Forfeiture Goes Offshoree
by Robert E. Bauman, JD*
FEAR Foundation Journal, Vol. 1 No. 1
posted on FEAR website 4/10/2004
(c) 2003 FEAR Foundation. Reprinting for distribution without charge, and republication permitted if article is printed in its entirety without editing, and attribution is given to FEAR Foundation Journal, Forfeiture Endangers American Rights Foundation, 20 Sunnyside Suite A-419, Mill Valley, CA 94941.
*Mr. Bauman, who is legal counsel to the Sovereign Society, served as a member of the U.S. House of Representatives (R-Md) from 1973 to 1981. He is an author and lecturer on many aspects of wealth protection. A member of the District of Columbia Bar, he holds a juris doctor degree from the Law Center of Georgetown University (1964) and a degree in international relations from the Georgetown University School of Foreign Service (1959). He served on the board of Forfeiture Endangers American Rights from 1996 to 2002.
The Civil Asset Reform Act of 2000 (CAFRA), which took effect on August 23, 2000, would never have become law if it were not for some last minute legislative bargaining between its chief sponsor, Rep. Henry Hyde (R-Ill) and representatives of the US Department of Justice.
Days before Congress finally acted on April 11, Rep. Hyde made known he would rather see no bill passed than one that he considered a sham. Hyde, chairman of the House Judiciary Committee, has been the forceful leader of forfeiture reform for over six years in the Congress. It was he who put together the unusual coalition of liberals and conservatives that passed the bill in the House with more than enough votes to override a presidential veto.
That overwhelming House vote and that unique coalition forced the White House and the Department of Justice to back down from what had been complete opposition to any bill. But in the final analysis, forfeiture reform advocates are questioning whether this was really a "reform" victory.
One series of DOJ demands which finally made its way into the law (Public Law 106-185) adds ominous new powers to the federal government forfeiture program. Title 18 USC sec. 986(d) in effect forces a person with US assets under government claim of civil forfeiture to choose between waiving offshore secrecy laws governing any "material" information about their offshore assets or finances. Failing that, the person losses all right and claim to the US based property that is the subject of the forfeiture action. Hardly a quid pro quo!
The DOJ claims that this provision is aimed at reducing the secrecy of offshore tax haven nations that insist on strict financial privacy as a matter of law. Of course, that very guarantee of privacy is a major attraction for offshore investors, bank account holders and others who are not engaged in any illegal conduct. That it also attracts criminals is undoubtedly true.
In another expansion of offshore forfeiture powers, the law adopts the theory known as "fugitive disentitlement." That will permit the US government to "disallow" a person from claiming any interest in property involved in a civil forfeiture proceeding if that person flees the US to avoid prosecution, or if they refuse to return to the US to face charges.
The new law also allows the government to seize immediately any assets located in the US owned by a foreign person that are the subject of a foreign court forfeiture judgment. The DOJ claims this is to prevent "emptying bank accounts" within an arrest by foreign authorities occurs.
Taken together, these provisions greatly extend government forfeiture jurisdiction beyond the national borders. The demand for forced waiver of offshore financial privacy laws will undoubtedly be used to pressure prospective defendants into surrendering financial information, leading to even further forfeiture actions.
The DOJ in recent years has had a mixed record of success in convincing US courts to extend forfeiture to offshore bank accounts and other foreign assets claimed by the government. It appears they now have a new and potentially powerful tool to effect what the courts have denied.
By any measure, that’s hardly reform, but rather an unhealthy expansion of forfeiture powers.
TEXT OF SECTION:
The ‘‘Civil Asset Forfeiture Reform Act of 2000’’ - effective date: August 23, 2000
Adds new: Title 18 USC sec. 986(d) as follows:
SEC. 17. ACCESS TO RECORDS IN BANK SECRECY JURISDICTIONS.
Section 986 of title 18, United States Code, is amended by adding at the end the following:
(d) ACCESS TO RECORDS IN BANK SECRECY JURISDICTIONS.–
(1) IN GENERAL.–In any civil forfeiture case, or in any ancillary proceeding in any criminal forfeiture case governed by section 413(n) of the Controlled Substances Act (21 U.S.C.
853(n)), in which–
(A) financial records located in a foreign country may be material–
(i) to any claim or to the ability of the Government to respond to such claim; or
(ii) in a civil forfeiture case, to the ability of the Government to establish the forfeitability of the property; and
(B) it is within the capacity of the claimant to waive the claimant’s rights under applicable financial secrecy laws, or to obtain the records so that such records can be made available notwithstanding such secrecy laws, the refusal of the claimant to provide the records in response to a discovery request or to take the action necessary otherwise to make the records available shall be grounds for judicial sanctions, up to and including dismissal of the claim with prejudice.
PRIVILEGE.–This subsection shall not affect
right of the claimant to refuse production on the basis of any
privilege guaranteed by the Constitution of the United States or any
other provision of Federal law.’’