HSE University Anti-Corruption Portal
Council of Europe Report: Non-Conviction Based Confiscation of Unexplained Wealth

The Council of Europe has released a report on the use of non-conviction based seizure and confiscation with respect to the proceeds of unlawful conduct.

Over the past thirty years, confiscation of proceeds of unlawful conduct has been used as a tool to combat transnational crimes, including corruption-related ones, reduce criminal capital that could fuel further criminal activity, removing the incentive to commit further crime and ensure that “crime doesn’t pay”.

Traditionally, confiscation of property has been enforced upon the conclusion of criminal proceedings: recovery of proceeds of crime has been possible only after the corruption (or other) crime itself has been proved in a criminal court. Over time, provisions regarding the possibility to apply an alternative approach, i.e. non-conviction based confiscation (NCBC) in the framework of civil proceedings, have been included in international treaties such as the Vienna and Palermo Conventions and the UN Convention against Corruption.

Benefits and challenges of NCBC

If compared to conviction-based confiscation, NCBC has a number of benefits, namely:

  • Lower standard: whereas in criminal proceedings the state is required to prove its case against an individual to the criminal standard, many NCB recovery systems (such as those introduced in the United Kingdom, Ireland and Bulgaria) feature a lower civil burden. In the United Kingdom for example, under civil proceedings the applicant enforcement authority should prove, on the balance of probabilities as opposed to the criminal standard of beyond reasonable doubt, that property was obtained through unlawful conduct or intended for use in unlawful conduct, which means that the court will agree with the reasoning of the applicant enforcement authority if the illicit origin of assets is more probable than the legal one, based on available evidence;
  • Reversed burden: the reversal of the burden to prove the legal character of the property whose origin raises suspicion to its holder removes the need to delve into the intricacies of complex criminal structures, especially where illicit transactions have been concealed through the use of shell companies, sham agreements or offshore structures;
  • Absence of strict criminal procedural requirements, which allows, in particular, the use of different sources of evidence such as hearsay evidence and circumvention of procedural safeguards for a case to be considered by the court (such as public interest gateway and the like);
  • Targeting of property and not individual: this approach provides the possibility to confiscate illicit assets even in the cases where it is difficult to bring proceedings against the criminal (for instance, when he/she may have absconded or died) or where there are objective obstacles to the initiation of criminal proceedings / criminal investigation (for example, where the defendant destroys evidence or refuses to disclose necessary documents, a courier does not know the name of the person who hired him, documents critical for collecting evidence are held in an uncooperative jurisdiction, or the defendant – in the first place, high-ranking officials – enjoy jurisdictional privilege (the so called “domestic immunity” etc.).

In spite of the aforementioned benefits, the employment of NCBC is also associated with certain challenges. 

Critics of these systems state that the scale of crime and its damage to society in cases of confiscation do not justify such an infringement of civil liberties of the owner of such property. In particular, non-conviction based confiscation of property may be incompatible with article 6 of the European Convention on Human Rights and article 1 of Protocol 1 thereto in terms of the rights to peaceful enjoyment of property, a fair trial and the presumption of innocence.

Besides that, the possibility that not only criminal but also civil proceedings can be brought against an individual possessing unexplained wealth puts substantial psychological pressure on him/her. If certain civil proceedings have concluded with the ruling to confiscate unexplained wealth, its owner should also expect that criminal proceedings will be subsequently brought against him/her. Conversely, if an individual has already been held criminally liable, in such a situation he/she should expect to be held liable also under civil proceedings. This will result in legal uncertainty and constant stress for the defendant.

Yet another problem is the lowered burden of proof: in spite of the fact that it is a benefit of the NCB systems, in the event that it is not wielded with caution law enforcement authorities may intentionally opt for less “uneasy” civil proceedings instead of criminal ones thereby downgrading the seriousness of the offences in the eyes of the public and allowing the individuals whose guilt could have been proved under criminal proceedings to avoid proportionately severe sanctions.

Therefore, NCBC cannot and should not substitute criminal proceedings where the latter is feasible and justified. 

Key components of NCBC

The countries considering the possibility to introduce an NCB confiscation regime should take into account the need to incorporate in their legal framework the following features:

  • Clear definition of property which should not be limited to funds and tangible property but should also include, for example, pecuniary advantages, rights, interests, moveable and immoveable property wherever situated and acquired also before the NCB system entered into force;
  • Limitation period for commencing NCB proceedings (for instance, in some jurisdictions, the time limit commences from when the property was believed to have been acquired);
  • Clarity over when property can be confiscated under an NCB confiscation regime (for example, in many countries the key trigger is a disparity between a person’s assets and lawful income; in this case a clear legislative definition of “lawful income” will be important to ensure that there is no ambiguity over how it is calculated);
  • Clear criteria for separating legitimate and illegitimate property;
  • Identification of applicants that may apply for an NCB confiscation order (the category may include tax authorities and financial enforcement authorities alongside conventional criminal enforcement authorities);
  • Application of civil standard;
  • Judicial oversight at each stage of the proceeding, from restraint of assets to final confiscation;
  • Provisions for the freezing of assets, which at a minimum, set out: who may apply for restraint of property; the property able to be restrained; the evidence required in support of a restraint application; who will be responsible for maintaining the restraint property; the period of restraint and when it will be extended or continued; the process for applying to vary or lift a restraint order by any person affected by the order;
  • Provisions for “carving out” reasonable living expenses, business expenses and legal costs of a person whose property is subject to confiscation where the person can demonstrate that they are in need;
  • Inclusion of a “reverse burden” compelling the respondent rather than the applicant authority to deliver up evidence of legitimate provenance of property;
  • Participation of persons affected in proceedings;
  • Protection of bona fide holders of illicit funds;
  • Robust investigation tools, including:

a.    Disclosure orders which compel any person to provide information relevant to an NCB confiscation investigation;

b.   Production orders which require entities such as banks and law firms and individuals to produce documents in their possession considered relevant to an NCB confiscation investigation;

c.    Customer information orders which require financial institutions to provide information about a customer suspected of criminal conduct (whether they hold an account, account numbers etc.);

d.   Account monitoring orders which enable enforcement authorities to monitor bank account activity;

e.    Unexplained wealth orders which can operate as a “precursor” to NCB confiscation proceedings – where a disparity between income and property is suspected an unexplained wealth order compels an individual to provide information with this information being able to be used in NCB confiscation proceedings at a later point;

  • Enhanced international cooperation in the application of NCB systems: application of mutual legal assistance (MLA) agreements currently used primarily under criminal proceedings also to civil ones. Enhanced cooperation in this area will facilitate taking of evidence, drafting of judicial documents, executing of searches and seizures, as well as provision of documents (government, bank, corporate records) necessary to initiate proceedings etc.;
  • Provisions on enforcement of foreign freezing and confiscation orders;
  • Provisions setting out the process for compensation by the applicant authority as well as to persons whose property is frozen but is not ultimately confiscated.

International landscape of NCB confiscation regimes

As of today, NCB systems are applied in many countries: in particular, relevant provisions are in force in Australia, Bulgaria, Canada, Georgia, Italy, New Zealand, Peru, the Philippines, the United Kingdom, the United States and in other countries (in 2020 for instance, relevant laws were adopted by Armenia and Mexico).

At the same time, the grounds and criteria for confiscation can differ from country to country. In Italy and Nigeria for instance, for a seizure and confiscation application of competent authorities to be granted it should be proved that relevant property has been obtained as a result of a criminal activity; in the Philippines, a confiscation application can be lodged to the court if there are reasonable groundsto believe that unexplained property is related to unlawful activity, whereas in Australia evidence that the unexplained property is the proceeds of crime is not required for an NCBC order to be granted. Peru’s legislation provides for courts to issue recovery orders in circumstances where the asset holder cannot be convicted of a crime by reason of, for example, death or absconding. In the United Kingdom, property of all kinds may be recovered following High Court proceedings with civil recovery proceedings being appropriate where the only known criminality is overseas, the suspect is no longer in the jurisdiction, there is insufficient evidence for criminal prosecution or a criminal prosecution has not resulted in a conviction. Moreover, in the United Kingdom, unlike in other countries, proceedings are brought against the property (in rem) and not the individual. 

Asset recovery
International cooperation

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