/ Social Justice, Fall 2001 v28 i3 p121(32)
License to loot? A critique of follow-the-money methods in crime control policy. R.T. Naylor.
Full Text: COPYRIGHT 2001 Crime and Social Justice Associates
Taken to the Cleaners?
OVER THE LAST 1.5 YEARS, THERE HAS BEEN A QUIET REVOLUTION IN THE THEORY and practice of law enforcement. Instead of simply closing rackets that generate illegal income, the central objective has become to attack the flow of criminal profits after they have been earned. The justification is that taking away assets accumulated by criminals simultaneously removes the motive (profit) and the means (operating capital) to commit further crimes.
Prodded on first by the U.S., then by the Financial Action Task Force of the OECD, and more recently by the United Nations, the pursuit of the "proceeds of crime" has been elevated to the status of a Crusade. A new crime -- money laundering -- has been put on the books of many countries. Various new reporting requirements have been imposed on financial institutions, which have been forcibly recruited into the struggle. In addition, law enforcement agencies now host special units responsible for arresting not malefactors, but bank accounts, investment portfolios, houses, cars, and even Rolex watches. These initiatives are closely related. Anti-money-laundering regulations require detailed information that helps to create a paper trail to aid tracing and seizing criminal money. They also create new offenses to justify such seizures. (1)
To various degrees in various places, the new laws have undermined traditional presumptions in favor of financial privacy, muddled civil and criminal procedures, and opened previously confidential tax records to police probes. Particularly, though not exclusively, in the U.S. these laws have been accused of reversing the burden of proof, smearing citizens with the taint of criminality without benefit of trial, and converting police forces into self-financing bounty-hunting organizations.
Some might argue that this is a necessary and justifiable response to an overarching social evil. Some might agree in principle that such a strategy can help to deal with a very serious problem, but criticize its worst abuses. However, some might suggest that the entire exercise is simply insane.
Clearly, these new legal initiatives are powerful weapons. It is reasonable to ask that they not be deployed unless and until their need has been unambiguously established, their objectives clearly delineated, and the public well informed of their actual (as distinct from nominal) purposes and of any "collateral damage" their use might entail. It should be convincingly demonstrated that any perceived failure of existing methods of crime control results from deficiencies of existing laws, rather than from deficiencies in the application of existing laws, that a crisis of sufficient order of magnitude exists to require radical alternatives, and that such alternatives have a good chance of being effective in rectifying those deficiencies.
Despite the rapid spread of anti-money-laundering regulations and asset-forfeiture laws across the world, no one really knows how much criminal income and wealth actually exists, how illegal gains are distributed, or how (if at all) deleterious their impact on legitimate society really is. No one can say with any confidence what impact a follow-the-money strategy might have on its intended target, though there is more clarity regarding some of its pernicious side effects.
A Solution in Search of a Problem
Contemporary laws that facilitate the confiscation of criminally derived assets are of two main types. Some involve in personam procedures, in which an individual must be charged with a crime and that crime proven beyond a reasonable doubt, before specified property, also proven on criminal criteria to be the proceeds of that crime, can be seized. Standard safeguards -- presumption of innocence, right to counsel, and protection against double jeopardy or disproportionate punishment -- apply. Other laws involve in rem procedures, whereby property can be seized if it can be established by civil criteria that the property was the proceeds of or means to commit a crime. Sometimes, as currently in England or Canada, property can be frozen in advance of a trial and, if an individual is found guilty under criminal criteria, that property can be forfeited if it is judged, using civil criteria, that it is likely the proceeds of a crime. (2) However, in the more extreme versions, as in the U.S. today, there is no need to charge the owner with, let alone prove, a crime. Once probable cause to freeze property is established, the burden of proof is shifted onto the owner, who has no protection against double jeopardy or disproportionate punishment. (3)
Although both criminal and civil forfeiture have only recently assumed a prominent place in the roster of modern law enforcement methods, they have deep historical roots. The obvious precursor of civil forfeiture is the medieval notion of deodand ("gift to God"). If an object (anything from a runaway horse to a flying ax-blade) was deemed to have done injury (usually fatal) to a person, the object itself was adjudged guilty and therefore subject to forfeit. Originally, the guilty property was destroyed in elaborate rituals, or used for compensation to kinsmen of the afflicted party. (4) Later the forfeited property began to be appropriated by the Crown. But, whatever the fate of the property, from very early times there were protests that the procedure really involved punishment of the owner without benefit of trial. Nonetheless, the fiction was maintained that property rather than a person was guilty, and that the procedure was accordingly remedial rather than punitive.
The spiritual antecedents of today's criminal forfeiture can also be found in early modern Europe. Anyone found guilty of treason was stripped of chattels and estate; the first became Crown property and the second reverted to the individual's liege lord. Later, that process was applied to all convicted felons, with the number of felony offenses rising pari passu with the Crown's need for revenue. Unlike modern criminal forfeiture, there was no need to establish any relationship between a specific crime and the lost property. A felony conviction could lead to loss of all chattels and estates, even those of completely legitimate origin.
In Britain, a third method by which assets could be seized in some ways would prove more influential in shaping modern proceeds-of-crime methodologies. The tasks of enforcing the Navigation Acts (which regulated trade within the British Empire) and of assuring collection of the customs duties and excise taxes were assigned to Vice-Admiralty and Exchequer courts. Ship captains were expected to prove that all taxes had been paid. If a ship and/or cargo lacked proper customs stamps or tax receipts, it could be impounded. Of course, the actual administration was not so tidy. Customs officials were rewarded with a share from confiscated cargoes. Corrupt officers collected kickbacks from merchants who sought to evade taxes, employed networks of paid informants, and falsified the value of seized inventories. (5) These abuses aside, the application of in rem procedures in this context seemed reasonable enough.
Deodands eventually died out and were formally abolished in Britain in the mid-l9th century. Forfeiture of estate, already de facto abandoned, was legally repealed in 1870, though it was maintained in cases of "outlawry" (i.e., fleeing justice) for some decades further. What was left in Britain (and its colonies) was the device of enforcing tax law through in rem procedures in Exchequer Court. It would be left to Yankee ingenuity many decades later to combine the superstitious spirit of deodands, the moral absolutism of forfeiture of estate, and administrative procedures created originally for fiscal purposes to give birth to the modern principles and practice of asset forfeiture.
The wave of Puritanism that swept North America in the early 20th century was a compound of many elements: a revolt by small-town and rural America against the decadence of the big cities, WASP racism against immigrants who were associated with offensive behavior (Chinese with opiate use, Irish with whiskey, "Hindoos" or Mexicans with marijuana), the flexing of muscle by an emerging middle-class feminist movement that saw male vices as a threat to family values, and an emerging political reform movement denouncing saloons (which functioned as working men's political clubs) as centers of vote-buying and election-rigging. The consequence was a concerted effort to criminalize personal vice. Gambling, buying sex, using recreational drugs, and even the consumption of alcohol were criminalized; if they were already criminal offenses, the laws were more systematically enforced. No longer would cities be permitted to host "red light districts," in which otherwise legitimate citizens could temporarily sate their appet ites before returning to a world of respectability. Prominent industrialists and their yes-men from the economics profession, who saw in the curbing of personal vice a means of reducing workplace absenteeism and therefore raising productivity and profit, cheered all this on. (6)
In response, there was a dramatic change in the direction of law enforcement. For the first time, the main thrust of police action shifted from combating predatory offenses (robbery, extortion, embezzlement, and like practices at the expense of an unwilling public) to attacking market-based crimes (in which underground entrepreneurs attempted to service the forbidden consumption needs of a complicit public). Though both are simply lumped together in the criminal code, there is a profound difference between the two in economic nature and therefore in the appropriate attitude of the authorities to the profits derived therefrom.
A predatory crime leads to the forcible or fraudulent transfer of property that must be restored to the rightful owner when the crime is solved. A market-based crime, however, produces not misappropriated property, but income earned by selling to a willing consumer. (7) The focus of crime control also shifted from countering actions against the public (where the afflicted public would fully support remedial action). Instead, it became suppressing actions in which the public appeared in the same role (willing customer) as it did with respect to legitimate business, and in which the methods of assuring customer satisfaction (free-market exchange) were basically no different from the behavior of legitimate businesses.
Because there is no definable victim to whom restitution is due, the law enforcement apparatus had trouble articulating what should be done with the "proceeds" of market-based offenses. With an awesome leap of logic, the position was taken that, because both involved illegal activity, there was a close analogy between stolen property and illegally earned income, with the proviso that the victim in the second case was some abstract concept called "society." That permitted the law to stumble onto the notion of forcing guilty parties to forfeit their gains to "society" (or its guardians). Such a development was assisted in the U.S. by political and constitutional factors.
When the early 20th-century anti-personal-vice campaigns began, the U.S. government faced a problem. Regulating such matters seemed, at first glance, to be beyond the powers of the federal government. The Constitution granted each state, along with the federal government, the right to legislate criminal law, and it seemed to preclude a national police force. Yet state-by-state variations in prohibition laws would have rendered them unworkable. However, the Supreme Court ruled that the federal government had the power to regulate anything it had the power to tax. As a result, narcotics enforcement started in the 1890s as a revenue matter, with heavy taxes. Even when narcotics became explicit contraband in 1914, drugs were banned under a law written as a revenue statute. (8) Later regulations prohibiting alcohol were also drafted as revenue measures. Logically, then, the front-line troops in the vice wars were Treasury agents. In short order, they were invading hospitals and using addicts to run sting operation s to jail any doctors still willing to treat addicts as patients in need of a prescription rather than criminals seeking illegal self-gratification. Those Treasury agents achieved even greater glory in the booze war to follow. (9)
The result was that the U.S. became the first, and for a longtime, the only major country following British models to systematically confound issues of criminal code and revenue enforcement. Its Internal Revenue Service operated, and still operates, simultaneously as a police force and a tax collection agency. It was a confusion of two distinct government functions that the U.S. would blithely export around the world in subsequent decades.
As a result, in rem forfeitures, something long central to the Treasury's kit of enforcement tools, played an important role in the vice wars. However, during Prohibition, the primary target was not the "proceeds," but the "instrumentalities" of crime - stills, stocks of raw materials, inventories of liquor, and specially rigged vehicles to convey the merchandise to market. Yet, in all the heat of the booze war, seizure of "instrumentalities" was confined to that part of the property actually used in the production, distribution, and sale of the banned substance. It would be quite different in the drug wars to follow. (10) The transition from fiscal enforcement to crime control would be complete once America mobilized for a new Crime War in the 1970s and beyond.
The Specter Haunting America
During the early postwar decades, a specter haunted America. Indeed, there were two: the Bolshevik Menace and the Cosa Nostra. Occasionally, opportunistic politicians would neatly combine them, claiming that the Mafia was a branch of the International Communist Conspiracy. Though largely the product of the overactive imaginations of crime reporters looking for a hot story and law enforcement agencies eager for greater powers and budget hikes, the notion of a huge, vertically structured Mafia operating across the U.S. to monopolize rackets and use the resulting profits to infiltrate and corrupt the legal economy gained widespread acceptance. (11)
To be sure, there were legitimate concerns. Mafiosi types existed, even if an organized, pan-American Mafia conspiracy did not. The Prohibition bonanza had given some mobsters the wherewithal to move into a number of legitimate sector -- construction, trucking, entertainment, and professional sports, especially -- along with taking control of some major unions. However, the cash resource generated by the vice rackets were grossly exaggerated for public consumption the profits that did exist were widely distributed among myriad small-scale operators. (12) Nor was there any evidence of a hostile takeover-bid for the Fortune 500 by some sort of Mafia Inc. Nonetheless, fears of "organized crime" control of the legitimate economy provided the rationalization for reintroducing criminal forfeiture into the U.S. law enforcement apparatus.