With the start of Russia’s full-scale invasion, the country’s legal system was forced to adapt quickly to new challenges. Priority was given to countering the economic activities of individuals directly or indirectly linked to the aggressor state. It is in this context that sanctions have become one of the key instruments of national security.
The media is regularly filled with reports on sanctions imposed on legal entities or individuals, as well as on instances of alleged circumvention of these restrictive measures. However, despite the fact that the sanctions mechanism itself has been in effect in Ukraine since 2014, the issue of criminalizing actions aimed at violating the sanctions regime has only recently arisen.
Article 1 of the Law “On Sanctions” establishes that sanctions are special economic and other restrictive measures that may be applied to protect the national interests, national security, sovereignty, and territorial integrity of Ukraine, to counter terrorist activities, as well as to prevent violations and to restore the violated rights, freedoms, and legitimate interests of Ukrainian citizens, society, and the state.
Part 2 of Article 1 of the aforementioned law provides that sanctions may be imposed by Ukraine against a foreign state, a foreign legal entity, a legal entity controlled by a foreign legal entity or a non-resident individual, foreigners, stateless persons, as well as entities engaged in terrorist activities; and sanctions in the form of revocation of state awards may be imposed against anyawardees who popularize or promote the aggressor state and its authorities, representatives of the aggressor state’s authorities, and their actions that create a positive image of the aggressor state, justify, or recognize the occupation of Ukrainian territory as lawful.
The law provides for 30 types of sanctions—ranging from asset freezes to bans on demonstrations and the use of symbols of terrorist organizations and groups, the promotion of the ideas and programmatic goals of such organizations (groups), blocking access to information resources used for these purposes, and other sanctions consistent with the principles for their application established by this law.
Such sanctions can be divided into:
sectoral (targeting a specific sector of the economy);
personal sanctions (against a specific individual who poses a threat to national security).
The most common are personal (economic) sanctions, which are directly linked to the sanctioned individual and their assets.
Ukrainian legislation has gradually established direct prohibitions on entering into legal transactions or taking any legally significant actions involving the property of sanctioned individuals. Such provisions are contained, in particular, in:
the Law “On Sanctions”;
the Law “On the Prevention and Counteraction of Money Laundering”;
the Law “On State Registration of Real Rights to Real Property and Encumbrances Thereon”;
relevant regulations of the National Bank of Ukraine, the Ministry of Justice, and the Ministry of Finance;
the Regulation on the State Sanctions Register.
These provisions are aimed at preventing transactional activity that may indicate the artificial transfer of assets, a change in ownership, or the transfer of control to third parties to circumvent restrictions.
Pursuant to paragraph 7 of the Ministry of Justice Order “On Approval of the Procedure for the Performance of Notarial Acts by Notaries of Ukraine” No. 296/5, when performing a notarial act, the notary verifies whether sanctions of the relevant types— as provided for in Article 4 of the Law “On Sanctions,” the decision to impose which was adopted by the National Security and Defense Council of Ukraine and enacted by a decree of the President of Ukraine, against the individuals or legal entities requesting the notarial act.
If it is established that sanctions provided for in Article 4 of the Law “On Sanctions” have been imposed on the individuals or legal entities who have applied for the notarial act, the notary shall refuse to perform such a notarial act in accordance with Article 49 of the Law “On the Notarial System,” if performing the notarial act would result in a violation of the restrictions (prohibitions) established by the sanction of the relevant type.
A notary’s failure to perform the specified actions entails disciplinary liability, in particular, the submission to the Higher Qualification Commission of Notaries under the Ministry of Justice of a motion to revoke the certificate authorizing the practice of notarial activities.
Despite this, in practice there are cases where sanctions checks are not conducted, or are carried out merely as a formality with reference to registries containing outdated information. Such actions are taken with the clear intent of unlawfully circumventing sanctions.
In accordance with paragraph 7 of clause 1 of part 3 of Article 10 of Law No. 1952-IV “On State Registration of Real Rights to Real Property and Encumbrances Thereon,” the state registrar verifies that the claimed rights and the submitted/received documents comply with the requirements of the law, as well as the absence of any conflicts between the claimed and already registered real rights to real estate and their encumbrances, in particular, the existence of sanctions imposed in accordance with the Law “On Sanctions,” which preclude state registration of such rights.
Pursuant to paragraph 61 of Part 1 of Article 24 of Law No. 1952-IV, grounds for refusing state registration of rights include the establishment of the fact that sanctions have been imposed in accordance with the Law “On Sanctions,” which preclude the state registration of rights.
At the same time, if the Ministry of Justice determines that the state registrar made a decision on state registration of rights in violation of sanctions imposed in accordance with the Law “On Sanctions,” in such a case, the Ministry of Justice shall specify in its decision the specific sanction that the state registrar violated when deciding to register the rights; as a result, such a decision by the state registrar to register the rights shall be deemed to have been made in violation of this law and shall be annulled.
Furthermore, paragraph 8 of Part 7 of Article 37 of Law No. 1952-IV provides that, concurrently with recognizing the state registrar’s decision as having been adopted in violation of this law and annulling it, the Ministry of Justice may adopt one of the decisions provided for in subparagraphs 4–6 of this part, namely:
temporarily block or revoke the state registrar’s access to the State Register of Rights;
bring disciplinary action against an official of a territorial body of the Ministry of Justice;
submit a motion to the High Qualification Commission of Notaries under the Ministry of Justice to revoke the certificate authorizing the practice of notarial activities.
Among other things, the Regulations on the Implementation of Special Economic and Other Restrictive Measures (Sanctions), approved by Resolution No. 65 of the NBU Board dated May 11, 2023, also establishes a number of prohibitions on conducting transactions involving the assets of sanctioned entities.
However, despite the fact that current legislation already provides for a whole range of tools to monitor compliance with sanctions, the scale of violations remains significant. An analysis of open sources and the Unified State Register of Court Decisions leads to the conclusion that sanctions evasion has become a systemic problem.
In some cases, law enforcement agencies have attempted to classify actions to circumvent sanctions as abuse of power, or the creation or acquisition of business entities for the purpose of concealing illegal activities or money laundering. However, in most situations, law enforcement agencies are unable to prove direct intent or a connection between the actions of the actual beneficial owner and intermediaries. This makes it impossible to establish the elements of a crime under the existing articles of the Criminal Code.
Consequently, there is an objective need to criminalize actions aimed at violating or circumventing sanctions.
Furthermore, on April 24, 2024, the European Parliament and the Council of the European Union adopted Directive 2024/1226 “On the Definition of Criminal Offenses and Penalties for Violations of Union Restrictive Measures and Amending Directive 2018/1673,” which requires European Union member states to incorporate criminal liability for violating and circumventing sanctions into their national legislation within one year.
On January 14, 2025, the President submitted to the Verkhovna Rada a draft law “On Amendments to the Criminal Code of Ukraine, the Criminal Procedure Code of Ukraine, and the Law of Ukraine ‘On Sanctions’ Regarding the Establishment of Liability for Violations of Special Economic and Other Restrictive Measures (sanctions) (No. 12406).
This draft law proposes, in particular, to supplement the Criminal Code with a new Article 1143, which establishes liability for crimes against the foundations of Ukraine’s national security—violation of restrictive measures (sanctions), as well as intentional circumvention of sanctions.
As noted in the explanatory memorandum to Draft No. 12406, the elements of this crime are formulated as formal, meaning that the mere commission of the act is sufficient, while socially dangerous consequences fall outside the scope of the elements—that is, they are not a mandatory element. The proposed article provides that such crimes are classified as serious.
The minimum monetary threshold for criminalizing a violation related to the subject matter of the crime—the asset (resources, capital, the size of a financial transaction, etc.)— is set at 100 non-taxable minimum incomes (as of January 1, 2025, this amount is 151,400 UAH). At the same time, the value threshold does not apply to military goods and dual-use goods.
The subject of this offense is general, meaning it includes not only the entity imposing the sanctions but also, first and foremost, the person against whom the sanction is imposed, as well as third (other) parties who, through their actions or inaction, violate the sanctions or facilitate their violation.
To clarify the objective element of this offense, the legislature proposes amendments to the Law “On Sanctions” that define the following forms of “circumventing” sanctions:
1) acquiring frozen assets or taking actions to transfer, convert, conceal, or disguise them;
2) driving a business entity into bankruptcy or causing its fictitious bankruptcy, where a sanction in the form of asset freezing has been imposed on the entity or its ultimate beneficial owner.
Although, at first glance, this draft law appears promising, it also contains dangerous legal uncertainty. In particular, the provisions lack clarity regarding the definition of what exactly constitutes a violation of each sanction, since—unlike the definition of the term “circumvention” of sanctions—the draft law does not provide definitions for such violations.
Furthermore, the legislation does not contain a clear explanation regarding the enforcement of each of the 30 types of sanctions provided for in Article 4 of the Law “On Sanctions.” This could lead to varying and excessively broad interpretations of the provisions of the proposed amendment to Article 1143 of the Criminal Code.
Given that this offense is classified as a serious crime, the definition of its elements must correspond to the level of such liability.
Draft Law No. 12406 also proposes:
not to apply statutes of limitations to criminal liability for the offense provided for in Article 1143 of the Criminal Code;
to provide for an additional penalty in the form of a prohibition on holding certain positions or engaging in certain activities;
apply criminal law measures to legal entities;
to establish special confiscation for the committed crime.
Thus, the proposed bill is an extremely timely initiative that could become an effective tool for preventing the evasion of sanctions. At the same time, its implementation requires clear elaboration and in-depth discussion involving representatives of the legal community, experts, and human rights advocates.
Criminal liability for committing a specific act can only be imposed if the elements of the crime are clearly defined and the standard of proof precludes the possibility of arbitrary interpretation. Otherwise, there is a risk of systemic human rights violations and a decline in trust in the justice system in Ukraine.
Author: Ivanna Chernyi, Attorney and Partner at Barristers
Source: https://zib.com.ua/ua/166562-vidpovidalnist_za_obhid_sankciy_v_ukraini_yak_ce_pracyue_zar.html