Asset freezing

Asset freezing orders are typically issued by courts in civil cases, such as freezing injunctions (known as Mareva injunctions in the UK) that prevent a defendant from dissipating assets before judgment. In criminal law, freezing orders are used to preserve assets that may be subject to confiscation, often under proceeds-of-crime legislation.¹ Government sanctions regimes, such as those administered by the US Office of Foreign Assets Control (OFAC) or the European Union, impose asset freezes on designated individuals and entities to achieve foreign policy or national security objectives.² These measures are distinct from seizure, which involves taking custody of assets, and from confiscation, which permanently divests ownership.

International sanctions often include asset freezing as a key component, targeting political leaders, oligarchs, terrorist organizations, and proliferators of weapons of mass destruction.³ The United Nations Security Council imposes asset freezes under Chapter VII of the UN Charter, and member states implement them through domestic legislation.⁴ The European Union's asset freezes are implemented through Council regulations that are directly applicable in member states, while the US uses executive orders and OFAC's Specially Designated Nationals (SDN) list.² Compliance is enforced through reporting requirements and penalties for violations, and financial institutions play a critical role in identifying and freezing assets.

Asset freezing raises legal and practical challenges, including the risk of error, the need to protect fundamental rights, and the difficulty of tracing assets across jurisdictions.⁵ Courts have developed safeguards such as the requirement for full and frank disclosure by applicants, and the provision of living expenses and legal fees from frozen assets. In the context of sanctions, individuals and entities may challenge their designation through judicial review or delisting procedures, as seen in cases before the European Court of Justice.⁶ The effectiveness of asset freezes is often limited by the ability to move assets into non-cooperative jurisdictions or through complex corporate structures.

Asset freezing has a long history, with early examples including the freezing of enemy assets during wartime, such as the US freezing of Japanese assets in 1941.⁷ A lesser-known application is in divorce proceedings, where freezing orders prevent the dissipation of marital assets pending settlement. In the digital age, asset freezes now extend to cryptocurrencies, with OFAC adding crypto addresses to the SDN list and exchanges required to freeze such assets.² Another niche area is the freezing of assets of deceased persons in probate disputes. The term 'Mareva injunction' derives from the 1975 case Mareva Compania Naviera SA v International Bulkcarriers SA, which established the modern freezing order in English law. Asset freezing is also used in international arbitration to secure awards, and in anti-money laundering efforts to freeze suspicious transactions.

Mareva injunction

A court order preventing a defendant from disposing of assets before judgment, originating from English law.

OFAC

The Office of Foreign Assets Control, a US Treasury agency that administers and enforces economic sanctions.

SDN list

The Specially Designated Nationals and Blocked Persons list maintained by OFAC, identifying individuals and entities subject to asset freezes.