The troubling model case involves an American lawyer who was accused of defrauding clients out of millions of dollars and absconding to Central America. Federal prosecutors indicted him and moved to freeze and seize some of the ill-gotten booty that they traced to a bank in Belize. The accused lawyer and his wife were allegedly bleeding the foreign accounts to purchase luxury items such as yachts.
However, a court in Belize blocked the move by the feds to freeze the assets.
Enter the handy, dandy Patriot Act.
Under the Act’s enhanced forfeiture provisions, the Justice Department was able to move in late 2001 to seize about $1.7 million --
Officials said that the money seized from the inter-bank accounts totaled about $1.7 million, money that would be paid in the form of restitution to some of the embezzler's victims.
According to the Times report, Charles A. Intriago, a specialist in money laundering law in Miami, said the new seizure powers “may be the most startling provision of the Patriot Act. It’s an awesome power, and it may even go too far because of the diplomatic problems it could cause.”
Such diplomatic problems are already emerging, says the report, in the form of diplomatic communications from Switzerland and other countries wary of what the U.S. is up to.
When Congress pushed through 2001’s Patriot Act, it left broad language in the forfeiture of funds section that gives the Justice Department the ability to seize in the U.S. not only money residing in foreign banks linked to funding terrorism, but any and all monies tainted by any fraud or money-laundering – even transactions wholly unrelated to terrorism.
The Patriot Act’s Section 319 reads: “For the purpose of a forfeiture under this section or under the Controlled Substances Act, if funds are deposited into an account at a foreign bank, and that foreign bank has an inter-bank account in the United States with a covered financial institution, the funds shall be deemed to have been deposited into the inter-bank account in the United States, and
There is neither much qualification nor much avenue of redress in the section, which concedes only that “the Attorney General, in consultation with the Secretary of the Treasury, may suspend or terminate a forfeiture under this section if the Attorney General determines that a conflict of law exists between the laws of the jurisdiction in which the foreign bank is located and the laws of the United States…”
Furthermore, says the section, the owner of the funds deposited into the account at the foreign bank may contest the forfeiture by filing a claim.
But the aspect of the section that lets it really soar resides in the magic words: “If a forfeiture action is brought against funds that are restrained, seized, or arrested…it shall not be necessary for the Government to establish that the funds are directly traceable to the funds that were deposited into the foreign bank…”
Although the Justice Department has been flexing its new forfeiture muscles quietly, the Times reports that the agency has seized at least 15 foreign-based bank accounts in the United States recently. Reportedly involved is tainted money belonging to overseas banks in Israel, Oman, Taiwan, India, Belize and elsewhere.
Officially and publically, however, The Justice Department has acknowledged just two cases in which authorities have seized a total of more than $2 million from foreign banks, declining to give the total number of seizures.
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