Extended confiscation – a new solution to fight organized crime?

The Amendments to the Criminal Law and certain other acts of law have been in effect in Poland beginning from April this year. The new legislation introduces a broader range of tools, the institution of extended forfeiture, the requirement to evidence the legal origin of property and the possibility of executing preventive freezing, to name but a few.

What does this all mean in practical terms? The State Treasury may take over the property of those convicted for more than five years of imprisonment, if they fail to evidence that their assets have been acquired by legitimate means. The burden of proof as regards legitimacy of the property acquired not only at the time of committing the offence but also over the preceding five-year period rests with the convicted offender.

The new requirements have been added with criminal organizations in mind.

The extended forfeiture laws have already been put into practical use. The first case concerns a group giving usurious loans, where authorities have secured property to be able to reimburse the injured parties. The criminal group granted home equity loans and the values of apartments were grossly underestimated which resulted in illegal take-overs of property.  There are almost 100 injured parties in the case and the losses amount to circa PLN 16 million.

The Public Prosecutor’s Office has also imposed a compulsory mortgage of PLN 1.25 million on the real property inhabited by the individual that was allegedly the leader of the group concluding loan contracts with transfer of ownership rights as collateral. The entire procedure was carried out with the help of frontmen, i.e. people purposely engaged to conclude contracts using forged documents. The property seized as part of the proceedings is formally owned by a frontman, but it has been bought using funds from the bank account belonging to the suspect’s wife.

The other case concerns a group trading in lubricating oils which has committed tax evasion: excise duty (PLN 24 million) and VAT (PLN 16 million). The Group attempted to ‘launder’ the money by purchasing shares worth PLN 2 million in another company, which have also been secured in the proceedings.  The authorities have secured assets worth over PLN 10 million, including cars, funds in various currencies and jewellery.

The new regulations certainly require intensified efforts and care on the side of entrepreneurs. They should pay close attention and make sure to collect and store evidence of the transactions executed, because in case of an audit, such evidence might be used to confirm the legitimacy of the property held.

Owners of companies who consider a possibility that their company could have been used to commit an offence or conceal the benefits obtained by the perpetrator must take into account the eventuality that their assets could be confiscated.

The introduction of the new regulations is surely welcome by honest entrepreneurs, because from their viewpoint, stricter regulations will translate into stronger protection against frauds.

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