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Management of seized and forfeited assets

/ 10:56 PM August 28, 2013

Last week, I was a speaker in a roundtable, organized by the Philippine Judicial Academy, on the topic “Knowledge Sharing on Laws, Rules and Trends on Asset Forfeiture and Management.” I was assigned to speak on “Emerging Trends and Jurisprudence” in relation to asset forfeiture and management in the Philippines.

The topic is timely in light of the scandal relating to the Priority Development Assistance Fund (PDAF), popularly known as the pork barrel fund, which may eventually result in the seizure and forfeiture of assets of public officials and private individuals who may have been involved in the misuse of the fund. Aside from the PDAF, good examples are the PCGG-sequestered assets, and properties frozen by the Anti-Money Laundering Council.

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My presentation covered three areas—relevant Philippine jurisprudence, emerging trend in the Philippines and international best practices that can be adopted to improve the existing legal framework and organizational infrastructure of asset forfeiture and management in the Philippines.

One possible improvement is the establishment of a central Philippine assets management authority.  In the United States, for example, the US Marshal Services—under the US Department of Justice—acts as a central asset management authority for seized and forfeited assets.  The same holds true in other advanced jurisdictions like Canada and the United Kingdom, which have their respective asset management systems.  The common goal of these systems is to preserve and conserve seized and forfeited assets to prevent their dissipation and wastage and, more importantly, to maximize their value. One can just imagine the billions of pesos that could have been saved from the dissipation or wastage of PCGG-sequestered assets if such a system had been in place.  No less than former Senate President Juan Ponce Enrile once called for the accounting of assets sequestered by previous PCGG administrations.

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In the Philippines, to create an effective asset forfeiture system, there may be a need for a new legislation creating the proper organizational infrastructure “to cope with the myriad practical issues that occur when handling seized and forfeited property, including custody, safe storage, management, and disposition of such property.” This central body may be tucked into the existing departmental framework but it may also be an entirely new government agency. Either way, the new system should establish the qualifications of the asset managers in the said national body (i.e., expertise or familiarity with asset management, investments and finance); identify and delineate the responsibilities and duties of the asset managers (e.g., fiduciary duty to maintain and preserve assets), and expressly empower them to take all steps necessary to properly manage the assets, including the ability to hire experts and contractors, lease facilities and invest. Best practices also suggests that the system must also provide “pre-seizure planning, maintaining and disposing of assets in a prompt and efficient manner” and “mechanisms to ensure predictable, continued and adequate financing for the operation of an effective forfeiture program and limit political interference in asset forfeiture activities.”

In the G-8 Lyon/Roma Group Criminal Legal Affairs Subgroup publication “G8 Best Practices for the Administration of Seized Assets,” the G-8 identified certain principles to ensure the “integrity, accountability, and transparency” in a forfeiture program which may be helpful in drafting the future legislation.  These principles include yearly examination by independent auditors, clear separation of duties to avoid the concentration of control over all aspects of managing seized and forfeited assets in just one person, and that no one should receive a personal benefit or use seized property for personal purposes. The Organization of American States has also issued model regulations that suggest that “government officials should not use property that has been seized but not yet forfeited” to avoid damage or reduction in the value of the property.

Finally, both the IBRD-WB and G-8 publications suggest that a “forfeiture fund” be set up to “ensure predictable, continued, and adequate financing for the operation of an effective forfeiture program.”

Surely, asset seizures and forfeiture proceedings require a lot of manpower and resources in order to be effective. At the very least, a central asset management authority would require serious funding commitment from the government.  Best practices suggest that a forfeiture fund wherein part of the proceeds from the recovered assets are earmarked to pay for the expenses of the asset forfeiture program. This “allows the asset confiscation/forfeiture program to be self-sustaining” and ensures the continuity of such a program while reducing its reliance on the already limited funds in the national coffers. (See Id., G-8 Publication.)  More often than not, a forfeiture fund generates a surplus which may be remitted to the National Treasury to be made part of the general appropriations act.

The emerging trend in the Philippines has been to strengthen the asset forfeiture system, as exemplified by the recent amendments to the Anti-Money Laundering Act. However, as discussed above, there is a lot of green field to expand and improve, especially in the management of forfeited and seized assets. Only with serious commitment can we truly breathe life into the maxim “Crime does not pay.”

(The author, former president and CEO of the Philippine Stock Exchange, is the co-managing partner and head of the corporate and special projects department of ACCRALAW.  The views expressed in this column are strictly his and not of ACCRALAW. He may be contacted at [email protected])

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TAGS: assets, Business, Francis Lim, point of law, Seized and forfeited assets
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