Freeze and Sear? EU struggles to target oligarchs’ assets

The wealth of the oligarchs remains largely untouched in the European Union, weeks after Brussels approved measures to freeze the assets of dozens of billionaires and senior officials linked to Russia following its invasion of Ukraine.

Every week since war broke out on February 24, the EU has introduced new sanctions against Russia, adding nearly 700 top politicians, businessmen and military personnel to its blacklist – including 42 super ‘oligarchs’. wealthy such as Chelsea football club owner Roman Abramovich and banking tycoon Mikhail Fridman.

Those on the list are supposed to have their bank accounts and assets frozen, but so far only a small fraction of their funds have been affected due to legal constraints and enforcement difficulties, officials say. EU and government data from a dozen EU countries.

Germany, the EU’s biggest economy, declined to give details of assets frozen so far. It set up a task force last week to enforce the sanctions, and the economy ministry told Reuters it expected to report progress in one to two weeks.

Austria and Ireland also declined to say whether they had frozen assets, as did Cyprus and Malta, both of which in recent years have issued “golden passports” to wealthy individuals, including Russians.

Some countries that have reported freezing assets say they have only touched a small portion of the wealth subject to sanctions.

The Dutch finance ministry, for example, said it froze about 390 million euros ($428 million) in financial transactions and deposits. This represents only about 1% of the wealth of those sanctioned in bank accounts, trusts and other financial vehicles in the Netherlands and in offshore centers linked to the country, according to government estimates.

Italy, one of the most active countries in the EU in seizing physical assets, having taken yachts and villas worth around 800 million euros so far, does not has yet to touch the liquid wealth of the oligarchs as much of it is believed to be stored in third party bank accounts. or in trusts with no clear beneficial owner, said Italian tax police chief Giuseppe Zafarana.

Spain also did not freeze any bank accounts, authorities said, but it did detain at least three luxury yachts linked to blacklisted people. Read the full story

Neighboring Portugal only blocked one account held by a sanctioned person, with just 242 euros, said a banking source familiar with the matter.

Belgium seems to have been the best performing EU country so far. It froze about 2.7 billion euros in bank accounts and 7.3 billion euros in transactions, but did not identify any property belonging directly or indirectly to anyone on the blacklist, the ministry said. Finance.

Abramovich and Fridman were not immediately available for comment. Fridman has previously described sanctions against him following Russia’s invasion of Ukraine, which Moscow calls a special military operation, as “bogus and baseless”.

The United States, which has imposed similar sanctions on Russia, is also facing difficulties in freezing assets amid legal hurdles. The oligarchs are believed to hold most of their assets outside the EU and US, including in offshore jurisdictions, Britain, Switzerland and the Gulf. Read the full story

Switzerland announced on Thursday that it had frozen $6.2 billion in sanctioned Russian assets. Its banking lobby estimates that Swiss banks hold up to $213 billion in Russian wealth. Read the full story

UPWARD STRUGGLE

The EU has struggled for years to implement sanctions because enforcement relies on member states, which often lack the legal tools, personnel and, in some cases, political will to target wealthy investors, said a senior EU official.

“Historically, enforcement across the EU has not been consistent. What is agreed to be implemented at EU level is not necessarily implemented as required at member state level,” said David Savage, sanctions expert at law firm Stewarts.

To address this, the European Commission this month set up a “freeze and seize” task force specifically to apply sanctions against the oligarchs.

So far, however, the task force has not identified any assets that need to be frozen urgently because they could be sold or moved outside the EU, the senior EU official said on condition of anonymity. .

A Commission spokesman said EU members were required to report action taken to enforce sanctions, but declined to say whether they had all done so and gave no value for assets frozen so far.

Last year, the Commission proposed to set up a “sanctions information exchange repository” by the end of 2021 to facilitate the process. This repository “is currently in the development phase,” the spokesperson said.

Even when there is political will to act, it is not easy to find the wealth of the oligarchs.

After four rounds of sanctions, the EU is still working to close loopholes that allow targeted individuals to safeguard money through third parties, trusts or crypto transactions, diplomats have said.

FREEZE, MAYBE, BUT NO SEIZURE

Even when fully enforced, EU sanctions can usually go no further than freezing assets.

In most countries this means that 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” task force, seizure – or the state taking control of an asset and even profiting from its sale – is usually unsuccessful.

“In most member states this is not possible and a criminal conviction is required 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 spokesman Piotr Muller said.

France has frozen around 850 million euros in assets of blacklisted people, including properties and yachts, the finance ministry said. But physical assets can still be used by their owners.

Italy, which has one of the strictest laws among EU countries to recover assets from criminals, is also stopping short of appropriating yachts and villas.

Separate court proceedings would be needed for that, Italian lawyers said.

(Reuters)

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