#66: The EPPO is here

On June 1, 2021, the European Public Prosecutor’s Office (EPPO) was launched. The first Dutch European public prosecutor is Daniëlle Goudriaan. Furthermore The Netherlands has two delegated European public prosecutors. A new European institution which can carry out criminal investigations into offences mentioned in Directive 2017/1371 and offences that are inextricably linked to them. So now that the EPPO is active, what can we expect?

First it is interesting to know what the material scope of competence is of the EPPO. Article 22 of the Council Regulation (EU) 2017/1939 (The EPPO Regulation), states that the EPPO shall cover three different aspects of criminal conduct. First, EPPO focuses on offences affecting the financial interests of the European Union that are provided in the PIF Directive, Directive EU 2017/1371, which are implemented in the 22 participating Member States. Second, the Regulation focuses on participation in a criminal organisation, as long as the organisation is focusing on committing PIF offences. Last, the Regulation covers criminal offences that are inextricably linked to crimes affecting the financial interests of the European Union.   

The Directive has two provisions that define the PIF offences. In each case, the offence covers fraudulent conduct that damages the financial interests of the European Union (EU). The PIF crimes are focused on procurement funds, VAT and corruption. For VAT related crimes the crime should have been taken place in at least two participating Member States and have a tax damage of at least € 10.000.000,-.

The Directive requires these offences to be transposed into the legislation of the Member States as early as 2019. The Netherlands did not make any substantive changes to the criminal law provisions because this was not necessary. Only the penalty for embezzlement has been increased, as a result of which this has also become an offence for which pre-trial detention is possible.

For a good understanding of the EPPO powers and division of tasks, it is important to have an overall picture of the organisation. The EPPO has a central and a decentralised level. At the central level, there are permanent chambers consisting of a number of European prosecutors, who, among other things, supervise and control the cases. The decentralised level consists of delegated European Prosecutors (EDP’s) from the Member States. The delegated prosecutors investigate and prosecute offences in their home Member State as they are familiar with the local law over there. The delegated prosecutors thus play an important role in the investigation and prosecution. Incidentally, these delegated prosecutors are also members of the public prosecutor’s office in the Member State in question.

The competence of the EPPO is stated in Article 23 of the Regulation. The EPPO is competent when the offences, stated above, are committed in whole or in part in the territory of a Member States or by a national of the Member State, provided that that Member State has jurisdiction over the offence or in specific cases also outside the territory of the Union.

In principle, a case is brought and tried by a delegated European Prosecutor from the Member State where the centre of gravity of the criminal activity is located or, if several related offences have been committed, the Member State where most of those have been committed. In principle, therefore, the territoriality principle is adhered to. However, whether this can always be properly determined at the start of an investigation is questionable. An investigation can also develop in the course of time, or apply a certain focus; will the place of prosecution and the EDP then change?

It Is possible to deviate from this criteria for the location of prosecution. The following criteria can be used to deviate from this:

(a) the habitual residence of the suspect or accused;

(b) the nationality of the suspected or accused person;

(c) the place where the greatest financial loss was suffered.

It is unclear whether a defendant himself can request that the case is transferred to another delegated prosecutor from another Member State. Moreover, it seems that the EPPO will often be charged with cross-border cases involving defendants from different Member States. In our view, this could lead to discussions about where the prosecution should take place. The permanent chamber has the power to refer, merge or split a case. We believe that a defendant should also be able to turn directly to the permanent chamber for the referral, joining or splitting of a case. But what criteria are to decide on this is not clear.

Delegated prosecutors act partly on the basis of the powers of national law. The Dutch EDPs are thus bound by the Code of Criminal Law and the Code of Criminal Procedure. However, this does not apply to policy rules and instructions. In this respect, the EPPO is a completely independent and autonomous body. This means for instance that the EPPO is not bound by the Dutch policies on transactions of a criminal case. The EPPO is autonomous in this.

The advantage of the EPPO is mainly that it does not have to make requests for judicial assistance to other Member States – which in practice is still time-consuming – but that a delegated prosecutor can informally seek the assistance of a delegated prosecutor in another Member State who can exercise the investigative powers on the basis of national rules. This is not the case for arrest warrants and surrender warrants but only for investigation warrants.

This intensive cooperation between delegated European officers of the EPPO also requires the necessary efforts of lawyers, because now that the prosecutors are united at a European level and thus have specialist knowledge of the law within each Member State, a good European network within the legal profession is just as important. Cooperation is therefore necessary to defend the rights of defendants at the European level.

Do you have any questions about the above or would you like to exchange views? Please contact boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl.

#65: Preaching to the converted

The money laundering provisions in Dutch law are quite an effective weapon for prosecutors. In many fraud cases there is a suspicion of money laundering, preferably a suspicion of money laundering with an unidentified predicate offence. In that case, based on the emerging case law, the suspect may be required to provide a statement about the origin of the funds. Although the prosecution sometimes seems to forget, this does not mean that the suspect has to provide evidence for his innocence. And it also does not mean that the Public Prosecution Service can sit back and relax and not conduct any investigation themselves. No, the Public Prosecution Service must investigate independently.

That is also the opinion of the Rotterdam District Court. In its judgment of March 22, 2021, the District Court dwelled on the test framework developed in case law for money laundering with an unidentified predicate offence. The prosecution took the position that the suspect’s statement about the origin of the funds was not sufficiently verifiable. This sounds familiar to many lawyer in the fraud practice. After all, the Public Prosecution Service often makes this claim. The idea arises that the Public Prosecution Service takes this position in order to prevent it from having to investigate the statement – in accordance with the step-by-step plan of the Supreme Court (as explained in Lawlunch #62), or even from having to conduct more far-reaching investigations.

In this particular case the court finds that part of the provided statement by the suspect on the source of the funds can be investigated, however a concrete name of the person from whom the money was received is missing. Nevertheless, the court rules that this partial non-verifiability of the statement does not lead to the conclusion “that it cannot be otherwise than that the money derived from any crime” as money laundering can be proven. In doing so, the court emphasizes that it is not up to the suspect to prove that the money did not come from crime.

The court further deals with five points that are involved in the assessment of the suspect’s statement:

• The failure to provide a sufficient explanation of the origin of the money, in conjunction with the presumption of proof, may lead to the conclusion that it cannot be otherwise than that the money derived from crime.
• The presumption of proof in this case consists for a large part of facts and circumstances the suspect has no knowledge of. Therefore, no statement about these can be required either.
• According to the court, the requirements for the verifiability of the statement are related to its concreteness and probability.
• In the assessment of the statement, it also plays a role whether the statement made by the suspect is possibly influenced by information that the police have disclosed.
• According to the court “further investigation into the origin of the money should not depend solely on the statement of the suspect.”

It is very welcome that the court expresses itself in such detail on the assessment of the verifiability of the statement. This is the only way to stimulate the Public Prosecution Service to not just always randomly state that the statement of the suspect is not sufficiently concrete and verifiable. After all, that is partially dependent on other available material and on the facts and circumstances that emerge from the investigation. The Public Prosecution Service – also in the Netherlands – therefore cannot just “sit back and relax” in such an investigation, but has an obligation to investigate the origin of the funds independently of the suspect’s statement.

This consideration of the court is welcomed by the criminal defense lawyers in the Netherlands. They don’t need to be convinced of this consideration, that would be preaching to the converted. Well, that leaves the Public Prosecution Service.

Do you have any questions about the above or would you like to exchange views? Please contact boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl.

#64: An exciting read

A case file usually consists of documents, statements, reports of wiretaps and other pieces of evidence. These items of evidence are often summarized in official acts and accompanied by conclusions of the reporting officers. In practice, we often see official acts that read like an exciting boys’ book. This as a result from far-reaching assumptions and presumptions that are not supported by the evidence. Assumptions and conclusions are not evidence in itself. Nothing new thus far. But it remains an important point of attention, as a recent Supreme Court decision also shows.

In the case at hand, the defendant was convicted by the court for money laundering because, according to the court, the defendant knew that sums of money derived from a crime. The court justified this judgment by referring to an official report of a police officer. This report contained a summary of tapped telephone conversations but also conclusions of the officer about what the contents of the conversations would show with respect to the knowledge of the suspect about the criminal origin of the money. In cassation this manner of using ‘evidence’ is objected. This is confirmed by the Supreme Court. According to the Supreme Court, this method of reasoning is inadmissible. Furthermore, a lesson on the use of evidence is provided.

Pursuant to Article 359, paragraph 3, of the Dutch Code of Criminal Procedure, a conviction must be based on evidence which contains the facts and circumstances. These means of evidence must be stated in the judgement or in the supplement to it. Another option is for the court to indicate the facts and circumstances in the judgement in sufficient detail, indicating the means of evidence from which these facts and circumstances are derived. The pieces of evidence that are used to substantiate the judgement must have been discussed during the court hearing.

The Supreme Court ruled that in this case the court used a statement of an official that contains conclusions that are inadmissible for the evidence. A judge must independently reach certain conclusions based on the underlying facts. It is not sufficient for the court to only consider that it agrees with the interpretations and conclusions of the reporting officer. The court has an independent task in drawing certain conclusions based on the facts instead of conforming unreasonably to conclusions of an official.

This judgement not only clearly indicates once again how a verdict or judgement must be substantiated with respect to the use of evidence. It is also an important point of attention for the defense: do not be misled by the interpretations and conclusions of the reporting officers and always assess independently whether the facts can support the conclusions. Also encourage the prosecution and the judge to do so. Always form your own opinion about the facts and circumstances, because a exciting boys’ book might as well be fiction.

Do you have any questions about the above or would you like to exchange views? Please contact boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl.

#63: Factory of lies

The fallibility of memory. It is a theme that comes up a lot in criminal cases. Especially if a witness has made an incriminating statement against a suspect. How reliable is that statement based on the memory of that witness? In practice, it turns out that the memory simply is not so accurate. A memory can become distorted in the course of time under the influence of many factors. During a recent TV program someone stated: “There is no bigger lie factory than the memory”. That is spot on. And if that is the starting point, it seems no more than logical to let the defense interview witnesses who have made an incriminating statement, without setting specific further requirements to the request to cross-examine such a witness. The ECtHR thinks so too, by the way.

On 4 July 2017, the Dutch Supreme Court rendered a judgment with an overview regarding the requirements to be imposed on witness requests in light of ECtHR case-law. The Supreme Court ruled that in the Dutch criminal procedure a request to summon and hear witnesses should be motivated by the defense in order to enable the court to assess the relevance of that request. This obligation applies to both defenses witnesses and witnesses of the prosecution. No distinction is made between the two. The Dutch Supreme Court does note that the court must always make sure that the procedure as a whole complies with the right to a fair trial guaranteed by Article 6 ECHR. The Supreme Court has ruled that the judge (after an earlier rejection of a request) will – if necessary ex officio – still proceed to summon and interview witnesses at a later stage.

In practice, however, requests to cross-examine a prosecution witness are rejected if the judge does not consider the grounds for the request adequate. This was the case in the recent judgment Keskin v. the Netherlands. The ECtHR ruled that this situation constitutes a violation of Article 6 of the ECHR. The ECtHR held: “The Court takes this opportunity to reaffirm the general principles relating to the right of an accused to examine or have examined witnesses against him or her, as set out in paragraphs 44‑45 above, from which it follows that the interest of the defence in being able to have those witnesses examined in its presence must in principle be presumed (see also paragraph 60 above).” In other words, the right to cross-examine a prosecution witness is paramount. Thus, the defense should in principle be given the opportunity to interview such a witness, while the Dutch Supreme Court interpretation is that the defense will not be granted that opportunity unless the conditions are met.

It seems that this judgment of the ECtHR will have to be answered by an adjustment of Dutch threshold. In any case, the defense will certainly have to make use of this specific decision. In which way the Dutch jurisprudence will adapt based on this “slap on the wrist” and how it will implement the new criteria will become apparent. Advocate General to the Supreme Court Spronken wrote quite strikingly: “A national legal system reacts to supranational case law like a body to an organ transplant: the first reflex is that of rejection and thereafter the foreign organ is assimilated into the body as well as it can be done.” Indeed, the Dutch Supreme Court has shown quite a tendency to hold a lower standard than the minimum defense rights guarded by the ECtHR. In our view, this judgment does not allow that to be a serious option. The addition in the July 4, 2017 judgment that ex officio decisions can be made to prevent a violation of Article 6 ECHR could already provide a good opening for this in everyday practice. Do you have any questions about the above or would you like to exchange views? Please contact boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl.

#62: The burden of proof in money laundering cases

In several Lawlunches we addressed the topic of money laundering. While the jurisprudence in the Netherlands seems clear and in some instances is accompanied with a step-by-step plan of the Supreme Court, it keeps causing problems. In practice, it seems difficult for the prosecution not to shift the burden of proof in money laundering cases. No matter how magisterial, apparently the Supreme Court’s jurisprudence offers (too) much temptation to shift the burden of proof to the suspect when there is a suspicion of money laundering with an unknown predicate offence. Unfortunately, this also counts for some courts. The Supreme Court holds on to the fact that the burden of proof remains with the prosecution and cannot shift to the suspect.

Case law shows the following step-by-step plan that a court must follow in case of a money laundering suspicion (step 1-4):

1. The first step concerns the question whether there is any direct proof of a predicate offence. If there is, the element “derives from any criminal offence” can be proven on that ground and the following step plan is no longer relevant.
2. In the absence of any direct evidence of the predicate offence, the question is whether there is any evidence of facts or circumstances that justify an evidentiary presumption of money laundering. These facts and circumstances often consist of so-called money laundering typologies: objective circumstances that, according to experience, indicate money laundering. The prosecution should provide these facts and circumstances.
3. If an evidentiary presumption of money laundering exists, the suspect may be required to give a statement for the (legal) origin of the object. This statement must be concrete, more or less verifiable and not highly unlikely in advance.
4. If the statement is considered to meet all these requirements, it is the task of the prosecutor to further investigate the alternative (legal) origin of the object, as indicated in the statement.

It often goes wrong after step 3. Because, the fact that such an explanation may be required of the suspect does not mean that it is up to the suspect to make a plausible case that the object did not originate from crime. If the suspect provides an explanation that is concrete, verifiable and not highly improbable in advance, it is up to the prosecutor to further investigate this explanation. It is then up to the judge to assess whether, based on this statement and the additional investigation, there is sufficient evidence to conclude that the object originated from any crime.

The above also means that the suspect cannot be required to provide underlying documents, such as bank documents, with his statement. This was already ruled by the Supreme Court in the 18 December 2018 ruling. The Supreme Court ruled that it also does not matter in that case whether or not the suspect would have made the commitment to provide the documents. It simply cannot be expected of the defendant and, more importantly, the failure to comply with that undertaking cannot contribute to any evidence of money laundering.

On 2 February 2021 the Supreme Court reiterated that line. In this case the defendant gave an explanation of the origin of the suspected deposits. He explained that there were redemptions of amounts of money he had withdrawn in cash and lent out. In addition, he explained that part of it concerned funds from an inheritance on a foreign account, which he withdrew from there and subsequently deposited. He also stated that the bank statements in the file are incomplete because they do not show the cash withdrawals and that the bank statements from the foreign account are missing.

The court ruled that the defendant did not provide a concrete, verifiable and not at all highly improbable explanation about the origin of the amounts, because he did not submit the bank statements and receipts. The Supreme Court finds that the court did not give sufficient reasons for its judgment, because the defendant’s statement was concrete and it was possible to investigate it further. The Supreme Court concludes that the court’s judgment was not adequately reasoned and remands the case back to the court.

Unfortunately, this state of affairs is not an isolated case. In practice, the prosecution goes to great lengths in demanding proof from the suspect instead of investigating the statement itself. In practice this leads to unnecessary procedures, which unfortunately sometimes go all the way to the Supreme Court (and back again) to get justice.

Do you have any questions about the above or would you like to exchange views? Please contact boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl.

#61: How (not) to patch up flawed evidence

The practice of the right to interview witnesses has, over the years, been the subject of many litigation procedures in the Netherlands. The European Court of Human Rights (ECHR) also decides upon this matter on a regular basis. The case law of the ECHR offers guidance on how national judges should deal with these issues. But the decisions of the national (lower) courts are not always in accordance with the ECHR standards. This also applies to the case which is nationally known as the ‘chalet murder’. In this case the Dutch Supreme Court had to decide whether a statement of a witness who was not interviewed by the defense can be used as supporting evidence for a statement of another witness who was also not interviewed by the defense.

Earlier in this case, the court of appeal answered this question affirmative. According to the court of appeal the evidence is not decisively based on the statement of the witness who was not questioned, since the evidence is based on “two independent, incriminating statements”, “which mutually support each other”.

The Supreme Court however overturns this decision in the recent decision of 12 January 2021. The Supreme Court decided that if the conviction is (partly) based upon statements of several witnesses who could not be interviewed by the defense, the aforementioned supporting evidence should be found in other evidence than those statements. The Supreme Court refers to the judgment of the ECHR in the case of Schatschaschwili v. Germany. Partly on the basis of this judgment, the Dutch Supreme Court provided the “roadmap” for the right to interview witnesses in the national context in its judgment of 4 July 2017.

The consideration from Schatschaschwili v. Germany that is particularly relevant is the following:

“In its judgment in Al-Khawaja and Tahery the Court addressed the requirement of the existence of sufficient counterbalancing factors to secure a fair and proper assessment of the reliability of the evidence in the context of cases in which convictions were based solely or to a decisive extent on the evidence of absent witnesses.”

In the present case on the ‘chalet murder’, the court of appeal found that the defense was not able to cross-examine the witnesses, despite their request to do so. Although the court of appeal has ruled that the conviction is not based to a decisive degree on the absent witnesses, the Supreme Court finds that the opposite appears from the reasoning of the court of appeal. The Supreme Court does not accept this, as the decision of the court of appeal implies that the supporting evidence of a non-interviewed witness can (also) be found in a statement of another non-interviewed witness. The Supreme Court overturns the decision and refers the case back to the court of appeal.

In our opinion, this decision of the Supreme Court is correct. The case involves evidence that is not considered sufficiently reliable without supporting evidence. The reliability cannot then be created with other equally flawed (supporting) evidence.

Do you have any questions about the above or would you like to exchange views? Please contact boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl.

#60: Bring on 2021!

In last years holidays greeting we wrote that ‘we are curious of what 2020 has in store for all of us’. Well, that became apparent quite clear early on in the year. The pandemic has impacted all of our personal lives tremendously. And we have shown to be resilient. As did the law.

Throughout the pandemic, lawyers all across the world have been working creatively to keep on providing legal assistance at the highest standards. Various interesting developments have taken place still showing opportunities and inspiration, despite the pandemic. With the efforts all around the world to turn the tides we are confident 2021 will continue to bring opportunities and inspiration.

We wish you all happy holidays and hope you are able to use this time to recharge to start the new year with renewed energy and enthusiasm. We look forward to be in touch with you all in the new year!

#59: Dutch settlement policies

It is well known that settlement procedures in the Netherlands are not bound by restrictive rules. A lot comes down to the discretion of the Dutch Prosecutors’ Office (DPO). Of course the DPO has set out some policy rules which are guiding in informal talks with the DPO. As of 4 September 2020, a new designation order has come into force regarding settlements out of court entailing large amounts of money,  so-called “high transactions”. This designation order has replaced the Designation Order for High and Remarkable Transactions, which entered into force in 2008. What has changed?

The new designation order is a response to recent criticisms on transactions entered into by the DPO. The complaint is that a judicial review is missing. The Minister of Security and Justice has announced that a legal regulation for this will be drawn up. In anticipation of the statutory regulation, the College of Procurators General in coordination with the Minister decided to issue an amended designation for high transactions which is evident from a letter from the Minister dated 29 June 2020. 

The most important change in the Designation of High Transactions is that transactions will from now on be assessed by an independent committee and will no longer be submitted to the Minister of Justice and Security. The committee tests the transaction proposal marginally on the basis of a substantiated transaction proposal, a statement of facts including the applicable penalty provisions and the draft press release. There is also a possibility to hear the defence. On the basis of this, it is assessed whether, in view of all the circumstances of the case and with due observance of the principles in the Designation, the DPO could have reasonably decided to enter in this settlement. The committee then issues an opinion to the College of Procurators General.

The committee consists of a former attorney at law, a former judge, a professor of criminal law and criminal procedure and former officers of the judiciary, in varying composition. A proposed transaction is assessed by three members. From now on, the minister is officially not involved. We do not yet know which members will be on this committee.

This new working method also provides various opportunities for the defence. Whereas in the past the defence was often handed over to the “whims” of the case officers when it comes to achieving a transaction, the committee now offers an entrance to have a transaction assessed on reasonableness. We believe that the defense should also be given the opportunity to present its case to this committee, so that it can assess whether a case qualifies for a transaction, even if the case officers initially believe that it is not.

Another noteworthy change is that the criteria for when a transaction qualifies as a high transaction have changed without further explanation. The threshold value for a high transaction has been raised from € 50,000 to € 200,000 for the penalty component. For the total transaction amount this has been increased from € 500,000 to € 1,000,000. The advantage for defending these higher threshold values is that a press release does not have to be issued for transactions that fall under this category. The DPO therefore has more freedom to independently enter into transactions below these thresholds.

The designation of high transactions therefore provides a slightly different transaction landscape than the current one and also offers opportunities for the defence on some points.

Do you have any questions about the above or would you like to exchange views? Please contact boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl.

#58: It is not always smoke and mirrors

Although suspects should be held innocent until proven guilty, a suspect is not always treated this way. Not by the government and not by society. This is a heavy burden that suspects have to bear. The apparent idea that where there is smoke, there will also be fire, plays a role in this. This even occurs if the evidence is flawed at first sight. A good defense is therefore of great importance to make the image tilt. This takes time, a lot of time, and is therefore costly. If the defense succeeds in stopping the case or to achieve an acquittal, there is the possibility to get the lawyer’s costs reimbursed on the basis of article 530 of the Dutch criminal procedural code (CPC). Only to ease the pain a bit then, because the actual damage is greater of course.

This compensation procedure provides a lot of room for discussion. For instance, a recent procedure concerned the question whether ‘a case’ was eligible for compensation. The investigation showed all the symptoms of a penal case, but the Public Prosecutor’s Office had stopped the investigation before it had registered it as a case in the systems. The Public Prosecutor therefore stated that this was no ‘case’ in terms of article 530. Fortunately, there was a clear judicial decision about this. In such a situation, as well, the case ended and costs are eligible for reimbursement.

Another common discussion concerns the fees charged by the lawyers and the time spent on the case. As a rule, the Public Prosecutor’s Office feels that the fees are too high and that too much time has been spent on the case. Although in some cases judges go along with this, there are also judges who do not allow themselves to be tempted to do so. This is also the case with the District Court of The Hague in a recent judgment. And the court also explains why.

In this case the court fully recognizes that this was an investigation that has been very laborious for the defense. It concerned an investigation into possible fraud in the form of forgery and fraud when applying for subsidies for innovative greenhouse construction. The investigation was lengthy – 2014 to 2019 – and extensive and ended in an acquittal for the person involved. According to the court, it also involved complex administrative, financial and technical matters. It is this nature of the case that the court takes into account when deciding to what extent the requested compensation is fair.

The court ruled that it should be cautious in its assessment of the hourly rates used. These do not appear unreasonable to the court, also in view of the above and the fact that the case required special specialization on the part of the counsel. In this specific case, assistance was provided by several lawyers. The District Court finds this understandable and finds that these costs are also eligible for reimbursement: ”The District Court does not consider it unfair in this case to also fully reimburse the costs involved. In addition, in the case of a long-term investigation, it is not uncommon for more hours to be spent on file research, because to a certain extent a lawyer has to re-read the case after the investigation – as in this case – has come to a standstill for some time.”

The court also understands that coordination has had to take place between the lawyers of the co-defendants. The District Court considers this: “To the extent that work has been divided between the counsels, such as the submission and substantiation of investigation requests, the questioning of witnesses and the preparation and presentation of the defense in court, it has become plausible that this has led to efficiency and time savings and, ultimately, cost savings. The court therefore considers it fair to also reimburse the costs involved in consultation with the counsel of the co-defendants”.

With the exception of a number of limited reductions, the court grants almost the entire request for compensation. Although the person concerned would undoubtedly have preferred to have been spared the investigation entirely, this can still ease the pain.

Do you have any questions about the above or would you like to exchange views? Please contact boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl.

#57: Colored laundery

The doctrine of money laundering knows many complex issues. Issues that can be addressedd for example are: when is there a casual link between the predicate crime and the object that has been laundered? And if money has been laundered when does it qualify as illegally obtained gains which can be confiscated? Or when can an action be qualified as an act of concealment? These issues are frequently discussed by us. However, one aspect of the money laundering problem has not yet been discussed often. It concerns the blending problem: what if ‘white’ money mixes with ‘black’ money? A recent judgment of the Supreme Court gives reason to discuss this topic.

In the underlying case the Court of Appeal established that approximately half of the turnover was not accounted for and was not involved in the levying of corporate income tax and sales tax. This means that the tax that was not paid derives from a crime and can in principle be laundered. The Court of Appeal also established that there was a mixture of legally obtained and illegally obtained funds. In any case, it was established that part of the cash that was kept off the books was brought to Switzerland. Loans were subsequently granted with this money and real estate was purchased; these were allegedly acts of concealment on the basis of money laundering. The Court of Appeal therefore considers all unjustified turnover as “deriving from crime”.

The question is whether all non-responsible turnover was obtained from crime or just the part that was not taxated? First of all, the Supreme Court finds that assets that were made available as a result of tax evasion can be regarded as derived from crime. This is therefore not the entire turnover that was kept out of the books but only the amount that should have been paid in tax. Subsequently, the blending theory comes into play. In case assets that derive from crime are mixed with assets obtained through legal activities, the mixed assets can be regarded as ‘partly’ derived from crime. The Supreme Court concludes:

“The findings of the court of appeal cannot therefore support the conclusion of the court of appeal that “all turnover that was kept outside of the book” can be regarded as “deriving from a crime”.”

It is just that the part that was made available as a result of tax evasion. However, this part was mixed with the turnover and could therefor be laundered as part of this turnover derived from a crime.

It is noteworthy, however, that the Supreme Court subsequently came to the conclusion that although the plea was rightly put forward, this could not lead to cassation. The Supreme Court ruled that, despite of the Court of Appeal’s consideration, it was proved that a considerable sum of money can be regarded as derived from crime and that, also in view of the other circumstances of the case, the accused has insufficient interest in setting aside the judgment under appeal and reopening the case.

It is difficult for us to resign ourselves to this judgment. In fraud cases, the amount laundered often plays a role in the level of punishment. It makes a big difference whether ‘all’ unjustified turnover from crime has been obtained or ‘only’ the portion that has not been paid to the Tax and Customs Administration.

However, the judgment of the Court of Appeal has not been published, so it cannot be ascertained to what extent the amount laundered played a role in the level of punishment. In our view this probably had some effect which would have made cassation obvious to us.

Do you have any questions about the above or would you like to exchange views? Please contact boezelman@hertoghsadvocaten.nl or boer@hertoghsadvocaten.nl.