On August 9, 2019, a decree (the “Decree”) was published in the Federal Official Gazette, enacting a new National Asset Forfeiture Law (the “Law”). The Decree became effective on the following day and repealed the Federal Asset Forfeiture Law and the local asset forfeiture laws.
This Law is intended to change the procedures that the Public Prosecutor shall follow and the elements that it needs to prove for a person or legal entity to lose its rights over assets that have an illegal origin or that are the product or instrument of certain illegal activities, in favor of the State.
Among the main aspects of the Law, it is worth mentioning the following:
1. The following acts could lead to an asset forfeiture procedure: those related to organized crime, kidnapping, hydrocarbon, oil and petrochemical crimes, crimes against public health, human trafficking, crimes involving corruption, crimes committed by public servants, theft of vehicles, illegally obtained resources and extortion.
2. The asset forfeiture applies to assets whose legitimate origin cannot be proven, that are an instrument, object or product of illegal acts.
3. The asset forfeiture action corresponds to the Public Prosecutor; it is a civil procedure, of financial/proprietorship nature, through mainly oral adversarial processes, carried out through a special kind of procedure, autonomous and independent of any criminal procedure. It may be initiated even when no criminal liability has been determined for the crimes set forth in the Law, and the resolutions issued by the Judge resolving the criminal case shall not influence the determination of the competent Judge in regards to asset forfeiture.
4. The exercise of the asset forfeiture procedure may be based, among other things, on the information obtained by the Public Prosecutor in criminal case ledgers or criminal trials, or any other source with useful leads or data.
5. The asset forfeiture procedure shall have no statute of limitations regarding assets with an illegal origin; for assets with a lawful origin, the asset forfeiture procedure shall have a statute of limitations of 20 years from the date when the asset was used for illegal purposes. No lawful act or agreement carried out in assets subject to an asset forfeiture procedure shall make them lawful, without prejudice to the rights of bona fide third parties.
6. At the request of the Public Prosecutor, without prejudging the legality of the situation or any circumstance related to the merits of the case, the Judge may issue precautionary measures consisting of the securing of property, prior to the filing of the lawsuit or during the trial. The temporary and immediate attachment of funds, assets, accounts and other securities and financial instruments that may be held by the financial system, may also be ordered.
Neither the defendant nor an affected party (one claiming an infringement of rights regarding the asset subject to the asset forfeiture procedure) may offer guarantees to lift the injunction, so that such measures shall prevail until a judgment is issued that causes enforcement. In case that the injunction is lifted or that the Public Prosecutor does not obtain a favorable resolution, the defendant and/or the affected party shall be entitled to request the payment of damages in a different procedure.
At the request of the Public Prosecutor, asset forfeiture procedures may be recorded before the Public Registry of Property or any other registry.
7. Except for those assets that the authorities consider as evidence, the Assets Administration Institute (Instituto de Administración de Bienes y Activos) may proceed to the advanced sale or disposition of the assets subject to asset forfeiture, when necessary, due to the nature of the assets, if the assets represent a danger to the environment or public health, if the assets may be lost, reduced or damaged in the course of time, or their functioning could be impaired, if their management or custody are unaffordable or cause a prejudice to the public finances, if the assets are expendable, consumable, perishable, or self-propelled or other animals, or in the case of assets that can be significantly depreciated in the course of time, regardless of whether they can be damaged or not.
Said assets may be disposed of in advance in favor of the offices and organisms of the Federal Public Administration, the General State’s Attorney, the local governments or the municipalities, as determined by the Social Cabinet or locally, by the corresponding authorities, to be destined to public service, social programs or other relevant public policies.
8. In the event that the asset forfeiture is declared, the Judge may also declare the forfeiture of other principal or accessory rights in-rem, or other rights if it is proven that the beneficiary thereof was aware of the cause from which the asset forfeiture arose. In case of guarantees, their beneficiary shall prove the prior existence of the secured obligation and, if applicable, that the appropriate measures per the applicable laws were taken to grant and use the loan; otherwise, the Judge may declare the guarantee as extinct.
9. If the Judge declares the asset forfeiture procedure inadmissible, the Judge shall order the immediate return of the assets or, whenever impossible, he/she shall order the updated value to the lawful owner or possessor with interests, returns and accessories actually produced during the term managed by the authorities, if any, considering their nature.
Whenever the assets were sold in advance, the product of the sale, plus the products, returns, interests and accessories, minus the management expenses shall be paid. In case that the assets have been donated or destroyed, or for any reason it is impossible to return them, the value thereof per an appraisal upon the time of the seizure shall be paid.
In this regard, the effects of the Law have caused controversy among legislators, the business community and lawyers regarding the conformity of its provisions with the applicable constitutional and legal principles.
Mainly, the observance of the presumption of innocence principle is questioned, as the Public Prosecutor is authorized to seize assets preventively, even before filing the asset forfeiture claim.
In addition, the advanced sale allows the Social Cabinet –lead by the President, and formed by the heads of the Ministries of Welfare, Government, Treasury, Education, and Public Health, as well as the IMSS, ISSSTE, and DIF, among others, to authorize the disposition of assets prior to the issuance of a definitive resolution.
As a consequence, in case that there is a definitive resolution that orders the restitution of the assets that may have been sold in advance, and it is not possible to return them, the State shall pay the owner only the value of the assets pursuant to an appraisal carried out at the time when they were seized.
Although the purpose of the asset forfeiture figure is to cause proprietorship/financial consequences against the owners of assets involved in illegal activities, there are some scenarios, like the above, that may contravene the legal certainty right and disregard principles as basic as the presumption of innocence.
On the other hand, notwithstanding the Law expressly provides that the asset forfeiture procedure shall be exercised in a jurisdictional procedure of civil nature and autonomous to the criminal case, it turns out that from the provisions of the Law the opposite could be interpreted, since: (i) among the elements of the action is the existence of a causal link between an illegal act and a good of illegal origin or destination; (ii) a catalogue of crimes is established for the origin of the asset forfeiture; and, (iii) the support of the action is precisely the information gathered by the Public Prosecutor's Office in the criminal case ledgers, the previous investigations and trials in progress.
From the above, we may anticipate scenarios where a final resolution declares the asset forfeiture based on information from unfinished criminal cases and that later their validity is questioned if once the criminal case is concluded and the existence of an illegal act or the causal link was not evidenced.
Considering the requirements for the asset forfeiture procedure to be applicable and the information that the asset forfeiture procedure is based on, the civil trial is not independent from the criminal case. On the contrary, its result should be conditioned upon the result of the criminal case.
On the other hand, the criteria pursuant to which the Social Cabinet shall determine the use of the assets declared as extinct is not clear.
It is provided that the forfeited assets shall be destined to a public service, social programs or relevant public policies, per the applicable laws, which creates uncertainty regarding the discretion that will apply for the disposition of forfeited assets or the product of their sale.
Also, the transitory regime of the Decree provides that the Law shall apply to asset forfeiture procedures that are initiated as of the effective date of the Law, even when the illegal acts from which they may derive happened before that.
The above could result in a violation of the non-retroactivity principle contained in Article 14 of the Mexican Constitution, particularly when the Law includes the catalogue of crimes that may result in an asset forfeiture procedure.
Upon the controversy caused by the effects of the Law, the study and interpretation carried out by the courts, as a result of legal claims initiated by private parties, shall be key to make the necessary adjustments for its legal application.