LEGISLATIVE, POLICY AND PRACTICAL TOOLS TO ENFORCE ASSET FREEZING SANCTIONS
In the wake of the Russian invasion of Ukraine, the designation of numerous oligarchs and their companies drew public attention to the newer practice of individual sanctions: targeting a country’s powerful personalities rather than its general population. Although targeted international sanctions have been used for decades by designating jurisdictions against individuals or entities who are believed to be involved in the misappropriation of public money, the momentum surrounding their use against Russian oligarchs has opened up debate about their effective enforcement.
Asset freezing sanctions, like sanctions in general, have diverse objectives. Anti-corruption sanctions have been imposed against high-ranking public officials by several jurisdictions as a way to prevent them from removing their corruptly acquired wealth and to give law enforcement agencies the opportunity to launch investigations and legal action to recover that wealth. Some key overarching objectives usually mentioned in the literature are:
- to change the behaviour of the target,
- to disrupt the target’s malicious activities, and
- to signal disapproval by the sanctioning jurisdiction.
As well as having the potential to be a method of diplomatic pressure, target asset freezing sanctions could be an avenue to boost asset recovery processes in general. By freezing illicit assets, enabling investigations, and laying the groundwork for legal action, they could lead to their permanent confiscation, particularly when linked to corruption or criminal activity.
In short, the possibilities for anti-corruption brought by targeted sanctions are wide. In practice, however, their actual enforcement sometimes proves less effective than hoped.
The Russian Escape investigations, led by CiFAR and EIC, have shown the legislative and policy loopholes and implementation and enforcement gaps that have been taken advantage of by individuals and businesses to evade these sanctions since 2022. In France, for example, the journalists revealed the ongoing use of assets supposed to be frozen and the transfer of other assets to family members before designation.
Through both a review of the literature and through laying out the institutions, penalties and actual enforcement of sanctions across eight jurisdictions in Europe and North America our new report released today highlights important considerations when it comes to the enforcement of sanctions.
This report is intended as a snapshot of the legislative landscape surrounding breaches of international sanctions in these jurisdictions, the innovations that have been put in place, and the shortcomings that still need to be addressed. It presents a mixed picture in terms of frameworks and penalties applied: some countries considering breaches as administrative offences, others having the possibility to impose prison sentences. It also demonstrates discrepancies between sanctioning jurisdictions in how frozen assets and enforcement actions are publicly reported – making it harder for journalists, civil society and citizens to monitor sanctions implementation.
Looking across the eight jurisdictions considered, plus EU reforms, we propose steps that could be taken by governments to strengthen enforcement itself to ensure compliance with sanctions, building on the approaches that have already been taken.
The recommendations are:
- Ensure robust legislation and policies are in place that foresee, and address, techniques used to evade sanctions, such as checking for and being able to prosecute unexplained transfers of ownership or to other jurisdictions prior to designation;
- Properly resource and staff institutions responsible for enforcing sanctions and implement requirements to report publicly and regularly on enforcement actions taken;
- Address the surrounding structures, including around secrecy in company ownership, that undermine efforts to enforce sanctions through legislation, policy and institutions;
- Review legislation to ensure coherence with other jurisdictions’ sanction evasion laws and policies and consider the introduction of civil enforcement routes, where not currently existing;
- Work with other jurisdictions, including those not sanctioning, to ensure that they cannot be used as a safe haven for sanctions evasion;
- Consider linking the imposition of fines and assets confiscated as part of sanctions enforcement actions to the victims of crimes related to the sanction designation. Where anti-corruption sanctions are in place, consideration should be given to the disbursal of fines to the people of the country where the corruption occurred;
- Review sanctions enforcement legislation and policy in light of the Civil Society Principles on Sanctions and Asset Recovery and other best practice standards;
- Address the use of strategic lawsuits against public participation (SLAPPs) and implementing protection for journalists, civil society and citizen activists engaged in public work from the threat of litigation, currently being used to avoid scrutiny over actual and potential sanctioned assets.
Read the full report here.