ILI experts explained why it is more выгодно for sanctioned individuals in the West not to hide their assets – and how Ukraine is lagging behind
Reporting is one of the key elements of an effective sanctions system. Precisely because of it, the safest option for a sanctioned person is the opposite of concealment – to disclose full information about their assets to the regulator. This is stated in an article by the Institute of Legislative Ideas for European Pravda, based on an analytical study.
“The first reason why it is beneficial to disclose information is purely pragmatic. After sanctions in the form of asset blocking are imposed, a sanctioned person cannot freely use their funds. This makes it impossible to support a family or pay for necessary medical or legal services, since any transactions involving assets are prohibited,” ILI experts explained.
They noted that pragmatic incentives alone would not be sufficient. That is why the United Kingdom and the EU have introduced mandatory self-reporting obligations, with criminal liability предусмотрена for violations. In the UK, the obligation was introduced in 2023 as part of the sanctions regime against Russia, and in 2024 – against Belarus.
“A sanctioned person must submit, within 10 weeks from the date of inclusion in the sanctions list, a report on any funds or economic resources they own, hold, or control. This applies to any assets with a value exceeding £10,000. The sanctioned person must also promptly inform the competent authority of any changes in their financial circumstances by submitting an update report,” the analysts explained.
They added that if the person is a UK resident, they must report all assets worldwide. If not, only those located in the United Kingdom must be reported. Refusal to report without valid reasons or submission of false information entails criminal liability.
According to ILI experts, EU practice under Article 9 of Regulation 269/2014 had already required sanctioned individuals to report assets within the Union within six weeks. Directive 2024/1226 obliges all Member States to recognize intentional failure to report as a separate criminal offense. If the value of undeclared assets exceeds €100,000, the maximum penalty must be at least one year of imprisonment.
“Since EU directives set only a minimum standard, which Member States may strengthen in their national legislation, some countries have introduced much stricter penalties. Even if a sanctioned person chooses not to disclose all their assets, hidden assets are highly likely to be identified anyway,” the article states.
At the same time, ILI noted that the Law of Ukraine “On Sanctions” currently does not provide for a self-reporting mechanism. However, as a candidate country for EU membership, Ukraine is obliged to harmonize its legislation with EU law, including by introducing a полноценная reporting system. The Ukrainian sanctions system still lacks such a tool, which is why its introduction should become a priority for the authorities.