By Goran Korać, Lawyer
Law office of Tomislav Šunjka
Certainly one of main and basic motive of criminal offences related to organized crime and for committing serious criminal offenses is financial gain. After committing an offence and receiving financial gain, offender and organised criminal group, are trying to find a way to transfer this illegal financial gain and proceeds of crime from illegal flows into legal businesses and activities, so they could afterwards lawfully use it. Consequently, despite the fact that this property and/or proceeds of crime are gained from a criminal offense, offenders and organised groups once again are committing criminal offence of money laundering in a way that they are converting and transferring property while aware that such property originates froma criminal offence doing it so with intent to conceal or misrepresent illegal origin of the property.
Considering above stated, it is clear that it is necessary to provide the competent state authorities with legal mechanisms for tracing, "freezing", confiscation and managing of the property derived from criminal offences. For that reason, Lawmakers in number of countries (Italy, Republic of Ireland, United States of America, Canada, Great Britain) have decided to implement measure of confiscation of the property derived from criminal offence (confiscation of proceeds of crime), by which measure social and public interest, that no one can gain benefits or property by committing criminal offence, is being realised. In relation to this and European Parliament has on February 25th 2014 adopted new Directive on the freezing and confiscation of proceeds of crime in the European Union which gives and provides much wider powers (authorisations) to Member states relating to regulating measure of confiscation of the property derived from criminal offence.
In any of aforementioned legal systems, primary goal and purpose of this measure (confiscation of the property derived from criminal offence) is neutralization and confiscation of proceeds of crime.
In Serbian criminal law this measure (confiscation of the property derived from criminal offence) does not represent real criminal sanction. It represents sui generis measure, different from traditional criminal sanctions such as penalties (imprisonment or monetary fine), cautionary measure or security measure.
The purpose of this measure is both prevention and repression. Preventive purpose is being achieved by putting into perspective to all of the offenders that property derived from criminal offence shall be confiscated from them in criminal proceeding, while at the same time and repressive purpose is being realised through confiscation of the property from the offenders.
Also, by seizing the property numerous other publicly approved goals and objectives are being achieved: prevention of committing future offences considering that proceeds of crime are representing main reason and motive for most of the offenders, prevention of transferring illegally obtained funds and property in lawful use, confiscation and limitation of the funds for committing criminal offences in future, rule of law, as well as public and social interest that no one can gain benefits by committing criminal offences, confiscation of the property is being done in favour of the state and where confiscated property becomes property of the state.
A confiscation of proceeds of crime i.e. confiscation of property derived from criminal offence, as criminal measure towards an offender, has been regulated in criminal law of Republic of Serbia by Article 91, Article 92 and Article 93 of Criminal code of Republic of Serbia (Official Gazette of RS, No. 85/2005, 88/2005 - correction, 107/2005 - correction, 72/2009, 111/2009, 121/2012 and 104/2013; hereinafter referred to as Criminal code) and by Law on confiscation of the property derived from criminal offence (Official Gazette of RS, No. 32/2013; hereinafter referred to as the Law).
Previously, it is should be noted that Criminal code and Law on confiscation of the property derived from criminal offence use two different terms for determining property and/or benefits gained from committing criminal offences. The difference is only of terminological nature. While Criminal code use term proceeds of crime, new Law on confiscation of the property derived from criminal offence use the term property derived from criminal offence.
Serbian Criminal code regulates confiscation of proceeds of crime in general by provisions of Article 91, Article 92 and Article 93. It stipulates that no one can keep the proceeds of a criminal offense, and that this proceeds of crime shall be seized under the conditions and in the manner provided by particular Law. Criminal code prescribes that it is possible to confiscate money, things of value and other material gain gained from criminal offence and prescribes that offender may be obliged, if confiscation is not possible, to handover as replacement some other property which respond to the value of property derived from criminal offence or to pay an amount which responds to the value of property derived from criminal offence. Criminal code also stipulates that, criminal court, when deciding on seizing of the proceeds of crime, is obliged to protect interest of injured party (victim) in a way that court shall seize the proceeds of crime only if proceeds of crime exceed the amount of property claim of injured party.
In relation to Criminal code, Law on confiscation of the property derived from criminal offence, as particular Law, regulates confiscation of the property in details and determines conditions for seizure of property, criminal offences for which seizure of the property may be imposed, term and definition of property which may be confiscated, term and definition of the property owner i.e. person from which is possible to seize property as well as competent authorities for tracing, confiscation and managing of the property derived from criminal offence as well as rules of procedure for confiscation of the property and rules of procedure for international legal assistance in respect to confiscation of the property.
It is important to point out that provisions of Law on confiscation of the property derived from criminal offence are being applied only to specific and serious criminal offences such as: criminal offences related to organised crime; abduction; criminal offences against property (criminal offence of aggravated/compound larceny, grand larceny, fraud, extortion); criminal offences against economic interests (counterfeiting money, forging securities, forgery and misuse of credit cards, tax evasion, money laundering, abuse of position of responsible person); unlawful production, keeping and circulation of narcotics; showing pornographic material and child pornography; criminal offences against public peace and order (Illegal crossing of state border and human trafficking); criminal offences against official duty (abuse of office, fraud in service, embezzlement, soliciting and accepting bribes, bribing); criminal offences against humanity and other rights guaranteed by international law (war crimes against civilian population, human trafficking, international terrorism).
Law determines definition of property in a way that property represents goods of every kind in Republic of Serbia or abroad, material or non-material, movable or immovable, assessable or not assessable but of a high value as well as documents in any form which prove the right or interest on this good. As property it is considered any income or other benefit gained, directly or indirectly, from criminal offence. Also, property which may be subject of confiscation may be any other property of the owner which is in obvious disproportion to his lawful income.
Compared to Criminal code, definition of a property determined by Law on confiscation of the property derived from criminal offence has been set wider in a way to include all of the goods and other benefits which may derive from a crime.
In accordance with provisions of the Law on confiscation of the property derived from criminal offence, property owner shall be considered offender and/or offender’s associate as well as decedent, legal successor, or a third person. In this way, lawmaker has expanded list of persons from which it is possible to confiscate the property derived from criminal offence by prescribing that it is possible to confiscate property and from other third persons, natural and legal persons, to whom property derived from criminal offence has been transferred to, leaving the option to confiscate the property derived from criminal offence and from decedents or a legal successors. Doing it so, Lawmaker has eliminated possibility of a misuse in a way that some persons would transfer this property without compensation to some other third person in attempt to unable confiscation of the property derived from criminal offence.
Special authorities for tracing, confiscation and managing of the property derived from criminal offence are being set by the Law. Law stipulates that competent authorities for tracing, confiscation and managing of property derived from criminal offence are: Public prosecutor office, Court, Organisational unit of Ministry of internal affairs for financial investigation (hereinafter referred to as: the Unit) and Directorate for managing of confiscated property (hereinafter referred to as: the Directorate), as part of Ministry of justice.
The Unit is specialised organisational part of Ministry of internal affairs, competent for tracing property derived from criminal offence, while Directorate is state authority which manages temporary and permanently seized property derived from criminal offence; manages property temporary seized by the Order of a Public prosecutor; manages other objects (objects used or intended to be used in the commission of a criminal offence); manages proceeds of crime in accordance with Article 91 and 92 of Criminal code; manages property given as a bail in criminal proceedings; performs evaluation of a confiscated property; stores, preserves and sells temporary seized proceeds from crime and operates with funds received; keeps records on property and criminal proceedings in which confiscation of a property derived from criminal offence has been determined, participates in the proceeding for providing international legal assistance, performs training of government officials in respect to confiscation of a property derived from criminal offence.Competent authorities for tracing property derived from criminal offence are Public prosecutor office and Unit. A proceeding for tracing of a property derived from offence is initiated by Order of a Public prosecutor. The Unit conducts financial investigation against the owner in cases when reasonable suspicion exists that it has gained property by committing a criminal offence. Financial investigation is being conducted urgently. During criminal investigation evidences on property, lawful income and expenses of a defendant and defendant’s associates are being collected. All of the data and information obtained during the investigation are confidential and secret. During this proceeding Unit is entitled to request access, access and download data and information from electronic and other databases of state authorities, organisations and public services as well as to take over information on property, income and life expenses of owner the property. In respect to financial investigation, Public prosecutor has specific authorisation as to give Order to bank or other financial institution to deliver to the Unit records and statements of business and personal bank accounts of the owner.
Law provides possibility of temporary or permanent confiscation of the property. Both of confiscations types are being performed upon of the Request of public prosecutor.
Considering of a phase of a criminal proceeding, Decision upon of the request for temporary confiscation of property delivers judge for previous proceeding or president of panel of judges. Public prosecutor is entitled to deliver Order on prohibition of disposal of a property and Order on temporary confiscation of movable property, in case if there is risk that owner shall dispose with property derived from criminal offence. Public prosecutor may deliver such Order before court delivers decision on confiscation of the property in which case Order shall be valid until court delivers decision on confiscation of the property derived from criminal offence, but not longer than three months after delivering of order.
Court delivers Decision on temporary confiscation of a property, in eight days from the day of receiving of the Request, only if following conditions are met:
-If reasonable suspicion exists that a natural or legal person has committed one of the offenses listed in the Law,
-If reasonable suspicion exists that property of the owner has derived from criminal offence,
-If value of the property derived from criminal offence exceeds amount of one million and five hundred thousand dinars, and
-If there is danger that later confiscations of the property derived from the criminal offence would be difficult or impossible.
Decision on temporary confiscation of the property must contain information about the owner, legal term of a criminal offence, information on type and value of the property which is being confiscated, circumstances from which it is possible to determine reasonable suspicion that property has derived from criminal offence, reasons which justifies temporary confiscation of the property, amount of time on which property has been confiscated and information on legal remedy. Against this Decision, Complaint may be filed by unsatisfied party in eight days from the day of receiving of a Decision, whereas Complaint does not postpone execution of the Decision. Panel of judges of a same court shall make decision upon the Complaint of unsatisfied party without holding a hearing.
Decision upon of a Request for permanent confiscation of the property derived from criminal offence is being delivered by the court on main hearing or by panel of judges without hearing after the criminal proceeding is completed.
In respect to provisions of the Law regarding permanent confiscation of the property, it is important to note that it contains and regulations regarding property claim of injured party stipulating that in case if property claim has been awarded to the injured party court shall extract awarded property claim from confiscated property.
Directorate is competent authority for managing temporary and permanently confiscated property. It is obliged to manage the confiscated property with care of a good businessman and care of a good master of the house. Directorate performs it duties in cooperation with other state authorities such as National bank of Serbia, Ministry on internal affairs, National museums, etc.
Also, Directorate organises sale of the confiscated property. Sale of the property is being organised by public auction under the estimated price which is determined by the Directorate. Law prescribes, that if for any reason, confiscated property is not sold in time period longer than a year, property shall be given for humanitarian purposes.
However, if it is established in criminal proceeding that property has not derived from a criminal offense, property or funds obtained from the sale of the property shall immediately be returned to the owner.
The Law on confiscation of the property derived from criminal offence provides rules of procedure for providing international legal assistance in respect to confiscation of the property derived from criminal offence. It stipulates that international assistance can be realised on the basis on international treaties and rules on reciprocity.
International legal assistance implies: providing of legal assistance in tracing of property derived from criminal offence, prohibition of disposal and temporary and permanently confiscation of the property derived from criminal offence.
Request of the foreign authority is to be delivered to domestic competent authority through Ministry of justice of Republic of Serbia.
Request of the foreign state authority must contain: name of the authority which submits the Request, information on the person to which request relates to (name, date and place of birth, citizenship and place of residence), information on property derived from criminal offence and explanation of connection between the person to which request relates to and mentioned property and specific actions to be performed.
In accordance with the Law, domestic state authority in order to provide legal assistance to foreign state authority, must determine whether following conditions are fulfilled: requested measure is not contrary to the basic principles of the domestic legal system and order; execution of a foreign authority request would not harm sovereignty, public order or other interest of Republic of Serbia; in front of the foreign authority, in proceeding for international legal assistance on confiscation of the property, all legal standards and right to a fair trial are complied, whether between Republic of Serbia and foreign state exists reciprocity.
If all of the conditions are met, Public prosecutor delivers Decision on adoption of the request for international legal assistance and issues order to a Unit to perform actions in order to trace and identify property derived from criminal offence, while the court delivers decision on prohibition of disposal i.e. temporary confiscation of property derived from criminal offence for which foreign state authority has requested assistance. After delivering Decision on temporary confiscation of the property derived from criminal offence, foreign authority may start proceeding for permanent confiscation of the property in Republic of Serbia.
Up to this moment, enforcement of the Law on confiscation of the property derived from criminal offence has given significant results. In almost two hundred proceedings, movable and immovable property from around three hundred and fifty people has been seized. Two hundred and thirty seven flats and fifty houses have been temporary confiscated and all of them have been currently leased from which state monthly collects one hundred thousand euros. Numerous high value properties have been permanently seized, such as villa in centre of Belgrade (estimated value of around two million euros) in which is kindergarten currently located. Apartments on Zlatibor and Fruska Gora Mountain as well as part of the hotel resort in Croatia. Directorate has at his disposal sixty six garages, sixty five business offices, more than a hundred hectares of agricultural land as well as two petrol stations. Beside aforementioned, sixty companies, four hotel and five restaurants have been confiscated and at this moment Directorate is managing them through a representatives. At the same time significant movable property has been confiscated: over hundred cars, seventeen kilograms of golden jewellery, eleven kilograms of gold in bars, many luxury watches and twenty nine paintings.
In terms of interpretation of the Law by the court, great number of court practices exists, but one of the significant court cases was attempt to “freeze the property” of Russian businessman Boris Berezovski in Republic of Serbia by prohibiting disposal of the property in certain companies in Serbia such as „Imlek“, „Knjaz Milos“ and „Bambi “ under the Request of main public prosecutor of Russian federation. In this case, second instance court has rejected request for providing international legal assistance because, considering that in court proceeding it has been established that “there is no reasonable suspicion that persons, stated in Request for international legal assistance, had by conducting stated actions, money acquired by activities of organised group, invested in purchase of capital of stated companies”.
The Law on confiscation of the property derived from criminal offence, rounds up all of the regulations regarding confiscation of the property in criminal proceeding in one particular Law.
So far, Law on confiscation of the property derived from criminal offence has given significant results and positive effects in combating criminal in Republic of Serbia. It has been well accepted by judges, prosecutors, attorneys and lawyers as well as general public as instrument in fight against criminal, because it has achieved goals and purposes for which it has been adopted.
The main objection of experts and lawyers refers to provision of the Law which allows sale of temporary confiscated property before delivering of a Decision on permanent confiscation of property, whereas this shortcoming of the Law has been eliminated in application of the Law, considering that movable property are not being sold by the Directorate until delivering of a Decision on permanent confiscation of the property. Beside this objection, experts and lawyers are pointing out in public necessity that this Law has to be consistently applied in all of criminal proceedings in which courts establish existence of proceeds of crime and not as it is today, only in those criminal proceedings in which courts have established existence of proceeds of crime in high value. The full significance and impact of this Law is yet to be seen considering that it is in force for only a year and considering that judges and prosecutors’ offices are to begin with a more comprehensive application of the Law.
In respect to further development and improvement of this institute in criminal law of Serbia, Lawmaker has to bear in mind regulations provided by Directive on the freezing and confiscation of proceeds of crime in the European Union adopted by European Parliament on February 25th 2014 which gives more wider powers (authorisations) to Member states considering that it gives powers (authorisation) to Member states to permanently confiscate property derived from criminal offence, even before the final conviction and even if defendant is ill or criminal proceeding is conducted in absentia.