Frozen Assets and Restrictions on Making Funds Available

By Dr. Julius Hagen, Attorney at Law

Why a payment has been blocked

If a bank holds a payment because of a possible sanctions-list match, clarifying the person's identity may help resolve it. Different requirements apply where assets are frozen directly under an EU sanctions regulation or restrained by an authority.

We review the bank's or authority's notice to establish the basis of the restriction. For a sanctions-screening match, we compare identity details with the list entry. If the assets are legally frozen, consent from the counterparty or the bank cannot by itself permit a prohibited transaction.

Permitted use of frozen assets

Freezing restricts dealings with existing funds and economic resources. The relevant sanctions regulation determines which movements and uses of funds are prohibited. Economic resources are other assets that can be used to obtain funds, goods or services.

A separate prohibition prevents funds or economic resources from being made available directly or indirectly to listed persons, or for their benefit. Deliveries, rights of use and set-off arrangements may therefore be prohibited. Each proposed use needs to be checked under the applicable EU regulation. Freezing does not automatically remove ownership or prohibit every purely personal use.

The involvement of a listed person

A company that is not itself on a sanctions list may still be affected. Relevant factors include ownership and control rights held by listed persons. Shareholdings, voting rights, board appointments and actual influence can provide evidence. A business relationship alone is insufficient for a conclusive assessment.

We use ownership records and contracts to establish who can deal with the assets and who would benefit from the proposed transaction. Where indirect provision is alleged, we trace the payment or delivery to the person said to benefit. Legal ownership and actual control each need separate assessment.

Applying for the release of assets

Sanctions regulations allow exceptions or authorisations in certain circumstances, for example for basic needs or legal fees. Availability depends on the particular sanctions regime and intended use. Payment of an old debt also needs to be checked; the contract date alone does not make the payment lawful.

The Deutsche Bundesbank is a principal authority for financial-sanctions authorisations in Germany. BAFA generally needs to be involved in matters concerning economic resources and goods. We identify the responsible authority and prepare the application with you, including the amount, recipient, purpose and legal basis. Any required authorisation generally needs to be obtained before the transaction is carried out.

Reporting frozen assets

The applicable sanctions regulation determines who must report information about frozen assets and what must be disclosed. Section 18(5a) AWG criminalises specified breaches. Section 18(13) AWG excludes criminal punishment for certain professionals bound by confidentiality. Before reporting, it is therefore necessary to establish which information is required and whether that exception applies.

If you already face an allegation under section 18 AWG, we coordinate statements to the bank and authorities with the defence. We also establish whether the measure is a sanctions freeze, provisional restraint in criminal proceedings or final confiscation. The distinction determines which legal remedies are available.