Confiscation of assets is essentially one of the most effective ways to fight against organized crime as it hits the criminals in the profits of their crimes.

Under Swiss law, the forfeiture of assets that result from a criminal offence, or which are a reward for committing an offence, or are presumed to be controlled by criminal organizations, is governed by articles 58 and 59 of the criminal code (see our previous articles on this topic).

Among the best examples of seizure and inter-cantonal judicial assistance, is the recent Colombian 'de Nasser' situation. The District attorney confirmed last week that the Cantons of Zurich and Vaud will now be allowed to share $ 176 million (SF 213 million) of funds that they ordered to be frozen in accounts at UBS Zurich on suspicion of their originating from the proceeds of Colombian drug trafficking. Back in February 1994, when a Colombian citizen, Mrs de Nasser was arrested while transferring illegal funds in Switzerland, the Zurich District Attorney had ordered the seizure of about 20 accounts opened in her name and those of her relatives. The investigation is now complete and has brought evidence of the relation between the funds and the drug trafficking offence. It is the highest cash seizure and forfeiture in any narcotics case to date, in Switzerland.

In the case of Raul Salinas, the brother of the former President of Mexico, Carlos Salinas, more than $ 100 million were frozen by the Swiss authorities in November 95. Raul Salinas is charged in Mexico for murder and corruption. The Swiss authorities initially launched investigations on information supplied by the US Drug Enforcement Administration. These investigations led the agents to certain bank accounts opened by Raul Salinas in Geneva under a fictitious name. The authorities then arrested Raul Salinas' wife and her brother as they attempted to withdraw money from these accounts. The Swiss arm of the probe has subsequently been widened to include other Mexican nationals, whose Swiss bank accounts have also been frozen, on suspicion of money laundering related to narcotics trafficking. Raul Salinas denies that the origin of the funds is illegitimate. A friend of Salinas, of 30 years standing, Carlos Peralta, head of a major cellular telephone company, has recently confirmed that he gave Salinas $ 50 million to invest in a capital venture fund. Peralta at the same time denies that the $ 50 million could have been a payment for special treatment received during the Salinas administration, hence that they could in fact be the proceeds of corruption. According to him R. Salinas solicited more than 20 prominent Mexican businessmen to invest in this capital venture fund. If this allegation and the subsequent "legitimate" origin of the funds can be proved, the Swiss authorities might be forced to call off the investigation and unfreeze the funds blocked in Salinas's accounts within weeks.

In practice, the forfeiture of funds in Switzerland is subject to a Court Order of Forfeiture. The Order can be appealed against, either by the defendant or by the bank, if the principles of proportion and linkage between the assets seized and the crime are not met. The appeal, however, does not suspend or delay the freezing of the assets.

Usually the frozen assets remain in the bank's possession and continue to be administered by it. The interest revenues generated during the freeze period, are also deemed to be covered by the Order of Forfeiture, and hence are not available to the bank's client either.

As far as international treaties are concerned, both the UN Convention against Drug Trafficking (Vienna 1988) and the Council of Europe Convention related to money laundering, tracking and forfeiture of criminal proceeds (Strasbourg, 1990, ratified by Switzerland in August 1992) rule on the confiscation of the proceeds of crime. In the Vienna Convention, the parties commit to adapt their legislation to facilitate the confiscation of the proceeds of drug trafficking. Each party can provide for the reversal of the burden of proof on the defendant concerning the origin of the funds.

The Strasbourg Convention's scope extends beyond drug trafficking to all kinds of criminal operations and it further sets the rules of international judicial assistance in a very extensive and exhaustive way, which encompasses confiscation. Switzerland ratified it in January 1995.

As far as confiscation is concerned, the Convention made it an obligation on the part of the contracting states to put in place domestic confiscation measures. It also provides, for the first time, an obligation to confiscate proceeds of crime at the request of another contracting State.

Like the articles 58 and 59 of the Swiss Criminal Code, the Convention provides that the assets may be seized when in the hands of a third party to whom they would have been previously transferred and that they comprise not only the proceeds of crimes but also the assets which have served or would serve to commit the crime. However, the judge may only seize and confiscate the assets from innocent third parties if they were obtained in exchange for inadequate consideration and if the seizure does not create excessive hardship for him. Following art. 59 of the SCC, the judge may even order innocent third parties to reimburse the State for all or portion of the value of the assets innocently acquired in the event that the assets have been used or otherwise disposed of by the third party.

The execution of the confiscation may, at the requested party's choice, either be the result of the requiring party's judicial order, or the result of an independent domestic confiscation procedure of the requested party.

Under Swiss law, a request for confiscation may only be refused in the case of one of the following events:

-if the offence or the assets to be confiscated are of low value, or would necessitate disproportionate expenses

-if the confiscation judgement has been pronounced in the absence of the defendant

-if under Swiss law, comparable measures would not be applicable

-if third parties' right of property on the confiscated assets are not respected

-if the fundamental principles relating to the juridical or public order or to the sovereignty or security of the country are not respected.

-if the fundamental rule of "ne bis in idem" is not respected, for instance if in Switzerland or in the requiring country, the case has been judged and led to acquittal or the dismissal of charges, or if a judge has given up applying a sanction, or if the sanction executed in Switzerland is not the same as in the requiring state. etc.

The Convention also prohibits the "fishing expedition" type of search. The request for assistance must mention where the assets are, and their link with the indicted persons and their delicts.

The Convention states that the confiscated assets may be disposed of according to the law of the requested party.

When the confiscated assets are not allocated following a judgement as indemnities to the criminals' identified victims or if they are not returned to the requesting state as the proceeds of a fraud against the state itself, they may become the property of the seizing government. The allocation of the funds between the authorities active in the search and seizure is subject to prior negotiations and finally to a judgement. The specific allocation of the seized funds to the fight against criminality is a matter under intensive discussion in the Cantons concerned. For the citizens, it would represent a way to morally justify the concept of state controlled seizure of the benefits of crimes which many people at the moment are uncomfortable with. At present, the proceeds of confiscation are allocated to the Canton's general budget, not even to the Department of Justice & Police. Recently the Canton of Fribourg, and it is the only one until now, decided to create a budgetary item for the fight against criminality and to apply to its financing a 100% of the proceeds of confiscation of criminal money.

We will give further details in our next articles on the practical procedures to be followed in requests for mutual assistance in criminal matters as well as the bilateral agreements between Switzerland and other countries.

For any further information on this topic, please contact Deloitte & Touche SA, Geneva, Marie-Christine Chalon, Senior Manager in charge of Fraud Prevention and Fraud investigations (41-22-788 02 46), or enter a text search on 'Deloitte and Touche' and 'Business Monitor'.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.