But Five Justices Express Deep Concern as to Civil Forfeiture Regimes

On May 9, in Culley et al. v. Marshall, the Supreme Court ruled that the U.S. Constitution does not require a preliminary hearing in civil forfeiture cases involving personal property for claimants to raise the “innocent owner” defense. Rather, the Court ruled that a “timely” forfeiture hearing affords claimants due process and that no separate preliminary hearing is constitutionally required. Although Culley arose under Alabama law, it has direct consequences for the forfeiture laws of many states, as well as federal civil forfeiture proceedings, in which claimants can raise the innocent owner defense.

It is important to remember that Culley involves personal property: as the Court noted, existing Supreme Court law allows States to immediately seize personal property (i.e., cars, currency, art, jewelry, etc.) subject to civil forfeiture if the property otherwise could be removed, destroyed, or concealed before a forfeiture hearing. Calero-Toledo v. Pearson Yacht Leasing Co., 416 U. S. 663, 679–680 (1974). In contrast, existing Supreme Court law provides that States ordinarily may not seize real property (i.e., land and structures) before providing notice and a hearing. United States v. James Daniel Good Real Property, 510 U. S. 43, 62 (1993). Moreover, States and Congress of course still can craft statutes which afford protections beyond the bare minimum required by the Constitution.

Finally, and more importantly, the dissenting and concurring opinions make clear that the legal and social debates over civil forfeiture practices, and their potential abuse, are far from over.

Continue Reading  Supreme Court:  Innocent Owners of Forfeited Personal Property Must Wait

In our last post discussing the new regulations issued under the Corporate Transparency Act (“CTA”), we suggested that “time will tell whether industry groups will launch lawsuits challenging the Final Rule.”  That time has apparently come: on November 15, 2022, the National Small Business Association (“NSBA”) filed a complaint (“Complaint”) challenging the reporting requirements set forth in the CTA and the accompanying regulations issued by the Financial Crimes Enforcement Network (“FinCEN”). 

The Complaint names Treasury Secretary Janet Yellen, the U.S. Treasury Department, and FinCEN Acting Director Himamauli Das as defendants. 

This post describes the allegations made in the Complaint and offers some commentary on its merits. Spoiler: while the Complaint’s allegations that the CTA will impose significant burdens on reporting entities are well-taken, its constitutional claims largely face an uphill battle.  Rather than attacking the potential, narrow legal grounds suggested in our last blog post – did the CTA really authorize FinCEN to require covered businesses to report as a beneficial owner more than just one person with “substantial authority” – the NSBA instead has launched a constitutional broad side.

Continue Reading  Small Business Interest Group Challenges CTA’s Constitutionality

Two days after North Korea’s successful long-range ballistic missile test, the U.S. District Court for the District of Columbia unsealed a memorandum opinion which granted the Department of Justice “damming” warrants to seize all funds in bank accounts belonging to five Chinese companies which allegedly were used to hide transactions with North Korea using U.S. currency in violation of U.S. sanctions and money laundering laws. The underlying conduct allegedly resulted in over $700 million of prohibited transactions being processed by eight international banks. The opinion is noteworthy not only because it demonstrates the important relationship between money laundering laws and foreign policy, but also for the government’s use of anticipatory warrants to seize the assets upon arrival to the targeted accounts, and to prevent those assets from exiting.

Continue Reading  Damming the Funding to North Korea:  Anticipatory Seizure Warrants as a Tool to Enforce Sanctions and Thwart Money Laundering Transfers

House and cashThe field of forfeiture saw significant action in 2016. The IRS offered to return forfeited funds used in structuring, but Congress still may clip its ability to forfeit such funds. Meanwhile, DOJ renewed a controversial program that incentivizes local law enforcement to aggressively pursue forfeiture. It filed a major forfeiture action which reminds law firms of their own need to vet the source of funds flowing into firm bank accounts. Finally, the U.S. Supreme Court made it clear that “clean” funds cannot be restrained pretrial when a defendant needs those funds for his criminal defense, even if the government wants to restrain the money in order to pay for forfeiture or restitution if the defendant is convicted.
Continue Reading  2016 Year in Review: Forfeiture