A criminal court has declared that unless the legislator steps in to amend the law, blanket freezing orders against those charged with money laundering and financial crimes cannot be limited before the case reaches its “final and conclusive” end. 

That pronouncement was delivered merely weeks after another court, presiding over a constitutional case, concluded that the applicant’s fundamental rights were not breached by such freezing order because the law provided a remedy.

That court declared that courts presiding over money laundering cases had the power to limit freezing orders in such manner as to free assets whose source was proved to be legitimate. 

Such “diametrically opposed interpretations” by the two courts were brought to the fore by lawyers representing a number of company directors allegedly involved in the laundering of funds derived from oil smuggling.

Florinda Sultana, former director of Nesvan Company Ltd and MS1 Catering Limited, Albert Buttigieg, director of Luzzu Catering Ltd, Keith Testa and Carlos Dimech, directors of Pietà Marina Caterers Ltd, are all pleading not guilty to money laundering and other financial crimes. 

All were targeted by criminal action during an extensive police anti-smuggling operation which first led to the arrest of former footballers Darren Debono and Jeffrey Chetcuti who were allegedly involved in a €30 million fuel smuggling racket.

The proceeds of crime were allegedly filtered into the Maltese commercial system by means of various local restaurants which allowed those funds to be circulated and laundered in such manner that all traces were lost.

Police investigating the ramifications of the suspected organised crime group traced a number of restaurant-companies whose directors were subsequently also charged with money laundering and targeted by a freezing order over all assets, including any property acquired subsequently to that order. 

Two years down the line while criminal proceedings continue, all directors together with the companies they represent are seeking to limit those blanket freezing orders to a fixed amount or to particular items of property. 

Their request was turned down by the Criminal Court in February.

But, a few weeks later, the First Hall, Civil Court in its constitutional jurisdiction, presiding over a case instituted by Edward Caruana, declared that the applicant’s fundamental rights had not been breached by a similar freezing order since the law provided a remedy.

Fresh applications filed

A person whose assets were all frozen under court order could present evidence to proof which property originated from a legitimate source, thus obtaining its release. 

Pouncing upon that judgment, Sultana and the other company directors filed fresh applications to the Criminal Court, flagging the outcome of the Caruana judgment and requesting the court to reconsider their request to limit the freezing orders in their regard. 

“These proceedings are breaking people,” said defence lawyer Stefano Filletti when making lengthy submissions last week on behalf of all four accused.

Freezing orders were applied indiscriminately to all assets belonging to the accused, including gifts, property acquired through inheritance and other assets accumulated through work that had nothing to do with the criminal charges. 

“A Lm100 baptism gift is also frozen. Why? Because a freezing order applies to all assets since the day they [the accused] were born,” argued the lawyer, citing ECHR case law stating that such blanket provision was harsh and restrictive, breaching the accused’s fundamental rights. 

Such orders are intended to freeze funds so as to guarantee that all amounts due to the State in case of a finding of guilt, are fully preserved. 

But it was very abusive for the State to press charges without being able to quantify the amount of allegedly illicit gains and consequently, the relative penalty to be paid in case of conviction.

The defence was thus calling for the release of those assets which absolutely had nothing to do with the company’s business operations, stressed Filletti.

Defence arguments rebutted

However, all the defence’s arguments were rebutted by AG lawyer Antoine Agius Bonnici who pointed out that the prosecution was simply following the law when requesting the court to issue freezing orders.

It was for the State to step in so as to amend the law that was deemed to be unjust. 

In case of conviction, the court orders confiscation of the proceeds of crime, as well as all assets of the accused and a fine.

The accused must then file separate proceedings to prove which assets came from a legitimate source so as to obtain their release. 

But that was only after final judgment.

If the court were to go into the source of property while proceedings were still ongoing, it would be touching upon the merits of the case, argued Agius Bonnici. 

Other remedies

The law provided other remedies including an annual allowance of €13,976.24 to the accused pending money laundering proceedings.

It also allowed payment of those creditors whose claims existed prior to the freezing order and also any transfer of the accused’s property that was authorized by the court. 

Following those submissions, the Court, presided over by Madam Justice Consuelo Scerri Herrera, delivered a decree rejecting the applicants’ request to limit the freezing orders.

The court stressed that “its hands were tied as long as the law remains as it is”, ordering a copy of the decree to be notified to the Justice Minister to consider possible amendments to the current legal framework. 

The legislator was to consider whether such freezing orders could be limited to property acquired by the accused at the time of the alleged offence, rather than extend to all assets. 

The court also made reference to EU Directive 2014/42 which stated that “member states shall provide for the effective possibility of a person whose property is affected, to challenge the freezing order before a court, in accordance with procedures provided for in national law.”

In a similar case scenario concerning Progress Press Company Ltd, the Criminal Court likewise decreed that the law could not be interpreted in such manner as to limit the freezing order before the case was decided on the merits. 

Such variation could only be possible if the law specifically provided for it.

Since the legislator has so far not set up a procedure to deal with such requests concerning freezing orders, the courts’ hands were tied. 

Lawyers Stefano Filletti and Nicole Galea assisted the applicants. AG lawyer Antoine Agius Bonnici prosecuted.