We assisted the client, a business established in Hong Kong belonging to a group of Spanish-based IT and telecommunications entities, in recovering funds (approx. EUR 1 million) that were arrested in Latvia as part of criminal proceedings. The client’s funds were considered to possibly be suspicious and relating to money-laundering activities.
In the past couple of years, non-Latvian resident bank accounts in Latvia have been particularly scrutinised as a part of the “restoration of the Latvian financial sector”. In some instances, however, companies that are legitimate but have slightly more complex businesses have been caught in the crosshairs, as was the case for this client.
A special type of criminal proceedings
A special type of criminal proceedings were commenced to determine whether the funds in question had a legitimate or criminal origin. These proceedings are unlike regular criminal proceedings, where a crime is alleged and the and the accused is examined. There are fewer procedural protections for those involved than in general criminal proceedings: namely, until the guilt of the accused has been established, no punishment is applied; nevertheless, the property in question may be confiscated. Moreover, the police do not need to prove the criminal origin of the property by reaching the usual standard of proof – “beyond a reasonable doubt” – but merely have to show that the property “likely” has criminal origin. Unless the owner provides evidence to the contrary, the criminal origin of the property is presumed. The owner of the property must prove that there is a probable basis that the property has a legitimate origin. These types of proceedings have been notoriously difficult to prevail in for arrested property owners and they have sparked an ongoing debate amongst legal professionals about the lack of sufficient protections for property owners; there are several constitutional complaints and even complaints to the European Court of Human Rights pending.
Lady Justice eventually favours arrested property owners
Sorainen White Collar team, together with individually practising attorney-at-law Kārlis Tračums, represented the client first before the police, then before the court and finally before the appellate court in the aforementioned special proceedings. Initially, the police and prosecution decided that the client’s funds likely had a criminal origin and recommended that the funds should be confiscated.
However, we managed to convince the court and finally the appellate court that there was sufficient evidence of a legitimate source for the funds – web and mobile advertising services – and that the conclusions about the illegality of the funds were due to the police’s inability to comprehend the business rather than actual links to any criminal activity, which the police were unable to show. Subsequently the special proceedings were terminated and the arrest on the funds was lifted. Also, the criminal proceedings (the general criminal case) have been terminated.
These types of cases usually have a very low success rate and therefore the client’s victory was also a notable achievement for Sorainen.
However, Sorainen’s White Collar team assist multiple clients in these types of cases on a daily basis, and do so with successful results.
Experience of our team
Among others, both our experts recently successfully helped a Sorainen client – a citizen of Ukraine and Cyprus – and his companies registered in Cyprus and the British Virgin Islands, whose funds (approx EUR 2,100,000) were frozen and later arrested as being possibly criminally obtained. In this case, after more than two years of active work (by proving the legal origin of arrested funds), criminal proceedings were terminated during the pre-trial proceedings.