In December 2016 the Council of Ministers approved an extended confiscation bill offering legal solutions which will foster combating organized crime and fraud.
The extended confiscation model is based on the assumption that assets held by a perpetrator have been derived from crime, hence their lawful origin needs to be proved.
The solutions proposed will make it impossible for criminals to enjoy the fruits of their criminal activities and impede financing of crime in future.
The extended confiscation was introduced to the Polish law in 2013, still it has not been widely and efficiently applied. The EU law requires that Member States implement more stringent regulations in this respect.
Extended confiscation – what will change?
Main changes in the criminal law:
- adding crimes punishable by imprisonment for a term over 5 years to the list of crimes punishable by extended confiscation;
- the obligation to prove the lawful origin of property acquired by the perpetrator in the period of 5 years before the crime;
- streamlining solutions which enable confiscation of assets held by a third party, who received these assets from the perpetrator free of charge or who purchased the assets for a price much lower than their market value where the third party knew or ought to have known that these transactions were concluded to avoid confiscation;
- possibility to adjudicate confiscation without conviction if the criminal proceedings are suspended or discontinued due to the death or flight of the criminal;
- applying operational control (such as wiretapping or controlling private exchange of correspondence) in serious crimes, with the view to determining confiscatable property;
- the possibility to confiscate a business other than that owned the perpetrator, which may be considered to be an instrument of a particularly serious crime, such as money laundering;
- introducing preventive interim freezing, i.e. the possibility to freeze property immediately with a view to future confiscation, in particular if the risk arises that the assets may be disposed of before the confiscation decision has been issued.
What does this mean for business owners?
Stricter requirements will provide additional solutions to combat business fraud and protect honest business. The new regulations, however, have certain limitations. They shall not apply to small-scale crimes, as a business may be seized only if the proceeds of the offender exceed PLN 200 thousand. Moreover, only businesses held by natural persons may be confiscated.
Moreover, a business which was not owned by the perpetrator, but became an instrument of crime, can also be confiscated if its owner had approved its fraudulent activities. The regulations will protect honest business owners who carried out their business activities and took decisions without sufficient care. Significantly, the amount of proceeds or damage caused by the enterprise must be commensurate with the size of the business, otherwise the extended confiscation principles shall not apply. Therefore, small-scale fraud committed by one employee without the owner’s awareness will not lead to confiscating the entire company, hence the unaware owner will be held harmless.
The State Treasury will manage any frozen business to ensure its survival, debt collection and even incurring debt. If the confiscation is adjudicated, the business will be acquired by the State Treasury.
In line with the amendment to the criminal law, not only will criminals be punished by imprisonment, but they will also lose the source of financing organized crime in future, which is particularly important from the point of view of honest business. Extended confiscation has been a common practice applied in many countries for some time already. The lawful origin of proceeds must be demonstrated in Italy and the UK. Confiscation without conviction is possible in Germany, Australia, Italy, Portugal, Bulgaria, the Czech Republic, Finland, Ireland, Slovenia, Denmark, Slovakia, Latvia, Lithuania and Hungary. In Italy property-based measures can even be applied to suspected collaboration with organized crime groups. Will this solution prove efficient in Poland and will it reduce business fraud? We will find out soon enough.