confiscated in the future."
A separate directive is proposed to expand the EU's general powers to confiscate criminal assets other than those associated with sanctioned persons and activities. In addition, new types of urgent freezing orders for the criminal property at risk of disappearance of assets will be available. "The proposed directive will provide the competent authorities with the tools to efficiently and quickly trace and identify, freeze, confiscate and manage property derived from criminal activity in all areas in which organised crime operates," the EU said.
The proposal expands the list of cases in which assets can be confiscated without a conviction, such as in the event of the death or inviolability of the accused or after the expiration of the prosecution for a crime. The possibility of selling the frozen asset before it is confiscated is also expected, although the owners will be given the right to appeal. Beneficial owners of frozen property may also be charged the authorities' costs of managing it during the period of its arrest.
The directive will also target unexplained wealth, EU Commissioner for Home Affairs Ylva Johansson said. New rules for confiscating this type of wealth will allow the judiciary to seize property if they are convinced that it was obtained through criminal activity, even if it may not be related to a specific crime. It will also apply when defendants cannot substantiate the legal origin of property that does not match their official income. However, that right would be limited to crimes committed by organised crime groups and "offences of a serious nature," Johansson said.
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