News & Press: Asset Recovery

Too much power, too little oversight in seizing assets? US lawmakers push for reform

Thursday, May 14, 2015  
Posted by: Brian Monroe
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From the highest echelons of the US government down to state legislators, a growing chorus of voices is calling for reform of the civil forfeiture powers available to US law enforcement after a string of allegedly profit-driven abuses.

At issue is a legal dynamic in which law enforcement agents – local, state and federal – can seize assets they believe by a preponderance of the evidence are linked to criminal activity. This civil forfeiture standard is substantially lower than the one required in the criminal context, and targets the assets rather than the person who owns them.

In essence, civil asset forfeiture is used against assets, rather than individuals, that appear to be guilty.

Prosecutors and law enforcement in the US have long wielded civil asset forfeiture as a useful legal weapon against drug traffickers, fraudsters and other financial criminals, often employing forfeiture against assets that might otherwise be liquidated or squirreled away into offshore secrecy havens.

More recently, the Justice Department has used civil forfeiture to take aim at property and funds of corrupt government officials through its Kleptocracy Asset Recovery Initiative, seizing accounts tied to the disgraced ex-president of South Korea and homes owned by relatives of an African dictator, among other cases.

Despite these successes, a darker side of civil asset forfeiture has appeared in a growing number of cases.

Civil forfeiture horror stories have become commonplace in regional and national media – an individual left penniless after having their life savings seized while moving to a new state, or a small business threatened with closure after their accounts were frozen and forfeited for structuring transactions, despite a lack of alleged illicit activity behind the funds.

The fallout from such cases has led a coalition of strange bedfellows to push for curbs on when and how civil forfeiture can be carried out.

“While people have been talking about asset forfeiture issues for a while, what is new is that currently at the state and federal levels, people finally want to do something about it,” said John Malcolm, a former federal prosecutor who is now a senior legal fellow and director at the Heritage Foundation, a conservative Washington, D.C.-based think tank.

Advocacy groups ranging from libertarian non-profits to the American Civil Liberties Union have taken up the cause, along with members of Congress from both parties and lawmakers in nearly a dozen states.

Yet many in the law enforcement community warn that the zeal for reform could imperil an essential tool in financial crime cases, raising questions about what constitutes the “right” way to conduct civil forfeiture.

Equitable sharing, administrative forfeiture trigger outcry

Civil asset forfeitures have become a critical and growing source of revenue for law enforcement across the nation and have more than doubled in recent years. Net forfeitures rose to $4.2 billion in 2012, up from $1.7 billion in the prior year, according to the US Department of Justice.

When the assets are taken, local authorities can keep as much as 80 percent of the value of the funds or goods for themselves under “equitable sharing” provisions.

Critics believe it’s an incentive to seize nearly any funds found, rather than doing so in the process of an arrest. Some police trainers discussing civil forfeiture have allegedly said departments can just “go shopping.”

Part and parcel of the problem is that when cash or property are taken by police, the person then must prove the funds are not tied to an alleged illicit act, which in many cases is too costly to do.

Watchdog and media reports have described cases where officers were requiring individuals to sign roadside waivers to take their cash, even when they did not have enough evidence to arrest them, in what are termed “administrative forfeiture” proceedings.

Conversely, though, powerful law enforcement groups such as the Fraternal Order of Police believe that while some tweaks could be made to civil forfeiture procedures, the practice should not be abolished wholesale.

They argue such a move may harm the ability of investigators to go after criminals and terrorists because budgets are already constrained and shrinking.

State forfeiture laws and the process of “equitable sharing” have been in place since the early 80s. What has changed recently is a sense that various investigative agencies are being tempted to abuse these powers, Malcolm said.

With power, comes responsibility

While it can be difficult to know when is, and is not, the right time to make a seizure of cash or property during a traffic stop or when analyzing seemingly structured bank transactions, there can be several steps a local or federal investigator can take to ensure they make decisions that hew closer to the spirit as well as the letter of forfeiture laws.

According to Malcolm, these include:

  • Thematic review: The officer should ask him or herself, if no money was involved in the action, would this be the highest and best use of their time and the resources of the department. Are they truly going after “the worst people that are a threat to public safety, violent or engaged in white collar crime,” Malcolm said.
  • True stories: When finding, say, wads of cash in a car, ask more questions to find out if the person truly is a drug running suspect or “is someone traveling to a new life in another state,” or is honestly going to buy a car or make a down payment on a property. Call other witnesses or check online auctions if the person can provide corroborating evidence the cash is for a legitimate purpose.
  • Arrest first: If the police officer is unsure if the funds a person has comes from an illicit activity, don’t just seize the money and let the person leave. Arrest the individual and start a formal forfeiture proceeding. Requiring someone to give up their assets, or sign them away on the side of the road, is an “unfair and dangerous practice,” Malcolm said.
  • Faulty structures: If an agent sees a business structuring, don’t seize first and ask questions later. There could be legitimate reasons why the person is depositing funds just below reporting thresholds and they are not part of a criminal enterprise. For instance, maybe they were given incorrect information by a teller and don’t want to take extra time filling out paperwork, but don’t know that it is a crime.
  • Risk rating: Call up or visit the person and business and gauge their financial crime risk, similar to a bank in engaging in customer due diligence and risk assessment procedures. If the person or business is low risk, the business has been around for years, or generations, and the person can explain that reason why they transact in cash, maybe they can’t afford credit card processing facilities, then the agent should reconsider seizing the money.

Congressional heavyweights, states weigh in

Currently, several influential members of Congress, including Republican Senator Chuck Grassley, Chairman of the Senate Judiciary Committee and ranking member, Democratic Vermont Senator Patrick Leahy, have called for civil asset forfeiture reform in terms of how the funds are obtained as well as more oversight on how they are spent, fearing government waste.

Nearly two dozen states have either formally changed their laws or are in the process of considering how that could be done. Approaches vary, with some requiring that seized funds go into a general fund, or are earmarked for education or victim compensation.

Some have also raised the standard for forfeiture to beyond a reasonable doubt. In addition, if someone’s home could be taken, the issue must go before a judge or jury.

So far, Minnesota, New Mexico and Washington, D.C. have passed comprehensive forfeiture reform, while Georgia and Utah have enacted reporting requirements aimed at “increasing transparency on the use of forfeiture,” while still others, such as California, Colorado and Nevada are considering similar moves,  according to the Arlington, VA-based Institute for Justice, a non-profit, libertarian law firm focused on civil liberties issues.

The scrutiny of civil forfeiture laws is also part of a larger trend of Congress and watchdog groups looking at a wide range of prosecutorial practices, Malcolm said.

“There is an interesting right/left coalition going on looking at the many aspects of the criminal justice system,” Malcolm said. “Just as attention is being given to sentencing reform, juvenile justice reform, alternatives to incarceration, drug courts and mental health courses, as a collateral consequence, [legislators and others] are also taking a hard look at civil asset forfeiture.”

That is chiefly due to a “fair number of documented cases of abuse,” he said. “Most law enforcement officers are straight shooters and are trying to do a good job and act ethically. But the incentives are so great, that it’s clear it’s not just a few bad apples. There are whole jurisdictions that have bought into this mode of forfeiture. That speaks to a larger, systematic problem that needs to be addressed.”

The examples in recent years highlighted by news outlets and watchdog groups are manifold, including: federal authorities seizing the funds to a decades old dairy farm due to structuring, and similar stories for several small businesses and restaurants, funds and property taken from cars at road side stops, even without enough evidence to arrest and even individuals losing their hotels or homes because someone on the property sold drugs.

Several steps needed to bring balance to the forfeiture

The IJ admits that “legitimate law-enforcement objectives can be satisfied through criminal forfeiture.” But short of abolishing civil forfeiture, advocacy groups, like the IJ, are pushing for federal reform measures like:

  • Profit center: eliminate the profit incentive by requiring forfeiture proceeds be deposited into the Treasury’s General Fund or another neutral fund, not the Justice Department’s Assets Forfeiture Fund or the Treasury Forfeiture Fund.
  • Not equitable: abolish the Equitable Sharing Program so local police funds can’t go directly back to the precinct doing the seizing.
  • Higher standards: increase the burden of proof on the government to prove that property is subject to forfeiture to at least clear and convincing evidence.
  • Innocent first: restore the presumption of innocence by placing the burden to prove actual knowledge of the criminal activity on the government.
  • Independent counsel: provide counsel for the indigent, or those who don’t have funds to fight the seizure.
  • Getting heard: provide for a prompt post-seizure hearing for seizures of currency.
  • Criminal minds: include a mens rea, or criminal intent, requirement to make clear that it is only willfully structuring financial transactions in order to evade currency reporting that is a crime.

Before leaving office last month, former Attorney General Eric Holder in March released guidance on civil asset forfeiture, restricting its use on structuring cases so that only the more serious cases should be engaged to better ensure that innocent individuals and business owners with no knowledge of structuring laws don’t get snared.

But that mandate does not have the power of a law, which can’t be rolled back in future administrations.

Changes to forfeiture laws are likely to come and can still be orchestrated to give ammunition to law enforcement to cripple the financial networks of criminals while ensuring innocent citizens don’t get caught in the crossfire.

“Our goal is to see civil forfeiture get abolished,” said Eapen Thampy, executive director of Americans for Forfeiture Reform, an advocacy group to reform forfeiture laws. “Civil forfeiture is such a unique issue and the abuses are so compelling. There is significant momentum for reform at the federal and state levels.”

Barring abolition, the group supports the efforts of some states to rein in civil forfeiture powers, while not cutting law enforcement off at the knees, he said.

“The reforms in some states to send seized revenues to a general fund or enhance the burden of proof balance the playing field between citizens and government actions. In addition, in the courts, they are beginning to take a more skeptical eye to the legality and constitutionality of asset forfeiture.” 


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