Asset recovery and criminal compliance programs in Spain - Interview with Héctor Sbert

00:00:04: Rosinus on air, the

00:00:06: criminal

00:00:07: compliance podcast.

00:00:13: Welcome to a new episode of The Criminal Compliance Podcast!

00:00:16: It is my great pleasure to welcome very special guest for our show today.

00:00:20: My name is Miriam Steinfeld and here with me is Hector Esper from Esizia in Barcelona.

00:00:36: Yes, of course.

00:00:37: Thank you very much Miriam for having me.

00:00:39: it's a pleasure to be with you.

00:00:41: My name is Hector Esverd.

00:00:43: I'm a lawyer based in Barcelona and partner at Ecija where i focus on complex litigation With a particular emphasis on asset recovery including fraud cases.

00:00:57: A large part of my work involves coordinating cross-border proceedings tracing and freezing assets in different jurisdictions and working closely with criminal authorities, and private clients to turn victories into actual recoveries.

00:01:13: So asset recovery in the broad sense from traditional fraud-to-digital assets is really at the core of my

00:01:20: practice.".

00:01:21: That sounds incredibly interesting!

00:01:24: Before we get into the specifics of asset recovery I think it might help our listeners understand Because as we know, our podcast is hosted here in Germany and will use to the inquisitorial model.

00:01:39: So how's the criminal procedure structured in Spain?

00:01:43: The Spanish criminal procedure is historically rooted in the Inquisitorial Model as well but over time it has evolved into a mixed system that combines inquisitorial and adversarial elements.

00:02:00: so we still have an investigating judge responsible for leading the pre-trial investigation, ordering measures such as searches, scissors or freezing orders and obviously ensuring that fundamental rights are respected.

00:02:17: And once a case goes to trial however the dynamics become much more adversarial.

00:02:22: Prosecution and defense present their evidence in an open court before at different trial courts and the judge or in some cases a jury, decide the case based on that oral hearing.

00:02:37: So in short investigation is judicially let-and-written while the trial phase is concentrated, oral and completely

00:02:47: adversarial.".

00:02:48: That's super interesting.

00:02:50: so you know... In Germany the Staatsanalyse after The Public Prosecutor is clearly the dominant figure when it comes to investigating a crime.

00:02:59: So who are the key actors in a Spanish criminal investigation?

00:03:03: Well, so we know.

00:03:03: In a Spanish Criminal Investigation there were three key public actors.

00:03:08: first you have investigating.

00:03:10: judge would as I said directs the investigation and authorizes coercive measures such as searches interception of communications or the freezing off assets.

00:03:23: second The Public Prosecutor Who promotes the action of criminal justice requests investigative measures and ultimately decides whether or not to bring charges against an investigated person.

00:03:37: And third, specialized police units which carry out the practical investigative work under direction of judge and prosecutor.

00:03:49: On top this victims can appear as private prosecutors which is very important in the asset recovery context.

00:04:01: So that seems like a different model from what we have here, particularly when it comes to asset recovery.

00:04:10: so you describe as a distinctive public-private model and if I understand correctly its particular effective when it come to cryptic cases?

00:04:19: What makes this difference with other jurisdictions?

00:04:23: So the model applies to all types of cases and not just for crypto-cases, even though it has proven particularly useful in those type scenarios.

00:04:31: But what really distinguishes is that victims are by definition structurally embedded in criminal proceedings from the very beginning through the figure of a private prosecutor—what we call the acusación particular.

00:04:48: The idea is that victim's and their counsel they are not passive observers of the proceedings.

00:04:54: They have full legal standing to request investigative measures, present expert evidence for example blockchain analytics and actively push for the freezing and confiscation of assets.

00:05:09: so in practice this creates a genuine public-private partnership where specialized private teams can bring speed They can bring technical expertise, they can bring international reach to complement the work of judges prosecutors and police especially in complex frauds and crypto cases.

00:05:33: This is really truly different from our understanding and parenthesis role for victims here in Germany particularly within fraud environment, I would like to say because we do know obviously the role of victims being important and getting more impolpetent over time.

00:05:51: But this is more when it comes to a physical victim or crime rather than financial victim of crimes.

00:05:59: so here you see something very different And i believe that not just in Germany but also France for example You have the victim participation on paper But it's not like... It would deliver any results comparable to what you have described.

00:06:17: So, when you look at these systems from what you've seen and know where exactly do you see the bottle next there?

00:06:24: Yes!

00:06:25: Many European systems indeed as we were saying recognize some form of victim participation on paper but in practice that participation is narrow For example, limited to supporting the prosecution or claiming compensation at the end of a case.

00:06:45: So from outside you can see several structural bottlenecks.

00:06:49: so first The victim's role is often secondary.

00:06:54: Prosecutors retain broad discretion as whether not to pursue complex asset heavy cases and there are very few procedural tools for victims to drive investigations forward when the system is overloaded.

00:07:12: By contrast, Spanish model allows victims have their own procedural standing from very beginning independent of public prosecutor or police which gives them more leverage to insist on asset tracing measures and keep pressure on timing international cooperation.

00:07:35: That really does seem like it's making a major difference.

00:07:39: So we obviously talked about this before and you told us that there is one case, its called the Avastar Pyramid Scheme And to all our listeners who will put a reference in the show notes where has been quite big success for public private prosecution with over two point five million euros and crypto recovered.

00:08:00: so please share some insights on these very special cases.

00:08:04: yes So the arbister case is one of them several cases involving crypto scams that were successful under this public private cooperation scheme.

00:08:16: So these type of cases what they show us, but this model can actually achieve in practice.

00:08:21: so as you are saying in that investigation more than two and a half million euros in crypto assets where recovered and secured for victims to coordinate an action.

00:08:30: Unfortunately, the scam was much larger than two and a half million euros.

00:08:34: At least something was recovered.

00:08:36: so what he had in practice is that you have large groups of affected investors.

00:08:42: You had very active private prosecution.

00:08:45: You had specialized blockchain forensics And In particular last but definitely not least at judge That was willing to move quickly on freezing orders.

00:09:00: That's what makes the case special.

00:09:01: And that case was followed in front of the Audiencia Nacional, which is probably the most sophisticated Spanish criminal court.

00:09:10: but on any case... The private teams.

00:09:12: they helped to map wallets To follow funds across exchanges and jurisdictions.

00:09:18: Then They help bring intelligence back into the criminal cases so that the Court could act upon this information while there were still something left to recover.

00:09:28: And this is, I guess one of the key elements here.

00:09:32: You just said it working well together and being able to move in good time which what i would assume again a key element.

00:09:41: that doesn't come from collaboration or goodwill alone but

00:09:46: you do

00:09:46: need very structured framework behind so its clear who can-do-what?

00:09:51: Who should-do... So how does cooperation actually

00:09:56: practically

00:09:57: work?

00:09:58: Yes, so in practice this cooperation is much more structured than just goodwill.

00:10:03: And in larger cases you will often see joint working arrangements sometimes even formalized as joint investigation groups where police prosecutors and private experts share information under judicial oversight.

00:10:19: You can even see regular case management conferences with the investigating judge agreed protocols on confidentiality and data protection, and also sequence for rapid freezing orders.

00:10:32: So the goal is to align everyone around one case strategy in a one evidence gathering plan instead of running parallel uncoordinated efforts.

00:10:45: From my point of view, that sounds even more organized and structured than some of the law enforcement agency work within themselves.

00:10:52: That we've seen to be quite honest a bit like ideal standard how it should be anyhow but I mean that is really great too here.

00:11:00: And i think another unique element To The Spanish Model Is The Arga?

00:11:07: I don't know if thats correct abbreviation So It's The Acid Recovery in Management Office.

00:11:13: So what role does it play in the Spanish model and is there anything.

00:11:19: Where's similar to other European models?

00:11:22: or what sets that apart from these European models, What do you take care?

00:11:27: Well yes indeed the order of the Spanish office for asset recovery management definitely plays an important role because it combines both their recovery and a management off criminal assets.

00:11:41: The numbers are still low statistically, but they're improving and definitely increasing their work.

00:11:50: According to Spanish law the ORGA can be entrusted by judges or by prosecutors with identifying tracing managing and selling seized assets.

00:12:03: And importantly for victims the ORG has a clear restitution mandate.

00:12:10: It's not just about freezing assets, it is about preserving them.

00:12:15: It is about optimizing their value so that after confiscation there are something meaningful to return the victims

00:12:23: Which really does pay again for the whole idea of asset recovery in combination with private public prosecution because again the victim is a financial fraud more than obviously seeing justice being served to any potential perpetrators is receiving their funds back or as much as possible.

00:12:42: So in this area again, what we were talking about the Abistar pyramid scheme.

00:12:49: from what we've seen here many of those cases don't just entail one victim but a large group of victims and if not so maybe even NGOs who act on behalf some other victims.

00:13:02: So, how do they interact with that model?

00:13:05: Yes.

00:13:06: In large scale fraud and crypto cases victims obviously rarely act alone.

00:13:13: They tend to organize themselves in associations or collectives That can pull information and resources.

00:13:20: These victim associations often finance forensic work.

00:13:26: They coordinate communications hundreds or even thousands of affected individuals and their legal teams running the private prosecution.

00:13:36: And on top of that, in Spain NGOs and other civil society organizations can in some circumstances also appear as popular prosecutors having a legal standing In criminal proceedings as well Even if they're not direct victims.

00:13:58: Understandably, this figure is politically controversial because it gives private actors a very strong role in criminal proceedings.

00:14:07: But I must say that it has been instrumental to bringing some of the most serious corruption cases into

00:14:15: Spain.".

00:14:27: prosecution in and of itself obviously is a rather new idea.

00:14:31: And you know, I think everybody's at the point to accept that as a concept but then the popular prosecution again is putting one on top?

00:14:40: But i do think it's something we see coming from the EU.

00:14:44: We in Germany for example had it now with GDPR where victims of GDPR infractions can actually be represented by NGOs.

00:14:54: so which is just coming and what's happening.

00:14:58: Now, the NGOs of course at this point would represent individuals but you can have corporations both as victims or theoretically as perpetrators of fraud.

00:15:12: And now here in Germany we do not have an industry sense a corporate criminal liability But As far as I understand different in Spain, because again we do not have that genuine criminal liability.

00:15:28: So what does the situation look like in Spain on this matter?

00:15:31: Yes

00:15:32: so indeed unlike some systems that still rely mainly on administrative fines spain did introduce true corporate criminal liability into the criminal code In two thousand and ten and significantly strengthened it in two thousand fifteen.

00:15:51: So what this means is that legal entities can be convicted for a wide range of offenses, including fraud money laundering where the crime is committed under name or for their benefit by managers or employees.

00:16:07: end very importantly if there has been failure supervision and control which links this idea to the whole compliance programs.

00:16:17: And sanctions for companies can include fines, they can include disqualification from public contracts... They can include judicial intervention and even include dissolution of other company.

00:16:30: So the stakes are very high.

00:16:33: That is interesting because in Germany we didn't have some legislative projects but they did not come to fruition.

00:16:43: And so, I think this is particularly interesting if you look at crypto fraud or money laundering cases.

00:16:50: So the companies like Bangs for Crypto Exchanges can become involuntarily entangled in their crime.

00:16:55: just as you said there may be some acting from managers and even completely unvoluntary as intermediaries or custodians simply because platform was used.

00:17:05: then you have illicit funds to surface them.

00:17:08: Taking what you shared with us on corporate criminal liability and we talked about before.

00:17:13: but the private prosecutors how does this criminal corporate liability shape the role of these companies in such cases and.

00:17:21: Does it affect their ability or willingness to step in as a private prosecutor themselves?

00:17:27: so.

00:17:28: In crypto fraud and money laundering cases banks an exchange is they often find himself in a dual position, On the one hand, they are victims of fraud or deception.

00:17:39: And on the other there is a platform through which illicit funds move and because they face potential corporate criminal exposure They have strong incentives to detect suspicious activity To cooperate fully with investigations in some cases indeed to appear as private prosecutors themselves and push for recovery.

00:18:06: And

00:18:06: I must say that Spanish case law has begun to explore this tension, distinguishing situations where the institution has done what could reasonably be expected in terms of compliance from those were structural failures justified corporate

00:18:23: liability.".

00:18:24: So this brings us straight to compliance as you just said or lack thereof?

00:18:30: In Spain, we have the Modelo de Organización e Ijeción and that has become a cornerstone of corporate defense.

00:18:38: So how do Spanish corporates actually handle compliance in practice?

00:18:44: And is there real legislative or factual incentive to be good corporate citizen?

00:18:50: Absolutely!

00:18:51: In Spain Corporate Compliance Programs are not just nice-to-have.

00:18:56: it's expressly recognized as a potential exonerating or mitigating factor under the Spanish criminal code.

00:19:05: So if our company can show that it had an effective compliance system in place before the offense with risk mapping, controls training and independent monitoring this can exclude corporate liability Or reduce penalty.

00:19:24: And beyond the criminal code there are Of course, a strong reputational regulatory and even civil law incentives for companies to demonstrate that they are good corporate citizens.

00:19:37: Especially in sectors like finance and crypto where trust is fragile?

00:19:43: I think it's very nice way of putting it.

00:19:46: so we talked about corporate criminal liability private public prosecution compliance.

00:19:53: So if you put all three together what comes next should be internal investigations, right?

00:20:00: And now this from our perspective... From a German perspective, internal investigation is always very interesting.

00:20:05: We do not have that genuine criminal corporate liability.

00:20:09: we do have the necessity of management to look into situations at some point or there can be a necessity.

00:20:17: so for me when a company first detect suspicious activities in its systems What role do internal investigations play before the matter ever reaches the criminal courts and how to turn investigation feed into.

00:20:32: The said unexplained later private prosecution.

00:20:36: so yes when a company detect suspicious activity internally investigations are, the first line of response.

00:20:44: they're supposed to be the first light on this one so that allow the company to clarify what happened.

00:20:49: i took reserve digital evidence an evidence in general to interview relevant staff, to take the urgent remedial steps including stopping the ongoing misconduct.

00:21:00: And under Spanish law the findings of an internal investigation can later be shared with prosecutors and courts... ...and if properly structured they can be used both to support a private prosecution or demonstrate that company is serious about compliance.

00:21:20: So again goes two roles that we were discussing earlier.

00:21:25: So there is obviously an important balance between maintaining legal privilege and cooperating with authorities, but when done well internal investigations become a central pillar of the public private enforcement model?

00:21:43: It does seem so!

00:21:44: And it really shows nicely how both the corporates within the compliance and liability framework before, during or after having this dual position.

00:22:00: We talked a lot about private public prosecution but clearly I would assume that there are other avenues one could explore if someone is trying to recover some assets?

00:22:12: Could you give us a pre-vote of

00:22:13: yours?".

00:22:14: Yes so.

00:22:15: beyond the criminal track Spanish law offers several Additional avenues for asset recovery.

00:22:21: First, within the criminal proceedings themselves victims can claim compensation through civil actions so that The same criminal judgment will address both Criminal responsibility and civil damages.

00:22:35: That's also an interesting element of Spanish law.

00:22:39: Second third parties who claim ownership of seized assets.

00:22:44: they can also protect their rights which is relevant when assets are in the name of intermediaries or relatives.

00:22:50: And outside a criminal case, victims can obviously still resort to pure civil or commercial litigation or even insolvency proceedings... When that's useful!

00:23:00: So how do you combine those tools and

00:23:07: practice?

00:23:08: In complex cases practitioners will need to build their toolbox strategy rather than relying on a single path.

00:23:17: So, typical sequence might be you have an urgent criminal complaint to secure freezing orders.

00:23:24: You have parallel civil or insolvency actions To reach assets and information that lie outside the criminal case And then coordinated use of the ORGA An international cooperation to manage and recover the proceeds.

00:23:42: So the key is timing, the keys coordination and making sure that criminal civil and insolvency tools support each other instead of creating conflicts or an application.

00:23:54: I think would be in everybody's interest if proceedings are actually harmonized and organized as a whole.

00:24:01: but i think thats one big challenge.

00:24:04: so talking about challenges you have laid out such really good sounding system that you're experiencing in Spain and clearly, You made some experiences there.

00:24:16: That we haven't at least for sure not a Germany.

00:24:19: What are the biggest challenges?

00:24:21: When other words what are the lessons that you've learned so far?

00:24:25: mm-hmm.

00:24:26: Yeah So one big challenge is aligning priorities And time horizons of public authorities and victims because prosecutors and judges, they must think in terms of legality.

00:24:40: They must thing in terms fairness for all parties while victims focus on speed or recovery.

00:24:46: So that's number one!

00:24:47: Number two you have international coordination which is another pain point.

00:24:52: You have cross-border cases depending quick cooperation with foreign authorities like exchanges In crypto scams and delays can mean that assets disappear or they lose value.

00:25:06: So international cooperation is great, great challenge And then also volatility the custody risks.

00:25:12: They're not just technical issues and they affect what recovery means.

00:25:16: when?

00:25:17: When the asset itself fluctuates widely in price?

00:25:21: That's another issue

00:25:22: that can be a really big issue.

00:25:24: that is true.

00:25:24: We have had that here too.

00:25:26: so What Is Then Still Like The Limit?

00:25:30: You just mentioned the time issue or cross-border issues.

00:25:34: Where would you say, okay this is really where the cooperation does hit a wall?

00:25:39: Yeah

00:25:40: well we've seen in decentralized finance protocols.

00:25:43: privacy coins and mixers are platforms that operate entirely from third country jurisdictions especially offshore jurisdictions.

00:25:52: they can make effective tracing and freezing extremely difficult.

00:25:56: And another limit I'd say technical capacity Because both public authorities and private practitioners, they need constant investment in training tools.

00:26:08: In specialist staff to keep up with innovation especially the crypto space.

00:26:14: That is true.

00:26:15: it's a race which you have to keep investing.

00:26:18: from all your experiences that you've drew And building on those lessons you just mentioned, perhaps looking at the fact that we're all within EU and clearly do have very different legislation.

00:26:29: At least in our both countries... We know they are more.

00:26:32: so if there's one message he could send to European legislators about this issue?

00:26:37: To your colleagues across the EU as well.

00:26:39: what changes would you like or hope to see next few years bring public-private cooperation to a truly European level?

00:26:49: So if I could send one message to European legislators, i would say take seriously the idea of embedding victims structurally into criminal proceedings and not just as an afterthought.

00:27:04: Our model was created in the nineteenth century.

00:27:08: our code of criminal proceedings dates eighteen eighty two.

00:27:13: so that's when we started.

00:27:16: Or us, the role of victims and private prosecution in criminal proceedings is at the core what criminal proceedings mean.

00:27:23: Then obviously a real European framework that facilitates public-private partnerships supports specialized asset recovery offices like ORGA In every member state and streamlines cross border freezing and restitution could make a real difference in practice.

00:27:44: And we do have European regulations that cover criminal cooperation also in terms of asset recovery purposes, but we know that in practice those instruments still are not used to their full extent.

00:27:59: if you will.

00:28:00: So and two colleagues across the EU I would say build bridges with prosecutors with police with victim associations an technical experts because No single actor can succeed alone.

00:28:15: So it's a team effort

00:28:17: and don't forget to build the bridges.

00:28:19: two other colleagues across the EU, right?

00:28:21: Of course.

00:28:23: Thank you so much Hector for being with us on our podcast this time And your very insightful an interesting explanations of that system in Spain.

00:28:35: also.

00:28:35: thank You dear listeners for tuning in again.

00:28:37: if you have any questions or comments Please feel free to contact us at anytime at infoatrosinos-on-air.com.

00:28:46: See you next time!

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