Beyond COVID-19: Crisis response or road to recovery?
Crisis response or road to recovery?
A new Mexican Asset Forfeiture Law (Ley Nacional de Extinción de Dominio, the AFL) has been enacted by virtue of the publication of a presidential decree (the Decree) August 9 in the Federal Register (Diario Oficial de la Federación).
The Decree marks the latest development in Mexico's continued efforts to fight corruption at all levels. In addition to the enactment of the AFL, the Decree:
(i) amends other statutes (such as the National Code of Criminal Procedures (Código Nacional de Procedimientos Penales)) to further harmonize the revamped Mexican anti-corruption and anti-money laundering legal framework; and
(ii) repeals the former Federal Asset Forfeiture Law (Ley Federal de Extinción de Dominio), local asset forfeiture statutes and all other provisions contravening the Decree.
The AFL now expressly adds corruption – both for private parties and public servants – and other activities (such as concealment, transactions with illicit funds and fuel theft) to the catalogue of conducts that will be subject to asset forfeiture proceedings.
Under the AFL, assets subject to forfeiture proceedings include:
(i) assets that result from the transformation (whether in whole or in part, factual or legal) of things, materials or instruments for which legal origin cannot be evidenced and are related to corruption, concealment, crimes committed by public servants, organized crime, vehicle theft, transactions with illicit funds, illegal drug activities (trafficking, production and distribution), kidnapping, extortion, human trafficking and fuel theft;
(ii) assets of legal origin, but used to conceal and/or otherwise combined (whether factually or legally) with the assets outlined in (i) above;
(iii) assets for which good, legal and valid title cannot be evidenced;
(iv) assets used by a third party to commit illicit activities, provided the rightful owner of the assets had prior knowledge and failed to notify the authorities or impede the commission of the illicit activities; and
(v) income, yield, accessories, profits and other benefits derived from the assets outlined above.
Asset forfeiture causes of action will be brought by the District Attorney (Ministerio Público) before specialized courts that will be established, and these proceedings will take part in two stages: (1) a preparatory stage overseen by the District Attorney (where, essentially, the District Attorney will build the case against a defendant); and (2) a proper judicial stage that generally will adhere to an oral trial structure.
The asset forfeiture proceedings will be independent and irrespective of any criminal liability that defendant may face or be subject to. Accordingly, the ruling in criminal proceedings initiated against defendant in a civil asset forfeiture proceeding (if any) will not prejudge on the lawfulness or legal origin of the assets subject to forfeiture proceedings.
The ruling rendered by the Court hearing asset forfeiture proceedings may be challenged by either party. Depending on the nature of the assets and the outcome of the proceedings, the Court may order the assets to be disposed of as provided for under the AFL (i.e., sold in accordance with the relevant regulation, donated or assigned to a government office or instrumentality for its proper use, or destroyed, among other outcomes) or returned to defendant.
Note that the AFL grants very broad authority to the Court to grant injunctive relief to preserve status quo until a final and conclusive resolution is rendered. Depending on the specifics of the case and the nature of the assets, injunctive reliefs may result in – among possible outcomes – seizures, preliminary injunctions and attachments preventing transfer of the assets that are the subject matter of the asset forfeiture proceedings.
In very specific cases such as when the nature of the assets is considered (e.g., assets for which custody is deemed untenable, perishable or fungible assets, animals, those subject to material depreciation over time), the Court may order that assets subject to forfeiture proceedings be sold even before a final and conclusive resolution is rendered. In those cases, if ultimately acquitted by a final and conclusive resolution, a defendant will be entitled to collect the proceeds of the sale plus "profits, yields, income and accessories" minus relevant administration costs. If, on the other hand, the assets were donated or destroyed, defendant will receive payment in an amount equal to the value of the assets as of the date of seizure.
The AFL is a public policy law (ley de órden público) and its provisions aim to be in line with the United Nations Convention against Transnational Organized Crime as well as the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances. Further, the AFL expressly provides that fundamental rights recognized in the Mexican Constitution and relevant International Treaties will at all times be respected and protected.
However, during the past few months even as the AFL was being discussed, many voices questioned its Constitutionality as it arguably contradicts the Mexican Constitutional principle that prohibits a law being retroactively applied to the prejudice of any person. The courts may need to sort out this questionable constitutionality of the AFL to the extent the saving provisions of the AFL mandate that the asset forfeiture proceedings initiated after the AFL's entry into force will be subject to its provisions, even if the relevant acts were committed before the AFL became effective (and provided no asset forfeiture proceedings subject to the former regulation had been initiated).
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