The EU Commission is proposing new rules to make it easier to expropriate assets from illegal activities. This is also aimed at Putin's oligarchs on the EU's sanctions lists. However, the implementation is legally difficult.
When talking about the reconstruction of Ukraine after the war of aggression by Russia, the sense of justice quickly points to the billions of Putin's oligarchs on the international sanction lists. Their assets should be confiscated and used for Ukraine, it is claimed. But this is more difficult than many people think.
What is the Commission proposing?
Brussels wants a common legal framework for EU member states to more easily confiscate and expropriate money from criminal activities. So far, the regulations have been very different, and expropriation is often extremely difficult. The proposals primarily target terrorism or transnational organized crime, but could also be used against the assets of oligarchs who are on EU sanctions lists.
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The focus is on speeding up the process. If a national court is convinced that funds originate from criminal activities, they should be able to be frozen before a verdict is reached. A court would then have seven days to make a subsequent decision on suspicion. Otherwise, the money has the “tendency to disappear,” explained Commissioner Ylva Johansson. The rules should also apply to the transfer of sanctioned funds, including transfers to family members.
As for Russian oligarchs, many member countries face legal difficulties even freezing and confiscating their money. The EU already has a way for whistleblowers to report imminent breaches of sanctions. But in some countries they are only considered administrative offenses. That is why Brussels is now proposing to make breaking sanctions a criminal offense everywhere.
According to Justice Commissioner Didier Reynders, the differences in national legislation also mean that oligarchs go where they can get off the easiest. The aim is to put a stop to this by standardizing the rules. And finally, money from Putin's billionaire supporters in Europe should be channeled into a joint fund for the reconstruction of Ukraine.
It's more difficult than hoped
“You have to differentiate between national and private wealth,” says economist Maria Demertzis from the Bruegel think tank in Brussels. In the first rounds of sanctions it was decided to freeze the assets of the Central Bank of Russia. “It does not belong to the government but to the Russian nation. Freezing it or even confiscating it is a very difficult thing. On what legal basis can one confiscate national assets ? (…) This affects fundamental rights and without an established legal framework this could be very doubtful”.
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The procedure can be simpler for private assets, but it is often a “cat and mouse game”. It is difficult to identify, find and then collect the funds.
So did the EU make mistakes when formulating the previous sanctions against Russia? The USA has more experience with this, says the scientist, and the EU is on a learning curve. But the member countries could of course look anywhere for untaxed wealth or criminal fraud. These would normally be sufficient grounds for confiscation. Nevertheless: If the sanctions are intended to damage Russia's finances, it is better to aim for an oil and gas embargo instead of pursuing individual oligarchs who have been operating outside of Russia for a long time anyway, like Demertzis.
Russian fortune is hard to find
Aside from a few spectacular actions like the confiscation of yachts, many G7 countries – which include the big EU members – are ill-placed to even identify oligarch fortunes. “They lack the skills and authority to track down illegal assets,” writes the NGO Transparency International in its latest report on the subject. Governments would also face major legal problems when attempting to confiscate and return these assets to the victims of corruption.
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But since 2004, when international recommendations were made for the first time to improve the instruments for this, hardly anything has happened. “Kleptocrats still have plenty of opportunities to hide their funds across borders.” In many cases, the real estate sector is still a loophole for storing dirty money. Especially where unregistered ownership is still allowed.
Transparency expert Maira Martini demands that countries finally act now: “The same loopholes that allow kleptocrats to amass and hide their huge illegal fortunes are now preventing even the most willing authorities from finding them.” States must back up their ambitious rhetoric of holding Russian elites to account with “real, hard work.” This includes, among other things, more resources for the police and judiciary in the long term.
Critics warn of legal consequences
The CSU MEP Markus Ferber is one of the critics of the plans. He considers the legal dangers to be greater than the benefits in enforcing the sanctions. It is true that breaking sanctions is a criminal offense anywhere in Europe, according to the economic policy spokesman for the EPP Group. Apart from that, he sees too much “symbolic politics” in the Commission's proposal.
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You shouldn't undermine the rule of law with the stroke of a pen in order to hit a few Russian oligarchs. “There should be a clear reference to the Russian state and the Russian war of aggression in all confiscations that are ultimately intended to benefit Ukraine's reconstruction. The assets of the Central Bank of Russia are eligible, the hurdles should be higher for assets of private individuals be set.”