HSE University Anti-Corruption Portal
A Report on the Management of Confiscated Assets Released
Natalia Gorbacheva, Vladislava Ozhereleva

The Stolen Asset Recovery Initiative (StAR) has released the analytical publication entitled Managing Seized and Confiscated Assets: A Guide for Practitioners.

The document highlights that over the last 14 years the property of illicit origin of the value of almost $10 billion was confiscated in different countries also through:

  • Criminal confiscation or civil forfeiture both domestic or initiated by foreign jurisdictions;
  • Private civil actions;
  • Administrative confiscation.

However, despite the considerable value of the assets confiscated, the low efficiency of their subsequent management, according to the authors of the publication, may hamper the reparation of damage inflicted to the public interest. Consequently, the StAR experts put forward a set of recommendations on how to improve the management of seized and confiscated assets.

1.Enforcement of confiscation orders

As per the report, the enforcement of confiscation orders is often associated with a considerable discrepancy between the value of assets subject to confiscation and the value of assets that are actually confiscated, where the latter can be significantly lower than the former.

Additionally, in often cases confiscation orders are not enforced at all due to the following factors:

  • Lack of resources of the asset management office;
  • Inability to trace assets after conviction also due to the lack of initiative to trace and identify assets at the international level;
  • Interference of third parties that claim their ownership of the assets subject to confiscation (for example, spouses and children of the persons against whom the confiscation order is issued).

To address these challenges, the authors of the report suggest:

  • Collecting and analysing the data on the enforcement of asset confiscation to assess the effectiveness of asset return programmes;
  • Considering the possibility to entitle the asset management offices to use such special mechanisms as civil law enforcement or debt-collection procedures.

2. Establishing an Asset Management Function

The StAR experts are of the opinion that efficient management of seized and confiscated assets is based on the following principles:

  • Legal basis ensuring transparent and flexible asset management and protection of rights of bona fide third parties: for instance, the 2022 Proceeds of Crime (Recovery and Management) Act adopted by Nigeria establishes the procedure for confiscation of assets and their subsequent management;
  • An asset management office that disposes of sufficient resources, including human ones: such authorities operate, in particular, in Romania, France and Uzbekistan;
  • Stable and sufficient funding of the asset management office and its transparent procurement: for example, the lack of necessary funding of the Asset Forfeiture Unit in the National Prosecuting Authority of South Africa hampered its capacity to manage a coal mine that had been presumably acquired with proceeds of corruption, which resulted in a search of a contractor to manage the asset on a temporary basis; however, the search of the contractor was hindered as the fee for the services rendered could be paid only after the final confiscation order was made, whereas the Unit was unable to cover the interim expenses of the services provided;
  • Accountability of the asset management office, in particular, through the publication of relevant reports: for example, the French Agency for the Management and Recovery of Seized and Confiscated Assets (Agence de gestion et de recouvrement des avoirs saisis et confisqués) publishes annual reports on its activities on the Internet.

Besides the above-mentioned principles of an efficient management function of seized and confiscated assets, the authors of the publication recommend:

  • Establishing clear and transparent rules regulating the funding of the function and providing, in particular, for the measures to restrict any outside influence;
  • Requiring strict, independent and transparent accounting in the event that the asset management office has large autonomy and defines independently the procedure for financing its activities.

3. Policies and Procedures for managing seized and confiscated assets

As per the report, an efficient management of seized and confiscated assets requires the development and adoption of clear and comprehensive policy and procedures to ensure operational efficiency and maximize the value of the assets upon their sale, which will ensure transparency and accountability in asset management and protect the officers of the asset management office from any accusations of misconduct.

4. Pre-seizure planning

The StAR experts stress that, at the stage of planning, the competent officials are to answer a number of questions, including:

  • What is the target asset? Are there specific requirements for storage, maintenance, or disposal? Will the asset satisfy the expected forfeiture order?
  • Who owns the asset? Are there any third-party interests?
  • Where is the asset located?
  • Does the present value of the asset meet minimum-value thresholds for seizure?
  • What is the expected length of time from seizure to forfeiture?
  • What are the estimated expenses and potential liabilities associated with asset management from seizure until disposal?
  • Is interim sale permitted? Are there legitimate reasons for interim use of the asset?
  • Does the estimated future value of the asset at disposal meet minimum value thresholds?
  • What is the estimated net equity at disposal? If there is minimal or negative estimated net equity at disposal, is there a compelling public interest for seizure? If the estimated net equity at disposal meets applicable thresholds, is there a compelling public interest against seizure?
  • Does the asset management office have the capacity and resources to maintain the asset and preserve its value?
  • Are there alternatives to seizure?
  • What conditions for seizure, management, or disposal should be included in the seizure or forfeiture orders?

To implement the decisions taken based on the preliminary answers to the above-listed questions, the authors of the publication also recommend:

  • Considering the possibility to draft and adopt legal acts defining the elements of pre-seizure planning, including the analysis of expenses and benefits of confiscation and the threshold value of assets subject to confiscation;
  • Allowing, where appropriate, for alternatives to asset confiscation, for instance, increased fines, tax foreclosures etc.

5. Preservation of the value of seized assets

The authors of the paper also point out that the preservation of the value of seized assets before the final confiscation order is issued is an important element of management of seized assets. As assets can be under arrest for an indefinite period of time, their cost may fluctuate also due to the reasons beyond the control of the asset management office (for example, new obligations under the assets and/or unforeseen claims on the assets from third parties, change in the economic situation, effect of natural disasters on the assets etc.).

To preserve the value of assets, the asset management office is obliged to transport, store, safeguard, insure and maintain them, as well as to cover the associated expenses, including utility services, mortgage and rent payments etc. However, the available funding is often insufficient to meet the necessary conditions. For instance, in 2022 the United States seized a yacht the annual maintenance of which is approximately $10 million, which turned out to be burdensome for the body responsible for the due maintenance of the yacht.

To preserve the value of the assets seized, the StAR experts recommend:

  • Ensuring that the asset management office has sufficient resources, including financial and human ones, to store/maintain the assets;
  • In case the resources are insufficient, providing for alternatives for confiscation and/or the possibility to involve private sector contractors to maintain the assets;
  • Allowing for selling the assets before their confiscation in the event that they are perishable, rapidly depreciating or have an excessive storage/maintenance cost.

6. Disposal of confiscated assets

The paper stresses that after assets are confiscated, they can be disposed of through:

1. Sale

After the final confiscation order is issued, the most widespread practice of disposal of assets is their sale on auctions, through public tenders etc. that are often organised by private sector contractors.

To enhance the effectiveness of the respective type of disposal of confiscated assets, the authors of the paper suggest:

  • Defining the procedure for managing conflicts of interest in selling confiscated assets, in particular, by restricting the involvement of persons who are associated with the persons whose assets are confiscated and officers of the asset management office in a way or another;
  • Cooperating with reliable private sector contractors to dispose of different classes of confiscated assets.

2. Official use

Besides sale, confiscated assets may be transferred to public bodies for use if there is an explicit benefit of such a decision.

However, a number of jurisdictions criticise this approach as it may incentivise confiscation regardless of whether it is the most efficient from the point of view of holding the perpetrator liable. To avoid such a situation, the authors of the publication suggest:

  • Drafting and adopting legal acts establishing clear and transparent procedures for transferring confiscated assets for official use;
  • Ensuring due oversight of the use of confiscated assets by public bodies, as well as accountability and transparency of relevant activities.

3. Social reuse

The report states that this type of disposal of confiscated assets can be preferable for the property that is difficult to dispose of due to its low market value (for example, the real estate located in high-crime neighborhoods) or of limited interest to potential buyers (for instance, the assets previously belonged to a notorious criminal).

The StAR experts formulate the following recommendations on how to enhance the effectiveness of this form of disposal of confiscated assets:

  • Draft and adopt legal acts establishing clear procedures for transferring assets to social reuse, including the indices stating the benefits of this measure;
  • Ensure that the recipient civil society organisations and other partners have the resources to develop and implement the programmes on social reuse of assets.

We wrote in further detail about the ways different countries transfer confiscated assets for social reuse here.

4. Salvage, scrap or destruction

The assets subject to these measures can be:

  • Low-value assets;
  • Assets that were not properly maintained or stored;
  • Assets that have depreciated due to being held longer than anticipated until forfeiture;
  • Counterfeit, illegal or dangerous goods.

If the decision to destruct the confiscated assets is taken, the authors of the paper recommend ensuring that the existing regulations allow for this option.

7. Allocation of proceeds

The StAR experts stress that asset confiscation is aimed not only at confiscating proceeds and instrumentalities of crimes form perpetrators but also at:

  • Returning the assets to the jurisdictions of their origin;
  • Returning the assets to their prior legitimate owners;
  • Compensating the victims of the offence that can be both natural and legal persons and groups of people and entire states; in this case, the proceeds of disposal of assets can be allocated to organisations and programmes benefiting the communities that are victims of corruption rather than directly to the victims.

The need to allocate the proceeds to these purposes is underscored in international treaties, for instance, in the United Nations Convention against Corruption.

Many jurisdictions allocate the proceeds to the general fund of the treasury or another national revenues fund and subsequently distribute them in accordance with the public needs. To enhance the efficiency of the use of relevant funding, a number of countries (for instance, Colombia and the United States) establish dedicated funds where the proceeds of specific crimes such as corruption-related ones are allocated; these funds generally sponsor the activities aimed at eliminating the consequences of respective offences.

Asset recovery

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