Deciding where to pursue an asset recovery case is a crucial step

Pursuing asset recovery is not as simple a task as filing an action where the assets are located.  There are a number of legal and practical issues to consider as well. Here, we examine some of the common issues one must consider.

Venue and Jurisdiction

One of the primary considerations is the venue and jurisdiction in which to pursue the recovery action.  Jurisdiction is the authority, both legal and practical, granted in a particular location to investigate, prosecute, adjudicate, and enforce legal matters.  Before an action can be instituted, local officials will want to make sure that their actions can be enforceable in their court system.  

Jurisdiction is generally of three types: territorial jurisdiction, jurisdiction over the person or party, and jurisdiction over the subject matter of the claim or dispute.  For criminal cases, a court will usually require territorial jurisdiction over alleged offenses committed by domestic or foreign offenders. This means that there must have been some act committed within the national territory that will satisfy the jurisdictional requirement.

Jurisdiction over the person or party can often be used to authorize authorities to claim jurisdiction for crimes committed by their nationals or incorporated entities in a foreign jurisdiction. Sometimes, the commission of one or more elements of the crime on national territory will be sufficient to invoke this type of jurisdiction, even if other elements were committed in a foreign jurisdiction. In many cases, actions constituting crimes will be multi-jurisdictional – that is, occurring in more than one jurisdiction.  Money laundering cases often involve activities occurring in several locales.  

Subject matter jurisdiction involves whether or not the authorities or the court can adjudicate a particular action and issue orders concerning its resolution or interim matters.   For example, a criminal court is often limited in its ability to consider and rule on civil proceedings.

Venue is the place in which an action may be brought before a court or other authorities.  Although it is somewhat similar to territorial jurisdiction, there can be some subtle legal differences. For instance, more than one court can have jurisdiction.  More than one court may have venue. It can then be an issue as to which court is appropriate to consider further proceedings.

 Lawyers in the United States will commonly refer to this issue as “preferred venue”.  Another legal concept is forum non conveniens, which means that one court may transfer a case -- usually a civil case -- to another court in another locale or jurisdiction based on certain established legal principals like conduciveness for the attendance of witnesses or parties to a legal action.

Problems can arise if more than one court or authority with jurisdiction decides to act on a case.  This can lead to conflicts in the direction of the case.

A challenge with cases that are multijurisdictional is that a foreign authority with jurisdiction may decide (or be obligated) to start its own case and issue its own rulings, even though another jurisdiction is doing likewise. If not properly coordinated, this can lead to confusion and often contradictory actions.  It also can expose the case through inadvertently putting targets on notice.

Applicable Legal Provisions Governing Asset Return

In determining where to proceed with an asset recovery action, it is critical that there be a good understanding of the laws and proceedings that will apply. Some of these legal provisions have been somewhat standardized through the United Nations Convention against Corruption (UNCAC), international standards set by various organizations, treaties, mutual legal assistance agreements, or through the adoption of model laws.  

For instance, under the UNCAC, public funds which have been embezzled or laundered from one jurisdiction and recovered in another jurisdiction pursuant to a request for mutual legal assistance should be returned to the requesting jurisdiction. In practice, this may not be as straightforward as it may seem. Some jurisdictions will return assets if the confiscation was the result of the direct enforcement of a foreign order and there is a treaty in place.  Some countries will authorize the return of assets directly to the legitimate owner or jurisdiction harmed by corruption offenses through a court order for damages or compensation.

However, if the assets were confiscated under different circumstances, such as through a domestic money laundering case conducted by foreign authorities, the amount to be returned may depend on any sharing agreement the parties may have in place or the prerogative of the requested jurisdiction.

Another consideration to make is that in some jurisdictions, foreign proceedings may be limited to money laundering offenses, which may operate as a barrier to confiscating the proceeds from predicate or related offenses.  This can often happen in jurisdictions that only confiscate assets linked to the offenses that form the basis of the confiscation, i.e. predicate crimes.

Costs and Expenses

Another critical factor, which could determine the issue, is the projected cost of proceedings and what remedies are available to recover the costs and expenses.  Although filing fees and judicial costs may be relatively minor, significant costs may be incurred if local legal counsel must be retained or if the services of experts or local investigators are required.  There may be pre-litigation expenses involved, such as if there is any requirement for discovery or depositions of witnesses.  Additionally, even when an order of return is granted, there may be administrative costs incurred to enforce and execute the terms of the order.

These expenses and costs, and the likelihood that any significant amounts may be recovered, should be factored into a decision, along with an assessment of the relative likelihood of success and the amount expected to be recovered and returned.

Timeliness of the action – Is it barred by the passage of time?

There are some legal theories that asset recovery should not be barred by the passage of time since title to the property was never abandoned by the rightful owner. But the reality is that most jurisdictions will apply a timeliness test. In criminal proceedings, there is generally a provision that once a certain period of time has passed since the commission of the offense, legal remedies for that offense are barred by time. These provisions are known as “statutes of limitation” or in some jurisdictions, the “period of prescription”.  

In civil proceedings, such provisions may also apply.  There is also a concept in common law jurisdictions, known as “laches” where an action may be dismissed because it was not brought in a timely fashion where circumstances exist that it could have been brought sooner.  These limitations are usually set by law or case precedent and can vary depending on the nature of the offense.  There may be grounds for legal argument that the passage of time should be delayed or suspended based on various factors, but this generally requires a decision by the court.  In some cases, the time period does not begin to run until there has been an opportunity for “discovery” of the wrongful act.

Determining the Liable Parties

Parties who knowingly facilitated the transfer of proceeds of crime or corruption or who received illicit assets may be held liable in most jurisdictions under various civil or criminal statutes, including complicity, conspiracy, willful blindness, negligence, and fraud.  Liable parties can include individuals, including professionals, such as bankers, financial managers, real estate agents, notaries, and lawyers who deliberately fail to make reasonable inquiries. Legal entities, such as corporations, may also face liability for their involvement.   

Deciding which parties to pursue can be important strategically. It can increase the chances of restitution or compensation from entities or individuals beyond the original wrong-doer, and as a means to obtain information and cooperation from third parties or co-conspirators.  

Official Immunities  

In many jurisdictions, some public officials enjoy immunity from prosecution for criminal offenses and in some cases, civilly. This immunity generally applies to acts or functions performed within the scope of their official duties.  The rationale behind such immunities is to recognize that public officials must make hard and difficult decisions which can adversely affect some portions of the public and that such discretion should be exempt from legal liability in order to give latitude to those officials to actually make decisions.  

If there was no immunity, then arguably many public officials would be reluctant to act decisively if they faced likely legal liability for their actions.  This principle of immunity is not intended to give carte blanche authority to public officials to act as they please; they are still bound by laws and applicable codes of conduct or other legal restrictions.  

In addition, in some situations, this immunity may be waived or nullified if the action of the official was done without legal authority or outside the scope of his or her official duties or functions.  Whether such immunity can be waived or nullified is usually a decision that is made by a court and could result in additional proceedings before an action could proceed further against that official in his or her individual capacity.

Discovery and Exchange of Evidence

Many jurisdictions permit the parties to a contested proceeding to obtain “discovery” or possible evidence from the opposing party in a civil, non-criminal case.  In criminal cases, many jurisdictions permit the defense to obtain discovery from the prosecution, but do not place a similar requirement on the defendant to provide incriminating evidence to the prosecutors.  Discovery can be time-consuming and expensive.  It can also be damaging to your case if it entails the release or disclosure of information which could jeopardize a recovery action.

Asset recovery practitioners may want to explore the availability of in rem proceedings, which is essentially a case against property. Potential claimants to the property can ask to join in the proceedings, but the risk of such is that they may be implicated in the underlying wrongful act.  Usually, in rem proceedings do not involve a large amount of discovery, if at all.
    
Other possible avenues include:

•    Whether the Court will entertain proceedings in camera, which is essentially a hearing before the Court in chambers with the exclusion of the public
•    Whether the Court can entertain proceedings ex parte –by one side only to the exclusion of opposing parties
•    Will the court authorize the sealing of proceedings, documents, or evidence, which effectively keeps such things secret from all but the attorneys involved and the court
 
Standards of Proof

Also, consider whether the evidence available is sufficient to meet the standards of proof required by a jurisdiction for preliminary proceedings, confiscation, civil actions, or conviction.  These standards vary widely among jurisdictions.  Usually, the more intrusive the investigative technique or measure is, the higher the evidentiary standard of proof.

In most common law jurisdictions, a conviction requires proof “beyond a reasonable doubt”.  Civil proceedings require a lower “balance of probabilities” or “preponderance of the evidence” standard. This common law standard represents a probabilistic approach to assessing the evidence - the quantifiable likelihood of the occurrence of the event expressed as an odds or percentage.

In most civil law jurisdictions, the standard of proof is an “intimate conviction” of the truth of the evidence; this same standard usually applies whether it is a conviction, a criminal or non-conviction-based confiscation, or a finding for the plaintiff in a civil proceeding.   Civil law jurisdictions focus more on the judge’s subjective impression.

Understanding these distinctions will aid in ensuring that evidence sufficient to meet the applicable standard is provided. Where evidence is insufficient to meet the standard of proof required under one approach, practitioners may have the option to consider another avenue.  For instance, if the evidence is unlikely to establish a criminal conviction “beyond a reasonable doubt”, it is also unlikely to result in a criminal confiscation. However, it may be possible to recover the proceeds through a private civil action or through non-conviction based confiscation proceedings where the standard of proof is less stringent.

Mr. Barden is a prolific author and contributor to IAAR's editorial and certification efforts. He has more than 30 years of professional experience battling fraud internationally and has worked to recover assets and establish Financial Intelligence Units around the world.