German and Dutch officials have outlined plans to strengthen their respective implementation and enforcement of EU sanctions amid Russia’s full-scale invasion of Ukraine.
Germany and the Netherlands were among several EU nations that established national taskforces this year after admitting that their historic approach to sanctions had left their governments ill equipped to identify and freeze assets secretly owned by blacklisted Russian oligarchs and officials through layers of shell companies.
On May 10, Germany’s ruling coalition of Social Democrats, Greens and Free Democrats presented to the Bundestag a draft Sanctions Enforcement Act that seeks to address the country’s reliance on private firms to implement sanctions by enabling authorities to play a far more active role in identifying and freezing property tied to blacklisted parties.
The current version of the bill would empower authorities to determine who beneficially owns real estate, yachts and other assets allegedly linked to blacklisted parties by deposing witnesses, searching homes and businesses, querying land registries and other databases, and requesting bank-account information without first having to launch a criminal investigation.
Germany’s federal financial intelligence unit would meanwhile gain authority to participate directly in those investigations and conduct their own related inquiries even in the absence of a suspicious transaction report.
The FIU could also direct financial institutions to reject certain transactions in the context of sanctions enforcement, according to the legislation, which separately clarifies that Germany’s 16 semi-sovereign states also carry the responsibility of implementing and enforcing financial and commercial restrictions.
The legislation would also give the FIU a greenlight to share the names, addresses and any other relevant details of blacklisted individuals, companies and the professionals who serve them with other government agencies.
Another key provision of the bill would require individuals and entities targeted with sanctions to disclose any assets that they hold in Germany to the Bundesbank—or to the Federal Office for Economic Affairs and Export Control—”without delay.”
“The disclosure of all financial circumstances by the sanctioned person is a prerequisite for the effective implementation of EU sanctions aimed at individuals,” officials said. Parties caught ignoring the disclosure requirement would expose themselves to fines and a year in prison.
German officials said the legislation would help “close regulatory gaps in the short term” while they develop a second bill, the Second Sanctions Enforcement Act, for introduction this year.
The second bill would establish a national database of assets tied to blacklisted parties as well as any assets “of unclear origin,” and would also create a new agency for whistleblowers to flag attempts to evade sanctions.
Christoph Trautvetter, an anti-corruption campaigner with Netzwerk Steuergerechtigkeit in Berlin, told ACAMS moneylaundering.com that support for far more ambitious reforms has grown within the Bundestag.
“This [first] law, as it stands, works for the yacht or villa [with a known link to a blacklisted party], but not for the hotel or factory where you’ve got no clue who owns the thing,” Trautvetter said. “The second task is to create a more general law that doesn’t just apply to sanctions, but would give authorities power to begin investigations into any asset of unknown origin without the need to have a criminal suspicion.”
Germany’s plans appear more advanced than those of the Netherlands, where last month the government appointed former Foreign Minister Stef Blok to lead a taskforce assigned with identifying any obstacles that have limited cooperation between the various agencies responsible for locating and seizing Russian assets.
Blok’s taskforce has since recommended making his role of national sanctions coordinator permanent and introducing a “stronger legal basis” to allow domestic authorities to collect and exchange data on individuals and companies in the context of sanctions enforcement.
Blok also called on Dutch officials to newly require attorneys, accountants and notaries to inform the government of any links they share with blacklisted parties. Current rules require only that financial institutions and corporate services providers disclose such links to the country’s central bank, De Nederlandsche Bank.
Dutch officials should also “press” the EU to establish a clear legal framework that would require all private firms to investigate the ownership and control of legal entities they serve, and lower the threshold at which financial institutions must freeze the assets of legal entities controlled by blacklisted parties from 50 percent ownership to 25 percent.
Blok also lamented the Dutch government’s failure to date to establish a fully populated beneficial ownership database and the EU’s lack of progress in linking the bloc’s other national registries of ownership data. “This is a serious impediment,” the former minister concluded in a final report on his taskforce’s investigation.
Wopke Hoekstra, who began leading the Foreign Ministry in January, told the Dutch Parliament on May 13 that the government would implement all of Blok’s recommendations.
Martijn Feldbrugge, director of the BSCN consultancy in Amsterdam, said that Blok’s plans represent “a step in the right direction,” but questioned whether the taskforce had fully understood the difficulty of linking blacklisted parties to the assets they control through complex, cross-border structures.
“There is a lot of navel-gazing when it comes to sanctions enforcement,” Feldbrugge said. “We have got to think much more about working cross-border, and that means using the power of the EU.”
Contact Koos Couvée at firstname.lastname@example.org
|Topics :||Sanctions , Asset Forfeiture|
|Source:||Germany , Netherlands|
|Document Date:||May 24, 2022|