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Practical Issues Regarding the Freezing and Confiscation of Instrumentalities and Proceeds of Crime

Practical Issues Regarding the Freezing and Confiscation of Instrumentalities and Proceeds of Crime

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At the European Community level there have been numerous regulations related to asset freezing and confiscation, the most recent being Directive 2014/42/EU of the European Parliament and of The Council on the freezing and confiscation of instrumentalities and proceeds of crime in the European Union (the “Directive”).

Most of the texts in the Directive find a corresponding provision in national legislation. In Romania, the relevant provisions are implemented in the Criminal Code and the Criminal Procedure Code. For the few issues that have not yet been implemented, the Romanian legislator has initiated a bill to modify and complete criminal normative acts in order to transpose the Directive, but the legislative proceedings do not seem to advance.

The Directive requires the Member States to establish minimum rules on the freezing of property in criminal matters, and to establish the necessary measures to enable the confiscation of instrumentalities and proceeds or property following a final conviction for a criminal offence, including from convictions obtained in absentia.

The Directive also refers to the possibility of freezing the assets of third parties, meaning that the Member States are required to take the necessary measures to enable the confiscation of proceeds or other property which, directly or indirectly, were transferred by a suspected or accused person to third parties, or which were acquired by third parties from a suspected or accused person, at least if those third parties knew or ought to have known that the purpose of the transfer or acquisition was to avoid confiscation. This actual or implied knowledge must be established on the basis of concrete facts and circumstances, including that the transfer or acquisition was carried out free of charge or in exchange for an amount significantly lower than market value.

The Romanian Criminal Procedure Code already regulates several proceedings that ensure asset freezing by allowing the Prosecutor, the Preliminary Chamber Judge, or the Court to establish a distraint when necessary in order to avoid concealment, destruction, disposal, or dissipation of assets that may be subject to special or extended confiscation or that may serve to secure the penalty by fine enforcement or to pay court fees or to compensate damages caused by the committed offense, regardless of whether targeted at an individual or a company. 

A matter worth considering is that the asset freezing may be maintained until the final judgment is pronounced. Since complex criminal investigations may take several years, this can represent a major problem for their subjects. 

Moreover, in terms of companies, one of the main issues that may arise relates to the fact that asset freezing may be ordered in respect to assets owned or held by a third party. Consequently, if a company is the subject of a criminal investigation (i.e., one related to money laundering), the assets of its contractual partners may be frozen as the alleged results of the criminal activity. That third party, who may be unaware of the existence of the criminal investigation (or trial), may find it quite difficult to challenge the proceedings, as only a short time is given to do so following the communication of the freezing order, which can make it very hard to obtain the relevant information. 

As a result, the length of the asset freezing may be a very significant problem to a company affected by such measures, irrespective of whether that company is the target of a criminal investigation or only a third party.

Summarizing the above, in Romania the risk of asset freezing does not exclude third parties not involved in the perpetration of the crime.

By Adrian Chirvase, Partner, Popescu & Asociatii

This Article was originally published in Issue 6.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Popescu & Asociatii at a Glance

Popescu & Asociatii is a top Romanian business law firm founded to provide premium integrated services to premium businesses, both in Romania and abroad, in all the relevant areas of practice, and especially in all industries of interest for active economic players.

Established as a full-service law firm, Popescu & Asociatii genuinely combines the expertise and exposure in the consultancy field with high level of strategic capabilities and experience in trials and court rooms, to provide state-of-art advice and representation both in local and cross border deals and files. The firm acts for corporation, local companies, banks and financial corporations, as well as for investment funds and entrepreneurs in all the areas of law: Banking and Finance, Capital Markets, Corporate and Commercial/Mergers and Acquisitions, Competition and Antitrust, Dispute Resolution, Employment, Compensations and Benefits, Energy and Natural Resources, Environment, Healthcare & Pharmaceuticals, Intellectual Property and GDPR, IT, Telecom & Media, Infrastructure, PPP and Public Procurement, Prevention, Compliance and White-Collar Crime, Real Estate and Construction, Restructuring and Insolvency, Transport Law.

Our mission is to deliver strategic, excellent and innovative legal and business solutions. Excellence, collaboration, and innovation are at the core of the way we work, with each other and with our clients. We focus on building long-term relationships and we do this by staying true to our founding principles: to provide client service and the highest standards, always keeping in mind work ethics, integrity and the responsibility towards our clients businesses, deals and cases that they entrusting us.

Popescu & Asociatii is ranked and recognized among outstanding law firms in Romania by all the high-profile legal directories researching the Romanian market, Chambers & Partners, Legal 500 EMEA, IFLR 1000 Financial and Corporate and Benchmark Litigation Europe edition. In addition, the firm received Best Litigation Law Firm in Romania award and has been recognized as one of the best White-Collar Crime Romanian law firms, based on our outstanding experience and market recognition in Romania, at the Legal Annual Awards Gala.

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