EUROPEAN COMMISSION

Brussels, 25.5.2022

SWD(2022) 245 final

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT REPORT

Accompanying the document

Proposal for a Directive of the European Parliament and of the Council

on asset recovery and confiscation

{COM(2022) 245 final} - {SEC(2022) 245 final} - {SWD(2022) 246 final}

Table of contents

1. Introduction    

1.1 Political context    

1.2 Legal context and description of the asset recovery process    

2. Problem definition    

2.1 Problem overview    

2.2.    Specific problem 1: Competent authorities have limited capabilities to swiftly identify, trace and freeze assets    

2.2.1    Driver: limited EU level provisions and in particular of the ARO Council Decision and insufficient human, financial and technical resources allocated to asset tracing    

2.3    Specific problem 2: Inefficient management procedures discourage authorities from launching asset recovery procedures    

2.3.1    Driver: generic requirements of the Confiscation Directive, lack of specialisation of authorities managing assets and insufficient use of the most effective management methods    

2.4    Specific problem 3: Existing confiscation tools do not cover all high revenue-generating criminal markets and do not address criminals’ complex modi operandi    

2.4.1 Driver: narrow scope of the Confiscation Directive    

2.5    Cross-cutting driver: absence of a strategic approach and of commitment to asset recovery by all relevant actors.    

3. Why should the EU act?    

3.1    Legal basis    

3.2    Subsidiarity    

4. Objectives: What is to be achieved?    

4.1    General objectives    

4.2    Specific objectives    

4.3    How do the objectives relate to the sustainable development goals?    

5. What are the available policy options?    

5.1    Baseline scenario: how will the problem evolve?    

5.2    Description of the policy options    

5.2.1 Option 1    

5.2.2 Option 2    

5.2.3 Option 3    

5.2.4 Option 4    

5. 3 Options discarded at an early stage    

6.    What are the impacts of the policy options?    

6.1    Social impacts    

6.2    Economic impacts    

6.3    Environmental impact    

6.4    Fundamental rights impacts    

6.5 Sustainable development goals impacts    

7.    How do the options compare?    

7.1    Effectiveness    

7.1.1    Strengthen asset tracing capabilities    

7.1.2    Ensure efficient asset management    

7.1.3    Strengthen confiscation capabilities    

7.1.4    Improve the overall efficiency of the asset recovery system    

7.2    Efficiency    

7.3    Coherence    

7.4    Proportionality (including impacts)    

8.    Preferred option    

8.1 Policy Option 3    

8.2 REFIT (simplification and improved efficiency)    

8.3 Application of the “one in, one out” approach    

9. How will actual impacts be monitored and evaluated?    

Annex 1: Procedural information    

Annex 2: Stakeholder consultation (Synopsis report)    

Annex 3: Who is affected and how?    

Annex 4: Analytical methods    

Annex 5: Categories and scope of confiscation measures    

Annex 6: Confiscation and fundamental rights    

Annex 7: Evaluation of the existing policy and legislative framework    

1.    Introduction    

1.1 Purpose and scope    

1.2 Sources and methodology    

2. What was the expected outcome of the intervention    

2.1 Description of the intervention and its objectives    

2.2 Points of comparison    

3. How has the situation evolved over the evaluation period?    

3.1 ARO Council Decision    

3.2 Confiscation Directive    

4.    Evaluation findings    

4.1 To what extent was the intervention successful and why?    

4.2 How did the EU intervention make a difference?    

4.3 Is the intervention still relevant?    

5.    What are the conclusions and lessons learned?    

ANNEX 8. Evaluation Matrix    

Glossary

1. Introduction

1.1 Political context

As acknowledged in Europol’s 2021 Serious and Organised Crime Threat Assessment, organised crime is one of the greatest threats to the security of the European Union 1 . The EncroChat, Sky ECC and AN0M 2 cases have shown the extent of organised crime’s transnational reach, its complex modi operandi and unprecedented degree of economic infiltration. With EUR 139 billion of annual profits at their disposal, criminals groups are able to take over vulnerable businesses to expand and cover up illegal activities 3 . Criminal infiltration, alongside organised crime’s widespread use of corruption, is a threat to the Rule of Law and to the integrity of the economy. Moreover, the presence of organised crime in society threatens the Sustainable Development goals of (16), peace, justice, and strong institutions and, through its infiltration into the legal economy, (8) decent work and economic growth. In view of the economic recovery from the Covid-19 crisis, it is more important than ever to tackle the profit-based motivation behind organised crime, taking away money from the hands of criminals. 

Following the announcement of the EU Security Union Strategy of July 2020 4 , the need to eliminate the profits generated by organised crime was further stressed in the EU Strategy to tackle Organised Crime (2021-2025) of April 2021 5 . The latter announced a revision of Directive 2014/42/EU 6 (hereafter the “Confiscation Directive”) and of Council Decision 2007/845/JHA 7 (hereafter the “ARO Council Decision”). This revision is in line with the expectations from the co-legislators. In June 2020 the Council called on the Commission to consider strengthening the legal framework on the management of property frozen and granting Asset Recovery Offices with additional powers, for instance to urgently freeze assets, and with access to a set of public registers 8 . The European Parliament has recently called for enhanced asset recovery rules 9 . These calls complement the previous request by both co-legislators to analyse the feasibility of introducing further common rules on the confiscation of property deriving from criminal activities, also in the absence of a conviction 10 .

These calls are in line with increased international efforts to improve asset tracing and confiscation capabilities globally. The United Nations Conventions on Organized Crime (UNTOC) 11 and against Corruption (UNCAC) 12 , as well as the recommendations of the Financial Action Task Force (FATF) whereby countries are to adopt measures to enable their competent authorities to freeze and confiscate proceeds and instrumentalities of crime. As recently as June 2021, the FATF adopted a report for government authorities that analyses the key obstacles to asset recovery and how to overcome them. At the summit in Rome on October 2021, the G-20 endorsed the adoption of “measures to prevent corrupt actors and organized criminal groups from enjoying the proceeds of their crimes” 13 .

1.2 Legal context and description of the asset recovery process

Asset recovery is a powerful tool of the criminal justice system and the anti-money laundering regime, since it enables Member States to identify, temporarily freeze and ultimately confiscate and redistribute profits originating from criminal activities. By depriving organised crime groups of their illicitly obtained profits, asset recovery is key to limit their capacity to operate, to compensate victims and to restore the damage inflicted by returning profits to affected communities. As criminals take advantage of the integrated nature of the EU’s financial system to launder their proceeds, the recovery of criminal assets requires strong cross-border cooperation and adequate confication tools in all Member States.

The EU legislative framework on asset recovery is composed of three main instruments. The ARO Council Decision requires Member States to set up Asset Recovery Offices to facilitate the tracing of proceeds of crime, and establishes minimum requirements to facilitate their cooperation across borders. The Confiscation Directive, partially replacing instruments dating back to the late 90s and 2000s 14 , sets minimum rules for the freezing, management and confiscation of criminal assets. The most recent legal instrument in force is Regulation (EU) 2018/1805 15 , which facilitates the mutual recognition of freezing and confiscation orders across the EU.

Where they fall within the legal framework of the Union, freezing and confiscation powers must be exercised in full compliance with the fundamental rights enshrined in the Charter of Fundamental Rights. The Confiscation Directive provides for a number of safeguards in this respect, as clarified by a growing body of jurisprudence by the Court of Justice of the European Union, such as the right to an effective remedy before a court.

Asset recovery is a process composed of five phases:

Figure 1: Asset recovery phases

2. Problem definition

2.1 Problem overview

Organised crime has never posed such a high threat to the EU and its citizens. 70% of criminal groups operating in the EU are active in more than three Member States and 65% of them are composed of members of multiple nationalities 16 . Transport routes of drugs, firearms or counterfeit products span across all continents through a global supply chain. Criminal groups engaged in property crime, migrant smuggling or trafficking in human beings carry out their crimes across multiple jurisdictions. VAT fraudsters set up complex schemes across several Member States in order to deceive revenue authorities. Moreover, criminals carry out crimes online from anywhere on the globe, from the illegal distribution of child sexual abuse material to online fraud and cyberattacks. 

While criminal groups have become increasingly sophisticated in their use of technologies such as encryption, their structures and modus operandi have also become more complex, hindering the capacity of law enforcement to tackle them. Organised crime groups cooperate with each other through ad hoc-partnerships and with providers of criminal services. At the same time, they are organised in hierarchical or complex structures where the managerial levels distance themselves from the “foot soldiers” executing the crimes on the ground while reaping most of the economic benefits. Therefore, “those at the upper echelons of the criminal enterprise remain insulated against criminal liability, with their property beyond the reach of law enforcement” 17 .

Moreover, criminals use increasingly elaborated methods to conceal their immense profits. Organised crime is profit-driven, generating at least EUR 139 billion per year, or 1% of the EU’s GDP, with the largest revenues deriving from fraud and illicit drugs 18 . The magnitude of criminal revenues is however likely to be significantly larger, given the intrinsically opaque nature of criminal activities and of the fact that criminals are involved in a wider range of markets than those analysed in existing studies.

Table 1 Summary of revenue estimates in the main markets (EUR million, 2019) 19

Criminals do not only hide illicit assets in the name of relatives or associates, but employ a complex web of bank accounts and front companies across jurisdictions to disguise the audit trail, mixing illicit assets with legitimate property and hiding the source and ownership of funds. They do so by employing professional money launderers who have established a parallel underground financial system to ensure assets cannot be traced 20 .

Against these challenges, and as highlighted in the Evaluation of the ARO Council Decision and of the Confiscation Directive (hereafter “the Evaluation,” see Annex 7), the EU asset recovery system is not well equipped to effectively address the complex modus operandi criminal organisations and to deprive them of their profits. Even though the EU has developed a legal framework promoting the establishment of asset recovery regimes and cross-border cooperation for the recovery of criminal assets, only around 2% of criminal assets are frozen and 1% confiscated 21 . Against this, several Member States have gone beyond the minimum standards provided in the EU rules, creating an uneven level of fight against criminal finances across the Union 22 .

The ineffectiveness of the EU asset recovery system comes from three specific problems: (1) Competent authorities have limited capabilities to swiftly identify, trace and freeze assets; (2) Inefficient management procedures discourage authorities from launching asset recovery procedures and (3) Existing confiscation tools do not cover all high revenue-generating criminal markets and do not address criminals’ complex modi operandi.

Figure 2: problem tree

2.2.    Specific problem 1: Competent authorities have limited capabilities to swiftly identify, trace and freeze assets 

The existing tracing and freezing framework stems from the ARO Council Decision and the Confiscation Directive, which respectively regulate, inter alia, Asset Recovery Offices 23 and the freezing of property which might become the object of a confiscation order. 24 The ARO Council Decision requires Member States to set up or designate at least one Asset Recovery Office for the purposes of the facilitation of the tracing and identification of proceeds of crime which may become the object of a freezing or confiscation order. Whilst Asset Recovery Offices may facilitate the tracing and identification of proceeds of any crime, the Confiscation Directive limits the scope of freezing orders only to the crimes listed in Article 3, and does not include an obligation to trace and identify property which might be subject to freezing and confiscation orders. 25  

The first step in the asset recovery process is the identification and tracing of suspected property which might become the object of a confiscation order. Without early identification of criminal property, it is not possible to subsequently freeze, confiscate and ultimately manage assets in an effective manner. Speed in tracing assets is essential, since criminals can rapidly move funds to avoid detection through the international and EU financial system. For example, one Member State, referring to the 140 requests sent to other Member States for the tracing of illegal proceeds in order to freeze them, indicated that “in almost all cases, the property (e.g. money in bank accounts) was already withdrawn or transferred elsewhere” 26 . The key actors in this phase are law enforcement authorities and Asset Recovery Offices, established in accordance to the minimum obligations of the ARO Council Decision, which tasks them with the facilitation of cross-border tracing and identification of proceeds of crime which may become the object of a freezing or confiscation order.

In the course of their investigation, law enforcement authorities may launch parallel financial investigations to trace the suspects’ assets, from bank accounts to vehicles, high-value goods, real estate or companies. To do so, they are empowered to check databases available to police, apply investigative techniques such as observation or undercover operations, or require financial information from private parties.

Despite the acknowledgement by Member States of the need for using financial investigations when dealing with organised crime from the very start of a criminal investigation 27 , many jurisdictions do not undertake pro-active parallel financial investigations in a routine and expedite manner: in the EU, only eleven Member States automatically launch parallel financial investigations for all forms of crime. Other eight Member States limit this automatism to certain crimes, while in other eight the decision to launch them is left to the discretion of the investigators or to the judicial authorities overseeing the investigation 28 . According to 72% of respondents to the public consultation, which gathered responses from EU citizens, academics, business associations, non-governmental organisations and public authorities, the fact that financial investigations are not systematically launched is one of the main components explaining the low rate of identified assets, a view shared by Asset Recovery Offices 29 .

Even when law enforcement authorities launch such investigations, investigators do not always pay sufficient attention to the economic dimension of crimes. Practitioners have underlined that competent authorities often concentrate on the collection of evidence on the criminal act rather than on their assets 30 . This does not only create risks of criminals laundering their proceeds in those Member States where there is a lower risk of detection. It also results in missed opportunities for cross-border cooperation, since a timely financial investigation is likely to uncover assets in other jurisdictions.

As regards the role of Asset Recovery Offices, the Evaluation shows that their creation has increased the effectiveness in the cross-border identification of criminal assets. However, their capacity to identify and trace assets is still suboptimal. Whilst all EU Member States have established at least one Asset Recovery Office, with 19 Member States have designated one (AT, BE, HR, CY, CZ, DK, EE, FI, EL, HU, IE, IT, LV, LU, MT, PL, PT, RO, SK, Slovenia having designated just a contact point) and seven other Member States designated two (BG, FR, DE, LT, NL, ES, SE), 31 the Offices’ legal framework, which only requires Asset Recovery Offices to be a mechanism to ‘facilitate’ the tracing of criminal assets (Article 1) and promote close cooperation between the authorities involved in the tracing of illicit proceeds and the “direct communication between those authorities” (recital 3), leaves a considerable degree of discretion to Member States regarding their number, legal nature, and powers.

Firstly, Asset Recovery Offices do not have all the necessary powers to efficiently facilitate asset recovery across borders. 27% of offices do not have autonomous tracing powers, and thus have to request and rely on the responsiveness of other competent authorities to trace criminal assets in order to answer to cross-border requests. The lack of tracing powers is more acute when a judge orders confiscation but no sufficient assets have been identified beforehand or they have lost value: 68% of Asset Recovery Offices are not legally empowered to trace assets in the post-trial phase and thus not able to respond themselves to post-trial tracing requests from other offices 32 .

This partly explains the fact that Asset Recovery Offices are not able to always meet the current deadlines for cross-border information exchange (eight hours for urgent requests and one week for non-urgent ones), especially since the number of requests has increased almost five-fold since 2013 33 . Less than half of offices considered that the deadlines are met, indicating that in almost half of the cases responses take up to two weeks non-urgent situations and 12 hours or more in urgent ones. Additional problems raised by Asset Recovery Offices are the provision of incomplete responses as well as the insufficient relevance of some of the requests for information. Moreover, the majority of offices usually provide information to other Asset Recovery Offices without granting its use for evidence purposes. 34  Thus, the requesting authorities need to re-send a request via judicial channels in order to obtain a freezing order, leading to delays and therefore increasing the risks of assets dissipating before they can be frozen. In addition, eight Asset Recovery Offices are still not directly connected to the Europol’s Secure Information Exchange Network Application (SIENA) network 35 , which should allow them not only to quickly communicate with each other, but also to benefit from Europol’s analysis and operational support and cross-checking of data with other intelligence and investigations.

Moreover, only one fourth of the Asset Recovery Offices have powers to freeze assets themselves in urgent cross-border cases. In such situations, assets can dissipate before the freezing order is prepared by the requesting Member State, recognised and executed. Urgent freezing powers are particularly important in relation to moveable assets such as funds held in bank accounts or cryptocurrencies, since criminals (or their associates) can quickly transfer those assets the moment the suspect is arrested or aware of being under investigation. In the absence of such powers, many Asset Recovery Offices resort to other authorities to ensure assets are quickly frozen (e.g. the Financial Intelligence Units, which can temporarily suspend or withhold consent to transactions). However not all Offices have such legal possibility.

Finally, in many Member States Asset Recovery Offices do not only facilitate cross-border cooperation but have become a central actor in the national asset recovery system, supporting national investigations in the tracing of criminal assets, providing training on asset recovery to law enforcement authorities, judges and prosecutors, or collecting statistics. However, not all Member States have incorporated these good practices into their national frameworks. One fourth of Asset Recovery Offices do not act as asset recovery focal points, 40% of them do not have training capacity and 60% do not collect statistics. Therefore, the role of Asset Recovery Offices in national settings is uneven across Member States, with some of them providing a clear added value to national asset recovery efforts and others being merely a letter box for cross-border requests. This affects the effectiveness of the respective asset recovery systems, as Member States with weaker asset recovery provisions will be less capable to address the cross-border problem of criminal finances.

Figure 3: The competencies of Asset Recovery Offices 36

Overall, the insufficient number and prioritisation of financial investigations, the challenges to the exchange of information among Asset Recovery Offices and insufficient powers, both in a cross-border and national context, lead to a limited capacity of Member States to identify and trace assets. This is reflected in the low percentage of criminal assets frozen, barely 2% of the estimated criminal revenues. Such limited capabilities hamper cross border cooperation and make it more difficult to confiscate assets linked to transnational crime.

The identified tracing and freezing problem has both national and cross-border connotations, since all cross-border cases require action to be taken on the national territory of Member States, which might then have cross-border implications. For example, information exchange and cooperation between Member States is directly affected by Asset Recovery Offices not responding sufficiently swiftly to requests from Offices in other Member States, which in turn is linked to their limited competences in tracing assets, limited resources and their limited access to the relevant databases. Similarly, the absence of parallel financial investigations directly affects the capabilities within each Member State to identify as early as possible in the process potentially illicit asset, having however negative spill over effects for cross border cooperation since it means that assets that may be present or have been moved to other Member States are not detected. Finally, the inability of Asset Recovery Offices to ensure that identified assets are temporarily frozen pending a formal freezing orders at national level has cross-border effects, as Asset Recovery Offices respond to cross-border requests for the purposes of tracing and identifying crimes of a cross-border nature.

2.2.1    Driver: limited EU level provisions and in particular of the ARO Council Decision and insufficient human, financial and technical resources allocated to asset tracing

The lack of systematic launching of financial investigations is due to legal and practical reasons. Not being regulated at EU level, the rules for carrying out financial investigations vary among Member States. In eight Member States, the legislation does not set any requirements for the automatic launching of financial investigations, leaving it to the discretion of competent authorities. In eight Member States, legal frameworks make the launching financial investigations subject to different conditions, such as the types of crime or the amount of profits generated 37 . Moreover, the reluctance of some competent authorities to carry out or prioritise financial investigations is also due to their lack of resources and expertise. Around half of the authorities competent for carrying out financial investigations do not have sufficient human resources to cope with their current tasks and responsibilities 38 , in particular the specialised staff required to carry out complex financial enquiries.

As regards the obstacles hampering cooperation among Asset Recovery Offices at EU level, the main reasons are the limited requirements of the ARO Council Decision, which have led to a disparity in national approaches. Moreover, Asset Recovery Offices do not have sufficient human, financial and technical resources: against a rising number of requests for cooperation and a workload that has increased between 15% and 50% for half of the offices, and between 50 and 100% for the other half, human resources have not risen to match the increased demands and remain limited. There are also significant differences between Member States: on an average of 19 employees per office, the staff ranges from one employee in one of the Member States, to 91 in another Member State (despite the latter being only double the population) 39 . This affects notably the capacity of Asset Recovery Offices to cooperate with each other.

Furthermore, as underlined in the Evaluation, the current legal framework is limited since it does not specify their role (besides “facilitating” asset recovery) and simply establishes a general requirement to cooperate and exchange information. The ARO Council Decision does not explicitly require Asset Recovery Offices to be vested with powers to carry out asset tracing investigations to answer to requests from other Asset Recovery Offices, or to provide information to other Asset Recovery Offices for evidentiary purposes. There are no information exchange rules as regards the channels to be used (i.e. SIENA), the types of crimes for which requests can be made, the type of information that should be provided and, most importantly, the sources of information that should be consulted to respond to asset tracing requests. This leads to the incompleteness and irrelevance of some of the responses. There are also no rules regarding the capacity of Asset Recovery Offices to take expeditious action to ensure freezing in urgent cases. While according to the Confiscation Directive Member States need to provide for the possibility of urgent freezing of assets where necessary to preserve the property (see Article 7(1)), it is not specified whether Asset Recovery Offices could take action to ensure urgent freezing in cross-border cases.

Only 15% of Asset Recovery Offices have access to all databases; and only one third can check police databases or tax/income registers. These limitations are mainly of legal nature, since national legislation does not foresee access to the offices for certain databases. The most relevant databases for asset tracing, real estate registers and company registers, can only be accessed by 64% and 45% of the Asset Recovery Offices respectively 40 . 66% of respondents to the public consultation considered that the limited access to databases by Asset Recovery Offices hampers the identification of criminal assets to a high or very high extent.

Figure 4: Asset Recovery Offices’ access to databases 41

Against the general obligations of the ARO Council Decision, Member States have applied different interpretations and provided Asset Recovery Offices with different roles, powers and information sources. This largely affects cross-border situations, but also applies to the role of Asset Recovery Offices in the national asset tracing activities, where the absence of rules at EU level have led to a considerable discrepancy of Member States approaches as to the capacity of the offices to provide training or to support investigators in identifying assets.

2.3    Specific problem 2: Inefficient management procedures discourage authorities from launching asset recovery procedures 

Once property is frozen, it should be adequately managed in order to preserve its value until a judge decides to confiscate it or to return it to the defendant in case of acquittal. Once confiscated, assets also have to be well managed before they are returned to the state budget or used for compensating victims or for social reuse. Given the length of criminal proceedings, which in complex criminal cases usually take at least five years 42 , assets can easily depreciate over time or deteriorate if not adequately managed. 

While assets such as real estate or artworks are less likely to lose value, moveable assets such as vehicles, which represent a very large part of frozen assets, are more likely to depreciate. Similarly, volatile financial instruments such as cryptocurrencies also require specialised management to ensure they do not lose value over time, an issue often raised at the Asset Recovery Offices Platform meetings. Particularly challenging is the management of confiscated companies controlled by organised crime, which have to be run by the authorities in a way that they continue generating profits and the jobs are preserved.

Inadequate management discourages asset recovery as a whole.  When the cost to manage assets is higher than the value of the assets that will ultimately be recovered, the authorities that are charged with taking the decision of freezing or confiscating assets are less inclined, or even reluctant, to take such decisions. According to a study prepared for the United Nations, “the financial burden on the State of the cost of preserving assets […] has the potential to bankrupt a nascent asset recovery programme” 43 . The perception of this issue was shared by the respondents to the public consultation, 58% of which indicated that the inadequate management of criminal assets negatively affects asset recovery to a high or a very high extent. The inefficient management of assets also leads to fewer returns in the disposal phase, with fewer or no criminal assets reverted to victims, communities or Member States.

Inefficient asset management further undermines the capacity of Member States to cooperate with each other, reducing cross-border incentives to freeze assets on behalf of other Member States. Given that criminals often hold assets in other jurisdictions, cross-border cooperation is of essence for their effective management. However, given the high management costs, a Member State with inefficient management methods will be reluctant to manage freeze assets upon request of another Member State. The inefficiencies in management in one Member State become thus a disincentive for the forwarding of confiscation orders. The problem is of particular relevance in those Member States who have not established at least one Asset Management Office with specialized competences for the management of property (AT, CY, DK, EE, FI, DE, EL, HU, LV, LT, LU, PL, SK, SI, and SE).

Furthermore, asset management offices have reported challenges in the identification of their counterparts in other Member States to coordinate the sale of assets, which can last up to three or four months in some occasions 44 . The delays in identifying cross-border counterparts increase the time assets are to be held for management, increasing in turn management and storage costs.

2.3.1    Driver: generic requirements of the Confiscation Directive, lack of specialisation of authorities managing assets and insufficient use of the most effective management methods 

The inefficient management of assets is driven by the absence of clear requirements and guidance on effective and efficient management methods, and by the fact that managing authorities lack adequate specialisation, capacities and expertise, particularly on the application of the most effective management methods.

The current legal framework requires Member States to take measures to ensure the “adequate management” of property frozen with a view to possible subsequent confiscation, including the possibility to sell or transfer property where necessary 45 . However, this provision does not provide a definition on what adequate management entails, and does not set obligations to achieve concrete effective management objectives. Similarly, Regulation (EU) 2018/1805 on mutual recognition of freezing and confiscation orders, while encouraging Member States to consider establishing an office responsible for the management of frozen property, relies on national laws for the management of property frozen in cross-border situations. 

Member States have therefore entrusted different and sometimes multiple bodies with management tasks and have developed different sets of asset management measures. In most cases, Member States have attributed asset management responsibilities to a wide range of authorities such as prosecution services, courts, bailiffs, law enforcement authorities, tax and custom authorities or local administrations 46 . These structures do not always have the necessary expertise, human, financial and technical resources and competences to ensure the efficient management of assets, which often means that they do not have enough resources to efficiently manage the property they have been mandated to. As the Confiscation Directive does not oblige Member States to adopt a management set-up over another, only 13 Member States (BE, BG, CZ, IE, EL, ES, FR, HR, IT, LU, NL, PT, RO) have attributed management tasks to entities specialised in handling criminal assets, i.e. Asset Management Offices (AMOs) 47 , in some cases along with other actors depending on the type of asset or confiscation procedure. Whilst this flexibility has allowed Member States to develop systems tailored to national realities, some management systems achieve very different degrees of effectiveness and efficiency. This perception is shared by the respondents to the public consultation, 76% of which considered the lack of harmonised rules on the management of frozen and confiscated assets a significant obstacle impacting to a high or very high extent effective management.

Figure 5: System used to register frozen and/or confiscated assets 48

Moreover, mechanisms of proven effectiveness for managing assets such as pre-seizure planning 49 or interlocutory sales 50 are not sufficiently used.

Pre-seizure planning is a widely recognised tool to effectively manage assets, as it entails an assessment of what property is most suitable for confiscation, and of how and when it could be frozen or confiscated. Through pre-seizure planning, authorities taking control of assets limit the risks that these might be managed at a loss, since assets could easily depreciate or even become a financial liability due to their high maintenance costs. Despite the fact that the Camden Asset Recovery Inter-Agency Network (CARIN) encourages jurisdictions to implement the principle of pre-seizure planning 51 , investigative and prosecution authorities in most Member States do not assess whether the management of seized assets is feasible and cost-effective before seizing them 52 . Without such planning, considerable resources are wasted on preserving assets that have little or limited value, leading to ineffective management of confiscated assets and overall discouragement of the use of asset recovery.

While the Confiscation Directive also requires Member States to allow for the selling or transfer of frozen property prior to confiscation, there are no provisions requiring Member States to use them nor a clear definition of interlocutory sales and the conditions under which it should be used, for example in cases when the asset is perishable or rapidly depreciating, or when the storage or maintenance costs are disproportionate to the asset’s value. Consequently, while interlocutory sales are available in all but two Member States, this mechanism is not applied as a rule across the EU, despite the promising results achieved where it is used. For example, the Netherlands was able to reduce the cost of management of movable assets from € 23 million to € 9 million through a strategy of selling off assets when costs exceed the value of the property 53 . Moreover, cooperation concerning management of frozen assets is hampered by Member States that do not use interlocutory sale or do not have sufficient experience with it, since it discourages Member States to recover assets on behalf of (and for the benefit of) another Member State, given the high costs the former would incur. 

In conclusion, the generic requirements of the Confiscation Directive lead to a patchwork of management structures in the Member States, which in turn lead to various degrees of effectiveness and efficiency of management techniques, which negatively affect the asset recovery system both overall and in cross-border cases through discouraging the use of asset recovery and cross-border requests.

2.4    Specific problem 3: Existing confiscation tools do not cover all high revenue-generating criminal markets and do not address criminals’ complex modi operandi 

When ordering a conviction, judges may take a decision to confiscate the assets of the offender, which are the direct proceed or the instrumentality of the specific offence for which the person is convicted (standard confiscation). However, criminals often convert those proceeds into other property, and mix it with property acquired from legitimate sources, or put it under the name of relatives or their associates. To address this, judicial authorities can resort to mechanisms such as value-based confiscation, which allows for the confiscation of any other property of the offender that is equivalent in value to the proceeds or instrumentalities of the offence, or third-party confiscation, to recover the assets transferred by the offender to another person.

However, these instruments only allow for the confiscation of assets linked to the concrete offence for which the person is convicted, while usually individuals involved in organised crime have perpetrated other criminal activities over a longer period. For example, a court might be able to convict a drug trafficker for one specific cargo, but not for the trafficking activities over preceding years from which they also profited. In these cases, the court can confiscate other property beyond the direct proceeds of the crime in question, if the court concludes that property is derived from criminal conduct (extended confiscation).

Moreover, confiscation can be ordered in the absence of a conviction (non-conviction based confiscation or NCBC). This can happen in situations where a conviction is impossible due to objective impediments, such as the accused being gravely ill or absconding.

Despite the wide range of mechanisms available to judicial authorities, only one third of assets traced and frozen are ultimately taken away from the hands of criminals. In 2019 authorities froze EUR 3 billion of estimated criminal assets, but only about EUR 1 billion were confiscated in that same year 55 .

Moreover, the most employed confiscation mechanism is standard confiscation, which – despite only allowing for the confiscation of the proceeds directly resulting from the offence for which the defendant is on trial, and therefore failing to capture proceeds of previous crimes which are inherent in the context of organised crime – represents more than half of confiscation orders in the large majority of Member States 56 . This is remarkable considering that assets confiscated through extended confiscation – a tool adapted to organised crime groups usually operating over long time periods – only represent less than 30% of total confiscated assets, while non-conviction based confiscation is, with the exception of a few Member States, less than 15% 57 .

A low use of confiscation methods such as extended and the limited scope of non-conviction based confiscation is an issue because standard confiscation fails to tackle the complex methods that criminal groups, and in particular its managerial layers, employ to cover their tracks and hide their assets. Criminals at the top of organised crime groups are often insulated from criminal liability, as they benefit from profits generated by crimes they themselves do not commit but that are carried out by others under their command, or when different organised crime groups provide services for one another without directly engaging with the predicate offence. Since existing forms of confiscation target only the proceeds of criminals for which there is enough evidence to obtain a conviction, the current confiscation frameworks fails to tackle illicit assets of criminals able to avoid criminal investigation and prosecution.

The fact that standard confiscation targets only the direct proceeds or instrumentalities of the specific offence for which the person is convicted, and extended confiscation – while allowing for the confiscation of other assets than those resulting from a specific crime – is still subject to a prior conviction leads to a situation where illicit assets of criminals able to avoid criminal investigation and prosecution will escape confiscation. Accordingly, the existing approaches are not able to “target the property of persons at the very top of the chain against whom enforcement authorities may struggle to gather sufficient evidence to bring a criminal prosecution” 58 , thus failing to address a significant portion of criminal profits in the hands of the managerial levels of organised crime. 

Furthermore, one of the main issues affecting confiscation in organised crime cases is proving the scope of assets that stem from criminal operations that went on for years. It is unlikely for such an operation to maintain organised records or bookkeeping exposing the full sum of assets amassed over the years and that evidence can be provided for each and every individual criminal act. Hence, the confiscation mechanisms available to the majority of Member States are not fit to effectively disrupt criminal activities, and even less so tackle the complex nature of organised crime, as they are not suited to deprive criminals who have successfully managed to hide the necessary evidence that would link them to the offence from their profits.

2.4.1 Driver: narrow scope of the Confiscation Directive

The limited capacity of Member States’ confiscation mechanisms derives from the narrow scope of the existing legal tools (both in terms of offences covered and types of confiscation available) and from a lack of sufficient awareness and willingness of judicial authorities to use others beyond standard confiscation.

Limited scope in terms of offences covered

The scope of existing confiscation measures varies greatly in terms of the number of minimum offences that EU legislation requires them to cover. Standard confiscation is the most widely used confiscation tool because, since it stems from a legal instrument preceding the Confiscation Directive – Framework Decision 2005/212/JHA 59 – it is applicable to all crimes having a penalty of over one year. The majority of Member States thus follow an ‘all crimes’ approach, allowing for the imposition of standard conviction-based confiscation to a larger number of crime areas than the confiscation tools foreseen under the Confiscation Directive.

The same scope is however not matched in confiscation tools covered by the Confiscation Directive, particularly value based, third party confiscation and NCBC, which are better placed to address modern organised crime, where flexible yet hierarchical groups distance themselves from proceeds directly stemming from crimes. These post-Lisbon confiscation mechanisms have nonetheless a narrower scope 60 than standard confiscation as foreseen by the 2005 Framework Decision, with the Confiscation Directive based on Article 83 (1) applying to specific criminal offences related to some, but not all, of the so-called ‘eurocrimes’ 61 . The minimum scope of extended confiscation is even further limited to a smaller set of offences: corruption, the participation in a criminal organisation, child-pornography, and IT crimes. For other crimes in scope of the Confiscation Directive but not explicitly listed in the relevant article on extended confiscation, extended confiscation is only applicable in relation to offences punishable by a custodial sentence of at least four years 62 .

Table 2: crimes covered in the scope of Directive 2014/42/EU

Consequently, the confiscation tools foreseen by the Confiscation Directive do not cover all revenue-generating criminal markets where organised crime is active; notably, they do not cover firearms trafficking, environmental crime, migrants smuggling, contract killing (including murder, grievous bodily harm and kidnapping), organ trafficking, organised armed robbery, trafficking in cultural goods, swindling, racketeering and extortion, counterfeiting, documents forgery, forgery of means of payment, trafficking of nuclear materials and of illicit hormonal substances, illicit tobacco trade and trafficking of stolen vehicles. Even though the aggregate value of the revenues generated from these crimes cannot be defined with precision, cautious estimates would place this value in at least EUR 50 billion per annum outside the scope of the Confiscation Directive 63 . The current scope of the Confiscation Directive thus fails to capture a wide area of criminal profits generating from offences organised crime is engaged with.

Stakeholders from law enforcement, prosecution and public authorities have identified the limited scope of application of the Confiscation Directive, in particular for extended confiscation and NCBC, as one of the underlying reasons behind the low rates of freezing and confiscation 64 . Stakeholders from Member States have referred in particular to the necessity of being able to confiscated profits stemming from environmental crimes 65 as well as for instance firearms trafficking, illicit tobacco trade, organised property crime and cyber fraud. As modern organised crime is more and more poly-criminal and engages in a multitude of criminal areas 66 , it is important that confiscation measures can counter its reach.

In conclusion, the narrow scope of the Confiscation Directive does not match with the poly-criminal nature of organised crime groups by requiring confiscation of one a minor fraction of criminal activities organised crime groups are engaged with. The absence of confiscation rules at EU level that would cover crimes such as firearms trafficking, migrant smuggling, illicit tobacco trade, or trafficking in counterfeit products, organised property crime or cyber fraud also affects the effectiveness of EU policies, including the effective implementation of harmonised rules in these areas 67 . Furthermore, the absence of confiscation measures at EU level for certain crimes is at odds with international obligations. 68  

Limited scope of existing confiscation mechanisms

The Confiscation Directive does not envisage for Member States to put in place confiscation mechanisms enabling authorities to confiscate assets where top-level criminals have successfully destroyed the evidence that would directly link them to the crime, or when they have hid the illicit origin of the property.

To address these challenges, some Member States have introduced alleviations in the burden of proof for confiscation, either shifting it to the defendant – requiring him or her to justify the origin of the property – or applying the civil standard of balance of probabilities in confiscation cases. However, to the extent that these confiscation measures are grounded in civil proceedings, they entail lower safeguards than in criminal procedures and are not covered by the EU Regulation on mutual recognition of confiscation orders 69 . Other Member States have developed confiscation systems grounded in criminal proceedings, with corresponding safeguards, that enable authorities to confiscate assets of suspects or offenders for which the court is sufficiently convinced that the suspect belongs to organised criminal groups or is involved in particularly serious crimes and that the assets are the proceeds of crime, since no legal origin can be demonstrated.

These systems have proven their effectiveness. In Italy, authorities are able to confiscate assets in 90% of judicial proceedings through these mechanisms, compared to 50% through the traditional confiscation mechanisms 70 . Since Germany established such a model in 2017, it has been put in practice for a considerable number of cases: 5,100 in 2018 and 5,800 in 2019, which is a significant figure considering the novelty of the model 71 . Latvia, on its part, is able to confiscate 25 times more through confiscation mechanisms not linked to a conviction than through standard forms of confiscation (EUR 105.4 million vs. EUR 4.2 million in a period of five years) 72 .

2.5    Cross-cutting driver: absence of a strategic approach and of commitment to asset recovery by all relevant actors.

In addition to the drivers contributing to each of the specific problems, an overall challenge affecting the different phases and the effectiveness of the confiscation system as a whole is the absence of a strategic approach by Member States towards asset recovery. Even though 56% of respondents to the public consultation considered that the Confiscation Directive has contributed to fostering a culture of asset recovery, confiscation is not always pursued as a key priority, according to the in-depth assessments of Member States’ frameworks carried out by FATF and Moneyval 73 .

While all the 20 EU Member States that have been subject to FATF/Moneyval fourth round of mutual evaluations were considered as fully or largely compliant from a legal perspective with the FATF recommendations (which are less detailed than the Confiscation Directive), the picture is less encouraging when it comes to the effectiveness of the asset recovery systems. Only four EU Member States (CZ, ES, IT, and SE) have proven to count on asset recovery systems with a substantial level of effectiveness. The vast majority (AT, BE, CY, DK, EL, FI, HR, IE, LU, LV, LT, PT) have moderately effective systems and four others are ranked with low effectiveness.

The four Member States with a substantial level of effectiveness are generally characterised by a strong commitment from policy makers to a defined set of goals reflected in strategic documents. Such a common approach to asset recovery is also reflected at operational level, with authorities and officers on the ground well equipped and aware of the importance of making crime unprofitable as the most effective tool to disrupt criminal organisations, usually on the basis of written guidelines and an adequate training offer.

For the other EU Member States, in many cases the mutual evaluations show that confiscation is not always considered as a key priority of the criminal justice system or have not set out specific objectives at a strategic level underpinning their confiscation policies. In other cases, the policy commitments are not followed in practice, especially in relation to the systematic undertaking financial investigations by prosecutorial and law enforcement structures, which do not count with the skills, knowledge and guidance or incentives to take a proactive approach. Asset tracing being the first step in the asset recovery chain, this affects the effectiveness of the overall system.

The absence of shared strategic objectives and operational commitment by all parties is of particular concern given the wide array of actors involved in the asset recovery process. Responsibilities are spread among different bodies, many of which do not have as their primary responsibility the recovery of criminal assets. Against conflicting priorities, and given the complexity and hurdles of asset recovery processes, those authorities are not always inclined to prioritise the financial dimension of crimes. Moreover, the mutual evaluations provide few examples of inter-agency cooperation structures in Member States, and several instances where different authorities are not aware of the role or even the existence of actors such as the Asset Recovery Offices, an issue highlighted also in the study underpinning this Impact Assessment.

A lack of effective coordination at national level can lead to duplicating efforts, or conversely to situations where assets are falling through the cracks due to a lack of information sharing. The lack of a coherent approach by all actors in relation to asset recovery is also reflected in the absence of comprehensive and comparable statistics on the number and value of assets frozen and confiscated, a problem that arises in all Member States to varying degrees. The Confiscation Directive requires Member States to “make reasonable efforts” 74 to collect a minimum set of statistics. Despite this, asset recovery data are not systematically collected at a central level. In many Member States, individual agencies or authorities collect certain statistical data, but without guidance at national level on the methodological aspects of data collection, it results in diverging datasets and a scant level of completeness and quality of data. Without a clear picture of the results in each phase of the asset recovery process and of the overall system, it is difficult to identify and bring political attention to the shortcomings and necessary actions to improve the effectiveness of the asset recovery system.

3. Why should the EU act?

3.1    Legal basis

The ARO Council Decision is based on Article 30(1)(a) and (b) TEU (now Article 87 TFEU) and Article 34(2)(c) TEU, whilst the Confiscation Directive is based on Article 82(2) and 83(1) TFEU. These articles under the TFEU are relevant for the envisaged revision of these legal acts and the measures identified in the different options.

In addition, measures aiming at the extension of the scope of the confiscation measures to crimes ares other than ‘eurocrimes’ (covered by Article 83(1)) would need to comply with the relevant requirements of Article 83(2).

The combination of these legal bases (Articles 82, 83 and 87 TFEU) allows for harmonising measures on freezing, confiscation and management of illicit assets, measures that directly facilitate cross-border cooperation as well as other measures that govern Member States’ internal procedures to the extent necessary to ensure the effective implementation of asset recovery and confiscation measures while also contributing to cross border cooperation.

3.2    Subsidiarity

Under Article 5(3) TEU, the Union, in areas which do not fall within its exclusive competence, shall only act if the proposed action cannot be sufficiently achieved by the Member States. Article 67 TFEU provides that the Union shall provide citizens with a high level of security by preventing and combating crime. Organised criminals transfer and spread their illicit property across multiple jurisdictions, hampering the capacity of competent authorities to trace, freeze and confiscate these assets. Cross-border cooperation is therefore crucial for the effective recovery of criminal assets. This cross-border dimension of organised crime and the criminal organisations’ activities and investements in more than one country justify the need for European action.

Individual efforts of Member States against organised crime’s activities are insufficient as criminals take advantage of the benefits of the EU’s internal market and of the speed of the financial system, as well as of organised crime’s underground parallel financial system. According to Europol, 80% of organised crime groups in the EU are highly poly-criminal and active across borders, with 7 out of 10 active in more than 3 countries and 65% of organised crime groups being composed of multiple nationalities 75 . As highlighted in the Evaluation, law enforcement authorities and representatives of the Confiscation Directive Contact Committee agree that this highly international crime picture is best tackled at EU level. 97% of consulted stakeholders in the public consultation consider cross-border cooperation essential in the identification of criminal assets and 88% believe it would be harder to freeze and confiscate the proceeds of crime without EU intervention.

The penetration of organised crime into the economy of one Member State affects the functioning of the whole EU Internal Market, with criminals reportedly targeting Member States with weaker asset recovery systems 76 . Organised crime groups often resort to intimidation and corruption of public officials, thus altering competition and the smooth functioning of the Internal Market. The resulting loss of revenues affects both national and the EU’s financial interests, even when it takes place in only one Member State. The recovery of criminal profits needs to therefore be addressed at EU level in order to address the cross-border threat of organised crime.

4. Objectives: What is to be achieved?

4.1    General objectives

The general objective is to deprive criminals and in particular organised crime groups of their illicit property in order to disrupt the capacity of organised crime groups to maintain and further expand their criminal activities, while compensating victims and repairing damage done to society more generally.

4.2    Specific objectives

(1)Strengthen asset tracing capabilities

Strengthening the capabilities of the competent authorities to identify and trace assets aims at ensuring that competent authorities have the competences and resources, as well as sufficient access to the necessary information, to facilitate asset tracing and information exchanges in an effective and swift manner, in particular in a cross border context.

(2)Ensure efficient asset management

Ensuring efficient asset management aims at ensuring that Member States have the capacity to manage frozen and confiscated asset so that management costs remain below the benefits of asset recovery, and at ensuring that the value of assets is safeguarded for further use, thereby increasing incentives to carry out asset recovery investigations and adopt freezing/confiscation decisions.

(3)Strengthen confiscation capabilities

The objective to strengthen confiscation capabilities aims at enabling authorities to capture all relevant criminal activities, in particular those typically carried out by organised crime groups, and to confiscate all relevant assets, in particular the property held or controlled by those orchestrating criminal activities. Achieving this objective would contribute to the overall aim of disrupting organised crime structures, groups and networks, going beyond the mere sanctioning of individual crimes.

(4)Improve the overall efficiency of the asset recovery system

This objective aims at increasing the cooperation between the wide range of actors involved in the asset recovery phases, promoting a more strategic approach in relation to asset recovery and improving data collection and monitoring of developments, trends and progress, so as to ensure that all actors prioritise asset recovery and work in a coordinated manner.

4.3    How do the objectives relate to the sustainable development goals?

The objectives of this policy initiative relate to a number of sustainable development goals. Countering organised crime’s profits primarily contributes to goals of (16), peace, justice, and strong institutions and (8), decent work and economic growth through countering organised crime’s infiltration into the legal economy.

5. What are the available policy options?

 5.1    Baseline scenario: how will the problem evolve?

The baseline scenario or status quo indicates how the identified problem is likely to evolve without additional public intervention, taking into account existing and forthcoming interventions.

While the current framework would remain untouched beyond further enforcement measures, there are a number of legislative and policy initiatives that would impact the work of Asset Recovery Offices and of authorities in charge of freezing and confiscation decisions. The application of Regulation (EU) 2018/1805 on the mutual recognition of freezing and confiscation orders will lead to greater execution by competent national authorities of freezing and confiscation orders in cross-border cases. However, while the Regulation sets the means for increased recognition of freezing and confiscation orders across the EU, the number of orders to be recognised is dependent on the capacity of authorities to identify assets, the confiscation instruments available to judicial authorities in every Member State, and their willingness to apply them. All these are areas where this Impact Assessment has identified significant deficiencies.

With the entry into force of Directive (EU) 2019/1153 77 on access to financial information on 1st August 2021, law enforcement authorities, including Asset Recovery Offices, soon should have access to bank account information once all Member States will have transposed the Directive. Once co-legislators adopt the recent Commission proposal to amend Directive (EU) 2019/1153 78 , access could include bank account information in other Member States, granting law enforcement access to an interconnected bank account registries system across the EU. However this covers only one of the relevant databases.

The Anti-Money Laundering package of July 2021 79 , once adopted, would facilitate a more effective detection of suspicious transactions and activities and increased dissemination of financial analysis by Financial Intelligence Units. This would increase the possibilities for law enforcement authorities to launch new investigations but, without prioritisation as well as the necessary resources and powers on the part of competence authorities responsible for tracing, freezing and confiscating assets, it is likely that authorities will not able to follow up on all the information disseminated by Financial Intelligence Units in an effective manner.

Despite progress in these areas, under the current framework, the problems identified would remain to a large extent. Financial investigations would continue to be carried out in a non-systematic way in most Member States and be hampered by lack of resources and prioritisation. Asset Recovery Offices would continue to gradually increase their cooperation, albeit hindered to the current limitations, including the lack of resources and insufficient access to databases or to SIENA. The exchanges in the Asset Recovery Offices platform meetings could lead to some incorporation of best practices by some Member States. As regards asset management, the number of Asset Management Offices could slightly increase, with one Member State already having foreseen its creation, as so would the use of instruments such as interlocutory sales, which another Member State is planning to facilitate 80 . Moreover, it is foreseeable that some Member States, following a 2018 Resolution of the Council of Europe Parliamentary Assembly inviting Member States to develop confiscation models that facilitate the confiscation of illegal assets 81 , would develop new confiscation models adapted to the complex nature of organised crime, an issue which is already being considered in one Member State where a process to review its asset recovery framework has been launched.

These improvements that may be expected in a limited number of Member States, however, would not represent the significant change which is required to ensure an asset recovery system across the EU that is able to effectively tackle the growing complexity and scale of criminal finances, especially in view of the evolution of the threat from organised crime and its transnational nature. In fact, the status quo option would not allow authorities to catch up with the likely increasing volume of assets owned or controlled by criminal organisations. The economic downturn produced by the pandemic creates new business opportunities for criminal groups, including by fraudulently benefitting public funds aimed at supporting economic recovery, and for infiltrating the economy and the institutions. In the current economic context, and organised crime is expected to take advantage of the weak financial situation in many companies “to launder money through dormant companies, buy out financially affected cash-intensive businesses, or invest in property in the construction sector” 82 . This would allow criminal groups to launder their proceeds while maximising their financial benefits, and to use the legal structures under their control to further their illicit activities.

Against this bleak outlook, it is expected that the slow increase of the amounts frozen and confiscated that could be achieved through the application of existing or ongoing measures would not match the foreseable ever-greater profits of criminal groups. When asked about how the criminal finances landscape will develop in the EU in the next 5-10 years without further EU intervention, 66% of the respondents to the public consultation agreed it would worsen and that the current legal framework would not be sufficient to retrieve criminal assets. Whilst awareness raising and recent legislative instruments will have a mitigating impact on the rates of criminal profits, the existing freezing and confiscation measures will not allow to bridge the gap between recovered assets and criminal profits in the foreseeable future, thus failing to ensure that asset recovery is an effective deterrent of criminal activity.

5.2    Description of the policy options

The following table summarises the different options for each of the specific objectives.

Table 3: Options table

5.2.1 Option 1

Under Option 1, the measures consist of making increased use of existing platforms and, where necessary, establish new expert or advisory groups to exchange experiences, know-how and good practice to strengthen capabilities and understanding in relation to the various phases of asset recovery. These exchanges would be further enhanced through the development of appropriate EU guidance and, where appropriate, trainings (by CEPOL, Europol, Eurojust, the European Public Prosecutor’s Office (EPPO), or the European Judicial Training network, EJTN).

These non-legislative measures would help address identified shortcomings for all phases of the asset recovery process to some extent. Promoting the exchange knowledge and best practices, offering guidance and training can be expected to contribute to improved capabilities related to asset tracing, asset management andthe use of confiscation possibilities and will to some extent improve the effectiveness and efficiency of the overall asset recovery system in Member States.

According to consulted stakeholders, (Asset Recovery Offices, Contact Committee of the Confiscation Directive, and Europol) measures under PO1 would address indirectly the policy objective to increase the rate of frozen, confiscated and recovered assets, and considered it unlikely that they would achieve the policy objective to a significant extent, given their soft nature. Training and guidelines with respect to victims’ compensation and social reuse of confiscated were however considered by stakeholder as being more appropriate than legislative intervention due to the many differences between Member States on these areas. 83  

5.2.2 Option 2

Option 2 would foresee minimum legislative measures composed of targeted amendment to existing legislation and national set ups. Under Option 2, the measures would consist primarily in specifying the scope of existing general requirements and making targeted amendments to the ARO Council Decision and Confiscation Directive with a view of reinforcing their effectiveness. This includes obligations on Member States on a more strategic/structural level:

·to adopt an overall strategy/action plan setting out the objectives of the asset recovery system. Such a strategy would set out the indicators, identify relevant actors, their responsibilities and cooperation mechanisms, identify gaps and the necessary measures to address them, in terms of resources, training, guidance, etc. This strategy could also include objectives, indicators and measures, where appropriate, to improve victim compensation;

·to ensure that the competent authorities have the necessary skills and capabilities;

·to require more comprehensive and meaningful statistical data at central level.

Other measures would aim at improving cross border cooperation:

·enabling Asset Recovery Offices to respond swiftly to information requests within the required short deadlines (by providing access to existing databases which are of greater relevance to Asset Recovery Offices and making use of SIENA for secure communication);

·ensuring that Asset Recovery Offices have the necessary powers to facilitate asset tracing upon request from Asset Recovery Offices in other Member State;

·ensuring that assets do not dissipate (through temporary urgent freezing powers);

·allowing authorities competent for asset management to identify their counterparts in other Member States (through the establishment of contact points) and set out general principles of adequate asset management 84 that Member States can rely on when assets linked to an investigation in a Member State are managed in another Member State.

Existing requirements on confiscation would remain in place as they stand. Only minor adaptations would be introduced, in order to cover all eurocrimes envisaged in Article 83(1) TFEU (i.e. adding firearms trafficking as defined in EU law) and extend non-conviction based confiscation to situations comparable to illness or absconding (i.e. where conviction is not possible because the offender has passed away). All confiscation measures would remain grounded in criminal law.

The measures under option 2 would contribute considerably to the objective of a more strategic approach to asset recovery addressing identified shortcomings in terms of prioritisation, cooperation among competent authorities or available resources. The measures under option 2 are expected to make a considerable contribution to better asset tracing and securing identified illicit assets through the facilitation of cross border information exchange and cooperation as well as requirements to adopt temporary urgent freezing measures. The measures are expected to improve to some extent asset management. Similarly, due to the only limited changes compared to the status quo, the measures under option 2 are expected to only marginally improve confiscation capabilities.

According to consulted stakeholders (law enforcement, judicial authorities, Europol, Asset Recovery Offices and NGOs), harmonization on asset recovery is highly necessary at national level in order to ensure the effectiveness of the system at EU level. Option 2 was therefore considered a minimum intervention to address the problems, with margin for improvement. 85

5.2.3 Option 3

Option 3, builds on measures under Option 2 and incorporates measures facilitating asset tracing and management as well as requirements for a more strategic approach and more detailed data collection provisions Option 3 would foresee more detailed requirements for Member States for all phases of the recovery process requiring more extensive changes to the current EU legal framework. The asset recovery regime in Member States would need to comply with more specific requirements, including:

·Obligations regarding asset tracing, which is currently not covered by the Confiscation Directive or spelled out in the ARO Council Decision. This would include in particular a requirement to ensure that financial investigations are systematically launched in certain cases and under certain conditions, e.g. when the crime under investigation is linked to organised crime and is likely to generate profits above a certain amount. This requirement is necessary to complement and steer eventual measures by Member States to provide resources, training and guidance for carrying out financial investigations as part of the overall strategy/action plan on asset recovery envisaged in Option 2.

·Additional specific requirements regarding asset management, notably:

omandating the use of pre-seizure planning 86 , and interlocutory sales in certain cases and under certain conditions 87 ;

orequiring the establishment of specialised Asset Management Offices with the necessary powers to ensure they can effectively support other authorities in charge of managing assets and, where necessary, manage frozen and confiscated assets -especially complex ones- upon request from competent authorities. The proposal would leave to Member States the freedom to choose the administrative and legal set up of the Offices to allow them to best respond to national needs.

·Requirements to facilitate a more complete statistical overview of the asset recovery process, notably the establishment of an asset recovery registry in each Member State, accessible to competent authorities, including Asset Recovery Offices and Asset Management Offices. Competent authorities would be required to encode relevant information throughout the asset recovery process, e.g. whether an asset is frozen, sold, confiscated, returned to its owner, to the State or the victim or used for social purposes.

The confiscation tools and mechanisms would be expanded to allow for the confiscation of significantly more illicit assets, in particular by:

·Expanding the scope of offences covered by the Confiscation Directive in order to cover additional crimes of particular serious nature, high profitability or linked to organised crime (e.g. firearms trafficking, migrant smuggling, trafficking of counterfeit products);

·Extending the scope of non-conviction based confiscation measures grounded in criminal proceedings to other cases in which a criminal conviction is not possible due to objective circumstances (such as immunity, amnesty, lapse of statute of limitations, because of out-of-court settlement, age-related decision not to convict);

·Foreseeing a new confiscation mechanism ensuring the confiscation of assets not directly linked to specific crime (for which the owner or possessor was convicted) but more broadly resulting from criminal activities.

The main elements of such new confiscation mode would be inspired by models in Member States 88 while ensuring full respect of the relevant fundamental rights and the relevant jurisprudence of the European Court of Human Rights (“ECtHR”) and the European Court of Justice. The new model aims at addressing the identified shortcomings with regard to the existing confiscation models, which do not allow for the recovery of all illicit assets related to criminal activities in the framework of organised crime and which go beyond the assets linked to a specific crime for which the person in question was convicted. Under this new confiscation model, it would therefore be for the prosecution to show that the assets in question are linked to criminal activities. Although a conviction of the defendant for a specific criminal offence is not required, the prosecution would have to prove the link between the assets and the criminal activities, showing that those assets could have been the proceeds of such conduct. The establishment of these facts can be based on circumstantial evidence, including in particular indications such as unexplained wealth (i.e. property without evidence of legitimate origin, when there is a significant disproportion between the value of assets and the stated income of the person) rebuttable by the defendant through a shifted burden of proof. 89

All confiscation measures would remain grounded in criminal law.

This possibility would be subject at least to the safeguards stipulated in Article 8 of the Confiscation Directive, and in particular the right of defence, providing for effective possibilities for the defendant to rebut allegations. Further safeguards could become necessary (e.g. in relation to the required threshold to initiate such proceedings or as regards the review possibilities ensuring timely remedies) to ensure that any interference with fundamental rights remains proportionate. Ensuring overall proportionality would need to be ensured (e.g. by limiting this possibilities to certain particularly serious crimes or crimes committed within the context of organised crime activities).

Cooperation between the relevant authorities both cross-border and within each Member State would be strengthened by establishing:

·Cooperation obligations between the different competent authorities within each Member State, including Asset Recovery Offices and Asset Management Offices 90 but also other authorities such as tax authorities; the functioning of the overall recovery process including cooperation between the relevant authorities would be subject to regular monitoring coupled where appropriate with recommendations for further improvement;

·More detailed requirements facilitating information exchange across borders (including templates).

The measures under option 3 will make a significant contribution to the objectives of improving asset tracing in that it will require Member States to carry out more systematically financial investigations which are of crucial importance in this regard. The measures will significantly improve the efficiency of asset management in that it will require pre-seizure planning and the use of interlocutory sales. Setting out more detailed requirements and conditions and requiring the establishment of asset management offices that can support other competent authorities in their work will help overcome identified shortcomings that limited the use of more efficient management tools. The measures under option 3 are also expected to make a significant contribution to improving confiscation possibilities by extending possibilities of confiscation where a criminal conviction is not possible for objective reasons (while all the evidence is there to show criminal conduct) and where the assets are clearly linked to organised crime activities but cannot be linked to a specific crime; but also be significantly extending the scope of offences. Measures under option 3 will further contribute to a more effective asset recovery framework in Member States in that it provides for a better sharing of information and improved cooperation among competent authorities.

Stakeholders consulted over the course of the Policy Options Workshops (law enforcement, judicial authorities, Europol, Asset Recovery Offices and NGOs) identified Policy Option 3 as the best performing in order to ensure that the provisions of the existing instruments are properly applied. According to consulted stakeholders, the alignment of the scope of confiscation measures with the crimes covered by Regulation (EU) 2018/1805 harmonization on asset recovery is particularly necessary to ensure the effectiveness of the system. This assessment extended to measures on tracing, management, and confiscation. 91

5.2.4 Option 4

Option 4 would foresee a maximum legislative intervention, building upon the measures under Option 3 (which includes certain measures under Option 2).

Option 4 would further strengthen the requirements established under Option 3 concerning the different asset recovery processes and procedures by:

·More extensive requirement on financial investigations, which should be carried out for all crimes, without limiting to organised crimes’ activities as in Option 3;

·Setting out more concrete conditions regarding urgent freezing orders (as already foreseen under Option 2). This would include requirements on the validity of such temporary orders, deadlines within which such temporary freezing orders must be issued and a requirement for establishing 24/7 contact points to ensure urgent freezing in cross-border cases;

·Requiring information exchanged among Asset Recovery Offices to be without purpose limitation e.g. for intelligence purposes only (so that information can be used also for evidentiary purposes).

At the same time, this option would aim at overcoming coordination and cooperation issues by further streamlining of responsibilities and ensuring greater interconnectivity:

·requirements for having asset tracing and management support functions within one single entity or under the oversight of one entity (Asset Recovery and Management Office, a model available in seven out of the thirteen Member States that have established Asset Management Offices);

·In addition to the establishment of asset registries as foreseen in Option 3, ensuring that national asset recovery registries are interconnected and that access to them is granted to all Asset Recovery and Management Offices of every Member State.

Finally, the scope of the confiscation measures would be further strengthened by expanding the scope of the new confiscation framework to all crimes, in order to align the scope with that of Framework Decision 2005/212/JHA 92 which regulates standard confiscation, the most used confiscation tool in the Member States, as opposed to the list of Regulation (EU) 2018/1805 as foreseen in Option 3. This possibility would be subject to safeguards stipulated in and going beyond Article 8 of the Confiscation Directive, and in particular the right of defence. All confiscation measures would remain grounded in criminal law.

Compared to Option 3, measures under option 4 would only marginally improve the achievement of the relevant objectives in terms of asset tracing, asset management, confiscation and overall improved strategic framework for asset recovery. The benefits of further extending the scope and providing more detailed requirements of the different measures already foreseen under Option 3 would come along with more substantive interferences with Member States’ prerogatives.

According to consulted stakeholders (law enforcement, judicial authorities, Europol, Asset Recovery Offices), the policy measures under PO4 reflect the level of harmonization and cooperation Member State might reach in the long term, but go too far to address what are perceived as being the most urgent issues to address for an effective asset recovery system. Under the current circumstances, the minimal performance of the asset recovery system is strongly severed by issued such as lack of resources, insufficient access to information, and lack of minimal legislative harmonization. Therefore, PO4 measures were perceived as too demanding on Member States and the relevant asset recovery actors, too costly to implement, and with benefits visible only in the long-term. 93  

5. 3 Options discarded at an early stage

The Inception Impact Assessment on the revision of the asset recovery framework 94 informed of the intention of the Commission to assess any possible obstacles related to the use of recovered assets for social purposes and for victim compensation.

Based on the outcome of the consultations, it has been considered that measures to reinforce the current voluntary nature of the provision on social re-use could interfere with the Member States’ budgetary autonomy, and would therefore be disproportionate.

In relation to victim compensation, the Commission services have not identified, based on the consultations, specific problems requiring an inclusion of victim compensation provisions in revised legislation on asset recovery. In addition to the requirement in the Confiscation Directive for Member States to ensure that confiscation measures do not prevent victims’ compensation, the EU legislation in this field comprises the Victims' Rights Directive 95 , which provides for a right to a decision on compensation from the offender in criminal proceedings, and the Compensation Directive 96 . The latter provides for access to compensation from the state for victims of violent and international crime, including national schemes on compensation to victims. The EU Strategy on victims’ rights indicated that the Commission will monitor and assess EU legislation on compensation, and if necessary propose measures to complement this framework. Considering the existence of a specific framework focused on victim compensation, any possible measure in this regard would be better addressed therein, should there be a revision of these instruments. Moreover, a few Member States’ expressed strong reservations on strengthening existing legal provisions on social reuse, as they would infringe upon budgetary autonomy national competences. 97

6.    What are the impacts of the policy options? 

6.1    Social impacts

Impact on security: criminal and in particular organised crime activities

All options are expected to contribute in different degrees to improving capabilities of tracing, freezing, confiscation and management and, as a consequence, the capabilities to disrupt criminal activities and in particular the activities of organised crime groups. The different options will thus – depending on the scope of the measures and the degree of harmonisation throughout the EU – contribute in different degrees to enhancing security in the EU as a whole (with the least impact for PO1 and higher impacts for PO2-4). This contribution will be even higher for options containing measures that not only address cross-border aspects but also investigations at domestic level (e.g. measures under PO3), given that illicit gains resulting from criminal activities in a domestic context can and are used for criminal activities throughout the EU. Increasing capabilities in tracing and freezing assets at national level increase the chances of identifying assets linked to criminal activities in other Member States.

PO1 is expected to improve capabilities necessary for effective asset recovery to a limited extent with the estimated increase in the number of freezing and confiscation orders being relatively marginal. Furthermore, confiscation measures remain limited in scope and will not be able to capture all relevant assets linked to organised crime activities. As a consequence, the impact on security is limited.

Measures under PO2 will make a positive contribution to increasing the capabilities of asset tracing and management and strengthening cross border cooperation. Information exchange can be expected to be significantly improved and response times significantly reduced in particular by giving Asset Recovery Offices access to the relevant databases. It is expected that the number of freezing and confiscation orders could increase considerably.

The highest impact is to be expected from measures under PO3 and PO4 since concrete measures are expected to significantly improve the operational capabilities at all stages of the recovery process as well as the overall effectiveness and efficiency of the asset recovery system as a whole.

The impact through significantly higher rates of freezing and confiscation orders is further increased by the extension of the scope of crimes subject to confiscation. As a result of these measures it is expected that measures under PO3 and PO4 could increase the rates of freezing and confiscation in a substantial manner, so as to effectively contribute to disrupting organised crime activities.

Both PO3 and PO4 will make a more significant contribution to fighting crime across borders since they foresee measures that will improve cross border information exchange and cooperation: increased access to the relevant information will not only improve asset tracing internally but also improve cross border cooperation in terms of better/more comprehensive information and shorter timeframes for replies.

Impact on citizens’ perception of justice and reassurance that crime does not pay

All options contribute in different degrees to the objective of making the asset recovery system more effective. However only PO2-4 make a substantial contribution to increasing rates of confiscation, so as to make a positive impact on the citizens’ perception of justice and the reassurance that crime does not pay. By increasing confiscation rates, all of these options would in different degrees ensure that funds are available for victim compensation or other public interest and social uses.

6.2    Economic impacts

Impact on businesses/competition

In general terms, the different options disrupt criminal activities by depriving criminals of illicit gains, thereby limiting their capabilities to reinvest such gains into the legal economy and distorting competition, re-establishing a level playing field among companies and providing increased confidence of the market that playing by the rules pays off . The impact on businesses would be higher for those options extending the scope of offences covered (PO3 and PO4), insofar as they could cover crimes that have a direct effect on some sectors, such as counterfeiting, or that distort competition, such as VAT fraud. While it is not possible to provide an estimate of economic impact for the different options, available data indicate the scale of the problem: imports of counterfeit and pirated goods into the EU amounted to as much as EUR 119 billion in 2019 98 , while VAT fraud account for a loss of between EUR 45 to 53 billion every year 99 . The more effective the options would be in depriving criminals of their profits and therefore disrupting criminal activity, the less these illicit activities would negatively affect EU businesses.

Impact on public administrations

To the extent that all options contribute in different degrees to increasing the rates of confiscation while improving asset management, there is a positive impact on the public administration where increased revenues are brought back to the state budget.

These positive impacts would result from the increases in assets identified (which eventually would lead to more assets being frozen and confiscated), the measures facilitating the confiscation of assets as such, the measures aimed at reducing asset management costs and maximising the value of assets or avoiding their depreciation, or the increased number of confiscated assets that would derive from a more strategic approach to asset recovery. The increase of revenues and thus the impact on the public budget will depend inter alia on the scope of crimes for which confiscation can be ordered. By including a few additional crimes such as firearms trafficking (under PO2), the impact will be relatively low compared to the additional criminal proceeds under PO3 resulting from the inclusion of more crime areas with (estimated at least 50 billion p.a.) 100 . PO4 is expected to have the highest impact with the largest set of crimes and illicit proceeds/assets being covered.

This positive impact is highest for PO3 and even more so for PO4, in particular because of the need for Member States to adopt measures that will contribute in a substantial manner to identifying an increased number of assets, as well as measures against dissipation and loss in value of such assets. These requirements coupled with extended possibilities to confiscate assets beyond those directly related to a specific crime are expected to increase revenues to the State budget.

In principle the large majority of any additional revenues would accrue to the state budget, unless they are used for victim compensation, which is often given priority over confiscation, usually upon claims by the victims via civil proceedings. While estimates cannot be provided since the figures of funds returned to the victims on the basis of a civil claim are not always reflected in the statistics on confiscation, some examples indicating the order of magnitude will be provided (e.g. in one Member State victim compensation represents 8.3% of recovered assets, in another the assets returned to victims amount to 5.6% of seized property).

These benefits however can only be achieved through additional investment. There will be additional costs for public administrations under PO2 – 4 requiring Member States to provide Asset Recovery Offices and Asset Management Offices with sufficient resources to fulfil their tasks. These costs for Member States to implement these measures are estimated to be of at least EUR 8.6 million for PO2, a figure which would considerably increase in PO3, with costs estimated in a range of EUR 31.6 and 38.4 million. PO4 would account for a slightly higher figure ranging from EUR 41.3 to 45.7 million 101 . However the additional costs are more than offset by measures that improve the efficiency of asset management and more generally the efficiency of the entire asset recovery process. Such measures would increase the amounts of criminal assets recovered in diverging degrees, in a range that could be on the order a few hundred million for PO2 or even double the current volume of confiscated assets for PO3 and PO4, which currently stands at one billion every year across the EU 102 . While the amounts that Member States would be able to allocate to the State budget would depend on their prioritisation of other aims such as victim compensation and social re-use, overall the costs for public administrations are expected to be lower than the additional resources obtained through a reinforced asset recovery system.

6.3    Environmental impact

Options PO2 – 4 can be expected to have a positive impact on the environment to the extent that these options will contribute in different degrees to recover illicit gains related to environmental crimes and therefore to deter and disrupt illicit activities that have a harmful impact on the environment. This impact will be highest for PO3 and PO4 given that confiscation possibilities (and other measures to improve the overall efficiency of the asset recovery regime as a whole) are the most extensive.

6.4    Fundamental rights impacts 

All proposed Policy Options but PO1 will increase the scope of confiscation measures and degree of potential interference with fundamental rights, particularly the right to property, procedural rights and data protection. Stronger freezing and confiscation measures under each of the legislative options will cover a greater number of offences and facilitate confiscation and therefore will affect a greater number of people and assets than the baseline, having therefore a greater impact on fundamental rights. The impact is lowest for PO2, which only extends the scope of confiscation measures to a very limited extent, and highest for PO3 and PO4, which foresee a significant extension to crimes not currently covered by the Confiscation Directive, as well as to assets not directly linked to a limited number of specific crimes. However, all options would be accompanied by appropriate safeguards and would meet the legal and procedural requirements as enshrined in existing case law.

Right to property

Article 17 of the Charter of Fundamental Rights of the European Union ("the Charter") guarantees the right to property. Whilst it can be argued that property of illicit origin is not protected under the right to property, such right is not absolute but can be subject to interference. According to the established case-law of the ECtHR, an interference with property rights must be prescribed by law (legality) and pursue one or more legitimate aims 103 . In addition, there must be a reasonable relationship of proportionality between the means and the aims. A balance has to be struck between the demands of general interest and the interest of the individual concerned.

Regarding the proportionality of proposed confiscation measures, case law requires that a “fair balance must be struck between the demands of the general interest of the community and the requirement of the protection of the individual’s fundamental rights. The requisite balance will not be found if the persons concerned have had to bear an excessive burden” (Todorov and others v. Bulgaria) 104 . For example, in Phillips v. UK and Butler v. UK held that the use of confiscation measures can be proportionate to the aims of a policy objective when "the making of a confiscation order operates in the way of a deterrent” and as a mean to deprive a person of illicit profits, as well “to remove the value of the proceedings from possible future use". 105 In cases of preventive confiscation, States are further allowed a wide margin of appreciation on the balance of the seriousness of the threat posed by particular offences such as, in the case of cited case law, drugs trafficking 106 .

Under this wide latitude, PO2 and PO3 would fully meet the legality, public objective and proportionality tests since they all aim at deterring crime, deprive an offender of illicitly acquired property, prevent future use of proceeds of crime, and are to be paired with adequate safeguards. Established ECtHR case-law states that all proposed confiscation measures are generally perceived to be a legitimate restriction to the right to property as long as adequate procedural safeguards, such as the right of fair hearing and right to a remedy, are in place: this applies to simple conviction-based confiscation 107 , extended confiscation 108 , and non-conviction based confiscation measures 109 . To the extent that PO2 extends the scope of confiscation measures only in a marginal manner, both in terms of crimes covered and additional possibilities to confiscate assets without conviction for a specific offence, the impact is limited. PO3 has a higher impact given that confiscation would be foreseen for a larger number of crimes (while still being limited to those of a serious nature or linked to organised crime activities). In addition, confiscation measures would also extend to more assets, given that confiscation would be possible for assets that are related to criminal activities but not necessarily to a specific crime for which the person in question was convicted. In addition, the requirement to make use of interlocutory sales will affect the right to property. The limited conditions under which such sales would be possible as well as the availability of effective remedies (see below) ensure however overall proportionality of the measure. PO4 has the highest impact in that extended confiscation as well as confiscation without prior conviction for a specific offence would be possible for all crimes. Whilst it would meet the legality test, an all crimes approach for far reaching confiscation measures would have a high impact on citizens and increase the risk of confiscation not meeting the public objective test and go beyond what is necessary to fight organised crime.

Procedural safeguards: right to a fair trial, presumption of innocence and right to an effective remedy

The right to a fair trial, the right to an effective remedy and the presumption of innocence are enshrined in Articles 47 and 48 of the Charter as well as in Articles 6 and 13 of the European Convention of Human Rights (“ECHR”). All these rights apply to confiscation measures which are considered to amount to a criminal charge 110 .

All options foresee the possibility to challenge decisions of confiscation, as currently foreseen in Article 8 of the Confiscation Directive. This includes the effective possibility to challenge the circumstances of the case, including specific facts and available evidence on the basis of which the property concerned is considered to be property that is derived from criminal conduct 111 . The impact is lowest for PO2 to the extent that possibilities for non-conviction based confiscation remain limited. The potential impact is highest where confiscation can be ordered in relation to assets that are linked to criminal activities but without a conviction in relation to a specific crime (as foreseen under PO3 and 4). The absence of a criminal conviction raises issues related to the right to fair trial, effective judicial remedy, the presumption of innocence as well as the right to property. The extension of possibilities to confiscation assets without prior conviction for a specific offence would therefore need to be paired with equally strong safeguards. The respect of rights of defense and the presumption of innocence will be ensured where the following safeguards are put in place: confiscation without a conviction for a specific crime is subject to the requirement to prove that the assets in questions are linked to criminal activities and that the affected person has the effective possibility to rebut allegations 112 . In addition, it is recalled that confiscation does not necessarily have a punitive character: confiscation aims at taking away criminal profits, and thereby limiting the incentives for and capacity of criminals to continue their activities. It also has the restorative goal of ensuring that victims of crime are compensated and that the money taken away from organised crime can be used for public interest and social purposes.

When looking at the overall proportionality of the measures, full compliance with the European Union directives on procedural rights 113 , notably Directive 2012/13/EU on the right to information in criminal proceedings 114 and Directive (EU) 2016/343 on the strengthening of certain aspects of the presumption of innocence and of the right to be present at the trial in criminal proceedings 115 must be ensured.

Data protection

Access to SIENA and databases would increase the amount and rate of data exchanged between relevant authorities. This increase will require the adequate data protection provisions to be in place, including existing safeguards in relation to protection of personal data at national and European level, which would apply. The human rights impact should be offset with the alignment of the new legislative measure with Directive 2016/68 116 on data protection, since the revision of the ARO Council Decision will allow clarifying that the processing of personal data is subject to the Law enforcement Data Protection Directive. Currently, Article 5 of this Council Decision refers explicitly only to the Council of Europe Convention of 28 January 1981 for the Protection of Individuals with regard to Automatic Processing of Personal Data, and the Additional Protocol of 8 November 2001 to that Convention, regarding Supervisory Authorities and Transborder Data Flows. This will allow to specify more precisely the categories of personal data that can be exchanged, taking due account of the operational needs of the authorities concerned. Appropriate protocols should equally be in place when authorities are granted access to additional databases to ensure the safeguards are applicable to all.

6.5 Sustainable development goals impacts

All policy options aim at improving the existing asset recovery systems. As such, all would have an impact on the sustainable development goal of (16), peace, justice, and strong institutions through contributing to countering organised crime through its profits. Similarly, all options would impact the sustainable development goal of (8), decent work and economic growth through countering organised crime’s infiltration into the legal economy. PO1 and PO2 would have a more limited impact, proportionate to their softer nature, whilst PO3 and PO 4 would have the greater impact given the stronger obligations that a legislative intervention would bring.

7.    How do the options compare?

Summary of the findings: each criterion is qualified by a score from -3 to +3 (-3 indicating the most negative impact and +3 the most positive impact). The assessment is made in comparison to the baseline scenario as a benchmark.

Table 4: comparison of policy options

7.1    Effectiveness

7.1.1    Strengthen asset tracing capabilities 

PO1 contributes to a limited extent to the objective of strengthening the asset tracing capabilities in Member States as it relies primarily on the voluntary exchange of best practices and the development of further guidance. Such measures are certainly useful and necessary, but would not be sufficient to overcome in a comprehensive manner and for all Member States the deficiencies in terms of lack of financial investigations and Asset Recovery Offices competences and access to and exchange of information. Given that these obstacles derive from regulatory shortcomings and lack of resources, the integration of best practices and guidance would depend on the willingness from policy-makers at national level to address these issues. Therefore, further voluntary exchanges are not expected to change this situation in a significant manner.

PO 2-4 would overcome such regulatory shortcomings to different degrees. By ensuring that Member States take a more strategic approach to asset tracing and financial investigations and that competent authorities have the necessary resources, additional powers and access to the most relevant information, PO2 would strengthen to a considerable extent the capabilities of law enforcement authorities and in particular Asset Recovery Offices to identify and trace criminal assets. The large majority of stakeholders confirmed through interviews, workshops and the public consultation that reinforcing the powers and resources of Asset Recovery Offices will improve asset recovery to a very high extent. These measures will also facilitate the cross border exchange of relevant information to a considerable degree. PO3 would increase substantially these capabilities in particular by ensuring that asset are systematically traced for the most proceed-generating criminal activities. PO4 would further increase to some extent these capabilities by strengthening the effectiveness of temporary freezing orders and information exchange as well as by extending the requirement to trace assets through financial investigations in all crimes related to organised crime activities. However, the latter obligation could stretch the capacity of law enforcement to investigate the financial dimension of criminal activities, since it might hamper their capacity to focus efforts on cases where profits are higher.

7.1.2    Ensure efficient asset management 

PO1 would contribute in a limited manner to the objective of ensuring efficient asset management. While improvements can be expected through the exchange of good practices and the development of possible guidance, such improvements are not expected to be significant in terms of ensuring that the value of confiscated assets outweighs the costs of asset recovery and maximises the revenues that can be used to repair the damage caused. PO2 would contribute to a higher (even if still relatively limited) extent to ensure efficient asset management by setting out higher minimum management obligations and facilitating cross-border coordination. PO3 would contribute significantly to the effectiveness of the management objective, in particular through the mandatory use of pre-seizure planning and interlocutory sales. These tools are best practices identified by stakeholders having a large potential for bringing down management costs on the one hand and maintaining and even maximising the value of confiscated assets 118 . The creation under PO3 of a specialised body responsible for asset management or Asset Management Office would equally contribute to a high extent to improving management of criminal assets, since a specialised body pooling expertise and capable of supporting and advising decentralised management structures (in the Member States where it is more beneficial for structures to be decentralised) would increase the efficiency of asset management, which in turn would lead to costs reductions and the overall increase of the final value of confiscated property. This is confirmed by a large majority of stakeholders consulted in workshops (Asset Recovery Offices, representatives from Justice Ministries), interviews, and the public consultation 119 . This effective instrument would be maintained in PO4 while merging it with the Asset Recovery Office, which could provide certain improvements in the managing of assets since it would ensure that good practices such as pre-seizure planning are systematically applied when Asset Recovery Offices are responsible for the tracing of assets.

7.1.3    Strengthen confiscation capabilities

PO1 would contribute only to a limited degree to strengthen to confiscation capabilities. The exchange of good practices and possible guidance or training are expected to improve the capabilities of individual stakeholders, within the legal framework as it exists in the different Member States. However, to the extent that not all Member States have confiscation measures in place that would allow for a more comprehensive ability to capture the proceeds from organised crime activities, these improvements are expected to be limited.

PO 2 – 4 are more effective in that they require Member States to put in place a number of legally binding measures that extend confiscation possibilities compared to the status quo. These options would foresee in different degrees an extension of the scope, with PO4 being the most effective in that it would capture all crimes and PO2 being the least effective in that the scope of existing confiscation measures would only be marginally increased. PO3 would contribute in a very substantial manner to the objective of disrupting organised crime. It would allow capturing at least those crimes of a serious nature or crimes linked to organised crime activities and foresee the possibility for new confiscation measures that are able to recover illicit assets linked to criminal activities more broadly. This tool has proven its effectiveness and is a common feature in countries that were rated by the FATF as high performing. 

PO3 would therefore be instrumental in addressing the threat of powerful poly-crime groups and address a common challenge encountered in relation to organised criminal activities carried out over a longer period of time.

7.1.4    Improve the overall efficiency of the asset recovery system

PO1 will contribute to the overall efficiency of the asset recovery system to a low extent since it promotes the exchange of best practices and further guidance on a number of relevant aspects such as financial investigations or asset management. PO2 will contribute to the efficiency of the recovery system as whole in a more substantial manner in that it obliges Member States to adopt concrete measures to promote asset recovery as part of a more strategic and coordinated approach, thereby giving asset recovery more prominence while at the same time ensuring that progress can be better monitored through more specific data collection requirements. PO3 will further increase the efficiency by requiring Member States to set up coordination and cooperation mechanisms among the multitude of actors and more stringent rules on monitoring the functioning of asset recovery measures, the identification of possible gaps and measures to remedy identified shortcomings. The requirement to establish asset registries would allow the relevant actors and in particular Asset Recovery Offices and Asset Management Offices to have real time information about the relevant assets and measures taken to ensure adequate feedback and coordination between relevant actors responsible for the different asset recovery phases. PO4 would allow for better steer of asset recovery measures taken during different phases and by different actors by establishing one single body responsible for the general oversight as well as data collection. Better information about identified assets and their status – provided through asset registries would be available also for Asset Recovery Offices and Asset Management Offices in other Member States further strengthening asset recovery in a cross border context.

Conclusion

All policy options would contribute to different degree to the effectiveness criterion, being interlinked and mutually reinforcing. However, certain individual measures carry a greater weight in the assessment than others. On the tracing policy objective, measures which would ensure the systematic tracing of assets and financial investigations are to be considered particularly effective. On the management policy objective, measures which would include the effective implementation of efficient management rules would lead to a higher effectiveness score. On confiscation, a broader scope would be the most effective in order to ensure the capturing of a higher percentage of criminal proceeds.

PO1 is therefore the least effective in that it relies exclusively on voluntary actions by the different actors in Member States within the current legal framework, and does not guarantee the effective implementation of the measures which would meet the tracing, management, and confiscation objectives. While some of the shortcomings in the application of the rules can be expected through increased awareness, guidance and improved skills this option will not overcome regulatory shortcomings identified and as a consequence not solve the problems caused by large criminal activities conducted by organised crime groups in Europe.

PO2 is moderately effective: it strengthens asset tracing capabilities to some degree and contributes to an overall improvement of asset tracing and management planning, thus efficiently achieving to a moderate degree the policy objectives of tracing and management. The effectiveness is however limited because these measures do not provide sufficiently strong safeguards against the dispersion or depreciation of identified assets and because confiscation measures remain limited in scope, achievining the confiscation policy objective only to a limited extent.

PO3 is very effective: it significantly strengthens the capabilities and powers of the competent authorities and in particular Asset Recovery Offices and Asset Management Offices as part of a more strategic and systematic use of financial investigations and on the basis of clear standards and requirements regarding asset tracing and management. These measures achieve the tracing and management policy objectives to a high extent by equipping relevant authorities with the tools necessary to achieve the policy goal and establishing stronger obligations on Member States. Moreover, the main aspect contributing to the effectiveness of PO3 is however the requirement for Member States to allow for confiscation of criminal assets which cannot be directly linked to a specific offence and this in relation to an extended list of criminal offences, which would broaden confiscation possibilities to meet the confiscation policy objective to a high extent. Compared to PO2, measures under PO3 are significantly more effective because of the particular importance and impact of more systematic financial investigations and the significantly broadened confiscation possibilities.

While contributing to all specific policy objectives PO4 is only slightly more effective than the previous option insofar as it sets out in further detail certain powers and obligations providing the competent authorities with the most extensive tools and competences and ensuring swifter cooperation between the different actors (also cross border).

7.2    Efficiency 

All envisaged policy options would lead to positive results from a cost-benefit analysis 120 (i.e. analysis of potential benefits as compared to the estimated costs of the different options), considering that the costs of the different measures are offset by the benefits for the State budget of a higher asset recovery rate, and by the benefit of society as a whole, which would benefit from increased safety and economic health derived from a reduced criminal activity. Even though the measures are interlinked and mutually reinforcing, certain individual measures carry a greater weight in the assessment than others, with the overall efficiency score depending on the costs and benefits of certain individual measures and their weight in achieving the policy objectives.

On the tracing policy objective, the costs of implementation of existing measures are to be balanced with the benefits which would arise from a greater number of identified assets. On the management policy objective, the efficiency criterion would fundamentally depend on whether the proposed measures would lead to a cost-efficient management system, with the costs of putting in place management structures and more stringent management provisions to be compared and balanced with the benefits stemming from overall lower management costs and higher returns regarding the final value of confiscated property. On the confiscation policy objective, the costs of establishing further confiscation measures are to be compared and balanced with the benefits stemming from confiscating a greater number of assets, both in terms of revenues and in terms of impacts on organised crime. On the policy objective to increase the overall efficiency of the asset recovery system, the costs stemming from developing a coherent national strategy on asset recovery and setting up the structures necessary to implement it are to be compared and balanced with the overall benefits stemming from improving the asset recovery system as a whole.

PO1 presents the lowest costs of all options considered: approximately EUR 1.53 million devoted annually to holding meetings for exchanging best practices, developing guidelines and delivering training activities (with costs being shared between Member States and the Commission or EU agencies). Such limited costs would certainly be compensated by the slightly higher rate of assets returned to the State resulting from the improvements in the capacity of authorities to detect, confiscate and manage criminal assets. However, such financial benefits would be relative low compared to other options and very much depend on the willingness of Member States to incorporate best practices in their national frameworks. The benefits in terms of remedies to harm inflicted by organised crime (including victim compensation or reuse for public interest or social purposes) would be relatively small, given the expected moderate increase in the rates of asset recovery. Likewise, the impact in fighting criminality would result in limited benefits for companies and for the society as a whole.

The costs are considerably higher for PO2, estimated to be in the order of at least EUR 8.6-million. The main expenses derive from the investments required to provide Asset Recovery Offices with access to databases, to ensure that the competent authorities including in particular Asset Recovery Offices have the necessary resources and skills and to implement the requirements on data collection 121 . Most of these costs would span over time, with the majority of the expenses to be provided in the first years of implementation.

Such costs are however proportionate to the benefits resulting from in particular reinforced capacities to identify and thereafter freeze criminal assets (including through improved access to information and strengthened cooperation) and efficiency gains related to both the identification and management of assets. Some additional benefits can be expected from the targeted improvements of the confiscation instruments. The number (and value) of confiscation orders is estimated to increase to a considerable extent. Should this increase range between 10% and 20% compared to the baseline –a plausible range when considering the measures envisaged-, it would represent an additional amount of recovered assets of approximately EUR 100-200 million per annum across the EU.

In addition to these direct economic benefits, which outweigh the estimated costs considerably, the latter should be seen against the overall impact that such a higher confiscation rate and the corresponding reduction in criminal activities would have on the economy and the society. Illicit activities would be expected to decrease to a certain extent, and therefore citizens would benefit from higher levels of safety against crimes and companies would be less affected by fraud and distortions to competition.

For the above reasons and in particular the significant benefits that can be expected from measures under PO3, the efficiency rating for PO3 is significantly higher than for PO2.

The costs for PO3 are significantly higher than for the previous options, since they comprise one-off costs estimated to be between EUR 31.6 and 38.4 million, with an approximate range of EUR 12 to 19 million every year derived from recurrent expenses. Besides costs derived from the measures in PO2 which are included in this option and those related to the establishment of a specialised Asset Management Offices with additional tasks, new costs of significant importance relate to the additional resources to develop expertise needed to carry out interlocutory sales and pre-seizure planning, the additional training required for law enforcement to systematically trace assets and on the new confiscation model as well as the establishment of asset registries.

However, similar to PO2, the costs of PO3 would be largely offset by the higher confiscation rates. It is conceivable that the measures could lead to an increase that could even double the current confiscation rate, which could mean one billion euros more in recovered assets every year. An increase of such an approximate magnitude is due to the significant extension of the confiscation possibilities and potential criminal assets covered, but also due to better identification of illicit assets and more efficient management (ensuring that illicit assets maintain or even increase in value). While the measures in PO3 imply additional costs, they are also expected to generate efficiency gains, e.g. through closer cooperation between the different stakeholders both cross border and internally.

More importantly, by increasing in such a substantial manner the amount of funds taken away from the hands of criminals (deriving from the much-increased capacity to trace assets and especially to confiscate them through the application of extended confiscation and the new confiscation model to a large set of crimes), the measures would contribute significantly to disrupt criminal activity. This would in turn positively impact the competitiveness of companies and the economy as a whole and increase significantly the safety of citizens, who would also benefit from greater opportunities for compensation (when falling victims to organised crime) and from social activities funded through confiscated assets.

PO4 presents costs similar to the ones expected for PO3, in particular for one-off costs, which would be in the range of EUR 41.3 to 45.7 million. These considerable costs derive from the costs of the measures in PO3 and the additional costs resulting from establishing new bodies and interconnecting asset registries. Such costs would only be partially offset by the efficiencies gained from joining the functions of asset management and asset tracing under one roof, as well as further (marginal) improvements when it comes to cross border cooperation and safeguarding identified illicit assets.

However, additional measures such as the extension of financial investigations and more efficient cross-border asset management would only bring relative gains compared to PO3. As a result of these measures, the asset recovery rate would increase to a certain extent compared with PO3, although the growth would be minor in relation to PO3 and the indicative volume of additional assets confiscated would be on the range of EUR 50-100 million. While such an increase would most certainly offset the additional costs of this option, overall the qualitative leap observed in PO3 as regards deterring criminal activity would be maintained but only marginally increased in PO4, and so would the positive impacts on the economy and the society as a whole.

Table 5: Summary of costs and benefits

Overall, PO3 is considered to be the most efficient option when comparing the additional costs with the increased effectiveness of the asset recovery system and the positive impacts on security and therefore on the economy and the society.

7.3    Coherence

As indicated in the Evaluation, the main deficiencies as regards the coherence with other EU legal acts and policies relate to:

-The scope of the Confiscation Directive is narrower than the one of the Asset Recovery Offices Council Decision but also of other recent legislative instruments (the Regulation on Mutual Recognition of freezing and confiscation orders, the Directive on Countering Money Laundering by means of criminal law and the Anti-Money Laundering Directive) 122 that cover a much larger range of illicit activities generating huge profits. Moreover, the scope of the Confiscation Directive is narrower than the EMPACT priorities for the cycle 2021-2025, agreed by the Council on 12th May 2021 and including high-risk criminal networks (looking at organised crime but also at their use of corruption), cyber-attacks, trafficking in human beings, child sexual exploitation, migrant smuggling, drugs trafficking, fraud, economic and financial crimes (including online fraud schemes, excise fraud, MTIC fraud, intellectual property crime, counterfeiting of goods and currencies and money laundering), organised property crime (including the trafficking of cultural goods), environmental crime and firearms trafficking.

-the confiscation tools which are narrower to some extent in the Confiscation Directive than in the Mutual Recognition Regulation. The latter does not only enable the recognition of orders covered by the Confiscation Directive, but it covers all types of freezing orders and confiscation orders issued following proceedings in relation to a criminal offence. This includes other types of orders issued without a final conviction;

-the level of EU intervention on the repressive and preventative dimension of anti-money laundering policies. As highlighted in the Evaluation, there is a stark contrast between the high level of details of the roles and powers of different actors contained in the asset recovery framework and the Anti-Money Laundering Directive, which results in a more strategic approach and better cooperation in the preventative dimension of anti-money laundering policies. This is reflected in the higher effectiveness that Member States have achieved on the preventative side than on the repressive angle, as reflected in evaluations by the FATF or Moneyval.

The scoring of the coherence criterion would therefore depend on the extent to which the policy option would address the above-outline policy incoherence. In relation to the scope, all legislative options (PO2, PO3 and PO4) would increase the coherence of rules governing Asset Recovery Offices and confiscation instruments. PO2 would increase the coherence in scope only to a very limited degree. PO3 would increase such coherence to a greater level, by adding a wider range of offences covered by the Mutual Recognition Regulation, the Directive on Countering Money Laundering by means of criminal law and the Anti-Money Laundering Directive, a coherence that would be achieved in its entirety under PO4.

As regards the confiscation tools covered, PO3 (and PO4, insofar as the measures of PO3 also apply in PO4) would ensure a greater coherence with the Mutual Recognition Regulation. PO3 would enlarge the situations where non-conviction based confiscation would apply and introduce confiscation models that enable authorities to confiscate assets of suspects or offenders for which the court is sufficiently convinced that the suspect belongs to organised criminal groups or is involved in particularly serious crimes and that the assets are the proceeds of crime. By doing so, PO3 would ensure that the different confiscation tools for which mutual recognition is enabled would be available to all Member States.

Finally, the various options would ensure that Member States develop a strategic approach to asset recovery (PO2), set the cases where assets should be traced through financial investigations (PO3) and regulate to increasing degrees the powers and information available to Asset Recovery Offices and the cooperation among them. In doing so, the different legislative options would increase the coherence with the preventative side of the Anti-Money Laundering regime, which requires Member States and private entities to adopt a risk-based approach and regulates the powers, accessible information and cooperation of relevant actors such as Financial Intelligence Units. PO2 and to a larger extent PO3 would ensure a more structured approach to asset recovery and to the roles of and cooperation among different actors, equating it to the preventative dimension. Therefore, while coherence with EU policies would be achieved to some extent by PO2 and to a large extent by PO3 and PO4, the non-legislative intervention (PO1) would only improve coherence to a negligible extent.

7.4    Proportionality (including impacts)

The analysis of proportionality focuses on the extent to which the measures are proportionate to the administrative burden on Member States and the interference on their discretion to organize themselves and balancing impacts in terms of in particular effectiveness with interferences with fundamental rights.

Measures that may be similar in terms of efficiency or effectiveness may nevertheless have a different proportionality score depending on the “costs” at which such otherwise efficient and effective measures come in terms of impact on fundamental rights or Member States’ prerogatives. Similarly, impacts in terms of either interference with fundamental rights or Member States prerogatives can be different depending on the kind of measures that contribute to the efficiency or effectiveness of asset tracing, management, confiscation as well as overall strategic framework. The proportionality assessment weighs these different considerations when coming to the overall proportionality rating.

All options, especially PO2-4, increase the administrative burden on Member States, especially in relation to measures that promote a more systematic asset tracing, access by Asset Recovery Offices to the relevant data, or urgent freezing powers. Regarding confiscation and management, the administrative burden is higher in PO3 and PO4, in particular in relation to the incorporation of additional confiscation instruments and measures to maintain the value of assets (e.g. through interlocutory sales) as well as in relation to the creation (and interconnection) of asset registries. However, in all cases the additional administrative burden is proportionate to the benefits.

As regards the interference with Member States organisational discretion, PO1 has no impact, while PO2 interferes in relation to aspects such as the development of a plan on asset recovery or the establishment of asset management contact points. This interference is higher in PO3, since it establishes concrete obligations on financial investigations –albeit limited to certain crimes and situations- or the establishment of an entity specialised in managing assets that would support existing managing authorities and have the possibility of managing assets. However, given the deficiencies identified in those areas and the need to achieve progress in relation to asset tracing and management, the level of interference is justified.

This is not necessarily the case in PO4. The limited effectiveness gains of measures such as the automatic launch of financial investigations for all crimes or the concentration of asset tracing and management tasks in one entity (Asset Recovery and Management Offices) could be considered as going beyond what is necessary to achieve the objective of improving the efficiency of the asset recovery system. Such measures would risk representing an excessive interference with the freedom of Member States to organise their national set-ups as they see best. This goal is achieved in a more proportionate manner through requirements for an action plan or coordination mechanisms (PO2 and PO3). Moreover, the extension of the scope as foreseen in PO4 would mean that powerful confiscation tools such as extended confiscation or the new confiscation model would be applicable to all crimes. However, such tools are designed to counter the complex nature of modern organised crime. Therefore, by allowing its application to all crimes -even those not necessarily linked to organised crime activities- PO4 could be considered as less proportionate.

When balancing relevant impacts including in particular fundamental rights impacts, proportionality must be ensured between the objective justification and need for the measures in question (e.g. in terms of combating organised crime) and the potential interference with fundamental rights that asset recovery measures could have, in line with the assessment undertaken section 6.4. Where the impact on fundamental rights (including in particular property right or fair trial)/rights of defence) is highest (as under PO3 and PO4, where the fundamental rights impact is the highest but outweighed by expected benefits) the resulting interference with fundamental rights is not only justified by the need to effectively deprive criminals and in particular organised crime from their illicit assets e.g. through extended confiscation possibilities (capturing more illicit gains from criminal activities going beyond the proceeds from a specific crime), or measures to prevent asset flight (e.g. through urgent freezing powers). The higher impact on fundamental rights will also need to be paired with stronger safeguards, including effective remedies available to the person affected.

In light of all the above, PO1-3 would be entirely proportionate, while PO4 would be considered partially proportionate. The main reason for the different proportionality rating of PO3 and PO4 is the interference with Member State prerogatives by regulating in more detail procedures at national level without such interference being compensated by additional efficiency or effectiveness gains.

8.    Preferred option

8.1 Policy Option 3

In a situation where only 1% of criminal proceeds are confiscated, criminals are not deprived of the entirety of their illegal gains and damage generated by criminal activities is not sufficiently remedied. Ambitious measures are needed to substantially increase the capabilities of the relevant authorities to swiftly and effectively identify, manage and confiscate illicit assets. However, each policy option also includes necessary trade-offs between, on the one hand, the level of impact on organised crime and the ability to disrupt such activities through the recovery of assets, and the potential interference with fundamental rights and Member States’ prerogatives and budgetary burdens on the other.

While measures under PO1 can indeed make a valuable contribution to improving the situation within the existing legal framework, it would only marginally contribute to overcome the scale and nature of the problem. As shown in the Evaluation, it is precisely the large margin of discretion of the current legal framework that is at the origin of many of the problems identified. Therefore, it is difficult to address them through non-legislative measures. Issues such as the lack of prioritisation of asset tracing or the inefficiency in asset management can only be overcome if there is a legal obligation. PO1 would have little interference with fundamental rights and Member States prerogatives and budgetary burdens, but would as a trade-off have low effectiveness in addressing the problem. Measures under PO1 could and should, however, be taken to complement legislative changes.

Similarly, PO2 would contribute only to a limited extent to improving the current situation in that the measures taken would maintain a relatively large margin of discretion for Member States and add only few additional requirements compared to the status quo. PO2 would have limited interference with fundamental rights and Member States prerogatives and budgetary burdens, but would as a trade-off have low effectiveness in addressing the problem.

PO4 can be expected to be more effective in some respects (e.g. more specific requirements on urgent freezing powers or information exchange, further extension of the scope of confiscation measures compared to PO3, requirements to centralise expertise and competences) but not necessarily in others (e.g. on financial investigations for all crimes). However, the trade-off of PO4 is that expected gains in effectiveness are expected to be limited compared to the extra costs and potential fundamental rights impacts. Moreover, this option would have significant drawbacks, as it would imply more significant and to some extent excessive interference with Member States’ freedom to organise asset recovery according to their choices and national preferences without the additional gains in terms of effectiveness and efficiency fully counterbalancing this interference. Furthermore, an all crimes approach for far reaching confiscation measures would have a high impact on citizens and increase the risk of confiscation not meeting the public objective test and go beyond what is necessary to fight organised crime.

As regards PO3, the measures to ensure asset tracing in the more proceed-generating cases, to reinforce Asset Recovery Offices’ powers and roles, to ensure the adoption of effective asset management mechanisms and confiscation models would raise the effectiveness of the asset recovery system to a significant extent. Stakeholders (law enforcement, judicial authorities, Europol, Asset Recovery Offices and NGOs) recognise the effectiveness of the measures under PO3. Despite the costs and potential fundamental rights impacts of confiscation measures, these measures are considered as efficient given the qualitative leap in the rate of assets taken away from criminals, and proportionate in relation to the administrative burden and interference with Member States organisational set-ups. In terms of fundamental rights, the impacts of PO3 and in particular of the new confiscation model are balanced against safeguards and policy objective sought, given the scale of the problem. The trade-offs of PO3 are therefore a higher effectiveness and efficiency of the asset recovery system, and the potential interference with fundamental rights, and Member States’ prerogatives and budgetary burdens on the other.

The overall impact of PO3 will differ on Member States, given the heterogeneity of the asset recovery set-ups between jurisdictions. While all the 20 EU Member States that have been subject to FATF/Moneyval fourth round of mutual evaluations were considered as fully or largely compliant from a legal perspective with the FATF recommendations (which are less detailed than the Confiscation Directive), effectiveness of the asset recovery systems varied. Member States whose asset recovery system was evaluated to be of low effectiveness (HU, MT, PL, SK) are therefore likely to be impacted by the reform of PO3 to a high extent. The majority of Member States whose asset recovery system was evaluated to be moderately effective (AT, BE, CY, DK, EL, FI, HR, IE, LU, LV, LT, PT) will be equally moderately affected by the measures of PO3. On the other hand, the countries with a higher effectiveness ratings (CZ, ES, IT, SE) are likely to be less affected by the new measures, although they would have to introduce some changes to their national frameworks.

At the same time, the resources that Member States would have to devote would not only depend on the regulatory changes foreseen in the preferred option, but also on the level of threat they face, since some Member States have higher levels of criminal activity than others or present certain characteristics (the size of the real estate market, the importance of the financial system) that make them more attractive to criminal investments. This will affect the impact of PO3 on different Member States. The extent to which Member States have complied or gone beyond current requirements also provides a picture of the countries most significantly affected. However, all Member States would be positively impacted by lowering the presence of organised crime in their territory which affects all layers of society in all the Member States.

In conclusion, PO3 strikes the best balance between effectiveness, cost efficiency and impact on fundamental rights and is overall proportionate to the scale of the problem.

The effective implementation of the new rules, including softer options such as the availability of necessary resources, will be ensured through monitoring Member States’ national strategies on asset recovery (which the preferred option would require Member States to undertake) which will ensure that the required measures, in all phases of asset recovery, are implemented and assessed nationally as a whole. This will ensure that Member States themselves assess their own situation on the ground, whilst viewing the main asset recovery problem in all its phases and not in silos, and design how to best implement rules of softer nature in a manner tailored to their national specificity. Moreover, the Commission will monitor the implementation of the new rules through a combination of monitoring transposition measures by Member States and dialogue with stakeholders at European and international level. Data such as availability of the necessary resources will be collected through consultation of the Asset Recovery Offices Platform and the Contact Committee of the Confiscation Directive, as well as agencies such as Europol and Eurojust.

Figure 6: intervention logic PO3

8.2 REFIT (simplification and improved efficiency)

Per the Commission’s Regulatory Fitness and Performance Programme (REFIT), all initiatives aimed at changing existing EU legislation should aim to simplify and deliver stated policy objectives more efficiently (i.e. by reducing unnecessary regulatory costs). The analysis of impacts suggests that the preferred option is anticipated to have a limited and at times positive impact in terms of burden on Member States.

To the extent that the measures foresee a more strategic approach to asset recovery (including the requirement to ensure a more systematic identification of assets by law enforcement authorities), and provide for more effective tools of confiscating assets (including the possibility to confiscate illicit asset related to criminal activities without requiring the conviction for a specific crime) and foresee the establishment of “centres of expertise” with the competent authorities having the necessary resources, skills and powers, the asset recovery process as a whole as well as cross border cooperation will become significantly more efficient.

Regulatory burden related to these measures will be – as shown in the sections above – more than offset by the benefits in terms of being able to identify freeze and confiscate more illicit assets and maintain or even maximise their value.

While ensuring that judicial authorities get acquainted with the new confiscation model would require important efforts in terms of training and guidance in the first place, in the long term the availability of such an effective tool would reduce the current burden on authorities to confiscate criminal assets.

Requirements to facilitate Asset Recovery Offices’ exchange of information, such as facilitating their access to relevant databases, would reduce the current burden in cross-border cooperation among Asset Recovery Offices. Given the specialised expertise of Asset Recovery Offices, ensuring they can support investigators in tracing assets would increase the overall efficiency of asset tracing and reduce the burden on non-specialised law enforcement units. Similarly, requirements for the establishment of an Asset Management Office would reduce the overall burden compared to the current situation, where in many Member States asset management is carried out by a wide array of authorities without the sufficient expertise or support, in particular to manage complex assets such as companies.

8.3 Application of the “one in, one out” approach

This initiative would not entail neither administrative costs nor savings for the private sector, and, as to adjustment costs, it would mostly concern public authorities.

9. How will actual impacts be monitored and evaluated?

To monitor the effective implementation of the revised legislation, the Commission will publish implementation reports. In addition, it is essential that the implementation of the preferred policy option and the achievement of the objectives is closely monitored. A robust monitoring and evaluation mechanism is crucial to ensure that the envisaged beneficial effects of the improvements to the asset recovery regime materialise in practice.

The Commission should also evaluate the implementation of the new legal framework, no sooner than four years after the date of transposition of the instrument to ensure that there is enough data relating to the functioning of the instrument. The Evaluation shall include stakeholders’ consultation to collect feedback on the effects of the legislative changes. The Commission will present a Report to the European Parliament and to the Council on the functioning of the legislative instrument. The report shall also include an evaluation of how fundamental rights and principles recognised by the Charter of Fundamental Rights of the European Union have been respected.

To ensure the effective implementation of the measures foreseen and to monitors their results, the Commission will closely work with relevant stakeholders from national authorities in the Member States.

The proposed, not exhaustive list of indicators will be based on the operational objectives pursued by the measures identified under the preferred option:

Table 6: Monitoring indicators based on the operational objectives

Annex 1: Procedural information

LEAD DG, DECIDE PLANNING/CWP REFERENCES

The lead DG is the Directorate-General for Migration and Home Affairs (DG HOME) for the preparation of the initiative and the work on the Evaluation and Impact Assessment. The agenda planning reference are PLAN/2020/8718 (freezing and confiscation of proceeds of crime) and PLAN/2020/8719 (Asset Recovery Offices).

ORGANISATION AND TIMING

The Inception Impact Assessment was published on 9 March 2021. Within this framework, the Impact Assessment and the Evaluation were subsequently prepared.

The Inter-Service Group set up by the Secretariat-General to assist with the implementation of measures related to the Security Union was consulted within the framework of the preparation of this policy initiative. The Inter-Service Group was composed of the following Commission Directorates-General and services: Secretariat-General (SG); Legal Service (LS); Justice and Consumers (JUST); Financial Stability, Financial Services and Capital Markets Union (FISMA); European Anti-Fraud Office (OLAF); Taxation and Customs Union (TAXUD); Informatics (DIGIT); Education, Youth, Sport and Culture (EAC); European Civil Protection and Humanitarian Aid Operations (ECHO); European External Action Service (EEAS); Employment, Social Affairs and Inclusion (EMPL); Energy (ENER); Environment (ENV); Foreign Policy Instruments (FPI); Internal Market, Industry, Entrepreneurship and SMEs (GROW); Human Resources and Security (HR DS), Joint Research Centre (JRC); Maritime Affairs and Fisheries (MARE); Mobility and Transport (MOVE), Neighbourhood and Enlargement Negotiations (NEAR); Regional and Urban Policy (REGIO); Research and Innovation (RTD); Health and Food Safety (SANTE); TRADE; Structural Reform Support (REFORM); International Partnerships (INPTA); Eurostat (ESTAT).

The Inter-Service Group was consulted on the following: (1) the Inception Impact Assessment, (2) the terms of reference of the study to support the preparation of the Impact Assessment, (3) the consultation strategy, public consultation questionnaire, draft problem tree, (4) the Evaluation intervention logic and Evaluation questions, (5) the Inception Report of the study to support the preparation of the Impact Assessment, (6) the Interim Report and (7) Final Report for review of the same study, the (8) first and (9) second draft Impact Assessment. The Inter-Service Group met 2 times, during (1) the kick off meeting of the study to support the preparation of the Impact Assessment, and (2) to discuss the draft Impact Assessment report.

CONSULTATION OF THE RSB

The Directorate-General for Migration and Home Affairs submitted the present Impact Assessment report to the Regulatory Scrutiny Board (RSB) on 2 February 2022. The Regulatory Scrutiny Board reviewed the draft impact assessment at its meeting of 2 March 2022 and delivered a positive opinion without reservations on 4 March 2022, following which the impact assessment was revised to strengthen the presentation and comparison of the policy options, including their costs, benefits, and impacts. The impact assessment was further revised to better reflect the views of different stakeholder and how the identified problems differ in the Member States. Finally, the revision outlines a first monitoring and evaluation programme of the envisaged proposal.

EVIDENCE, SOURCES AND QUALITY

The Impact Assessment is notably based on the ‘Study to support the preparation of an Impact Assessment on EU policy initiatives on asset recovery and confiscation’ 123 and on the stakeholder consultation (see Annex 2) and on the results of the Evaluation (see Annex 7). The Commission applied a variety of methods and forms of consultation, ranging from consultation on the Inception Impact Assessment and a public consultation, which sought views from all interested parties, to targeted stakeholders’ consultation by way of questionnaires, experts’ interviews and targeted thematic technical workshops, which focused on subject matter experts, including practitioners at national level. In particular, the Commission organised two workshops in 2021 on asset recovery: the Asset Recovery Offices Platform Meeting 124 of 25-26 May 2021 and the Contact Committee meeting of the Confiscation Directive 125 of 1-2 June 2021, where additional data was collected among the participants also for the preparation of the Evaluation.

In this context, the Commission also took into account the findings of the study on ‘Asset recovery and confiscation: what works and what doesn’t work’ 126 and the study on the transposition of Directive 2014/42/EU 127 , which were commissioned by DG HOME and developed by the contractor based on desk research and the following stakeholder consultation methods: surveys, interviews with subject matter experts, questionnaires, and expert workshops.

Annex 2: Stakeholder consultation (Synopsis report)

This Annex provides a synopsis report of all stakeholder consultation activities undertaken in the context of this Impact Assessment.

1.Consultation Strategy

To ensure that the general public interest of the EU in relation to asset recovery and confiscation was properly considered in the Commission’s approach, a wide consultation of stakeholders was undertaken. The aim of the stakeholder consultation was:

§To identify the problems in relation to asset recovery and confiscation

§To identify the effectiveness, efficiency, relevance, coherence and EU added value of the current instruments

§To identify the roles of different actors in the actions to be taken and the level of action needed, in accordance with the principle of subsidiarity

§To identify the possible options to tackle the problems identified and the impact of such options.

Views were sought from a range of stakeholders, through different consultation tools. These stakeholders related to Asset Recovery Offices, National Authorities (Judicial and Law Enforcement), EU Agencies (Europol, Eurojust, CEPOL), international organisations, the European Institutions, civil society organisations and from members of the public. During the consultation process, a variety of methods and forms of consultations were applied. They included:

§Consultation on the Inception Impact Assessment, which sought views from all interested parties

§Targeted stakeholder consultations in the form of Workshops

§Targeted stakeholder consultations in the form of written responses

§Targeted stakeholder consultations in the form of semi-structured interviews

§A public consultation

In this context, the Commission also took into account the findings of the Study to support the preparation of an Impact Assessment on EU policy initiatives on asset recovery and confiscation, 128  which was commissioned by the Commission’s Directorate-General for Migration and Home Affairs in March 2021 and prepared by a contractor based on desk research and the following stakeholder consultation methods: written questionnaires, semi-structured interviews and Policy Option Workshops. The Commission also considered the findings of the Study on freezing, confiscation and asset recovery – what works, what does not work 129 ’, commissioned in 2020.

The diversity of perspectives proved valuable in supporting the Commission to ensure that its proposal addressed the needs and took into account the concerns of a wide range of stakeholders, at both European, national and international level. Taking into account the COVID-19 pandemic, the consultation activities focused on virtual interviews and Workshops through video conference. This has no impact on the overall quality of the consultations.

2.Consultation activities

2.1.Feedback on the Inception Impact Assessment

A call for feedback, seeking views from any interested stakeholders, on the basis of the Inception Impact Assessment 130 was issued by the Commission. The consultation sought feedback from EU citizens, public authorities and non-governmental organisations. The call for feedback period was between 9 March 2021 and 6 April 2021. Participants of the consultation were able to provide online comments and submit short position papers, if they wished, to provide more background on their views.

2.2.Stakeholder events

Over the course of the consultation, the Commission organised two Workshops that were held with Asset Recovery Offices representatives (25-26 May 2021) and the Contact Committee of the Confiscation Directive (1 – 2 June 2021). Background documents were shared to the participants to the Workshops presenting the initial problem tree, with key questions steering the discussions in relation to the stakeholders’ practical experiences relating to the problems existing.

Workshop with Asset Recovery Offices representatives and Contact Committee of the Confiscation Directive

On 25 and 26 May 2021, a Workshop was held with Asset Recovery Offices representatives at an Asset Recovery Offices Platform meeting. The objective of this Workshop was to gain Asset Recovery Offices’ views in relation to the effectiveness, efficiency, relevance, coherence and EU Added Value of Directive 2014/42/EU and Council Decision 2007/845/JHA concerning cooperation between Asset Recovery Offices. The Workshop also enabled the contractor to gain viewpoints regarding the problem definition and potential Policy Options.

On 1 – 2 June 2021, a Workshop was held with members of the Contact Committee of the Confiscation Directive, composed of Member States’ representatives. The aims of this Workshop were the same as those for the Workshop with Asset Recovery Offices representatives.

For both Workshops, the use of digital online tools such as Slido and Mentimeter were used to measure stakeholders’ viewpoints in relation to the different elements of the Evaluation and the Impact Assessment.

2.3.Targeted consultation by way of written responses

Following the Workshops held in May and June 2021, stakeholders were invited to provide their additional comments to the Commission in the form of written questionnaires.

2.4.Public consultation

A public consultation 131 was also launched for the purposes of this Impact Assessment to offer citizens and other stakeholders the opportunity to express their opinions on current problems and the future of EU asset recovery and confiscation, and on the Evaluation of the asset recovery and confiscation framework composed of Directive 2014/42/EU and Council Decision 2007/845/JHA. The public consultation was launched on 21 June 2021, with the Consultation closing on 27 September 2021.

2.5.Study to support the preparation of an Impact Assessment on EU Policy Initiatives on Asset Recovery and Confiscation

The Commission also contracted an external consultant to conduct a Study to support the preparation of an Impact Assessment on EU Policy Initiatives on Asset Recovery and Confiscation. The work on the Study took place between March 2021 and December 2021 and involved desk research, stakeholder consultations by way of written questionnaires, semi-structured interviews and Policy Option Workshops.

2.5.1 Semi-structured interviews

Almost 40 semi-structured interviews were undertaken over the course of the contracted Study. The consultation included targeted interviews with stakeholder groups on the basis of formalised and open-ended questions allowing for open and in-depth discussions. These interviews were conducted from April to July 2021 via video conference. The stakeholder groups targeted for these interviews included:

§European Commission

§Europol

§CEPOL

§Eurojust

§Member State National Prosecution Services

§Member State Law Enforcement Authorities

§Asset Recovery Offices

§Asset Management Offices

§NGOs (Libera/CHANCE, Transparency International, WWF Central and Eastern Europe )

§Council of Europe

The interviews aimed at (i) gathering information related to the implementation of the current legislative framework at EU level including the problems existing (ii) deepening the understanding of current practice in relation to the asset recovery phases (iii) gathering points of view relating to potential measures for improvement. The results of these interviews were presented in the Final Report of the Study to support .

2.5.2 Targeted consultation by way of a questionnaire

A written questionnaire was submitted to both Asset Recovery Offices and members of the Contact Committee of the Confiscation Directive in July 2021 to fill missing gaps in relation to the problem definition and the assessment, as well as to gather quantitative data relating to effectiveness and efficiency, necessary for the Commission’s Evaluation. Responses to the Asset Recovery Offices questionnaire were received from the following Member States: Austria, Bulgaria, Czech Republic, Denmark, Finland, Germany, Greece, Ireland, Italy, Latvia, Netherlands, Romania, Spain (Judicial Asset Recovery Office), Spain (Police Asset Recovery Office), Sweden. Responses to the Contact Committee questionnaire were received from the following Member States: Bulgaria, Cyprus, Estonia, Germany, Italy, Latvia, Lithuania, Netherlands, Portugal, Slovakia, Slovenia.

2.5.3 Policy Option Workshops

Four Policy Option Workshops were held with stakeholder groups in September 2021 with a view to presenting the problem assessment undertaken by the contractor and presenting the potential policy options. The aim of these Workshops, via videoconference, was to gather the views of the stakeholders on the policy options and identify the potential impacts of the Policy Options in relation to key impacts measured for the Study i.e. impact on confidence in justice in the EU, impact on law enforcement, impact on policy objectives and impact on costs associated with the measures. The Workshops were held with Europol, Law Enforcement and Prosecution Authorities, Disposal and Management Authorities and the World Bank and non-governmental organisations.

3.Stakeholder participation

Stakeholders consulted included:

§EU Institutions and Agencies

§Asset Recovery Offices

§Law enforcement authorities in the Member States

§Judicial authorities in the Member States

§Non-governmental organisations and civil society (Libera/CHANCE, Transparency International, WWF Central and Eastern Europe)

§International organisations (World Bank, Council of Europe)

The feedback on the Inception Impact Assessment and the public consultation included responses from members of the public, non-governmental organisation and associations with an interest in this field. This diversity in responses and perspectives has been valuable in assisting the Commission in drawing up its proposal.

4.Methodology and tools

The processing of responses was undertaken manually due to the written responses received from a vast variety of stakeholders. The results from stakeholder interviews and written questionnaires for the Study was inputted into an Evidence Grid by the contractor in order to be in a position to triangulate the results of primary research with secondary research conducted through desk review.

5.Results

5.1.Consultation on the Inception Impact Assessment

This Inception Impact Assessment received 13 responses from a variety of stakeholders, ranging from members of the public and public authorities to EU Agencies and the European Parliament.

Figure 1 Overview of responses to Inception Impact Assessment

The Inception Impact Assessment was welcomed by responding stakeholders. A diversity existed regarding the Policy Options supported. NGOs and national authorities supported Policy Option 3 focussing on legislative measures. Some stakeholders (NGO) welcomed the introduction of additional measures in relation to extended confiscation and non-conviction-based confiscation. While Policy Option 3 was supported by stakeholders, Policy Option 2 (the non-legislative option) was identified by one national authority as the best solution due to the time lapsing since the adoption of the Confiscation Directive. A combination of both legislative and non-legislative intervention was supported by a public authority responding to the Inception Impact Assessment, with suggestions also made in relation to expanding the scope of Asset Recovery Offices in each Member State and introducing a legal framework for cooperation between judicial authorities to execute out of court confiscation decisions. The Inception Impact Assessment also provided the Commission with useful feedback from citizens. A past victim of crime responded welcoming the provisions in relation to greater victim protection and victim compensation.

5.2 Stakeholder events

The workshops held by the Commission were attended by Asset Recovery Offices representing all Member States as well as contact points in EU Agencies. The workshop with the Contact Committee of the Confiscation Directive also ensured Member State representativeness.

During the Workshops undertaken with both Asset Recovery Offices and the Contact Committee of the Confiscation Directive, the contribution of both Council Decision 2007/845/JHA and of Directive 2014/42/EU towards their respective specific objectives was discussed. Regarding Council Decision 2007/845/JHA, these Workshops confirmed that the legislative instruments in place contributed to the specific objectives in relation to (i) improving cooperation and communication of information and data between Asset Recovery Offices (ii) reinforcing the Offices’ asset freezing and tracing ability through the enhancement of Asset Recovery Offices’ powers (iii) increasing the rate of frozen, confiscated and recovered assets (iv) improving the management and disposal of frozen and/or confiscated assets (v) improving the consistency of statistical data on asset recovery.

The workshops also confirmed the problem tree presented in relation to the key drivers impacting effective asset recovery and confiscation. Asset Recovery Offices were asked to rate the drivers that cause the greatest problem in identifying assets. The first rated driver related to insufficient operational powers of the Offices, with the second driver identified as the limited resources allocated to Asset Recovery Offices. Limited access to information at national level was identified as the third most important driver, the lack of automatic launch and standardised rules on financial investigation as the fourth and finally, challenges for the exchange of information were identified as the last driver.

In relation to management and disposal of assets, this was also discussed with the Contact Committee. Eighteen respondents out of 25 representatives marked that the limited resources allocated to management causes the greatest problem in the management and disposal of assets, whereas two representatives marked it as the second, four as the third, and one as the fourth greatest challenge. As to the necessity of exchange of information between Asset Management Offices in cross-border cases, it was suggested that communication between requesting and executing state about the management of asset could be improved.

The discussions at the Workshop highlighted the position of stakeholders to ensure that intervention included non-legislative measures relating to greater coordination, cooperation and training. Some Member State representatives at both Workshops highlighted the benefits brought at national level by such non-legislative measures. Moreover, the issue of limited resources was highlighted as a key point by all stakeholders, with participants indicating that legislative measures would not have a considerable impact if resources did not accompany such new measures.

Following the workshops held in May and June 2021, a number of written responses were received from Member States. These written responses followed on from the Background Documents submitted to the participants prior to the Workshop. Written responses were received from national authority representatives in the Netherlands, Czech Republic, Germany, Poland, France and Finland.

The responses confirmed the overall relevance of the ARO Council Decision and the Confiscation Directive to respond to the needs existing in relation to asset recovery and confiscation. In relation to the envisaged revision of the asset recovery framework, Member States stressed the need to ensure effective implementation of existing acquis and the need for raising awareness and further increasing expertise and experience in the application of the relevant rules. Member States also highlighted specific aspects of particular importance from their specific point of view including the need for strengthened cooperation, more systematic asset tracing, and increased capabilities and powers for asset recovery offices as well as measures to improve asset management. Extended confiscation possibilities implemented in several Member States have yielded good results; a replication at EU level would require a careful assessment of the fundamental rights implications and necessary safeguards. Member States cautioned against legislative changes that would interfere with Member organisational prerogatives or budgetary autonomy or which would result in disproportionate administrative burden.

The responses also highlighted the need for greater coherence between the instruments in place in relation to asset recovery and confiscation and other EU legislative instruments in place such as Regulation 2018/1805 on the mutual recognition of freezing orders and confiscation orders.

5.4 Public consultation

50 responses to the public consultation were received in total (n=50). When interpreting the results of the consultation, responses received cannot be understood as representing the views of any particular population or group of stakeholders. The questionnaire was publicly available on the Internet, and no one was precluded from providing a response. Information on the demographic profile of respondents is based on self-reported values and the survey design did not allow for any verification of received data.

The sample include 30 responses (60%) submitted on behalf of EU citizens. Public authorities were the next largest group, accounting for eight responses (16%), followed by companies/business organisations (n=4, 8%), non-governmental organisations (NGO) (n=3, 6%), business associations (n=2, 4%), ‘other’ (n=2, 4%) and academic/research institutions (n=1, 2%). The overview of contribution types is presented in the Table below.

Table 1 Overview of contribution types

Regarding the geographical distribution of respondents (see Figure), most contributions came from EU Member States. By far, the largest group of contributions (n=17, 37%) was submitted by respondents based in Italy, followed by Bulgaria (n=5, 10%), France (n=5, 10%), Spain (n=5, 10%) and Belgium (n=3, 6%). Respondents based in nine other Member States submitted contributions to the public consultation, with no responses received from 13 Member States. Responses were also submitted by respondents in third countries, respectively located in Brazil (n=1, 2%) and the United States (n=1, 2%).

Table 2 Geographical distribution of contribution types

Respondents agreed that law enforcement authorities cooperating at EU level in the fight against serious and organised crime was ‘very important’ (n=49, 98%), though one respondent stated that this was ‘moderately important’ (n=1, 2%). Contributors unanimously concurred that freezing and confiscating criminal profits could help make serious and organised crime less attractive (n=50, 100%). Most respondents (n=49, 98%) also believed that the rates of asset freezing, and confiscation could increase compared to current estimated rates. Nevertheless, one participant stressed the importance of considering fundamental rights throughout the asset recovery process (1 response).

Respondents considered that cross-border cooperation was negatively affected by the i) low rates of identification of criminal assets, ii) failure to freeze and/or confiscate all identified assets, iii) inadequate management and disposal of frozen and confiscated assets; and iv) relatively poor quality of data collected above frozen and confiscated assets. The misalignment of the Asset Recovery Data Offices data protection framework with the Data Protection Policy Directive (Directive 2016/680) was not identified as a considerable obstacle to cross-border cooperation, though many respondents (n=20, 40%) stated that they did not know whether this had a negative effect.

When asked about the challenges hampering the identification of criminal assets, most respondents agreed that these practices are significantly limited by Asset Recovery Offices’ i) lack of operational powers to trace and identify assets, ii) limited human, financial and technical resources, and ii) limited access to databases at the national level and inability to share information. Respondents also considered that financial investigations not automatically being launched in all cases and the lack of standardised rules on how to conduct financial investigations could hamper the identification of criminal assets to a ‘high’ or ‘very high extent’.

In terms of elements hindering the freezing and confiscation of assets, most respondents considered that i) Asset Recovery Offices’ lack of involvement in the confiscation process, ii) the limited scope of the Confiscation Directive, iii) Member States’ distinct approaches to asset recovery, as they developed additional rules on top of the Confiscation Directive, and iv) challenges in identifying cross-border EU counterparts and exchanging information considerably affected the asset freezing and confiscation process.

Finally, when assessing the challenges hampering the management and disposal of criminal assets, most respondents agreed that i) the lack of human financial and technical resources allocated to the management of frozen and confiscated assets, ii) the lack of harmonised rules on the management and disposal of frozen and confiscated assets, iii) the limited involvement of Asset Recovery Offices and judicial authorities in post-conviction tracing and freezing cases, iv) the lack of harmonised rules on victim compensation, v) the lack of clarify on cost-sharing rules between Member States and vi) the communication breakdowns between counterparts involved in previous asset recovery phases, contributed to a ‘high’ or ‘very high’ extent to hampering the management and disposal of criminal assets.

Overall, respondents agreed that increasing the levels of freezing and confiscation of criminal profits could help prevent future serious and organised crime (n=44, 88%). The vast majority of respondents called for EU intervention to improve the fight and prevention of serious and organised crime and to increase EU asset recovery rates (n=48, 96%).

Most respondents considered that a future EU intervention should focus on revising and updating existing legislative measures (n=23, 46%), though some considered that both legislative and non-legislative measures should be revised and updated (n=16, 32%). Those who favoured only the revision and update of non-legislative measures represented a minority (n=9, 18%). Other respondents did not know (n=2, 4%). According to most stakeholders, an EU intervention would add significant value in i) fighting serious and organised crime (n=42, 84%) and ii) increasing asset recovery assets (n=38, 66%) compared to what Member States can achieve under the existing EU Framework. When asked to explain why, some respondents suggested that an EU intervention would add value in further harmonising Member States’ practices and promote cooperation on asset recovery (7 responses).

Respondents were asked to assess the extent to which given options could contribute to improving EU asset recovery and confiscation. The option that seemed most valued by respondents was granting Asset Recovery Offices direct access to a minimum set of data and databases (e.g., land registries, vehicle registries, company registries, criminal records, maritime and aviation registries). Other options that were significantly valued by participants include i) systematically launching financial investigations and ensuring powers to conduct post-conviction financial investigations, ii) equipping Asset Recovery Offices with urgent freezing power, iii) reinforcing Asset Recovery Offices’ status and powers, iv) expanding the scope of non-conviction based and extended confiscation provisions, v) expanding the set of minimum information to be included in cases of cross-border information sharing between Asset Recovery Offices, vi) mandating Asset Recovery Offices to exchange information through the Europol Secure Information Exchange Network Application (SIENA), vii) gathering statistical data of higher quality and in an harmonised manner, and viii) establishing Asset Management Offices in all EU Member States. Respondents also considered that broadening the scope of the Confiscation Directive to cover additional criminal offences and aligning the Asset Recovery Offices data protection framework with the Data Protection Police Directive (Directive 2016/680) could help enhance EU asset recovery and confiscation, though to a lesser extent than the aforementioned options.

6.How the results have been taken into account

The results of the consultation activities have been incorporated throughout the Impact Assessment in each of the sections for which feedback was received. The consultation activities were designed to follow the same logical sequence as the Impact Assessment, starting with the problem definition and then moving on to possible options and their impacts.

Annex 3: Who is affected and how?

3.1 Practical implications of the initiative

The key obligations that will have to be fulfilled by Member States and the European Commission are summarised below:

National authorities:

·Elaborate a strategy/action plan on asset recovery, establish cooperation mechanisms among relevant asset recovery authorities and regularly report on the results of the asset recovery system.

·Establish rules and measures for ensuring the identification of assets through the launching of financial investigations for certain organised crime certain crimes committed in the context of organised crime activities and under certain conditions, including training of staff from law enforcement authorities.

·Equip competent authorities with sufficient technical and human resources, including for Asset Recovery Offices to carry out tracing of criminal assets whenever this is not possible yet.

·Provide Asset Recovery Offices with access to a set of databases and ensure their access to SIENA (for those for which it is not available yet).

·Establish mechanisms allowing Asset Recovery Offices to ensure the swift freezing of assets in urgent cases.

·Establish Asset Management Offices (wherever these do not exist yet), which would be set out as contact points for cooperation with other Member States and support national authorities in the managing of assets (and ensure their management whenever necessary).

·Establish measures to ensure the systematic use of pre-seizure planning by law enforcement and judicial authorities, including the development of guidelines, provision of support by the Asset Management Office, etc.

·Develop measures to enable the application of interlocutory sales for frozen assets.

·Adopt measures to ensure the application of the confiscation mechanisms, including the new confiscation model, to the new scope of criminal offences. This would include the provision, as necessary, of guidance, training, etc.

·Improve the collection of statistics at central level

·Establishment of asset registries

European Commission

·Elaborate, where necessary, implementing acts on the collection of statistical data

·Set out a programme for the monitoring of outputs and results of the new legislative framework.

·Organise meeting among Asset Recovery Offices and other relevant authorities to facilitate the application of the new regulatory provisions, including through the exchange of best practices.

Europol

·Assist, where necessary, in the connection of additional Asset Recovery Offices to SIENA

3.2 Summary of costs and benefits

The table below presents the overview of benefits for the preferred option.

Table 1. Overview of benefits for the preferred option

The costs associated with the preferred option are presented in the Table below.

No costs are identified for citizens/consumers and businesses since the costs associated with the policy measures are directly impacting administrations at national level.

Table 2. Costs for the preferred option

3.3 Relevant sustainable development goals

Annex 4: Analytical methods

The Impact Assessment report and the Evaluation draw from a multitude of sources, which were triangulated with objective evidence (e.g. databases accessible to Asset Recovery Offices), a targeted consultation (meetings of the Asset Recovery Offices Platform and the Confiscation Committee) as well as the public consultation. These sources of information and opinions have been triangulated with an own analysis of reports from international organisations (notably the mutual evaluation reports of the Financial Action Task Force) as well as academics, which overall point to similar conclusions. The European Commission relied in particular on three studies and two reports: the Commission report “Asset Recovery and confiscation, ensuring that crime does not pay,” 133 the staff working document “Analysis of non-conviction based confiscation measures in the European Union,” 134  and the studies on the transposition of Directive 2014/42/EU 135 , on “Asset recovery and confiscation: what works and what doesn’t work” 136 and the “Study to support the preparation of an Impact Assessment on EU policy initiatives on asset recovery and confiscation” 137 .

1.Analysis of Member State Data – Freezing and Confiscation

The Impact Assessment drew upon the freezing and confiscation data submitted by Member States’ to the European Commission in accordance with Article 11 of Directive 2014/42/EU. The level of completeness of this data varied between Member States, with some Member States not providing data for the years 2017, 2018, 2019 and 2020.

Table 1 Data provided by Member States per annum (2017 – 2020)

Based on the number of Member States providing data, the reference years 2017, 2018 and 2019 were selected for analysis. 2020 was not selected due to the low level of data provided by Member States, with only 13 Member States providing data in September 2021.

Where possible and reasonable in relation to the level of data provided by Member States, 138 data was extrapolated for those Member States where no data was provided in order to provide an estimation of data for all EU-27 Member States in relation to:

§The number of freezing orders executed

§The number of confiscation orders executed

§The estimated value of property frozen

§The estimated value of property recovered at the time of confiscation.

Data was estimated, in some cases, for Member States 139 where no data was provided based on reference data received from other Member States. This extrapolation was based on 2 criterion: (i) the population size and (ii) trends of the Member State in question. This allowed for an estimation of data for the EU-27.

Table 2 Extrapolation of data for number of freezing orders executed 2017 – 2019

Methodological note 140

The same approach was applied in relation to the estimated value of property frozen.

Table 3 Extrapolation of data for estimated value of property frozen 2017 and 2019

Methodological note 141  

In relation to the number of confiscation orders executed, the same approach was taken, with the following estimates provided for 2017 – 2019.

Table 4 Extrapolation of data for number of confiscation orders executed 2017 – 2019

Note: For Member States where data was provided for other indicators, no extrapolation was undertaken since unclear whether this represented an absence of confiscation orders.

The table below presents the estimated value of confiscation orders for the years 2017 and 2019.

Table 5 Extrapolation of data for estimated value of assets confiscated 2017 and 2019

Note: For Member States where data was provided for other indicators, no extrapolation was undertaken.

Estimation of value of property recovered

In relation to the estimated value of property frozen and the estimated value of property recovered, an average value per order was identified. This was estimated based only on those Member States providing data. The data extrapolated for other Member States was not applied in this regard due to the inaccuracies associated with this approach. This enabled for the identification of an average value of assets frozen or recovered per order in the Member States.

Cross-border freezing and recovery    

While data provided by the Member States was scarce in relation to the following indicators (i) number of requests for freezing orders to be executed in another Member State, (ii) number of requests for confiscation orders to be executed in another Member States, (iii) value or estimated value of property recovered following execution in another Member State, data could be extrapolated for those Member States where no data was provided with a view to providing a global figure for the EU-27. This exercise was only undertake for the reference years 2017, 2018 and 2019. Based on those Member States where data was provided on the value or estimated value of property recovered, an estimation of the average value per request was provided. This allowed for the estimation of increases foreseen on the basis on the Policy Options.

2.Estimation of revenues generated by organised crime

It is estimated that the indicative volume of revenues generated by organised crime which are not covered by the Confiscation Directive amounts to approximately EUR at least 50 billion. This approximate estimation is based on desk research analyzing different data sources such as international and EU studies, government information or Eurostat statistics, 142  and applying informed assumptions such as the depreciation of counterfeited and stolen property.

The first data source is the 2021 Study for the European Commission on ‘Mapping the risk of serious and organized crime infiltrating legitimate businesses’, 143 which estimates that in 2019 criminal proceeds from serious and organized crime in nine of the most important criminal markets ranged from €92,000 to €188,000 million, with a mid-point estimation of €139,000.

These estimates cover both offences included in the scope of Articles 3 and 5 of Directive 2014/42/EU on the freezing and confiscation of instrumentalities and proceeds of crime in the European Union 144 as well as offences that currently fall outside the scope of this Directive. The latter concern notably revenues for illicit firearms, migrant smuggling, some forms of organised property crime (cargo theft and ATM physical attacks) as well as the illicit cigarette market. The mid-point estimations for these crime markets provided in the above-mentioned study have been used to develop an indicative approximate estimate of the criminal revenues not covered by the Confiscation Directive. Similarly, the study provided a mid-point estimate of the revenues generated by Missing Trader Intra-Community (MTIC) fraud, the most common form of VAT fraud. This is a highly complex form of fraud which is typically carried out by organised crime groups. MTIC fraud is partially covered by the Confiscation Directive insofar as the PIF Directive (which refers to the Confiscation Directive) covers offences against the common VAT system causing a total damage of at least EUR 10 million. Based on a sample of investigations of MTIC fraud schemes supported by Europol, an indicative proportion of the figure provided in the study for MTIC fraud was considered to be outside the scope of the Confiscation Directive.

Additional approximate estimations have been elaborated for other crime areas where organised crime is active, taking into account different information sources and adjusting the data available taking into account different parameters. Such estimations have been carried out for other forms of organised crime such as burglary, robberies and vehicle thefts (based on EU figures of reported crimes published by Eurostat, factoring in international figures on the average value stolen in these crimes adjusted to the GDP per capita in the EU 145 ), the illicit trafficking of cultural goods (adjusting global estimates from an international study to the EU’s GDP), counterfeiting (adjusting available data of direct lost sales for EU companies of counterfeiting according to assumptions of lower prices for counterfeited products), or forged documents (based on an evaluation of average prices in the market of fake documents carried out by law enforcement authorities in Member States and an estimation of the number of forged documents elaborated on the basis of forged documents detected in the EU’s external borders).

The figure does not cover other forms of crime or criminal markets where organised crime is active, such as other forms of fraud other than MTIC fraud, contract killing (including murder, grievous bodily harm and kidnapping), swindling, racketeering and extortion, trafficking of nuclear materials and of illicit hormonal substances, given the lack of reliable data sources on which to base any estimation. Another crime area where organised crime is active, organ trafficking, is also not included insofar as the Directive 2011/36/EU on combating trafficking in human beings and protecting its victims covers trafficking in human beings for the purpose of organ removal.

3.Costs of policy measures

The estimations of costs of the policy measures envisaged in the different options considered are mainly based on the study underpinning this Impact Assessment. The study applied different methodological techniques to develop these estimates and used different data sources, such as the costs of training based on data provided in the CEPOL Annual Report 2020 146 , the costs related to the organization of previous meetings of the Asset Recovery Offices Platform, the costs of establishing Asset Management Offices in a number of Member States where these bodies already exist, or the average costs of Full Time Equivalents within public administration in the Member States. For the latter, the study applied the quantitative estimates in the Commission Impact Assessment for a Proposal for a Directive of the European Parliament and of the Council on combating fraud and counterfeiting of non-cash means of payment and replacing Council Framework Decision 2001/413/JHA 147 was applied. Where no data was available, estimates were made by the contractor based on market experience (i.e. in the preparation of digital registries etc.).

These figures were included as such for certain cost categories (e.g. on the costs of establishing Asset Management Offices or asset registries) or were used the basis for further estimations elaborated by the Commission services in order to reflect the difference in the measures considered in this Impact Assessment as compared to the ones envisaged in the study. The additional estimations were elaborated by adjusting the data provided in the study through an informed guess of the additional resources needed to carry out certain tasks, using where available proxies such as number of investigations supported by Europol, information from previous Impact Assessments, etc.

4.Estimation of benefits

Section 7.1 of this Impact Assessment related to the efficiency of the different includes approximate figures of the indicative volume of additional assets confiscated as a result of the measures contained in the legislative options. These figures indicate a plausible range of additional amount of recovered assets of approximately EUR 100-200 million per annum across the EU for PO2, EUR 1 billion for PO3 and an additional EUR 50-100 million for PO4.

These figures are aimed at providing an approximate order of magnitude and are based on the estimations in the Impact Assessment study, a qualitative assessment of the measures in each option and its expected impact in terms of additional asset recovered, based on an informed appraisal as to the impact of these measures in the asset recovery rates and the experiences of Member States on the effectiveness of different measures, considering for example the importance of financial investigations, the data from Member States with more ambitious confiscation models or the contribution of Asset Recovery Offices and Asset Management Offices in promoting and facilitating the recovery of assets.

The indicative nature of such approximations is due to the lack of comprehensive statistical data in current asset recovery systems, a problem highlighted in this Impact Assessment, as well as external factors outside the scope of this Impact Assessment which would have an impact on the asset recovery rates, such as the level of criminal activities, the sophistication of organised crime groups in applying new methods and technologies to avoid detection, or the number of criminal investigations launched in relation to organised crime activities.

Methodology applied for the evaluation

For the Evaluation the Commission relied on findings gathered in the reports “Asset Recovery and confiscation, ensuring that crime does not pay,” 148 and the staff working document “Analysis of non-conviction based confiscation measures in the European Union.” 149  These reports are complemented by the evidence gathered of three studies, 150 which were paired with a public consultation and evaluation-specific stakeholders consultation. The Commission organised, in particular, the 20th Meeting of the EU Asset Recovery Offices’ Platform to test previous findings and to develop the Evaluation and Impact Assessment that underpin the revision of the ARO Council Decision and the Confiscation Directive. In addition, the Fifth meeting of the Contact Committee of the Confiscation Directive was organised in the context of the preparation of the Evaluation as well.

Evaluation-specific stakeholders’ consultation sought to complement and add upon the data gathered in previous studies and reports, which relate to the asset recovery system but were not tailored towards an evaluation. The consultation aimed at addressing the tailored needs of an evaluation, without gathering further factual data which had already been gathered in the transposition study of Directive 2014/42/EU 151 and the study ‘Asset recovery and confiscation: what works and what doesn’t work’ 152 . The ‘Study to support the preparation of an Impact Assessment on EU policy initiatives on asset recovery and confiscation’ 153 further gathered evaluation-specific data, which informs the Evaluation report.

Annex 5: Categories and scope of confiscation measures

Different legal traditions of EU Member States have over the years given rise to a wide range of existing confiscation measures. EU legislation, such as Framework Decision 2005/212/JHA and Directive 2014/42/EU, have laid down minimum rules on the following confiscation measures:

·Standard confiscation

·Value confiscation

·Third party confiscation

·Extended confiscation

·Non-conviction based confiscation

Standard confiscation

Standard confiscation refers to a judicial order concerning property related to a specific crime for which the owner has been convicted. The targeted assets are the direct proceed or the instrumentality of a crime, following a criminal conviction for that crime.

Standard confiscation is regulated by Article 2(1) of Framework Decision 2005/212/JHA. It applies to all offences punishable by deprivation of liberty for more than one year. 154  

Value confiscation

Value confiscation refers to a type of confiscation measure targeting property of equivalent value to the proceeds or instrumentality of a crime. The confiscation order is realizable against any property of the individual charged. It is employed most often in cases where criminals convert proceeds of crime into other property to hide its illicit origin and disguise the audit trail.

Value confiscation is regulated by Article 2(1) of Framework Decision 20015/212/JHA and Article 4(1) of Directive 2014/42/EU. 155 It applies to all offences punishable by deprivation of liberty for more than one year 156 and to the crimes listed and cross-referenced in article 3 of the Directive, covering certain offences in relation to corruption, 157 counterfeiting of the euro, 158 credit card fraud, 159 money laundering, 160 terrorism, 161 illicit drug trafficking, 162 organised crime, 163 trafficking in human beings, 164 sexual exploitation of children, 165 cyberattacks, 166 and fraud to the Union's financial interests 167 .

Third-party confiscation 

Third-party confiscation refers to a confiscation measure made to deprive someone other than the offender – the third party – of criminal property, where that third party is in possession of property transferred to him or her by the offender. It is regulated by Article 6 of Directive 2014/42/EU 168 . It applies to the same list of offences to which value confiscation is applicable to, listed in Article 3 of the Directive.

Extended confiscation

Extended confiscation concerns confiscation orders which go beyond the direct proceeds of a crime. The order follows a criminal conviction, targeting property “beyond the direct proceeds of the crime for which the offender was convicted, where the property seized is derived from criminal conduct.” 169 A direct link between the property and the offence, such as in the case of standard confiscation measures, is not necessary if the court assesses that the offender’s property was nevertheless derived for other unlawful conduct.

This confiscation measure is particularly applicable in cases where the court assesses that the offender will have perpetrated a greater number of offences than those they are directly on trial for, such as in the case of organised crime members. For example, a court might be able to convict a drug trafficker for one specific cargo, but not for the trafficking activities over preceding years from which they also profited. In these cases, the court can confiscate other property beyond the direct proceeds of the crime in question, if the court concludes that property is derived from criminal conduct.

Extended confiscation is regulated by Article 5 of Directive 2014/42/EU. 170 It applies to corruption, 171 the participation in a criminal organisation, 172 child-pornography, 173 and IT crimes. 174 For other crimes in scope of the Directive but not explicitly listed in the relevant article on extended confiscation, extended confiscation is applicable in relation to offences punishable by a custodial sentence of at least four years. 175  

Non-conviction based confiscation (NCBC)

Non-conviction based confiscation refers to a confiscation measure taken in the absence of a conviction and directed against an asset from illicit origin. In the case of Directive 2014/42/EU, it covers cases where a criminal conviction is not possible because the suspect has become ill or fled the jurisdiction. In more expansive non-conviction based regimes, NCBC can also be available in cases where the suspect has died, lacks legal capacity (e.g. is a minor or of unsound mind), has immunity from prosecution or amnesty or where the statute of limitations has passed, or where a conviction is not possible for other reasons like lack of proof, but the court is nevertheless convinced in a criminal procedure that the assets are of criminal origin.

As highlighted by FATF, like all other types of confiscation measures NCBC is a legal consequence of criminal conduct, with however the evidentiary focus being on the property and its nexus to a criminal activity, rather than the prosecution of a particular individual. It can be based in civil or criminal proceedings. Whilst Directive 2014/42/EU convers only cases of criminal non-conviction based confiscation, the concept of non-conviction based confiscation also covers the cases of action against the asset itself (so-called "proceedings in rem", generally in civil proceedings), regardless of the person in possession of the property. It is applicable to cases, for example, when the proceeds of crime have been identified but cannot be linked to any individual; or the suspect is outside the jurisdiction of the Member State considering confiscation and there is no prospect of his being brought within that Member State to face trial. 

Criminal non-conviction based confiscation is regulated by Article 4(2) of Directive 2014/42/EU. 176 It applies to the same list of offences to which value confiscation is applicable to, listed in Article 3 of the Directive, but only in cases of impossibility to reach a confiscation verdict because the defendant fled or was ill.

The table below compares the scopes of these confiscation measures.

Table 1. Comparison of scope of confiscation measures

Moreover, the confiscation tools foreseen by Directive 2014/42/EU do not cover all revenue-generating criminal markets where organised crime is active. The table below highlights the scopes of offences covered by confiscation measures regulated by Directive 2014/42/EU.

Table 2. Crimes covered by Directive 2014/42/EU

Consequently, Directive 2014/42/EU fails to address a multitude of crime where organised crime is active: firearms trafficking, environmental crime, migrants smuggling, contract killing (including murder, grievous bodily harm and kidnapping), organ trafficking, organised armed robbery, trafficking in cultural goods, swindling, racketeering and extortion, counterfeiting, documents forgery, forgery of means of payment, trafficking of nuclear materials and of illicit hormonal substances, illicit tobacco trade and of stolen vehicles. Even though the aggregate value of the revenues generated from these crimes cannot be defined with precision, cautious estimates would place this value at EUR 50 billion at least per annum outside the scope of the Confiscation Directive.

Annex 6: Confiscation and fundamental rights

The fundamental rights enshrined in the Charter of Fundamental Rights of the European Union ("the Charter") and the Treates provide important limits for Union legilsative action, notably in the field of confiscation 178 . In particular, Article 49 of the Charter sets out the principles of legality and proportionality of criminal offences and penalties, and Artice 52 Paragraph 1 deals with the arrangements for the limitation of some rights (relative or rectius rights, as opoposed to absolute rights) inlcuding the right to property.

At stake in confiscation cases are also procedural rights, including in particular the right to a fair trial, the right to an effective remedy, and the presumption of innocence;

1. Right to property and the principle of proportionality

Article 17 of the Charter guarantees the right to property 179 . The corresponding provision is Article 1 of the first Protocol to the European Convention of Human Rights ("ECHR") 180 .

The right to property is relevant in the context of freezing and confiscation orders as in the former the control over the property is altered and in the latter the ownership of the property is transferred.

The right to property is not an absolute right, as it is subject to interference. According to the established case-law of the European Court of Human Rights ("ECtHR") 181 , an interference with property rights must be prescribed by law (legality) and pursue one or more legitimate aims. In addition, there must be a reasonable relationship of proportionality between the means employed and the aims sought to be realised. A balance has to be struck between the demands of general interest and the interest of the individual concerned.

2. Procedural rights, including in particular the right to a fair trial, the right to an effective remedy and the presumption of innocence

The nature of confiscation measures is a central aspect when assessing their impact on procedural rights, such as the right to a fair trial, the right to an effective judicial remedy, and the principle of presumption of innocence. All these rights apply to confiscation measures which are of criminal nature 184 .

The right to a fair trial, the right to an effective remedy and the presumption of innocence are enshrined in Articles 47 and 48 of the Charter 185 as well as in Articles 6 and 13 of the ECHR.

Inasmuch as confiscation orders interfere with the right to property, affected parties must be able to challenge such orders under the conditions set by these articles.

In this context due account has also to be taken of the European Union directives on procedural rights 186 and notably Directive 2012/13/EU on the right to information in criminal proceedings 187 and Directive (EU) 2016/343 on the strengthening of certain aspects of the presumption of innocence and of the right to be present at the trial in criminal proceedings 188 . These directives provide for common minimum standards of procedural rights which are necessary to enhance mutual trust between Member States and to facilitate the principle of mutual recognition.

Moreover, the Confiscation Directive introduced in its Article 8 procedural safeguards in line with the fundamental rights enshrined in the Charter. This will lead to a minimal harmonisation in this area throughout the EU.

Ordinary conviction-based confiscation

It appears from the established case-law of the ECtHR that the ordinary conviction-based confiscation is generally perceived to be a legitimate restriction to the right to property guaranteed by Article 1, Protocol 1 of the ECHR, if the principles of legality and proportionality are respected, and if procedural safeguards such as the right of the person concerned to a fair trial and to an effective remedy provided for in Articles 6 and 13 of the ECHR are sufficiently ensured. The principle of presumption of innocence has also to be respected.

Extended confiscation

Extended confiscation (in which a criminal conviction is followed by the confiscation not only of assets associated with the specific crime, but of additional assets which the court determines as deriving from criminal conduct) may raise concerns with regard to the presumption of innocence, as confiscation is enabled without an established link between the asset and a particular criminal conviction. It may also raise issues with regard to the principle of legality, including the non-retroactivity of criminal law and the prohibition of the imposition of heavier penalties laid down by Article 49 of the Charter and Article 7 ECHR. However, the ECtHR has on many occasions concluded that extended confiscation is compatible with the ECHR, provided that certain safeguards, notably under Article 6(1), are complied with.

In the case Phillips v. UK 191 , Mr Phillips was sentenced to nine years imprisonment for the importation of cannabis resin. On the basis of the 1994 Drug Trafficking Act, an inquiry was conducted into the applicant's means that same year. The investigating officer argued that the applicant had benefited from drug trafficking and invited the Crown Court to apply assumptions foreseen by section 4(2) and 4(3) of the Drug Trafficking Act, namely that any property appearing to have been held by the defendant at any time since his conviction or during the period of six years before the date on which the criminal proceedings were commenced was received as a payment or reward in connection with drug trafficking, and that any expenditure incurred by him during the same period was paid for out of the proceeds of drug trafficking. Shortly after, the Crown Court imposed an extended confiscation order on the applicant, having assessed the illicit profits at GBP 91,400). Mr Phillips complained that the statutory assumption under the UK Drug Trafficking Act 1994 violated the presumption of innocence enshrined in Article 6(2) ECHR as well as his right to property contained in Article 1, Protocol 1 ECHR.

With regard to the alleged breach of the presumption of innocence, the ECtHR examined first whether the prosecutor’s application for a confiscation order following the applicant’s conviction amounted to the bringing of a "new charge" within the meaning of Article 6(2) ECHR. In order to address this issue, the Court applied three criteria: the classification of the confiscation proceedings under national law, their essential nature and the type and severity of the penalty at stake. The Court first looked at the first criterion and held that the application for a confiscation order did not involve any new charge or offence in terms of criminal law. The Court then examined the other two criteria. It underlined that - although the Crown Court assumed that the applicant had benefited from drug trafficking in the past - the purpose of the confiscation procedure was not the conviction or acquittal of the applicant for any other drug-related offence. The confiscation procedure was instead aimed at enabling the national court to assess the amount at which the confiscation order should properly be fixed. In this sense, the person was thus not "charged with a criminal offence" and Article 6 (2) was not applicable to the confiscation proceedings.

Furthermore, the Court found no violation of Article 6(1) ECHR as "the system was not without safeguards", in the sense that the assessment was carried out by a court following a judicial procedure including a public hearing, advance disclosure of the prosecution case and the opportunity for the applicant to adduce documentary and oral evidence, the most relevant safeguard being the opportunity for the applicant to rebut the assumption foreseen in the national legislation.

In the case Grayson & Barnham v. UK 192 , Mr Grayson was convicted with intent to supply over 28 kilograms of pure heroin and Mr Barnham was convicted of two conspiracy charges involving plans to import large consignments of cannabis. Extended confiscation proceedings were initiated against each of them. They both alleged that the burden to prove that their realisable property was less than the amount to which they had been assessed to have benefited from drug trafficking violated their right to a fair hearing under Article 6 (1) of the Convention. The ECtHR, when assessing whether the way in which the statutory assumptions of the 1994 Drug Trafficking Act were applied in the particular proceedings offended the basic principles of a fair procedure inherent in Article 6(1), took well into account that the rights of the defence were protected during the confiscation proceedings by "the safeguards built in the system. Thus, in each case the assessment was carried out by a court with a judicial procedure including a public hearing, advance disclosure of the prosecution case and the opportunity for the applicant to adduce documentary and oral evidence. Each applicant was represented by counsel of his choice".

As regards the burden of proof, it "was on the prosecution to establish that the applicant had held the assets in question during the relevant period. Although the court was required by law to assume that the assets derived from drug trafficking, this assumption could have been rebutted if the applicant had shown that he had acquired the property through legitimate means. Furthermore, the judge had a discretion not to apply the assumption if he considered that applying it would give rise to a serious risk of injustice". The Court concluded that "it was not incompatible with the notion of a fair hearing in criminal proceedings to place the onus on each applicant to give a credible account of his current financial situation" after having been proved to have been involved in extensive and lucrative drug dealing over a period of years".

Non-conviction based confiscation

NCBC enables interferences with the right to property without the property being linked to a specific criminal conviction. Since these measures do not relate to assets for which a criminal conviction has been obtained, they may raise issues with regard to the right to a fair trial, the right to an effective remedy and the presumption of innocence.

Although the ECtHR has not ruled on the principled question of their compatibility with the ECHR, the Court has repeatedly considered NCBC to be consistent with Article 6 ECHR and Article 1, Protocol 1, as long as effective procedural safeguards are respected.

Third party confiscation

The question of proportionality and relevant safeguards plays also an important role in the context of third party confiscation. Where, in the case-law of the ECtHR, there is an interference with the property rights of such parties, a link between the proceeds of crime and the assets in the possession of a third party has to be established. Moreover, the confiscation must be proportionate to the objectives being pursued and the right to a fair trial must be respected. In any event, confiscation from third parties should not prejudice the rights of bona fide third parties 199 .

For the ECtHR, it is also essential that a third party has an effective opportunity possibility to claim the ownership of a seized asset and to protect her/his interests.

Annex 7: Evaluation of the existing policy and legislative framework

1.Introduction

1.1 Purpose and scope

Financial gain is the primary motivation behind organised crime. Criminal revenues in the nine main criminal markets in the European Union amounted to €139 billion in 2019, 204 corresponding to 1% of the Union’s Gross Domestic Product. 205 Their large illegal profits allow organised crime groups to maintain and expand their activities and to infiltrate the licit economy and public institutions, including via corruption, eroding the rule of law and fundamental rights, and undermining people’s right to safety as well as their trust in public authorities. The EncroChat 206 , Sky ECC 207 and AN0M 208 cases have further shown the extent of organised crime’s transnational reach, their complex modi operandi and unprecedented degree of economic infiltration.