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Not many criminal assets are recovered

NIK about recovering criminal assets

In Poland there is no coherent, fully-fledged system enabling disclosure, freezing and  efficient recovery of criminal assets. According to NIK, activities performed by dedicated services and institutions are dispersed. Besides, there is no uniform system of registering the recovery of criminal assets. The entire process of recovering assets from their seizure/ freezing to their factual recovery was not monitored or coordinated. As a result, only PLN 3 billion was recovered from 2014 to 2018, whereas illegal profits of criminals in that period were estimated at PLN 200-500 billion or more.

Recovery of criminal assets and profits is a vital element of fight against crime and its consequences. Forfeiture of illegally gained profits may be a more effective tool to fight crimes than long-term imprisonment.

There is a whole spectrum of services in Poland which - as part of investigative activities and preparatory proceedings - disclose criminal assets. These are e.g.: the Police, Internal Security Agency, Border Guard, Central Anticorruption Bureau, Military Gendarmerie and National Revenue Administration. In urgent cases (for instance, when the assets may be removed) they make the temporary seizure of assets. Then the Prosecutor’s Office, at the request of an eligible body or on its own initiative, carries out the so-called temporary freezing of assets (which is an interim ban on transferring, destroying, processing, moving or handling of assets) to make sure the decision to impose a fine, penalty measures, forfeiture or compensatory measures may be enforced. In the long run, the court passes a judgement in which it ultimately deprives the perpetrator of the illegal assets and profits.

Key audit findings

The Minister of Justice plays the leading role in the process of developing and implementing the criminal policy, including its real impact on the execution of the process of forfeiting criminal assets. The organisation of the process of recovering criminal assets as well as legal provisions significant for the criminal policy in that respect helped eligible entities perform their statutory tasks (such as identification, freezing and foreclosure of criminal assets). The  legislation works carried out in the Ministry of Justice caused considerable changes in the way forfeiture operated. Among others, at the end of 2017, EU Directive no. 2014/42/UE was implemented in with a 6-month delay the Polish legal order and thus extended confiscation came into force in Poland. It allowed broadening the scope of asset freezing (including among others: forfeiture of criminal assets, without the need to prove that they come from illegal activity, also in case the assets were transferred to third parties). Though, until the end of the audit the so-called confiscation in rem was not regulated in the Polish law.

The process of recovering criminal assets has become part of domestic strategic documents (including the Efficient State Strategy). NIK has noted that until now the Minister of Justice - Prosecutor General has not defined the role that this process should play in developing the criminal policy in that respect. Also, no system document has been prepared to determine long-term activities of the state in terms of recovering criminal assets. Besides, the objectives and priorities of the process are missing. Actions are focused on ad hoc solutions, without being properly coordinated.

NIK has found that the value of frozen assets was disproportionate to estimated profits from criminal activity in Poland. However, in 2018 the value of frozen criminal assets increased significantly (from nearly PLN 0.5 billion to over PLN 1 billion year to year). According to the United Nations Office on Drugs and Crime, the global estimated profits from crime amount to 2.3 to 5.5 GDP. In case of Poland the estimated profits of criminals from 2014 to 2018 totalled from PLN 217 to 520 billion, whereas the value of frozen assets in that period was PLN 2.7 billion. It should be stressed that the Minister of Justice - Prosecutor General has not presented any information during the audit about the value of finally confiscated profits from crime in 2014-2018. The absence of reliable data concerning the level of crime and related losses in assets make it impossible to say to what extent the increase in the value of the frozen criminal assets reported in 2018 resulted from the law changes and to what extent it was a consequence of changes in the levels of crime and losses.

Value of secured property between 2014 and 2018  as compared with estimated profits from crime in that  period in Poland

It is also worth noting that the frozen assets ratio in Poland varied from the ratios of other European countries. According to Europol studies, about 2.2 percent criminal assets were temporarily seized or frozen in the EU countries in 2010-2014, and 1.1 percent of those assets were finally confiscated (in Poland in 2014-2018 the value of frozen assets was about 0.8 percent of estimated criminal profits).

NIK has underlined the low percentage of judgements to freeze assets as compared with the number of proceeded legal cases (4.3 percent on average).

Characteristics of securities used in Prosecutor’s Office organisational units from 2014 to 2018

According to the audit findings neither the Police nor the Prosecutor’s Office monitored how effective the temporary seizure of assets was. The data in the registration systems of the Prosecutor’s Office, Police and Border Guard was not consistent. The main reasons were: the absence of a standardised glossary and the fact that data was not regularly input in the systems. A cross-audit in those three institutions showed that from among 121 records in the IT system only eight were correct.

NIK has noted that the existing system of recovering assets lacked consistent definitions crucial for managing and evaluating effectiveness of the process of recovering assets. Individual institutions used their own definitions and principles of estimating and registering the value of frozen/ recovered assets. For instance, the Police or other services used the term recovered assets (meaning the assets that were frozen as physical evidence at some point. However, during the investigation a part of the assets initially frozen as physical evidence may be changed to the object of asset freezing). That term had no equivalent in the registers kept by the Prosecutor’s Office where the terms frozen assets and factually frozen assets (pursuant to effective provisions of law). At the same time, the Border Guard used the terms value of frozen assets and recovered assets based on their dictionary definitions.

The Ministry of Justice gathered only statistical data about the number of convicts as to whom the forfeiture of assets or financial gains was ruled. At the same time, the data concerning the value of effectively executed forfeiture judgements was not collected.

In the National Public Prosecutor’s Office there was no system in place that would make it possible to thoroughly analyse effectiveness of the process of asset freezing used by prosecutors. The data about the value of frozen assets (both in relation to persons and cases) gathered in the Prosecutor’s Office IT system varied from the data found in other repositories of the Prosecutor’s Office and other sources. To ensure the data integrity the information had to be complemented and corrected. This however prolonged and complicated the process of analysing legal cases and evaluating their effectiveness. Those issues were raised by the prosecutors. For instance, an inquiry made in 11 regional branches of the Organised Crime and Corruption Department at the National Public Prosecutor’s Office revealed significant discrepancies in four branches between the Prosecutor’s Office IT system and the case files. The differences totalled at least about PLN 60 million.

According to NIK the data presented to the public did not illustrate effectiveness of the asset recovery system. The data gathered by organisational units of the National Public Prosecutor’s Office in the IT system indicated that the value of factually frozen assets was PLN 768.5 million in 2014, over PLN 755 million in 2015, over PLN 613 million in 2016, over PLN 1.43 billion in 2017 and over PLN 1.1 billion in 2018. The value of frozen assets was the highest in 2017. As regards the number of persons and cases where the assets were frozen, the peak was in 2014. However, the value of factually frozen assets in 2014 was nearly a half lower than in 2017. In terms of the value of frozen assets (including those related to cases and persons), the data gathered in the Prosecutor’s Office IT system did not correlate with the data provided in the activity reports of the Prosecutor’s Office organisational units in criminal cases for 2014-2018 (with regard to the completed preparatory proceedings). According to statistical reports the value of frozen assets in subsequent years was as follows: over PLN 600 million in 2014, PLN 303.5 million in 2015, over PLN 251 million in 2016, over PLN 474 million in 2017, nearly PLN 1.05 in 2018.

Differences between value of property securities based on data in Prosecutor’s Office IT system and data in activity reports of Prosecutor’s Office organisational units in criminal cases for 2014-2018

Until the end of the audit the works to modify the IT system providing the register of frozen assets were not completed. The file digitalisation system was not expanded, either. The system expansion was to streamline exchange of information between the Prosecutor’s Office and other public entities.

The Police used various repositories to register the assets. Those registers did not include the data significant for the service evaluation. In the Police the data concerning the value of frozen assets, recovered assets and the value of crime-related losses were recorded in three different IT systems. The scope, functionality and purpose of data gathered and processed in those three systems varied. As a result, there were significant differences in the figures depicting the same phenomenon. The reason was they came from the systems which differed in terms of the way of gathering data. E.g. in 2017, the value of assets frozen in the proceedings conducted by the Police was close to PLN 394 million in one system, whereas in another it was nearly PLN 1.5 billion.

The exchange of information concerning the establishment of criminal assets between foreign entities and eligible domestic entities was the responsibility of the General Police Headquarters which thus performed tasks of the Asset Recovery Office (ARO). The data of the Police Crime Bureau showed that in 2016-2018 the ARO received the total of 711 requests from eligible domestic entities. It should be stressed, though, that over 90 percent of requests came from the Police. Other domestic entities, including the Prosecutor’s Office (24 sent requests) rarely used that tool. From 2016 to 2018, the Asset Recovery Office received from foreign entities the total of 313 requests for information from 27 countries, of which  287 (92 percent) of requests  from 20 EU member states (80 from Germany, 62 from Great Britain, 37 from France) and 26 requests from non-EU countries (most from Ukraine - 10).

In order to increase efficiency of preparatory proceedings, also related to asset freezing, organisational changes were made as part of the reform of the Prosecutor’s Office in 2016. The Economic Crime Department was established in the National Public Prosecutor’s Office. At the same time Economic Crime Sections were founded in regional and district prosecutor’s offices. Additionally, Financial and Tax Crime Sections came into being in six regional prosecutor’s offices. The new organisational solutions, principles and procedures implemented in audited entities streamlined the process of establishing criminal assets due to ongoing preparatory proceedings. It should be noted, however, that the National Public Prosecutor’s Office did not set up - as it initially intended to - the structure of proxies and consultants equipped in tools that would allow elimination of bad practices.

In the Police there are two Asset Recovery Sections, four inter-departmental Asset Recovery Teams and 11 teams as part of the Economic Crime Sections. The Chief Commander of the Police has numerously pointed to the need to isolate relevant structures at the regional level, standardise their activities, increase headcount and strengthen mechanisms of supervision at the central level in the Police. The asset recovery issue is related to a broader and more complex project concerning changes in the structures dealing with economic crime in the Police. Therefore, the planned changes were not implemented in the audited period. The organisational structure of the Border Guard was adjusted to the tasks of the organisation and investigation division. The headcount there was too small, though.

Recommendations

The Supreme Audit Office has issued recommendations to the Minister of Justice - Prosecutor General to:

  • develop a uniform system ensuring proper registration and handling of assets as well as efficient exchange of information between Prosecutor’s Office organisational units and other bodies taking part in criminal proceedings;
  • standardised glossary should be developed and implemented to be used by bodies dealing with recovery of criminal assets. The point is to make sure that the presented data is consistent and of high quality;
  • develop new indicators (or modify the existing ones) to measure effectiveness of the assets recovery processes in a way considering results of activities performed by the services and bodies which cooperate in recovering criminal assets. The new (or modified) indicators should also enable the system evaluation at the strategic level;
  • gather information and data as well as develop principles of measuring effectiveness of the execution of court judgements related to finance.

Author: , Date of creation: 2020-02-28 11:56:35