Forfeiture of the profits and proceeds derived from drug trafficking: thoughts on future action in Malaysia

Sections

ABSTRACT.
Introduction
General provisions
Special provisions under the Dangerous Drugs Act 1952
Present position
Special legislation on forfeiture
Coverage of Legislation
Special measures
Legislation under special powers of Parliament
Investigations
Secrecy provisions
Investigated person to supply sworn statement of assets
Search and seizure
Authority to oversee the investigation
Forfeiture proceedings and notice to show cause
Presumption
Opportunity to be heard
Forfeiture order
International co-operation

Details

Author: K. C. VOHRAH
Pages: 31 to 41
Creation Date: 1984/01/01

Forfeiture of the profits and proceeds derived from drug trafficking: thoughts on future action in Malaysia

K. C. VOHRAH *
Head, Advisory Division, Attorney General's Chambers, Government of Malaysia, Kuala Lumpur, Malaysia

ABSTRACT.

While the Dangerous Drugs Act 1952 of Malaysia has been amended to take into account changing patterns of drug abuse and trafficking, it lacks provisions for the mandatory forfeiture of proceeds derived from drug trafficking.Nor do the general powers of forfeiture in the Criminal Procedure Code of the country extend to such proceeds.

To meet further changing patterns of drug trafficking involving criminal syndicate leaders, who rarely incriminate themselves through overt and detectable acts, Malaysia has a bill in Parliament the purpose of which, when it becomes law, is to detain without trial, upon cogent evidence, persons who have been associated with any activity relating to or involving drug trafficking, and to prevent them from further committing drug crimes. In addition, serious thinking has been given to the possibility of adopting, within the constraints of the Malaysian Constitution, a law on forfeiture of the proceeds derived from drug trafficking. There are, in this respect, several problems to be resolved, such as the secrecy of bank accounts and taxpayers' returns, which might make it difficult to trace proceeds and to keep track of tainted money being remitted abroad, although it is believed that such problems could be overcome by domestic measures.A more serious problem is the lack of international co-operation for investigations to be carried out outside national borders to trace, seize, freeze and secure the forfeiture of the proceeds of drug crimes located abroad.

Introduction

This article gives a brief account of the existing law on forfeiture of the proceeds of drug crimes in Malaysia, including both general and specific provisions and comments on the inadequacy of the provisions for debarring individuals convicted of drug crimes and their associates from enjoying the fruits of their illegally acquired gains. lt further examines certain legal possibilities open to deal with the proceeds of drug crimes and, for this purpose, sketches out the eclectic approach that might be taken to best suit circumstances in Malaysia and its legal system. lt also highlights the need for international co-operation in this area.

The views expressed in this article are those of the author and do not necessarily reflect the views of the Malaysian Government.

General provisions

ln Malaysia, section 4()7 of the Malaysian Criminal Procedure Code provides a court of law to have the power to make such order as it deems suitable for the custody or disposal of any movable property or document regarding which an offence against the law appears to have been committed or which has been used for the commission of such an offence. Thus under section 407, a court has the power to make an order for forfeiture or confiscation, but this power has to be exercised subject to special provisions relating to forfeiture or confiscation contained in the law under which the conviction was made.

There are several statutes which contain special provisions relating to forfeiture or confiscation. These include the Customs Act 1967; the Excise Act 1976; the Betting Ordinance 1953 ; the Emergency (Essential Powers) Ordinance No. 22 of 1970 (dealing with corrupt practices of any member of the federal or state Government, members of parliament or legislative assemblies and civil servants); and the Dangerous Drugs Act 1952.

Special provisions under the Dangerous Drugs Act 1952

In this Act (Revised Act 234) the relevant provisions relating to forfeiture are contained in section 30, which was amended in 1966 and in 1973.

The Dangerous Drugs Ordinance was passed in 1952 to make further provisions for the regulation of the import, export, manufacture, sale and use of opium and of certain other dangerous drugs and substances. Opium was the major drug of concern and the Ordinance replaced the Opium and Chandu Proclamation 1946. The Proclamation was introduced after the Second World War to replace various state enactments in Peninsular Malaysia dealing with opium and chandu (cooked opium).

Under section 17 (l) of the 1946 Proclamation, all opium and chandu (in respect of which any offence had been committed), together with the utensils, vessels below 100.tonnes, packages, vehicles and conveyances used in connection with such offence, "may be seized and if seized may be forfeited by the Court''. It was, however, mandatory for a court of law to make an order for such forfeiture, if there was no apparent owner of the articles.

Section 30 (l) of the 1952 Ordinance provided for the mandatory forfeiture of drugs and other articles such as syringes, pipes, lamps, utensils, books and documents together with any receptacles or packages in which these articles were found. Conveyances used in the commission of drug offences were to be forfeited unless such an offence had been committed without the knowledge, consent or connivance of the owner [section 30 (2)].

There were many cases of opium smuggling into Peninsular Malaysia and through Malaysia into Singapore. One common feature in most of the cases brought to the courts was that the conveyance used in the commission of a drug offence could not be forfeited, since the owner could show that a given offence had been committed without his knowledge, consent or connivance. l. 2. 3

Present position

In 1973, section 30 of the 1952 Ordinance was amended and modeled upon the forfeiture provisions contained in the Customs Act 1967 (Revised Act 235).

The relevant provisions of section 30 read :

"(30). (l) All dangerous drugs, syringes, pipes, lamps, utensils, books and documents in respect of which any police officer or officer of customs reasonably believes that an offence under this Actor any breach of the restrictions or conditions subject to or upon which any licence, permit or authorization has been granted has been or is being committed, together with any receptacle, package or conveyance or other article in which the same is found or which is reasonably suspected of having been used in the commission of the offence or breach, may be seized by such officer.

"(2) All things liable to seizure under this section, shall be liable to forfeiture.

"(3) . . .

"(4) . . .

"(5) . . .

"(6) An order for the forfeiture or for the release of any thing liable to forfeiture under the provisions of this section shall be made by the Court before which the prosecution with regard thereto has been held, and an order for the forfeiture of the thing shall be made if it improved to the satisfaction of the Court that an offence under this Actor any breach of the restrictions or conditions subject to or upon which any licence,permit or authorization has been granted has been committed and that the thing was thesubject matter of orwas used in the commission of the offence notwithstanding that no person may have been convicted of such offence or breach."

1Loke Tham Chuan v. Public Prosecutor. Malayan Law Journal. 1955, p. 3.

2Patani Motors Co. Ltd. v. Public Prosecutor. Malayan Law Journal. 1957, p. 129.

3Eu Tong Sen Finance Ltd. v. Public Prosecutor. Matayan Law Journal, volume 2, 1965. p. 29.

It should be noted that, at present, the items which can be forfeited are those mentioned in section 30 (l). It contains no specific provision giving power to a court of law to forfeit the proceeds of drug trafficking and the assets of the drug traffickers into which such proceeds have been converted.

Section 30 could, of course, be amended to include mandatory forfeiture of the profits and proceeds from drug trafficking, but the present terms of section 30 call for an offence to be proved. However, in dealing with the proceeds derived from trafficking by major drug traffickers, it is often impossible to establish their guilt because those who are caught and convicted are merely street pedlars, couriers or small-scale distributors.

Special legislation on forfeiture

There is a need for special legislation which can be tied to the Dangerous Drugs Act 1952 and to other laws dealing with drug trafficking. Such legislation is under consideration in Malaysia; the provisions should include forfeiture of the profits and proceeds obtained from any activity relating to or involving drug trafficking. Such a law would have to be in accordance with the Federal Constitution which is the supreme law of the country 4.

Coverage of Legislation

Any law providing for forfeiture should cover not only persons convicted of offences relating to dangerous drugs, but also persons who own or are in possession, control or custody of property acquired as a result of drug trafficking. Such a law must also cover persons associated with the two aforementioned. illegal activities, for example, persons holding illegally acquired property who have not acquired such property as transferees in good faith for adequate consideration.

Most of the persons caught and convicted under the Dangerous Drugs Act 1952 are front-line distributors of dangerous drugs or lower-echelon traffickers of well organized drug syndicates. Evidence is usually available for their conviction since drugs are either found in their possession or they are caught transacting a sale. However, the higher the offenders stand in the hierarchy of the drug syndicates, the harder it is to find sufficient evidence to convict them. Most often, however, through information supplied to the police, customs or drug enforcement officers and through investigations, such people are identifiable, but there is a lack of admissible evidence to convict them in a court of law.

4Article 4(1)of the Federal Constitution.

Special measures

Extraordinary measures are, therefore, needed to immobilize drug traffickers, because, unlike ordinary criminals, their activities lead to more criminal activities and spread misery to a relatively large proportion of the population. On 17 October 1984 in the Malaysian House of Representatives, the Deputy Minister of Home Affairs, in tabling a motion to refer the Dangerous Drugs (Special Preventive Measures) Bill 1984 to a special select committee of the House, said that the Government was introducing the said bill because the drug abuse problem was posing a threat to national security and public order. Statistics from 197() to August 1984 showed that there were 100,731 drug addicts and the number of new cases uncovered was increasing every year. He added that approximately 60 to 70 per cent of criminal cases were related to drugs, while Prison Department statistics showed that 46 per cent of convicts were drug offenders.

There was a need for a special law to be made under the special powers conferred to Parliament under article 149 of the Constitution. The purpose of the proposed bill was to detain without trial persons against whom there was cogent evidence of involvement in activities relating to or involving drug trafficking. The Government had to take preventive measures to detain such persons in order to break up the criminal syndicates.

Legislation under special powers of Parliament

A law on forfeiture of the proceeds derived from drug trafficking should apply to those detained under the provisions of the above-mentioned bill when it becomes law. It would have to be passed by Parliament as a special law under article 149 of the Federal Constitution.A special law on forfeiture under article 149 is required because article 13 of the Constitution enshrines the fundamental principle of protection from deprivation of property. In respect of article 13 the Federal Constitution was amended in 1981 to allow a special law to be adopted by Parliament under the provisions of article 149, which reads as follows:

"149. (l) lf an Act of Parliament recites that action has been taken or threatened by any substantial body of persons, whether inside or outside the Federation,

"(a)to cause, or to cause a substantial number of citizens to fear, organized violence against persons or property; or

"(b)to excite disaffection against the Yang di-Pertuan Agong or any Government in the

Federation; or

"(c)to promote feelings of ill-will and hostility between different races or other classes of the population likely to cause violence; or

"(d)to procure the alteration, otherwise than by lawful means, of anything by law established; or

"(e)which is prejudicial to the maintenance or the functioning of any supply or service to the public or any class of the public in the Federation or any part thereof; or

"(f) which is prejudicial to public order in, or the security of, the Federation or any part thereof,

"any provision of that law designed to stop or prevent that action is valid notwithstanding that it is inconsistent with any of the provisions of Article 5, 9, 10 or 13, or would apart from this Article be outside the legislative power of Parliament; and Article 79 shall not apply to a Bill for such an Act or any amendment to such a Bill.,, (Legislation against subversion, action prejudicial order.)

If the bill for detention, at present being studied by the select committee, becomes law, then, the special law on forfeiture could encompass those detained under the detention law and reach their illegally acquired gains.

Investigations

To forfeit illegally acquired gains they must be shown to be traceable to activities relating to or associated with drug trafficking. Appropriate investigations need to be carried out for this purpose, and the question is, who should carry them out? Police officers are traditionally called in to investigate matters relating to criminal activity. but there would be serious drawbacks in relying solely on them to deal with the type of case under consideration, since bank accounts would have to be investigated, incometax returns scrutinized and land office records inspected. Police officers should be assisted by officers in government service or in agencies with specialized knowledge of the matters being investigated, for example, officers from the Central Bank, to go through the accounts and other records of a bank customer, or an income tax officer to go through the records of a taxpayer.

Secrecy provisions

There are several laws with specific provisions relating to secrecy and prohibiting the disclosure of information to unauthorized persons. Section 36 (l) of the Banking Act 1973 (Act 102) prohibits the Central Bank from enquiring specifically into the affairs of any customer of a bank and imposes a duty upon it to maintain the secrecy of any incidental information relating to the affairs of a customer obtained in the course of any inspection or investigation made by the Central Bank in exercise of its powers under other sections of the Act. Section 36 (2) strengthens the requirement of secrecy with regard to the account of a customer of a bank by imposing a duty of secrecy on bank officers and persons who, by reason of their capacity or office, have access to the records of a bank customer. Section 138 of the Income Tax Act 1967 (Revised Act 53) prohibits the production of any tax returns or other documents for the purposes of the Act or for any other reason except for very limited official purposes. In the view of the author, these provisions should not apply to investigations into records relating to illegally acquired proceeds of drug trafficking.

Investigated person to supply sworn statement of assets

The investigating officer should be authorized to require any person under investigation to furnish a sworn statement enumerating all movable or immovable property belonging to or possessed by him and his agents, and to supply the date on which each item of the property was acquired by way of purchase, gift, bequest or inheritance. The police should also be authorized to require such a person to furnish a sworn statement of any money or other property sent out of Malaysia during a specified period. Failure to supply the required information should be punishable by law.

Search and seizure

In the opinion of the author the investigating officer should also have powers of search and seizure. He should be authorized to seize monies, movable articles, share certificates or other valuable documents where he has evidence that they were illegally acquired from drug trafficking.

Since the extensive investigatory powers required to prosecute a suspect have the potential of being abused, sufficient safeguards must be provided against such an eventuality.

Authority to oversee the investigation

There should be an authority to oversee the exercise of investigatory powers. No investigation under the proposed law should be commenced unless the authority consents to the investigation. The police, customs or drug enforcement officers should in the first instance investigate the suspect either under the Criminal Procedure Code, the Customs Act 1967 or the Dangerous Drugs Act 1952, and evidence so obtained should be made available to the authority to decide whether or not consent should be given for further investigations under the for feature legislation against a particular person. If the suspect,s accounts in a bank need to be examined, the consent of the authority would be required for such examination. Consent would be required for an investigation into the suspect,s tax records with the Department of Inland Revenue.

The question arises as to who should be the authority to determine whether property owned by or in the possession or control of the suspect should be forfeited. Ideally the existing courts should be invested with such powers, but because of the backlog of cases and the relatively cumbersome court procedures, they would not be able to cope expeditiously with such matters.

Assuming that the courts are not chosen for this purpose, a lawyer with judicial or legal experience should sit as chairman of the authority constituted under special legislation. An experienced lawyer would be able to apply the principles set out in the forfeiture law to determine such facts as whether a suspect would fall within one of the categories of persons who could be prosecuted, who would be a bona fide transferee for adequate compensation, who would be trustees and what would be trust properties.

The authority would have to decide whether to commence investigations against a person involved in drug crimes, to consent to the exercise of some of the wider powers to investigate, and to search for and seize the proceeds of such crimes. The authority should also be vested with the power to freeze dealings involving suspected property, thus prohibiting the suspect or any person acting on his be half from disposing of, exporting or otherwise dealing with such property. There should also be a power to order banks, through the Central Bank, not to allow a suspect or his nominee to remit funds abroad.

Forfeiture proceedings and notice to show cause

After the investigating officers have completed their investigation into illegally acquired properties and submitted their report to the authority, the function of the authority would be to determine whether such properties should be forfeited. The authority would have to determine from the report, on a prima facie basis, whether the suspect has a case to answer. If the authority has reason to believe that such properties were illegally acquired, it should issue a notice calling upon the person, within a specified period of time, to indicate the sources of his income, earnings or assets, to provide other relevant evidence and information and to show cause why all or any of such properties should not be declared illegally acquired and forfeited to the Government.

Presumption

Giving such a power to the authority to issue a notice calling upon an incriminated person to explain satisfactorily his possession of pecuniary resources of property disproportionate to his known sources of income would in fact be based on awelltriedpresumptiveprinciplewhich appears in section 17 of the Malaysian Prevention of Corruption Act 1961 (Revised Act 57). This section reads:

"17. (l) In any trial or inquiry by a court into an offence under this Act or into a prescribed offence the fact that an accused person is in possession, for which he cannot satisfactorily account, of pecuniary resources or property disproportionate to his known sources of income, or that he had, at or about the time of the alleged offence, obtained an accretion to his pecuniary resources or property for which he cannot satisfactorily account, may be proved and may be taken into consideration by the court as corroborating the testimony of any witness in the trial or inquiry that the accused person accepted or obtained or agreed to accept or attempted to obtain any gratification and as showing that the gratification was accepted or obtained or agreed to be accepted or attempted to be obtained corruptly as an inducement or reward. (Evidence of pecuniary.)

"(2) An accused person shall, for the purposes of sub-section (l), be deemed to be in possession of resources or property or to have obtained an accretion thereto where the resources or property are held or the accretion is obtained by any other person who, having regard to his relationship to the accused person or to any other circumstances, there is reason to believe is holding the resources or property or has obtained the accretion in trust for or on behalf of or as a gift from the accused person.''

Opportunity to be heard

The incriminated person should be given an opportunity to be heard. The person would have first to respond to the notice to show cause. If the authority is not satisfied with his explanation, an opportunity should be given to the suspect to appear before the authority and adduce evidence. The burden should however be on the person to prove that the properties specified in the notice were not illegally acquired.

Forfeiture order

Where the authority finds that the properties specified in the notice were illegally acquired from drug trafficking and can be so identified, it should then declare that such properties would be forfeited to the Government free from all encumbrances.

Provision must be made to deal with a situation in which only a part of the property specified in the notice is financed from tainted sources. A fine equal to the market value of that part might be imposed, or the whole property could be auctioned off and an amount equal to that part forfeited.

International co-operation

Several problems need to be resolved in this area, in particular the following two problems.

The first relates to the lack of restrictions on foreign exchange dealings in the country. A system needs to be devised whereby remittances abroad could be monitored without disturbing the policy of relatively free dealings in exchange control. It is thought that this problem could be resolved through domestic measures.

The other is a far bigger problem, as was made clear by the Deputy Minister of Home Affairs in a statement referred to earlier in this article.The Deputy Minister noted that an increasing number of persons were involved in dangerous-drugs-trafficking in Malaysia because of the lucrative nature of the business. Such lucrative gains were demonstrated recently by the police in Penang, who found copies of bank records showing that between January and June 1983, 209 million ringgit (approximately $US 90 million) had been remitted by drug syndicates to Hong Kong through New York. Even if legislation on forfeiture existed, the question arises as to what could be done in regard to funds remitted to other countries.

There is a clear need for international co-operation to investigate the movement of tainted money, illegally acquired assets, and bank accounts and accomplices of drug traffickers. Requested Governments should agree to share information about such crimes and to search for and seize documents and other evidence relating to illegally acquired assets. Governments should also co-operate in enforcing orders that prohibit transactions of illegally acquired assets and that require the forfeiture of such assets.

Drug traffickers are organized into powerful illegal syndicates that respect no borders and laws. Special constitutional measures are needed to deal with the syndicates by preventive detention of their leaders and by forfeiture of their illegally acquired gains. However, legal rules and procedures to combat drug crimes can only be effective if all evidence within or outside national borders can be obtained and made available to the courts. Illegally acquired proceeds must be reached by forfeiture orders wherever they are located within the country or abroad. Much, therefore, depends on international co-operation to combat drug syndicates and their nefarious activities.