EU Member States agree on measures for freezing and confiscating 'unexplained' assets

Monday, 12 June 2023
Justice ministers of EU Member State governments have agreed their position on a draft directive on asset recovery and confiscation, setting out minimum rules on the tracing, identification, freezing, confiscation and management of criminal property.
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The directive will be based on a draft proposed by the European Commission in 2022. Member States' asset recovery offices will be given extra powers to follow criminal money across borders with immediate and direct access to relevant national databases and registers in some cases. They will also be granted new powers to confiscate assets, although the directive will not oblige a Member State to introduce or maintain any offence. The definition of property that can be subject to freezing and confiscation is defined as broadly as possible. It covers legal documents or instruments evidencing title or interest, including financial instruments, crypto-assets and documents found in the possession of the target individual or trust.

The most contentious element of the directive is a new rule allowing confiscation of unexplained wealth without requiring a criminal conviction. Most Member States’ delegations agreed with the substance of the proposed provisions, but considered that adjustments had to be made in relation to national legal systems and to accommodate technical requests.

The result was an annex containing a 'balanced compromise text' taking account of the interests of all Member States. It does not require that a criminal offence is proved against the target individual, but a court will have to be convinced that the property is derived from criminal conduct before it can be seized. Moreover, confiscation without a prior conviction will be limited to cases where a final conviction in criminal proceedings was not possible because of illness, absconding or death of the perpetrator. It will also apply only where the offence would have caused substantial economic benefit, was committed by organised criminals and was punishable by at least a four-year jail term.

Accordingly, unexplained wealth confiscation proceedings will have to show that the value of the property is 'substantially disproportionate' to the lawful income of the owner of the property affected person; that there is no plausible licit source of the property; and that the person is connected to people linked to a criminal organisation.

Member States will retain the right to insist that confiscation is not to be ordered if it is disproportionate to the offence of which the target individual is accused or if it would cause undue hardship for the affected persons. They will have to allow the individual to challenge any order to confiscate or sell the property in question and third-parties will be entitled to submit a claim for ownership or other property rights in the seized assets. Suspected persons will have the right of access to a lawyer throughout the freezing and confiscation proceedings and will have the right to defence, to an effective remedy and to a fair trial.

The directive's scope will include sanctions violations, once the EU has adopted parallel legislation on the definition of criminal offences and penalties for the violation of EU restrictive measures.

A final text has yet to be negotiated with the European Parliament. Once the directive is adopted, Member States will have three years to bring its provisions into effect.

Sources

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