Eli5:Civil Asset Forefiture



Eli5:Civil Asset Forefiture

In: Other

Basically, prosecutors can take money if it’s believed to be profit from a crime, or to have been used in a criminal enterprise.

The way they do this is they literally take the money to court. They sue a stack of $100 bills.

The bar for them seizing the money is astoundingly low. They just have to argue that it’s from a crime. The money can’t defend itself, and all the owner of it can do is say “nuh uh, it’s mine legally”. Of course, it costs money to hire a lawyer to make that argument. So many people don’t even have a chance.

It’s shockingly stupid and unconstitutional.

Cops: “Hey, this property was used in the commission of a crime and we’re now going to take it. Lol.” And then departments use the money or property seized through civil asset forfeiture to cushion their budgets.

In most other countries there is no due process requirement when the police seize property. They just seize it and you have to go to court and prove that the government shouldn’t be able to seize your property.

In the US you have a right to due process for seized property. This requires the government to go to court and prove that the property should be seized in the first place. The vast majority of civil forfeiture cases involve abandoned property – basically property that has sat in a customs warehouse without being claimed or cars that were left junked by the side of the road. Nobody fights it because nobody wants the property. Fighting an illegitimate asset forfeiture isn’t hard – all you have to do is to show up in court. Again, its up to the government to prove that the asset should be seized, not for you to prove that it shouldn’t.

What internet people think of when they think of civil forfeiture really has nothing to do with it. In the US there are banking regulations that require banks to know the source of their client’s money. If the bank doesn’t know where your money comes from then they can’t let you keep any money there. This pairs with the fact that the IRS will flag people with suspicious transactions as being money launderers. Once the IRS flags you then your bank will close all of your accounts.

About 10 years ago this used to result in the money you had in the bank getting stuck in a weird banking purgatory. The bank would close your account but wasn’t allowed to transfer the money to you unless you could prove its source. Doing that required you to follow a complicated process that wasn’t possible without a lawyer.

This was further compounded by the fact that bad financial advisors would tell small businesses to make cash deposits that were just below the IRS reporting requirements because people wrongly thought that having a transaction “reported” to the IRS was a bad thing (its not). This was called “structuring” and would result in the IRS flagging them as money launderers. This would cause all of their bank accounts to immediately be frozen, at which point their life savings would go into banking purgatory.

This hasn’t been a problem for at least a decade because the regulations have changed so now banks have to cash out any money that was in a flagged account without you needing to go to court. Also, when people do accidentally structure, the IRS gives them a chance to properly report the money before flagging them as a money launderer.