The law does not permit people to profit from criminal activity. Profits (including property or money) obtained from criminal activity are referred to as “proceeds of crime”.
The Commonwealth Government or NSW Government will use freezing orders (also known as a “mareva order” or “mareva injunction”) or forfeiture orders to confiscate a person’s illegally obtained profits. This is commonly referred to as property being “forfeited to the Crown”, as the Commonwealth or NSW Government will assume control or ownership of the property.
If a person’s property is suspected to be the proceeds of crime, the Commonwealth or State Government may request that a court make an order preventing the person from dealing with the illegal profits even before criminal proceedings have concluded.
Which property can be forfeited or frozen?
Proceeds of crime refers to cash, property, or other assets directly or indirectly derived from the commission of an offence. “Property” has a broad meaning and includes tangible and intangible property, including cash, a house, a yacht, a car, and bank accounts.
Freezing orders and restraining orders under Australian law
Proceeds of crime may be forfeited under both Commonwealth and State laws. In NSW, three key legislations may be used to capture the proceeds of crime held by individuals or groups.
All three of these Acts aim to prevent people from benefitting from criminal offences, and to preserve evidence. Many of the provisions impose significant financial burdens on a defendant.
Proceeds of Crime Act 1992 (Cth)
Under this Commonwealth legislation, the Australian Federal Police (AFP) and Commonwealth Director of Public Prosecutions (CDPP) can apply to withhold proceeds of crime concerning Commonwealth offences under one of the following types of orders:
- Freezing Order and Restraining Order: These orders prevent someone from dealing with or disposing of their assets. They are pre-emptive measures that ensure a person does not hide illegitimate assets before a conviction or forfeiture order can be obtained. For example, if police suspect that an offender purchased a car using tainted money, the police can obtain an order stopping the offender from selling the car while proceedings are ongoing.
- Forfeiture Order: When convicted of a serious offence that has generated proceeds, a person may be subject to a forfeiture order. This order forfeits those proceeds or property to the Crown.
- Pecuniary Penalty Order: When someone has benefitted from a crime, a pecuniary (financial) penalty order may apply. This order requires the person to repay the amount.
Confiscation of Proceeds of Crime Act 1989 (NSW)
Under this Act, the NSW Director of Public Prosecutions (NSW DPP), the Commissioner of the Independent Commission Against Corruption (ICAC), or the NSW Police Commissioner can apply to withhold “tainted property” concerning NSW offences under one of the following types of orders:
- Drug proceeds order: Applies when someone has benefited from a drug trafficking offence.
- Pecuniary Penalty Order: When a court is determining the penalty amount for a pecuniary penalty order under this Act, the court will consider:
- The value of the benefit derived from the offence.
- The average amount paid for that type of property.
- The overall value of the offender’s property before and after the offence.
- The offender’s income and expenditure.
- Forfeiture Order.
- Freezing Notice and Restraining Order.
Confiscation of Proceeds of Crimes Act 1989 (NSW)
In NSW, under this Act, the NSW Crime Commission can withhold proceeds of crime under one of the following types of order:
- Proceeds Assessment Order: Used when a person derived proceeds from the illegal activity of another person.
- Unexplained Wealth Order: Used when the origin of a person’s wealth cannot be determined or traced, but the NSW Crime Commission suspects that it was acquired through illegal activity.
- Restraining Order.
- Forfeiture Order.
Under both Proceeds Assessment Orders and Unexplained Wealth Orders, a court can order the person to pay the NSW Treasurer the value of the proceeds derived from the illegal activity, or the value of the unexplained wealth.
What does a court consider when issuing freezing orders or asset forfeitures?
A court will consider a variety of factors specific to each type of order. However, some general considerations include:
- Whether the property or asset sought to be frozen is a “tainted property”. Tainted property includes:
- Property used in carrying out or commissioning a serious offence, or in connection with committing or commissioning a serious offence. For example, for a drug offence, this includes a vehicle used to transport drugs to the point of sale, or if the vehicle is sold, then the money obtained from the sale.
- Property that is directly or indirectly gained as a result of the commission/carrying out of a serious offence. This may include a car that was stolen during a robbery, and any money obtained if the stolen car is then sold.
- Whether the order will cause disproportionate hardship to the person or their family.
- A court has the discretion to decide on the amount of money that will be provided to the person for “reasonable living expenses”, and potentially for “reasonable legal expenses”.
What can I spend when my assets are frozen?
At a minimum, a person will be allowed to use money to pay for “reasonable living expenses”. This is usually a set amount of money per week. The person will be able to take this money out every week to pay for living expenses such as groceries, bills, and loan repayments.
If the person owns or runs a business, the orders will usually allow for costs incurred in the ordinary and proper course of that person’s business.
Orders will not always allow for legal expenses, however, in most instances they may allow for reasonable legal expenses, or sometimes legal expenses up to a certain cap.
If the person believes the amount allowed is not enough for their expenses, they can negotiate for a larger amount or make an application to the court to increase the amount.
It may be possible to negotiate for other exceptions to the orders, however, the person will have to provide documentary evidence as to why the exception is necessary. If an agreement is not possible, the person can make an application to the Supreme Court for an increased amount of money for living expenses.
Challenging freezing orders and restraining orders
Applications made by law enforcement agencies for a freezing or restraining order can be defended in court. Agencies must prove that the orders applied for are necessary and meet the requirements under the legislation. To defend an application, it is important to first consult a defence lawyer with experience in asset forfeiture orders.
If an order has already been granted, there are two courses of action which can be taken.
Option one: Application to exclude property from forfeiture
Under section 94 of the Proceeds of Crime Act, an application can be made to the Supreme Court of NSW, or the equivalent Court in other States and territories, to exclude property from forfeiture if it can be shown that the property was derived from a legitimate source.
Any action to exclude property from forfeiture must begin as soon as possible after conviction. There is a 15-month limitation period from the date of conviction (or sentence), after which the property will automatically be forfeited.
Option two: Negotiate a settlement
The second option is to negotiate a settlement and reach an amicable agreement. This may involve forfeiting part of the property.
Settlement negotiations may occur with the CDPP or the NSW Crime Commission.
