Property confiscation and

disposal: Lessons from other

countries
By JEAN PHILLIPO-PRIMINTA
STATE ADVOCATE -THE DIRECTORATE OF PUBLIC PROSECUTIONS
ARINSA CONTACT POINT
ARINSA

 The Asset Recovery Inter-Agency Network for Southern Africa (ARINSA) is a multi-
agency informal network of prosecutors and investigators known as contact points between
participating countries
 Each member country is required to nominate a prosecutor and an investigator as the
contact points for asset recovery cases
 16 member States: Angola, Botswana, Kenya, Lesotho, Madagascar, Malawi, Mauritius,
Mocambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Uganda, Zambia,
Zimbabwe
 ARINSA’s Objectives
• Focus on the proceeds and instrumentalities of all crimes, within the
scope of international obligations through national legislation;
• Establish itself as a Centre of Excellence in all aspects of tackling
the instrumentalities and proceeds of crime;
• Promote the exchange of information and good practice;
• Establish a network of contact points;
• Make recommendations to other bodies e.g. Eastern and Southern
African Anti-Money Laundering Group (ESAAMLG) and SADC,
relating to all aspects of tackling the proceeds of crime, including
wildlife and timber crime;
• Act as an advisory group to appropriate authorities;
Confiscation

 Final or permanent deprivation, by court order, of illicit or tainted property that is derived
from or connected to criminal activity
 Two types: Conviction-based(civil forfeiture) or non-conviction-based (criminal forfeiture)
 Aimed at removing the profit from crime
 As a deterrent measure, making criminal activity unprofitable
 Disarms criminals by taking away assets that they use to commit crimes
 Compensation of victims of crime
 A powerful law enforcement/crime prevention tool
 Not enough to secure convictions and leave criminals to retain illicit gains or instruments
Types of property subject to confiscation

 Proceeds of crime  Instrumentalities

 Derives from the commission of an  used to commit crimes
offence
 Direct and indirect
Value-based or object-based confiscation?

 value-based confiscation order- a convict is ordered to pay an amount of money equivalent

to the value of the criminal benefit that was derived. The order thus takes the form of a
value-based judgment. Object-based confiscation orders address specified property as the
proceeds (either direct or indirect) or instrumentality of a crime.
 Most countries provide for both. RSA, UK, MW…
 It is important, as far as possible, to identify the assets in advance of making the order so
that the prospect of recovering assets as per the order is on a more solid footing
Interim/provisional measures

 Freezing, seizure, restraint orders

 The primary policy concern- to ensure that as much of the alleged instruments and
proceeds of crime as possible are available when a confiscation order is ultimately made.
 Need to mitigate the risk that the alleged criminal property may be placed beyond the
reach of law enforcement, lost, damaged, destroyed or diminished in value in any other
way, thereby frustrating the fulfilment of a confiscation order once it is made
 Another risk…the property, unless taken into safe custody, will continue to be used in the
criminal operations of its owner or a criminal enterprise
Interim measures-pre seizure planning

 It is important to conduct pre-seizure planning to determine which assets should be seized

…not necessary or prudent to seize each and every asset
 Some asset simply require restriction of use or disposal
 Need to take adequate care of an asset to ensure that its economic value is preserved during
this phase.
 Failure to do this may ultimately undermine efforts to compensate victims for their loss
and to repair the harm done by criminal conduct.
 It is thus increasingly important to ensure that assets are preserved at minimal cost and that
they yield maximum return when they are ultimately realized.
Preservation of the value of assets pending
confiscation
 Important to:
 Maintain the value of assets for meaningful compensation of victims
 Maintain the value of assets to be appropriated to special confiscation funds
 Retain value of assets to be returned to suspects or owners in case of an acquittal-return
valuable assets to avoid law suits. Section 39 TIP Act
Characteristics of an asset management
framework
 (a) There should be a framework for managing or overseeing the management of frozen,
seized and confiscated property.
 Designated authority(ies).
 It should also include legal authority to preserve and manage such property.
 (b) There are sufficient resources in place to handle all aspects of asset management.
 (c) Appropriate planning takes place prior to taking freezing or seizing action.
 (d) There are measures in place to: (i) properly care for and preserve as far as practicable
such property; (ii) deal with the individual’s and third-party rights; (iii) dispose of
confiscated property; (iv) keep appropriate records; and (v) take responsibility for any
damages to be paid, following legal action by an individual in respect of loss or damage to
property.
Asset management framework

 (e) Those responsible for managing (or overseeing the management of) property have the capacity
to provide immediate support and advice to law enforcement at all times in relation to freezing
and seizure, including advising on and subsequently handling all practical issues in relation to
freezing and seizure of property
 (f)Those responsible for managing the property have sufficient expertise to manage any type of
property.
 (g) There is statutory authority to permit a court to order a sale, including in cases where the
property is perishable or rapidly depreciating.
 h) There is a mechanism to permit the sale of property with the consent of the owner. (i) Property
that is not suitable for public sale is destroyed. This includes any property: that is likely to be used
for carrying out further criminal activity; for which ownership constitutes a criminal offence; that
is counterfeit; or that is a threat to public necessary, without undue complication and delay.
Asset management framework

 (k) To ensure transparency and assess the effectiveness of the system, there are
mechanisms to: track frozen or seized property; assess its value at the time of freezing or
seizure, and thereafter as appropriate; keep records of its ultimate disposition; and, in the
case of a sale, keep records of the value realized.
 (j) In the case of confiscated property, there are mechanisms to transfer title, as necessary
without undue complication or delay
Appointment of receivers-UK

 The UK system is based on the fact that although it is the prosecutor who has the legal
power to seek asset restraint, or freezing orders, it is for the courts to exercise the
discretion to appoint specialised management receivers in respect of realisable orders
 Generally, the Prosecutor does not have the qualifications or experience necessary to make
important decisions relating to the management of restrained businesses etc.
 It is therefore necessary to appoint someone who is experienced in such areas, for example
an accountant.
 Model similar to Malawi’s model under the Financial Crimes Act
Lessons from Australia-Victoria

 Asset Confiscation Operations: Unit which manages the confiscation and disposal of
property connected to crime (The Unit)
 Also responsible for enforcing pecuniary penalty orders  issued by Victorian courts which
require offenders to pay back the dollar value of any benefit they receive from crime
 Focuses both on proceeds and instrumentalities
 Disposal:
 Sold at public auction by the Unit
 Funds generated from the sale are placed into a consolidated fund.
Victoria-Australia

 Victoria Police—primarily through the Criminal Proceeds Squad (CPS)

 The Office of Public Prosecutions (OPP)—through the Proceeds of Crime directorate
(POC)
 The Department of Justice (DOJ)—through the Asset Confiscation Operations unit (ACO).
 In addition, the Scheme includes two committees: the Asset Confiscation Scheme
Executive Management Group (ACSEMG), which oversees the Scheme, and the
Confiscation Operations Committee, which is concerned with the operational, practical and
administrative aspects of the Scheme.
Victoria…

 Weaknesses in the scheme:

 Identification of assets- failure to make the most of its investigative tools, by a lack of
effective planning, and by capacity and capability weaknesses.
 Governance problems that undermine its effectiveness and efficiency
 ACSEMG has failed to fulfil its oversight and leadership roles. In particular, it has not set a
strategic focus for the Scheme, nor ensured that objectives are being achieved
European Union- asset recovery units

 Article 1 of European Union Decision 2007/845/JHA, adopted in December 2007

“Each Member State shall set up or designate a national Asset Recovery Office, for the
purposes of the facilitation of the tracing and identification of proceeds of crime and other
crime related property which may become the object of a freezing, seizure or confiscation
order made by a competent judicial authority in the course of criminal or, as far as possible
under the national law of the Member State concerned, civil proceedings
EU response

 governments responded differently:

 Belgium and the Netherlands, the prosecuting authority assumed responsibility for the
functions.
 Other States set up an entirely new centralized office:
 National Agency for the Administration and the Destination of Seized and Confiscated
Assets from Organized Crime in Italy in 2010
 and the Agency for the Recovery and Management of Seized and Confiscated Assets in
France in 2011.
 Malawi is creating a unit under the DPP’s office
EU- Asset management units

 Article 10(1) in Directive 2014/42/EU on the freezing and confiscation of instrumentalities

and proceeds of crime:
“Member States shall take the necessary measures, for example by establishing centralised
offices, a set of specialised offices or equivalent mechanisms, to ensure the adequate
management of property frozen with a view to possible subsequent confiscation.”
 In October 2015, for example, the Asset Recovery and Management Office in Spain was
set up within the Ministry of Justice. It is responsible for locating, retrieving, storing and
managing effects, property, instrumentalities and proceeds of a crime.
 Romania also adopted a law in 2015 on setting up the National Agency for the
Administration of Seized Assets, which took over asset recovery functions from the
Ministry of Justice.
ARINSA members

 Most ARINSA members have established asset recovery units, asset recovery funds and
asset management processes
Disposal

 How do we deal with confiscated property?

 How do we dispose of perishable property?
Pre-confiscation sale or disposal

 The Organization of American States guide on Asset Management Systems in Latin

America and Best Practices Document on Management of Seized and Forfeited Assets
(2011) highlights pre-confiscation sale or disposal as a good practice, especially for
perishable or rapidly depreciating assets.
 E.g buses in Rep v Leonard Kalonga case (disposal)
 The G8 Best Practices for the Administration of Seized Assets also recommends the pre-
confiscation sale for assets that are perishable, will rapidly decline in value (such as
vessels and aircraft) or too burdensome to maintain.
 These initiatives have resulted in a significant increase in the number of countries that now
provide for the pre-confiscation sale of assets in their law.
Pre-confiscation sale or disposal

 Because the final determination of an asset has yet to be made in the interim phase, some
jurisdictions forbid the sale of assets prior to confiscation or limit the sale to perishable
goods only.
 And because the costs of storing and maintaining deteriorating assets over long periods of
time mount, more countries are making provision for the pre-confiscation sale or disposal
 Netherlands introduced a central registration system that allows for swift action to be
taken when the costs exceed the value of the asset. In combination with an aggressive
strategy of selling off assets pre-confiscation, the Netherlands reduced the cost of
managing movable seized and confiscated goods from €23 million to €9 million a year
What happens to the proceeds of pre-
confiscation sale or disposal?
 The G8 Best Practices for the Administration of Seized Assets recommends that the resulting
proceeds from pre-confiscation sale or disposal should be secured, pending a final determination.
 Countries that allow for pre-confiscation sale or disposal provide for: the proceeds to be deposited
into a bank account controlled by a court (as is the case in the Czech Republic);
 a consolidated judicial bank account (as in Brazil);
 an account managed by the asset management office (as in France);
 or a trust account in the name of the defendant, operated by a court-appointed trustee, pending
confiscation (as in Australia and New Zealand).
 In the United States, the Marshal Service operates the Seized Assets Deposit Fund, into which all
proceeds of pre-confiscation sales are deposited.
 In Brazil, there is a prohibition on investing the proceeds of pre-confiscation sale or disposal of
seized assets. Policy issue…each country to decide
Method of sale and costs

 A sale is effected mostly by public auction

 The principles that typically govern pre-confiscation sale or disposal are: recovering
maximum return on the sale at minimum cost, ease of disposal and ensuring that the
process is transparently accounted for.
 In the USA, there are limitations on who can buy an asset to ensure that nominees and
associates of a criminal do not re-acquire such property at what may be less than market
price, depending on the asset.
 The screening of such associates demands due diligence
Disposal of forfeited property
Organization of American States
 Adopted in 2003 model regulations concerning laundering offences connected to illicit drug trafficking and
related offences.
 Article 7 of the model regulations deals primarily with the disposal of forfeited property, providing for a court
or other competent authority, in accordance with the law to:
 Retain forfeited property for official use or transfer it to any government agency that participated directly or
indirectly in the freezing, seizure or forfeiture .
 Sell forfeited property and transfer the proceeds from such sale to any government agency that participated
directly or indirectly in the freezing, seizure or forfeiture.
 may also deposit the proceeds from the sale into a special fund to be used by the competent authorities in their
fight against illicit trafficking, prevention of the unlawful use of drugs, treatment, rehabilitation or social
reintegration of those affected by its use.
 Transfer the property, proceeds or instrumentalities or the proceeds from their sale to any private entity
dedicated to the prevention of the unlawful use of drugs, treatment, rehabilitation or social reintegration of
those affected by its use.
Disposal of forfeited prop
Organization of American States
 Transfer the object of the forfeiture or the proceeds from its sale to intergovernmental
bodies specializing in the fight against illicit traffic, prevention of the unlawful use of
drugs, treatment, rehabilitation or social reintegration of those affected by its use.
 Promote and facilitate the creation of a national forfeiture fund to administer the objects of
forfeiture and to authorize their use or allocation to support programmes for the
administration of justice, training and for the fight against illicit drug trafficking, its
prevention and prosecution, as well as for social programs related to education, health and
other purposes, as determined by each government.
Managing forfeited property-Disposal
models
 For the management of finally confiscated property, countries typically choose to deposit
the proceeds from confiscation orders into the general revenue fund or into a special fund
for specific purposes.
 Special funds, however, usually require additional capacity to manage, distribute and
monitor the allocation of deposited proceeds. Management of the budget for the interim
care of assets and accounting for the use of allocated funds to this purpose is typically
performed by an asset management office.
 The provision of storage facilities, valuation services and managing disposal services, such
as auctioneering services, are among the functions suited to centralized management due to
advantages when procuring services in bulk.
Disposal of confiscated property-National
budget model
1.Payment to the State or the general revenue fund
 In many countries, the default beneficiary of confiscation orders is the State.
 The income derived from confiscation orders is treated as government revenue for use in
government programmes to ensure, through the budget approval process, a fair, transparent
and accountable way of allocating recovered proceeds.
 However, the symbolic value of using the proceeds of crime to fight crime is lost if the
proceeds are distributed through the general budgetary process.
 Need to choose which policy to follow, general national revenue or law enforcement. And
other specific programs?
Disposal…Payment to a special or dedicated
fund model
 Many countries, including ARINSA members have created special funds.
 USA-Staff of the United States Federal Asset Forfeiture Program manage the Assets
Forfeiture Fund.
 Forfeited funds can be used for forfeiture operations expenses (asset management and
disposal, third-party interests, case-related expenses, training and printing, contracts to
identify forfeitable assets, awards based on forfeiture) and for general investigative
expenses (awards for information, joint law enforcement operations).
 After the costs associated with the management and sale of an asset are recouped and
victim claims satisfied, an amount of at least 20 per cent may be retained for operational
expenses, under strict auditing controls.
Disposal…Special/dedicated fund-USA

 The Funds are largely self-sustaining and rely minimally on appropriated funds from the
national budget.
 Every year, the Assets Forfeiture Fund is audited by an independent auditor, and the
Department of Justice annually reports to Congress on the status of the fund, including
every confiscation valued at more than $1 million.
 Malawi situation? TIP Fund vs Asset Confiscation Fund?
Disposal…Special/dedicated fund-RSA

 South Africa has the Criminal Assets Recovery Account

 POCA provides for establishment of a high-level Criminal Assets Recovery Committee
consisting of the ministers of justice, safety and security, and finance and the national
director of public prosecutions to advise the Cabinet in connection with all aspects of
forfeiture of property to the State
 Among other things, the committee makes recommendations to cabinet regarding the
allocation of property and money from the account to specific law enforcement agencies or
to any institution, organization or fund supporting victims of crime; and the allocation of
funds for its own administration.
Disposal…Special fund-RSA

 the Cabinet must indicate the purpose for which that property or money is to be used.
 The Minister of Justice must cause all particulars of such allocation to be tabled in
Parliament.
 The committee cannot allocate money unless an accounting officer is appointed to account
for the acquisition, receipt, custody and disposal of all property and that all payments made
are for the purpose for which the allocation was intended.
Disposal-Victim compensation

 Article 25 of the Convention against Transnational Organized Crime (Palermo Convention)

provides for the return of recovered proceeds to prior legitimate owners and for
compensating victims, as a priority over payment to the State.
 If sufficient assets exist to satisfy a confiscation judgment and a restitution order, the
confiscated assets are generally used to benefit the government only after the victims
receive restitution
 TIP offences fall under this Convention victim compensation should not be ignored
Disposal…Victim compensation and asset
sharing (MEXICO)
 The Asset Administration and Disposal Service (SAE) is entitled to sell assets through
auctions after confiscation.
 The Mexican law mandates that the proceeds from assets be used mainly to compensate
victims of abduction.
 The remainder is divided in equal shares among: (i) crime prevention activities, (ii) the
judiciary system and (iii) treatment of health problems related to drug dependence.
Payment to law enforcement agencies

 Funds for law enforcement ordinarily come from the general budget.
 Many jurisdictions, however, permit recovered proceeds to be allocated to investigative
and prosecutorial projects outside of the ordinary budgetary process, such as to purchase
special equipment, provide training or to fund joint law enforcement projects.
 The purpose is to convey a symbolic message that criminals will have the fruits of their
crimes used against them.
 The allocations are generally not intended to fund recurring law enforcement expenditure,
such as salaries.
Disposal-In Australia

 An official trustee is designated in the law to dispose of any property specified in the
forfeiture order that is not money as soon as practical after the order is made.
 The official trustee must apply any money received from that disposal and any property
specified in the order that is money to its remuneration and other costs, charges and
expenses incurred in connection with the disposal, as well as costs associated with the
management of restrained property.
 The remainder of the funds must be credited to the Confiscated Assets Account.
 Money in the Confiscated Assets Account can be used to fund: crime prevention and law
enforcement measures; measures relating to the treatment of drug addiction and
diversionary measures relating to the illegal use of drugs. These payments are made
through community- and government-run programmes.
Disposal-Australia

 The Minister for Justice determines, on a discretionary basis, which programmes are to be
allocated funds, in line with the Government’s priorities. Details of programmes to which
funds are allocated are publicly available, and the funding is subject to standard
government accounting and reporting requirements
 Here again transparency of the allocations is key
Disposal-Covering costs of the asset
recovery programme
 The cost of establishing capacity to properly manage seized and confiscated property and
more generally meeting the aims of a country’s asset recovery programme can be
significant.
 Without sufficient funds for personnel and infrastructure, it can be difficult to seize and
confiscate assets at a scale sufficient to make an impact on crime. Canada and France
 In countries in which there is intense competition for resources from other equally
compelling development priorities, ensuring that asset recovery capacity is or becomes
self-funding can considerably boost the work of an asset recovery programme.
Asset sharing

 Important aspect
 Both domestic LEAs and foreign
 Foreign counterparts, TIP being also cross border
 ARINSA region
 Angola & Mauritius
 RSA & Mocambique
International cooperation

 Formal via AG
 Informal through networks like ARINSA, SAARPCO
 Important given the transnational nature of TIP offences
Case Example – Mauritius and Switzerland

 “Recently we experienced a major fraud in the form of Ponzi schemes involving more than
700 Million Mauritius Rupees. We were able to freeze about MUR 300 m in the form of
money in bank accounts as well as other property both movables and immovables. We
were able to do that with the technical assistance received from ARINSA and also
identified money transferred to other jurisdictions like South Africa and Switzerland
through CARIN which provided us the contact point’s details in these countries.”
Constitutionality &Proportionality

 Confiscation and provisional orders should not be arbitrary

 Should pass constitutionality test
 Instrumentalities…proportionality
 Proceeds…proportionality, all criminal proceeds including profits
 RSA jurisprudence very progressive on this
Third party rights

 The G8 Best Practices for the Administration of Seized Assets recommends that there
should be mechanisms for persons or entities with a legal interest in seized property to
apply to a court to modify a seizure order to permit the release of the property, subject to
adequate controls, including mechanisms to inform potential bona fide third parties about
the seizure or confiscation of an asset.
 Same for FATF standards, Palermo Convention
 In South Africa for example, creditors with secured rights against seized assets are
specifically protected.
 Malawi too…Financial Crimes Act
Transparency and accountability

 The institutional arrangements to manage and dispose of seized and confiscated assets
must withstand intense public scrutiny.
 If a decision is made to remove tainted property from the control of its owner, the
mechanisms to take care of such assets must be beyond reproach.
 Equally, confiscated property must be dealt with in accordance with the law. Reports that
expose poor management of seized property or illustrate that confiscated property is being
dealt with contrary to a court order can seriously undermine the credibility of the asset
recovery programme.
 Meticulous recordkeeping, the adoption of transparent procedures and compliance with the
policies, procedures, court orders and laws that govern the asset management process are
critical for its transparency and accountability
 ARINSA Progress

355 cases of
Confiscated
Assets $5,6m in Gold and
178 vehicles
other
worth over $2m
assets
seized
237 cases
Where
funds are
$23m worth of
seized
assets seized