On August 9, 2019, the National Law on Asset Forfeiture (the "Law"), was published in the Official Gazette of the Federation.
Upon the entry into force of the Law, on August 10th 2019, the Federal Law on Asset Forfeiture (the "Federal Law"), as well as the laws on asset forfeiture of the Mexican States, and all legal, regulatory and adminis are abrogated, with the intention of unifying criteria, and thus have a single procedure at national level.
The Federal Judiciary Council and the judicial powers of the States and Mexico City, now have a period of 6 months to create civil courts specialized in matter of asset forfeiture; in the meantime, ordinary civil courts will have jurisdiction.
Asset forfeiture in favor of the State, through the Federal Government and the federative entities, as appropriate, is the loss of rights that a person has, in connection with patrimonial assets whose legitimate origin cannot be proven, particularly those that are instrument, object or product of illicit acts, declared by sentence of a judicial authority, without any payment or compensation for the owner.
The exercise of the action for asset forfeiture (the "Action"), corresponds to the District Attorney (the "DA"), as it was established in the Federal Law, and will be through a special procedure of the jurisdictional process of civil nature and patrimonial character, autonomous of the criminal procedure, (i.e. it will proceed even when the criminal responsibility of the corresponding felonies has not yet been determined); Mexico City (the "Local Law"), abrogated through the entry into force of the Law, and that established that the lawsuit for asset forfeiture could only be filed when the formal prison warrant has been issued. The Action provided in the Law does not have a statute of limitations in the case of property of illicit origin; it shall prescribe in 20 years in the case of property of illicit destination; and it will not be extinguished by the death of anyone who is subject to investigation or criminal proceedings, with the consequences and effects subsisting against heirs, legatees and successors in title.
The Law expands the catalogue of illicit acts for which asset forfeiture may proceed to the following: organized crime; kidnapping; hydrocarbon, oil and petrochemical crimes; health crimes; human trafficking; corruption crimes; cover-up; crimes committed by public servants; vehicle theft; resources of illicit origin (also known as money laundering); and extortion.
In terms of the Law, for the Action to proceed it shall be based on the following elements: (i) the existence of an illicit act; (ii) the existence of an asset of illicit origin or destination; (iii) the causal nexus of the two previous elements; and (iv) the owner's knowledge of the destination of the asset to the illicit act, or of the fact that it is the product of an illicit act, however, the latter shall not be considered fulfilled when it is proven that the owner was incapable of knowing it, determining as a presumption of good faith the real impediment of the affected party to know of the illicit act related to the asset, and in case of having learned of the illicit use, having prevented or given timely notice to the authority; the burden of proof being on the owner or possessor of the asset subject of the asset forfeiture procedure.
In the Local Law, it was foreseen that the Action proceeded regarding the assets subject to hereditary succession, as long as it was exercised before the stage of inventory and liquidation of assets in the corresponding procedure, being impossible to proceed if the latter was already in a subsequent stage; with the new Law this circumstance of legitimation of the asset is suppressed, establishing that no legal act carried out on the assets subject to asset forfeiture legitimates them, without prejudice to the rights of third parties in good faith.
Regarding the special procedure, and as crucial and/or controversial points, the following are noted:
- The DA has the right to use the evidence collected in the investigation file, and it shall be considered pre-constituted evidence in the proceeding in question.
- The judge may order as a provisional measure, even prior to the filing of the lawsuit, the securing of the property subject to asset forfeiture, and may also order a sand still since the issuance of the measure, with the intention of guaranteeing the conservation of the property, without granting the affected person the right to offer a bond in order to have such measure lifted.
- The DA may request from the judicial authority the client’s information from credit institutions and other financial, trust and tax system entities, and due to the nature and purpose of the Action, the banking, exchange, stock exchange or tax secrecy shall not be opposable, nor shall the access to the information contained in databases be prevented regarding asset forfeiture.
- In the event that the judgment declares the asset forfeiture, the judge may also declare the extinction of other rights, principal or accessory over them, if it is proven that the owner knew the cause that gave rise to the Action. In case of guarantees, the holder must prove the pre-existence of the secured credit, and if necessary, that the measures established by law for the granting and use of credits were taken; otherwise, the judge will declare the collateral extinct. On the other hand, if the Action is declared inadmissible, the return of the assets will be ordered immediately, or when it is not possible (meaning the case in which the anticipated sale has been made), the delivery of their updated value will be carried out, to their legitimate owner or possessor, together with the interests, yields and accessories, minus the administration expenses, in liquid amount that effectively have been spent (if any). In addition, a resolution will be made concerning the lifting of the precautionary. and provisional measures that may have been imposed.
- The acquittal of the person involved in the criminal proceeding, or the non-application of the penalty of confiscation of property, does not prejudge the legitimacy of any property.
- The judgment that declares the asset forfeiture, shall also resolve the issue of preferential rights in the terms provided by the Law (as described hereafter).
- The possibility of use by the government, or even the anticipated sale of the asset, during the process of asset forfeiture and prior to the issuance of the final judgment, is provided; with the exception of those assets which the authorities consider to be object of proof. In addition, in the event of asset forfeiture for being declared, the Administrative Authority will not be able to dispose of the assets if, in any pending criminal case, their preservation is ordered for probative purposes.
- The anticipated sale of the asset, subject to the process, shall proceed only if: (i) such disposal is necessary based on the nature of the property; (ii) they represent an environmental or health hazard; (iii) over time they may suffer loss, deterioration or impairment or, in any case their operation may be seriously affected; (iv) its administration or custody becomes unaffordable or causes damage to the treasury; (v) it is fungible, consumable, perishable, self-sustaining or other animal movable property; or (vi) it is an asset that, without suffering material deterioration, depreciates substantially over time.
- The assets may be given in use, deposit or commodatum, when: (i) they allow the public administration to obtain a greater benefit than that resulting from their anticipated sale, or such disposal is not considered appropriate prior to the final judgment, and (ii) if they are suitable for a public service. Upon request of the affected person, and once the ownership and lawfulness of the possession of the assets have been proven, they may remain in possession of their owner, possessor or any of their occupants, as depositary; those who remain in possession of the assets may not sale or encumber them.
- The Federal Law provided, regarding the application of the proceeds of the sale of asseasset forfeiture, a first priority right for the reparation of any damage to the victim, and then for the payment of credits secured by the asset; in this case, the Law suppresses this scenario and establishes, as second priority, the payment of disbursements derived from the execution of social programs for crime prevention, programs for public security institutions strengthening and the procuration of justice, in accordance with the objectives established in the National Development Plan.
- When the assets are abroad or subject to a foreign state jurisdiction, both the precautionary measure and the execution of the asset forfeiture judgment, will be substantiated through international legal assistance.
The Law has a national character and, unlike the Federal Law, this one will be applicable at the federal and local level.
Although, on one hand, the Law establishes the independence of the special process of asset forfeiture from the criminal procedure, it also determines the illicit act as one of the elements that conditions asset forfeiture. Under this logic, it should be noted that, factually, it is not possible to identify the autonomy or rupture of the criminal procedure referred to both in the Law and in the Constitution, since it does not correspond to a civil judge the determination of the existence or not of an illicit act or a criminal offence, but to a criminal court.
Furthermore, even when the anticipated sale of the specific assets referred to in the Law is contemplated, this applies, in general terms, to those properties, that have the character of perishable or not manageable for the State; and finally, the Law contemplates that, the requirements for the Action to proceed will not be configured, when it is proven that the owner did not know the illicit act related to the asset, and in case of having learned of it, did give timely notice to the authority. In this understanding, as long as the transactions related to properties are conducted with due.