Confiscation of Unexplained Wealth: A Wolf in Sheep’s Clothing? | European Union

On 24 April 2024, the European Parliament and the Council of the European Union adopted Directive (EU) 2024/1260 on asset recovery and confiscation. This Directive is the fourth harmonisation EU instrument in the field of confiscation of criminal proceeds and instrumentalities, following Framework Decision 2001/500/JHA on money laundering, the identification, tracing, freezing, seizing and confiscation of instrumentalities and the proceeds of crime, Framework Decision 2005/212/JHA on confiscation of crime-related proceeds, instrumentalities and property, and Directive 2014/42/EU on the freezing and confiscation of instrumentalities and proceeds of crime. Each of these instruments introduced new forms of confiscation in the fight against criminal assets, which are stereotypically declared as “a significant threat to the integrity of the economy and society, eroding the rule of law and fundamental rights”. Their common characteristic is their emancipation from the criminal process and their independence from a guilty verdict.

The latest addition to the arsenal against criminal proceeds is the introduction of confiscation of unexplained wealth. Article 16 of the latest Directive states that member states shall take the necessary measures to enable, where, in accordance with national law, other forms of confiscation measures may not be applied, the confiscation of property identified in the context of an investigation related to a criminal offence. To this end, a national court must be satisfied that the identified property is derived from criminal conduct committed within the framework of a criminal organisation and that conduct is liable to give rise, directly or indirectly, to substantial economic benefit. Factors for confiscation include the property’s disproportionate value to the lawful income of the affected person, lack of a legitimate source, and the affected person’s connections to criminal organisations. Moreover, the Preamble (par. 34) clarifies that it is not a precondition for the confiscation of unexplained wealth that the individual offences must be proven, but rather that there are “sufficient facts and circumstances for the court to be satisfied that the property in question is derived from criminal offences”. Therefore, the Directive imposes a lower burden of proof for this type of confiscation than the proof beyond reasonable doubt required for a conviction in a criminal court.

At first glance, the confiscation of unexplained wealth is meant to be an extraordinary measure, applicable solely under two procedural conditions: i) in cases where other forms of confiscation cannot be imposed on the suspected proceeds, and ii) the suspected proceeds are connected to an offence committed as part of the activities of a criminal organisation, and not to other crimes. However, this limited scope is not binding for member states, which are not prevented by the Directive “from adopting measures that enable the confiscation of unexplained wealth for other crimes or circumstances” (par. 35 of the Preamble).

This is not the first time a new form of confiscation has been introduced to specifically target the proceeds of organised crime. FD 2005/212/JHA was the first to establish the extended confiscation of the assets of individuals convicted for offences committed solely in the context of a criminal organisation or terrorism. The scope of such confiscation was expanded by Directive 2014/42/EU, which stipulated that extended confiscation may be triggered if a person is convicted of at least one of the crimes listed in par. 2 of Article 5. Today, per Article 14 of the latest Directive on confiscation and asset recovery, extended confiscation may be imposed on property belonging to a person convicted of any offence, as long as this offence is liable to give rise, directly or indirectly, to economic benefit.

The expansion of the scope of confiscation can also be observed in relation to non-conviction-based confiscation, which had been introduced by Directive 2014/42 and was initially applicable in cases where confiscation following a conviction was not possible due to the illness or absconding of the suspected or accused person. The latest Directive expanded its scope, and now, in Article 15, it is stipulated that member states must take the necessary steps to enable confiscation where criminal proceedings have been initiated but could not be continued due to the following circumstances:

The trend of initially designing new forms of confiscation to target the proceeds of specific serious crimes under strict conditions, and later expanding their scope after their introduction into national legal systems, raises concerns that the newly adopted confiscation of unexplained wealth may follow the same path. Indeed, time will tell whether any asset without sufficient evidence of its origin will be subject to this form of confiscation, transforming it from an extraordinary to an ordinary measure.

Crime should not pay. However, it is important to question whether the need to take the profit out of crime can be satisfied by introducing new forms of confiscation, which are invasive to individual rights and the guarantees of a fair trial. Statistics indicate that despite the successive introduction of invasive legal tools, laundered criminal wealth in the EU is still on the rise. A better solution to this problem can be found in smarter due diligence rules, monitoring mechanisms, and the exchange of information between asset recovery agencies. Fortunately, the new Directive provides sets of rules in some of these areas, which may prove more efficient in combating illicit enrichment than overly aggressive types of confiscation.