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Criminal asset recovery – legal framework

Confiscation – legal framework

Describe the legal framework in relation to confiscation of the proceeds of crime, including how the benefit figure is calculated.

The Prevention and Suppression of Money Laundering Activities Law provides the legal framework that regulates the confiscation of the proceeds of crime.

A confiscation order is issued regarding the product of a specified offence, which is in the possession of the defendant or a third party, or the defendant’s proceeds from illegal acts or the commission of a money laundering offence, or both. The product of an offence is the financial advantage deriving directly or indirectly from a specified offence, including any investment or conversion of products and any major gain. Proceeds of the defendant from illegal acts or the commission of a money laundering offence are the total amount of remuneration or payments that have been paid towards the defendant, or the product of the illegal acts or proceeds from illegal acts, including any investment or conversion of products and any major gain.

In ascertaining the amount of income obtained as a result of the commission of illegal acts or the commission of a money laundering offence, the court will assume, unless the contrary is proved or the court considers that there is a serious risk of injustice against the defendant to so assume, the following:

  • that any property obtained by the defendant after the commission of that offence, or obtained during the preceding six years before the commencement of the criminal proceedings against him or her, constitutes income, payment or remuneration from illegal acts or the commission of a money laundering offence;
  • that any property obtained by the defendant (as under the first bullet point) was obtained by him or her free of any charge or interest for the benefit of any other person; and
  • that any expenditure the defendant incurred during the six-year period (as in the first bullet point) was paid from the income, payment or remuneration the defendant obtained from illegal acts or the commission of a money laundering offence.

However, if the court considers that the amount of the defendant’s property that can be realised is less than the amount that the court has calculated as proceeds from illegal acts or the commission of a money laundering offence, then the amount to be confiscated shall be the amount that can be obtained from the defendant’s realisable property, including property in which the defendant has an interest or right and property of another person that the defendant has donated or transferred to that other person illegally.

Criminal asset recovery – confiscation

Secondary proceeds

Is confiscation of secondary proceeds possible?

The criminal confiscation regime is a value-based system, as a confiscation order does not attach particular assets or property received by the defendant. The process is rather that the court calculates the value of the benefit the defendant received from illegal acts and issues a confiscation order to confiscate any available property of the defendant equalling the value of this benefit.

To establish the value of the benefit received by the defendant from illegal acts, the court will consider any reinvestment or conversion of proceeds and any valuable gain for the defendant as a result of the commission of a crime.Third-party ownership

Is it possible to confiscate property acquired by a third party or close relatives?

Any property of the defendant that was unlawfully transferred or gifted to a third party or a member of the defendant’s family is subject to confiscation.

Property is regarded as being unlawfully transferred or gifted as follows:

  • where the defendant has transferred the property as a gift (or for consideration that is significantly less than the real value of the property) to a third party during the past six years before the commencement of the criminal proceedings against him or her, or at any time after the commencement of the criminal proceedings against him or her;
  • where the defendant has transferred as a gift (or for consideration that is significantly less than the real value of the property) to a third-party property that the defendant has previously accepted as a gift or otherwise for the commission of a primary criminal offence, which was committed by himself or herself or another; or
  • where the defendant has transferred the product of crime, directly or indirectly, to another who knows or ought to have known that the purpose of the transfer was to avoid the confiscation of that property, and this can be inferred from particular circumstances, including that the transfer was effected without consideration or with consideration that was significantly lower than the market price of the property.

If no sufficient explanations have been provided for how members of the defendant’s family acquired certain property during a summary inquiry process for ascertaining the benefit received by the defendant as proceeds of crime, the court is entitled to assume that any property owned by the defendant’s family for which no sufficient explanations were provided, and that was transferred to members of the defendant’s family during the preceding six years before the commencement of the criminal proceedings against the defendant, has been transferred to them from the defendant as gifts to avoid the law.Expenses

Can the costs of tracing and confiscating assets be recovered by a relevant state agency?

The costs of the Unit for Combating Money Laundering and Unit of Financial Information for receiving, requesting and analysing suspicious transactions and tracing proceeds of crime, inter alia, to apply for confiscation orders are not recoverable.

Costs of the court-appointed receiver to execute a confiscation order if the defendant does not comply with it are paid with priority from the property confiscated by the receiver during the execution of the confiscation order.

In the event that the receiver’s fee cannot be fully paid from the confiscated property, the payment will be arranged by the Republic of Cyprus. Value-based confiscation

Is value-based confiscation allowed? If yes, how is the value assessment made?

The criminal confiscation regime is a value-based system, as a confiscation order does not attach particular assets or property received by the defendant. The process is rather that the court calculates the value of the benefit the defendant received from the illegal acts and issues a confiscation order for the confiscation of any available property of the defendant equalling the value of this benefit.

To establish the value of the benefit received by the defendant from the illegal acts, the court will consider any reinvestment or conversion of proceeds and any valuable gain the defendant obtained as a result of the commission of a crime.Burden of proof

On whom is the burden of proof in a procedure to confiscate the proceeds of crime? Can the burden be reversed?

Generally, the burden of proof in a procedure to confiscate the proceeds of crime rests on the Office of the Attorney General.

However, there is a rebuttable presumption that any property obtained by a defendant after the commission of an offence, or during the preceding six years before the commencement of the criminal proceedings against him or her, constitutes income, payment or remuneration from the commission of the offence. Therefore, the Office of the Attorney General bears the burden of proving that the property was obtained by the defendant after the commission of the offence or during the preceding six years before the commencement of the criminal proceedings against him or her; following which, the defendant bears the burden of proving that the property in question does not constitute proceeds from crime, that it would be unjust for the above presumption to apply or that his or her realisable property is less than the proceeds that he or she received from the commission of the crime.Using confiscated property to settle claims

May confiscated property be used in satisfaction of civil claims for damages or compensation from a claim arising from the conviction?

In general, confiscated property cannot be used in satisfaction of civil claims for damages or compensation from a claim arising from the conviction. At the same time, the issuance of a confiscation order does not preclude the victim or the complainant from raising a civil claim for damages against the defendant. However, the Office of the Attorney General may not apply for confiscation or proceed with the execution of a confiscation order where the victim or the complainant has raised civil proceedings for damages against the defendant.Confiscation of profits

Is it possible to recover the financial advantage or profit obtained through the commission of criminal offences?

Financial advantage or profit obtained as a result of the commission of a criminal offence for which the defendant was convicted may be subject to confiscation.Non-conviction based forfeiture

Can the proceeds of crime be confiscated without a conviction? Describe how the system works and any legal challenges to in rem confiscation.

A non-conviction confiscation order may be made where the suspect cannot appear in court upon being charged with a specified crime by reason of fleeing or illness.

In addition, a non-conviction confiscation order may be made where a suspect is outside the jurisdiction or deceased and has not appeared in court further to a retention of property order being issued against him or her. A confiscation order is issued in that case provided that the prosecution has made reasonable efforts to find the suspect and opportunity has been given to any interested party to set out his or her views in court on the confiscation order to be issued.

It is noted that a retention of property order is issued against a suspect who is outside the jurisdiction or deceased, upon the application of the Attorney General, where the court is satisfied that there is prima facie proof against the suspect that he or she has committed a specified offence and his or her property may be converted or transferred or moved outside Cyprus to hide or cover up its illegal origin.

There is no legal framework for in rem confiscation.Management of assets

After the seizure of the assets, how are they managed, and by whom? How does the managing authority deal with the hidden cost of management of the assets? Can the assets be utilised by the managing authority or a government agency as their own?

The court may appoint a receiver, upon the application of the public prosecutor, to take possession of, or realise or liquidate the product of the illegal acts or the property subject to the confiscation order, or both, including to receive any realisable property of the defendant held by a third party and to execute a charging order by disposing of, selling or liquidating the property subject to the charging order. Accordingly, the property confiscated is under the management of the court-appointed receiver who holds, manages, sells and liquidates it.

Cyprus stocks may only be sold upon a relevant court order further to an application by the prosecution authority or the court-appointed receiver, by means of public auction (unless the court orders otherwise).

After the conclusion of the liquidation process, the funds held by the receiver are applied against the amount payable under the confiscation order, provided the fees and expenses of the receiver are paid, including the expenses for the management of the property. If the funds liquidated are not sufficient to satisfy the fees and expenses of the court-appointed receiver, the government pays the fees.

This article first appeared on Lexology. You can find the original version here.