What does the new bill on responsibility for violation of sanctions do?
The other day, the news broke that the President had introduced a bill on criminal liability for violating and circumventing sanctions. This event has been expected for a long time. The EU did it in May 2024. Ukraine could not stand aside.
The draft law results from comprehensive work by the state and public institutions. Given that the President personally introduced the draft law and publicly announced it, it is clear that it will be adopted promptly with minimal amendments.
The document criminalizes violations of Ukraine’s sanctions regime. However, its content is significantly limited compared to what was discussed at the drafting stage and doesn’t consider the practices of partner states of the sanction’s coalition.
What is the circumvention of sanctions?
Despite Ukraine’s 10-year application of sanctions, no prohibition to violate or circumvent sanctions has been established. The drafters of the law are addressing this gap. The document defines a broad list of actions that will constitute sanctions circumvention. This is any action aimed at removing assets from the sanctions effect.
These are the acquisition, transfer or change of the form of assets of a sanctioned person; actions aimed at concealing the fact of ownership and control over an assets by a sanctioned person (the value threshold of assets is set at UAH 151 thousand); bringing a company to bankruptcy against which or whose owner is subject to a sanction in the form of blocking assets; submission of a knowingly false statement about the inability of a sanctioned person to fulfil obligations to a creditor.
What will be punished, and how
It is proposed that liability for sanctions violations (intentional and careless) and intentional circumvention of sanctions be established. Violation will be understood as failure to comply with sanctions or obstructing their implementation. For example, a violation of sanctions would be the improper implementation of compliance procedures and the conclusion of an agreement with sanctioned persons or continued cooperation with them.
Intentional circumvention of sanctions is, for example, a change of assets ownership after adopting the sanctions law. This only applies to sectoral and specific personal sanctions, as defined in a note to the relevant article of the Code. The threshold for bringing to liability is set at UAH 151 thousand. The exception is military or dual-use goods; the minimum value is not defined.
The proposed penalties for these acts include a fine (from UAH 425 thousand to UAH 2 million) or imprisonment for 2 to 10 years. Violators will also be deprived of the right to hold positions or engage in certain activities for 10 to 15 years. Confiscation of property will be optional.
Companies will also be held liable. Violations and circumvention of sanctions will be punishable by fines, property confiscation, or even business dissolution. The exception is banks, which are not subject to liquidation.
In addition, persons who intentionally fail to comply with or obstruct the execution of a High-Anti Corruption Court decision to recover the assets of russia accomplices to the state. The Security Service of Ukraine is proposed to be responsible for investigating this new type of crime.
In criminal proceedings concerning violation and/or intentional circumvention of sanctions, it is proposed to allow investigation and trial in the absence of the suspect or accused (in absentia).
Disadvantages of the bill
Undoubtedly, criminalizing the violation and circumvention of sanctions is a step that will significantly increase their effectiveness. However, the proposed draft law doesn’t fully comply with international practice.
- The draft law does not provide for the possibility for a sanctioned person to obtain permission to perform specific actions prohibited by the sanctions. This is a standard practice in civilized countries (the United States, the United Kingdom, and EU members). Permits (licenses) are issued by authorized bodies for specific actions: payment for legal services, delivery of humanitarian aid etc.
- The draft law does not establish an obligation for sanctioned persons to declare blocked assets. The state is responsible for finding them, which requires additional resources. Establishing an obligation would simplify the work of the Ministry of Justice in recovering assets for the state and allow businesses to identify problem assets. This obligation is provided for in the laws of the United States and EU members.
This version of the draft law is not final. Parliament Members can make changes during its consideration. I hope that the parliamentarians will finalize the draft law to the level of the legislation of the partner states of the sanction’s coalition.
