Bill C-53, An Act to amend the Criminal Code (proceeds of crime) and the Controlled Drugs and Substances Act and to make consequential amendments to another Act, was introduced in the House of Commons on 30 May 2005. Its intention is to provide a reverse onus of proof in proceeds of crime applications involving offenders who have been convicted of a criminal organization offence or certain offences under the Controlled Drugs and Substances Act.(1) The bill provides that a court shall make an order of forfeiture against any property of an offender if the court is satisfied that the offender has engaged in a pattern of criminal activity or has an income unrelated to crime that cannot reasonably account for all of the offender’s property. A court may not, however, make an order of forfeiture against a property that the offender has shown, on a balance of probabilities, not to be proceeds of crime. A court may also decline to make an order of forfeiture against a property if the court considers it to be in the interests of justice.
The bill also amends the Criminal Code(2) to clarify the authority of the Attorney General of Canada in regard to proceeds of crime, and to clarify the definition “designated offence” in regard to offences that may be prosecuted by indictment or on summary conviction. It also amends the Controlled Drugs and Substances Act to clarify the authority of a justice under that Act to issue warrants in respect of investigations of drug-related money laundering and the possession of property obtained by drug-related crime.
The current proceeds of crime provisions in the Criminal Code, found in Part XII.2, sections 462.3 to 462.5, have been in place since 1989. They provide that, in order to obtain an order of forfeiture, the Crown must prove, on a balance of probabilities, that property is the proceeds of crime and that the property is connected to the offence for which the person was convicted. If no connection between the offence(s) and the property is established, the court may, nevertheless, order the forfeiture of the property if it is satisfied beyond a reasonable doubt that the property is the proceeds of crime.
The scope of the proceeds of crime provisions was broadened to apply to most indictable offences under federal legislation, as part of the criminal organization and law enforcement legislation that came into force in 2002. While proceeds of crime applications are not limited to organized crime situations, they are especially relevant to combating this form of criminality.
The Royal Canadian Mounted Police (RCMP) operates the Proceeds of Crime (POC) Program. The program is directed at identifying, assessing, restraining, and forfeiting illicit and/or unreported wealth accumulated through criminal activities. It relies on various provisions of the Criminal Code, Controlled Drugs and Substances Act, Customs Act,(3) Excise Act,(4) Proceeds of Crime (Money Laundering) and Terrorist Financing Act,(5) and Seized Property Management Act.(6)
The objectives of the POC Program are to: remove the incentive from committing crime; identify, assess, restrain, and forfeit illicit and unreported wealth accumulated through criminal activities; prosecute offenders; restrain and seize assets pending judicial forfeiture; and identify for the courts assets that could not be seized in order to justify the imposition of other judicial penalties, such as fines. In order to carry out these objectives, officers in the POC Program conduct investigations relative to the laundering of proceeds derived from designated offences. The program currently comprises 12 integrated and 2 non‑integrated units. The majority of its resources are invested in long-term organized crime investigations. Although the program runs independent money laundering investigations, most of the projects are conducted in partnership with an investigating team looking into the substantive offence.
The Integrated Proceeds of Crime (IPOC) Program is a national initiative that began in 1996-1997 following the legislative changes of 1989 and the creation of three Integrated Anti-Drug Profiteering units in Montréal, Toronto and Vancouver in 1982.(7) IPOC units include RCMP and local law enforcement agencies, the Department of Justice, forensic accountants and property managers from Public Works, the Canada Revenue Agency and the Canada Border Services Agency. This integration is intended to facilitate a coordinated approach toward removing the incentive for engaging in criminal activities through the seizure of profits from such activities.
Canada’s primary instrument for fighting money laundering is the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. It requires financial institutions and other intermediaries to meet certain standards relating to customer identification, due diligence, and record-keeping and to report suspicious and other financial transactions relevant to the identification of money laundering. In addition, the Act requires the reporting of the importation and exportation of cash or monetary instruments. Under the Act, the penalties for failing to report suspicious transactions include fines of up to $2 million and/or imprisonment for up to five years.
Canada’s financial intelligence unit, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), was created in July 2000 to collect, analyze and disclose financial information and intelligence on suspected money laundering and terrorist activities financing. It has been operational since October 2001. Its primary functions are to receive reports under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act from various reporting agencies (including banks, insurance companies, money services businesses, casinos, accountants and real estate agents), to analyze those reports for information relevant to money laundering and terrorist financing, and to provide identifying information to law enforcement and intelligence agencies. FINTRAC operates at arm’s length from the police and other departments and agencies of government.
In July 2006, Canada will take on the presidency of the Financial Action Task Force (FATF) for one year. The FATF was established by the G7 group of nations in 1989 in response to mounting concerns about the growth of money laundering. In 2001, its mandate was expanded to include terrorist financing. The FATF examines money laundering and terrorist financing techniques and trends, reviews national and international policy efforts and recommends additional measures to be taken. The Task Force is made up of 31 countries and territories and two regional organizations, which represent nations in the European Community and the Arabian Gulf.
The FATF published a series of Forty Recommendations in 1990, which were revised in 2003. They provide a set of counter-measures against money laundering. Each member of the FATF is periodically examined by its peers to assess the effective implementation of its anti-money laundering and anti-terrorist financing measures and to highlight areas where further progress is needed. Canada was last assessed in 1997 and will be reassessed in early 2007.
Ontario has enacted the Remedies for Organized Crime and Other Unlawful Activities Act, 2001(8) to provide civil remedies that will assist in compensating persons who suffer losses as a result of unlawful activities. It is also intended to prevent persons who engage in unlawful activities from keeping property that was acquired as a result of those activities, and to prevent property from being used to engage in certain unlawful activities. The Act states that, in a proceeding commenced by the Attorney General, the Superior Court of Justice is obliged to make a forfeiture order if it finds the property in question is proceeds of unlawful activity. An exception is made where forfeiture would clearly not be in the interests of justice and where there is a legitimate owner of the property. Findings of fact in proceedings under the statute are made on a balance of probabilities, and an offence may be found to have been committed even if no person has been charged with the offence, or the person was charged with the offence but the charge was withdrawn or stayed, or the person was acquitted of the charge.
The mechanics of the operation of the Act were examined in the case of Ontario (Attorney General) v. Chow.(9) In this case, the Crown applied for forfeiture of funds pursuant to the Act, alleging that they were being used in the buying or selling of controlled substances. The application was allowed. The court found that, if the subject monies represented payment in exchange for controlled substances or were intended for the purchase of controlled substances, they were subject to forfeiture under the Act. The statute does not require finding of fault, either criminal or civil, against a person. The Act does contemplate that “legitimate owners” may apply for the property on proof by them as a party to the proceeding that, notwithstanding the nature of the property being proceeds of unlawful activity, the party is a legitimate owner whose property interest is to be protected. While the Act is silent on onus, it would be unworkable for the Crown, as applicant, to disprove a respondent’s ownership interest. In Chow, on a balance of probability, the respondent to the Crown’s application failed to establish a legitimate property interest in the cash and so it was subject to forfeiture.
Chow provides an interesting point of comparison with the proceeds of crime provisions found in Part XII.2 of the Criminal Code and the amendments proposed in Bill C-53. The federal legislation requires a criminal conviction or discharge before property can be the subject of a forfeiture application. In the Ontario statute, however, an offence may be found to have been committed even if no person has been charged with it. In addition, the Criminal Code requires proof beyond a reasonable doubt that the property for which a forfeiture order is sought is proceeds of crime where a connection between the designated offence and the property has not been established. The Ontario Act only requires proof on a balance of probabilities (the civil standard) that the property in question is the proceeds of unlawful activity. Finally, Bill C-53 will reverse the onus of proof (see the discussion of clause 6, below) in certain cases so that the Crown will not have to prove that specific property is the proceeds of crime. In other words, there will be a rebuttable presumption that certain property is the proceeds of crime. Under the Ontario Act, however, the court must always find, on a balance of probabilities, that the property in question is the proceeds of unlawful activity.
In Ontario (Attorney General) v. $29,020 in Canada Currency,(10) a respondent to a Crown application for forfeiture argued that the Ontario forfeiture statute was ultra vires because it was an intrusion into federal jurisdiction over the criminal law under section 91(27) of the Constitution Act, 1867. This position was rejected. The court found that, while the federal forfeiture provisions are conviction-based and part of the sentencing process, the Ontario Act works without regard to criminal convictions and charges. The real purpose of the Ontario statute is to disgorge unlawful financial gains to compensate victims, and to suppress the conditions that lead to unlawful activities by removing incentive. These are legitimate provincial goals. Thus, the two statutes act concurrently, not in conflict.
The other constitutional argument raised in the $29,020 in Canada Currency case was that the Ontario statute violated various sections of the Canadian Charter of Rights and Freedoms. One argument was that the Act violates the section 8 right to be secure against unreasonable search or seizure. The Crown, however, argued that section 8 of the Charter protects only a person’s reasonable expectation of privacy, not property rights. This argument was accepted by the court. The other important Charter allegation was that the Act violated the section 11(d) right to be presumed innocent until proven guilty according to law. Section 11(d) of the Charter requires the state to prove guilt beyond a reasonable doubt, but the Ontario statute only requires proof on a balance of probabilities. The Crown submitted that a person must be charged with an offence for section 11(d) of the Charter to apply. The court accepted this submission and found that a civil forfeiture does not qualify as an offence. This leaves open the question of whether the offence-based provisions in the Criminal Code would be subject to a section 11(d) challenge, although by the forfeiture stage of proceedings the offender has already been convicted on proof beyond a reasonable doubt after having been presumed innocent.
Manitoba has enacted its own civil forfeiture statute. The Criminal Property Forfeiture Act(11) provides that, where a police chief is satisfied that property is proceeds of unlawful activity or an instrument of unlawful activity, he or she may apply to the court for an order forfeiting the property to the government. Proof that the property in question is owned or possessed by a member of a criminal organization is proof, in the absence of evidence to the contrary, that the property is proceeds of unlawful activity. Unless it would clearly not be in the interests of justice, the court must make an order forfeiting property to the government if it finds that the property is proceeds of unlawful activity or an instrument of unlawful activity.
On 7 March 2005, British Columbia introduced the Civil Forfeiture Act.(12) The wording of this bill is similar to that of the Manitoba statute, with proof that a person participated in an unlawful activity being proof, in the absence of evidence to the contrary, that the interest in property that is the subject of the application is proceeds of unlawful activity.
Bill C-53 consists of 16 clauses. The following discussion highlights selected aspects of the bill and does not review every clause.
Subsection 462.3(1) of the Criminal Code currently defines “designated offence,” in part, as “an indictable offence.” Clause 1 amends that definition by replacing the term “an indictable offence” with the words “any offence that may be prosecuted as an indictable offence.” This wording makes it clear that any hybrid offence – i.e., one that may be prosecuted either as an indictable offence or as a summary conviction offence – will be considered a “designated offence” for the purpose of the proceeds of crime part of the Criminal Code. This will serve to eliminate any doubt that only purely indictable offences, or only those that are prosecuted as indictable offences, can be considered to be “designated offences.”
Clause 1(2) reiterates that the Attorney General of Canada has all the powers of the Attorney General of any province in relation to proceeds of crime if the alleged offence is related to an alleged contravention of an Act of Parliament other than the Criminal Code. An addition to subsection 462.3(3) clarifies that the Attorney General of Canada may conduct proceedings in respect of an offence referred to in section 354 (possession of property obtained by crime) or section 462.31 (laundering the proceeds of crime) of the Criminal Code if the alleged offence arises out of conduct that is in relation to an alleged contravention of an Act of Parliament other than the Criminal Code. Thus, for example, if money obtained in breach of the Controlled Drugs and Substances Act is being laundered, the Attorney General of Canada may conduct the forfeiture proceedings. This capacity will be helpful when the alleged offences span provincial or even international borders.
Clause 2 amends the French version of section 462.31 so that it accords with the broad language used in the English version. In English, the section refers to an offence being committed, inter alia, when a person “disposes of or otherwise deals with, in any manner and by any means, any property” knowing that the property was obtained as a result of the commission in Canada of a designated offence. The current French version uses more restricted terms, such as “aliène” and “en transfère la possession.” The amendment broadens the French version by using the words “en dispose” and “prend part à toute autre forme d’opération à leur égard.” The new wording means that any dealings with the proceeds of crime, not merely selling or transferring possession, may lead to prosecution under section 462.31.
The current section 462.32 of the Criminal Code provides for special search warrants with respect to property that falls into the category of proceeds of crime and that is subject to forfeiture under Part XII.2. Section 462.33 provides for the issuance of restraint orders with respect to property that falls into the definition of “proceeds of crime” and is subject to forfeiture under Part XII.2. Section 462.34 provides for an application to a judge for an order returning property seized under section 462.32, revoking a restraint order made under section 462.33, or permitting the examination of seized or restrained property on such terms as the judge may require. Section 462.341 provides that the review applications in section 462.34 apply to a person who has an interest in money or bank-notes that are seized under the Criminal Code or the Controlled Drugs and Substances Act and in respect of which proceedings may be taken for a forfeiture of that property.
Clauses 3, 4, and 5 of Bill C-53 amend sections 462.32, 462.33, and 462.341 to add a reference to new subsection 462.37(2.01). This new subsection, to be added by clause 6 of the bill, will provide for an order of forfeiture in particular circumstances. Details of the changes made in clause 6 are set out below.
Section 462.37 of the Criminal Code deals with the forfeiture of proceeds of crime after an accused person has been convicted or discharged of a designated offence. Subsection (1) provides for an order for the forfeiture of property by the judge imposing sentence when a person is found guilty of a designated offence. If the judge is satisfied, on a balance of probabilities, that any property is the proceeds of crime and that the designated offence was committed in relation to that property, the court shall order that the property be forfeited to Her Majesty. Subsection (2) provides that where, in the proceedings described in subsection (1), the connection between the offence and the property is not established, but the judge is satisfied beyond a reasonable doubt that the property is proceeds of crime, the judge may order its forfeiture. Subsection (3) provides that, where an order should be made under subsection (1), but the property cannot be found after the exercise of due diligence, or the property has been transferred to a third party, or is outside Canada, or has been diminished in value or commingled, the court may, instead of ordering forfeiture, impose a fine of equal value to such property on the offender. Subsection (4) provides a sliding scale for imprisonment in lieu of payment of the fine.
Clause 6 adds subsections 2.01 to 2.07 to section 462.37. Subsection 2.01 provides for orders of forfeiture when a court imposes sentence on an offender convicted of an offence described in subsection 2.02. Subsection 2.02 describes these offences as a criminal organization offence punishable by five years or more of imprisonment, and an offence under section 5, 6 or 7 of the Controlled Drugs and Substances Act – or a conspiracy or an attempt to commit, being an accessory after the fact in relation to, or any counselling in relation to an offence, under those sections – prosecuted by indictment. Section 5 of the Controlled Drugs and Substances Act makes it an offence to traffic in certain substances; section 6 makes it an offence to import and export certain substances; and section 7 makes it an offence to produce certain substances.
When sentencing an offender convicted of an offence described in subsection 2.02, a court will be obliged to order that any property of the offender that is identified by the Attorney General in its application for forfeiture be forfeited to Her Majesty. Before making such an order, the court must be satisfied, on a balance of probabilities, that:
Thus, subsection 2.01 will provide for a presumption that the property of an offender convicted of certain criminal organization and drug offences is to be forfeited to the Crown if the property cannot be accounted for from legitimate sources or the offender has engaged in a pattern of criminal activity. Subsection 2.03, however, provides an offender with the possibility of establishing, on a balance of probabilities, that his or her property is not the proceeds of crime. If this can be done, no order of forfeiture under subsection 2.01 is to be made.
Subsections 2.04 and 2.05 provide details on how a court may determine that an offender has engaged in a pattern of criminal activity. A court must consider the circumstances of the offence for which the offender is being sentenced, as well as any other factor that the court considers relevant. A court, however, shall not determine that an offender has engaged in a pattern of criminal activity unless it is satisfied, on a balance of probabilities, that the offender committed, within 10 years before the proceedings were commenced in respect of the offence for which the offender is being sentenced:
Subsection 467.1(1) of the Criminal Code defines the terms “serious offence” and “criminal organization.” A “serious offence” means an indictable offence under the Criminal Code or any other Act of Parliament for which the maximum punishment is imprisonment for five years or more. A “criminal organization” means a group, however organized, that is composed of three or more persons in or outside Canada that has as one of its main purposes or activities the facilitation or commission of one or more serious offences that, if committed, would likely result in the receipt of a material benefit by the group. A “criminal organization” does not include a group of persons that forms randomly for the immediate commission of a single offence.
A “criminal organization offence” is defined in section 2 of the Criminal Code to mean an offence under section 467.11, 467.12 or 467.13 (participating in the activities of a criminal organization, committing offences for it or instructing the commission of an offence for a criminal organization), or a serious offence committed for the benefit of, at the direction of, or in association with, a criminal organization.
Subsection 2.07 allows a court to decline to make an order of forfeiture against any property that would otherwise be subject to forfeiture under subsection 2.01, if it considers it in the interests of justice. In such a case, the court is to give reasons for its decision.
Section 462.42 of the Criminal Code provides for written applications by innocent third parties for relief from forfeiture under Part XII.2 within 30 days after such forfeiture is ordered. Clause 9 amends this section so that relief from forfeiture can be granted for any property seized under the new subsection 462.37(2.01). In addition, the language of this section is changed to clarify that a relief application may not be brought by a person who is charged with, or was convicted of, a designated offence that resulted in the forfeiture. The current wording simply refers to a person charged with, or convicted of, a designated offence that was committed in relation to the property forfeited.
Section 11 of the Controlled Drugs and Substances Act specifies the information that must be provided to a judge before a warrant of seizure will be issued. Subsection 11(1)(d) states that a judge must be satisfied that there are reasonable grounds to believe that any thing that will afford evidence in respect of an offence under the Controlled Drugs and Substances Act is in a place. Clause 13 of Bill C-53 amends this subsection to add any thing that will afford evidence of an offence in whole or in part in relation to a contravention of the Controlled Drugs and Substances Act, under section 354 or 462.31 of the Criminal Code. Section 354 of the Criminal Code describes the offence of possession of property obtained by crime, while section 462.31 describes the offence of laundering the proceeds of crime. Where either of these offences is alleged to have been committed in relation to a contravention of the Controlled Drugs and Substances Act, a warrant to seize property may be granted under section 11 of that Act.
The Seized Property Management Act is a statute respecting the management of property seized or restrained in connection with certain offences, the disposition of certain property on the forfeiture thereof, and the sharing of the proceeds of disposition of such property. Sections 10 and 11 of this statute deal with the sharing of the proceeds of disposition of forfeited property. Clause 14 amends subsection 10(1)(a) of the Seized Property Management Act so that a law enforcement agency that has participated in the investigation of an offence that leads to the forfeiture to Her Majesty of property, pursuant to the new subsection 462.37(2.01) of the Criminal Code,will be entitled to a share of the proceeds. In a similar vein, clause 15 amends subsection 11(a)(i) of the Seized Property Management Act by adding a reference to property forfeited pursuant to new subsection 462.37(2.01). Section 11 allows the Attorney General of Canada to enter into an agreement with the government of any foreign state respecting the reciprocal sharing of the proceeds of disposition of property that has been forfeited to Her Majesty.
Section 12 of the Seized Property Management Act established the Seized Property Working Capital Account, which is used to pay the expenses incurred in respect of seized and forfeited property. Section 13 of the Act established the Seized Property Proceeds Account, into which are paid the net proceeds from the disposition of any property that is forfeited to Her Majesty and disposed of by the Minister of Public Works and Government Services. Clause 16 of Bill C-53 amends section 14 of the Seized Property Management Act, which deals with the situation where the proceeds of disposition available to Her Majesty from the forfeiture of any property are insufficient to cover the outstanding amounts charged to the Working Capital Account. In this situation, there shall be charged to the Working Capital Account an amount equal to the amount of the shortfall. Clause 16 adds to this section a reference to the proceeds of disposition from the forfeiture of any property pursuant to the new subsection 462.37(2.01).
It has been noted that a number of countries have already reversed the burden of proof in order to combat organized crime more effectively. These countries include France, Great Britain, Switzerland, and Australia. In addition, the action group on money laundering of the Organisation for Economic Co-operation and Development has recommended this step as a means of preventing criminal organizations from enjoying the fruits of their illegal activities.(13)
In Canada, the Canadian Professional Police Association has asked for such an amendment to the Criminal Code for a number of years in order to aid in the battle against organized crime and drug traffickers.(14) Some lawyers, however, have criticized Bill C-53 as a dramatic, and possibly unconstitutional, shift of the normal burden of proof from the prosecution to the defence.(15)
* Notice: For clarity of exposition, the legislative proposals set out in the bill described in this Legislative Summary are stated as if they had already been adopted or were in force. It is important to note, however, that bills may be amended during their consideration by the House of Commons and Senate, and have no force or effect unless and until they are passed by both Houses of Parliament, receive Royal Assent, and come into force.
(1) S.C. 1996, c. 19.
(2) R.S. 1985, c. C-46.
(4) R.S. 1985, c. E-14.
(5) S.C. 2000, c. 17.
(6) S.C. 1993, c. 37.
(7) Supt. Jacques Désilets, “Integrated Proceeds of Crime,” RCMP Gazette, Vol. 67, Issue 2, 2005.
(8) S.O. 2001, c. 28.
(10) [2005] O.J. No. 2820.
(11) S.M. 2004, c. 1, proclaimed in force on 11 December 2004.
(12) Bill 5 (2005).
(13) Alec Castonguay, “Nouvelle arme légale contre le crime organisé,” Le Devoir [Montréal], 31 May 2005, p. A1.
(14) Joël-Denis Bellavance, “Lutte contre le gangstérisme et le traffic de drogue,” La Presse [Montréal], 1 June 2005, p. A7.
(15) Cristin Schmitz, “Proceeds of crime bill tabled,” National Post, 31 May 2005, p. A8.
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