Organic Law of 28 April 2023 No. 6.745 “On Termination of Ownership” (Ley Orgánica de Extinción de Dominio) contains provisions on forfeiture of property proceeding from corruption and other related offences to the State.
1. Property subject to forfeiture.
Under the Law, property that can be subject to forfeiture means everything that can be owned or economically assessed, be it movable or immovable, tangible or intangible, material or immaterial, including shares, securities and digital assets, as well as profit, fruits, products, returns or exchanges that originate from this property.
Property can be forfeited if:
- it is derived or generated directly or indirectly from illegal activities as per the Law (according to the legal act, illegal activity is any activity recognised as such by the legislation on the fight against corruption, organised crime, terrorism financing, money laundering and illegal trafficking of psychotropic substances and narcotic drugs even if the verdict on the relevant criminal case has not been delivered;
- it is fully or partly used or intended for use in a way or another in illegal activities;
- it was a material object of illegal activities;
- it proceeds from partial or full physical or legal transformation or conversion of the property listed in the previous paragraphs;
- it has legal origin but was used to conceal property of illegal origin;
- it has legal origin but was merged with property of illegal origin;
- it constitutes unjustified increase in assets if there are reasonable grounds to believe that this increase originated from illegal activities;
- it constitutes increase of assets of a natural or legal person directly or indirectly associated with the person with regard to whom an investigation is underway or a forfeiture case was initiated if there are reasonable grounds to believe that this increase originated from illegal activities;
- it constitutes increase in assets of a natural or legal person who gained advantage or profit from goods, fruits, products, profit or interest from illegal activities if there is no credible evidence of legal origin of this increase in assets;
- it constitutes revenue, rent, fruits, products or profit from property directly or indirectly related to illegal activities;
- it has legal origin, and its value is equivalent to any of the above-mentioned property provided that this property is impossible to trace, identify, arrest, freeze, seize or forfeit;
- it has legal origin, and its value is equivalent to any of the above-mentioned property if the right of a third party to this property has been proved.
The Law is retroactive: property under one of the above-listed conditions can be seized even in the event that the prerequisites for its acquisition were in place before the adoption of the legal act.
2. Institutional environment.
In order to implement the provisions of the Law:
- the Supreme Court of Justice (Tribunal Supremo de Justicia) will establish specialised first instance and appeal courts empowered to consider cases related to forfeiture; the Law envisages that these courts are to be established within 60 days with civil courts of first instance and higher civil courts fulfilling these functions in the meantime;
- the Public Ministry (Ministerio Público) will establish dedicated divisions on termination of ownership (Fiscalías Especializadas en materia de Extinción de Dominio). The employees of these divisions will be empowered to detect, trace, arrest, seize and return assets derived from illegal activities at the domestic and international levels and to ensure cooperation with foreign bodies responsible for the return of assets. Before they are established, these functions will rest with the prosecutors competent in the matters of corruption, organised crime, terrorism financing, money laundering and illegal trafficking of psychotropic substances and narcotic drugs;
- the Service for Confiscated Assets (Servicio de Bienes Recuperados – SBR) that is responsible for managing confiscated assets, in particular, for their sale.
3. Forfeiture procedure.
Under the Law, the prosecutors’ offices are entitled to initiate investigations with regard to the assets that can be related to illegal activities. These investigations can be launched by prosecutors at their own initiative or if they receive information about a violation.
Based on the outcome of investigations, prosecutors’ offices apply to specialised courts that:
- accept the applications filed by prosecutors’ offices within three days;
- notify the accused and other interested persons about the court proceedings;
- schedule a preparatory hearing within ten to 14 days from the date of receipt of application from prosecutors’ offices;
- schedule a hearing on the merits within 15 days from the preliminary hearing where the final decision on forfeiture is taken.
Before the proceedings are concluded, a ban on alienation or encumbrance, arrest, freezing, provisional seizure or forfeiture can be imposed on and other reasonable measures can be taken with respect to the property of the accused. These measures are designed to ensure the real possibility to forfeit property by a court decision.
4. Civil forfeiture.
An important novelty of the Law is that it foresees the possibility to forfeit property without a criminal conviction: the decision on termination of ownership is now taken within civil proceedings regardless of criminal prosecution.
The Law also imposes the obligation to inform prosecutors’ offices about property subject to confiscation on public officials.
Other persons who make reports regarding such property are entitled to a reward the amount of which is defined by the Service for Confiscated Assets and to protection in line with the whistleblowing legislation.
The Law has been criticised by experts who believe that its efficient enforcement will be hampered by the following negative circumstances at the domestic level:
- politicized and corrupt institutions of power, which can lead to a situation where the Law is used to persecute opposition and opponents;
- potential misuse of property forfeited due to the lack of mechanism for supervision of subsequent disposal of assets after their forfeiture in the Law. In this context experts highlight the precedent cases where property confiscated from drug traffickers has ended up in the ownership of high-ranking officials and houses seized have been used as torture centers by the General Directorate of Military Counterintelligence (Dirección General de Contrainteligencia Militar);
- lack of possibilities to return considerable amounts of assets transferred abroad;
- poor performance of entities responsible for confiscation of assets.