An assessment of legal measures to trace, freeze and confiscate the proceeds of drug crimes in France:the Customs viewpoint

Sections

ABSTRACT
Introduction
Legal provisions: the Customs Code
The possessor
Accomplices and other persons involved
Effect of the sentence
Limitations of legal measures: possible improvements
Sheltering the profits
Checking financial transfers
Exchange controls
Other possible action
Concluding remarks

Details

Author: C. JACQUEMART
Pages: 43 to 50
Creation Date: 1984/01/01

An assessment of legal measures to trace, freeze and confiscate the proceeds of drug crimes in France:the Customs viewpoint

C. JACQUEMART* Deputy-Director for Legal Affairs and Matters in Dispute, General Directorate of Customs and Indirect Duties, Ministry of Finance and Economics Budget, Paris, France

ABSTRACT

Well-organized drug traffickers and their associates use sophisticated methods, such as banking transactions, to conceal their illegally acquired assets under the cloak of quasi-legitimate operations. The Customs Code contains provisions that govern French Customs officials in their fight against drug crimes and the proceeds of such crimes. In any customs offence relating to illicit drugs, legal action is directed against all those associated with the offence. When convincing information is received on drug trafficking and the proceeds derived from it, customs officials are authorized, in conjunction with the police, to make house searches anywhere in the country, even if no court procedure has been initiated.The confiscation of property derived from drug crimes can be ordered only by a court of law. Once sentence has been pronounced, any illegally acquired property that has been seized is confiscated. The Customs check all financial movements, searching for any exchange infractions, and banking secrecy is not allowed to obstruct the performance of this function. Although legal provisions in France have proved effective, the results obtained in respect of confiscation of the proceeds of drug crimes have generally been limited. Insufficient international co-operation seems to a certain extent to account for this unsatisfactory situation and the author pleads for more effective cooperation between Governments in tracing and securing the confiscation of property derived from drug trafficking.

Introduction

In 1983, the Customs seized 23 tonnes of various drugs in France, with a value, based on illicit market prices, of 573 million French francs. This figure gives an idea of the amount of drug trafficking that takes place, even though the seizures unfortunately represent only a small fraction of what is actually consumed. The proceeds from drug traffic.king are enormous. Numerous minor retailers take a percentage of the proceeds, while large amounts go to the big illegal organizations, which derive enormous profits from these activities.

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

The effectiveness of law-enforcement prevention services must be measured not only in terms of the quantity of drugs seized but also in terms of the value of the confiscated proceeds of such crimes and the imposition of fines. In this respect the results are far from satisfactory. The authorities of the countries most affected are showing a growing interest in the problem, which is also of concern to international organizations. ln this article, efforts made by the Customs to combat drug crimes in France are summarized and possibilities for improving the situation are discussed.

Legal provisions: the Customs Code

Confiscation of the profits derived from drug crimes is based on the assumption that such profits, and the persons who have made them, can be identified; but in order to be able to do so, the authorities responsible for drug control must have sufficient powers.

The confiscation of a sum of money derived from drug trafficking can be ordered only by a court of law. This penalty is unlikely to accomplish much unless the funds derived from drug trafficking or belonging to persons suspected of having engaged in it are blocked as soon as the evidence is confirmed. It should also be possible to seize property derived from drug trafficking without delay.

Although the French Customs Code was not specifically formulated to deal with profits from drug trafficking, it nevertheless contains provisions to combat drug crimes.

According to article 64 of the Customs Code, the possession of illicit drugs is a customs offence not only at the point at which the frontier is crossed but also at any other point in the country, and Customs officials are authorized to make house searches without being required to present letters rogatory. The only requirement is that they have sufficient information on which to base their search and that they collaborate with the police, for example when a laboratory or wholesale dealer is uncovered ; action can then be taken even if no court procedure has been initiated.

The perpetrator

It is possible to take swift and effective action against the perpetrator of a customs offence once a drug seizure has been made.

The tax penalties provided for by the Customs Code are high and are calculated on the basis of the illicit market values of the commodity in question (article 414 of the Customs Code).

Furthermore, the means of transport used in connection with the offence can be seized, except in certain very unusual cases (article 434 of the Customs Code). From then on, sums of money in the possession of the offender may be held in order to guarantee the .payment of penalties (article 323 of the Customs Code). If the offender owns property in France, it is likewise possible to take out a court order giving permission for immediate preventive measures to be taken to block the offender's assets, including, of course, his or her bank accounts (article 341 bisof the Customs Code).

The possessor

When an illicit drug has been found concealed in some means of transport at the frontier and the smuggler cannot be identified, the Customs can use their special powers to move against the possessor of the merchandise, who is in this case deemed to be the responsible party (article 392 of the Customs Code). If illicit drugs are discovered on a cargo ship and the proprietor of the vessel does not help to identify the smugglers, the ship may be detained as surety and released only on security, which in a recent case amounted to 9 million francs (the value of 15 kilograms of seized cocaine).

Accomplices and other persons involved

Since the possession of drugs is a customs offence, legal action may involve all persons associated with such an offence. This may apply to persons who have neither transported nor possessed the illicit drugs, for example, those who have provided funds for drug trafficking and, generally speaking, any person who has a direct interest in promoting such traffic, which is a customs offence. Article 399 of the Customs Code specifies that this measure applies to "those who have cooperated in some way in a set of acts committed by a number of individuals acting in concert to defraud, in accordance with a plan of fraud devised to achieve the result pursued in common''.

Such persons are subject to the same penalties as the perpetrators of the offence and the Customs can therefore apply the same measures in respect of their property.

Effect of the sentence

Once sentence has been pronounced, the seizure becomes a confiscation. Furthermore, the fines imposed involve joint liability (articles 406 and 407 of the Customs Code), which means that claims may be lodged against any of the persons involved, for all the fines imposed.

The sentences also provide for imprisonment for debt (articles 382 -407 of the Customs Code), for periods of up to two years. A sentence of imprisonment, which is in addition to penalties involving deprivation of freedom, is cancelled only after payment of the sums due or at least of an amount determined by the Customs according to the circumstances of each individual case.

There is a provision making it possible for the property of traffickers to be forfeited when they have arranged their own insolvency. A joint sentence can in fact be imposed on persons who have participated in arranging such insolvency (articles 326 - 328 of the Customs Code).

Limitations of legal measures: possible improvements

Once drug trafficking has been detected, legal powers provide for the confiscation of the profits derived from such trafficking, but to do so it is necessary for the merchandise to have been seized or for there to have been admission of its import or possession.

Sheltering the profits

The big criminal organizations involved in this type of traffic know what precautions to take. Very often the action of the Customs services results only in the arrest of the smugglers who, if they themselves are addicts, are often as much victims as culprits; they have little money, and since they are only a link in the chain, they are often unable to supply information of use to drug law enforcement officers. They also know how to keep silent.

It is obvious that the objective of the organizers of large-scale drug trafficking is to derive maximum profit from their activities. It is also evident that once these profits have been obtained, they are kept in a safe place and then partly converted into ostensibly legitimate operations or invested in further drug-trafficking operations. Local laundering of illegally acquired assets is possible, but the risks are generally greater than if one or more foreign countries are used to camouflage the origin of the funds.The revenue produced by drug trafficking is mainly in cash: one of the classic means of disposing of it is to transfer the funds to another country, where they can be used or invested without difficulty. The traffickers often derive very sophisticated ways of doing this. Physical transfer can, however, be considered as evidence, if the intention is to evade the national revenue system and transfer funds abroad.

Well-organized drug traffickers and their associates generally use the banking channel to conceal an illegal operation under cover of another seemingly legitimate one. The means used include: marked up invoices; fictitious purchases; a network of companies set up to act as relays for the recycling of merchandise; more or less spurious licences involving the payment of royalties, imaginary investments and similar operations. For this purpose they make use of tax havens, sacrosanct banking secrecy and the fact that international treaties only rarely apply to taxation matters.

Checking financial transfers

It is virtually impossible to combat the laundering of the drug profits if there is no way of checking financial transfers.This does not, however, imply that freedom of exchange should in any way be interfered with.

Suspects must be identified and checks carried out on the movement of funds that are wholely or partly international in character, as and when they appear. In short, the Customs must ensure that the frontier, while hindering the drug traffickers, does not at the same time guarantee impunity for the profits derived from such trafficking.

The United States of America has adopted verification measures identical to those used in exchange controls for the detection of large-scale movements of funds abroad. In recent years, the United States has carried out operations involving massive resources to detect movements of funds that might be related to drug trafficking. It appeared that the profits from drug crimes were being laundered and then ploughed back into lawful remunerative activities in the home country through companies located in countries where the influx of capital was welcomed.

Exchange controls

The Customs in France are responsible for keeping track of all financial movements, regardless of whether or not the transfer of merchandise is involved. Banking secrecy cannot be invoked and the search for exchange infractions is carried on within the legal framework provided for in general terms by the Customs Code. Article 459 of the Code provides for very severe penalties for exchange infractions, including confiscation of the capital, fines ranging from one to five times the amount involved, and from one to five years' imprisonment.

Obviously, methods are still being uncovered for concealing the profits derived from drug trafficking. Experience shows that, except in flagrant cases, which are rare, effective action in this area is not possible without the co-operation of the authorities in the other countries concerned.

Other possible action

Domestic measures

No reference has yet been made to the possibility of confiscating the profits of drug trafficking obtained within the country that cannot be proved to derive directly from drug crimes either because they have been laundered and recycled or because they have escaped the notice of the various detection and prevention agencies. ln the opinion of the author, some of these profits could be traced and confiscated by pooling the resources of various administrations and those of the police services. The latter are in the best position to ferret out suspected drug criminals, and could advise the tax and customs agencies, enabling them to use all legal means at their disposal to tackle the problem. The laundering and recycling of profits is often focused on certain well-defined professions. In France, some tracing operations have been carried out with very satisfactory results. The results might be even better if citizens were required to prove that their assets came from legitimate sources. lt should be pointed out, however. that one means of laundering capital is to invest in private gambling clubs or casinos, and that supervision of these establishments, which are often located abroad, is an extremely difficult matter.

Although powerful legal means for confiscating the profits from drug trafficking are available, the number of such confiscations in France are very low compared with the amount of drugs involved.

ln conclusion French legal provisions may be said to act in the main as a deterrent. Traffickers know that the risks are great if they are arrested in France. The police and Customs administrations are effective when it comes to frontier checks and to searches over the territory as a whole. Banking secrecy cannot be used as a means of protection. Exchange control is a formidable weapon. Joint operations with the tax administration also lead in some cases to the imposition of taxes on illicitly gained assets, even if the profits have previously been laundered.

International measures

The less than satisfactory results obtained in respect of confiscation of the profits of drug crimes are to a certain extent a consequence of insufficient international co-operation.

Governments are in general agreement to help each other in seizing drugs and taking action against smugglers. In this regard, practical cooperation exists and is achieved without formalities.

lt is quite a different matter when information is needed on the possessors of capital, or on investments made in other countries by residents who are suspected of involvement in drug crimes. In such cases, "tax havens'' surface, which are primarily for crooks, receivers and others who profit from criminal activities

. lt is desirable for every country to have suitable legal provisions and the means of effectively enforcing them; there should also be international cooperation in investigations and in legal procedures for detecting illegal movements of capital. Questions of national sovereignty and banking secrecy should not be allowed to stand in the.way of co-operation, any more than medical secrecy and national sovereignty should obstruct efforts to control epidemics. Banking secrecy should not protect defrauders against the interests of the country in which they live and commit the offences. Banking secrecy was established to protect honest citizens and to ensure the confidentiality of dealings undertaken in good faith; so-called banking "codes of honour'' or measures that provided for co-operation when funds were found to be owned by a criminal would be hypocritical, in view of the virtual impossibility of discovering the true owners of illegally acquired funds or property.

It can thus be seen that much remains to be done at the international level to make it possible to trace and confiscate the profits derived from drug crimes.

Concluding remarks

The following legal measures are suggested to combat drug crimes and the proceeds deriving from them:

  1. At the national level:

    1. The possession of illegal drugs should be made a punishable

    2. Investigatory powers, especially the power to make house searches, should be vested in the competent authorities;

    3. Any funds discovered to have been derived from drug trafficking should be seized and blocked pending confiscation, to be decided by a court of law;

    4. High tax penalties should be imposed, calculated on the basis of the value of the drugs seized (or lost, in the event of a suspect having confessed to earlier operations);

    5. The competent authorities should have the right to seize the means of transport used to smuggle drugs;

    6. If it has not been possible to determine the identity of the smuggler, the possesser should be held responsible for paying the large amounts required to secure the return of the means used to transport the drugs, especially if cargo ships are involved;

    7. Measures should be adopted to secure the right to retain the property of persons being prosecuted;

    8. Penal measures should be applied against persons associated with the smuggling offence;

    9. Joint liability should be invoked for the payment of fines;

    10. Failure to pay the fine should be punishable by imprisonment;

    11. Controls should be imposed on the movement of funds;

    12. Banking secrecy should not be an obstacle to the investigation of drug crimes;

    13. Proof of the source of assets suspected to be illegally obtained should be required;

    14. Measures should be adopted to circumvent arranged insolvency.

  2. At the international level:

    1. The measures set out by international drug control treaties should be expanded to facilitate the tracing, freezing and confiscation of the proceeds and profits of drug crimes. To this end, co-operation between countries within the international organizations concerned should be rendered more effective;

    2. Countries should afford each other administrative and legal assistance in tax and blanking matters.

In conclusion, it should be stressed that it is mot sufficient to have appropriate laws; effective enforcement of the existing laws is also important and this calls for both human and financial resources.