There is no need for extensive discussion about the difficulties already experienced—and to be increasingly so—by business entities in Brazil and around the world, particularly in countries where the pandemic’s consequences have been more severe. Very few companies maintain the same revenue levels; many are laying off employees en masse and defaulting on their obligations. This creates a cascading effect that heralds a long period of recession, followed by coordinated efforts to rebuild economies.
In this context, beyond the relief measures expected from public authorities, one can anticipate greater care from agencies responsible for criminal prosecution concerning the economic consequences of their actions. Precautionary measures that restrict corporate assets, even when executives or employees have committed crimes, demand special attention.
It has long been pointed out that, in cases of crimes involving companies, the State’s punitive power should be exercised in a way that minimally impacts their economic activity. A balance is needed between the interest in criminal prosecution and strict justice administration on one side and the survival of the business entity on the other.
Destroying companies means eliminating jobs, diminishing consumption and tax revenue, squandering national expertise, reducing the country’s competitiveness, and ultimately hindering its development.
In this context, it is essential to analyze the precautionary measures affecting companies’ assets in criminal proceedings: freezing (sequestro) and seizure (arresto). The former involves the blocking of assets of potentially criminal origin, while the latter targets lawful assets to secure future damages in case of conviction.
In the first case, the legitimacy of the measure is unquestionable. A company that has received assets or funds of illicit origin may be subject to asset freezes, even if the perpetrator of the respective crime is not its employee or executive, as long as the illicit assets are part of its property. This applies irrespective of acts of money laundering.
In cases of seizure, however, caution is warranted.
One of the authors of this article has previously argued that it is impossible to decree seizure measures against legal entities, even in cases where their executives or employees are accused of money laundering. Seizure aims to guarantee damage reparations, fines, and procedural costs in the event of a conviction. Therefore, only individuals can have their assets seized, as only they can be criminally convicted.
Before delving into the main topic of this article, namely precautionary measures against corporate assets, it is worth briefly discussing similar measures imposed on individuals. Given the urgent need to stimulate the economy and ensure capital circulation amid a looming recession—perhaps the most severe since the Great Depression of 1929—precaution is necessary, even when implementing such measures against individuals.
Currently, it is often unclear whether a precautionary measure targets illicit assets (freezing) or lawful assets (seizure). Hybrid forms of asset blocking are common, rendering an accused person’s entire current and future assets unavailable without distinguishing between frozen and seized assets.
This distinction becomes even more critical in cases of alleged money laundering, where the burden of proof shifts to the accused, who must prove the lawful origin of assets to have them released following a freeze.
If the measure involves a seizure—and its nature must be explicitly defined in the decision—then it is essential first to assess the factual damage caused. This establishes the parameters for the measure.
For instance, in corruption cases, precautionary decisions aimed at future damage reparations often use the bribe amount paid to a public official as a parameter. However, this has no direct correlation with the damage caused to public finances. Indeed, there may not always be directly assessable damages to be compensated following a corruption conviction—a circumstance often overlooked.
In procurement fraud, it is common to seize assets based on the amount received by the accused’s company for services rendered under a given contract, even when there is no evidence of overbilling. If services were indeed rendered, can one assert that the entire contracted amount constitutes damage requiring restitution? Clearly not.
Thus, even in the case of individuals, the unavailability of assets through precautionary measures requires well-defined criteria and parameters, especially in times of economic depression.
Returning to the original topic of this article—precautionary measures against corporate assets:
While freezing measures are legitimate, precautions must ensure that the measure does not paralyze a company’s operations before a definitive judgment on the illicit origin of its assets. Companies in severe economic distress fail to pay taxes, employees, and creditors. For this reason, caution is required, even when freezing assets suspected of being illicit.
In an article on criminal prosecution of corporations, particularly regarding the Arthur Andersen case, Professor Patricia H. Bucy from the University of Alabama noted that the experience in that case made U.S. prosecutors more cautious when targeting corporations. She explained that aggressive criminal prosecutions risk destroying viable businesses, and prosecutorial authorities also want corporations to disclose potential illegal acts committed internally.
In other words, beyond the prudence in applying criminal law and related precautionary measures to preserve businesses, there is also an incentive for companies to report isolated illegal acts by their executives or employees to appropriate internal and external authorities. A system that penalizes corporations severely for disclosing illicit activities risks undermining compliance mechanisms.
This does not mean that freezing illicit assets incorporated into a corporation’s property is unwarranted. However, such measures should be taken cautiously, considering the current and worsening economic devastation.
Initially, corporate working capital—necessary for paying employees and creditors—must be treated responsibly.
The fungibility of funds in checking accounts complicates the identification of illicit origins, except in specific cases where deposits directly result from illicit activities. Here, we discuss operational businesses, not shell companies established solely to facilitate illicit funds.
Regarding non-circulating assets, such as fixed assets, freezing decisions must be based on well-founded suspicions about the flow of funds from the alleged illicit act to the acquisition of the targeted asset.
Finally, having outlined many considerations to limit the use of precautionary asset measures, especially against corporations, we must explore potential alternatives to ensure businesses’ survival when such measures are justified, except in cases where the company is a mere façade for criminal activities.
For instance, mechanisms could be devised to preserve a company’s liquidity even when its assets are subject to precautionary restrictions.
Similar to alternatives developed for preventive detention, options could mitigate the harmful effects of precautionary asset measures on companies. These might include mandatory external audits and monitoring to oversee restrictions on dividend distribution or non-operational cash outflows, gradual and feasible deposits of amounts to be forfeited in the future based on audited ability-to-pay assessments, or judicial guarantees in the form of bank guarantees or insurance bonds—all as substitutes for asset freezes.
In summary, the aim is to demonstrate that criminal law—and, in this case, criminal procedure—can be constructed to serve society not only by punishing those responsible for intolerable violations of legal norms but also by ensuring that only those directly responsible, not innocent third parties, suffer the severe personal and financial consequences of such measures.