How do sanctions work?

Yurii Ivaniushchenko, also known as “Yura from Yenakiieve,” is a former Party of Regions MP of the 6th and 7th convocations and one of Viktor Yanukovych’s closest associates. After the Revolution of Dignity, he fled the country and has since lived primarily in Monaco. But despite all the cases opened against him, Ivaniushchenko is still not under sanctions.

A reminder here: sanctions in Ukraine are governed by the dedicated Law on Sanctions. Under this law, proposals to apply such restrictions to a specific individual, company, or state can be submitted to the NSDC by parliament, the president, the Cabinet of Ministers, the National Bank, or the Security Service. And although the SSU is not the only body that can propose sanctions against someone, it is entirely logical that the NABU turned to it as a law enforcement agency.

The grounds for applying sanctions, while described fairly broadly in the law, form an exhaustive list, and all of them relate to protecting the state’s national interests or the rights of its citizens. That said, we cannot know for certain why sanctions are imposed on any specific person, since such reasoning is not made public.

By way of example, we can recall the rapid imposition of NSDC sanctions on Timur Mindich and Oleksandr Tsukerman following NABU’s release of materials from the Midas case.

At the time, the tapes published by NABU referred, among other things, to “two [million] to Moscow.” And although we cannot assert that this was precisely what underpinned the sanctions, it is clear that, unlike in the Ivaniushchenko case, there was enough evidence of activity threatening national security to impose on Mindich and Tsukerman more than half of all available restrictions. The package even included deprivation of state awards — which Mindich and Tsukerman do not hold — and a ban on foreign non-military vessels and warships entering Ukraine’s territorial waters, although that sanction also has little bearing on these particular figures in NABU’s case.

At the same time, we do not know the reasoning behind the sanctions imposed on Mindich, Tsukerman, or other figures on such sanctions lists. The general problem with Ukrainian sanctions is that we cannot find out which specific actions and supporting evidence underpin the application of such measures to any given person. This is because sanctions are often based on the materials of criminal cases in which the sanctioned individuals are involved, and that information cannot be disclosed. That said, under the EU standard, the NSDC’s decision should at least include a general statement of reasons for sanctioning a person.

In Ivaniushchenko’s case, once again, we can rely on the materials the NABU has published, the contents of court rulings, and the SSU’s own public statement — all of which refer to his ties to Russia. Despite this, it is impossible to understand why the NSDC applied sanctions against Mindich and Tsukerman but the SSU refused to take the same approach with Ivaniushchenko, because the law does not require the reasoning behind such decisions to be made public.

How does Ivaniushchenko’s citizenship affect the application of sanctions?

There is one more contested aspect to the “Yura from Yenakiieve” case — his Ukrainian citizenship. The practice of states imposing sanctions on their own citizens is generally very rare, since it runs counter to the very logic of such measures. For its own citizens, the state has internal means of influence — chief among them criminal liability for offenses against national security and the like.

Under the law, all sanctions other than deprivation of state awards may be applied to Ukrainian citizens only if those individuals engage in terrorist activity. But there is room for maneuver when it comes to people who hold dual citizenship, have been stripped of Ukrainian citizenship, or hold only a residence permit. In particular, the Law on Citizenship of Ukraine sets out, as a ground for termination of citizenship, the voluntary acquisition by a person of citizenship of a state recognized by the Verkhovna Rada of Ukraine as an aggressor state or occupying state.

The European Convention on Nationality likewise allows a state to deprive a person of citizenship if they have voluntarily acquired the citizenship of another country or if their conduct seriously harms the state’s interests.

 

Many sanctioned Ukrainian citizens have also held Russian citizenship — Viktor Yanukovych, for example. As for other cases, Ihor Kolomoiskyi was stripped of Ukrainian citizenship by a presidential decree, and Hennadii Boholiubov holds only a permanent residence permit in Ukraine (although the sanctions register lists him as a Ukrainian citizen). 

In the cases of Petro Poroshenko, Kostiantyn Zhevaho, and, more recently, Andrii Bohdan, however, the NSDC must have evidence of their terrorist activity, since these individuals do not hold any citizenship other than Ukrainian and have not been stripped of it.

As for Yurii Ivaniushchenko, according to Radio Liberty, back in 2004 he obtained a passport of a citizen of the Russian Federation in Rostov-on-Don. In the same investigation, journalists indicate that the former MP held at least two Russian international passports and used them to travel to Russia. In particular, since the start of the full-scale invasion, he has flown there at least ten times. 

Thus, Ivaniushchenko’s citizenship should not stand in the way of applying NSDC sanctions against him — given the now-established practice of sanctioning even Ukrainian citizens who hold no other passport.

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The Ivaniushchenko story is yet another piece of evidence that Ukraine’s sanctions policy has shifted from confronting Russia to using such measures as a substitute for justice or a tool of selective political pressure.

A situation in which the SSU itself publicly labels someone an “FSB resident in the ‘DPR’” and then does not find sufficient grounds to impose sanctions on that person amounts, at the very least, to institutional inconsistency that requires a better explanation than the one NABU received in response to its petition.

As long as the reasoning behind sanctions remains opaque and their application remains situational and reactive, this instrument will continue to be perceived not as part of the national security system, but as a lever whose use depends on the political climate.

Why is it important to reform the existing approach?

Sanctions are temporary political measures imposed by a state on individuals, companies, and economic sectors of another state that threaten or violate its national interests. Restricting the rights of such violators, particularly in the economic sphere, compels them to cease their unlawful actions. The faster and more effectively these measures are enforced, the less harm the state will suffer.

That is why it is crucial to prevent sanctioned persons from adapting to new restrictions and finding ways to circumvent them—something the Russian Federation continues to do even in the third year of the full-scale invasion and the twelfth year of the Russian-Ukrainian war.

The Law on Sanctions in Ukraine was adopted in 2014 in response to Russia’s military aggression in the eastern Ukrainian regions. Its goal was to safeguard national security, interests, and sovereignty through targeted restrictions on specific individuals and legal entities. Even in its original version, the law outlined the mechanisms for imposing and lifting sanctions, provided a non-exhaustive list of measures, and established the foundation of the country’s sanctions policy.

However, no state policy can be truly effective without enforcement mechanisms to ensure compliance. When sanctions serve as a state’s response to violations of its national interests, enforcing them becomes especially crucial.

Nevertheless, when the law was adopted in 2014, there was no discussion about establishing liability for violating or circumventing sanctions. The law stipulated that the NSDC would decide on the application of sectoral or personal sanctions, with the president enforcing this decision by decree. In the case of sectoral sanctions, parliamentary approval was required through a corresponding resolution. The law also states that once a presidential decree is issued or a Verkhovna Rada resolution is adopted, the decision becomes binding. However, it does not address any consequences for non-compliance, which has severely undermined the effectiveness of sanctions.

After a full-scale Russian invasion in 2022, the Law on Sanctions was amended in accordance with new military challenges. The key update introduced a new type of sanction—asset recovery (confiscation) by court decision, transferring the assets of sanctioned individuals to state ownership. This measure can only be applied during martial law and only after the individual’s assets have been frozen, preventing any use or transfer.

This amendment to the sanctions legislation signaled that Ukrainian authorities were prepared to take more decisive action against the Kremlin’s allies.

However, despite tightening sanctions policy, lawmakers failed to address a broader issue—the risk of sanctioned assets being withdrawn from Ukraine during the blocking stage, before reaching the courts. To grasp the scale of the issue, consider this: as of the end of January 2025, according to the State Register of Sanctions in Ukraine, the assets of more than 14,000 individuals and companies had been blocked. This means that before a sanctioned confiscation case begins, there is a high risk that the sanctioned individual may transfer the property to someone not subject to sanctions or move the assets out of Ukraine.

An example of this scenario is the asset recovery case involving Russian oligarch Mikhail Shelkov. Until March 2023, he controlled Demurinsky Mining and Processing Plant LLC, which exported titanium-containing raw materials to Russia and Belarus in 2020–2021. Although the Law on Sanctions had been in force for several years by then, before the full-scale Russian invasion, it was still possible to operate in ways that circumvented its restrictions.

When the High Anti-Corruption Court began reviewing the case, it was revealed that just days before February 24, 2022, Shelkov sold his share in the Ukrainian enterprise—owned through the Cyprus-based company Limpieza Limited—to a Ukrainian citizen, Svitlana Iltio. At that time, Shelkov was already under indefinite sanctions imposed by the NSDC, which included, among other measures, asset blocking and a total or partial ban on transactions involving securities of his companies.

Such actions constitute a direct violation of sanctions, and those responsible should be held accountable. However, in Ukraine, the only current legal avenue for prosecuting violators of anti-Russian sanctions is to charge them with collaboration. Yet, this offense only partially covers actions related to evading or breaching sanctions. This approach is ineffective because it defines the crime based on cooperation with the enemy rather than the act of circumventing sanctions itself.

Moreover, the article on collaboration was only added to the Criminal Code in April 2022, whereas Ukraine began imposing anti-Russian sanctions eight years earlier. This means that despite the existence of sanctions, they had little real impact and did not effectively restrict the ability of enemies of the state to own and conduct operations with their property in Ukraine.

For example, the NSDC imposed asset-blocking sanctions on Russian oligarch Oleg Deripaska in 2018. However, this did not prevent him from continuing to own and manage assets in Ukraine, which he had acquired in the early 2000s. Among these assets, Deripaska owns Mykolaiv Alumina Plant, the largest producer of metallurgical alumina and aluminum hydroxide in Ukraine, along with 11 other enterprises and their industrial complex. These assets were recovered from the Russian oligarch’s ownership and confiscated through a new sanctions mechanism in 2023. However, until then—even after the war began in 2014—they continued to operate under Deripaska’s control. 

One can only speculate how much weaker Russia’s influence on the Ukrainian economy would be if Ukraine’s sanctions policy—particularly the enforcement of penalties for violations and circumvention—had matched the scale of Russian aggression. However, the draft law on liability for circumventing sanctions has finally been submitted to parliament for consideration, making it a case of better late than never.

How do other countries punish violations and circumvention of sanctions? 

Another key argument for adopting this draft law in Ukraine is that our Western partners are already actively enforcing or beginning to enforce the criminalization of sanctions violations and circumvention.

For example, after Brexit, the United Kingdom passed the Sanctions and Anti-Money Laundering Act (SAMLA). Based on this law, in September 2024, the UK’s Office of Financial Sanctions Implementation imposed a £15,000 fine on Integral Concierge Services for violating financial sanctions against the Russian Federation.

The EU’s approach to criminalizing sanctions circumvention is particularly relevant for Ukraine. This is logical, as Ukraine is actively moving toward EU membership and must align its national legislation with European law.

Notably, some EU countries, such as Latvia, Lithuania, and Estonia, have had national legislation criminalizing sanctions violations and circumvention since 2016–2018. These changes enabled the Baltic states to respond swiftly to Russian aggression. For example, as of August 2024, Lithuania had already launched investigations into 50 cases of sanctions violations against Russia and Belarus. The penalties for these crimes can include fines, property confiscation, or imprisonment for up to eight years. 

But, unlike the Baltic states, not all EU members had a legal basis for punishing Kremlin henchmen for violating and circumventing sanctions imposed after the full-scale invasion. This led to the unification of the process in April 2024 through the adoption of a special EU Directive on the definition of criminal offences and penalties for the violation of Union restrictive measures. This directive establishes minimum rules defining which acts constitute violations and circumvention of EU restrictive measures, while also setting thresholds for punishment.

 For example, it proposes a maximum penalty of at least five years’ imprisonment for individuals who violate EU sanctions, provided the offense involves goods, services, operations, or activities valued at €100,000 or more at the time of commission. The directive also urges EU countries to confiscate both assets involved in the crime and any proceeds derived from it.

Of course, when discussing global practices of criminalizing the circumvention of sanctions, it is essential to mention the United States. The country criminalized the violation and circumvention of sanctions as early as 1977 through the International Emergency Economic Powers Act (IEEPA).

Since the beginning of the full-scale invasion, the United States has led efforts to hold Russian oligarchs criminally accountable, even confiscating several of their assets. This includes more than $5 million from the sanctioned Konstantin Malofeev and a $300 million yacht belonging to Suleiman Kerimov, a close associate of Putin. However, a month after the new presidential administration took office, the US sanctions policy toward Russia appeared to stall, and its future direction may radically change. That is why Ukraine must immediately strengthen its cooperation with the EU on this issue.

How should the violation and circumvention of sanctions be criminalized in Ukraine?

Given our active efforts toward European integration, we should implement the directive’s minimum requirements now to save time. Otherwise, these changes will still be necessary later during negotiations with the EU.

Moreover, Ukraine has already significantly delayed the criminalization of sanctions circumvention, while such violations remain critically harmful to us today. It is time to take the lead in holding the Kremlin’s henchmen accountable. 

The introduction of an article in the Criminal Code, as proposed by draft law No. 12406, which defines the violation or circumvention of sanctions as a crime, will allow:

• in addition to confiscating the assets of Putin’s henchmen, also bringing them to criminal responsibility in the form of imprisonment;
• impose fines from UAH 425,000 to UAH 2.04 million on violators of sanctions. These amounts will go to the state budget.
• strengthen the sanctions policy of Ukraine as a whole and prevent new potential violations. 

It is important to note that, for the effective application of the new article on the criminalization of violations and circumvention of sanctions, legislators should retain the negligent form of guilt for this crime.

Currently, the explicit mention that criminal liability for violating and circumventing sanctions includes a negligent form of guilt appears only in the explanatory note to the draft law. Meanwhile, the EU Directive mandates the criminalization of activities such as trade, import, export, sale, purchase, transfer, transit, or transportation of sanctioned goods, as well as the provision of services related to such goods—even if committed out of negligence—at least when these goods are military or dual-use.

It is crucial to implement this provision, at least due to the current martial law, and to ensure that violators cannot evade responsibility by claiming ignorance of the imposed sanctions.

For example, state registrars and notaries are required to comply with financial sanctions imposed on individuals or companies. This means they must not draft or register any transactions involving the assets of sanctioned persons, as such property is officially blocked. However, a common scenario is when a registrar, driven by personal interest, enables a sanctioned person to sell an asset to someone not under sanctions. In their defense, the registrar might cite external factors—such as loss of access to state registers or system failures due to martial law. This makes it extremely difficult to prove the registrar’s intent to violate the sanction.

Another element of European sanctions legislation, which is unfortunately not mentioned at all in draft law No. 12406, is the provision of temporary licenses allowing the disposal of sanctioned assets. In the EU, this mechanism allows an authorized body of an EU member state to grant temporary permission to a sanctioned person, their relatives, etc., to use a frozen asset—for example, funds to cover basic needs, court fees and payments, or fulfill contractual obligations. Companies can also obtain such a license to avoid bankruptcy or other serious financial consequences associated with sanctions.

Each country establishes the procedure for such licensing through its national legislation. In most cases, this mechanism requires submitting a license application through a designated state platform, along with documents justifying the need to use a frozen asset, specifying how it will be used and for what period. The authorized body reviews such applications within a few months and either grants or denies the license. Any violation of the issued license’s terms is treated as a breach or circumvention of the sanction.

Implementing such a mechanism in Ukraine would offer additional opportunities to maintain the financial stability of Ukrainian enterprises, as companies affected by sanctions can suffer significant losses. Consequently, after these companies are confiscated, the State Property Fund may face greater challenges in selling them.

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Criminalizing the violation and circumvention of sanctions in Ukraine is a long-overdue step for a state that has been resisting Russian military aggression since 2014. Recent political events only reinforce the urgency of a united effort to counter the enemy effectively.

Due to the absence of penalties for violating sanctions, Russian businesses continued to operate and expand within Ukraine’s economy until the full-scale invasion by the Russian Federation in 2022. And there are still significant risks of “losing” Russian assets that could otherwise be confiscated in Ukraine’s favor.

After such a difficult struggle at the front, we cannot afford to shift focus away from sanctions or continue lagging behind our partners in sanctioning the Russian Federation. That is why we must implement the best European practices now, demonstrating our firm commitment to countering Russian economic intervention and reinforcing our intent to join Europe’s joint sanctions regime against the Kremlin.

1. VS Energy 

The case of VS Energy is currently the largest of all that has been in the practice of the HACC. The Ministry of Justice filed a lawsuit against the European owners of this company in Ukraine because of their potential connection with the Russians close to Putin: Yevgeny Giner, Mikhail Voevodin, and Alexander Babakov. 

Thus, officially, the owners of the Ukrainian branch of VS Energy are citizens of Germany and Latvia, who are actively defending their independence from Putin’s henchmen in court. However, law enforcement agencies have evidence to the contrary, which was the basis for seizing the assets of this company. After the full-scale invasion, they had grounds to file a claim for confiscation by the Ministry of Justice. 

VS Energy International Ukraine owns 8 regional electricity distribution companies (3 of them partially), 2 hotel chains under the Premier and Accord Hotels brands, First Investment Bank, Metropolis and Metrograd shopping centers in Kyiv, and 2 factories. In addition, VS Energy has corporate rights in another 31 companies that can also be confiscated. 

The case has been heard by the HACC since June 2023, and more than 100 people are involved in it, so the decision should not be expected soon. We wrote more about this case and its complexity here.

2. HMS Group (Hydromashservice) 

The Ministry of Justice filed a lawsuit against the HMS Group Company, as well as its owners — Russian businessmen father and son Lukyanenkos and Herman Tsoi — in November 2023. The reason is that this company is one of the largest machine-building holdings in Russia, which produces pumping equipment for the oil and gas complex, energy, housing, and municipal services and water management of the Russian Federation. The HMS Group has its assets in Belarus, Germany, and Ukraine. 

In particular, in Ukraine, this company owns shares in the Sumy Pumping and Power Engineering Plant Nasosenergomash, Sumy Machine-Building Scientific and Production Association (former Frunze plant), Heavy Drill and Lead Pipe Plant, SMNVO-Engineering, Atommashproekt Consortium, and Yubileinyi Hotel Complex. 

In addition to these enterprises, the Ministry of Justice also asks to recover the corporate rights of the HMS Group in 13 more companies, as well as to confiscate 21 land plots, 2 apartments, 1 house, 6 vehicles, funds on an account, and 8 guns.

3. ROYAL PAY EUROPE

Royal Pay Europe is registered in Latvia and provides services for electronic payments and other financial solutions for businesses. 

In 2023, the State Bureau of Investigation (SBI) opened criminal proceedings against this company on the fact of embezzlement of funds allocated by foreign banks to one of the Ukrainian commercial banking institutions for a total amount of more than EUR 30 million.  

According to the materials of this investigation, the company, during the hostilities in Kharkiv Oblast, tried to re-register the property rights to the real estate of one of the Ukrainian banks, which is in the process of dissolution. In addition, the SBI established in the course of this investigation that the beneficiary of Royal Pay Europe is Sergey Kondratenko, a Russian citizen associated with the Russian bookmaker 1xBet. 

As part of the open criminal proceedings, the assets of Royal Pay Europe were seized and transferred to the management of the ARMA. However, it is much easier to confiscate assets through a sanction case than to wait for a decision in criminal proceedings. The Ministry of Justice mainly bases its lawsuits on the materials of criminal proceedings. 

Because of this, the ARMA acts as a third party in the sanction case against Royal Pay Europe. In the event of granting the lawsuit, the funds and securities under its management will be transferred to the SPFU. The assets that might be confiscated amount to about UAH 2 billion.

4. The case of Bohuslayev and Kononenko 

The last high-profile case that was opened following a lawsuit of the Ministry of Justice was the case against Vyacheslav Bohuslayev, the former president of Motor Sich JSC, and Petro Kononenko, the senior manager of the enterprise. 

Since October 2022, Bohuslayev has been suspected of collaboration and has remained in custody. 

The Ministry of Justice motivates the lawsuit by the fact that Bohuslayev, together with Kononenko, supplied the aggressor country with products manufactured by Motor Sich JSC and its separate subdivisions since 2014. It was done despite the legislative restrictions on the prohibition of the export of military goods to the Russian Federation through a number of enterprises owned by them. Even after the full-scale invasion on February 24, 2022, they ensured the supply of engines for the Russian army so that it could continue to produce and repair combat helicopters (Mi-8, Mi-24, Mi-28, and Ka-52). All these helicopters were actively used by the Russian Federation in attacks on Ukraine, especially at the beginning of the full-scale war. 

The Ministry of Justice asks the court to confiscate 10 apartments, 3 houses, 8 land plots, 12 non-residential real estate objects, corporate rights in 11 enterprises, property rights, money on accounts, and more than 600 guns in favor of Ukraine. The parties to the case, together with the defendants, are their relatives as co-owners of certain property and the mentioned 11 enterprises.

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Thus, we see that during the second year of the full-scale invasion, the Ministry of Justice began to increase the scale of its lawsuits to confiscate Russian assets in Ukraine. This is undoubtedly a positive pattern that needs to persist and improve because the work done must not only end in success in the High Anti-Corruption Court but also withstand potential international appeals. To this end, first of all, it is important to ensure proper procedural rights for all participants in the trial.

This publication was prepared by Transparency International Ukraine with the financial support of Sweden.

What needs to be refined

Unfortunately, our main concern about this bill came true. MPs sustained the amendment that after paying UAH 17-42.5 thousand fine for lies in declarations up to UAH 1 million 342 thousand, a violating official will not even be regarded as someone who has faced administrative penalties. 

This critical moment was emphasized earlier by Transparency International Ukraine urging the President to veto this bill. Almost one and a half million hryvnias is a rather large amount enough to  buy a car or an apartment. Therefore, it is simply unacceptable to allow declarants to “forget” to mention property of such value in their declarations and just pay off a ridiculous fine without entering it in the Register of Corrupt Officials.

Moreover, the new law preserves the NACP’s quasi-judicial role, which will discreetly decide whether to hold the declarant accountable for late submission of the declaration. According to Article 124 of the Constitution of Ukraine, justice in Ukraine is administered exclusively by the courts, and the appropriation of these functions by other bodies or officials, shall not be permitted. The NACP is not an exception here, just like any other state institution. The jurisdiction of the courts extends to any legal dispute, and, of course, any fine for failure to submit a declaration on time, which is imposed by the NACP, is simply meaningless in essence. 

Therefore, taking over the judicial function of the NACP, in our opinion, at least contradicts the Basic Law of the state.

What should be left in the new law

As we noted earlier, TI Ukraine positively assesses the introduction of time limits for staying in the Register of Corrupt Officials. This problem is long overdue because such a restriction corresponds to the legal principle that after a certain time for a person brought to legal responsibility, all negative legal consequences associated with it should be stopped.

In addition, during the second reading, the MPs adopted an amendment that proposes to provide in the draft law a list of valid reasons why the declarant could not submit the declaration on time. They are: 

• arrest, detention, or serving a sentence; 
• restriction of freedom of movement due to a law or court ruling;
• force majeure, i.e. epidemics, military events, natural disasters, or other similar circumstances; 
• serious illness or stay in a health care facility for treatment or in case of pregnancy, provided that it is impossible to temporarily leave such facility; 
• technical failures in the official NACP website; 
• requesting information for inclusion in the declaration. 

These exceptions represent a generally favorable development, affording the declarant at least some chance to offer their explanations and prevent the automatic imposition of fines without appealing in court. Since the list of justifiable reasons for such delays is quite exhaustive, this will help minimize the potential for exploiting this provision to avoid accountability. 

However, on the other hand, such exhaustion will also not allow to cover all possible situations that prevented the official from submitting a declaration. Therefore, it is probably worth adding some other variable point that will add flexibility — recent years have shown that it is hardly possible to provide for all the obstacles to the timely submission of declarations by officials.

Thus, this law must also be vetoed by the President

We are convinced that the President should veto this bill and also return it for revision. Especially in terms of harmful recent amendments that allow avoiding responsibility for lying in the declaration up to UAH 1 million 342 thousand, and to give powers to the NACP that were previously assigned to the court. 

The triumph of civil society, which collaboratively achieved the veto on draft law 9534 and the opening of the declaration register, must not overshadow the need to veto 9587-d. After all, it can also lead to a significant weakening of the anti-corruption reform, which we definitely do not want to happen.