New Bill on Sanctions Violations: What It Means for Ukraine

The Ukrainian government is stepping up its efforts to combat sanctions violations. Recently, the President introduced a bill imposing criminal liability for violating and circumventing sanctions—a move long anticipated by legal experts and the business community. The European Union (EU) introduced similar measures in May 2024, making it inevitable for Ukraine to follow suit.

This draft law is the result of comprehensive collaboration between state institutions and civil society. Given the President’s direct involvement in its submission and public announcement, it is expected to be passed swiftly with minimal amendments.

While the bill criminalizes violations of Ukraine’s sanctions regime, its scope is more limited than originally discussed. It also fails to fully align with international best practices adopted by partner states in the sanctions coalition.

Sanctions Circumvention: What Does It Mean?

Although Ukraine has imposed sanctions for over a decade, the legal framework lacked explicit prohibitions against violating or circumventing them. The new legislation addresses this gap by defining a broad range of actions that qualify as sanctions circumvention. These include:

• Transferring, acquiring, or modifying assets belonging to sanctioned individuals.
• Hiding ownership or control of assets by a sanctioned person (if the asset value exceeds UAH 151,000).
• Forcing a company into bankruptcy if the business or its owner is sanctioned under asset-blocking measures.
• Submitting false claims about a sanctioned person’s inability to fulfill financial obligations.

For a more detailed analysis of Ukraine’s sanctions regime and its enforcement mechanisms, visit Ukrainian Sanctions, a comprehensive resource on sanction policies and legal implications.

What Sanctions Violators Will Face

The bill proposes penalties for both intentional and unintentional violations of sanctions, as well as deliberate circumvention.

What Constitutes a Violation?

Sanctions violations include:

• Failure to comply with restrictions or obstructing their enforcement.
• Improper compliance procedures, such as signing contracts with sanctioned entities.
• Continued cooperation with sanctioned individuals or companies.

What Constitutes Intentional Circumvention?

Examples of deliberate sanctions circumvention include:

• Transferring ownership of assets after the law is enacted to avoid penalties.
• Shifting financial transactions to bypass trade restrictions.

This only applies to sectoral and specific personal sanctions, as outlined in the legislation. The threshold for legal action is set at UAH 151,000, except for cases involving military or dual-use goods, which have no minimum limit.

Penalties for Violations

The bill establishes severe consequences for those who violate or circumvent sanctions:

• Fines ranging from UAH 425,000 to UAH 2 million.
• Imprisonment from 2 to 10 years.
• Bans on holding positions or conducting business for 10 to 15 years.
• Potential property confiscation.

Corporate Liability

Companies will also face penalties, including:

• Heavy fines and property confiscation.
• Business dissolution for serious offenses (except for banks, which are exempt from liquidation).

The Security Service of Ukraine (SBU) will be responsible for investigating these new types of offenses, particularly cases involving the High Anti-Corruption Court’s asset recovery decisions.

Additionally, the bill allows in absentia trials for cases involving sanctions violations and circumvention.

Key Weaknesses in the Bill

While criminalizing sanctions violations is a crucial step toward strengthening Ukraine’s legal framework, the bill has several shortcomings compared to global best practices:

No Provision for Special Licenses

Unlike in the US, UK, and EU, sanctioned persons cannot apply for special licenses to perform specific prohibited actions (e.g., paying legal fees or delivering humanitarian aid).

No Mandatory Declaration of Blocked Assets

The burden remains on the state to track and confiscate assets, requiring additional resources. A self-declaration requirement—as seen in US and EU laws—would streamline asset recovery efforts and improve compliance monitoring.

What’s Next?

The current version of the bill is not final. Lawmakers may introduce amendments to bring it in line with the legal frameworks of partner states. Strengthening these provisions could significantly enhance the effectiveness of Ukraine’s sanctions regime.