There is still no criminal liability in Ukraine for sanctions violation and/or circumvention. For Ekonomichna Pravda, Denys Shkarovskyi explains whether we should expect changes in the near future and what they might be.
The EU Council recently adopted a Directive criminalizing sanctions violations. Countries have to enforce the document by May 2025.
Ukraine has been trying to criminalize such actions for several years. Since 2020, three bills have been registered to supplement the Criminal Code with relevant articles. However, no changes have been adopted in four years. The criminalization of sanctions violations and circumvention remains an open question.
This year, the Ministry of Justice, together with the Institute for Legislative Ideas, developed another draft law.
Comprehensive amendments to the Criminal Code and the Criminal Procedure Code, as well as the Law of Ukraine «On Sanctions», are envisaged.
Key proposals:
- An explicit prohibition on violating and circumventing sanctions (currently, such prohibition does not exist).
- Recognizing violation and circumvention of sanctions as crimes.
- Obligation to declare blocked assets.
- Issuance of official authorization for sanctioned persons to take some actions.
How was it started?
There is no liability without prohibition. Therefore, it is proposed that a ban on violating and circumventing sanctions be enshrined in the Law of Ukraine «On Sanctions». The following intentional actions will be understood as circumvention of sanctions:
- activity restricted by sanctions without special authorization
- failure to provide or provide false information about assets subject to blocking
- failure to update information about the beneficiary of blocked assets
- actions with blocked assets, including their transformation, disguise, any concealment
Why and how will they be punished?
The main purpose of the draft law is to criminalize the violation and circumvention of sanctions. The draft law proposes to supplement the Criminal Code with two articles:
Intentional violation and circumvention of sanctions
Criminal liability is provided for:
- transactions with assets worth more than UAH 151,400 (as of 2024)
- actions with military or dual-use goods, regardless of value
- circumvention of sanctions
The penalty ranges from a fine of UAH 34,000 to imprisonment for 6 years, depending on the nature of the actions.
Aggravating factors will include the destruction of evidence, intimidation of witnesses, the commission of a crime by an official or a group of individuals, or offences in respect of assets worth more than 1,514,000 UAH.
In this case, a fine of UAH 170,000 or imprisonment for up to 8 years is possible.
Even more severe liability is provided for the commission of a crime by an organized group, an official holding a responsible position or in relation to assets worth more than UAH 15,140,000.
This includes imprisonment for up to 10 years with possible confiscation of property.
Negligent violation of sanctions
There is no provision for circumvention of sanctions by negligence. This is because circumvention is possible only through active and deliberate actions.
The threshold for criminal liability is the value of assets exceeding UAH 757,000. The penalty is a fine of UAH 34,000 or more.
The offence will be aggravated if it is committed by an official or in relation to assets worth more than UAH 1,514,000.
In this case, liability ranges from a fine of UAH 85,000 to imprisonment for 6 years.
For negligent violation of sanctions with respect to assets worth more than UAH 15,140,000, imprisonment for up to 8 years is possible.
Both the sanctioned persons and those who enter into relations with them – banks, financial institutions, and counterparties – will be brought to liability.
The Security Service will investigate the crimes. It is proposed that pre-trial investigations be conducted in absentia with regard to suspects who are hiding from the investigation (in absentia).
Blocked assets? Declare them
The obligation to report about frozen assets has existed in EU law since 2014. In Ukraine, persons subject to the asset-blocking sanction are also to be obliged to declare their assets.
In addition, even non-sanctioned persons will have to provide information if their assets are owned or used by a third party to whom the sanctions have been applied.
All immovable and movable property worth more than UAH 151,400, securities, corporate rights, intangible assets, cryptocurrencies, financial assistance, etc., will be subject to declaration.
Persons who have already been sanctioned will be required to provide such information after the issue is resolved by a Cabinet of Ministers resolution.
