Asset Confiscation and Asset Forfeiture
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The abuse of asset confiscation and forfeiture statutes by governments, law
enforcement agencies, and political appointees and cronies throughout the world
is well-documented. In many developing countries and countries in transition,
assets confiscated from real and alleged criminals and tax evaders are sold in
fake auctions to party hacks, cronies, police officers, tax inspectors, and
relatives of prominent politicians at bargain basement prices.
That the assets of suspects in grave crimes and corruption should be frozen
or "disrupted" until they are convicted or exonerated by the courts - having
exhausted their appeals - is understandable and in accordance with the Vienna
Convention. But there is no justification for the seizure and sale of property
otherwise.
In Switzerland, financial institutions are obliged to automatically freeze
suspect transactions for a period of five days, subject to the review of an
investigative judge. In France, the Financial Intelligence Unit can freeze funds
involved in a reported suspicious transaction by administrative fiat. In both
jurisdictions, the fast track freezing of assets has proven to be a more than
adequate measure to cope with organized crime and venality.
The presumption of innocence must fully apply and due process upheld to
prevent self-enrichment and corrupt dealings with confiscated property,
including the unethical and unseemly use of the proceeds from the sale of
forfeited assets to close gaping holes in strained state and municipal budgets.
In the United States, according to The Civil Asset Forfeiture Reform Act of
2000 (HR 1658), the assets of suspects under investigation and of criminals
convicted of a variety of more than 400 minor and major offenses (from
soliciting a prostitute to gambling and from narcotics charges to corruption and
tax evasion) are often confiscated and forfeited ("in personam, or value-based
confiscation").
Technically and theoretically, assets can be impounded or forfeited and
disposed of even in hitherto minor Federal civil offenses (mistakes in
fulfilling Medicare or tax return forms)
The UK's Assets Recovery Agency (ARA) that is in charge of enforcing the
Proceeds of Crime Act 2002, had this chilling statement to make on May 24, 2007:
"We are pursuing the assets of those involved in a wide range of crime
including drug dealing, people trafficking, fraud, extortion, smuggling, control
of prostitution, counterfeiting, benefit fraud, tax evasion and environmental
crimes such as illegal dumping of waste and illegal fishing." (!) Drug dealing
and illegal fishing in the same sentence.
The British firm Bentley-Jennison, who provide Forensic Accounting Services,
add:
"In some cases the defendants will even have their assets seized at the start
of an investigation, before any charges have been considered. In many cases the
authorities will assume that all of the assets held by the defendant are
illegally obtained as he has a "criminal lifestyle". It is then down to the
defendant to prove otherwise. If the defendant is judged to have a criminal
lifestyle then it will be assumed that physical assets, such as properties and
motor vehicles, have been acquired through the use of criminal funds and it will
be necessary to present evidence to contradict this.
The defendant's bank accounts will also be scanned for evidence of spending
and any expenditure on unidentified assets (and in some cases identified assets)
is also likely to be included as alleged criminal benefit. This often leads to
the inclusion of sums from legitimate sources and double counting both of which
need to be eliminated."
Under the influence of the post-September 11 United States and the FATF
(Financial Action Task Force on Money Laundering), Canada, Australia, the United
Kingdom, Greece, South Korea, and Russia have similar asset recovery and money
laundering laws in place.
International treaties (for instance, the 1959 European Convention on Mutual
Legal Assistance in Criminal Matters, the 1990 Convention of the Council of
Europe on Laundering, Search, Seizure and Confiscation of the Proceeds from
Crime (ETS 141), and The U.N. Convention against Corruption 2003- UNCAC) and
European Union Directives (e.g., 2001/97/EC) allow the seizure and confiscation
of the assets and "unexplained wealth" of criminals and suspects globally, even
if their alleged or proven crime does not constitute an offense where they own
property or have bank accounts.
This abrogation of the principle of dual criminality sometimes leads to
serious violations of human and civil rights. Hitler could have used it to ask
the United Kingdom's Assets Recovery Agency (ARA) to confiscate the property of
refugee Jews who committed "crimes" by infringing on the infamous Nuremberg race
laws.
Only offshore tax havens, such as Andorra, Antigua, Aruba, the British Virgin
Islands, Guernsey, Monaco, the Netherlands Antilles, Samoa, St. Vincent, the US
Virgin Islands, and Vanuatu still resist the pressure to join in the efforts to
trace and seize suspects' assets and bank accounts in the absence of a
conviction or even charges.
Even worse, unlike in other criminal proceedings, the burden of proof is on
the defendant who has to demonstrate that the source of the funds used to
purchase the confiscated or forfeited assets is legal. When the defendant fails
to furnish such evidence conclusively and convincingly, or if he has left the
United States or had died, the assets are sold at an auction and the proceeds
usually revert to various law enforcement agencies, to the government's budget,
or to good social causes and programs. This is the case in many countries,
including United Kingdom, United States, Germany, France, Hong Kong, Italy,
Denmark, Belgium, Austria, Greece, Ireland, New Zealand, Singapore and
Switzerland.
According to a brief written by Jack Smith, Mark Pieth, and Guillermo Jorge
at the Basel Institute on Governance, International Centre for Asset Recovery:
"Article 54(1)(c) of the UNCAC recommends that states parties establish
non-criminal systems of confiscation, which have several advantages for recovery
actions: the standard of evidence is lower ("preponderance of the evidence"
rather than "beyond a reasonable doubt"); they are not subject to some of the
more restrictive traditional safeguards of international cooperation such as the
offense for which the defendant is accused has to be a crime in the receiving
state (dual criminality); and it opens more formal avenues for negotiation and
settlements. This is already the practice in some jurisdictions such as the US,
Ireland, the UK, Italy, Colombia, Slovenia, and South Africa, as well as some
Australian and Canadian States."
In most countries, including the United Kingdom, the United States, Austria,
Germany, Indonesia, Macedonia, and Ireland, assets can be impounded,
confiscated, frozen, forfeited, and even sold prior to and without any criminal
conviction.
In Australia, Austria, Ireland, Hong-Kong, New Zealand, Singapore, United
Kingdom, South Africa, United States and the Netherlands alleged and suspected
criminals, their family members, friends, employees, and partners can be
stripped of their assets even for crimes they have committed in other countries
and even if they have merely made use of revenues obtained from illicit
activities (this is called "in rem, or property-based confiscation"). This often
gives rise to cases of double jeopardy.
Typically, the defendant is notified of the impending forfeiture or
confiscation of his or her assets and has recourse to a hearing within the
relevant law enforcement agency and also to the courts. If he or she can prove
"substantial harm" to life and business, the property may be released to be
used, though ownership is rarely restored.
When the process of asset confiscation or asset forfeiture is initiated,
banking secrecy is automatically lifted and the government indemnifies the banks
for any damage they may suffer for disclosing confidential information about
their clients' accounts.
In many countries from South Korea to Greece, lawyer-client privilege is
largely waived. The same requirements of monitoring of clients' activities and
reporting to the authorities apply to credit and financial institutions, venture
capital firms, tax advisers, accountants, and notaries.
Elsewhere, there are some other worrying developments:
In Bulgaria, the assets of tax evaders have recently begun to be confiscated
and turned over to the National Revenue Agency and the State Receivables
Collection Agency. Property is confiscated even when the tax assessment is
disputed in the courts. The Agency cannot, however, confiscate single-dwelling
houses, bank accounts up to 250 leva of one member of the family, salary or
pension up to 250 leva a month, social care, and alimony, support money or
allowances.
Venezuela has recently reformed its Organic Tax Code to allow for:
" (P)re-judgment enforcement measures (to) include closure of premises for up
to ten days and confiscation of merchandise. These measures will be applied in
addition to the attachment or sequestration of personal property and the
prohibition against alienation or encumbrance of realty. During closure of
premises, the employer must continue to pay workers, thereby avoiding an appeal
for constitutional protection."
Finally, in many states in the United States, "community responsibility"
statutes require of owners of legal businesses to "abate crime" by openly
fighting it themselves. If they fail to tackle the criminals in their
neighbourhood, the police can seize and sell their property, including their
apartments and cars. The proceeds from such sales accrue to the local
municipality.
In New-York City, the police confiscated a restaurant because one of its
regular patrons was an alleged drug dealer. In Alabama, police seized the home
of a senior citizen because her yard was used, without her consent, for drug
dealing. In Maryland, the police confiscated a family's home and converted it
into a retreat for its officers, having mailed one of the occupants a package of
marijuana.
About the Author
Sam Vaknin ( http://samvak.tripod.com
) is the author of Malignant Self Love - Narcissism Revisited and After the Rain
- How the West Lost the East.
He served as a columnist for Central Europe Review, Global Politician,
PopMatters, eBookWeb , and Bellaonline, and as a United Press International
(UPI) Senior Business Correspondent. He was the editor of mental health and
Central East Europe categories in The Open Directory and Suite101.
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Article Published/Sorted/Amended on Scopulus 2007-10-31 21:26:52 in Economic Articles
