Designing a civil forfeiture system: an issues list for policymakers and legislators

Published date01 April 2006
Date01 April 2006
Pages132-163
DOIhttps://doi.org/10.1108/13590790610660863
AuthorAnthony Kennedy
Subject MatterAccounting & finance
Designing a civil forfeiture
system: an issues list for
policymakers and legislators
Anthony Kennedy
Assets Recovery Agency, Belfast, UK
Abstract
Purpose – In recent years an emerging global trend of introducing legislation to use civil procedures
against criminal assets can be detected. However, these civil forfeiture models, which exist vary from
jurisdiction to jurisdiction. This paper seeks to identify issues which need to be considered when such
a scheme is being designed and examines the options which have been adopted.
Design/methodology/approach – The paper examines the legislative provisions in a number of
jurisdictions setting out the common issues which have arisen and the range of options which have
attempted as potential solutions.
Findings – The paper concludes that jurisdictions which seek to introduce civil forfeiture legislations
now have various examples from which to learn but that these models will likely evolve in the face of
litigation and experience as legislatures and policymakers attempt to produce fair but effective
procedures for the civil recovery of criminal proceeds.
Originality/value – As further jurisdictions respond to this emerging trend and draft their own
legislation, there is much to be leant from the issues which others have considered necessary to
address and the way in which these issues have been dealt with.
Keywords Legislation,Civil law, Criminal forfeiture, Forfeiting
Paper type Research paper
Introduction
In recent years an emerging global trend of introducing legislation to use civil
procedures against criminal assets can be detected. South Africa, Ireland, the UK, Fiji,
the Canadian provinces of Ontario, Alberta, Manitoba, Saskatchewan and British
Columbia, Australia and its individual states, and Antigua and Barbuda have all
introduced such procedures. In addition, the Commonwealth has produced provisions,
which may now serve as a template. However, the models, which exist vary from
jurisdiction to jurisdiction. For those policy makers and legislators who are tasked with
designing a non-conviction based forfeiture system[1], what are the lessons which can
be learnt from other jurisdictions’ experience? This paper seeks to identify issues which
need to be considered when such a scheme is being designed and examines the options
which have been adopted.
Definition of proceeds
A fundamental issue which legislation must address is how it defines the proceeds
sought to be forfeited. The UK model provides that such property must have been
obtained “by or in return for unlawful conduct”[2]. This is not as widely drawn as in
the Irish model which defines proceeds of crime as any property obtained or received
by, or as a result of, or in connection with the commission of an offence[3]. The
Commonwealth model is also wider, providing that proceeds of unlawful activity
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Vol. 13 No. 2, 2006
pp. 132-163
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DOI 10.1108/13590790610660863
means any property or economic advantage derived or realized, directly or indirectly,
as a result of or in connection with, an unlawful activity, irrespective of the identity of
the offender[4].
In the Australian model property is “proceeds” of an offence if it is wholly or partly
derived or realised, whether directly or indirectly, from the commission of the
offence[5]. The Victorian[6] and South Australian models[7] use similar definitions.
The Ontario model provides that “proceeds of unlawful activity” means property
acquired, directly or indirectly, in whole or in part, as a result of unlawful activity[8].
The Saskatchewan model uses an identical definition[9]. The Alberta model is similar,
providing that property acquired by illegal means is a reference to property that has
been acquired or derived directly or indirectly through an illegal act[10].
Some jurisdictions incorporate, in effect, a “predicate offence” approach to civil
forfeiture. The original New South Wales model allowed the civil forfeiture of criminal
proceeds only if they came from drug trafficking crime[11]. However, this approach
was subsequently abandoned and a new model introduced which allowed the forfeitur e
of proceeds of serious crime[12]. This approach has also been adopted in the New
Zealand model where tainted property is any property that, in whole or in part, has
been acquired as a result of significant criminal activity or directly or indirectly
derived from significant criminal activity[13]. Significant criminal activity means any
activity engaged in by a person which constitutes offending that consists of one or
more offences punishable by a maximum term of imprisonment of five years or more;
or from which property to a value of $30,000 or more has, directly or indirectly, been
derived[14]. The approach is also evident in the Antiguan and Barbudan model which
provides that civil forfeiture is available if the court makes a finding that the defendant
has engaged in money laundering activity[15]. The approach may prove to be a serious
weakness in that it requires plaintiffs to prove that the proceeds came from one type of
crime rather than another.
The US model provides two notable definitions of proceeds. Firstly, in respec t of
cases involving illegal goods, illegal services and unlawful activities, proceeds is
defined as property of any kind obtained directly or indirectly as a result of the
commission of the offence giving rise to forfeiture and any property traceable thereto
and is not limited to the net gain or profit realised from the offence[16]. In cases
involving lawful goods or services that are sold or provided in an illegal manner,
proceeds means the amount of money acquired through the illegal transactions
resulting in the forfeiture, less the direct costs incurred in providing the goods or
services. However, such direct costs do not include any part of the overhead expenses
of the entity providing the goods or services or any part of the income taxes paid by the
entity[17].
The South African model has perhaps the widest definition, defining “proceeds of
unlawful activities” as:
...any property or any service, advantage, benefit or reward which was derived, received or
retained, directly or indirectly ... in connection with or as a result of any unlawful activity
carried on by any person[18].
The Antiguan and Barbudan model avoids the issue of defining proceeds and allows
for forfeiture of all interests in property held by a defendant which are subject to a
freezing order at the time that a forfeiture order is made[19].
Designing a civil
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When policymakers and legislators reach a decision regarding the definition of
“proceeds” to use in their legislation, it will have a clear impact on the range of property
which is forfeitable. For example, can a regime deal with property, which has been
lawfully obtained, but then retained through unlawful conduct? Although the
definitions have much in common, those which include the words “in connection with”
allow for the most robust application of civil forfeiture.
Proceeds of foreign crimes
Legislation should indicate whether proceeds of crimes which are committed outside
the jurisdiction are subject to it. The UK model provides that proceeds of conduct
which occurs in a country outside the UK and is unlawful under the criminal law of
that country and, if it had occurred in a part of the UK, would have been unl awful
under UK criminal law, are recoverable. This is a dual criminality provision. (It would,
of course, be a very strong step to seek to adopt a single criminality test and deprive a
person of property, which had been lawfully obtained in the jurisdiction where it was
acquired.) The Manitoba model has a similar dual criminality provision, providing that
proceeds of an activity that is an offence under an Act of Canada, Manitoba or another
Canadian province or territory or an Act of a jurisdiction outside Canada, if the activity
would be an offence under an Act of Canada or Manitoba if it were committed in
Manitoba are forfeitable[20]. Other jurisdictions which have adopted a dual criminality
provision are Ontario[21] and Saskatchewan[22]. The Commonwealth model provides
likewise[23].
Some jurisdictions have adopted a modified dual criminality mechanism. The US
model contains a dual criminality test but combines this with a list-based approach,
providing that proceeds obtained directly or indirectly from an offence against a
foreign nation are subject to forfeiture. However, there are limitations on the offences
which apply. Firstly, the offence must fall into one of the categories of foreign crimes
listed as specified unlawful activity[24]; secondly, it must be punishable in the foreign
state by death or imprisonment for more than one year; and, thirdly, the conduct must
be punishable in the USA by imprisonment for a term of more than one year if the act
or activity constituting the offence had occurred there[25]. The British Columbian
model provides a dual criminality test for unlawful activity but provides that acts
under a particular foreign enactment or under enactments of a particular foreign
jurisdiction may be prescribed as not falling within the definition of unlawful
activity[26]. The government, therefore, maintains control over the proceeds of which
foreign crimes are forfeitable in British Columbia.
The Alberta model provides that property acquired by illegal means refers to
property that has been acquired or derived directly or indirectly through an illegal act.
However, illegal act is defined as meaning anything done in contravention of the
Canadian Criminal Code or anything done or carried out in contravention of an
enactment of Alberta[27]. The effect of this is that proceeds of foreign crimes are
incapable of being forfeited under the Alberta model.
The Irish model was silent on the issue of foreign proceeds. The High Court held in
DPP v. Hollman[28] that the Act applied to criminal proceeds even if the crime was
committed outside Ireland, notwithstanding the failure of the legislation explicitly to
say so. Subsequently, however, the Supreme Court held in McK v. D[29] that the
purpose of the legislation was to confiscate property acquired with or representing the
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