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Debate heats up on EU goal of clamping down on criminal proceeds

By SOPHIE DONOGHUE

BRUSSELS – The EU’s current framework for confiscation of criminal assets came under fire as being too ‘loose’ during the European Parliament’s special committee for organised crime, corruption and money laundering (CRIM) on 28 November.

“Organised crime is driven by profit, so we need to hit that profit to effectively combat organised crime” Stefano Manservisi told the committee. Head of the European Commission’s directorate general for home affairs policy, he said the EU’s existing tools “are not adequate [because] the legal framework on asset confiscation is too vague and not implemented effectively in the member states. The framework needs tightening up and there is an urgent need for higher harmonisation at EU level.”

Different legislative approaches to asset confiscation across the member states allows for loopholes which organised crime exploits. “Disjuncture facilitates the movement and hiding of proceeds of crime on a trans-national basis”, he warned. (For analysis on the possible social reuse of criminal proceeds, see related CRIM article in this issue.)

Aiming to plug such holes, the Commission unveiled in March its draft directive on the freezing and confiscation of proceeds of crime. It would put in place a set of common tools for national authorities across the EU to use. These include:

  • Extended confiscation, based on seizing property belonging to a convicted person whose property in question has probably been derived from similar criminal activities;
  • Third party confiscation where proceeds transferred to third parties by a convicted person are seized;
  • Non-conviction based confiscation where seizure takes place without a criminal conviction, due to the accused’s death, illness or flight;
  • Precautionary freezing powers to block property in danger of being dissipated, hidden or transferred out of the jurisdiction;
  • Access to profit not linked to crime but where insufficient assets were confiscated;
  • Safeguards to protect fundamental rights to ensure that persons affected by the directive’s measures are preserved under presumption of innocence.

Indeed, the CRIM hearing highlighted these and other barriers faced by countries trying to confiscate criminal assets.

Studies by the World Bank, for example, point to three broad sets of barriers that block effective asset recovery: institutional issues, legal requirements that delay assistance, and operational barriers and communication problems. An important hurdle for any authority seeking to confiscate assets is the lack of trust between countries. Emile van der Does de Willebois, senior financial sector specialist at the World Bank, said it was vital to promote personal contacts between relevant officials such as liaison magistrates and police attaches.

Another barrier is linked to insufficient resources. “Capacity and expertise needs to be developed”, said Willebois, who argued that countries must confer more with each other about the sharing of costs and recovered assets to compensate for resources drained away in the fight against organised crime.

Other obstacles are less obvious. One is that many countries do not have quick-freeze or restraint mechanisms in place. “It is urgent to introduce a mechanism allowing for the prompt tracing and temporary freezing of assets before a formal money laundering act is filed,” observed Willebois. “Money moves at the click of a mouse, whereas confiscation takes a long time; we therefore need a mechanism to stop money in its tracks.”

Another is the diversity of notice requirements between countries. To obtain bank account information, banks often have to inform the account holder, “which tips off criminals about investigations”, he said.

Creating a common “confiscation toolbox” for the EU27 is but the first step, according to John Ringuth, member of the Council of Europe’s committee of experts on the evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL).

“Transnational organised crime does not begin and end within the borders of the EU,” he said, adding that similar powers are need “so that EU nations can ask non-EU ones to do the same sort of things that they ask EU member states to do, for example monitoring accounts. Organised crime transcends borders, so the rules on tracing and confiscating proceeds of crime need to be too.”

 THE UPSHOT: If the EU27 can exploit the draft directive’s provisions, that alone will be a big step forward in combating criminal networks that, by all accounts, have become pervasive in Europe, one of the world’s richest regions.
Getting the EU’s partners – beyond the OECD core of industrialised nations – to move in the same direction will be very difficult and plagued with delays, in our view.
For example, Willebois rightly points to the difficulty of obtaining information about an account’s true beneficial owner since corrupt or compliant intermediary officials never hold assets in their own name, but hide things behind complex corporate structures. To strip away that would entail new rules about information in company registries, new due diligence obligations for lawyers, accountants and trust service providers, and new obligations for banks in partner countries to identify actual beneficial ownership. That would take years, if not decades, to pull off.

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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