On April 29, 2024, the European Union (“EU”) adopted the Directive (EU) 2024/1226 on the definition of criminal offenses and penalties for the violation of Union restrictive measures and amending Directive (EU) 2018/1673 (“Directive”). Member States will have until April 30, 2025 to transpose it into national legislation.
The Directive defines criminal offenses and penalties and establishes minimum rules concerning the prosecution of violations or circumvention of EU sanctions in Member States and directs Member States to ensure that conduct is considered a criminal offense when it is intentional and in violation of a prohibition or an obligation under EU sanctions.
Specifically, the Directive provides that the following conduct (including inciting, aiding, abetting and, in most cases, attempt[1]) are criminal offenses:
- Breach and circumvention of asset freeze and/or economic resources measures related to a “designated person, entity or body” where the conduct involves funds or economic resources with value exceeding EUR 10,000;
- Breach and circumvention of trade control measures, even if only the result of serious negligence[2], where the conduct involves goods, services, transactions or activities with a value exceeding EUR 10,000. Such conduct includes:
- the trade, export, import, sale, purchase, transfer, transit, transport, brokering, insurance, technical assistance or any other service related to sanctioned goods;
- the provision of financial services or the performance of financial activities such as financing and financial assistance, providing investment and investment services, issuing transferable securities and money market instruments, accepting deposits, dealing with in banknotes, providing credit rating services and providing crypto-assets and wallets;
- the provision of services other than financial services. Such services include but are not limited to the provision of legal advisory services, trust services, public relations services, accounting, auditing, bookkeeping and tax consulting services, business and management services, IT consulting, broadcasting, architectural and engineering services.
- Breach of, or failure to comply with, the conditions of authorizations granted by the competent authorities where such conduct involves goods, services, transactions or activities with a value exceeding EUR 10,000.
Member States should have the discretion to decide that violations of EU sanctions involving funds, economic resources, goods, services, transactions or activities with a value not exceeding EUR 10,000 are not criminal offenses.
The Directive also directs Member States to ensure that their national law takes into account:
- aggravating circumstances, such as the use by the offender of false or forged documents or if the offender destroyed evidence, or intimidated witnesses or complainants; and
- mitigating circumstances, if the offender provides the competent authorities with information they would not otherwise have been able to obtain to (i) identify or bring to justice other offenders; or (ii) find evidence.
Legal persons may also be held liable if one of the above-mentioned offenses is committed for the benefit of that legal person by any person who has a leadership position within the legal person, including when the lack of supervision or control by such a person enabled the commission of the offense by a person under their authority. Both legal persons and natural persons may be prosecuted.
The Directive provides for a range of penalties to be imposed on natural and legal persons:
- for natural persons:
- Maximum terms of imprisonment ranging from at least one year to at least five years, depending on the nature of the offense and whether the value of the goods, services, transactions or activities exceeds EUR 100,000. Where military equipment or dual-use goods listed in Annex IV to Regulation (EU) 2021/821 are involved, the maximum penalty should be at least five years’ imprisonment;
- Ancillary criminal and non-criminal penalties, such as fines, revocation of licenses and permits that gave rise to the offense, or temporary disqualification from running for public office.
- for legal persons:
- optional additional criminal or non-criminal penalties, such as exclusion from entitlement to public benefits or aid or public funds, including tenders, grants and concessions, or withdrawal of permits and authorizations to engage in the activities that gave rise to the relevant criminal offense.
Member States are also directed to implement measures to enable the freezing and confiscation of instrumentalities and proceeds from criminal offenses and of funds or economic resources subject to EU sanctions.
The Directive further establishes that the statute of limitation period shall be at least three years from the date of commission of the offense.
Finally, the Directive imposes obligations on Member States to facilitate the investigation, prosecution, and penalizing of EU sanctions violations (such as tools to investigate sanctions violations or to protect whistleblowers).
[1] Please note the attempt is not criminalized for offenses such as (i) failure to freeze funds of a designated person or body, (ii) failure by a designated person or body to comply with EU restrictive measures, (iii) failure to provide information on frozen funds or economic resources to the competent authority, and (iv) breaching or failing to fulfil conditions under authorizations granted by competent authorities in derogation of a sanctions measure.
[2] At least for military goods or equipment included in the EU Common Military List or for dual-use items listed in Annex I and IV of Regulation (EU) 2021/821.
