Freeze and seize? EU struggles to target oligarchs' assets
24/03/2022 14:04
* Germany has not detailed any frozen assets so far
* Austria, Ireland, others decline to report any freezing
* EU aims to 'freeze and seize,' but seizures often illegal
By Francesco Guarascio
BRUSSELS, March 24 (Reuters) - Oligarchs' wealth remains
largely untouched in the European Union, weeks after Brussels
approved measures to freeze the assets of dozens of billionaires
and top officials linked to Russia following its invasion of
Ukraine.
Every week since war broke out on Feb. 24, the EU has
introduced new sanctions on Russia, adding nearly 700 top
politicians, businessmen and military staff to its blacklist -
including 42 super rich "oligarchs" such as Chelsea soccer club
owner Roman Abramovich and banking tycoon Mikhail Fridman.
Listed individuals are meant to have their bank accounts and
assets frozen, but so far only a small fraction of their funds
have been affected amid legal constraints and enforcement
challenges, according to EU officials and government data from a
dozen EU countries.
Germany, the EU's largest economy, has declined to give
details of any assets frozen so far. It set up a taskforce last
week to enforce sanctions, and the economy ministry told Reuters
it expected to report progress in one to two weeks.
Austria and Ireland also declined to specify whether they
had frozen any assets, as did Cyprus and Malta, which in recent
years have both issued "golden passports" to wealthy
individuals, including Russians.
Some countries that have reported freezing assets say they
have only hit a small part of the wealth subject to sanctions.
The Dutch finance ministry, for example, said it had frozen
about 390 million euros ($428 million) in transactions and
financial deposits. That is only about 1% of the wealth of
sanctioned individuals in bank accounts, trusts and other
financial vehicles in the Netherlands and in offshore centres
linked to the country, according to government estimates.
Italy, one of EU's most active countries in seizing physical
assets, having taken yachts and villas worth about 800 million
euros so far, has yet to hit oligarchs' liquid wealth because
much of it is believed to be stored in the bank accounts of
third parties or in trusts with no clear beneficial owner, said
the head of the Italian tax police Giuseppe Zafarana.
Spain has also not frozen any bank accounts, authorities
said, but it has detained at least three luxury yachts linked to
blacklisted individuals. urn:newsml:reuters.com:*:nL2N2VJ1OZ
Neighbouring Portugal has blocked only one account owned by
a sanctioned individual, with just 242 euros in it, a banking
source familiar with the matter said.
Belgium appears to have been the most successful EU country
so far. It has frozen about 2.7 billion euros in bank accounts
and 7.3 billion euros in transactions, but has not identified
any property belonging directly or indirectly to a blacklisted
person, the finance ministry said.
Abramovich and Fridman were not immediately available for
comment. Fridman has previously described the sanctions against
him over Russia's invasion of Ukraine, which Moscow calls a
special military operation, as "spurious and unfounded."
The United States, which has imposed similar sanctions on
Russia, is also facing difficulties in freezing assets amid
legal hurdles. Oligarchs are believed to hold most of their
assets outside the EU and United States, including in offshore
jurisdictions, Britain, Switzerland and the Gulf. urn:newsml:reuters.com:*:nL2N2V71US
Switzerland said on Thursday it had frozen $6.2 billion of
sanctioned Russian assets. Its bank lobby estimates Swiss banks
hold up to $213 billion of Russian wealth. urn:newsml:reuters.com:*:nL5N2VR3HC
UPHILL STRUGGLE
The EU has struggled for years to implement sanctions
because enforcement rests on member states, which often lack the
legal tools, personnel and, in some cases, political will to
target wealthy investors, a senior EU official said.
"Historically, enforcement throughout the EU has not been
consistent. What is agreed to be implemented at an EU level is
not necessarily implemented as required at the member state
level," said David Savage, a sanctions expert at law firm
Stewarts.
To address this, the European Commission set up a "freeze
and seize" taskforce this month specifically to enforce
sanctions against oligarchs.
So far, however, the task force has not identified any asset
that needed to be frozen urgently because it could be sold or
moved away from the EU, the senior EU official said on condition
of anonymity.
A Commission spokesperson said EU members were obliged to
report measures taken to implement sanctions, but declined to
say whether they all did, and did not give a value for assets
frozen so far.
Last year, the Commission proposed setting up a "Sanctions
Information Exchange Repository" by the end of 2021 to
facilitate the process. That repository "is currently in the
development phase," the spokesperson said.
Even when there is political will to act, it is not easy to
find oligarchs' wealth.
After four rounds of sanctions, the EU is still working to
close loopholes that allow targeted individuals to shield money
via third parties, trusts or crypto transactions, diplomats
said.
FREEZE, PERHAPS, BUT NO SEIZE
Even when applied in full, EU sanctions can usually go no
further than freezing assets.
In most countries, this means the assets cannot be sold, but
can still be used. An oligarch could in theory live in a
"frozen" villa.
Despite the Commission's "freeze and seize" taskforce,
seizing - or the state taking control of an asset and even
profiting from its sale - is usually a non-starter.
"In most member states, this is not possible and a criminal
conviction is necessary to confiscate assets," the Commission
said in a statement to Reuters.
In Poland, one of the staunchest supporters of sanctions,
seizing assets would require a change to the constitution,
government spokesperson Piotr Muller said.
France has frozen around 850 million euros of blacklisted
individuals' assets, including properties and yachts, the
finance ministry said. But physical assets can still be used by
their owners.
Italy, which has some of strictest legislation among EU
countries to recover criminals' assets, is also stopping short
of appropriating yachts and villas.
Separate legal proceedings would be needed for that, Italian
lawyers said.
($1 = 4.2766 zlotys)
($1 = 0.9105 euros)
(Reporting by Francesco Guarascio @fraguarascio, Emilio Parodi
in Milan, Michele Kambas in Nicosia, Catarina Demony and Sergio
Goncalves in Lisbon, Jesus Aguado and Belen Carreno in Madrid,
Karol Badohal in Warsaw, Tom Sims in Frankfurt, Anthony Deutsch
and Toby Sterling in Amsterdam, Layli Foroudi in Paris, Chris
Scicluna in Valletta, Francois Murphy in Vienna, Graham Fahy in
Dublin
Editing by Mark Potter)
((Francesco.Guarascio@thomsonreuters.com;))