United States. Congress. House. Committee on the J.

Civil Asset Forfeiture Reform Act : hearing before the Committee on the Judiciary, House of Representatives, One Hundred Fourth Congress, second session, on H.R. 1916 ... July 22, 1996 online

. (page 12 of 37)
Online LibraryUnited States. Congress. House. Committee on the JCivil Asset Forfeiture Reform Act : hearing before the Committee on the Judiciary, House of Representatives, One Hundred Fourth Congress, second session, on H.R. 1916 ... July 22, 1996 → online text (page 12 of 37)
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items .

The provision relating to fraud offenses states that only
property used on a "continuing basis" is subject to forfeiture.
This is intended to make clear, as many courts have already held,
that there must be a substantial temporal connection between the
forfeited property and the act giving rise to forfeiture. Under
the statute, property otherwise used for lawful purposes will be
subject to forfeiture if it is used to commit two or more
offenses, or if it used to commit a single offense that involved
the use of the property on a number of occasions. On the other
hand, property otherwise used for lawful purposes would not be
subject to forfeiture if used only in an isolated instance to
commit or facilitate the commission of an offense.

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Section 312 Forfeiture of Vehicles Used in Gun Running

This section provides for the forfeiture, under 18 U.S.C.
§§ 981 and 982, of vehicles used to commit gun running crimes,
such as transporting stolen firearms. The provision is limited
to instances in which 5 or more firearms are involved, thus
making it clear that it is not intended to be used in instances
where an individual commits a violation involving a small number
of firearms in his personal possession.

Section 313 Forfeiture of Criminal Proceeds Transported in
Interstate Commerce

Section 1952(a) (1) of title 18 makes it a crime to
distribute the proceeds of an "unlawful activity" in interstate
commerce. "Unlawful activity" includes gambling, drug
trafficking, prostitution, extortion, bribery and arson. 18
U.S.C. § 1952(b). There is, however, no statute authorizing
forfeiture of the criminal proceeds distributed in violation of
§ 1952(a) (1) .

Prosecutors have attempted to work around this problem by
charging interstate transportation of drug proceeds as a money
laundering offense under 18 U.S.C. § 1956(a) (1) (B) (i) , an offense
for which forfeiture of all property involved is authorized. See
18 U.S.C. §§ 981(a)(1)(A) and 982(a)(1). The courts, however,
have not endorsed this theory either on the ground that mere
transportation of drug money is not a -"-financial transaction, "
see United States v. Puig- Infante . 19 F.3d 929 {5th Cir. 1994)
(transporting drug proceeds from Fla. to Tex. not a "transaction"
absent evidence of disposition once cash arrived at destination) ,
or because transporting cash does not, by itself, evidence an
intent to "conceal or disguise" drug proceeds, see United States
v. Garcia-Emanuel . 14 F.3d 1469 (10th Cir. 1994) (simple wire
transfer of proceeds to Colombia evidences no intent to conceal
or disguise); United States v. Dimeck . 24 F.3d 1239 (10th Cir.
1994) (covert nature of transportation of funds from one state to
another not sufficient to imply intent to conceal or disguise) .

The amendment to § 1952 cures this problem by authorizing
civil and criminal forfeiture of the proceeds of unlawful
activity distributed in violation of subsection (a) (1) . In each
instance, the applicable procedures would be the same as those
applicable to money laundering forfeitures.

Section 314 Forfeiture of Proceeds of Federal Food, Drug, and
Cosmetic Act Violations

This section creates civil and criminal forfeiture
provisions for proceeds traceable to Federal Food, Drug, and
Cosmetic Act (FFDCA) violations codified in chapter 9 of title 21

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(21 U.S.C. § 301 et seq.). The new forfeiture provisions would

be additions to chapter 9 (new 21 U.S.C. §§ (civil

forfeiture) and (criminal forfeiture) ) .

FFDCA violations are investigated by the Food and Drug
Administration's Office of Criminal Investigations (FDAOCI) . The
FFDCA presently provides for forfeiture of only the specific
articles of food, drugs, or cosmetics that are in violation of
the FFDCA. See 21 U.S.C. § 334 (seizure, judicial condemnation,
and court -ordered destruction or sale of adulterated or
misbranded foods, drugs, or cosmetics, with net proceeds of any
sale going to the Treasury of the United States) . In order to
achieve forfeitures of the proceeds of FFDCA violations, FDAOCI
has to expand FFDCA cases to include additional offenses (e.g.,
mail or wire fraud and the laundering of fraud proceeds) which
serve as predicate offenses for adoptive forfeitures undertaken
by other federal law enforcement agencies under statutes outside
the FFDCA (e.g., 18 U.S.C. §§ 981 and 982). FDAOCI forfeiture
cases under the FFDCA forfeiture statutes will simplify the
process by which FDAOCI investigations lead to proceeds
forfeitures .

FDAOCI does not seek forfeiture of facilitating property;
nor does FDAOCI seek administrative forfeiture authority., FDAOCI
does not want to establish organizational infrastructures for
managing property seized for facilitating FFDCA violations (e.g.
factories and warehouses) or for executing administrative
forfeitures. All forfeitures of articles that are in violation
of the FFDCA under the existing FFDCA forfeiture statute (21
U.S.C. § 334) are judicial.

Section 315 Summary Destruction of Explosives Subject to
Forfeiture

This section provides legal authority for the Secretary of
the Treasury to destroy summarily explosives that are subject to
forfeiture and that are too dangerous to store pending the
completion of forfeiture proceedings. The statute provides for
compensation, up to the value of the destroyed property, to any
owner or person with an interest in the property who, within a
period of 90 days, files an application with the Secretary and
establishes that he or she was an innocent owner of the property.

Section 316 Archeological Resources Protection Act

This section expands the forfeiture provisions of the
Archeological Resources Protection Act of 1979 (16 U.S.C.
§ 470gg(b)) to include proceeds of a violation of the Act and to
provide that the procedures governing criminal and civil
forfeiture in title 18, as amended by the Forfeiture Act, apply
to such forfeitures.



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TITLE IV - MISCELLANEOUS AND MINOR AND TECHNICAL AMENDMENTS

Section 401 Use of Forfeited Funds to Pay Restitution to Crime
Victims and Regulatory Agencies

This section amends the civil and criminal forfeiture sta-
tutes to make it clear that the forfeited property may be used to
restore property to victims of the offense giving rise to the
forfeiture.

The civil statute, 18 U.S.C. § 981, explicitly authorizes
the use of forfeited funds to restore property only in cases
based on the offenses set forth in §§ 981(a) (1) (C) and (D) , most
of which involve financial institution fraud. At the same
time, the criminal statute, § 982, permits forfeited funds to be
restored to victims in virtually all instances. See 21 U.S.C.
§ 853 (i) incorporated by reference in § 982(b). Taken together,
these statutes imply that the Attorney General may not use
forfeited funds to restore property to victims in other civil
cases - such as consumer fraud and money laundering. These
amendments negate that implication by making it clear that the
Attorney General make use the forfeiture laws to restore property
to victims in all cases.

First, subsection (e) (6) , which presently authorizes the
payment of restitution to victims of any crime listed in
§ 981(a) (1) (C) , is expanded to cover all offenses for which
forfeiture is authorized under § 981. In the case of money
laundering offenses, this includes the offense that constituted
the underlying "specified unlawful activity."

Second, subsections (e) (3) , (4) and (5) , which authorize
restitution to financial institutions in cases governed by
§ 981(a) (1) (C) , is revised to take into account the fact that not
all financial institution offenses are covered by subsection
(a) (1) (C) . See subsection (a) (1) (A) relating to money laundering
offenses in which the underlying unlawful activity may be a
financial institution offense. Thus, the_ introduction to each
subsection, respectively, is amended to refer to "property
forfeited in connection with an offense resulting in pecuniary
loss to a financial institution or regulatory agency" regardless
of what statutory provision is employed to accomplish the forfei-
ture.

Third, a similar amendment is made to subsection (e) (7) to
reflect that not all crimes relating to the sale of assets by
receivers of failed financial institutions are covered by subsec-



^ The restitution provisions were enacted as part of the
Financial Institutions Reform and Recovery Act (FIRREA) of 1989,
which explains their limitation to these particular offenses.



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tion (a) (1) (D) , see subsections (a) (1) (A) and (E) , and to elimi-
nate the need to revise the cross references in .his section in
the future each time the various subparagraphs of subsection
(a) (1) are amended or redesignated.

Finally, the criminal forfeiture provision, which as
mentioned, is contained in a cross-reference to 21 U.S.C.
§ 853 (i) (1) , is revised to clarify its application in money
laundering cases and cases where there are persons who were
victimized by a the same scheme but not by the particular
offenses that were the subject of the criminal prosecution.
Thus, in money laundering cases, property could be restored to
victims of the offense that constituted the underlying "specified
unlawful activity, " and in all cases, property could be restored
to the victim of any offense that was part of the same scheme,
conspiracy, or pattern of criminal activity, a formulation
derived from the restitution provision of the Victim and Witness
Protection Act, 18 U.S.C. § 3663. (It is not necessary to make
reference to a "scheme" or "pattern" in the civil forfeiture
statute because civil forfeiture, unlike criminal forfeiture,
need not be tied to the commission of a specific offense.)

Section 402 Compliance with Vienna Convention Regarding

Enforcement of Foreign Drug Forfeiture Orders

The United States was the eighth country to ratify the
United Nations Convention Against the Illicit Traffic in Narcotic
Drugs and Psychotropic Substances (hereinafter the Vienna Conven-
tion) , and has been under an obligation Lu-meet the Convention's
requirements since the treaty went into effect on November 11,
1990.

Article V of the Vienna Convention requires the member
nations (the Parties) to enact legislation providing for the
forfeiture of proceeds and instrumentalities of drug trafficking
and drug-related money laundering offenses. Specifically, para-
graph 1 (a) of Article V says that each Party shall adopt measures
authorizing the forfeiture of "proceeds derived from offenses
established in accordance with article 3, paragraph 1, [which
defines the predicate drug and drug-related money laundering
offenses] , or property the value of which corresponds to that of
such proceeds . "

The United States is in full compliance with these require-
ments insofar as they relate to domestic forfeitures. The drug
and money laundering forfeiture statutes enacted by Congress
since 1978 authorize the forfeiture of both drug proceeds and
property involved in money laundering offenses where the underly-
ing crime is committed in the United States. The substitute
assets provisions of these statutes permit the forfeiture of
property of "equivalent value" when the property traceable to the
criminal offense is unavailable. See 21 U.S.C. § 853 (p) . In-

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deed, these statutes frequently serve as models for other Parties
seeking to comply with the Vienna Convention's requirements.
Additional legislation, however, will support our compliance with
the Convention's international forfeiture obligations.

Under Article V, a Party must provide for the forfeiture of
drug proceeds derived from an offense occurring in another coun-
try by providing forfeiture assistance to a Party in whose juris-
diction the underlying drug or money laundering offense occurred.
This obligation applies both to the drug proceeds themselves and
to property of equivalent value . Under 18 U.S.C. § 981(a) (1) (B) ,
the United States can initiate a civil action against foreign
drug proceeds that would result in the seizure and confiscation
of such property. But because that statute is a civil i n rem
statute, it does not authorize the forfeiture of substitute
assets of equivalent value.

The proposed statute is intended reinforce our compliance
with the Vienna Convention in this regard by giving our treaty
partners access to our courts for enforcement of their forfeiture
judgments. Under the proposal, once a defendant is convicted of
a drug trafficking or money laundering offense in a foreign
country and an order of forfeiture is entered against him, the
foreign country, as the Party requesting assistance under the
Vienna Convention, would file a civil action as a plaintiff in
federal court seeking enforcement of the judgment against assets
that may be found in the United States. The Requesting Party,
however, would not be allowed to file for enforcement without
approval from the United States DepartfflSfit of Justice, thereby
permitting the United States to screen out requests that are
factually deficient or based on unacceptable foreign proceedings.

The concept of placing the Requesting Party in the posture
of a plaintiff seeking enforcement of a judgment is drawn from
Canada's Mutual Legal Assistance in Criminal Matters Act. Sec-
tion 9 of the Act provides, in pertinent part:

Where the Minister [of Justice] approves a request
of a foreign state to enforce the payment of a fine
imposed in respect of an offense by a court of criminal
jurisdiction of the foreign state, a court in Canada
has jurisdiction to enforce the payment of the fine and
the fine is recoverable in civil proceedings instituted
by the foreign state, as if the fine had been imposed
by a court in Canada.

The Justice Department has been informed by Canadian Justice
Ministry authorities that, although this provision has not yet
been applied, it is expected to cover foreign criminal forfeiture
orders. Canada views Section 9 as part of its response to the
Vienna Convention.



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Enactment of this proposal woi Id bring the United States
into line with an important trend in international law enforce-
ment while preserving our in rem/in personam distinctions and
without requiring the government to become a party to the en-
forcement of a foreign order. Laws providing for the enforcement
of foreign confiscation orders have been enacted by a number of
jurisdictions, including Australia, Denmark, Hong Kong, Japan,
the Netherlands, Singapore, and the United Kingdom. We can
anticipate that more countries will enact laws to give full faith
and credit to their treaty partners' "equivalent value" forfei-
ture orders. If we expect such countries to enforce our forfei-
ture orders against substitute assets located abroad, we must be
prepared to render reciprocal assistance.

Section 4 03 Minor and Technical Amendments Relating to 1992
Forfeiture Amendments

These are minor and technical corrections to statutes amend-
ed by the Anti-Money Laundering Act of 1992, the Anti-Car Theft
Act, and the 1993 Treasury Appropriations bill.

Subsection (a) amends section 982(b) (2) to clarify, in light
of additions made to section 982(a) in 1990 and 1992, that the
substitute asset limitation in that section applies only to money
laundering cases.

Subsection (b) makes several clarifying changes to the
statute authorizing forfeiture of fung ible property in civil
cases when no property traceable to the underlying offense is
available. It also makes the statute applicable to all civil
forfeitures. See United States v. All Funds Presently on Deposit
at American Express Bank , 832 F. Supp . 542 (E.D.N.Y. 1993) (ques-
tioning failure to make § 984 applicable to drug offenses) .

The clarifying changes are necessary to make sure that the
provisions of § 984, including the limitations set forth in the
statute, only apply to instances where the government seeks to
invoke the fungible property provisions of the statute because
neither the property actually involved in the offense giving rise
to forfeiture nor any property traceable to it is available for
forfeiture. If such property is available, there is no need to
invoke § 984 and none of its provisions would apply. This an-
swers the question raised in Marine Midland Bank, N.A. v. United
States . 11 F.3d 1119 {2d Cir. 1993), where the appellate court
remanded a case to determine if the limitations relating to
interbank accounts in § 984 applied when property traceable to a
money laundering offense was forfeited under § 981.

The amendments also make clear that § 984 does not abrogate
any other applicable theory of forfeiture. See American Express
Bank which suggested, in dicta , that § 984 was intended to abro-
gate the case law authorizing the forfeiture of facilitating

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property under § 981(a) (1) (A). Under § 984, a court may forfeit
fungible property in place of any property forfeitable under any
civil forfeiture statute, including facilitating property if the
forfeiture of such property is authorized by another statute.
See United States v. All Monies . 754 F. Supp . 1467, 1473 (D. Haw.
1991) (facilitating property is forfeitable in money laundering
cases under § 981(a)(1)(A); United States v. Certain Accounts .
795 F. Supp. 391, 396 (S.D. Fla. 1992) (same).

The amendment also extends the period within which the
forfeiture action must be commenced for the provisions of § 984
to apply from one year to two years, which is consistent with the
Senate-passed version of the statute when it was enacted in 1992.
See American Express Bank , supra (seized property returned to
Ecuadorian money exchanger despite evidence of drug traffic)cing
because seizure occurred 18 months after money laundering and
outside of § 984 's one-year limitations period). The amendment
makes clear that for the purposes of the limitations period, a
forfeiture action is "commenced" either when the property is
seized or when an arrest in rem is served.

Finally, the amendment provides that a "financial institu-
tion" includes a foreign bank so that interbank accounts main-
tained by foreign banks are covered by the provision exempting
interbank accounts from the application of the rule permitting
the forfeiture of fungible property.

Subsection (c) makes similar stylistic changes to section
986, making it applicable to all § 981 forfeitures including the
provisions added in 1992, and eliminating the erroneous reference
to § 1960. The amendment also strikes a meaningless cross-refer-
ence to a non-existent statute, 18 U.S.C. § 985.

Subsection (d) amends 18 U.S.C. § 3554, the statute enacted
as part of the Sentencing Reform Act of 1984 to provide for the
entry of an order of forfeiture in criminal cases, to reflect the
enactment of various criminal forfeiture statutes that were not
in existence at the time of the 1984 legislation. The amendment
also inserts a reference to Rule 32, Fed.R. Crim. P. , to make clear
that nothing in § 3 554 is intended to be inconsistent with the
Rule as it may be amended from time to time.

Subsection (e) adds an attempt provision to the statute
making it an offense to fail to file a CMIR form, or to file a
false or incomplete form. This makes it clear that a person who
boards a domestic flight in the United States with the intention
of transferring to an international flight at another airport in
the United States, and who does so with the intent to evade the
CMIR reporting requirement, is guilty of the offense at the point
where he boards or prepares to board the first flight.
Otherv;ise, the statute could be read to make it impossible to
take any law enforcement action under the CMIR statutes until

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such time as the traveller changed planes en route to his
international destiuation. For example, under the amendment, a
traveller carrying a large quantity of cash who boards a plane in
Ohio to fly to New York where he will change planes for a flight
to South America, will be in violation of 31 U.S.C. § 5324(b) at
the point when he is about to board the plane in Ohio with the
intent to evade the CMIR reporting requirement.

Subsection (f) amends the civil penalty provision of 18
U.S.C. § 1956. The first new provision is a long arm statute
that gives the district court jurisdiction over a foreign bank
that violates the money laundering statute, provided that the
bank maintains an account in the United States and that the bank
receives service of process pursuant to the applicable statutes
or rules of procedure. The purpose of the provision is to ensure
that a bank that violates the money laundering laws of the United
States and that conducts banking business through an account in
the United States does not escape liability under Section 1956 (b)
by asserting that its contacts with the United States are not
sufficient to satisfy the "minimum contacts" requirements for in
personam jurisdiction. The second provision, modeled on 18
U.S.C. § 1345(b), gives the district court the power to restrain
property or take other action necessary to ensure that a
defendant in a § 1956 action does not dissipate the assets that
would be needed to satisfy a judgment under that section.

Section 404 Civil Forfeiture of Coins and Currency in
Confiscated Gambling Devices

This section makes a change in the civil forfeiture provi-
sions in the Gam±)ling Devices Act, 15 U.S.C. 1171 et seq. The
Gambling Devices Act, set out as chapter 24 of title 15, United
States Code, is a scheme for regulating devices like slot ma-
chines and other machines used for gambling. In general, the
chapter makes it illegal to ship such devices into states where
they are illegal and to use or possess them in areas of special
federal responsibility such as in the special maritime and ter-
ritorial jurisdiction and in Indian country. 15 U.S.C. 1175
provides for the seizure and civil forfeiture of gambling ma-
chines involved in a violation of the chapter. Occasionally a
slot machine or video game involved in a violation will contain
money. This section clarifies that money in such a machine at
the time it is seized is also subject to seizure and forfeiture.
Such a forfeiture is justified and the section eliminates any
need for a complicated procedure under which such a machine would
have to be opened and the money counted and removed before it can
be seized.

Section 405 Drug Paraphernalia Technical Amendments

Section 511(a) (10) of the Controlled Substances Act (21
U.S.C. 881(a) (10)) provides for the civil forfeiture of "[a]ny

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drug paraphernalia (as defined in section 857 of this title)."
Section 2401 of the Crime Control Act of 19SJ, Pub.L. 101-647,
104 Stat. 4858, November 29, 1990, transferred 21 U.S.C. 857
(drug paraphernalia violations) to a new 21 U.S.C. 863 and made
it part of the Controlled Substances Act. "Drug paraphernalia"
is defined at 863(d). Paragraph (a) above amends 21 U.S.C.
881(a) (10) to correct the misreference to the repealed section
857.

Prior to enactment of 21 U.S.C. § 863, references in 21
U.S.C. 881 and 853 to violations of "this subchapter" as bases
for forfeiture did not include drug paraphernalia violations
because 21 U.S.C. 857 was part of the Anti-Drug Abuse Act of
1986. The references to "this subchapter" in 21 U.S.C. 853 and
881 are actually references to the original legislation (Title II
of Pub.L. 91-513, October 27, 1970, 84 Stat. 12421 popularly
known as the "Controlled Substances Act".' See editorial note
entitled "References in Text" after 21 U.S.C. 801 in West's
Federal Criminal Code and Rules (1991 Revised Edition) at 962.
Consequently, the reference to "this title" in 21 U.S.C.
881(a) (10) should be corrected to "this subchapter" when the
proposed amendment is codified.

Section 863 penalizes sale, use of any facility of inter-
state commerce to transport, and import or export of drug para-
phernalia with imprisonment for up to three years. Additionally,
21 U.S.C. 863(c) provides for criminal forfeiture of drug para-
phernalia involved in a violation of 21 U.S.C. 863 "upon the
conviction of a person for such violat luii" - and directs forfeited
drug paraphernalia to be delivered to the Administrator of Gen-
eral Services, who may order its destruction or authorize its use
by federal, state, or local authorities for law enforcement or
educational purposes. Paragraph (b) above deletes section 863(c)
as unnecessary because 21 U.S.C. 853(a) (2) provides for criminal
forfeiture of any property used to commit "a violation of this



Online LibraryUnited States. Congress. House. Committee on the JCivil Asset Forfeiture Reform Act : hearing before the Committee on the Judiciary, House of Representatives, One Hundred Fourth Congress, second session, on H.R. 1916 ... July 22, 1996 → online text (page 12 of 37)