HBA-JLV H.B. 1522 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1522 By: Averitt Financial Institutions 2/27/2001 Introduced BACKGROUND AND PURPOSE Civil asset forfeiture provides a means for law enforcement to seize a criminal's assets from financial institutions as contraband, despite a lienholder's bona fide security interest in the property. Under current law, the lienholder must show that it acquired and perfected the security interest prior to or during the commission of the offense, and at the time the interest was acquired and perfected, that it did not know or have reason to know of the offense or that it was likely to occur. There are concerns that this allows a prosecutor, depending upon the circumstance of timing, to shift a loss that results from an individual's criminal activity to a lienholder. Additionally, there are concerns that the immediate and unexpected withdrawal of accounts or assets from a bank, depending upon the amount of the seizure in relation to the bank's assets, can jeopardize its liquidity. House Bill 1522 establishes procedures for the seizure of assets from a regulated financial institution. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS House Bill 1522 amends the Code of Criminal Procedure to set forth provisions regulating the seizure of accounts and assets at regulated financial institutions (institution). The bill provides that an institution is not required to pay an account or tender assets held as security for an obligation owed to the institution until the time has expired for an appeal from a decision of the court relating to the forfeiture of accounts or assets. The bill requires the institution to preserve and maintain the account or assets pending entry of a final judgment of forfeiture. The bill also requires the institution to take action to freeze the account or assets immediately upon service of the seizure warrant and to provide evidence of the terms and the amount of the account or a detailed inventory of the assets to the attorney representing the state. The bill provides that assets subject to diminution in value may be liquidated without court action by agreement between the institution and the attorney representing the state. If agreement cannot be reached, the court is authorized to order liquidation if liquidation is consistent with the terms of the security agreement between the institution and the property owner. If the institution fails to comply with the obligations to freeze and preserve the account or assets constructively seized, the bill authorizes the court to order the institution to pay a specified amount of damages. The bill releases an institution that complies with the provisions of the bill from liability in damages to the owner of a seized account or asset (Art. 59.12). The bill provides for the disclosure of information relating to accounts and assets at an institution by the attorney representing the state to a financial institution regulator, but requires a primary state or federal financial institution regulator to keep information provided by the attorney confidential (Art. 59.13). The bill requires the attorney representing the state to notify the primary state or federal financial institution regulators before taking any action that may have a substantial adverse effect on an institution (Art. 59.14). The bill provides that if property is seized from the possession of the interest holder who asserts a possessory lien interest in the property, the interest holder's lien remains in effect during the pendency of proceedings as if possession of the property had remained with the interest holder (Art. 59.02). The bill amends the Penal Code to provide that it is an exception to the application of provisions governing money laundering that the transaction was an assertion by an owner or interest holder of interest in seized property or opposition by an owner or interest holder to the nature of property as proceeds of a criminal activity or contraband (Sec. 34.02). This applies only to an offense committed before September 1, 2001. EFFECTIVE DATE September 1, 2001.