EC proposes to introduce unexplained wealth confiscation orders

Thursday, 26 May 2022
The European Commission (EC) has published proposals to reinforce its rules on the urgent freezing, recovery and confiscation of assets, including confiscation of unexplained wealth without requiring a conviction.
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The EC says the new asset recovery powers are needed for use against Russian oligarchs who are violating its restrictive sanctions, as well as criminals generally. It intends to make the violation of EU restrictive measures into an EU-wide crime with penalties including asset confiscation.

The potential criminal offences could include engaging in actions or activities that seek to directly or indirectly circumvent the restrictive measures. Such offenses include concealing assets, failing to freeze funds held or controlled by a designated person or entity, engaging in trade such as importing or exporting goods covered by trade bans and failure to comply with any obligation to provide information to the authorities. The EC says these are already offences in most EU Member States.

The new directive would apply to actions such as moving an asset outside the EU or changing its ownership between different entities, for example by transferring ownership of sanctioned property to a non-sanctioned third party or through shell companies. 'This will allow [setting of] a common basic standard on criminal offences and penalties across the EU', it says. 'In turn, such common EU rules would make it easier to investigate, prosecute and punish violations of restrictive measures in all member states alike.' The EC says the implementation of EU restrictive measures against Russia 'shows the complexity of identifying assets owned by oligarchs, who hide them across different jurisdictions through complex legal and financial structures...An inconsistent enforcement of restrictive measures undermines the Union’s ability to speak with one voice.'

'It is paramount that EU restrictive measures are fully implemented and the violation of those measures must not be allowed to pay off', says the EC. '[The] proposals aim to ensure that the assets of individuals and entities that violate the restrictive measures can be effectively confiscated in the future.'

A separate directive is being put forward to increase the EU's general powers of criminal asset confiscation, aside from those linked to sanctioned persons and activities. New types of order will be available for urgently freezing criminal property when there is a risk that assets could disappear. 'The proposed directive will grant competent authorities with the tools to effectively and swiftly trace and identify, freeze, confiscate and manage property derived from criminal activities in all areas where organised crime is active', says the EC.

The proposal extends the situations where assets can be confiscated without a conviction, such as in cases of death or immunity of the accused or when the time limits for prosecuting the offence have expired. It also suggests the possibility of selling a frozen asset even before it is confiscated, although the owners will be allowed the right to object. Beneficial owners of frozen property may also be charged for the authorities' costs of its management while frozen.

It will also target unexplained wealth, said EU Commissioner for Home Affairs Ylva Johansson. The new rules on confiscation of unexplained wealth will enable judicial authorities to confiscate property when they are convinced it derives from criminal activities, even if it cannot be linked to a specific crime. This will also apply when the accused cannot justify the legal origin of property that does not match their official income. This power will, however, be limited to crimes carried out by organised crime groups and to 'offences of serious nature', said Johansson.


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