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EU legislator strengthens minimum rules on asset recovery and confiscation in criminal matters
EU legislator strengthens minimum rules on asset recovery and confiscation in criminal matters
31 July 2024
Series
Blogs
31 July 2024
The EU remains under a persistent threat of rising organised crime, generating substantial revenues that are increasingly being laundered through parallel financial systems. The European legislator is therefore increasingly taking new initiatives to tackle the expansion of organised crime, as well as further steps to strengthen the existing legal framework.
With the aim of depriving criminals of their illicit profits and disrupting their criminal activities, the European legislator has recently adopted Directive 2024/1260 on asset recovery and confiscation (the “Directive”). The Directive updates the existing legal framework by laying down new, reinforced minimum rules on (i) tracing and identification, (ii) freezing and confiscation and (iii) management of assets within the framework of criminal proceedings.
Scope of application
The Directive seeks to set minimum requirements on asset recovery and confiscation of property resulting from a broad scope of criminal activities. This includes revenues from human and drug trafficking and also money laundering, violations of EU restrictive measures (e.g. violations of EU sanctions against Russia), active and passive corruption in the private sector and environmental offences.
Despite its broad scope of application, the provisions on tracing and identification are nonetheless limited to offences punishable, under national law, with a prison sentence of at least one year.
Tracing and identification
The Directive requires Member States to have competent authorities in place to carry out asset-tracing investigations when they initiate an investigation in relation to criminal offences that are likely to give rise to substantial economic benefits. Member States are allowed to confine this obligation to offences that have been committed within the framework of a criminal organisation.
To facilitate cross-border co-operation in relation to these asset-tracing investigations, each Member State must establish at least one “asset recovery office”. This is not a new concept (it already existed under the previous EU directives on asset recovery) but the Directive gives these asset recovery offices additional powers, in particular with a view to cross-border co-operation. This includes the exchange of information with other asset recovery offices and with the European Public Prosecutors Office (EPPO), which became operational in 2021.(for more information on the EPPO see our previous publications: The European Public Prosecutor’s Office – the first step to a powerful, cross-border investigation authority?, Europe’s new Chief Prosecutor has her hands full from the outset and our Global Business Crime Outlook podcast series episode 8.)
Freezing and confiscation
The overall aim of the Directive is to oblige Member States to ensure that their competent authorities can efficiently freeze and confiscate property, proceeds or instrumentalities that have been derived from or involved in criminal activity.
Member States should take all measures to enable the freezing of property that are necessary for a potential confiscation. The freezing measures consist of both freezing orders and immediate action when needed to preserve the property until a freezing order has been issued.
As far as confiscation measures are concerned, the Directive sets out extensive obligations for Member States to enable the confiscation of instrumentalities and proceeds stemming from criminal offences following a conviction. This may include:
As far as asset recovery is concerned, the Directive also provides for the obligation to take account of the claims (and consequent compensation) of victims within the relevant asset-tracing, freezing and confiscation proceedings. Additionally, Member States are encouraged (but not obliged) to take measures allowing the possibility of using confiscated property for public interest or social purposes.
Management
Finally, the Directive requires Member States to ensure the efficient management of frozen and confiscated property until its disposal further to a final confiscation order. To facilitate this, each Member State must establish at least one “asset management office”. In addition to facilitating the efficient management of frozen and confiscated property, the asset management office also has an important role in cross-border co-operation with other competent authorities for tracing and investigation of property, as well as the management of frozen and confiscated property.
Similar to the asset recovery offices, the asset management offices were already established under the previous legal framework. However, with the Directive, their organisation and tasks will have to be re-assessed and strengthened where necessary.
It is up to Member States to decide how they want to set up the asset management office. This can be the same authority as the asset recovery office or the tasks can be divided between multiple competent authorities. Considering the overlap between tasks and the essential role both of them have in facilitating cross-border co-operation, it is not surprising that most Member States have so far decided to set up one single office.
The Directive entered into force on 22 May 2024. Member States have until 23 November 2026 to transpose the minimum requirements set out in the Directive into their national laws.
Additionally, Member States are required to adopt a national strategy on asset recovery by 24 May 2027. This should include, among other things, the resources dedicated, training organised and role and responsibilities of the competent authorities. Once adopted, the strategy should be updated at regular intervals of no longer than five years.