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Criminal assets tracked, frozen and seized. What are the next steps?

By SOPHIE DONOGHUE

BRUSSELS – Confiscated mafia assets should be recycled into civil society for social purposes, said the European Parliament’s Special Committee on Organised Crime (CRIM) during a 29 November public hearing on money laundering. The social reuse of confiscated assets as a means for compensating communities affected by serious or organised crime is an idea which appeals to many according Salvatore Iacolino, Italian member of the European Parliament (MEP). “To give assets confiscated from mafias back to society has a strong symbolic value”, he said.

Several EU action plans, reports and strategies refer to the utility of a social reuse of confiscated assets from organised crime. Despite such calls, however, there is a lack of legislation on the matter.

A study commissioned by the EP was presented at the hearing by Pedro Gomes Pereira, a researcher at the Basel Institute of Governance, which focuses on corruption and money laundering. Arguing there is “still a need for EU regulation on the social reuse of confiscated assets”, his study analyses existing EU regulation in the field of confiscation of criminal proceeds and recommends new legislative measures.

The 97-page document points out that only limited attention has been given to the final destination of confiscated assets, adding that the “social reuse of confiscated assets is not common practice in the MS [EU member states]”. Though there is an EU regulation for sharing confiscated assets to compensate the victims of crime, there is no regulation on the wider social reuse of such assets. Pointing to the advantages that such a social reuse would offer, it says there is a “clear need” for a common European approach.

One of the study’s objectives was to define “social purposes”. However it fell short of this goal because the countries studied all had differing or “hazy” interpretations of the term, said Pereira, who noted that “this is a major barrier to the harmonisation of legislation.”

The Basel Institute study makes four recommendations, namely:

  • a new directive to establish coherent and transparent procedures for social reuse
  • the creation of a “European asset recovery database” to collect statistics on the total value of assets confiscated, including information about the destination of the assets, thus boosting their transparency and allowing civil society to suggest new uses
  • the creation of a “European Asset Fund” that would go beyond the aforementioned database. Countries with confiscated assets that have already compensated victims could hand over any remaining assets to the fund, to be managed by a European agency. The member states could then designate how the money would be disbursed on European social projects.
  • the establishment of an over-arching administrative system, the “European Asset Recovery Office” (ARO) which would oversee exchanges of information and ensure that member states use assets for social purposes (after victims have been compensated). The ARO would be based on a harmonised interpretation of ‘social purposes’.

The study also points to one unanswered question in particular: what should happen to criminal assets that originate from outside EU borders but end up in one of its member states? EU regulation does not take this into account. Thus the study calls for a clarifying EU regulation.

The European Commission was criticised during the hearing for not including the social reuse of confiscating assets in its March 2012 proposal to revise the EU’s third anti-money laundering Directive. “The Commission did not propose anything to do with reusing confiscated assets, which was a serious mistake”, said MEP Sonia Alfano, committee chair.

However, Stefano Manservisi, head of the Commission’s Director-General for Home Affairs, countered that the lack of national laws on confiscation and its reuse made it impossible to propose common rules. “The basis for harmonising is very thin,” he told the hearing, but added that the money-laundering proposal does give “a clear signal that they must move in this direction”.

The Committee agreed that provisions for reusing confiscated assets for social purposes should be included in the proposed EU directive on confiscation on which the Civil Liberties Committee will vote in mid-December.

 THE UPSHOT: MEPs reacted very positively towards the recommendation of the European Asset Fund, which would direct “leftover” confiscated assets (net of victim compensation) towards European or international social projects. While some observers in the room expressed surprise at this, considering it wishful thinking on behalf of the MEPs, the idea might have a certain rational.
A European fund would limit intra-EU competition between police authorities clamouring to claim assets for their own purposes. Indeed, given that organised crime today crosses all borders, it is difficult to argue why one country should receive more confiscated assets than another. Such a fund would get around such arguments. Even the diverse opinions about what constitutes a “social project” is less problematic than it appears. After all, the EU’s own Social Funds are based on a common understanding across the 27 about which projects are eligible for such spending.
In our view, the real problems are elsewhere. One is the potentially huge legal complications that would arise if the EU had to share assets confiscated on its territory with a third country where the originating crime ring lies. That would be too difficult to legally orchestrate. “Sieze and keep” should probably be the internationally rule here.
The other problem is the risk of administrative overkill. Multiple confiscation databases and funds and a bureaucracy to administer them sound like a high-risk approach that could eat up the very funding intended to benefit society at large. If the EU were to tread down this path, a very lean machine would be imperative.

About Sophie Donoghue

Sophie Donoghue was deputy editor and policy analyst at SECURITY EUROPE during 2012-2013 and now freelances for the publication from London. She can be reached at: sd@seceur.info

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