The Forfeiture of Gains in Chile

With the entry into force of Laws 21,577 and 21,595 in 2023, the regulation of asset forfeiture in the Chilean legal order shifted from being a simple accessory penalty aimed at depriving offenders of the instruments and proceeds of crime to a system of enormous complexity and procedural heterogeneity. Forfeiture ceased to be exclusively a punitive sanction requiring a prior conviction as a necessary condition, admitting novel procedural mechanisms such as non-conviction-based forfeiture.

This legislative development forms part of a process of implementing the guidelines contained in various instruments of international law, including the Vienna Convention against Drug Trafficking, the Palermo Convention against Transnational Organised Crime and the United Nations Convention against Corruption (UNCAC), as well as the global standardisation promoted by the 40 Recommendations of the Financial Action Task Force (FATF).

As a result of these amendments, the landscape of forfeiture forms is heterogeneous and complex.

An analysis of the various provisions regulating this institution permits, first and foremost, a distinction to be drawn between the forfeiture of instruments, the forfeiture of proceeds and now, the forfeiture of gains.

The forfeiture of instruments applies to those things that served as a tool or means for the commission of the offence. The forfeiture of proceeds consists of the deprivation of ownership of material objects that result directly from the commission of the unlawful act. The forfeiture of gains consists of the deprivation of ownership of assets up to the total value obtained as a consequence of the commission of the offence. The forfeiture of gains may be imposed on an equivalent basis where it is not possible to seize the direct material gain.

Following the systematic amendment of forfeiture, it may be imposed as an accessory penalty to a criminal conviction or, alternatively, without a prior conviction.

Regarding the forms of non-conviction-based forfeiture in the legal order, the forfeiture of instruments and proceeds that are particularly suited to the commission of offences, and the forfeiture of gains (and equivalent forfeiture of gains), is configured as a general action of public law whose primary function is the correction of illicit enrichment.

This latter form of forfeiture is the most significant innovation in the field of asset forfeiture in the Chilean legal system. It is regulated in general terms under Article 24 bis of the Chilean Criminal Code. This provision establishes that every criminal conviction necessarily entails the forfeiture of gains derived from the offence.

Regulation of the forfeiture of gains in the Chilean legal order

The gains that may be forfeited pursuant to the new Article 24 bis of the Chilean Criminal Code are not restricted to direct financial income but encompass a broad spectrum of increases in value. The legal order defines the causal basis using broad prepositions, ordering the deprivation of assets obtained “through the offence” or “for or by committing it”. This legislative formulation captures not only tangible patrimonial advantages, fruits and profits derived from the investment of illicit funds, but also corporate cost savings.

The calculation of gains must be carried out in accordance with the so-called gross proceeds principle, under which the court is prohibited from deducting the expenses or costs incurred by the offender in the preparation and execution of the offence. Given the complexity of precisely reconstructing the amount of the gains, the law also authorises basing the forfeiture calculation on a simple comparison of the convicted person’s income level or on the unjustified increase in assets relative to their lawful sources of income.

Effects on third parties of the forfeiture of gains

To prevent the pursuit of criminal profitability from being easily evaded through corporate concealment manoeuvres or strategic transfers to family members, the legal order has had to extend the reach of forfeiture beyond the direct perpetrator of the offence, encompassing the assets of third parties.

Article 24 ter of the Chilean Criminal Code strictly regulates the manner in which this exception is constituted, with a view to safeguarding the position of the bona fide third-party acquirer. Accordingly, forfeiture against third parties shall only proceed in the following circumstances:

• gratuitous acquisition – where the third party acquired the gain on a gratuitous basis, as occurs in successions upon death or donations, given that the law affords no protection to the gratuitous receipt of assets tainted by unlawfulness;
• offence committed in the interest of the third party – where the underlying offence was committed directly in the interest or for the benefit of the third party, a situation that constitutes the cornerstone of criminal liability of legal persons;
• bad-faith acquirer – where the third party acquired the assets knowing, or having reasonable grounds to know, of their illicit origin at the time of the transaction; and
• capital contribution to a legal person – where a legal person has received the illicit gain materialised as a contribution to his or her share capital.

Conflict with civil claims

Forfeiture may come into conflict with civil patrimonial claims, particularly in insolvency scenarios. Patrimonial claims grounded in civil law may thus conflict with those arising from the forfeiture action. Chilean legislation resolves this complex concurrence of patrimonial claims radically, by means of a distributive rule contained in Article 48, first paragraph, of the Criminal Code, which grants the forfeiture of gains absolute payment priority, displacing fines, procedural costs and even the civil compensation of damages caused to victims.

With a view to mitigating the effects of state priority, the legislature created a special action under Articles 46 and 47 of Law 21,595 for victims who are unable to have their civil claim satisfied due to the offender’s insolvency. This action entitles them to proceed subsidiarily against the state itself, compelling it to pay their compensation using the very same assets that the Treasury succeeded in forfeiting in the criminal proceedings. In this way, the substantial mass of confiscated assets constitutes an authentic guarantee fund or special purpose estate, harmonising the demands of criminal policy with restorative justice.

The exercise of this restitution action is neither free nor automatic, being subject to strict cumulative conditions designed to protect the public purse and prevent abuse. For the action to succeed, the victim must hold, without exception, a monetary credit arising from the offence that has been judicially declared. The victim must likewise demonstrate conclusively the insufficiency of assets in the convicted person’s estate, confirming that it is materially impossible to meet the pecuniary liabilities without recourse to public funds. Of equal importance, the law requires an unavoidable “direct causal link” between the harm suffered by the victim and the specific gain that was forfeited. This action is subject to a limitation period of four years.

The state is not left without procedural recourse: the legislation grants it a catalogue of exceptions raised as preliminary and special procedural incidents. The state may invoke the “exception of availability of other assets”, a defence analogous to the civil benefit of excussion, whereby the Treasury obliges the victim to exhaust the search for and liquidation of the offender’s or third parties’ private assets in full before claiming the proceeds of forfeiture.

Equally, the Treasury may plead the “exception of negligent enforcement” if it can demonstrate that the impossibility of payment arose from the victim’s own dilatoriness or procedural incompetence in seizing assets in a timely manner. Finally, the state may refuse payment by raising the “lack of a direct causal link”, severing the normative causal nexus between the damage claimed and the state’s gain obtained through forfeiture.