Regulating Property Confiscation

One of the recommendations from GRECO, the Council of Europe anti-corruption organization, that Serbia was supposed to implement by the end of 2007 was dealing with temporary and permanent confiscations of property in corruption cases. The necessary legislation has not passed, however.

Last September, the Justice Ministry tasked a special working group with drafting legislation that would allow the impounding of illegally acquired money and property. The resulting bill was sent to the CoE for evaluation as part of the Project Against Economic Crime in Serbia.

At the same time, MPs from G17 Plus submitted a bill also dealing with the confiscation of crime-derived assets in cases involving organized crime, corruption, and crimes against humanity.

In the public debate that has been in progress in the last two years, experts have stressed that the threat of confiscation has a strong preventive effect against most crimes. It also imposes barriers to the entry of dirty money into legal channels, while eliminating money that could be used in future crimes.

The first official to bring up asset confiscations was Special Prosecutor for Organized Crime Slobodan Radovanovic. As a result, he is considered the man who launched the initiative. Radovanovic has said that providing a legal framework for the confiscation of assets gained through crime is key to cutting corruption and crime in the country.

The GRECO recommendation dealing with property seizures also encourage the extension of this measure to property transferred to other individuals and items or funds of equivalent value of property that is not found.

The Justice Ministry working group's draft implements all the confiscation measures required by GRECO. This and all other measures are already a part of the National Strategy on Fighting Corruption and an action plan adopted to put it into force. Some have already been included in recent laws.

At present, the Penal Code deals with property confiscation. Seizures can be ordered by a court when convicting a defendant of a crime. In addition, the law allows for activities aimed at finding, identifying, freezing, and confiscating assets acquired through criminal enterprise.

In 2006, there were 23 cases in which the courts ordered defendants' assets seized. In 2007, the total rose to 54. The value of the individual confiscations ranged from USD10,000 to USD10 million, according to date from the Justice Ministry. However, detailed data does not exist because of the way records are kept.

Justice Ministry officials believe that the increase in seizures in 2007 is a result of training programs organized in recent years in cooperation with a number of international organizations.

One thing that experts have stressed is the need to confiscate assets, funds in bank accounts, at the beginning of a criminal case that could take years to conclude. The aim is to prevent the defendant or defendants from selling any of the property and make it harder for the state to obtain the assets in question.

In the public debate the preceded the approval of the Justice Ministry's confiscation bill, Tomo Zoric, spokesman for the Office of the Special Prosecutor for Organized crime, said that convicts should lose all property that they cannot prove the origin of. Any property transferred to family and friends should also be subject to confiscation, he said.

According to Goran Ilic, a professor at the Belgrade University School of Law, Serbia's property confiscation legislation should be based on similar laws in the U.S., Italy, Ireland, and the UK since these countries have successfully been using these laws to tackle organized crime for years.

"Simultaneously with the criminal prosecution of a defendant, that same defendant usually faces a civil suit in which he has to provide proof of the origin of the property he possesses. In most cases these civil suits are brought by the prosecutor after the end of the criminal trial. In the U.S., however, a civil suit can began prior to the handing down of a verdict in the criminal trial," says Ilic.

Ilic says the future confiscation law could be enforced retroactively in cases that are presently underway.

Last year, a single Italian police operation resulted in the confiscation of EUR6 billion from the Mafia. In Italy, this money is used for a variety of purposes, including funding law enforcement, social projects, and assistance to the poor. So far, the list of confiscated property includes hotels, factories, companies, buildings, money, jewelry, to name just a few. Factories are never shut down. Instead, the authorities keep them operating until a new owner is found.

Over the years many individuals and groups have been charged with the embezzlement of tens of millions of euros. All of them denied possession of the assets they were accused of wrongfully taking. Had confiscation legislation existed then, organized crime groups existing in transportation, toll collection, and customs, believed to have cheated the state out of EUR70 million, would have had their assets frozen. Any assets they could not account for would have ended up in the treasury. Although the courts did order the defendants' bank accounts frozen, they contained very little money.

The confiscation legislation put forth by G17 Plus allows for both temporary and permanent seizures.

G17 Plus corruption expert Zeljko Ivanji says that his party's proposal focuses on checking all property believed to have been acquired through criminal activity irrespective of when the crime was committed. As such, it would have unlimited retroactive use.

The party's draft envisions a special agency that would manage temporarily seized property and have the power to search for and find questionable assets and investigate their origin.

Ivanji adds that the bill targets assets, not individuals or companies, and that the agency would confiscate property after court approval via civil suit. Lex specialis status for the law would speed the process up even more.

He goes on to say that the agency would have the power to take action in cases where it suspects that illegal activity may have been used to derive financial or other gain. It would also, in his opinion, make life a lot easier for the courts.

Property would be impounded temporarily during the investigative phase, with permanent seizure taking effect only after a court ruling. In that event the agency and judiciary would each get 25 percent of the proceeds, with the rest going to the national treasury.

G17 Plus' proposal would also extend to friends and distant relatives of a defendant, not just his immediate family, for obvious reasons. The burden of proof would be on the defendant.