European Parliament Votes to Criminalize Sanctions Violations

The European Parliament this week voted to approve new rules that could require member states to treat sanctions violations as criminal offenses, leading to harsher penalties and possible prison time (see 2312120059).

The new rules -- approved 543-45, with 27 abstentions --- create a common definition for what constitutes a criminal breach of sanctions, the parliament said in a news release. That includes “not freezing funds,” not “respecting” arms embargoes, transferring funds to a sanctioned person, doing business with state-owned entities of countries that are subject to sanctions, and providing certain blocked financial services or legal advisory services. Trade in arms or dual-use items would also be criminalized “in cases of serious negligence.”

It also defines what constitutes “circumvention of sanctions,” including hiding or transferring frozen funds, hiding the true ownership of property and not reporting required information. Although those activities would be considered criminal violations, the parliament stressed that activities related to humanitarian aid “should not count as sanctions violations.”

The rules also would set certain penalties for violations across member states. Violators can face a maximum five-year prison sentence, and member states can decide whether a judge should fine the violator based on the “worldwide annual turnover” of the company or “based on absolute maximum amounts.” The parliament said this will stop sanctions violators from seeking out the EU country with the weakest enforcement authority.

“We need this legislation because diverging national approaches have created weaknesses and loopholes, and it will allow for frozen assets to be confiscated,” said Sophie in ’t Veld, a parliament member from the Netherlands. “Parliament took an ambitious, harmonising approach to the law, and even though we could not close all the loopholes we wanted to, it is an improvement on the current situation and shows our strong support to Ukraine.”

The law next needs to be formally approved by the European Council and will take effect 20 days after it's published in the Official Journal of the EU. Member states will have one year from that date to “transpose it into national legislation.”