Author:
Igor Glushko, Partner at GOLAW, Head of Criminal Law and White Collar Defence practice, Attorney at law
The importance of asset freezing in transnational criminal proceedings
Asset freezing in international cases is a popular tool in the fight against organised crime, corruption, money laundering, and terrorism. The transnational nature of offences requires the use of international mechanisms to seize assets outside the country of investigation. These procedures are regulated by bilateral legal assistance treaties (MLATs), the European Convention on Mutual Assistance in Criminal Matters of 1959 and the UN Palermo Convention of 2000, which allow for the restraint of assets in other jurisdictions.
However, transnational crime is not the only one. There are situations where, in respect of persons subject to domestic criminal prosecution for more trivial crimes, the prosecution nevertheless seeks to seize property located abroad. Quite often, the object is funds in accounts in foreign banks.
In this case, the procedures for both imposing and cancelling such an arrest will be somewhat complicated due to different standards of proof, jurisdictional requirements, and the need to interact with foreign law enforcement agencies.
Jurisdictional limitations of the Ukrainian court's decision to seize property abroad
Pursuant to Article 551(1) of the Criminal Procedure Code of Ukraine (hereinafter — “the CPC of Ukraine”), a court, prosecutor or investigator, upon approval of the prosecutor, may request international legal assistance in criminal proceedings conducted in Ukraine. Such a request may be made to seize assets located outside Ukraine as a measure to secure criminal proceedings.
At the same time, under the Article 4 of the CPC of Ukraine, the jurisdiction of the Ukrainian court extends only to the territory of Ukraine. This means that a Ukrainian court order to seize assets has no direct legal effect abroad. To execute such an arrest in another country, Ukrainian law enforcement agencies must use international legal mechanisms provided for by bilateral treaties, multilateral conventions or the principle of reciprocity.
Procedure for seizure of foreign property
The process of seizing property abroad through international legal assistance consists of several successive stages.
First, the Ukrainian court, at the prosecution's request, issues a ruling on the seizure of assets.
Upon receipt of such a ruling, the law enforcement agency conducting the relevant criminal proceedings prepares a request for international legal assistance and sends it to the central authority of Ukraine provided for in Article 545 of the CPC of Ukraine. At the pre-trial investigation stage, the authorised (central) body is the Office of the Prosecutor General or the National Anti-Corruption Bureau of Ukraine, during court proceedings, the Ministry of Justice of Ukraine.
In accordance with the provisions of part 4 of Article 552 of the CPC of Ukraine, a request for the seizure or confiscation of property or other procedural actions authorised by a court in accordance with this Code shall be accompanied by information on evidence justifying the need for the relevant measures. If the request is justified and complies with Ukrainian law and international agreements, a decision is made to forward it to the authorities of the country where the assets are located.
At the next stage, the authorised bodies in the foreign jurisdiction consider the request and organise its execution. A foreign court decides to seize funds in a foreign bank account, as no bank abroad is obliged to execute a Ukrainian court order directly. This is because the Ukrainian court order is not a foreign court decision recognised in the relevant jurisdiction, does not have the status of an international order and is not subject to automatic recognition mechanisms, as there are no such mechanisms in criminal proceedings.
If a foreign court order is available, a bank or other financial institution imposes a so-called freeze order. This process usually takes several weeks or months, depending on the country, the complexity of the case, and the available evidence, as discussed further in the article.
Peculiarities of asset freezing in different jurisdictions
The seizure of assets in foreign jurisdictions can take various forms. In the EU and the UK, such a procedural action is called a freeze order, a judicial or administrative measure aimed at temporarily freezing assets that may be related to a crime or subject to future confiscation. They do not involve the seizure of property, but only restrictions on the right to dispose of and move assets. In the European Union, freezing orders are regulated mainly by Regulation (EU) 2018/1805 and Directive 2014/42/EU, which establish a mechanism for mutual recognition of decisions on seizure and confiscation and standards of proof. In the United Kingdom, the legal basis for freezing orders is contained in the Proceeds of Crime Act 2002 (POCA) and the Criminal Finances Act 2017, which provide for Restraint Orders, Account Freezing Orders and other types of freezing.
In the U.S. jurisdiction, such measures have a different name: asset seizure and restraining orders cover both the actual seizure of assets (seizure) and the freezing of assets to ensure future confiscation (restraining order). They are applied based on federal regulations 18 U.S.C. §981-§983, 18 U.S.C. §982, 21 U.S.C. §853, which regulate criminal and civil forfeiture, including the possibility of civil forfeiture without a conviction. Restraining orders in the U.S. are broad in scope and can cover any asset, corporate rights, digital assets, and future proceeds.
Ukraine and the United States communicate on the imposition and enforcement of such measures through international legal assistance mechanisms in accordance with Articles 3, 4 and 5 of the 1998 Treaty between Ukraine and the United States on Mutual Legal Assistance in Criminal Matters, which regulate the form of the request, the grounds for cooperation and the procedure for the transfer of evidence and procedural actions in criminal proceedings. The regulatory framework governing these legal relations in the United States makes it one of the most institutionally structured jurisdictions in cross-border asset seizure and confiscation.
The procedural complexity of appealing such decisions requires the interested party to engage a defence attorney, file motions with the district court, follow the federal forfeiture procedure, and use the procedural tool provided for in Rule 41(g) - Motion for Return of Property. This procedure is established by the Federal Rules of Criminal Procedure and is one of the main mechanisms for challenging arrests in the United States.
Special attention should be paid to the jurisdictions of Cyprus and Switzerland
Cyprus ratified the European Convention on Mutual Assistance in Criminal Matters on February 24, 2000. Traditionally, this country has been one of the most popular jurisdictions for business structures of Ukrainian beneficiaries due to low corporate taxation, a well-developed system of holding companies, nominee services and numerous trust structures that are often used for tax optimisation or asset protection.
The key difficulty for authorities seeking to seize property in Cyprus is the multi-level corporate structures. In most cases, the Ukrainian request concerns a company that is only one link in a chain of three to seven companies in different jurisdictions. Cypriot courts may require proof that the ultimate beneficiary is involved in a criminal offence, rather than merely that the company is "connected to Ukraine."
As for Switzerland, it has one of the most complex and, at the same time, most effective systems in the field of asset freezing and confiscation. The main regulatory acts are the Federal Act on International Mutual Assistance in Criminal Matters (IMAC) of 1981, the Federal Law on Freezing and Recovery of Illicit Assets (FIAA) of 2011, the Swiss Code of Criminal Procedure and the 1959 Convention, which was ratified in 1966. Switzerland remains the jurisdiction with the highest requirements for the quality of the seizure request and the supporting evidence. The banking system and the regulator, FINMA (Swiss Financial Market Supervisory Authority), have strict standards for anti-money laundering and for cooperation with law enforcement agencies.
The high evidentiary requirements and bank secrecy pose significant obstacles to seizure. While banking secrecy is no longer "impenetrable" as it used to be, it still does not allow for the transfer of data without a Swiss judicial order, limits the scope of the transferred material, and requires proof of proportionality. Requests that do not contain specific accounts or transactions will be denied.
Switzerland also applies the dual criminality requirement and does not comply with arrest requests related to tax evasion unless the conduct is fraud, a non-criminal offence, or a matter that does not constitute a crime in Switzerland. The courts require a precise identification of specific assets, not "all of the suspect's assets in Switzerland".
If assets have already been frozen, removing them from the freeze is a complicated process. The person concerned must apply to the Office of the Federal Prosecutor or the Federal Criminal Court (Bundesstrafgericht). The central argument is to prove that the assets are not related to the crime, and not simply "derived from other activities".
Actions in case of seizure of property abroad
Given the above, the seizure of property abroad is not a one-step process. Moreover, it often does not involve the property owner. Thus, if it becomes known that funds in a foreign bank have been seized, the priority is to determine the grounds for such a measure: 1) the initiative of foreign law enforcement agencies, 2) automatic freezing by the bank as part of its own compliance policy, or 3) arrest within the framework of international legal assistance.
To do this, it is necessary to obtain all documents related to the seizure, including a letter from the bank notifying of the freeze, internal decisions of the financial monitoring or compliance department, a court decision of a foreign jurisdiction (if available), a copy of the Ukrainian court decision (if the seizure was initiated by Ukraine) and materials for a request for international legal assistance (through a petition to the prosecution in the case or to the court).
It is important to establish what kind of asset is being seized: cash, investments, deposits or securities, the duration of the seizure, and whether there is a risk of confiscation or only temporary blocking.
If the unlawful seizure of a foreign asset is discovered because of a Ukrainian court ruling and a request is made to a foreign jurisdiction, it is first necessary to appeal the Ukrainian ruling that served as the basis for the "international" request.
It is necessary to check the procedural documents on which the request was based, as competent authorities often make procedural errors in them, thereby violating the rights of persons subjected to unjustified procedural coercion. For example, a person has the status of a witness, but the request states that he or she is a suspect or accused. This may entail a violation of the procedural form of the request and, as a result, increase the chance of appealing such a procedural action.
It is worth noting that Articles 2 and 5 of the European Convention on Mutual Assistance in Criminal Matters of 1959 provide several grounds on which a foreign state may refuse to execute an international request, including for the seizure of assets. The refusal is possible if the request relates to an offense considered to be political, political-related or tax-related; if its execution may harm the sovereignty, security, public order or other essential interests of the state; if the act on which the request is based is not criminalised (the principle of dual criminality is observed) or is not extraditable under its legislation; and if the execution of the request contradicts the internal regulations of the requested country.
It should be borne in mind that the list of grounds for refusal in each case is subject to separate determination, as it depends on certain factors. The main one is the location of the assets, as this will affect the regulatory framework to be applied.
Therefore, to establish the legality of the seizure, it is essential to analyse both the compliance of the foreign decision (if any) with international standards and the request itself, which must be submitted in accordance with bilateral treaties on international legal assistance (if any).
Conclusion
The analysis of the mechanisms of seizure of property with a foreign element in criminal proceedings allows us to formulate several key conclusions that are important for understanding the practical implementation of these instruments. First, Ukrainian solutions do not work abroad without a foreign freeze order. This means that even if there is a legitimate and well-founded Ukrainian court order to freeze assets, they will not be frozen in a foreign jurisdiction without a corresponding decision of the competent authority of that country. Similarly, foreign judgments are not effective in Ukraine without a Ukrainian court order, which confirms the principle of territoriality of court decisions in criminal cases and the need to comply with international legal assistance procedures.
Secondly, the standard of proof in international arrests is much more complicated than in domestic proceedings. The main condition is compliance with all procedural requirements and ensuring the proper quality of the evidence base.
In each individual case, the grounds for challenging the seizure of funds in a foreign bank are subject to separate determination based on the analysis of the legal regulation existing between Ukraine and the country where the account is opened, as well as all the documents collected. In this case, we can distinguish the most typical situations of successful lifting of the asset freeze. In particular: the seizure was imposed without sufficient grounds, the principle of proportionality was violated, international legal assistance procedures were not followed, the seizure has already been cancelled in Ukraine, or there is no connection between the assets and the criminal proceedings.
Third, and most importantly, the interested party and its lawyers must act simultaneously in two jurisdictions. Effective defence in cases with a foreign element requires coordination of actions in both Ukraine and the foreign jurisdiction where the assets are located. This involves not only knowledge of national legislation but also an understanding of the peculiarities of other countries' legal systems, their procedural requirements, and standards of proof. A successful defence strategy is based on a comprehensive approach that includes appealing decisions at the national level, interacting with foreign colleagues and using all available mechanisms of international law to protect the client.