Proceeds of Crime
The definition of proceeds of crime is stipulated in Article 70.11, paragraph 1 and 11 of the Criminal Law:
(1) Criminally acquired property is any economic benefit which has come into the ownership or possession of a person as a direct or indirect result of
committing a criminal offence.
(11) Indirectly criminally acquired property is any economic benefit which has come into the ownership or possession of a person as a result of further use of
directly criminally acquired property, including as a result of reinvestment or transformation, or resources which the person has acquired from the sale of such property, and also the gained fruits and profit.
The definition of proceeds of crime is established based on DIRECTIVE 2014/42/EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 3 April 2014 on
the freezing and confiscation of instrumentalities and proceeds of crime in the European Union (Directive of freezing and confiscation of proceeds of crime) Article 2, paragraph 1.
The property is considered to be proceeds of crime, if it is proven that they have come into the ownership or possession of a person as a direct or indirect
result of a criminal offence (predicate offence). Where several predicate offences have been committed, it is not necessary to prove specifically from which the proceeds were obtained. However, the property may also be recognised as proceeds of crime without proving the predicate offence, but by establishing the criminal origin of the funds and their laundering.
Article 70.11, paragraphs 2 and 3 of the Criminal Law provide for two presumptions for determining the criminal origin of funds.
Article 70.11, paragraphs 2 of the Criminal Law prescribe a presumption of the criminal origin of the funds for a specific group of persons:
(2) If the value of the property is not proportionate to the legitimate income of the person and the person does not prove that the property is acquired in a
legitimate way, as a criminally acquired property can also be recognised the property that belongs to a person:
1) who has committed a crime which, in its nature, is focused on the gaining of property or other kind of benefit regardless of whether any property or other
kind of benefit has been gained as a result of the crime;
2) who is a member of an organised group;
3) who has committed a crime related to terrorism.
The application of this presumption is linked to the crime committed by the person and does not apply to a criminal violation.[1] It is introduced on the basis of paragraph 19 of the Preamble and paragraph 1 of Article 5 of the Directive of freezing and confiscation of proceeds of crime. Determination of origin of funds is carried out in accordance with Article 126, paragraph 31 and Article 124, paragraph 6 of the Criminal Procedure Law. The Court of Justice of the European Union (CJEU) has ruled that this presumption applies only to criminal offences from which economic advantage (benefits) derive.[2] Article 5 of the Directive of freezing and confiscation of proceeds of crime prescribes that the criminal origin of funds must be proven by the circumstances of the case, including the specific facts and available evidence.
Article 70.11, paragraphs 3 of the Criminal Law extends presumption of the criminal origin of funds to:
A property which is at the disposal of such person who maintains permanent family, economic or other kind of property relations with the person referred to
in Paragraph two of this Section can also be recognised as a criminally acquired property, if the value of the property is not proportionate to the legitimate income of the person and the person does not prove that the property is acquired in a legitimate way.
This is introduced based on Article 6 of the Directive of freezing and confiscation of proceeds of crime. The application of Article 70.11, paragraphs 3 is linked
to the presumption of Article 70.11, paragraphs 2 of the Criminal Law. However, the application of the presumption of Article 70.11, paragraph 3 requires establishment of a permanent connection with prerpetrator of the crime, but does not depend upon the establishment of a link with the crime committed. In other words, the presumption applies to the property of a person who has not committed the crime. Nor does a person have to know or be aware of the crime committed.[3] However, the CJEU has clarified that according to Article 6 of the Directive on freezing and confiscation of proceeds of crime the purpose of a transfer of funds must be concealment of assets (avoid confiscation).[4]
The concept of proceeds of crime of the Criminal Law is further supplemented by provisions of Article 4, paragraph 3 of law on the Prevention of Money
Laundering and Terrorism and Proliferation Financing (AML):
(3) In addition to that laid down in the Criminal Law, funds which belong to the following person or are directly or indirectly controlled by the following person
shall also be considered proceeds of crime:
1) who is included on any list of those persons suspected of being involved in terrorist activity or production, possession, transportation, use or distribution of
weapons of mass destruction compiled by the countries or international organisations stipulated by the Cabinet;
2) who is included on the list of subjects of sanctions drawn up by the Cabinet on the basis of the Law on International Sanctions and National Sanctions of
the Republic of Latvia with the view to combat the involvement in terrorist activity or production, possession, transportation, use, or distribution of weapons of mass destruction;
3) on whom bodies performing operational activities, investigating institutions, the Office of the Prosecutor, or a court have information which forms sufficient
basis for suspecting such person of committing a criminal offence related to terrorism or participation therein.
For the assessment of the criminal origin of funds “the preponderance of evidence” instead of “the reasonable doubt” is used as the standard of proof. The
standard of proof of the preponderance of evidence is enshrined in Article 124, paragraph 6 of the Criminal Procedure Law:
(6) In criminal proceedings and in proceedings regarding criminally acquired property, the conditions included in an object of evidence in relation to the
criminal origin of the property shall be considered proven if there are grounds to recognise during the course of proving that a property is, most likely, of criminal rather than lawful origin.
The preponderance of the evidence standard applies to the criminal origin of the property only.[5] Article 124, paragraph 6 of the Criminal Procedure Law is
based on provisions of paragraph 21 of the Preamble and paragraph 5, subparagraph 1, paragraph 6, subparagraph 1 of the Directive of freezing and confiscation of proceeds of crime.
According to Article 125, paragraph 3 of the Criminal Procedure Law the legal presumption of the preponderance of probabilities applies where money
laundering activities have been carried out with the property and if a person involved in criminal proceedings is not able to believably explain the legality of origin of the relevant property.
Article 126, paragraph 31 of the Criminal Procedure Law shifts the burden of proof from the person directing the proceedings to the person who claims that
the property has been obtained legally. It follows that the person must be able to explain the origin of the property, i.e., must be able to prove the verification of the property’s origin obtained.
Nevertheless, the initial burden of proof of criminal origin of funds lies with the person directing proceedings and the prosecutor, otherwise it contravenes
Article 124, paragraph of the Criminal Procedure Law.
The probability of criminal origin of funds must be reasonable and compelling.[6] Consequently, only then can the burden of proof be imposed on the
person, which does not exempt the person directing the proceedings and the prosecution from gathering a body of evidence that would provide a basis for the presumption that the property is probably of criminal origin.
The Connotational Court ruled that the presumption of innocence as a fundamental right enshrined in the Constitution would be violated, if a person had to
prove his or her own innocence, i.e. if criminal proceedings were initiated with a presumption of guilt.[7] In the case law it is established that the person directing the proceedings bears the burden of proving that the property is probably of criminal rather than lawful origin, and only then the person claiming otherwise bears the burden of proving the lawful origin of the property.[8]
The Burden on natural and legal persons to prove the lawful origin of their property is taken over from:
Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism (Warsaw Convention) Article 3, paragraph 4;
United Nations Convention against Transnational Organized Crime (Palermo Convention) Article 12, paragraph 7;
United Nations Convention against Illicit Traffic and Psychotropic Substances (Vienna Convention) Article 5, paragraph 7.
For a person unfamiliar with the process of investigation and drafting the documents for transactions and given the limited information on gathered evidence
as legal basis for application of presumption that funds are likely to be of criminal origin the obligation to provide evidence/explanations of the origin of the funds is not an easy task.
Laundering
Article 195 of the Criminal Law prescribes criminal liability for a person who commits laundering of criminally acquired financial resources or other assets. The
description of the objective and subjective characteristics of laundering is found in the provision of Article 5, paragraph 1 of the AML:
(1) The following actions are money laundering:
1) the conversion of proceeds of crime into other valuables, change of their location or ownership while being aware that these funds are the proceeds of
crime, and if such actions have been carried out for the purpose of concealing or disguising the illegal origin of funds or assisting another person who is involved in committing a criminal offence in the evasion of legal liability;
2) the concealment or disguise of the true nature, origin, location, disposition, movement, ownership of the proceeds of crime, while being aware that these
funds are the proceeds of crime;
3) the acquisition, possession, use or disposal of the proceeds of crime of another person while being aware that these funds are the proceeds of crime.
Laundering refers to funds of criminal origin and it can be carried out by the person who committed the predicate offence (self-laundering) or by another person who did not commit the predicate offence (third-party laundering).[9] Correspondingly Article 5, paragraph 1.1 of the AML installs when a person deliberately assumes the funds to be criminally acquired, shall also be regarded as money laundering. Article 5, paragraph 2 of the AML provides that laundering is also recognised, if the predicate crime is committed outside the territory of Latvia. But a distinction must be made between money laundering and the laundering of property, which is the object of a criminal offence.
Article 124, paragraph 7 of the Criminal Procedure Law determines that in order to prove the laundering of proceeds from crime, there is no need to establish the specific predicate criminal offence. This legal provision was introduced to prosecute a person for "Stand-alone" money laundering without proving a specific predicate offence, based on circumstantial evidence indicating the criminal origin of the property, typology and characteristics of laundering, as well as the person's inability to prove the lawful origin of the property.[10] It is applicable not only where the predicate offence has not been established, but also where the person is only charged with laundering.[11] The criminal origin of the property, on the other hand, must be established in accordance with the presumption in Article 125, paragraph 3 of the Criminal Procedure Law. However, typologies and characteristics of laundering do not prove by themselves the criminal origin of funds, therefore, have an informative nature.[12]
Freezing of Funds
Article 1, subparagraph 18 of AML institute that freezing of funds is prevention of any move and transaction with funds, and also transfer, amending,
alteration, use, access to them or dealing with them in any way that would result in any change in their volume, amount, location, ownership, possession, character , destination or other change that would enable the use of the funds, including portfolio management. The European Court of Human Rights (ECHR) has established that the freezing of funds is regarded as a measure to control the use of funds and is aimed at deterring the owner of the funds from further use of it.[13] In addition, Article 32.1 paragraph 1 of the AML enact that the Financial Intelligence Unit (FIU) has the right to issue an order binding on the subject of the AML or the State information system manager to freeze the funds if there are reasonable suspicions that a criminal offence is being committed or has been committed, including money laundering, terrorism and proliferation financing, or an attempt to commit criminal offences. The aim of the FIU freezing order is to achieve criminal procedural objectives.[14] In line with Article 51 of the AML the FIU does not carry out an investigation, but collects the information and gets send to the pre-trial investigation authorities for further examination or establishing of evidence, unless a decision is made to revoke the order because evidence and explanations have been received on the legitimate origin of the funds. The FIU freezing order is an interim decision, which further can continue as criminal proceedings. Moreover, the FIU freezing order may be followed by the seizure of assets.
Seizure of Property
The ECHR has clarified that the seizure of property in criminal proceedings is a control of property rights.[15] Latvian legislation does not contain a legal
definition of the seizure of property. It is pointed out that Latvia has implemented international law, which indicates that seizure of property means a temporary prohibition to transfer, destroy, alter, sell or move property, based on a warrant issued by a court or other competent authority. Property is seized, if criminal proceedings have revealed that the property has criminal origin, or if a person has committed a criminal offence punishable by an additional penalty of confiscation of property, or in other cases where confiscation of property is possible under the law (e.g., coercive measures applicable to legal persons).[16] Based on Article 138 of the Criminal Procedure Law, the seizure of property in itself is not an investigative act because no evidence is established. In pre-trial proceedings, property shall be seized with a decision of the person directing the proceedings that has been approved by an investigating judge, but during the trial a court shall take a decision, in accordance with the provisions of Article 361 paragraph 3 of the Criminal Procedure Law. Article 361 of the Criminal Procedure Law sets out the objectives to be achieved by the seizure of property. The basis for the seizure is that failure to do so in a timely manner may otherwise make it difficult or impossible to resolve property issues or to enforce a potential criminal remedy.[17] Article 927 of the Civil Code describes ownership as the right to possess and use it, obtain all possible benefits from it and dispose of it. Property can be movable or immovable, and registered or unregistered in a public register. In order to preserve a person's property in the state in which it was at the time of the application of procedural measures and to ensure the objectives set out in Article 361 of the Criminal Procedure Law, it should be clear how the seizure of property will take place, taking into account the above-mentioned characteristics of property. It follows from the legal provision of Article 361, paragraph 8 of the Criminal Procedure Law that it shall not be allowed to seize basic necessities objects used by the person. The time limits for the seizure of property are laid down in Article 389 of the Criminal Procedure Law. In line with Article 356, paragraph 5 of the Criminal Procedure Law, the decision on seizure of property imposes the burden of proving the lawful origin of the property on the person. Pursuant to Article 126, paragraph 31 of the Criminal Procedure Law, if the person does not provide credible information regarding the legality of the origin of the property within a specific time period, such person is prohibited from receiving compensation for the harm caused thereto in relation to the restrictions imposed within the criminal proceedings to act with this property.
Special Confiscation of Property
Special confiscation of property is the compulsory alienation of a criminally acquired property (Article 70.11 of the Criminal Law) or object of a criminal offence
(Article 70.12 of the Criminal Law), or the property connected to a criminal offence (Article 70.13 of the Criminal Law) to the State property without compensation. The special confiscation of property is not a criminal punishment. To confiscate property, it has to recognised as criminally acquired.
Article 356, paragraph 1 of the Criminal Procedure Law institutes property may be recognised as criminally acquired by a court ruling that has entered effect,
or by a decision of a prosecutor to terminate criminal proceedings.
Furthermore, Article 356, paragraph 2 of the Criminal Procedure Law prescribes that During pre-trial criminal proceedings, property may also be recognised
as criminally acquired by:
1) a district (city) court decision in accordance with the procedures laid down in Chapter 59 of this Law;
2) a decision of the person directing the proceedings, if, during the pre-trial criminal proceedings, the property in relation to which its owner or lawful
possessor had applied for the loss of property and right to which he or she has proven, by eliminating any doubts, after its finding has been found in the possession of the suspect, accused or third persons or it has been removed therefrom.
Article 356, paragraph 3 of the Criminal Procedure Law adds that after termination of criminal proceedings for reasons other than exoneration, property may be recognised as criminally acquired by a district (city) court ruling in accordance with the procedures laid down for proceedings concerning criminally acquired property.
Proceedings Regarding Criminally Acquired Property
Proceedings regarding criminally acquired property are a special category of case, in which material relating to property that may have been obtained by
crime is extracted from the main criminal case.[18] In other words, the case is not examined on merits, but only the origin of property is considered and if it is found to be criminal, a decision is taken on what to do with it. It is important to highlight that criminal proceedings may be initiated in respect of property referred to in Articles 70.11 - 70.13 of the Criminal Law and Article 4, paragraph 3 of the AML, but no such proceedings are contemplated in respect of other property.
Article 626, paragraph 1 of the Criminal Procedure Law provides that in the interests of solving the financial matters which have come about in pre-trial
criminal proceedings, in timely manner and in the interests of the economy of proceedings, to separate the materials from a criminal case regarding criminally acquired property and to initiate proceedings, if the following cumulative conditions exist:
1) the totality of evidence provides grounds to believe that the property that has been removed or seized is criminally acquired or related to a criminal offence;
2) due to objective reasons, the transferral of the criminal case to court is not possible in the near future (in a reasonable term), or such transferral may cause
substantial unjustified expenses.
In the case law is settled that the decision to initiate proceedings regarding criminally acquired property must state and justify all the reasons for commencing such proceedings and that the court must assess whether the statutory reasons for launching and continuing proceedings regarding criminally acquired property existed.[19] The proceedings regarding criminally acquired property do not deal with the question of criminal prosecution.[20] As the proceedings are limited to the origin of the property, there can be no presumption of a crime being committed. Objective obstacles should not be regarded as circumstances, which are within the control of the person directing the proceedings.[21] Where it is possible to bring a prosecution, it is not reasonable to initiate proceedings regarding criminally acquired property.
Pursuant to Article 627 of the Criminal Procedure Law, if the conditions referred to in Article 626 of the Criminal Procedure Law of this Law exist, the person directing the proceedings shall take a decision to initiate proceedings regarding criminally acquired property and transfer the materials regarding the criminally acquired properties to a court. The person directing the proceedings shall indicate the following in a decision: (1) information regarding facts justifying the relation of the property to a criminal offence or the criminal origin of the property, as well as regarding the materials that have been separated from the criminal case regarding a criminal offence currently in investigation into the case regarding criminally acquired property; (2) the persons that are related to the specific property; (3) the actions with the criminally acquired property that he or she proposes; (4) the victim, if any.
The information provided in the decision of the person directing the proceedings on the facts substantiating the connection of the property with a criminal offence or the criminal origin of the property is essential for the person to be able to effectively exercise his or her rights - to provide explanations, to rebut the allegations made and the applicable presumptions. Consequently, the decision must, therefore, contain clear and detailed information and its reasoning and the request made are the limits of the proceedings.[22] In interpreting the persons that are related to the property of Article 627 of the Criminal Procedure Law, it is necessary to take into account the provisions of Article 628 of the Criminal Procedure Law on informing of persons related to property, from which it follows that the persons related to property are the person from whom the property has been removed or seized, as well as another person who has the right to the specific property.
Replacement of the Confiscated Property and Acquiring
Property of Criminal Origin in Good Faith
In the light of Article 4 Directive of freezing and confiscation of proceeds of crime and Article 70.14, paragraph 1 of the Criminal Law, the value of the object of
the offence can be recovered, if the object of the offence belongs to another person. Article 70.14, paragraph 2 of the Criminal Law provides, if a criminally acquired property has been alienated, destroyed, concealed or disguised, and the confiscation of such property is not possible, the value of the property can be recovered. The same applies for a person who has acquired property in good faith and did not know or ought not to have known that the property has criminal origin and it does not have to be returned to the owner or lawful holder. Moreover, Article 358.1 of the Criminal Procedure Law installs that a person can request replacement of criminally acquired property If a criminally acquired property has been returned to the owner or lawful possessor thereof, the third person who acquired such property, or pledge, in good faith has the right to submit a claim, in accordance with the procedures laid down in the Civil Procedure Law, regarding compensation for the loss, including against an accused or convicted person. If a criminally acquired property is an immovable property that escheats to the State, it shall be left in the ownership of a third person who acquired such property in good faith and whose ownership rights have been corroborated in a public register. The value of such property shall be recovered, in accordance with the procedures laid down in the Civil Procedure Law, for the benefit of the State from the person who committed a criminal offence.
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- [1] Stukāns, J. (2020). Prezumētā noziedzīgi iegūtā manta un procesa par noziedzīgi iegūtu mantu piemērošana. Jurista Vārds. Nr. 22 (1132).
[2] Eiropas Savienības Tiesas 2021.gada 21.oktobra spriedums apvienotajās lietās C-845/19 un C-863/19 37. un 38. punkts.
[3] Krastiņš, U., Liholaja, V. (2018). Krimināllikuma komentāri. Pirmā daļa (I–VIII2 nodaļa). Rīga: Tiesu namu aģentūra. 301 lpp.
[4] Eiropas Savienības Tiesas 2021.gada 21.oktobra spriedums apvienotajās lietās C-845/19 un C-863/19 68.punkts.
[5] Stukāns, J. (2022). Pierādīšanas standarta nošķiršanas jautājumi - “ārpus saprātīgām šaubām” un “iespējamības pārsvars.” Jurista Vārds. Nr. 49 (1263).
[6] Stukāns, J. (2019). Mantas atzīšanas par noziedzīgi iegūtu tiesiskais regulējums un tā piemērošanas problemātika. Promocijas darbs. Rīga. 66. lpp.
[7] Satversmes tiesas 2016. gada 15. novembra spriedums lietā Nr. 2015-25-01, 19. punkts.
[8] Rīgas apgabaltiesas 2021.gada 17.decembra lēmuma lietā Nr.KA04-0959-21/17 19.punkts.
[9] Finanšu Izlūkošanas Dienests. (2021). Noziedzīgi Iegūtu Līdzekļu Legalizācijas Tipoloģijas un Pazīmes. Metodoloģiskais Materiāls. 2.papildinātā redakcija. 5. lpp.
[10] Ibid.
[11] Augstākās tiesas Senāta Krimināllietu departamenta senatoru 2019. gada 19. jūnija kopsapulces lēmums "Par tiesību normu par noziedzīgi iegūtu līdzekļu legalizācijas novēršanu interpretāciju". 2. lpp. the Civil Law,
[12] Rīgas apgabaltiesas 2022.gada 15.decembra lēmuma lietā Nr.KA04-0851-22/1, 19.punkts.
[13] Eiropas Cilvēktiesību Tiesas 1994.gada 22.februārā spriedums lietā Raimondo v. Italy, 29.punkts.
[14] Latvijas Republikas Augstākās tiesas Senāta Administratīvo lietu departamenta 2008.gada 4.marta lēmums lietā Nr. A7023107/6 SKA– 140/2008, 12.punkts.
[15] ECT 10.10.2017. spriedums lietā Lachikhina pret Krieviju (iesnieguma Nr. 38783/07), para. 58; ECT 07.04.2020. spriedums lietā OOO Avrora Maloetazhnoe Stroitelstvo pret Krieviju (iesnieguma Nr. 5738/18), para. 60.
[16] Tieslietu Ministrija. (2022). Rokasgrāmata Rīcībai ar Mantu Kriminālprocesā.. 44.lpp.
[17] Berezins, A. (2014). Aresta uzlikšana mantai kriminālprocesā: mērķi, pamats un iemesli. Jurista Vārds. Nr. 39 (841).o
[18] Kriminālprocesa likuma komentāri. (2019). A daļa. Zinātniska monogrāfija prof. K. Stradas-Rozenbergas zinātniskā redakcijā. Rīga: Latvijas Vēstnesis,.953. lpp.bligation
[19] Augstākās tiesas Senāta 2009.gada 19.februāra lēmumu lietā Nr.SKK-2/2009.
[20] Stukāns, J. (2020). Prezumētā noziedzīgi iegūtā manta un procesa par noziedzīgi iegūtu mantu piemērošana. Jurista Vārds, Nr. 22 (1132).
[21] Ņikifirovs, A. (2022). Mantas konfiskācija noziedzīgi iegūtu līdzekļu legalizācijas lietās. Jurista Vārds. Nr. NR. 22 (1236).e all ot
[22] Rīgas apgabaltiesas 2022.gada 6.decembra lēmuma lietā Nr.KA04-976-22/10, 7.punkts.