EU Regulation 1351/2014
Pursuant to EU Regulation 208/2014, and with effect from 6 March 2014, the EU has imposed a freeze on all funds and economic resources belonging to, owned, held or controlled by designated persons/entities/or bodies (as listed in Annex I). Former President of Ukraine Viktor Yanukovych and 17 other Ukrainian individuals, primarily ministers and other government officials, are currently listed in Annex I. Regulation 208/2014 is targeted at persons identified as being responsible for the misappropriation of Ukrainian State funds and persons responsible for human rights violations in Ukraine, and natural or legal persons, entities or bodies associated with them.
Pursuant to the Regulation, it is prohibited for any funds or economic resources to be made available, directly or indirectly to or for the benefit of the designated persons. This prohibition is subject to a limited exception that permits financial or credit institutions to credit frozen accounts with funds transferred by third parties to the account of a designated person, although any additions to those accounts must also be frozen. The financial or credit institution must inform the relevant competent authority about any such transaction.
Further exceptions apply in respect of payments into the frozen accounts of designated persons where those payments relate to:
- interest or other earnings on those accounts;
- payments due under contracts/agreements/obligations that were concluded or arose before the date on which the designation occurred; or
- payments due under legal decisions in a Member State or enforceable in the Member State.
All such funds must also be frozen.
It is also expressly prohibited to participate knowingly and intentionally in activities whose object or effect is to circumvent the prohibitions outlined above.
The Regulation provide for derogations from the prohibitions in certain circumstances, subject to prior authorisation from the relevant competent authority, such as where the funds are:
- necessary to satisfy the basic needs of a designated person (such as payments for food, housing, medical needs);
- used exclusively for the payment of reasonable professional fees/legal expenses;
- used exclusively for the payment of fees or service charges for the routine holding or maintenance of the frozen funds/economic resources;
- necessary to satisfy certain legal claims against a designated person/entity/body;
- payments due by designated persons under contracts/agreements which were concluded by, or under an obligation that arose, prior to the date on which the designation occurred.