EU, US Begin Legislation to Confiscate Sanctioned Assets

The Council of the European Union has agreed on a negotiating position for a draft directive designed to improve the tracking, identification, freezing, confiscation, and management of criminal assets, While legislation in Washington aims to provide additional aid to Ukraine using assets confiscated from the Central Bank of the Russian Federation and other Russian sovereign assets.

Part of a broader effort to strengthen the EU's capabilities against organised crime, the draft legislation will establish minimum rules for handling illicit profits and will apply to a variety of offences, including violations of sanctions. If adopted, the new law will lead to enhanced competencies for asset recovery offices and improve cross-border cooperation.

Swedish Justice Minister Gunnar Strömmer highlighted the importance of disrupting the financial flows of organised crime, saying the proposed measures would ensure that "crime does not pay off." Member states will be required to adequately resource administrations dealing with criminal assets and will need to provide their asset recovery offices access to national databases and registries.

A notable inclusion in the legislation is the allowance for the confiscation of unexplained wealth, which does not necessitate a criminal conviction but requires a court to determine the assets are derived from criminal activity.

The legislation is motivated by estimates from Europol that criminal organisations in the EU generate at least €139 billion in revenue annually. The EU has been called to strengthen its legal framework for tracing and confiscating illicit assets by both the Council and the European Parliament, leading to the proposal of the current draft law in May 2022. Following the Council's agreement, negotiations with the European Parliament will begin to finalise the legal text.

US Proposal Targets Sovereign Assets

A group of U.S. lawmakers introduced the Rebuilding Economic Prosperity and Opportunity (REPO) for Ukrainians Act today. The legislation aims to provide additional aid to Ukraine using assets confiscated from the Central Bank of the Russian Federation and other Russian sovereign assets.

The bipartisan initiative led by House Foreign Affairs Committee Chairman Michael McCaul (R-TX), Senate Foreign Relations Committee Ranking Member Jim Risch (R-ID), and others, asserts that Russia, as the instigator of the conflict, should bear the financial burden for the damage in Ukraine.

McCaul criticized what he sees as a pattern of the Biden administration making major concessions to adversaries in negotiations, citing the Iran nuclear program and the New START treaty. He asserted that Congress must act to prevent the administration from giving away frozen Russian assets before they can be used to aid Ukraine.

More than $300 billion in Russian assets remain frozen globally after over a year of conflict, according to Risch. He called for those funds to be seized and redirected to assist Ukraine's reconstruction efforts.

The REPO Act contains several key provisions:

1. It authorizes the U.S. President to confiscate Russian sovereign assets that are frozen in the U.S. and transfer them to assist Ukraine.
2. It bans the release of funds to sanctioned Russian entities until Russia withdraws from Ukraine and agrees to compensate for the harm caused by the war.
3. It directs the President to collaborate with international allies to establish a mechanism for transferring confiscated or frozen Russian assets to assist Ukraine.
4. It allocates additional resources to the State Department Office of Sanctions Coordination to work with international partners toward the confiscation of additional Russian assets abroad.
5. It emphasizes that the cost of damage caused by Russia's invasion should be borne by Putin and not U.S. taxpayers.