RESOURCE MATERIAL SERIES No. 58

GROUP 2COMPONENTS AND LEGAL FRAMEWORK FOR COMBATINGMONEY LAUNDERING, CURRENT SITUATION, PROBLEMSAND SOLUTIONS FOR ASSET CONFISCATION SYSTEM
Chairperson
Co- Chairperson
Rapporteur
Co- Rapporteur
Co Rapporteur
Members

Advisors
Professor
Professor
Visiting Expert

Mr. Meinrado P. Paredes
Mr.Wataru Nemoto
Mr. Kedar Prasad Poudyal
Mr. Ahmad Zaidi Bin Ibrahim
Mr. Camillus Jacob Sambua
Ms. Nadira Tabassum
Mr. Richard Otieno Okore
Mr. Haruo Maruyama
Deputy Director Keiichi Aizawa
Chikara Satou
Nosaka Akihino
Ms. Susan Lea Smith

I. INTRODUCTION
Rapid globalization and economic
development has opened up newopportunities for pursuing more fulfilling
lives. On the other hand, it has also created
new opportunities for criminal exploitation,
challenging the basic rules of our social,economic and political systems. In recent
years, crime has become increasinglyinternational in scope, and the financial
aspects of crime have become more
complex, due to rapid advances intechnology and globalization of thefinancial services industry. Moneylaundering is an indispensable element oforganized crime, narcotics trafficking,terrorist activities or arms trafficking. It
is necessary for all the nations to enact thenecessary laws and regulations toeffectively combat money laundering. One
such method is the establishment of aneffective confiscation system.1

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Philippines
Japan
Nepal
Malaysia
Papua New Guinea
Bangladesh
Kenya
Japan
UNAFEIUNAFEIUNAFEI
United States

Traditionally, nations concentrated only
on crimes not on proceeds. Consequently,
existing laws are inefficient to trace andconfiscate proceeds of crime. Legal
provisions for confiscation of the proceeds
generated from all types of serious crimes
is the main tool to fight against money
laundering. Therefore, the focus of antimoney laundering legislation should
include a strong confiscation provision.
This group has identified problems relating
to the tracing, freezing and the confiscationof illegal proceeds and suggests that strong
legislative and administrative measures
must be enacted to create an effective
confiscation system. This paper will
examine the following issues concerning
confiscation:
1

Article 1(f) of the UN Convention Against Illicit
Traffic in Narcotic Drugs and Psychotropic
Substances, (Vienna Convention), and Article 2(g)of the UN Convention Against Transnational
Organized Crime define confiscation as thepermanent deprivation of property by order of acourt or other competent authority.

117TH INTERNATIONAL SEMINARREPORTS OF THE COURSE(i)

The current situation inparticipating countries as well asother countries;(ii) I d e n t i f i c a t i o n o f c o m m o n
problems;(iii) Identification of possible solutions.
Prior to discussing these issues, however,
it is first necessary to examine the current
international standards concerning thecreation of an effective confiscation system.
II. INTERNATIONAL STANDARDS
A. 1988 United Nations Convention
against Illicit Traffic in Narcotic
Drugs and Psychotropic
Substances (Vienna Convention)
The scope of the Vienna Convention was
to promote co-operation among the parties
so that they may address more effectively
the various aspects of illicit traffic innarcotic drugs and psychotropic
substances. To comply with their
obligations under the Convention, theparties must take such legislative andadministrative measures which
criminalizes all forms of narcotics
trafficking, drug-related money launderingand provides for the confiscation ofproperty derived from such drug-related
crimes.
Article V of the Vienna Convention
details the obligations of the parties to seek
confiscation of drug trafficking and money
laundering proceeds, as well as the
instrumentalities used to commit suchoffenses. It mandates each signatory
country to enact laws with domestic andinternational confiscation application.
Article V requires parties to the convention
to enact domestic confiscation legislations
enabling the party in question to locate,freeze, and confiscate all kinds of property
derived from, or used in, drug trafficking
or drug money laundering. It also requires
each party to provide assistance to anothercountry by identifying, tracing, seizing,
freezing, or confiscating any property orproceeds which were derived from, or usedin, drug trafficking or drug money
laundering and which may be located intheir country. Furthermore, Article V
provides that bank secrecy laws must notserve as a barrier to domestic andinternational asset confiscation
investigations.
B. The Forty Recommendations of
the Financial Action Task Force(FATF)The FATF is an international working
group whose purpose is the development
and promotion of policies to combat money
laundering. These policies aim to prevent
such proceeds from being utilized in future
criminal activities and from affecting
legitimate economic activities. The FATF
requires each country to take necessary
measures to criminalize money laundering
for all serious crimes. The determinationof what constitutes serious crimes andwhat will be designated as money
laundering predicate offences is left to eachcountry to decide.
In Recommendation 7, the FATF
identified and recommended confiscation
as one such measure to combat money
laundering. It recommended that countries
should adopt measures similar to those set
forth in the Vienna Convention to enable
their competent authorities to confiscate
property actually laundered or traceable
thereto, instrumentalities used in, or
intended for use in the commission of any
money laundering offence, or property ofcorresponding value, without prejudicing
the rights of bona fide third parties. Suchmeasures to confiscate should include theauthority to:(i)

Identify, trace and evaluate
property which is subject to459

RESOURCE MATERIAL SERIES No. 58
confiscation;
Carry out provisional measures,such as freezing and seizing, toprevent any dealing, transfer or
disposal of such property; and(iii) Take any appropriate investigative
measure.

crimes.
These countries havecomprehensive confiscation regimes whichallow for the confiscation of the proceedsof drug trafficking and other serious crimes
as well as the confiscation of
instrumentalities used to facilitate thecrime.

C. 2000 United Nations Convention
Against Transnational OrganizedCrime
The purpose of this Convention is topromote international co-operation toprevent and combat transnationalorganized crime more effectively. Article
12 of the Convention explicitly deals withthe seizure and confiscation of proceeds ofcrime. It restates the requirements
contained in Article V of the Vienna
Convention but extends seizure andconfiscation to other serious crimes.

While all the above listed countries haveprovisions for criminal confiscation basedon conviction, Malaysia, South Africa,
Thailand and the United States
additionally have civil in rem2 confiscation
procedures.

(ii)

III. REVIEW OF CURRENTSITUATION IN COUNTRIESFrom the countries’ reports anddiscussion, it was determined that
Bangladesh, Cambodia, Costa Rica, Kenya,
Malaysia, Nepal, Oman, Pakistan, Sri
Lanka and Tanzania have enacted laws to
confiscate the proceeds of drug trafficking,and a few have additionally extended theirlaws to confiscate the proceeds of othe
crimes such as bribary and other forms ofcorruption. The penal laws in Papua New
Guinea and the Philippines provide for theconfiscation of the proceeds of all crimes.
However, these laws are inadequate as they
do not apply to converted or transferredassets. Additionally, all the above named
countries have not criminalized money
laundering for all serious crimes.
Canada, Fiji, Germany, Hong Kong,Japan, Portugal, Republic of Korea, South
Africa, Thailand and the United States
have enacted anti-money laundering
legislation which extends to all serious

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IV. PROBLEMS RELATING TO THE
CONFISCATION OF PROCEEDSThe group identified the following
general and specific problems relating toconfiscation measures to fight againstmoney laundering. Upon review of thelegal provisions of participating countries,
it was determined that while all theparticipating countries have confiscation
laws, most countries’ laws are insufficientand ineffective in the fight against money
laundering.
A. General Problems
1. Lack of AwarenessIn many of the countries, there is a
general lack of awareness among thegeneral public and particularly amonglawmakers, law enforcement officials, andjudges concerning the gravity and adverse
effect of money laundering.

2

Civil in rem confiscation proceedings are brought
against the property and do not depend upon theconviction of the wrongdoer. The government must
prove the basis of the confiscation action by apreponderance of the evidence, after which theburden shifts to the claimant to defend his or herinterest in the property.

117TH INTERNATIONAL SEMINARREPORTS OF THE COURSE
2. Lack of a Strong Political Will
The increasing concentrations of wealthamong criminal groups in a number ofjurisdictions is a concern not only becauseof the impacts on investments, real estatevalues, legitimate commerce andgovernment integrity, but also because
these organizations have the wealth to
make large campaign contributions tocandidates who may then assist them intheir criminal activities. A government
elected with the help of such money
generally loses the political will to enact
strong anti-money laundering andconfiscation legislation. Illicit funds andcorrupt officials represent a continuing
threat to democracy in virtually all regionsof the world.
B. Specific Problems
1. N a r r o w s c o p e o f a p p l i c a t i o n o f
confiscation laws
In most of the participating countries,
confiscation is only available for theproceeds of narcotics trafficking. In
addition, only a few of the participating
countries have legislation which
criminalizes money laundering for theproceeds of all serious crime and which
would extend confiscation to such proceeds.
Because of the narrow scope of thecountries’ confiscation laws, successful
confiscation actions have been limited in
numbers.
2. Standard of Proof
In many countries, criminal confiscationis the only basis for confiscation. Therefore
before any confiscation can occur, adefendant must be charged and convictedof a crime. The burden of proof in criminalcases requires the government to prove its
case beyond a reasonable doubt. Because
a conviction is necessary before confiscation
can be effected in most countries, it issometimes difficult to achieve. In many of
the countries, the rate of conviction is very
low. Sometimes, even though a defendantcannot show any legal source for his assets,
the confiscation will fail because thegovernment has insufficient evidence toprove guilt. Additionally, most criminal
forfeiture systems contain no means forconfiscating the illegal assets of a criminal
who has absconded or died.
3. Implementation Problems
A Study of the situation of the various
countries also shows that despite havingsome confiscation provisions, their effective
implementation has been lacking. In mostof the countries, there are no prosecutions
for money laundering or confiscation. Mostof the implementation problems are related
to a country’s ability to identify, trace,
freeze and confiscate the proceeds of crime
both pre-trial and post conviction. The
following causes were determined to hinder
the implementation of confiscation laws.
(a) Strong Bank Secrecy Laws
In countries like the Philippines, there
is a strong bank secrecy law which cannot
be pierced for law enforcement purposes.
Because of this, investigating authorities
cannot identify or trace illicit monies forconfiscation.
(b) Lack of Reporting Obligations ofFinancial Institutions as Regards
Suspicious Transactions
In most of the participating countries,
there is no provision mandating financial
institutions to report suspicioust r a n s a c t i o n s . C o n s e q u e n t l y, t h einvestigating authorities do not receive thenecessary information which would alert
them to the possible existence and locationof illegal assets.
(c) Lack of Financial Intelligence Units
Criminals are increasingly usingsophisticated methods to hide their illegal
proceeds. Without the assistance of afinancial intelligence unit to analyze
suspicious transaction reports and

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RESOURCE MATERIAL SERIES No. 58
facilitate financial investigations, mostillegal assets cannot be identified andconsequently are not confiscated.
(d) Lack of Procedural Laws
Additionally, it was determined that insome countries, there is a lack of procedural
laws to satisfactorily give effect toconfiscation. In many countries, forexample, the property laws create an equal
property right of the father, mother andsons over the ancestral property. If one
member of the family is involved incriminal activity and has used the common
property for facilitating his/her criminal
activities, naturally, it is unfair toconfiscate the entire common property. The
property rights of those family members
who did not know of the criminal use of
the property should not be affected.
Because of the difficulty in determining
which part of the property should be
confiscated, confiscation claims usually fail.
Thus, because the procedural law has nomeans to satisfactorily divide the property,
it is impossible to execute a confiscation
order.
(e) Lack of Proper Provisions forInternational Co-operation
Even those countries which haveconfiscation laws often are unable to fully
implement the law because there is noprovision for international co-operation. In
many instances, illegal proceeds have beentransferred to another country and without
assistance from that country, the proceeds
cannot be confiscated. However, if thecountry in which the assets are located does
not have the ability to provide suchinternational assistance, the confiscation
action will fail.

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V. SOLUTIONS TO IDENTIFIEDPROBLEMS
A. Increase Awareness Concerning
Money Laundering
Substantive efforts should be made toraise the public awareness concerning thedangers of money laundering to thenational security of a country. This can beaccomplished through the publication of
informative articles in local newspapers,
the conducting of seminars for lawmakers,
judges, law enforcement officials andprivate sector persons and ultimately, in
the investigation and prosecution of money
launderers.
B. Need for a Comprehensive
Proceeds of Crime Law
Those countries which only have alimited confiscation system should enact acomprehensive law to confiscate theproceeds of serious crime. It is suggested
that developed countries should provide
assistance to those countries in the draftingof such new legislation as well as provide
financial and technical assistance to create
an infrastructure for the effective
implementation of the confiscation laws.
Furthermore, where countries areunwilling to enact and implement suchlaws, the international community must
exert pressure through the use ofcountermeasures against such non cooperating countries. An effective
confiscation law should include thefollowing provisions.
1. All Serious Crimes to be Included
All countries should include provisions
within their law which allow theconfiscation of proceeds from serious
crimes3. However, it is recognized that eachcountry will determine those crimes to be
designated as serious. It is suggested thatcertain crimes be included in suchdefinition such as, drug trafficking, humanand arms trafficking, terrorism, corruption,

117TH INTERNATIONAL SEMINARREPORTS OF THE COURSE
if it is registered in other’s nameso long as the owner is not an
innocent owner or a bona fidepurchaser for value;fraud and other transnational organizedcrimes.
2. Provisional Measures
Any confiscation law should provide forthe pre-trial freezing or seizure of assets.
If any individual or organization orcompany is suspected of engaging in an
illegal transaction with the proceeds ofcrime, the competent authority must be
given the power to demand particulars of
the accounts of such persons and if
necessary, to freeze and/or seize theidentified assets prior to trial.
3. Types of Property to be Confiscated
In some countries, only the proceeds
which are located with or in the name ofan accused can be confiscated. In othercountries, intangible property cannot be
confiscated nor can the property generated
from the proceeds be confiscated.
Difficulties are also experienced concerning
the confiscation of instrumentalities, mixed
property (illegal property mixed with thelegal property) and other property whichfacilitates the concealment of illegal
property. A comprehensive confiscation law
should provide for the confiscation of thefollowing types of property:

3(i)All movable, immovable, tangible,
intangible, claim rights, andsecurities;(ii)

All property that is proved to beproceeds or traceable thereto, even

The UN Convention Against Transnational
Organized Crime in Article 2(1)(a) requires theconfiscation of the proceeds of offences covered by
the Convention. The offences mentioned areorganized crimes, money laundering, corruption,and obstruction of Justice. (See Articles 5, 6, 8 and
23). The Convention also defines serious crime as
conduct constituting an offence punishable by amaximum deprivation of liberty of at least four
years or a more serious penalty.

(iii) All instrumentalities including
real estate, vehicles, andmachinery which have been used
or intended to be used in thecommission of a crime;(iv)

Any proceeds which have been
mixed with other legal property to
the extent of the value of the illegal
property;(v)

Interest and profit generated fromthe proceeds.

4. In rem Confiscation
In some countries like the United States,
there is a provision under which, in certain
instances, property can be confiscated even
without conviction. This type ofconfiscation is difficult for many countries
to accept. However, as has been statedearlier, in many of the developing countries,
the conviction rate is very low thus
prohibiting the confiscation of most illegal
assets. Consequently, adoption of such inrem confiscation measures is suggested if
the legal system of a particular country
permits.
5. Legal Presumptions
If a country’s domestic legal systems
allows, a defendant should be required toprove the lawful origin of the alleged
proceeds of serious crime or other property
liable to confiscation.4

4

See Vienna Convention, Article V(7) andConvention Against Transnational Organized
Crime, Article 12(7).

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C. Enhancements for Effective
Implementation
Effective implementation is still aproblem in most countries. The following
measures are suggested to enhance
effective implementation.
(i)Bank secrecy laws must be
amended to allow law enforcement
agencies to obtain information
concerning the location of theproceeds of crime.5(ii)

Financial institutions must be
required to report suspicioustransactions.6(iii) A Financial Intelligence Unit
should be established to analyze
suspicious transaction reports andassist in financial investigations.
D. Disposition of ConfiscatedProperty
In some countries, all or a portion ofconfiscated assets are segregated to be used
to enhance law enforcement capabilities.
However, other countries believe that suchconfiscated assets should be returned to thegeneral treasury. It was concluded thateach country should determine the properuse of such property according to theirrespective laws.
E. International Co-operation
Major drug traffickers and othercriminals often hide their illicitly generated
proceeds outside the country where they
commit their crimes. Thus, one country’s
confiscation efforts, however effective andcomprehensive, may not be enough to takethe profit out of transnational crime. For
confiscation laws to work effectively,
countries must apply and enforce theirdomestic confiscation measures
5
6

FATF Recommendation 2.
See FATF Recommendation 15 and Convention
Against Transnational Organized Crime, Article 7.

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consistently and must pursue theconfiscation of illegal assets found abroad.
Recognizing the diversity of legal
systems among nations, the Vienna
Convention7 and the Convention Against
Transnational Organized Crime providethat a requested country may seek theforfeiture of property at the request ofanother country in one, or both, of two
ways. The requested country may initiate
its own forfeiture proceedings against theproperty in question using the evidence
provided by the requesting country.
Alternatively, the requested country may
give full faith and credit to a forfeiture
judgment rendered by the competentauthorities of the requesting country.
The sharing of confiscated assets among
countries serves to create an incentive for
future cooperation and often provides themeans for a country to assist in theinvestigation, tracing, freezing, seizing andconfiscation of illegal assets. The means
to effect a request for assistance in thefreezing, seizure and confiscation of illegal
proceeds and asset sharing should bedetermined through multilateral orbilateral agreements among countries.
VI. CONCLUSION
To c o m b a t m o n e y l a u n d e r i n g ,participating countries should have strong
substantive and procedural laws against
it. Effective asset confiscation is a critical
tool of modern law enforcement. Throughasset forfeiture, governments can take boththe profit out of crime and disrupt criminal
activity by forfeiting the property thatmakes the crimes possible. In this way, law
enforcement is not limited to arresting andprosecuting criminal offenders, but can also
attack the economic underpinnings ofcrime and make restitution to victims.
7

See Article V.

117TH INTERNATIONAL SEMINARREPORTS OF THE COURSE
However, as criminal activity becomesincreasingly transnational, international
cooperation has become a law enforcement
imperative. Only through suchinternational cooperation, can nations hope
to win the fight against transnationalorganized crime.

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