Enhancing Integrity and Effectiveness of Illegal Asset Confiscation - European Approaches
There are generally two types of confiscation models used internationally to recover the proceeds of crime: non-conviction based (NCB) asset confiscation and conviction based (criminal) confiscation. They share the same objective, namely the confiscation by the state of the proceeds and instrumentalities of crime. Criminal and NCB asset confiscation differ in the procedure used to confiscate assets. The main distinction between the two is that criminal confiscation requires a criminal trial and conviction, whereas NCB asset confiscation does not.
Confiscation of assets or property means the permanent deprivation of property by order of a court or other competent authority. The term is often used interchangeably with forfeiture.
Forfeiture takes place through a judicial or administrative procedure that transfers the ownership of specified funds or other assets to the State. The persons or entities that held an interest in the specified funds or other assets at the time of the confiscation or forfeiture lose all rights, in principle, to the confiscated or forfeited funds or other assets.
Confiscation may apply in principle to all crimes but in practice it is more frequently applied to serious cases involving organised crime and especially crimes generating huge income and liquidity, such as drug trafficking, money laundering and corruption.
In order to disrupt organised crime activities it is essential to deprive criminals of the proceeds of crime. Organised crime groups are building large-scale international networks and amass substantial profits from various criminal activities. The proceeds of crime are laundered and re-injected into the economy to be legalised. The confiscation and recovery of criminal assets is considered as a very effective way to fight organised crime, which is essentially profit-driven. Seizing back as much of these profits as possible aims at hampering activities of criminal organisations, deterring criminality and providing additional funds to invest back into law enforcement activities or other crime prevention initiatives.
The relevance of this problematic is in removing the economic gain from serious crime (including, but not limited to drug trafficking, corruption, money laundering, organised crime) in order to discourage the criminal conduct. Its importance is evidenced by the number of multilateral treaties that have been concluded and provide obligations for states to cooperate with one another on confiscation, asset sharing, legal assistance, and compensation of victims.
Confiscation and recovery of criminal assets are two stages of a legal process whereby criminal/illegal assets (proceeds or instrumentalities of crime) are recovered in favour of victims, deprived communities or the state. At the heart of this process lies the determination by a court that particular assets are criminal, or the inability of the violator to prove the legal origin of the assets and, thereby, liable to confiscation. This typically takes the form of a confiscation order. The full process entails identification, preservation and confiscation of assets, as well as enforcement of the confiscation order against particular assets and management of the assets or return of confiscated assets to the victims.
Preservation means temporarily prohibiting the transfer, conversion, disposition or movement of property, usually on the basis of an order issued by a court or a competent authority. The term is used interchangeably with freezing, seizure, restraining, attachment, preservation or blocking.
Conviction-based confiscation or forfeiture, also called criminal forfeiture in some jurisdictions, means confiscation by the state of proceeds of crime for which a conviction has been recorded. It is an “in personam” order, an action against the person and requires a criminal trial and conviction, and is often part of the sentencing process. Some jurisdictions apply a lower standard of proof for the confiscation process than for the criminal portion of the process. Nonetheless, the requirement of a criminal conviction means that the government must first establish guilt “beyond a reasonable doubt” or such that the judge is “intimately convinced”. Criminal confiscation systems can be i) object-based, which means that the prosecuting authority must prove that the assets in question are proceeds or instrumentalities of the crime. Alternatively, they can be ii) value-based regimes, which allow confiscation of the value of offender’s benefit from the crime, without proving the connection between the crime and the specific object of property.
Non-conviction-based confiscation or forfeiture means asset confiscation in the absence of the conviction of the wrongdoer. The term is used interchangeably with civil forfeiture, in rem forfeiture and objective forfeiture. NBC confiscation is an action against the asset itself. It is a separate action from any criminal proceeding and requires proof that the property is tainted (that is, the property is the proceeds or an instrumentality of crime). Generally, the criminal conduct must be established on a balance of probabilities standard of proof. This eases the burden on the government and means that it may be possible to obtain confiscation when there is insufficient evidence to support a criminal conviction. Because the action is not against an individual defendant, but against the property, the owner of the property is a third party having the right to defend the property. NCB asset confiscation can be particularly effective in divesting the politically corrupt of the fruits of their crimes and restoring those funds to the citizens of the victimized state. While NCB asset confiscation should never be a substitute for criminal prosecution, in many instances (particularly in the context of official corruption), NCB asset confiscation may be the only tool available to recover the proceeds of those crimes and to exact some measure of justice. The influence of corrupt officials and other practical realities may prevent criminal investigations entirely, or until after the official has died or absconded. It is not uncommon for a corrupt official who robs a country to also attempt to obtain immunity from prosecution. Because an NCB asset confiscation regime is not dependent on a criminal conviction, it can proceed regardless of death, flight, or any immunity the corrupt official might enjoy.
Value-based confiscation means a method of confiscation that enables a court, once it determines the benefit accruing directly or indirectly to an individual from criminal conduct, to impose a pecuniary liability (such as a fine, usually in multiples of the profit or benefit derived from the crime), which is realizable against any asset of the individual.
Benefit derived from crime or criminal benefit means any property, service, advantage or benefit that is a constituent of a person’s wealth and which was directly or indirectly acquired as a result of the person’s involvement in the commission of an offence, whether or not the property, service, advantage or benefit was lawfully acquired. In some jurisdictions, the terms profits of crime or proceeds of crime are preferred.
Along with the criminal benefit, states usually confiscate instrumentalities of crime – any property used or intended to be used, in any manner, to commit a criminal offence or criminal offences.
Trading in Influence is the promise, offering or giving to a public official or any other person, or the solicitation or acceptance by a public official or any other person, directly or indirectly, of an undue advantage in order that the public official or the person abuse his real or supposed influence with a view to obtaining from an administration or public authority an undue advantage for the original instigator of the act or for any other person, is called trading in influence. Trading in influence is also commonly divided into its active form (giving an advantage in exchange for influence) and its passive form (requesting or accepting an advantage in exchange for influence).
Embezzlement – a common corrupt practice is embezzlement of public property. It may be defined as the misappropriation or other diversion by a public official, for purposes unrelated to those for which the assets were intended, for his benefit or for the benefit of another person or entity, of any property, public or private funds or securities or any other thing of value entrusted to the public official by virtue of his position. The embezzlement of property can also occur in the private sector in the course of economic, financial or commercial activities.
The corrupt act of illicit enrichment may be defined as a significant increase in the assets of a public official that he cannot reasonably explain in relation to his lawful income. Illicit enrichment is a particularly controversial act of corruption in the European region because according to some opinions, the criminalisation of such an act goes against the principle of presumption of innocence and reverses the burden of proof.
The abuse of functions or position is referred to as the performance of, or failure to perform an act, in violation of laws, by a public official in the discharge of his functions, for the purpose of obtaining an undue advantage for himself or for another person or entity.
Prevention and eradication of corruption is a responsibility of all governmental institutions, as well as groups outside the public sector, such as civil society, non-governmental organizations, and community-based organizations. Within the Illicit Asset Confiscation Project, the tree chapters in Bulgaria, Romania and Italy will implement civil monitoring over Asset Recovery Offices in their countries in terms of transparency, integrity, accountability and access to information.
Transparency is about shedding light on rules, plans, processes and actions. It is known why, how, what, and how much. Transparency ensures that public officials, civil servants, managers, board members and businessmen act visibly and understandably, and report on their activities. And it means that the general public can hold them to account. It is the surest way of guarding against corruption, and helps increase trust in the people and institutions on which our futures depend.
Accountability means ensuring that officials in public, private and voluntary sector organizations are answerable for their actions and that there is redress when duties and commitments are not met. Accountability is an institutionalized (i.e. regular, established, accepted) relationship between different actors. One set of people/organizations are held to account (“accountees”), and another set do the holding (“accounters”).
Access to information. As a principle, public officials, civil servants, managers and directors of companies and organizations and board trustees have a duty to act visibly, predictably and understandably to promote participation and accountability. Information should be presented in plain and readily comprehensible language and formats appropriate for different stakeholders. It should retain the detail and disaggregation necessary for analysis, evaluation and participation. Information should be made available in ways appropriate to different audiences. It should be made available in sufficient time to permit analysis, evaluation and engagement by relevant stakeholders. This means that information needs to be provided while planning as well as during and after the implementation of policies and programs. Information should be managed so that it is up-to-date, accurate, and complete.
The concept of Integrity involves the behaviours and actions consistent with a set of moral or ethical principles and standards, embraced by individuals as well as institutions that create a barrier to corruption. Integrity is an attribute of the overall performance of the system of checks and balances to control corruption. More specifically, integrity enforcement is about the existence of rules that aim to prevent corruption (e.g. codes of conduct, ethical codes, and integrity pacts) in relationships between the actors involved in service delivery.