REPORTS OF THE COURSEGROUP 1

EFFECTIVE MEASURES TO DEPRIVE CRIMINALS AND
CRIMINAL ORGANIZATIONS OF CRIME PROCEEDS

Chairperson
Co-Chairperson
Co-Chairperson
Rapporteur
Co- Rapporteur
Co- Rapporteur
Members

Visiting Experts
Advisers

Mr. Jumpon Phansumrit
Mr. Chethiya Goonesekera
Mr. Koji Morishita
Mr. Ramadhan Ali Nassib
Mr. Anthony Adverse Vanderhyden
Mr. Kazuyoshi Tsuji
Ms. Tuyet Mien Duong
Mr. Naoki Fukuda
Mr. Toshiyuki Igusa
Mr. Katsuhiko Manabe
Ms. Jean B. Weld
Mr. Wayne Walsh
Prof. Naoyuki HaradaProf. Kumiko Izumi
Prof. Haruhiko Higuchi
Prof. Yuichiro Wakimoto(Thailand)(Sri Lanka)(Japan)(Tanzania)(Guyana)(Japan)(Viet Nam)
(Japan)(Japan)(Japan)(U.S.A.)(Hong Kong)(UNAFEI)(UNAFEI)(UNAFEI)(UNAFEI)

I. INTRODUCTION
This group discussed “Effective Measures to Deprive Criminals and Criminal Organizations of Crime
Proceeds” under the following sub headings:
a.
b.
c.
d.
e.

Measures to identify and trace the proceeds of crime;
Measures to freeze/seize the proceeds of crime;
Confiscation/deprivation of the proceeds of crime;
Recovery of the confiscated proceeds of crime;
Capacity building.

II. MEASURES TO IDENTIFY AND TRACE THE PROCEEDS OF CRIME
A. Current Situation
1. Establishing an FIU
All participants stated that in their countries there are measures to identify and trace the proceedsof crime. During the discussion it was discovered that in each country there is an FIU or legislation toestablish an FIU. However, the status of FIUs varied from one country to another. Some FIUs belong to theMinistry of Finance, some to the National Police Agency, some to the central/State bank, etc.
It was also found that most FIUs do not have duties and powers to conduct investigation, but the ThaiFIU has investigative power for civil forfeiture. In Sri Lanka, the Financial Intelligence Unit does not haveinvestigative powers but there is another Financial Investigating Unit, which belongs to the police, withinvestigative power.
2. Suspicious Transactions Reporting (STR) System
All participants’ countries have Suspicious Transaction Reporting systems in accordance with the FATF
40+9 Recommendations, and they have also sanctions against designated institutions which do not reportsuspicious transactions. However, there are some countries that are not in compliance with the FATF
40+9 Recommendations where attorneys, judicial scriveners, administrative scriveners and licensed tax
accountants, etc. do not have to report suspicious transactions.
Most participants’ countries require that the transactions exceeding certain amounts, such as US$10,000,
have to be reported to the FIU for analysis. However, Japan does not have such a threshold requirement.

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Also, all participants’ countries have laws or guidelines regarding Customer Due Diligence (CDD), but
requirements vary. In some countries, CDD requirements are lenient and people have to present identification
but no photograph when opening an account; similarly, companies do not have to present a list of shareholders
when opening an account.
However, co-operation of banks and non-bank financial institutions and FIUs in all participants’ countries
is well secured. Banks and non-banks have to report suspicious transactions to their country’s FIUs and othercompetent investigative organs can get information from the FIU.
In all countries, an investigative agency can receive information on customers of banks or non-banks if
necessary. (In some countries, the investigative agency needs a warrant from a judge or court.) So there are noobstacles caused by bank secrecy laws.
3. Asset Disclosure
All participants’ countries, except Tanzania-Zanzibar, have an Asset Disclosure System for politicians in
the legislature. In some countries, civil servants of high rank also have to declare their assets. However,access to information of disclosed assets is different. In some countries, such as Thailand and Japan, ordinary
citizens can access information on politicians’ assets; but in Sri Lanka, Guyana, mainland Tanzania andVietnam ordinary citizens cannot access the information, only competent investigative authorities.
4. Co-operation and Information-sharing
Co-operation and information-sharing among relevant authorities domestically and internationally wasalso considered in the group discussion. Domestically it was found that in all countries, except Japan andVietnam, FIUs send information of STRs, after analysis, if an investigative agency requests the FIU tosend it. But in Japan, Guyana and Vietnam, FIUs disseminate STR information, after analysis, to competentauthorities without request. However, in none of the participants’ countries can investigation agencies
access STR information (before analysis) directly.
5. International Co-operation
All participants’ countries, except Tanzania, are members of the Egmont Group. The members of theEgmont Group can exchange STR information between FIUs. However, Non-Egmont Group countries canexchange STR information between FIUs upon a Memorandum of Understanding, etc. Non-Egmont Groupcountries, even if they do not have an MOU, can exchange STR information on a voluntary basis between
FIUs.

B. Problems, Countermeasures
1. Our recommendation is that FIUs should be independent from politicians and governments and eachcountry should establish a suitable FIU according to its system. The aim of this recommendation isthat the FIU should not be interfered with by politicians.

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2.

In some countries, FIUs have investigative powers. In countries where the FIUs have limited
personnel and capacity, the introduction of investigative power to the FIUs may cause problems.
Therefore, the FIUs should focus on analysis and dissemination of information, not investigativon.

3.

Most participants think that threshold requirements should be introduced in order that financial
institutions cannot avoid reporting of transactions. But the economy of one country may differ fromthat of another. Our recommendation is that each country has to set its own threshold requirement
depending on its economy, because if the threshold is too low, the amount of information ofsuspicious transactions will be huge, and it will be difficult for the FIU to analyse it efficiently.

4.

If there is no clear definition of a suspicious transaction, setting a threshold alone is not enoughto detect suspicious transactions; criminals may easily circumvent the threshold set. The group
recommends that each country has to give a clear definition or standard of a suspicious transaction.
There might be two ways to give a clear definition or standard of a suspicious transaction:		
a. Define it in law; or		b. Establish guidelines.

146TH INTERNATIONAL TRAINING COURSEREPORTS OF THE COURSE

The former has merit: the definition is clear, and the definition has legal force. The latter also has
merit: it is possible to provide detailed guidelines, and it is flexible; guidelines can be changed. Soeach country has to give a clear definition or standard, depending on its legal system.
5.

Asset disclosure requirements for appropriate public officials should be set up. That disclosed
information should be at least accessible to the competent investigative authorities.

III. MEASURES TO FREEZE/SEIZE THE PROCEEDS OF CRIME
A. Current Situation
1. Legislation for Rapid Freezing/Seizure
All participants’ countries have legislation for rapid freezing or seizure of relevant property. However,each country has a different organ for freezing and seizing. In Sri Lanka, Guyana and Vietnam it is the police
who freeze and seize, but in Japan there is a need for a judicial order for the police or a public prosecutor toexecute. In Thailand freezing is done by committee; in Tanzania-Zanzibar there is a need for judicial orderto freeze property, and there is a need for the Director of Public Prosecutions to order the freezing of a bankaccount.
2. Protection of the Rights of bona fide Third Parties
Confidentiality is maintained in all participants’ countries before the execution of the order of freezingor seizure of relevant property. However, when the relevant organs are executing the order the owner isinformed. Also, in all countries the rights of the third party are protected. The third party can appeal against
the freezing or seizure order.
3. International Co-operation
Co-operation between countries is done through Mutual Legal Assistance or agreements. In somecountries, a judicial order from a requesting country is required to accompany the request.

B. Problems, Countermeasures
In some participants’ countries, the police or public prosecutor needs the order of a judge or court
to freeze the relevant property for confiscation. In such countries, it is difficult for the police or publicprosecutor to freeze the property quickly because more time is needed to pursue the order from a court.
Therefore, the property might be concealed or lost.
Our recommendation is that countries should consider adopting a system in which:(i) police, public prosecutors or other competent authorities can temporarily freeze property quickly
without a judicial order (as an administrative measure);(ii) if police, public prosecutors or other competent authorities can identify the relevant property
which can be confiscated, they should be able to freeze only that property. But if they cannot
identify the relevant property which can be confiscated, they should be able to freeze the wholeproperty of the suspect;(iii) the owner of the property can appeal against the temporary freezing order, and if he or she canprove that the property has a legitimate source, the freezing order might be cancelled (in orderto protect the right of the owner).
The aim of the recommendation is to regulate between quick and effective freezing of the property andprotection of rights of the third party owner.
For international co-operation, if confidentiality is not established in the requested country, there will bea problem.
Our recommendation is that all countries should adopt a system of confidentiality before the freezing orseizure of property, because if the owner of the property is aware of the request for freezing or seizure, theproperty might be concealed or lost. In addition, to protect the rights of the bona fide third party, it is sufficiently
fair if there is a system whereby the owner can appeal against the freezing order, after its execution.

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International co-operation of freezing or seizure has two points for discussion. First, in some countries, it
is difficult to execute judicial orders of the requesting country quickly, because in some requested countries,
a judicial procedure to execute a foreign judicial order is required.
The group recommends that the court proceedings of the requested country should be simple, forexample, only registering judicial orders in the court of the requested country. Informal consultation should
be widely used before formal request.
The second problem concerns orders of the requesting country, including not only orders of judges
or courts but also orders of other competent authorities. In some countries, only judicial orders can beexecuted in the requested country; it is difficult to execute orders of other competent authorities. For
example, in some countries, only committees can issue orders to freeze the property; such orders cannot beexecuted in the requested country.
Our recommendation is that such countries should, like Guyana, consider adopting provisions inaccordance with the UNCAC, whereby orders of any competent authorities can be executed in the requestedcountry.

IV. CONFISCATION/DEPRIVATION OF THE PROCEEDS OF CRIME
A. Current Situation
1. Conviction-Based Confiscation
All participants’ countries have legislation on conviction-based confiscation. But the collection ofequivalent sum of the relevant property is not possible in some countries. If the property is transformedor converted in all participants’ countries except Sri Lanka, it is possible to confiscate the property. If theproperty is intermingled with other legitimate property, all countries have provisions to confiscate theproperty, except Sri Lanka and Vietnam.
2. Non-Conviction Based Confiscation
On the issue of non-conviction based confiscation it was explained that Tanzania, Guyana and Thailand
have NCB confiscation provisions but Japan, Sri Lanka and Vietnam do not.
3. Administrative Forfeiture
Only Thailand has administrative forfeiture, which only applies in cases of tax and property tax evasion.
4. Confiscation without the Presence of Accused (ex parte )Guyana, Sri Lanka and Tanzania have ex parte confiscation procedures but Japan, Vietnam and Thailand
do not have such procedures. However the ex parte procedure can be applied in civil confiscations inThailand.
5. Shifting the Burden of Proof
Currently, most participants’ countries have provisions for shifting the burden of proof to the accused/defendant. But in Japan the provisions are only applicable under the Anti-drugs Special Law. In Sri Lanka(Money Laundering Act), Guyana, Tanzania and Thailand the accused/defendant has to prove the property
has a legitimate source on the balance of probabilities.
6. Taxation of Criminal Proceeds
Legislation for taxation of criminal proceeds is only found in Japan and Tanzania. In Japan, proceeds ofcrime are taxed after confiscation. In Tanzania, provisions of tax laws provide that any income accrued in
Tanzania is subject to tax.
7. International Co-operation
All participants said that international co-operation in confiscation is possible in their countries through
MLA or agreements. In all countries, except Vietnam, judicial orders of confiscation from requesting
countries are required to accompany the request.

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B. Problems, Countermeasures
1. Some countries do not confiscate proceeds transformed or converted or intermingled with other
legitimate property. The group believes that this is a problem, especially where the proceeds
cannot be found. Therefore, countries are urged to consider including collection of equivalent sumsof transformed or converted property and property intermingled with other legitimate acquired
property, because sometimes, it is difficult to prove connection between crime and the property.
The reason for the recommendation is that usually criminals conceal the property by converting ortransforming the property, and it becomes difficult to confiscate illicit property perfectly.
2.

All participants’ countries should consider adopting a non-conviction based confiscation system.
Such a system has many merits, including that the level of proof is not higher than a conviction
based confiscation system and that competent authorities can confiscate the property even if thedefendant is not guilty. Also, competent authorities can confiscate the property even if the defendantabsconds or dies.

3.

Administrative forfeiture is a simple and speedy procedure. However, the excessive scope ofadministrative forfeiture can cause unfairness to the owner of the property. For instance, in Thailand,
the tax authority can exercise administrative forfeiture to confiscate all types of property, including
real property, without any limitation of amount of property. If the property owner wants to challenge
the confiscation, the property owner has to initiate the litigation in court which causes an unfair
burden.
The group suggests that, if countries want to adopt administrative forfeiture, some limitations
similar to the U.S. model should be considered; for example, that it is applicable to only monetary
instruments with some limitation of amount. And if the forfeiture order is challenged, thegovernment has to take the case to court for confirmation of forfeiture.

4.

All participants considered that a system to shift the burden of proof to the defendant is a very usefuland effective system to confiscate illegitimate property. However, the presumption of innocence will
be at stake. Therefore, the group recommended that when they consider adopting such system, it
is important that the government should set basic requirements to be proved by the prosecutor. For
example, it could be required to prove that the defendant associated with the offender, that there isa connection between crime and the property, or that the defendant committed a crime, before theburden of proof is shifted to the accused.

5.

Taxation of criminal proceeds is an effective measure to deprive criminals of the proceeds of crime.
Participants’ countries are urged to consider adapting or adopting taxation of proceeds of crime. It
was commented that, if taxation of crime proceeds is possible in addition to the confiscation of theproceeds, it can impose additional damage on the criminals. It may also lead to deprivation of hidden
crime proceeds, which cannot be confiscated.

6.

In international co-operation it has been learned that requirements are higher in some countries
which need judicial orders or a treaty or agreement. This procedure causes delay. So the group
recommends that all countries should lower requirements to meet reciprocity and include requests
from other competent authorities rather than only judicial orders. Countries should also establish
firm and fair procedures to make sure that confiscation is done properly.

V. RECOVERY OF THE CONFISCATED PROCEEDS OF CRIME
A. Current Situation
1. Returning the Proceeds of Crime
All participants’ countries have provisions for returning the proceeds of crime to individual victims. Butin Japan recovery is only possible for victims of organized crime and money laundering offences. The scopeof recovery of proceeds of crime in Japan is limited.
With regard to international asset recovery, all participants’ countries, except Thailand, have a system ofreturning the proceeds of crime to the requesting countries.

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2. Asset Sharing
Only Sri Lanka has provisions on asset sharing; in other countries asset sharing is possible depending on
individual countries’ agreement. In Thailand asset sharing is not possible.

B. Problems, Countermeasures
1. In some countries, the scope of returning confiscated proceeds is limited and sometimes there areno funds to compensate victims. Thus the group recommended that countries with limited scopeshould broaden the scope of recovery to victims. Also, each country should consider establishing afund, similar to the U.S.A. model, in order to compensate victims. But the fund should be subject todomestic laws.
2.

Our group recommends that all countries should consider introducing a law to return assets tovictim countries in order to comply with Article 57 of UNCAC. Property should be returned to theorigin countries where real victims are present. If a requested country returns the assets to thevictim country, the reciprocity principle can be asserted when the victim country returns the asset to
the requested country in the future.

3.

Our group recommends that all countries should consider establishing a law or regulation on asset
sharing. When establishing the law or regulation, they can consider establishing a law or regulationthat allows deducting a reasonable amount of expenses in the requested country before returning
the assets. The percentage of asset sharing is decided by mutual agreement on a case by case basis.
Some participants consider that retaining some additional amount in the requested country is strong
incentive for the requested country and can hasten the procedures of asset recovery.

4.

International co-operation is urged by requesting countries to ask for technical assistance frominternational organizations, for example the Basel Institute on Governance, to help in consultation
on how asset sharing can effectively be achieved, if the requesting country faces some obstacles.

VI. CAPACITY BUILDINGOur group agrees that capacity building of investigators, public prosecutors and judges in attacking theproceeds of crime is important. Therefore, holding of meetings, seminars and training of relevant officers isimperative and indispensable.
Also, acquiring experience and expertise from organizations such as the Basel Institute on Governanceand UNAFEI is impertant. The responsible officers should not be rotated frequently and should bespecialized. If rotation is necessary, the head or supervisors of the department should not be rotatedfrequently.

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