Insights

In a judgment delivered by the Criminal Court (per Madam Justice Consuelo Scerri Herrera) on 23 September, 2021 in the names Ir-Repubblika ta’ Malta vs X and Y^[1], whilst revoking a decree that ordered a temporary Seizing and Freezing Order against one of the accused, the Court went to great lengths to explain the purpose behind a freezing order and the function it is designed to fulfil.

In these proceedings, the Attorney General filed an application requesting that the decree of the first court that had ordered the issuance of a Freezing Order in terms of article 5 of the Prevention of Money Laundering Act (Cap. 373 of the Laws of Malta; the “PMLA”) with respect to the first accused company, but rejected such a request with respect to the second accused (who was the Head of Compliance of the accused company), and ordered instead the issuance of a temporary Seizing and Freezing Order in terms of article 36 of the Proceeds of Crime Act (Cap. 621 of the Laws of Malta; “POCA”) be revoked (and that whilst the freezing order in respect of the accused company be confirmed a freezing order be also issued against the second accused).^[2]

According to article 5 of the PMLA:

“5(1) Where a person is charged under article 3, the court shall at the request of the prosecution make an order –

1. attaching in the hands of third parties in general all moneys and other movable property due or pertaining or belonging to the accused, and
2. prohibiting the accused from transferring,  pledging, hypothecating or otherwise disposing of any movable or immovable property: Provided that the court shall in such an order determine what moneys may be paid to or received by the accused during the subsistence of such order, specifying the sources, manner and other modalities of payment, including salary, wages, pension and social security benefits payable to the accused, to allow him and his family a decent living in the amount, where the means permit, of thirteen thousand and nine hundred and seventy-six euro and twenty-four cents (13,976.24) every year: Provided further that the court may also –

1. authorise the payment of debts which are due by the accused to bona fide  creditors and which were contracted before such order was made; and
2. on good ground authorise the accused to transfer movable or immovable property.”

Insofar as the temporary Seizing and Freezing Order is concerned, article 36(1) of the POCA states, in almost identical terms as for the Freezing Order, that, where a person is charged with a relevant offence, the Court shall at the request of the prosecution issue a Seizing and Freezing Order (although it permits the freeing of €600 every 15 days instead and clarifies, unlike the case of the Freezing Order, that “in no event, however, may such payments be made from funds which there is reasonable cause to believe were taken unlawfully from victims of crime who would stand to recover such property if the accused is convicted”).

Admittedly, both orders are couched in very broad terms and seem to apply to absolutely all the moneys and property belonging to the accused.  Having heard the parties submissions, however, the Criminal Court immediately sought to set some limits on the breadth of these provisions and observed that:

“Illi l-ghan ta’ Ordni ta’ Iffrizar huwa sabiex izomm lill-imputata, mixlija bil-kummisjoni ta’ reat rilevanti jew reat ta’ hasil ta’ flus milli tiddisponi minn dawk il-flejjes jew propjeta’ li l-provenjenza u l-uzu ta’ l-istess tkun gejja minn attivita’ kriminali u dan fl-interess tal-kollettivita’.” (“that the purpose of a Freezing Order is to stop the accused, who is charged with a relevant crime or the crime of money laundering, from disposing of the monies or property the provenance and use of which is derived from criminal activity, and this in the interests of the community.”)

The Court also referred to the judgment delivered by the First Hall Civil Court (in its Constitutional Jurisdiction) in the lawsuit in the names of Angelo Zahra vs Avukat Generali^[3] in which the Court observed that: “Ordni bhal dan jissarraf f’mizura procedurali kawtelatorja, temporanja u mehtiega, sakemm jintemmu l-proceduri kriminali li tahthom ikun inghata dak l-Ordni” (“an order such as this translates into a precautionary procedural remedy, which is temporary and necessary, until the criminal proceedings in terms of which the order is issued, are completed.”).  In other words, the ultimate aim is the confiscation of the criminal proceeds – all this is done so that if the accused is found guilty all assets that are the fruit of some criminal activity are confiscated in favour of the State.

The legislator also catered for the eventuality where an accused may have actually already spent the proceeds or fruits of the criminal activity, and states that:

“3(5)(b) Where  the  proceeds  of  the  offence  have  been dissipated or for any other reason whatsoever it is not possible to identify and forfeit those proceeds or to order the forfeiture of such property the value of which corresponds to the value of those proceeds the court shall  sentence  the  person  convicted  or  the  body corporate,  or  the  person  convicted  and  the  body corporate in  solidum,  as  the  case  may  be,  to  the payment of a fine (multa) which is the equivalent of the amount of the proceeds of the offence. The said fine shall be recoverable as a civil debt and for this purpose the sentence of the court shall constitute an executive title for all intents and purposes of the Code of Organisation and Civil Procedure.”

So the bottom line is that if the proceeds of crime have been dissipated by the accused, the accused will not be allowed to get away with this and will have a fine imposed that is equivalent to the proceeds of the offence committed.

Applying these principles to the case at hand, where the Court remarked that at such a preliminary stage where the Court of Criminal Inquiry had not even decided yet whether the persons concerned should be charged, and where the prosecution itself testified that none of the proceeds of crime allegedly committed by the first accused company were in the possession of the second accused, the Court held that the accused’s assets should not be seized at this stage.

According to the Court:

“Ordni tal-Iffrizar fil-konfront tal-imputata mhux ser iservi ta’ ebda salvagwardja mit-telfien tar-rikavat mir-reat u dan stante li ma jinsabx fil-gid patrimonju taghha u ghalhekk jista’ jservi biss ta’ pregudizzju kbir ghaliha bl-indhil ta’ l-Istat fl-uzu ta’ propjeta’ akkwistata minnha b’mod legittimu, liema ndhil ikun sproporzjonat mill-ghan legittimu li talvolta l-hrug ta’ din l-Ordni sabiex tissalvagwardja l-interess pubbliku jew generali.” (“A Freezing Order with respect to the accused will serve as no safeguard against the loss of the proceeds of crime and this in view of the fact that these proceeds are not in her patrimony, and will thus only be a cause of huge prejudice to her as a result of the interference of the State in the use of property that is legitimately acquired by the accused, which interference would be disproportionate compared to the legitimate aim of such Order, to safeguard the general or public interest.”)

In this regard the Court made reference to the decree issued by the same Criminal Court on the 30 June, 2021 in the names ir-Repubblika ta’ Malta vs X Company Ltd et.  According to the Court, in this particular case, if the Court were to impose such a tough measure (namely a Freezing Order) it would be responsible for a lack of proportionality with respect to the constitutional right of every person to enjoy property and the legitimate aim that the State would be seeking to achieve when there is the forced deprivation of that property.

In conclusion the Court quoted from the judgment in the names George Tabone et vs l-Avukat General in which it was held that:

“any interference must achieve a fair balance between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights. The concern to achieve this balance is reflected in the structure of Article 1 as a whole, including the second paragraph: there must therefore be a reasonable relationship of proportionality between the means employed and the aim pursued” (C.M. vs France decided on 26 June 2001 – 28078/95).”

For the above reasons, and particularly because of the prosecution’s testimony in this case that, according to them, there are no proceeds of the crime that is the merits of the money laundering proceedings, in the accused’s possession, the Court felt that the Attorney General’s request for the issue of a freezing order was not going to serve as a precautionary tool but only as a cause of prejudice towards the accused.

This case draws out a clear distinction between those cases where the accused is allegedly involved in the underlying crime that has generated the proceeds (and where the proceeds are likely to still be in the accused’s possession) and those crimes where, although the accused may still be charged with the actual crime of money laundering on the basis of complicity, the nature of the involvement could be the result of a breach of professional duty, perhaps, but not actual knowing participation in the underlying revenue generating crime.  In this latter case, it is unlikely that any proceeds of the crime would be in the accused’s possession and, therefore, according to the Criminal Court, the main aim of the Freezing Order (being that of ensuring that the proceeds of crime are ‘crystallised’ and frozen, for possible confiscation in the event of a finding of guilt) would not be met.

[1] The names have been anonymised to preserve the confidentiality of the persons’ identity since the judgment is not public.

[2] Article 5(8) of the PMLA provides that “where for any reason whatsoever the court denies a request made by the prosecution for an order under sub-article (1), the Attorney General may, within three working days from the date of the court’s decision, apply to the Criminal Court to make the required order and the provisions of this article shall apply mutatis mutandis to the order made by the Criminal Court under this sub-article as if it were an order made by the court under sub-article (1). The temporary freezing order made under sub-article (7) shall remain in force until the Criminal Court determines the application.”

[3] Decided by the First Hall of the Civil Court (in its Constitutional Jurisdiction) on the 22 October, 2019.