Special confiscation of assets within criminal proceeding

by Volodymyr Yefymenko

Causes of special confiscation and its order are regulated by the following:

Article 96-1, 96-2 of the Criminal Code of Ukraine;

Article 17 of the Code of Criminal Procedure of Ukraine (referring to the seizure of property);

Article 100 of the Code of Criminal Procedure of Ukraine (referring to physical evidences).

Special confiscation is compulsory uncompensated seizure by the court to the state ownership of money, valuables and other property in cases provided for in the Criminal Code of Ukraine subject to the commission of a crime or a socially dangerous act in cases provided for in the Special Part of this Code for which primary punishment in the form of imprisonment or penalty exceeding three thousand personal exemptions is provided, as well as for a range of crimes for committing which such punishment is not provided, however, they can be a subject of special confiscation (the list is given in the Article 96-1 of the Criminal Code of Ukraine)

Special confiscation is applied on the basis of the following:

Court judgement of guilty;

Court judgement of relief from criminal responsibility;

Court judgement of the application of compulsory measures of a medical nature;

Court judgement of the application of compulsory measures of an educational nature.

Special confiscation is applied in cases when money, valuables and other property are as follows:

received as a result of a crime and/or are the profit from such property;

were used for incitement inducement of a person to commit a crime, financing and/or material security or reward for its commitment;

were the subject of crime except those that return to the owner (lawful owner), and, in cases when the latter is not ascertained become state property;

were sought out, made or used as an instrument of crime, excluding those returned to the owner (lawful owner), who did not know and could not know of their unlawful use.

in case the money, valuables and other property were obtained as a result of crime commitment and/or are the profit from such property, were fully or partially converted into other property, then such fully or partially converted property is the subject of confiscation.

If the confiscation of money, valuables and other property obtained from the commission of a crime and/or being the profit of such property at the time of the court judgement on the special confiscation is impossible because of their use or inability to extract them from legally obtained property, or alienation, or due to other reasons, the court shall decide on the confiscation of a sum of money corresponding to the value of such property.

Special confiscation shall also apply in the case when a person is not subject to criminal liability being under the age of criminal responsibility, or criminal incapacity, or relief from criminal liability or punishment on the grounds provided by the Criminal Code of Ukraine, except for the relief from criminal liability in connection with the lapse of time.

Money, valuables, including funds kept in bank accounts or deposited in banks or other financial institutions, other property specified in Article 96-2 of the Criminal Code of Ukraine shall be subject to special confiscation from a third party, if the latter knew or should have known and could have known that such property corresponds to any of the grounds specified in paragraphs 1- 4 of the Criminal Code of Ukraine, Article 96-2.

The above-mentioned information in respect of a third party must be established in the court on the basis of sufficient evidence.

It should be noted that special confiscation cannot be applied to the property owned by a bona fide purchaser.

The issue of special confiscation shall be resolved by the court with making a judgment which puts an end to the criminal proceeding.

In the case of closing criminal proceedings by the investigator or the prosecutor, the issue of special confiscation is resolved by a court judgement on the basis of the corresponding petition which is considered in accordance with Articles 171 - 174 of the Code of Criminal Procedure of Ukraine (regulation of property arrest issues).

It should be noted that the property (money or other property including the profits they bring) of the person convicted for committing the crime of corruption, legalization (laundering) of the ill-gotten money, as well as the one of the related person shall be confiscated unless the court proves lawfulness of such property acquisition.

Together with this, in accordance with the law persons related to the convicted are legal persons who received the indicated property with the assistance of the former.

Special confiscation may be applied only after proving in court by the prosecution that the owner (legal owner) of money, valuables and other property was aware of about their illicit origin and/or use.

It should be noted that legislative exposition of special confiscation bears a lot of scrutiny regarding its application which is constantly being complicated with amendments introduced by the Supreme Soviet of Ukraine therein. Thus, during previous two years the legislator introduced amendments into the Criminal Code of Ukraine and the Code of Criminal Procedure of Ukraine in the part of special confiscation four times already. This undoubtedly could not but affect the elaboration of a unified approach of the judicial system therein.

All this has led to the fact that Attorney General’s Office of Ukraine addressed Specialized Higher Court of Ukraine on trial civil and criminal cases with the proposal to generalize the practice of implementation of substantive and procedural laws on special confiscation in the criminal proceeding on corruption.

Specialized Higher Court of Ukraine (letter dated 29.12.2015 №9-2657/0/4-15) took into consideration the problematic issues and paid attention to the complexity of this issue, however no generalization of the practice therein has followed so far.

It is necessary to pay attention to the fact that the circumstances proving that money, valuables and other possessions subject to special confiscation should be necessarily established by the investigation officer/prosecutor during criminal proceeding. At the same time, in case Company’s assets may be subject to special confiscation, then an investigation officer may address an investigating magistrate with a petition of arrest of such assets that can be satisfied by the judge. 

In this case there is a risk that assets may be frozen for a very long period. Moreover, the owner of the arrested assets is limited in the right to use or dispose of the arrested property. Judgement lien delivered by the investigating magistrate or the judge also brings to the company – asset owner reputation losses. Together with this, resolutions of arrest issued by the investigating magistrate are published without any limitations in the Unified Register of Judgements and are available to a wide public.

According to practice, sometimes judges fail to pay enough attention to complying with presumption of innocence principle and groundlessly supply their verdicts with both proved, set circumstances indicated by the investigator in the application concerning involvement of certain persons or companies to committing a crime. Together with this, judgements of arrest issued by the investigating magistrate are published without any restrictions in the Unified Register of Judgements and are available to wide public.

There are two ways of releasing assets from arrest stipulated by the law – by means of lodging an appeal against the judgement of investigating magistrate or in case the owner of the property appeals the investigating magistrate with sequestration.

The most problematic aspect of the considered issues is when the owner possesses no assets that can be the subject to special confiscation or a procedural status of the participant of criminal proceedings. Thereby, procedurally, such owner is groundlessly deprived of procedural ability to defend own rights and interests during criminal proceedings, prove the principle of good faith of assets acquisition, furnish evidence, participate in their investigation, initiate expertise, implement procedural rights etc.

The situation can be slightly “saved” in case an investigator or prosecutor shall address the judge with a petition of attachment. From the moment of filing such petition the owner of the property acquires procedural rights of the third person whose property arrest is being considered. such person is vested with the rights of the suspected, accused, but only in respect of the property. However, here it is necessary to note that the investigator can file a petition of assets arrest or not. It becomes the right, not an obligation.

Moreover, the company may acquire assets and realize them. In this case there is nothing to be arrested, however, the court may confiscate money in the amount equal to the value of assets in favor of the state.

It should be mentioned that the presence of such legislative gaps concerning the procedure of prosecutor’s proving, on the basis of sufficient proof as the law requires, the circumstances that the third party knew or should have known, or must have known that the assets have been obtained as a result of committing crime or are the profits from the property acquired in such way. In case of the release of a person from criminal responsibility, e.g. according to part 4 of Article 212 of the Criminal Code of Ukraine, the prosecution sends one petition to the court. The stage of court procedure as it is does not exist, the evidence, within competitive procedure, is not examined by the court, the owner of the property, whose assets may be confiscated, does not take part during the consideration of such petition.

If so, then during which process and with the participation of whom will the prosecutor prove, with sufficient evidence, the lack of conscientiousness of acquisition of such assets that are subject of special confiscation?

This is the question without the answer. Nevertheless, at delivery of the judgement of releasing the person from criminal responsibility, the court has a formal right to apply special confiscation to the assets which will bring about expropriation of assets from the owner in favor of the state and amotion.

Similar discrepancies can be observed also in case the prosecution files a petition to the investigating magistrate in accordance with the Articles 170-174 of the Code of Criminal Procedure on the application of special confiscation in case of the closure of the criminal procedure.

Despite legal discrepancies in certain essential aspects of the application of special confiscation, it should be noted that the most essential element of protection of the right of property is European Human Rights Convention, in particular it is the first article of the first protocol to the Convention (right of quiet property possession), article 6 (right of fair trial), article 13 (right of effective remedy), as well as the practice of the European Court of Human Rights.