FATF ¦ R.38 Mu­tu­al Le­gal As­sis­tance: Freez­ing and Con­fis­ca­tion

Recommendation 38: Why Fast Cross‑Border Freezing and Confiscation Matter in Financial Crime Cases

In complex financial crime cases, especially those involving fraud, corruption, money laundering, and tax crime, criminal proceeds rarely stay in one country. Money moves quickly through multiple jurisdictions, often ending up where authorities are slow, uncoordinated, or constrained by outdated laws. Recommendation 38 of the FATF (Financial Action Task Force) is designed to close those gaps. It focuses on mutual legal assistance for freezing and confiscating assets across borders. In simple terms, it asks countries to be ready and able to quickly help each other identify, freeze, and ultimately confiscate criminal property, and to cooperate fully in asset recovery. For practitioners, this recommendation is the bridge between a successful investigation on paper and actually getting the stolen or laundered assets back.

Core Requirement: Fast and Effective Help on Asset Freezing and Confiscation

At the heart of Recommendation 38 is a straightforward expectation: when a foreign country asks for help to locate, evaluate, investigate, freeze, seize, or confiscate criminal property (or its equivalent value), the requested country should:

• act quickly;
• have the necessary legal powers and procedures in place;
• be able to enforce foreign freezing, seizing, or confiscation orders;
• manage and eventually share or return confiscated assets.

The focus is not just on recognizing foreign decisions, but on making sure they can be turned into real enforcement action on the ground: bank accounts blocked, real estate registered as seized, luxury assets held and managed, and eventually sold or returned.

Beyond one‑off requests, Recommendation 38 expects countries to put in place broad frameworks: treaties, arrangements, or other mechanisms that allow for consistent, predictable cooperation in asset recovery.

Conviction-Based and Non-Conviction Based Confiscation: Keeping Options Open

Modern financial crime cases often fail at trial because the suspect is out of reach, dead, missing, or simply unidentified. Recommendation 38 therefore insists that mutual legal assistance should be available in the widest possible range of circumstances, including:

• confiscation after a criminal conviction;
• non‑conviction based confiscation proceedings, and related provisional measures.

The interpretive note clarifies that countries should, at a minimum, be able to help foreign partners with non‑conviction based cases when:

• the perpetrator has died;
• the perpetrator has fled or is otherwise absent;
• the perpetrator is unknown.

This assistance must of course remain consistent with each country’s fundamental principles of domestic law. Some legal systems still limit or resist non‑conviction based confiscation, but the standard pushes countries to ensure that these limitations do not unnecessarily block international asset recovery in clear cases of criminal proceeds.

Bastian Schwind-Wagner _Follow

"Recommendation 38 highlights that successful asset recovery is not just about detecting financial crime, but about turning legal decisions into concrete action across borders. It pushes countries to cooperate quickly, trust each other’s factual findings, and have the legal and operational tools to freeze and confiscate assets wherever they are located.

For practitioners, this means more cross‑border collaboration, tighter timelines, and greater expectations on both public and private actors. When properly implemented, this standard significantly reduces safe havens for illicit funds and increases the chances that victims and affected states actually get assets back."

Relying on Foreign Findings: No Second Full Investigation

One of the most practical parts of Recommendation 38 is the expectation that requested countries should be allowed to rely on the findings of fact in the foreign freezing, seizing, or confiscation order.

In practice, that means:

• The requested country should not require its own full‑scale domestic investigation before enforcing a foreign order.
• Courts in the requested country can review the foreign order for legality and compatibility with domestic principles, but they should not repeat the entire fact‑finding process.
• Once satisfied, the domestic court issues any orders needed to make the foreign order effective for assets located in that country.

This approach significantly speeds up cross‑border enforcement. For investigators and prosecutors, it means that a carefully prepared foreign order can lead directly to action abroad, instead of being treated as a mere “information tip” that then triggers a new, slow investigation.

Court Orders, Domestic Principles, and Cross‑Border Reach

In some jurisdictions, constitutional or fundamental legal principles require a domestic court order before any freezing or confiscation is executed, including when based on a foreign request. Recommendation 38 accommodates this but adds an important expectation: if a country insists on having its own court order to act, then:

• its courts or competent authorities should also be able to issue orders that relate to property located abroad; or
• have mechanisms that allow domestic judicial review and validation of orders intended for enforcement in another country.

This is critical for mutuality. A country cannot demand that others give direct effect to its orders without being able to do something equivalent in reverse. For practitioners, this means:

• designing domestic laws so that courts can deal with foreign-related assets;
• ensuring domestic case law does not undercut the enforceability of foreign decisions;
• setting up procedures and forms that make it easy to issue and recognize such orders.

Follow-On Assistance: No Need for Constant Supplemental Requests

Financial crime investigations rarely stand still. Once a bank account is frozen, new information may point to other accounts, shell companies, or beneficial owners. Recommendation 38 highlights that countries should be able to provide further related assistance on the basis of an initial request, without always demanding a new, formal supplemental request.

In practical terms:

• If the original request clearly sets out the case context and legal framework, authorities in the requested country should have flexibility to:
  • seek related information (e.g., connected accounts);
  • extend freezes to linked property;
  • take other necessary provisional measures.

This avoids time‑consuming formalities that can allow assets to be moved or dissipated while authorities exchange documents.

Managing Frozen, Seized, and Confiscated Property

Freezing and seizing assets is only half the job. Once property is under state control, it must be preserved, managed, and eventually disposed of in a way that maintains value and respects legal rights. Recommendation 38, through its link to Recommendation 4, expects countries to have effective mechanisms for:

• Management: using specialized asset management offices or units to handle seized assets (real estate, cash, securities, vehicles, luxury items, cryptoassets).
• Preservation: ensuring assets don’t lose unnecessary value due to neglect or mismanagement (e.g., maintaining properties, securing high‑risk items).
• Disposal: selling or otherwise disposing of confiscated property in a transparent and lawful way, as appropriate.

For financial crime professionals, this aspect is often underestimated, but it is essential. Without sound management frameworks, confiscation can turn into administrative chaos, legal disputes, or asset value destruction, which ultimately undermines deterrence and public confidence.

Sharing and Returning Assets: Fairness and Incentives for Cooperation

Recommendation 38 clearly promotes the sharing and return of confiscated property. Countries should:

• be able to share confiscated property with other countries, especially where confiscation stems from coordinated law enforcement actions;
• have arrangements to deduct or share substantial or extraordinary enforcement costs when executing freezing, seizing, or confiscation orders.

This serves multiple purposes:

• Victim-focused justice: assets can be returned to the country or population harmed by the crime (e.g., corruption, large‑scale fraud).
• Incentives: sharing gives real motivation for countries to invest resources in asset recovery for foreign partners.
• Fairness: where one country bears heavy operational or legal costs in enforcing an order, cost‑sharing arrangements prevent undue financial burden.

From a policy and practice standpoint, states often use asset‑sharing agreements or clauses in mutual legal assistance treaties to structure this cooperation, including specifying percentages, procedures, and criteria for distribution.

Informal Communication: Speed Before Formal Paperwork

Another key feature of Recommendation 38 is the recognition that strict formal channels alone are too slow in urgent asset recovery situations. It therefore encourages countries to have measures enabling informal communication between authorities, particularly:

• before a formal mutual legal assistance request is made;
• during the processing of a request, to provide status updates or clarify details;
• in urgent cases where assets are at immediate risk of being moved or dissipated.

Examples include:

• Early contact between central authorities, FIUs, asset recovery offices, or specialized prosecutors to:
  • confirm that assets are likely in a certain jurisdiction,
  • check what legal basis will be needed,
  • pre‑agree the structure of a future request;
• Use of secure networks and liaison officers to exchange preliminary information rapidly.

For practitioners, effective informal communication can mean the difference between freezing assets in time and losing them forever.

Building the “Widest Possible Range” of Cooperation Mechanisms

Recommendation 38 is explicit: countries should have the widest possible range of treaties, arrangements, or other mechanisms to support cooperation in asset recovery. This includes:

• bilateral mutual legal assistance treaties that cover freezing and confiscation.
• multilateral conventions (e.g., against corruption, organized crime) with asset recovery provisions.
• regional instruments and networks.
• domestic laws that allow assistance even in the absence of a treaty, under specified conditions (e.g., reciprocity, dual criminality tests, basic human rights safeguards).

For a financial crime framework to be credible, it cannot depend solely on a handful of treaties with close partners. Criminals exploit legal gaps and weak links, so the standard pushes countries to build dense, flexible cooperation networks that allow action in most directions.

Practical Implications for Financial Institutions and Compliance Teams

Although Recommendation 38 primarily targets states and their legal frameworks, it has direct consequences for financial institutions, DNFBPs, and other private‑sector entities:

• Expect more foreign freezing and confiscation requests to be channeled through your national authorities, leading to:
  • more account freezes;
  • requests for transaction records, KYC files, and asset information related to foreign cases.
• Faster timelines: authorities will be under pressure to act expeditiously, meaning shorter deadlines for banks to respond to orders.
• Cross‑border implications: a freeze at the request of a foreign authority may involve group‑wide coordination, depending on local law and group policies.
• Enhanced scrutiny on asset handling: improper treatment of frozen assets, or delay in executing orders, can lead to regulatory criticism or sanctions for institutions.

Compliance officers and legal teams should ensure that internal procedures are robust enough to respond quickly to state orders, preserve evidence, and maintain clear audit trails.

Key Takeaways

Recommendation 38 is about turning international cooperation in financial crime cases into something fast, practical, and results‑driven. It expects countries to:

• act quickly on foreign requests to identify, freeze, seize, and confiscate assets;
• accept and rely on foreign findings of fact, without insisting on duplicative domestic investigations;
• support both conviction-based and, where consistent with domestic law, non‑conviction based confiscation, especially when perpetrators are dead, missing, or unknown;
• manage seized and confiscated assets properly, and be ready to share or return them;
• use both formal treaties and flexible mechanisms, backed by strong informal communication between authorities.

For financial crime professionals, Recommendation 38 defines how realistic cross‑border asset recovery can be. Where it is fully implemented, criminal proceeds are much harder to hide. Where it is weak or missing, even the best investigations risk ending with empty hands.

Dive deeper

• FATF ¦ The FATF Recommendations ¦ Link
• FATF ¦ Luxembourg’s measures to combat money laundering and terrorist financing ¦ Link