Defensive Measures of the Suspect Against the Freezing of Assets by Order of the Anti-Money Laundering Authority

Legal Insight

October 2024

Christina Kapourani, LL.M. (mult.), PgCert, PhD Candidate

Introduction – Summary: As we have discussed in a previous article (see here), the offense of money laundering (or as commonly known, "money laundering") is provided for under Law 4557/2018, as currently amended. The establishment of this offense requires the commission of a previous criminal act, both in time and substance, called the "predicate offense," meaning the crime from which the property to be laundered is derived. The primary offenses that constitute the major criminal acts are listed in the law (see Art. 4 of Law 4557/2018). In short, money laundering refers to the process by which the traces of criminal acts that generate illicit proceeds are concealed or erased, allowing such proceeds to be later used in the formal economy under a "disguised" form, mixed with legitimate funds. Authorities, as part of their investigations aimed at detecting, preventing, and suppressing money laundering activities, can order measures such as the freezing of bank accounts (including safety deposit boxes, securities, etc.) and the prohibition of transferring any property (movable or immovable), even before an individual becomes formally accused, that is, before any criminal prosecution for an offense has been initiated. One such measure is the freezing order under Article 42, paragraph 7 of Law 4557/2018, issued by the President of the Anti-Money Laundering Authority. Below, we will briefly outline the conditions for imposing this measure and the defense mechanisms available to the suspect affected by the freeze.

Specifically:

I. Conditions for Imposing Freezing Orders under Art. 42, para. 7, Law 4557/2018:

Article 42, paragraph 7 of Law 4557/2018 ("When an investigation is conducted by the Authority, the freezing of accounts, securities, financial products, and the contents of safe deposit boxes, as well as the prohibition of transferring or disposing of any property, may be ordered in urgent cases by the President of the Authority, subject to the terms and conditions provided in paragraphs 1 to 3, provided there are reasonable suspicions as per item d of paragraph 2 of Article 48. A copy of the President's order is immediately forwarded to the competent prosecutor, without impeding the continuation of the Authority's investigation {…}") allows the freezing of bank accounts, securities, safe deposit boxes, and financial instruments in general, as well as prohibiting the transfer of any property, based on an order issued by the President of the Anti-Money Laundering Authority. The conditions for applying this provision are: a) the conduct of an investigation by the Authority to detect money laundering activities or predicate offenses, b) the presence of reasonable suspicions that a predicate offense or money laundering activity has been committed, and c) an urgent situation (e.g., the immediate risk of asset disappearance through successive transfers and concealment of crime traces by the offenders). This measure is applied against a suspect to a) gather information and evidence regarding the commission of predicate offenses and money laundering and b) immobilize the suspect’s assets, preserving them intact and preventing their use, particularly within the financial (banking) system. The effect of the freezing order is the complete legal inability to dispose of or use the frozen assets. In practice, suspects often become aware of the freeze when they are unable to conduct a transaction, typically a banking transaction, before they are formally notified of it. Legally, the freezing may last up to nine (9) months from its imposition for investigative purposes (see the combined interpretation of Art. 42 para. 7 and Art. 36 para. 2 of the Code of Criminal Procedure). For the freezing measure to remain valid after this period, a specific decision by the investigating judge or judicial council, depending on the procedural stage of the case, is required before the deadline expires. In the absence of a specific provision in the Anti-Money Laundering Law, an extension may be granted for another 9 months (Art. 36 para. 2 of the Code of Criminal Procedure).

II. Legal Remedies Available to the Suspect and Conditions for Their Exercise: The suspect affected by the President's freezing order has at their disposal primarily two main legal remedies. Thus, the suspect may, cumulatively, according to prevailing case law:

a) File an appeal under Art. 42 para. 4 of Law 4557/2018 before the competent judicial council within 20 days from the service of the Authority's order, requesting the lifting or limitation of the freeze (for example, because the frozen assets have a lawful origin, such as when they were acquired before the commission of the predicate offense, or because they are not linked to the alleged gain, such as frozen salaries and pensions, or are absolutely necessary for the suspect's livelihood, etc.); and

b) Request the Authority or the judicial council to revoke the issued order due to new circumstances concerning the suspect or their family members. This request can be made at any procedural stage of the criminal trial without any deadline, unlike the aforementioned 20-day appeal period, and may even occur when the deadline has been missed.

This ability of the affected party to defend themselves in two stages (after the service of the order and, in any case, after new information arises) is justified from a practical standpoint, as the collection of new evidence is a particularly time-consuming process and thus very difficult to complete within twenty (20) days from the service of the freezing order. A "new circumstance" may be anything that alters the facts on which the original freeze was based, such as regarding both the likelihood of the unlawful origin of the frozen assets and the validity of the alleged criminal conduct attributed to the suspect. New facts that have been considered include proving the lawful origin of the frozen assets, satisfying the victim in property offenses, and a lack of liquidity to meet subsistence needs (this reason for lifting the freeze is now explicitly provided by law), or the completion of preliminary investigation without prosecution for money laundering.

III. Case Law Examples of Lifting Freezes: Indeed, courts have lifted the imposed freeze when the legal conditions for its imposition were not met. Specifically:

The Court of First Instance of Athens, Decision No. 3216/2019, held that bank deposits with guaranteed lawful origin, clearly reflected in their records, cannot be considered proceeds of money laundering.

The Court of First Instance of Athens, Decision No. 3721/2017, ruled that frozen assets could not originate from criminal activity since they were acquired before the alleged commission of the predicate offense.

The Court of First Instance of Lamia, Decision No. 50/2020, did not maintain the freeze beyond nine months, citing that the frozen assets were mostly acquired long before the predicate offense period.

The Court of First Instance of Thessaloniki, Decision No. 1525/2020, concluded that the conditions for freezing did not exist for the moral instigator since the illegal gain from document forgery did not end up with the instigator.

Lastly, it is common for assets to be unfrozen to meet the suspects' vital needs, as highlighted by the Supreme Court of Appeal, Decision No. 1374/2020.

IV. Conclusion: From the above, it appears that the prosecuting authorities, in practice, take burdensome procedural coercive measures against suspects, often indiscriminately freezing assets of lawful origin or assets necessary for their subsistence. Essentially, the burden of proving the legality of transactions and, thus, the origin of property is shifted to the suspect (or accused if criminal charges are brought). This shift in the burden of proof raises questions about the presumption of innocence. Moreover, it places the burden on the defendant to organize the best possible legal defense and choose suitable remedies that will lead to the release of precariously "immobilized" assets, creating, in turn, a precedent for the substantive disengagement from the criminal dispute.