The confiscation and recovery of criminal property: a European Union state of the art
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DOI: 10.1007/s12027-016-0436-1
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- Fernandez-Bertier, M. ERA Forum (2016). doi:10.1007/s12027-016-0436-1
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Abstract
Since the late twentieth century, new criminal policies have emerged which have substantially restructured the global effort to fight crime. These anti-crime strategies eschew traditional approaches to fighting illicit behaviours in favour of a new paradigmatic shift towards the asset recovery strategy. The newly established mechanisms aim at tackling the criminals where it hurts the most, i.e. their property, with a view to ensuring that crime does not pay. This contribution succinctly analyses the birth and evolution of modern confiscation mechanisms, the prevailing models for efficient recovery of criminal property, and the European Union state of the art on the matter.
Keywords
Asset recoveryExtended confiscationNon-conviction based confiscation, civil forfeitureUnexplained wealthMutual recognitionEuropean Union1 Introduction
For the past decades, the legal literature has highlighted the correlation between unlawful conduct and money. The importance of the financial element of crime has been increasingly acknowledged. As a result, criminal policies focusing on the deprivation of ill-gotten gains have surfaced throughout the world1 and have been constantly evolving.2 The trend has been to progressively focus on the (illicit) assets rather than on the person herself as a way to tackle the inefficiency of traditional responses of the criminal justice to acquisitive crime.3 This objective has mainly been attained through a twin-track strategy based on the ‘follow the money’ approach: on the one hand through the creation of new criminal offences, i.e. the criminalisation of money laundering and terrorism financing—and even the criminalisation of unexplained wealth; on the other hand through the creation or expansion of asset recovery mechanisms, i.e. the freezing/seizure and confiscation of dirty assets. Both tracks are complementary to each other with a view to controlling illicit flows and their correlative criminal behaviours; they are two faces of the same coin. As a matter of fact, confiscation laws (of the proceeds of crime) and anti-money laundering regulations emerged contemporaneously and have since evolved hand-in-hand.4 Although the criminalisation of illicit flows shall not be disregarded for effective anti-crime policies, this article focuses on the second track of the paper-trail approach, i.e. the ‘asset recovery’ strategy.
The asset recovery strategy is constituted of distinct yet correlated phases:5 the financial investigation, detection and tracing of illicit assets; the provisional freezing or seizure of (presumed) criminal property and their management; the permanent confiscation of said assets; and the recovery and re-use of the confiscated property. Although each of these phases deserve an equal attention with a view to ensuring the effectiveness of the overall anti-crime strategy,6 this contribution essentially elaborates on the ‘confiscation’ (or ‘forfeiture’ when applicable7) of assets, i.e. the permanent deprivation of criminally-related property which entails the transfer of their ownership to the state.
The confiscation of criminal property mainly contemplates two forms of property: instrumentalities and proceeds of crime.8 In short, the ‘instrumentalities’ of crime are the property used or intended to be used in any manner for the commission of a criminal offence.9 ‘Proceeds’ mean any economic advantage derived directly or indirectly from an offence.10 The term proceeds does not only consist of net profits of a crime; in most instances it may be understood as gross proceeds. A third type of confiscable property seldom cited is ‘contraband’, i.e. unlawful goods per se that cannot be possessed or produced and must be taken out of the economy. From a historical perspective, the focus was originally placed on depriving instrumentalities of crime and contraband.11 It is only during the past half century that legislators of the Western world (under the influence of the US12) started targeting proceeds of crime with the adoption of new confiscation laws. As of today, depriving wrongdoers from their ill-gotten gains is a major crime-control strategy worldwide. Yet, the focus on the instrumentalities of crime has recently got back at the forefront of the follow-the-money approach with a view to preventing money to be used for criminal purposes, especially within the field of terrorism financing (Sect. 2).
The rhetoric of modern confiscation rests on three premises: criminals are motivated by profits and we should hit them where it hurts; significant proceeds may derive from crime and are therefore available for recovery; and traditional forms of law enforcement are not effective—especially within the scope of acquisitive crime.13 Several functions of confiscation can be highlighted, which are often overlapping. Firstly, there is a retributive purpose, for most legal systems have (at least) established confiscation as a form of criminal penalty. The deprivation order may be perceived as a (potential) substantial economic sanction against the defendant. It has been long argued that the confiscation of real estate, luxury goods and money has more impact on offenders (or at least on a category of them) than jail time.14 Another fundamental role of confiscation today is to reduce or control crime through deterrence.15 Specific deterrence (or ‘prevention’) aims at dissuading the subject of the sanction from committing further wrongdoings: on the one hand, it prevents the targeted property to be re-used within the scope of future criminal activities; on the other hand, it may discourage the person subject to the confiscation order from engaging in further unlawful conducts by imposing an additional sanction to the crime.16 General deterrence aims at dissuading the society in its entirety from engaging into unlawful conducts. The general deterrent function of confiscation presupposes that if crime does not pay, if wrongdoers are not allowed to retain their ill-gotten assets, they will have less incentive—hence will be less likely—to pursue unlawful activities.17 The purpose of confiscation is also said to be remedial in that it aims at restoring the statu quo ante through the disgorgement of illicit property.18 Lastly, as regards to restitution: confiscated funds and assets may be used to compensate the victims, to restore their rights by making them whole again—absent of which, confiscation may contribute to the financing of government budget especially in times of crisis.19
2 The political impetus towards the confiscation of criminal property
The confiscation of criminal property has virtually always existed. Yet, the outburst of (supra-) national legislative instruments addressing the recovery of dirty assets can be traced back to the late 20th century.20
In the early 70s, legislations targeting criminal property (with an emphasis on the proceeds of crime) started to develop in the US as new means to fight drug trafficking and organised crime efficiently, namely President Nixon’s ‘war on drugs’ and ‘war on organised crime’.21 In 1970, hence, Congress decided to use confiscation (or ‘forfeiture’ as referred to in the US) as a way to tackle the inefficiency of traditional forms of punishment against said unlawful behaviours: back at the time, convicted individuals could enjoy their ill-gotten fruits once they had gotten out of jail. Furthermore, in criminal organisations (drug trade included) new people stepped forward immediately to replace convicted offenders with few or no impact on the enterprise itself. Confiscation thus aimed at attacking directly the foundations of the organisation, the criminal enterprise’s ‘source of economic power itself’, i.e. the lifeblood of crime.22 The underlying idea of targeting illicit proceeds, which has since been repeated in every (supra-) national hemicycle, was that ‘crime should not pay’.
A decade after the American impetus, the early 1980s saw a growing momentum that led to the development of legislations devoted to the deprivation of proceeds of crime in a limited number of European jurisdictions, such as Italy and the UK. Both were pioneers in adopting ‘extended’ and/or ‘non-conviction based’23 forms of confiscation (Sect. 3) and have since been at the forefront of the asset recovery strategy: Italy was facing similar societal and economic scourges as in the US, namely a deep-rooted presence of organised crime and drug trafficking;24 for its part, the UK’s political drive towards targeting criminal assets was developed in response to the increase in drug trafficking in and outside Britain.25 The follow the money approach or ‘age of the proceeds’26 then rapidly evolved to spread both on a global and European scale in the late 1980s, notably through the adoption of the United Nations Conventions,27 the Financial Task Force Recommendations28 and the Council of Europe instruments.29 It took until the late 1990s for the European Union to address the necessity of harmonising freezing and confiscation among Member States (Sect. 4). Once the first confiscation laws targeting proceeds were adopted and started to be used by national authorities, supranational and domestic legislators of the Western (and European) community realised the potential benefits of chasing criminal money. Hence, most jurisdictions decided in the 1990s to expand confiscation to the (instrumentalities and above all) proceeds of any and every form of acquisitive crime (in lieu of limiting it to drug and organised crime).
In the early 2000s, following the launch by President Bush of the ‘war on terror’, the asset recovery movement was further expanded through specifically targeting funds channelled to finance terrorism. The Al-Qaeda terrorist attacks on the United States soil marked a paradigm shift in the search for criminal money: targeting terrorist property has led to the redefinition of ‘dirty assets’ for terrorism money became a ‘means to an end rather than an end in itself’.30 Whereas modern confiscation strategies used to focus on the proceeds of crime—where the monies derive from—the new policies have re-insisted on the need to target the instrumentalities of crime—where the assets are directed to.31 More than ever, the concept of recoverable property must be understood as any and every property traceable in any way to crime.
The ‘war’ on crime metaphors used by Presidents Nixon, Reagan and Bush have allowed for a major reorientation (not to say transformation) of governance through the culture of control,32 among others through profit-oriented anti-crime strategies. One may thus wonder whether the next decade will lead to the declaration of a ‘war on white-collar crime’33 and the development of even more far-reaching asset recovery policies:34 following the outburst of the global economic crisis in 2008, investigating and prosecuting economic and financial crime (and institutions) has substantially increased, not only in the US but within the international community. One might argue that the year 2008 represents a new turning point of chasing criminal money strategies, with the launch by national law enforcement authorities of a new ‘witch hunt’ against the business sector—and their correlative crimes. There is certain coherence to the fact that confiscation has been used more extensively and aggressively than ever lately against such forms of unlawful behaviours: white-collar crime is the most illustrative form of acquisitive crime and involves the highest amounts of illicit money.35
3 The search for more efficient confiscation mechanisms
Initially, the deprivation of criminal property was implemented globally through the traditional proceedings of ‘criminal confiscation’, which allow for the deprivation of the illicit economic advantages of a defendant after his criminal conviction for a specific (set of) crime(s). The ‘conviction-based’ form of confiscation—which can be described as an actio in personam (against the person) as opposed to an actio in rem (against the thing)—is ordered by a court of law, as part of the offender’s sentence, against the property that is proven to be connected to the offences he was found guilty for. Yet, the classic form of confiscation rapidly proved to be insufficient, not to say inefficient. On the one hand, there is a lack of prosecutorial culture towards the confiscation of tainted assets in many occidental countries; and a subsequent lack of enforcement of such orders (where they exist). More importantly, the true limits of the ‘standard’ conviction-based confiscation come from various factors, among which are the difficulty to first secure the criminal conviction of an identified person,36 then the necessity to prove the nexus between the property subject to confiscation and the offence he was convicted for. Further, the evident budgetary and time constraints that relate to investigating and prosecuting criminal cases—i.e. the lack of human, technical, and material resources within law enforcement agencies—have considerably hindered the success of state authorities in depriving criminals from their unlawful assets.
Over the time, and facing the aforementioned constraints, legislators from the Western community have developed new models of recovery of tainted assets—supposedly more effective/efficient. Two specific trends can be highlighted: a growing implementation of ‘extended’ (presumption-based) forms of conviction-based confiscation (Sect. 3.1), and an increased interest in ‘non-conviction based’ mechanisms (Sect. 3.2). The trend has been to the duplication of—or gradual shift from/to—punitive (i.e. conviction-based) and preventive or remedial (i.e. non-conviction based) approaches to confiscation. Yet, even more far-reaching models of asset recovery devices seem to have already emerged for the sake of efficiency (Sect. 3.3). Although these different models all imply a decrease in procedural guarantees afforded to the individual and raise obvious and fundamental questions of legitimacy, this contribution does not elaborate such a complex topic due to brevity constraints.37
3.1 Extended (conviction-based) confiscation
Extended confiscation has been one of the fastest developing new forms of deprivation with a view to alleviating the recovery of illicit property—especially within the European soil where the legal mechanism appears to have first emerged.38 Extended—or presumption-based—confiscation is generally understood as the deprivation of the ‘unjustified assets’39 of an offender. The term ‘extended’ relates to property other than directly connected to the crime the person was convicted for, property that goes beyond the direct proceeds of crime.40 Extended confiscation ordinarily follows the prior criminal conviction of a defendant for specific crimes, i.e. being a conviction-based form of confiscation. It generally relies on (rebuttable) presumptions of illegality of the defendant’s property, which may derive from a disproportion between his lawful income and his actual possessions and economic resources. It is then the task of the property owner to rebut the said statutory assertions to avoid confiscation. The mechanism thus entails a reversal, or at least a sharing, of the burden of proof between the prosecution and the individual.
As far as prosecutors and courts are concerned, extended confiscation is a quite practical feature when it comes to prosecuting serious and organised crime offences—which rarely consist in a ‘one shot’ activity. Estimating the amount and finding tainted proceeds is generally a very complex task, especially given the important skills and resources constraints state authorities face in such cases. Hence, being able to rely on the assumption that the property a convicted person possesses derives from related offences alleviates the associated investigatory issues. As often pointed out by the supporters of extended confiscation, it is easier for a convicted offender to prove the licit origin of his assets than for the prosecution to prove their unlawful character. Conversely, it is also easier for the prosecution to successfully claim confiscation through ‘watering down some of the traditional criminal procedural safeguards’.41 Extended confiscation does facilitate the task of law enforcement authorities in proving the illicit character of the assets through less rigorous judicial procedures than the standard conviction-based confiscation approach. Although it is ordered within the scope of criminal proceedings, extended confiscation is not considered a punishment but an additional sanction ordered as part of the sentencing procedure.42
In the last couple of decades, the adoption of asset recovery tools based on presumptions has been consistently growing and is predicted to become a common feature of confiscation laws—especially within the European Union (Sect. 4.1).
3.2 Non-conviction based confiscation
Non-conviction based confiscation (NCBC) allows for the deprivation of tainted assets irrespective of any prior conviction (i.e. of the possessor or property owner). Hence, the targeting of the assets may operate at a very early stage of the investigations. This form of confiscation of criminal property was historically based on the fiction that the property itself was ‘guilty’ of an unlawful activity (thus was brought as an actioin rem, i.e. ‘against the thing’). However, the idea that property could be considered guilty of an offence ‘sounds strange to the modern ear’.43 The legal fiction is outdated.44 It has given way to more modern concepts of in rem confiscation—which emerged in the US—that merely allow the Government to quiet title to criminally-related property.45 The main justifications for non-conviction based orders today rely on the preventive and remedial functions of confiscation: to prevent assets (instrumentalities) from being used for the commission of further unlawful activities, and/or to restore the status quo ante on basis of the unjust enrichment theory and the idea that the offender has no right whatsoever to ill-gotten gains (proceeds).
One of the main attractions for such a device, from a law enforcement standpoint, is the absence of requirement of any prior conviction before initiating confiscation proceedings: the asset is dissociated from its owner and confiscation is not conditional upon prior liability of any individual. Confiscation can therefore be ordered within the course of less rigorous judicial procedures than criminal proceedings since the only burden of the prosecuting authority is to demonstrate that the property is related to an unlawful activity. Furthermore, the onus of proof that must be met by law enforcement authorities rests on a lower standard than usually sought in criminal affairs for the proceedings are conducted outside of the criminal justice system.46 They thus rest on a medium (civil) standard of proof—i.e. the traditional balance of probabilities.47 NCBC is hence very useful either where prosecutors have not identified the owner of the tainted assets, or where they cannot build a criminal case solid enough to obtain his conviction beyond reasonable doubt.
Since it has proven very lucrative (especially in the US), non-conviction based confiscation is getting increasingly popular globally. As of today, this approach to asset recovery is mainly present in common law jurisdictions.48 Although it has emerged in a limited number of continental law jurisdictions,49 most EU countries have not established the possibility of confiscating criminal property regardless of any conviction.50 NCBC is nonetheless predicted to spread in further jurisdictions in the future given the avowed limits of criminal (hence conviction-based) confiscation. Yet this evolution might not be an easy path: given the peculiarities of the legal traditions and systems involved, different approaches to non-conviction based confiscation have emerged. At least four of them have been identified within the sole European community: the common law (i.e. Irish and UK), the Italian, the German-Scandinavian, and even the EU approach (Sect. 4.2).51
3.3 Towards unexplained wealth orders and offences?
Extended confiscation and non-conviction based confiscation have undoubtedly been at the forefront of the development of new ‘efficient’ asset recovery policies. Yet even more far-reaching models of deprivation of criminal property have emerged, which may once again change the landscape of asset recovery (if they were to expand on a global—and EU—basis): ‘unexplained wealth orders’ and ‘illicit enrichment offences’.
Unexplained wealth orders (UWOs) have been implemented in a very limited number of jurisdictions52 but are increasingly debated.53 Although extended confiscation and non-conviction based confiscation may (precisely) be ordered when the property owner (or possessor) fails to explain the source of a portion of his wealth—albeit when he fails to prove the lawful origin of his property, this term of art describes a specific asset recovery tool. Firstly, UWOs follow a non-conviction based model. Additionally, the regime induces a shift of burden of proof so that it is up to the owner to prove the legitimate origin of his wealth; state authorities do not have to prove the nexus between the property and a crime.54 In other words, there is a presumption that said property has been unlawfully acquired.55 The approach could be somewhat seen as radical: unexplained wealth orders appear to combine the benefits of both NCBC and extended confiscation (supra); they are a non-conviction and presumption-based form of deprivation of assets. However, they are brought as an actio in personam in lieu of an actio in rem.56 In short, once law enforcement authorities have suspicions as to the legitimacy of transactions conducted by a person57 or of assets he possesses, recovery proceedings may be initiated. It is then to the latter to justify the source of his wealth. Absent such a justification, confiscation is ordered if the court is satisfied (supposedly on the balance of probabilities58) that the person’s wealth is greater than his legitimately acquired wealth.59 UWOs are therefore very useful where law enforcement authorities have moderate60 or low evidence as to the existence of any unlawful activity—i.e. where the requirements for traditional NCBC (and incidentally criminal confiscation) would not be met. In practice, it has been observed that the radical features of the regime have been tempered by the actors of the criminal chain (police, prosecutors and courts)—yet they remain a powerful and controversial instrument of the asset recovery arsenal.61
Various legal systems have also criminalised the possession of unexplained wealth (otherwise denominated as illicit enrichment offences).62 Under this regime, the inability of the defendant to explain and prove the legitimate source of his wealth is not only evidence of the commission of an offence, it is a (the) crime in itself. Thus the prosecution must initially demonstrate that the person’s ‘significant’63 enrichment cannot be justified from a legitimate source, there is no need for the prosecution to prove either the source of wealth or any underlying offence.64 The criminal proceedings rest on the presumption that the property was acquired unlawfully, which can be rebutted by the defendant. A reversal of the burden of the proof therefore operates. Failure to rebut such a presumption results in the conviction of the accused (and the imposition of a penalty which—besides confiscation—may consist in deprivation of liberty). For example, the prosecution for ‘illicit enrichment’ may rest on a disproportion between the defendant’s lawful income and his property, expenditures or pecuniary resources.65 Given its egregious consequences on individuals, the criminalisation of unexplained wealth66 remains much debated and subject to controversy.67
It is interesting to note that both regimes are becoming a topic of interest in the UK: the Government has very recently expressed its intention to explore the possibility of introducing unexplained wealth orders as well as an illicit enrichment offence in the Kingdom’s legislation.68 Yet, it is argued that both approaches encroach on fundamental rights and contributes to a further decline in procedural guarantees afforded to the individual within the scope of the asset recovery strategy.
4 The EU legal framework on confiscation
Confiscation is a strategic priority in the European Union’s fight against (organised) crime.69 Yet, when compared to other supranational institutions (such as the UN, the FATF and the Council of Europe), it took the EU some time to adopt legislative instruments addressing the asset recovery approach. Better late than never, after its 1998 Joint Action on money laundering, freezing and confiscation,70 the Union passed in the early 2000s a succession of instruments that aimed at harmonising legislations and enhancing collaboration between Member States on the matter:71 the 2001 Framework Decision on money laundering, freezing and confiscation;72 the 2003 Framework Decision on freezing property or evidence;73 the 2005 Framework Decision on confiscation;74 the 2006 Framework Decision on mutual recognition of confiscation orders;75 and the 2007 Decision on cooperation between Asset Recovery Offices.76 The focus of the EU legal framework was directed at harmonising confiscation mechanisms; enhancing mutual recognition of freezing and confiscation decisions; and promoting horizontal cooperation between Member States as to the asset recovery process.77
Yet its most contemporaneous instrument to date consists in the 2014/42/EU Directive on the freezing and confiscation of instrumentalities and proceeds of crime in the European Union.78 The Directive does not reshape the landscape of the EU legal framework for it only replaces the 1998 Joint Action and limited dispositions of Framework Decisions 2001/500/JHA and 2005/212/JHA.79 Hence, all the instruments that were adopted in the first decade of the 2000s remain in vigour.
The Directive is far from revolutionising the EU landscape of confiscation. In brief, the instrument mainly focuses on the substantive concept(s) of confiscation.80 The priority of the Directive is to harmonise and establish minimum rules for extended confiscation (Sect. 4.1) and third party confiscation.81 Though it initially hoped to introduce a harmonised form of non-conviction based confiscation, the final text is far from reaching such a compromise (Sect. 4.2).
Before getting into the core of the subject, it must be noted that the Directive has to be transposed by October 2016 in all Member States (Ireland is taking part in the Directive, contrary to Denmark and the UK). It is therefore difficult at this stage to provide any meaningful results regarding the effectiveness of the new legal framework or what Member States have undertaken so far to comply with the Directive.82
4.1 Extended confiscation
First and foremost, the 2014 Directive provides for a unique model of extended (conviction-based) confiscation. The device is not a novelty for it was first tentatively established in Framework Decision 2005/212/JHA. Yet, the text provided for three different sets of rules of extended confiscation and left Member States to decide which option(s)83 they were to implement internally. Unsurprisingly, this attempt was unsuccessful due to being unclear and unevenly transposed in domestic legal orders.84 The divergence of concepts of extended confiscation in Member States may hence have obstructed cross-border cooperation.85
The Directive therefore pointed out the necessity to ‘further harmonise the provisions on extended confiscation by setting a single minimum standard’.86 As a result, Art. 5(1) of the Directive prescribes that:
‘Member States shall adopt the necessary measures to enable the confiscation, either in whole or in part, of property belonging to a person convicted of a criminal offence[87] which is liable to give rise, directly or indirectly, to economic benefit, where a court, on the basis of the circumstances of the case, including the specific facts and available evidence, such as that the value of the property is disproportionate to the lawful income of the convicted person, is satisfied that the property in question is derived from criminal conduct’ (emphasis added).
The provision targets ‘the confiscation not only of property associated with a specific crime, but also of additional property which the court determines constitutes the proceeds of other crimes’.88 ‘This does not mean that it must be established that the property in question is derived from criminal conduct. Member States may provide that it could, for example, be sufficient for the court to consider on the balance of probabilities, or to reasonably presume that it is substantially more probable, that the property in question has been obtained from criminal conduct than from other activities. […] Member States could also determine a requirement for a certain period of time during which the property could be deemed to have originated from criminal conduct’ (emphasis added).89
The priority of Directive 2014/42/UE is clear: to provide a unique and harmonised concept of conviction-based extended confiscation. Many Member States had already incorporated such a model in their legal order before the Directive. It nonetheless remains to be seen what will be the overall effectiveness of the mechanism. After all, extended confiscation (in its EU acceptation) does require the prior conviction of an individual, i.e. the proof of his guilt for a specific set of crimes beyond a reasonable doubt. Such a prerequisite has recurrently been pointed out as a hurdle to the efficacy of asset recovery. Thus, steps are already being taken at the EU level to shift towards non-conviction based models of confiscation.
4.2 Non-conviction based confiscation
Implementing a non-conviction based form of confiscation was much discussed during the legislative process for the adoption of the 2014/42/EU Directive.90 Yet the result is quite disappointing in the eyes of the supporters of NCBC.91 This may be due to the fact that the relevant provision of the Directive was adopted following ‘an intransparent debate that took place over a relatively short period of time and led to a compromise’.92 Art. 4(2) of the Directive establishes that:
‘Where confiscation on the basis of [a final conviction] is not possible, at least where such impossibility is the result of illness or absconding of the suspected or accused person, Member States shall take the necessary measures to enable the confiscation of instrumentalities and proceeds in cases where criminal proceedings have been initiated […] and […] could have led to a criminal conviction if the suspected or accused person had been able to stand trial’ (emphasis added).
It may outright be stated that such a provision does not resemble any in way the most traditional forms93 of non-conviction based confiscation for several reasons.94 Firstly, whereas NCBC orders generally follow proceedings in rem,95 the EU mechanism is manifestly in personam for it requires criminal proceedings to have been first initiated against the accused.96 Further, it is a ‘hybrid’ device which intertwines criminal and non-criminal proceedings: it is only when the conviction route is impossible that the court may open the way to a non-conviction based order,97 what has been qualified as a ‘semi-non-conviction based confiscation’.98 Yet, the main feature (and advantage) of NCBC is precisely to be able to circumvent criminal proceedings. It may also be wondered whether the wording of the text does not give rise to a presumption of guilt since it links confiscation to the fact that the initial proceedings could have led to a criminal conviction.99 It has been even argued that it is not possible to determine whether the confiscation proceedings established in Art. 4(2) of the Directive must be classified as criminal or non-criminal in nature according to the Engel test.100
Recital 15 of the Directive only adds to the confusion (and criticism101) by stating that ‘in such cases of illness and absconding, the existence of proceedings in absentia in Member States would be sufficient to comply with this obligation’. (Criminal) Proceedings in absentia are traditionally understood as the possibility for the judge to convict a defendant who has not appeared in court—hence not defended himself. In such a situation, the confiscation order that follows the finding of guilt is a conviction-based one. Needless to say that legal systems that provide for criminal proceedings in absentia will have very little (not to say nothing) to do to comply with Art. 4(2) of the Directive. As for the others, it remains to be seen how the provision will be implemented in their legal order: Art. 4(2) ‘simply requires the creation of an absentia procedure that does not lead to a conviction but (only) to a confiscation decision’.102 Hence, ‘if a Member State does not want to enact generally applicable in absentia procedures, it is sufficient for it to create a kind of ‘limited’ in absentia procedure (allowing only for confiscation but not conviction in absentia)’.103 All-in-all, it is argued that Art. 4(2) is little helpful as far as harmonisation is concerned, it will have limited value in practice,104 and it is in no way a step forward towards finding more efficient ways of confiscating criminal property.105
As of today, the Union has been unable to implement a true EU-wide model of non-conviction based confiscation. Supporters of NCBC may have lost a battle, but they have not lost the war (Sect. 5.1).106
5 The call for revising the existing EU legal framework
As it has been mentioned before, the European Union has mainly focused its attention on harmonising confiscation mechanisms and enhancing cooperation between Member States. Though the Directive was recently adopted and has not been fully transposed yet, new initiatives have already been taken with a view to further strengthening the asset recovery strategy.
Not much can be said at this point as regards extended confiscation: the EU now possesses a harmonised model that has to be transposed by October 2016. Member States shall pay attention to the already existing best practices on the matter—especially considering the wide experience of certain legal systems (such as Italy and the UK). At the very least, the common approach introduced in the Directive will help enhance cooperation and mutual recognition of extended confiscation orders between Member States. Yet the overall efficacy (and efficiency) of the EU mechanism itself will have to assessed over the time. It is thus interesting to note that the Commission shall, by 4 October 2019, ‘submit a report to the European Parliament and the Council, assessing the impact of existing national law on confiscation and asset recovery, accompanied, if necessary, by adequate proposals’.107
On the other hand, the EU has already reaffirmed its will to elaborate a unified model of non-conviction based confiscation at the regional level—which is surely the hot topic of the moment (Sect. 5.1). It also seeks to enhance mutual recognition of freezing/confiscation orders (Sect. 5.2).
5.1 Non-conviction based confiscation
The 2014 Directive was undoubtedly a failure to ensure a common approach to non-conviction based confiscation. Yet, even before the adoption of the final text of the Directive, the EU authorities already called for undertaking further discussions on NCBC with a view to strengthening its legal framework. On 28 November 2013, a Joint Declaration was made by the Council and Parliament within the scope of the approval of the final compromise text of the Directive:
‘The European Parliament and the Council call on the Commission to analyse, at the earliest possible opportunity and taking into account the differences between the legal traditions and the systems of the Member States, the feasibility and possible benefits of introducing further common rules on the confiscation of property deriving from activities of a criminal nature, also in the absence of a conviction of a specific person or persons for these activities’ (emphasis added).108
This declaration followed on the European Parliament’s resolution of 11 June 2013 on organised crime, corruption, and money laundering (interim report)—which manifested interest towards both the common law (Irish and UK) and Italian law approaches to NCBC. In this resolution, the Parliament:
‘invites Member States, on the basis of the most advanced national legislations, to consider to implement models of civil law asset forfeiture, in those cases where, on the balance of probabilities and subject to the permission of a court, it can be established that assets result from criminal activities, or are used for criminal activities’ (which can be assimilated to the common law remedial approach of NCBC); ‘it considers that preventive models of confiscation could be foreseen following to a court decision, in compliance with constitutional national guarantees and without prejudice to the right of property and the right of defence’ (an approach similar to the Italian preventive NCBC) (emphasis added).109
Since the adoption of Directive 2014/42/UE, the EU has renewed its commitment to developing a common approach to non-conviction based confiscation. In its European Agenda on Security of 28 April 2015, the Commission stated that it would issue in 2016 a feasibility study on common rules on NCBC.110
Yet, it is foreseen that the EU will face at least three severe hurdles when it comes to finding a common approach to non-conviction based confiscation. Firstly, various Member States have highlighted the existing incompatibility of the mechanism with their legal tradition (albeit their constitutional requirements). Secondly, there is no unique model of NCBC. Although they all aim at responding to the same problem, i.e. the hardship in the prior identification and conviction of an offender, at least three different approaches of NCBC have been identified within the European Member States: the common law, the Italian, and the German-Scandinavian one111 (the two first approaches having had much influence at the EU level). The different models indeed entail different features: some are an actio in rem, others (at least to some extent) an actio in personam; they are based on different policy considerations (be it preventive, remedial, or compensatory); they involve different types of proceedings and even legal disciplines.112 Lastly, and that might even be a bigger challenge, it has been argued that the EU actually lacks the competence to legislate NCBC broadly.113 If it was to be confirmed, the only way around to strengthen the Union’s non-conviction based landscape would be to encourage Member States to legislate on their own initiative under EU guidance (soft law): a ‘remedial’ (or ‘re-establishment’) model of NCBC that seeks to disgorge ill-gotten assets and to restore the status quo ante—hence ensure that crime does not pay—should then be promoted.114
5.2 Mutual recognition of freezing and confiscation orders
In the absence of a harmonised legislation on non-conviction based confiscation (for the Directive now provides for a harmonised model of extended confiscation), national authorities will continue to face obstacles when it comes to implementing cross-border demands. Put briefly, what attitude shall the requested/executing authority adopt (in a legal system where NCBC does not exist) when the issuing state (e.g. the UK) is requesting the enforcement of a non-conviction based confiscation order? Some Member States still deny such a request based on the existing incompatibility of the measure with their legal traditions; others do accept and comply with the demand. At the moment, everything is about communication between respective authorities to facilitate the cooperation among Member States.
Yet, the European Union has regularly manifested its intention to submit a new legislative proposal on the mutual recognition of freezing and confiscation orders in the last years. For example, in its resolution of 23 October 2013 on organised crime, corruption, and money laundering (final report), the European Parliament:
‘calls on the Commission, as a matter of priority, to produce the concrete legislative proposal required in order to give effect to mutual recognition of seizure and confiscation orders, including those issued for civil purposes’; ‘calls on the Commission to bring forward a legislative proposal aimed at effectively ensuring the mutual recognition of seizure and confiscation orders linked to the asset-protection measures adopted by the Italian judicial authorities and to the civil law measures adopted in various EU countries; calls on the Member States to immediately adopt the operational measures needed to render those provisions effective’ (arguably respectively the Italian and common law NCBC measures) (emphasis added).115
Through the Joint Declaration of the Council and Parliament of 28 November 2013 made within the scope of the approval of the final compromise text of the 2014 Directive, the authorities recall that:
‘An effective system of freezing and confiscation in the EU is inherently linked to well-functioning mutual recognition of freezing and confiscation orders. Considering the need of putting in place a comprehensive system for freezing and confiscation of proceeds and instrumentalities of crime in the EU, the European Parliament and the Council call on the Commission to present a legislative proposal on mutual recognition of freezing and confiscation orders at the earliest possible opportunity, in relation to which the concept of freezing should be further examined’ (emphasis added).116
The European Commission confirmed in its 2015 European Agenda on Security that ‘mutual recognition of freezing and confiscation orders should be improved.’117 The Commission’s Action Plan for strengthening the fight against terrorist financing of February 2016 (which was taken in response to the Paris terror attacks of 13 November 2013) then specified that it would take forward the strengthening of mutual recognition by the 4th quarter of 2016 at the latest.118 Commissioner Jourová herself stated in April 2016 that the institution has been working on the matter. She declared: ‘[i]n a few months, we will present a new proposal that allows the full and swift recognition of a decision taken by a judge in one country into another one.’119
6 Conclusion
Overall, what has been observed during the past five decades is a fast evolution of crime control policies directed to the deprivation of criminally-related property. Facing the poor efficacy of traditional forms of (criminal) confiscation, (supra-) national legislators have imagined new efficient ways to recover assets which have correlatively induced a (sometimes worrisome) decrease in procedural guarantees. The asset recovery strategy has successively (but successfully?) moved away from traditional conviction-based confiscation towards presumption-based (extended) forms of conviction-based confiscation; non-conviction based models of deprivation; and more recently towards both non-conviction based and presumption-based forms of recovery (unexplained wealth orders). In parallel, various legal systems have criminalised the possession of unexplained wealth (illicit enrichment offences). Far from wanting to dig into ethical and legitimacy considerations, it must be highlighted that a negative correlation exists between the procedural efficiency of deprivation mechanisms and the fundamental protections they guarantee. Thus, the past decades have witnessed a progressive decline in defence protections for the sake of efficiency when it comes to chasing criminal property. Such an observation should be taken into account to avoid overzealous asset recovery strategies and to find a needed balance between efficient and righteous response to crime.
‘Money and crime have become inextricably linked. An assault on the financial structure has become a central defining characteristic of contemporary crime control. Within this emerging assault on criminal finances, a dramatic transformation is occurring’. Gallant [18], p. vi.
Initially, drug trafficking and organized crime; today, the deprivation of criminal assets is being promoted for each and every type of offence (especially acquisitive crime).
Being later joined by a reinforced attention on terrorist money and the freezing of terrorist property.
E.g. there has been a noticeable lack of interest from the literature as to the question of the temporary deprivation of alleged criminally-related property. Only recently did political (hence legislative) authorities realise the fundamental need for ‘freezing’ or ‘seizing’ (alleged) criminally-related property at a very early stage of proceedings with a view to their subsequent permanent deprivation.
The proposed terminology emanates from both supranational instruments and common law jurisdictions. Yet civil law systems employ a different and more diverse classification than exposed, such as the object, instrumentalities, product and profits/proceeds of the offence.
See e.g. Art. 2(3) of Directive 2014/42/EU of the European Parliament and of the Council of 3 April 2014 on the freezing and confiscation of instrumentalities and proceeds of crime in the European Union, OJ L 127 of 29 April 2014, pp. 39 ff.
Set aside the confiscation of estate, a penalty that targets the entirety of the assets of a person who was convicted for certain crimes—which was particularly prevalent from ancient times until the modern era.
Bullock/Lister [9], p. 48. Yet several studies argue that little proof exist about the effectiveness of this strategy. See e.g. Harvey [19], pp. 201–202.
‘Conversely, convicting the defendant but leaving him in possession of the riches of wrongdoing gives others the impression that a life of crime is worth the risk.’ Cassella [10], p. 2.
Further (utilitarian) justifications to the power of confiscation have been brought forward: e.g. protecting the community, enhancing confidence in the criminal justice system, improving crime detection, encouraging cooperation between law enforcement authorities/agencies… King/Walker [22], p. 7; Cassella [11], p. 16; SealsBersinger [32], p. 856.
For an extensive discussion on the evolution of confiscation laws in continental and common law jurisdictions, see Fernandez-Bertier [16].
‘As long as the property of organised crime remains, new leaders will step forward to take the place of those we jail.’ US Senate [37], p. 78.
Although Ireland was first to implement a common law model of non-conviction based confiscation in Europe through its Proceeds of Crime Act 1996. The UK only did so in the Proceeds of Crime Act 2002—following the Irish impetus.
First through the Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, Vienna, 20 December 1988; then the Convention against Transnational Organized Crime, Palermo, 12 December 2000; and the Convention against Corruption, New York, 31 October 2003.
The Financial Task Force (FATF) is an inter-governmental body devoted to elaborate standards and promote the fight against money laundering, terrorist financing and other threats to the integrity of the international financial system. It adopted in 1990 Forty Recommendations to fight money laundering, which were subsequently revised in 1996, 2003 and 2012.
First through the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime, Strasbourg, 8 November 1990, CETS No. 141; then the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism, Warsaw, 16 May 2005, CETS No. 198.
‘Terrorism put a new twist on the preoccupation with criminal proceed. […] In dealing with this crime, the focus tends to shift from proceeds derived from crime to moneys destined for crime.’ Gallant [18], p. 3.
It is argued that through tackling white-collar crime, the US Congress has once again changed the landscape of forfeiture. Dery [12].
See e.g. the BNP Paribas criminal confiscation of USD 8.8 billion imposed on May 1, 2015 following the bank’s violation of economic embargos with Sudan, Iran and Cuba. It is quite symbolic as it constituted the ‘largest financial penalty ever imposed in a criminal case’. It is noteworthy that the additional criminal fine ‘only’ amounted to USD 140 million, which testifies of the potential extensive and harsh character of confiscation orders today. US Department of Justice [38]; US Department of Justice [39].
Knowing that criminal proceedings call for the highest standard of proof, i.e. beyond a reasonable doubt.
Extended confiscation ‘is achieved by removing the causation requirement between the criminal offence and the proceeds’, which originate from ‘more vague preceding criminal activity’. Boucht [8], p. 129.
The fiction was ‘about as irrational and unjust a proposition as a sober mind can concoct’. Finkelstein [17].
‘Although in practice there is often a link between the preventive [NCBC] measures and criminal proceedings […]’. Panzavolta/Flor [27], pp. 118, 123.
Set aside the Italian anti-mafia preventive confiscation (which was adopted through Law of 13 September 1982, No. 646), non-conviction based mechanisms were recently adopted in Romania (2007), the Slovak Republic (2011), Bulgaria (2012) and Slovenia (2012).
Only Australia, Colombia and Ireland according to Transparency International, Empowering the UK to recover corrupt assets. Unexplained Wealth Orders and other new approaches to illicit enrichment and asset recovery, March 2016, p. 24, www.transparency.org.uk. To this day, the Australian UWO regime has faced constitutional challenges and has not been particularly successful. Ibid. at 24.
E.g. a report was prepared for the US Department of Justice on the matter: Booz Allen Hamilton [6]. The UK Government has also expressed its interest in UWOs: Home Office [20], p. 21, 2.33.
E.g. that the person is laundering the proceeds of corruption. Transparency International [35], p. 26.
This being the case of France. See the StAR Initiative of 2012, according to which 44 countries had at the time created an offence of illicit enrichment. Muzila/Morales/Mathias/Berger [24], p. xiii. See also Boles [5].
Although the notion has no strict statutory definition. Boles [5], pp. 855–856; Muzila/Morales/Mathias/Berger [24], pp. 18–21.
The offence is habitually part of anti-corruption regimes. See generally Muzila/Morales/Mathias/Berger [24].
Council of the European Union’s Joint Action 98/699/JHA on money laundering, the identification, tracing, freezing, seizing and confiscation of instrumentalities and the proceeds of crime, OJ L 333 of 9 December 1998, p. 1.
For an analysis of the evolution of the EU framework for confiscating the proceeds of crime, see Borgers [7].
Council Framework Decision 2001/500/JHA of 26 June 2001 on money laundering, the identification, tracing, freezing, seizing and confiscation of instrumentalities and the proceeds of crime, OJ L 182 of 5 July 2001, p. 1.
Which was undoubtedly the masterpiece instrument of the EU until the adoption of Directive 2014/42/EU on freezing and confiscation (infra). Council Framework Decision 2003/577/JHA of 22 July 2003 on the execution in the European Union of orders freezing property or evidence, OJ L 196 of 2 August 2003, p. 46.
Council Framework Decision 2005/212/JHA of 24 February 2005 on Confiscation of Crime-Related Proceeds, Instrumentalities and Property, OJ L 68 of 15 March 2005, pp. 49–51.
Council Framework Decision 2006/783/JHA of 6 October 2006 on the application of the principle of mutual recognition to confiscation orders, OJ L 328 of 24 November 2006, p. 61.
Council Decision 2007/845/JHA of 6 December 2007 concerning cooperation between Asset Recovery Offices of the Member States in the field of tracing and identification of proceeds from, or other property related to crime, OJ L 332 of 18 December 2007, p. 103.
Directive 2014/42/EU of the European Parliament and of the Council of 3 April 2014 on the freezing and confiscation of instrumentalities and proceeds of crime in the European Union, OJ L 127 of 29 April 2014, p. 39.
I.e. point (a) of Art. 1 and Arts. 3 and 4 of Framework Decision 2001/500/JHA, and the first four indents of Art. 1 and Art. 3 of Framework Decision 2005/212/JHA.
Simonato [34], p. 220. It only gives limited attention to the tracing, freezing, management, recovery and re-use of criminal assets. On the last phase of asset recovery, see Montaldo [24].
Third party confiscation (Art. 6 of the Directive) is not discussed hereinafter given the limited scope of this contribution. The Directive also gives a particular attention to procedural safeguards (Art. 8).
Contra, some Member States (such as Spain) have modified their Criminal (Procedure) Code to comply with the 2014 instrument.
I.e. one, two or all three options. Proposal for a Directive of the European parliament and of the Council on the freezing and confiscation of proceeds of crime in the European Union, Brussels, 12 December 2012, COM(2012) 85 final, p. 10.
‘Moreover, the alternative options for extended confiscation have restricted the scope for mutual recognition of confiscation orders. The authorities in one Member State will execute confiscation orders issued by another Member State only if these are based on the same alternative options applied in that Member State. As a result, the mutual recognition of orders based on extended confiscation is problematic’. Ibid.
An offence that is comprised in the list of crimes established by the Directive. See Art. 3 and 5(2) of the Directive.
Rui/Sieber [29], p. 277. Although it is both interesting and useful to consider the whole legislative process from the proposal to the final text of the Directive (especially the LIBE Committee proposal—which could be seen as NCBC in the traditional sense), this is not discussed in this contribution for brevity purposes. See also Alagna [2], pp. 455–459.
It is here primarily referred to the common law model of confiscation-based confiscation (such as it exists in the US, the UK or Ireland); alternatively to the Italian (continental) preventive confiscation.
It is ‘something entirely different to what is commonly known as non-conviction based conscation’. Rui [30], p. 354.
This is not entirely true for the Italian preventive (anti-mafia) confiscation, which is non-conviction based in nature, has historically been tied to the prior existence of suspicions against (and targeting of) an individual—similarly to an actio in personam. Yet it is argued that it is/should be evolving towards an actioin rem. See Panzavolta/Flor [27].
‘This necessary nexus between an offender and a crime makes it clear that, in substance, Art. 4 No. 2 has nothing to do with a typical NCBC decision.’ Rui/Sieber [29], p. 278.
Rui and Sieber argue that ‘the Directive’s use of illness as a reason for a judgment in absentia is misleading.’ Rui/Sieber [29], pp. 279–280.
Accordingly, see the statement of the UK Parliament European Scrutiny Committee: ‘Most Member States do not have civil non-conviction based confiscation regimes and do not face the same problem with this Article as we do. In general, Member States have sought to change Art. 5 [now 4(2)] so that they can comply with it without having to create new non-conviction based confiscation powers. Negotiations have reshaped the Article so that Member States can implement it by using in absentia prosecutions to achieve a conviction.’ House of Commons [21], p. 56.
Although Alagna laments that ‘a great opportunity has been lost, insofar as NCB measures are concerned, and, probably, many years will necessarily pass before a new comprehensive Directive will be approved and a European legislation on non-conviction based confiscation enacted.’ Alagna [2], p. 449.
Art. 13 of the Directive, which first erroneously referred to year 2018. It was corrected through a corrigendum published in OJ L 138 of 13 May 2014, p. 114.
Joint declaration of the Council and Parliament, Proposal for a Directive of the European Parliament and of the Council on the freezing and confiscation of proceeds of crime in the European Union [first reading]—Approval of the final compromise text, 28 November 2013, 16861/13 ADD 1.
European Parliament, Special Committee on Organized Crime, Corruption and Money Laundering: European Parliament resolution of 11 June 2013 on organised crime, corruption, and money laundering: recommendations on action and initiatives to be taken (interim report), (2012/2117(INI)).
Communication from the Commission to the European parliament, the Council, the European economic and social committee and the committee of the regions, The European Agenda on Security, 28 April 2015, COM(2015) 185 final, p. 17.
Rui and Sieber make the distinction between repressive criminal law, preventive police law and civil law. Ibid. at pp. 249–255.
Ibid. at pp. 283–284, 288, 290. ‘To sum up, Art. 83(1) TFEU cannot serve as a basis for the EU to enact a common law model of NCBC legislation. The same must be said about Art. 83(2) TFEU, which contains the same requirements as No. 1 on ‘criminal… sanctions.’ In addition, confiscation rules under Art. 83(2) TFEU can only be adopted once an EU policy has first been harmonized. As yet, no such policy can be identified in the context of confiscation’. Ibid at 288. For its part, Simonato observes that ‘the legal basis for the adoption of the Directive is Art. 83 TFEU, which seems unsuitable for introducing a pure system of civil asset forfeiture detached from substantive criminal law aspects’. Simonato [34], p. 221. See also Nilsson [26], p. 19.
European Parliament resolution of 23 October 2013 on organised crime, corruption and money laundering: recommendations on action and initiatives to be taken (final report) (2013/2107(INI)).
Proposal for a Directive of the European Parliament and of the Council on the freezing and confiscation of proceeds of crime in the European Union [first reading]—Approval of the final compromise text, 28 November 2013, 16861/13 ADD 1.
Communication from the commission to the European parliament and the Council on an Action Plan for strengthening the fight against terrorist financing, 2 February 2016, COM(2016) 50/2, pp. 11–12.
Speech by Commissioner Jourová at the European Criminal Law Academic Network 2016 Annual Conference, 10th Anniversary, Brussels, 25 April 2016, www.europa.eu.
