SEIZURES: AML seizure of property

HI My commercial lender wants to see where it states that property can be seized if it is determined that the funds used to purchase the property were illegal funds. Basically he feels that our collateral could never be seized without the bank getting our money. I know it is out there but can't seem to find it right now and it is driving me crazy!!!!!!!!!!

I may be wrong about this, but I think the property can only be seized if law enforcement can prove you had KNOWLEDGE that the funds were derived from an illegal source. I'm sure others will chime in........

18 USC 981
See: http://www4.law.cornell.edu/uscode/18/981.html

The concept is called Civil Asset Forfeiture. The only notes that I can find about it is from a seminar in early 2002. At that time it was part of the National Money Laundering Strategy for 2001 which had five goals with an objective on this topic. My seminar book summarizes the objective to say "Through the civil asset forfeiture statutes, Congress has empowered law enforcement to attack criminal enterprises at their roots by seizing and forfeiting illicit proceeds involved in, and property traceable to, money laundering activity." I do not remember the requirement to have knowledge of the activity. Sorry, but that's all I've got on it. Hope it helps!

Some property can also be seized in cased of drug dealing/use.

Some state laws and city ordinances even allow for seizure of an automobile based on a DUI conviction. I think these laws are being challenged as unconstitutional, but they are on the books.

Suggest that the lender read up on "willful blindness". Don't ask, don't tell doesn't work in this situation.

Dolly- Forfeiture actions are brought against the property itself, not the owner or holder. If the property is the fruit of specified unlawful activities, it's "arrested" (seized), taken off to a federal impound, and held pending trial. Once the property's tainted legacy is proven, the property is forfeited to the government. This is a significant risk for lenders who may be dealing with with customers who and not well known and trusted.

Even if your collateral is later found "innocent", the damage has been done.

re the requirement for property to be seized only if the bank had knowledge...I think law enforcement's answer in some cases was "you should have had knowledge" i.e. "Know Your Customer"

That is what I am trying to get through to the Commercial Lender that there is more to banking than good collateral. He in turn told me that Compliance does not make the bank money he does. I discussed the Patriot Act,Know Your Customer and Due Diligence. He then said that if we were not "involved" or have prior knowledge then we are ok. I tried to tell him that the Government is very serious about knowing who you are doing business with. He still feels that the Government would be hard pressed to prove their case and take the property. I like to stay on the side of better safe than sorry. Of course everything I have printed for him is in legalese and he tries to find loopholes in everything. This certainly explains all the gray hair on my head!!!!!!!!!!!!!!!!!!

Actually the Compliance Officer can save the bank money and reputation. No fines, civil monetary penalties, memorandum of understanding issues to name but a few. I realize lenders don't understand this - until something happens, of course. I feel your plight because I lived through it.

True story. It was about 15 years ago, we had a customer who was retired Army and owned a gun shop. He also had a pilot's license. Yes, you see the flags because you know where this is going.

We had a lien on his plane as well as all the inventory and equipment. Long story short, he was flying for a local dealer and they were busted one day upon returning from Mexico. The plane was seized because it was used in the crime.

Federal Marshall's reviewed our loan files with our attorney. Had it been evident that his retirement and gun shop income would not have supported his financial condition as we saw it, we would have lost our lien on the plane, we were told. Because it did all jibe, they sold the plane, paid our lien first and kept the equity income.

While that sounds good, it took over two years to do. We had a nonperforming asset we had to account for. We didn't want the charge off and kept explaining this to regulators. We also saw the plane dry rot on the tarmac during most of this period. That means it was losing value with poor upkeep. We didn't know when it would end as we had no control. This was not a good situation.