COMMISSION STAFF WORKING PAPER EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENTAccompanying theProposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND THE COUNCILon the freezing and confiscation of proceeds of crime in the European Union /* SWD/2012/0032 - COD/2012/0036 */
COMMISSION STAFF WORKING PAPER EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT
Accompanying the
Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND THE COUNCIL
on the freezing and confiscation of proceeds of crime in the European Union Disclaimer: This executive summary commits
only the European Commission’s services involved in its preparation and does
not prejudge the final form of any decision to be taken by the Commission
1.
Problem Definition
In order to disrupt organised crime activities it is essential to
deprive criminals of the proceeds of crime. Organised crime is essentially
profit-driven. Seizing back as much of these profits as
possible hampers criminal activities, deters criminality by showing that "crime
does not pay" and provides funds to be re-invested into law enforcement or
crime prevention initiatives. The problem addressed by this impact
assessment is the insufficient recovery of criminal assets in the EU. To
date, estimates of money lost to organised crime in the Member States, as well
as data on success in asset recovery, remain limited. Some recent reports and
unofficial sources estimated the annual proceeds from organised crime in some
Member States as very high[1]. The figures provide a
striking contrast with the amounts recovered annually in the Union[2].
Although only some Member States maintain statistics on the amounts recovered
annually from crime, at present the number of freezing and confiscation
procedures in the EU and the amounts recovered from organised crime seem insufficient
if compared to the estimated revenues of organised criminal groups or to the
number of criminal convictions decided by courts for serious crimes. Organised crime activities are often
transnational in nature and the assets of criminal groups are increasingly
invested in other Member States. Pursuing assets located abroad is invariably
more problematic, due to the increased difficulties in tracing them and to
legal obstacles in obtaining evidence and executing freezing or confiscation
orders. Although asset confiscation has a basis in
international law, EU law and Member State laws, these laws remain
underdeveloped and underutilised. It is unlikely that any Member State
confiscates a significant proportion of criminal assets and that the laws are
achieving their stated aim.
2.
Analysis of subsidiarity
The EU has already passed measures relating
to the confiscation and recovery of criminal assets. Following the entry into
force of the Treaty of Lisbon, the legal basis to support action in this field
can be found in Article 82, paragraphs (1) and (2), and Article 83 (1) TFEU. The
most appropriate legal basis and the extent of the EU’s power to harmonise will
depend on whether a specific provision relates to harmonisation or mutual
recognition. Under Article 5(3) TEU, the Union shall
only act if the proposed action cannot be sufficiently achieved by the Member
States. Article 67 TFEU foresees that the Union shall provide citizens with a
high level of security by preventing and combating crime. Confiscating criminal
assets is increasingly recognised as an essential tool to combat organised
crime, which is very often transnational in nature and thus needs to be tackled
on a common basis. This is all the more true in the EU, where the abolition of
internal frontiers makes it easier to commit cross-border crimes. As acknowledged by the Stockholm Programme 2010-2014, the Union must
reduce the number of opportunities available to organised crime as a result of
a globalised economy, not least during a crisis that is exacerbating the
vulnerability of the financial system. The EU is
therefore better placed than individual Member States in sharpening more
efficiently one of the most effective tools to fight organised crime groups. The cross-border dimension of organised
crime assets (increasingly invested outside their home country and often in
several countries) further justifies pan-European action.
3.
Objectives
The overall long-term objective is the
substantial reduction of organised crime revenues and accumulated wealth within
the EU. The general objectives are to combat organised crime, to achieve
justice for victims and to raise public confidence in the criminal justice
system. In line with the underlying components of the problem, four specific
policy objectives can be defined: i) to increase the harmonisation of rules
allowing to confiscate criminal assets, with due respect of fundamental rights
ii) to provide minimum harmonised rules allowing Member States to freeze/seize
and manage criminal assets pending confiscation, with due respect of
fundamental rights, iii) to make it easier for Member States to freeze/seize
and confiscate assets across borders, and iv) to raise utilisation of freezing
and confiscation tools by Member State agents.
4.
Policy Options
In order to remedy the shortcomings
resulting from the problem definition, 21 EU-level policy actions were
identified (some of which are complementary). Given the high number of envisaged policy
actions, the 21 EU-level actions were first screened individually against potential
barriers to implementation, such as i) the existence of an adequate conferral
of power to the EU, ii) proportionality; and iii) compatibility with fundamental
constitutional or criminal law principles of the Member States. The impact on
fundamental rights was also analysed in detail, based on the relevant
jurisprudence of the European Court of Human Rights. Four policy actions were
discarded after the screening against the implementation barriers. The remaining policy actions were grouped
into policy options representing different degrees of EU-level
intervention: a non-legislative option, a minimal legislative option
(correcting deficiencies in the existing EU legal framework which inhibit it
from functioning as intended) and a maximal legislative option (going beyond
the aims of the existing EU legal framework). Within the latter, two maximal
legislative sub-options are analysed, one with and one without EU level action
relating to mutual recognition.
4.1.
Policy option 1 – Status quo
This policy option would involve no new
action at EU level, but constitutes the continuation of existing activities. No
new action at EU level does not mean no change at EU level. Under the Treaty of
Lisbon the existing EU legal framework will, on 1 December 2014, become enforceable
against Member States through infringement proceedings.
4.2.
Policy option 2 – Non-legislative option
Under the non-legislative policy option,
workshops would be used with a view to promoting implementation of existing
confiscation obligations (policy action 1) and promoting implementation
of existing mutual recognition obligations (policy action 12). Utilisation
workshops for government decision-makers in some Member States on the
profitability of asset confiscation work (policy action 15) could increase
utilisation of these tools and provide a forum for the sharing of knowledge and
practitioner experience.
4.3.
Policy option 3 – Minimal legislative option
This option consists of transposition and
utilisation workshops plus additional policy actions addressing identified
deficiencies in the existing legal framework on mutual recognition. In relation
to the enforcement of confiscation orders, this option envisages that the legal
framework could be simplified by consolidating FD 2006/783/JHA and 2005/214/JHA
and extending their scope to include all compensation orders made in the
context of criminal proceedings (policy action 14). This option would also
include the introduction of consolidated mutual recognition forms
(policy action 19). This option would also entail enforcing the primacy
of mutual recognition over mutual legal assistance conventions as
regards requests between Member States (policy action 20). .
4.4.
Policy option 4.1 – Maximal legislative option
without mutual recognition
This option would consist of all policy
actions which do not involve legislative action in relation to mutual
recognition. In order to enhance confiscation powers,
this option would foresee the possibility of confiscating all valuable
benefits, including indirect proceeds (policy action 2) by introducing a wide
definition of "criminal proceeds". As a way to address the foreclosure of
confiscation activities when the criminal procedure is concluded, this option
foresees separating confiscation proceedings from criminal proceedings (policy
action 4) so that financial investigations can be carried out and
unexecuted orders can be enforced also at a later date when criminal
proceedings are finalised. This option would also strengthen
extended confiscation (policy action 5) by extending the scope of the
offences to which it applies and providing for it at least where a court finds
it substantially more probable that the assets of a person convicted of an
offence covered by Article 83(1) TFEU are derived from similar criminal
activities. With a view to addressing barriers to
prosecution, this option would include the introduction of non-conviction
based confiscation in limited circumstances (policy action 6). This would make
confiscation possible in circumstances where a conviction cannot be obtained
because the suspect has died, fled prosecution or sentencing or is unable to
stand trial due to mental illness. Criminals often transfer their assets to
knowing third parties as soon as they are under investigation in order to avoid
confiscation. This option would also include third party confiscation
(policy action 7) for assets received for less than market value and which
a reasonable person in the position of the third party would suspect to be
derived from crime. In relation to the freezing/seizure of criminal assets,
this option foresees the introduction of harmonised minimum standards (policy
action 8). It would also foresee mechanisms to safeguard freezing
(policy action 9), so that Member States would be required to have in place
appropriate mechanisms to ensure that assets in danger of being hidden or
transferred out of their jurisdiction can be frozen/seized immediately by
non-judicial authorities even prior to seeking a court order. With regard to asset preservation, this
option would grant powers to realise frozen assets at least where they
are liable to decline in value or uneconomical to maintain (policy action
10). In the area of utilisation of powers, this
option would introduce reporting obligations (policy action 16) for
Member States, which would help generate statistics which could be used for
evaluation purposes.
4.5.
Policy option 4.2 – Maximal legislative option
including mutual recognition
This option consists of all the
envisaged policy actions (but policy action 19 and 20 partly overlap).
Compared to option 4.1, it also includes the Mutual recognition of all types
of orders (policy action 13). This option would also entail the mutual
recognition of compensation orders (policy action 14) by consolidating
FD 2006/783/JHA and 2005/214/JHA and extending their scope to include all
compensation orders made in the context of criminal proceedings. This option
would also provide for consolidated mutual recognition forms (policy
action 19) and for measures enforcing the primacy of mutual recognition
(policy action 20).
5.
Assessment of Impacts
5.1.
Analysis of Option 1 - Status Quo
On
the ‘do nothing’ option, slow progress can be predicted towards
achieving each of the specific objectives Its economic impact is expected
to be low, resulting from natural progression in assets recovered. The spread
between criminally owned assets and assets recovered by governments is likely
to increase. Its social impact is likely to be negligible, following a slight increase in criminal assets being recovered
in favour of crime victims. This option would have no impact on criminal
behaviour. Without additional action at EU level, criminals are likely to
continue investing their assets in other Member States, thereby increasing the
need for a cross-border dimension of confiscation activities. Overall, significant
gaps would remain, mutual recognition instruments would remain underutilised
and the amount of criminal assets confiscated throughout the EU would remain small
compared to estimates of organised criminal turnover. Whilst the situation without
EU intervention would not be static, the pace of change would be too slow. This
option would therefore not achieve the objective of increasing the recovery of
criminal assets in the Union. Member States support for this option is
unlikely. The European Parliament would be totally dissatisfied with this
solution.
5.2.
Analysis of Option 2 – Non-legislative option
This
option would have a low economic impact. Transposition workshops could
entail a slight positive impact on transposition for the Member States which
have not yet fully transposed the relevant texts. The costs of utilisation
workshop would be negligible and their usefulness would depend on the scale on
which they are organised. Given the severe underutilisation of confiscation
procedures, utilisation workshops could potentially have a more significant
impact upon utilisation and avoid that decisions may continue to be made based
on the assumption that asset confiscation work is unprofitable. The social
impact would be negligible and the impact on criminal behaviour
are quite limited. Overall the added value of the non-legislative option
is likely to be low and its most promising aspect is the utilisation
workshops. This option would hardly achieve the objective of increasing the
recovery of criminal assets in the Union and would draw heavy criticism from
the European Parliament.
5.3.
Analysis of Option 3 – Minimal legislative option
In addition to the economic impacts
of transposition workshops and utilisation workshops, improving mutual
recognition instruments would clearly increase the number of cross-border
enforcement procedures and, to some extent, the value of the assets recovered.
However, it is hard to assess the economic added value of even a significant
increase in the utilisation of mutual recognition instruments. An increased
utilisation in mutual recognition instruments would shift administrative costs
from central authorities to local judicial authorities and the administrative
cost of handling requests from other Member States should in principle
decrease. The time savings resulting from a wider use of mutual recognition (as
opposed to mutual legal assistance) would allow faster cross-border execution
and increase the chances of successful recovery by limiting the risks for asset
dissipation. The envisaged consolidation of mutual recognition forms may
require some initial training for the practitioners, the costs of which would
be likely offset by the benefits. A moderate increase in the number and value
of assets recovered should logically correspond to a moderate increase in social
impact in the form of compensation to victims. Better enforcement of
cross-border procedures would likely result in increased confidence in the
national criminal justice systems and in the EU Area of Justice, Freedom and
Security. In relation to fundamental rights a low impact on the right to
property is expected. A slight impact on criminal behaviour can be
expected. A better enforcement of cross-border procedures may have some displacement
effects, resulting in a net capital flight of criminal money out of the EU,
with a slight negative impact on the illicit economy and on the economies of
third countries. Overall the added value of the minimal legislative
option is likely to be moderate. This option would barely
achieve the objective of increasing the recovery of criminal assets in the
Union and would likely not be considered as an adequate response to the problem
by the European Parliament.
5.4.
Analysis of Option 4.1 -
Maximal legislative option without mutual
recognition
In addition to the transposition workshops and
utilisation workshops, most policy actions, considered in isolation, would have
at least a moderate economic impact. Because of the number of policy
actions and the severe lack of data on both the amounts frozen, confiscated and
recovered and the costs of carrying out confiscation-related activities, it is
not possible to provide a quantification of the cost of this option. Moreover,
in many cases implementation costs may differ depending on the characteristics
of the Member States. In order to address the lack of data, the main
economic analysis presented is an EU27 profitability estimate based on a
model which uses proxy indicators to extrapolate from a detailed analysis of
income and cost in the UK (the only Member State for which income and costs for
all elements of the asset confiscation system can be estimated and which has a confiscation
system that is a reasonable approximation of the maximal legislative sub-option)
Although only indicative, the results of this exercise are encouraging: 21
of 27 Member States are indicated by the model to be profitable
(many of them highly profitable) for this option. The fact that asset
confiscation work appears to be potentially profitable in most Member States pleads
in favour of EU-level intervention. It can be assumed that recovering more
assets in favour of the State will have a significant social impact as it
will, at least in some Member States, go hand in hand with recovering more
assets in favour of victims of crime. Confiscating criminal assets will cause
public confidence in criminal justice to rise. Actions having a significant positive
impact upon confiscation tools (eg Actions 5 on extended confiscation, 6 on
non-conviction based confiscation or 7 on third party confiscation) are also
those having the biggest impact on fundamental rights. A limitation of
the right to property and right to a fair trial of the defendant must be
justified, respect proportionality and be accompanied by adequate safeguards. The
European Court on Human Rights (ECtHR) has rendered many decisions, consistently
upholding their application of non-conviction based confiscation regimes in
particular cases. However, it has avoided ruling on the principled question of
their compatibility with the European Convention on Human Rights. Reversals of
the burden of proof concerning the legitimacy of assets have so far survived
the scrutiny of the ECtHR, so long as they were applied fairly in the
particular case, with adequate safeguards in place to allow the affected person
to challenge these rebuttable presumptions. While the ECtHR has consistently upheld
extended confiscation regimes in specific cases, their compatibility with the
Convention is assessed on a case by case basis. Again, the degree of procedural
safeguards afforded to the defendant plays a determinant role in assessing the
proportionality of the measure. A strong argument in favour of justifying third
party confiscation is the case where assets are claimed both by the third party
and by a victim. If the perpetrator of a crime has insufficient assets to meet
a claim (as is often the case), measures in favour of the third party would
weaken the position of the victim. Temporary measures such as freezing orders may,
due to their provisional character, justify further limitations of certain
rights and principles of due process, provided that sufficient safeguards or
remedies are available and those limitations respect the essence of those
rights and principles. If applied with proportionality and complemented with
adequate safeguards, laid down in the EU legislative proposals, the measures in
this policy option would respect fundamental rights. The impact on criminal behaviour of
this option would be significant, as non-conviction based confiscation (even in
limited circumstances) and third party confiscation would oblige criminals to
change their practices and make it more difficult for them to hide their
assets. This option could cause moderate capital flight of criminal money to
non-EU countries and have a significant negative impact on the illicit economy
and on the economies of third countries. Overall the added value of this
option is likely to be significant. The immediate impacts of
implementing this option include stronger systems for confiscation, freezing and
managing assets. However, this option would also bring an important impact on utilisation.
While utilisation workshops would inform Member State decision-makers about the
potential profitability of asset confiscation work and thus empower them to
promote change, more powerful legislative tools would encourage utilisation by concretely
raising the chances of successful intervention. Moreover, harmonisation of confiscation
laws can also de facto promote mutual recognition by ensuring that
incoming orders are compatible with the judicial system of the executing Member
State. This option would achieve the objective of increasing the recovery of
criminal assets in the Union. Most likely it would be moderately welcomed by
the European Parliament.
5.5.
Analysis of Option 4.2 - Maximal legislative option including mutual recognition
In terms of economic impact, adding
EU-level action on mutual recognition would improve the results of the EU27
profitability analysis still further. However, given the scarcity of data on
the number and amounts of orders to be enforced in other Member States, a
detailed profitability estimate by country for this policy option is not
possible. The additional costs for Member States liable to receive many foreign
non-conviction based orders for execution would be fully offset by the existing
provision (in FD 2006/783/JHA) that the Member State enforcing a confiscation
order is entitled to retain 50% of the recovered value. The social impact would
be significant. In addition to the impacts of the maximal option without
mutual recognition, the enhancements on mutual recognition can be expected to
result in increased confidence in the EU Area of Justice, Freedom and Security.
The impact on criminal behaviour would also be significant. The
measures in the maximal legislative option coupled with a significantly
improved enforcement of cross-border procedures would likely oblige criminals
to change their practices and could have displacement effects, resulting in a
net capital flight of criminal money out of the EU. This would result in an
even more significant impact on the illicit economy and on the economies of
third countries. Overall, the added value of this option is likely to be
very significant. The combined effects of economic profitability,
significant social impacts and greater utilisation are further enhanced by
actions on mutual recognition which are more far-reaching than those in the
minimal legislative option. This option would be fully consistent with the
objective of increasing the recovery of criminal assets in the Union. It would
likely be welcomed by the European Parliament.
6.
Comparison of Options
The preferred policy option is the
maximal option featuring action on mutual recognition, while the maximal
legislative option without mutual recognition and the minimal legislative
option are ranked equal second. The preferred option respects the principles of
subsidiarity and proportionality because it does not go beyond what is needed
to achieve the objectives described whilst respecting fundamental rights. It
would considerably enhance the harmonisation of rules and enforcement of orders
in the Member States, inter alia by amending existing provisions on
extended confiscation and introducing new provisions on non-conviction based
confiscation, third party confiscation introducing the mutual recognition of
all types of orders (including non-conviction based orders). Its policy actions
are calibrated in order to be proportionate and not unduly affect fundamental
rights.. In order to meet the concerns expressed by defense lawyers, minimum
safeguards at EU level are foreseen with a view to fully comply with the EU
Charter on Fundamental Rights. Monitoring and Evaluation The implementation of the preferred option
should be subject to future monitoring and evaluation. . As a result of the
lack of statistical data on asset confiscation and the poor quality of
available data, it is currently not possible to carry out a proper evidence-based
assessment of the impact of new policies/legislation at EU level or at Member
State level in most countries. In addition, information on the extent to which
mutual recognition facilitates cross-border enforcement is not readibly
available. For this reason, the preferred option
includes the introduction of reporting obligations on the Member States in
relation to asset confiscation work. Data will be collected by judicial
authorities (courts, prosecution offices) asset management offices and other authorites
in charge of asset disposal, at least on an annual basis. The data so collected
will feed into monitoring and evaluation activities and will allow the
Commission to assess to what extent the proposed legislation achieves its
objectives. Particular attention should be paid to those Member States where
data collection is relatively under-developed. In order to monitor the effective
implementation of the proposed legislation the Commission will prepare prepare
an implementation plan and produce regular implementation reports based on
consultations of the Member States and stakeholders. The first report is in
principle foreseen three years after the entry into force of the legislation. The mapping exercise of the asset confiscation
legislation in the Member States which was carried out in preparation for the
present impact assessment could be used as a baseline for monitoring
developments in law and utilisation in the Member States. Evaluations
will also be carried out on a regular basis, the first report being foreseen
five years after the entry into force of the
legislation. The evaluation reports
could include a cost-benefit modelling exercise to assess the current and
estimate the future profitability of asset confiscation work. Transposition
workshops and other expert meetings will also take place to discuss
implementation problems. The exchange of best practices in all the phases of
the confiscation process will continue to take place within the EU Asset
Recovery Offices Platform. [1] In Italy the proceeds of organised crime laundered in
2011 were estimated at € 150 billion (Bank of Italy, 2011). In the UK an
official estimate in 2006 put organised criminal revenue at £15bn per annum [2] For example in 2009 €189m were recovered in the UK
and €60m in the Netherlands.