Ensuring that crime does not pay
Organised crime is one of the greatest threats to the security of the European Union. According to Europol’s 2021 Serious and Organised Crime Threat Assessment, 70% of criminal groups operating in the European Union are active in more than three EU countries, and 65% of them are composed of members of multiple nationalities. The recent major investigations of EncroChat, Sky ECC and ANOM illustrate the transnational reach and threat of organised crime in the EU.
Going after the money – confiscation to fight organised crime
Organised crime is profit-driven - its illegal activities generate profits estimated to be around at least €139 billion every year. These profits allow organised crime to fund further criminal activities, and infiltrate the legal economy and public institutions.
The most effective way to fight organised crime is going after criminals’ money, notably with asset recovery measures, which allow law enforcement authorities to discover and dismantle the broad networks of criminal organisations operating within and beyond the European Union. On 25 of May, the Commission adopted a proposal for a Council Decision to add the violation of EU restrictive measures to the areas of crime under article 83(1) of the Treaty on the Functioning of the European Union and a Communication entitled “Towards a directive on criminal penalties for the violation of Union law on restrictive measures”. Following the adoption on 28 November of the Council Decision identifying the violation of Union restrictive measures as an area of serious crime that meets the criteria set out in Article 83(1) of the TFEU, the Commission adopted on 2 December a proposal for a Directive to harmonise criminal offences and penalties for EU restrictive measures to ensure the enforcement of EU restrictive measures through criminal law. Once into force, the Directive will ensure the applicability of the entire collection of confiscation measures, including provisions on management, to cases of violation of sanctions by the oligarchs or their associates.
The asset recovery process includes several phases:
- tracing and identification of the illegally acquired assets
- freezing of the assets with a view to their possible subsequent confiscation
- management of frozen assets to preserve their value
- confiscation of the illegally acquired assets
- disposal of the confiscated assets, which could include their reuse for public or social purposes.
A common approach to confiscation: the new Directive on Asset Recovery and Confiscation
Confiscation is a strategic priority in the EU's fight against organised crime as highlighted in the EU Strategy to Tackle Organised Crime.
On 25 May 2022, The Commission presented a proposal for a new Directive on Asset Recovery and Confiscation, building upon previous legislation, particularly the Directive on the freezing and confiscation of proceeds and instrumentalities of crimes, Council Decision on Asset Recovery Offices, and Framework Decision on Confiscation of Crime-Related Proceeds.
The proposal provides a new comprehensive set of rules that addresses asset recovery from beginning to end - from tracing and identification, through freezing and management, to confiscation and final disposal of assets. In particular:
- Clear rules on asset tracing and identification to boost cross-border cooperation. The proposal will allow Asset Recovery Offices and competent national authorities to trace and identify assets in criminal investigations on the most serious crimes in Europe. New rules will provide the Asset Recovery Offices with the powers and information needed to trace and identify assets, and facilitate cross-border cooperation. The new rule will also ensure that financial investigations to trace and identify assets become an automatic reflex in investigations against the most serious forms of crime.
- New powers to freeze assets and make sure that they do not disappear before the criminal proceeding is finalised. The new urgent freezing powers for Asset Recovery Offices will ensure that illicit assets do not disappear before a freezing order is issued.
- A new confiscation framework to ensure criminals are deprived of their illegal assets. In order to strengthen confiscation measures in EU countries, the proposal reinforces the situations where assets can be confiscated without a conviction, such as in cases of death or immunity of the accused. Moreover, the proposal enables the confiscation of unexplained wealth linked to criminal activities to make sure that no illegal assets remain in the hands of criminals when they have been able to cover their tracks and hide the illegal origin of their properties. Safeguards have been reinforced to ensure that those affected by the measures have effective remedies.
- An effective management of assets to ensure that property does not lose value. The management of frozen assets is a challenge, as they may start losing value from the moment they are frozen until the final confiscation decision. New rules on management will minimise costs and maximise the value of assets. This will be beneficial for national country budgets, victim compensation, or for reusing those assets for social purposes. This revised Directive will require EU countries to establish an Asset Management Office, which will make sure assets are well managed. This is important for maintaining their value throughout criminal proceedings. The proposal also foresees the possibility to sell a frozen asset before it is confiscated. Yet, the procedural safeguards for the owners are ensured by providing them the right to be heard.
- Strengthening cooperation among different actors. Many authorities are involved in asset recovery, and it is important that they work together towards common goals. In order to achieve an efficient asset recovery system, the revised Directive will require EU countries to develop national strategies on asset recovery, including actions to ensure that all actors cooperate and have adequate resources. The new rules will also strengthen cooperation with the European Public Prosecutor (EPPO), Europol, Eurojust and third partners. Moreover, EU countries will have to set up registries with information on frozen and confiscated assets as well as collect statistics to measure progress made in tackling criminal finances.
Implementing EU sanctions
EU sanctions are only as effective as they are enforced.The proposed new rules on asset recovery and confiscation measures will contribute to the effective implementation of sanctions though boosting the capacity of EU countries to trace and identify assets in implementing EU sanctions, such as the ones set out against Russia and Belarus’ individuals.
The proposal empowers Asset Recovery Offices to trace and identify assets of sanctioned individuals and to cooperate with EU agencies and non-EU countries in this respect. This is to ensure that the assets of sanctioned individuals are frozen before they disappear or change ownership.
On 25 of May, the Commission adopted a proposal for a Council Decision to add the violation of sanctions to the areas of crime under article 83(1) of the Treaty on the Functioning of the European Union and a Communication entitled “Towards a directive on criminal penalties for the violation of Union law on restrictive measures”. When the violation of sanctions will be harmonised at EU level, the entire collection of confiscation measures, including provisions on management, will become applicable in cases of violation of sanctions by the oligarchs or their associates
The new Commission proposal on Asset Recovery and Confiscation builds upon and replaces three legislative instruments:
- The 2007 Asset Recovery Offices Council Decision, which facilitates information exchange and cooperation in tracing criminal property among asset recovery offices
- The 2014 Confiscation Directive 2014/42/EU, which establishes minimum rules on freezing, confiscation and management of criminal property
- The 2005 Framework decision on confiscation 2005/212/JHA,which has been for the most part replaced by the Confiscation but remains in place for so called standard confiscation measures
The proposal aims at reinforcing asset recovery and confiscation by bringing together rules scattered in three different EU lawsinto one single Directive. The Directive strengthens the role of competent authorities, from early identification of illicit property up to its confiscation, ensuring swift cooperation among all actors and a more strategic approach to asset recovery. This is also an improvement of the cross-border dimension of cooperation between partners in other EU countries.
The Commission conducted an evaluation and impact assessment, which concluded that EU rules on asset recovery and confiscation are effective in achieving their aims only to a limited extent.
In June 2020, the Commission adopted a report which assesses the implementation of the Directive 2014/42/EU. The report also follows on from the Commission staff working document on the analysis of non-conviction-based confiscation in the EU that was adopted in 2019 and responds to a request of the European Parliament and the Council to assess the feasibility and possible benefits of introducing additional common rules on non-conviction based confiscation. The report also examines the work of the Asset Recovery Offices, and the challenges they face when carrying out day-to-day tasks. The Commission published a study on freezing, confiscation and asset recovery, and its country chapters, to further asses the state of play of asset recovery measures in EU countries.
Other important policies
Organised crime groups are quick to adapt modern technology to their operations on an international scale, usually in more than one EU country. In order to combat organised crime more effectively, investigators should be enabled to follow, freeze and confiscate money transferred to bank accounts in different countries. Measures have been taken at EU level to ensure swifter access to information. The Directive on the use of financial and other information to combat serious crimes grants law enforcement authorities and Asset Recovery Offices with direct access to bank account information for the purposes of fighting serious crime. It aims to improve the cooperation between law enforcement authorities and Financial Intelligence Units and facilitate the exchange of information between Financial Intelligence Units.
In addition, the adoption of Regulation (EU) 2018/1805 on the mutual recognition of freezing and confiscation orders is another significant milestone in the area of asset recovery. The Regulation aims to facilitate cross-border asset recovery and make the freezing and confiscation of criminal assets across the EU quicker and simpler. It applies to all freezing and confiscation orders issued within the framework of proceedings in criminal matters, thus including conviction and non-conviction based confiscation.