The Dominican Republic is a prime location for investment, because of its pristine beaches; strategic location; tourism incentives and favourable environment for direct foreign investment; equal treatment for nationals and foreigners; and social, political and economic stability. This attracts both investors and money laundering. As stated by Robert Hunter in the Preface to this of this Law Review, 'Rarely nowadays will a fraudster leave the proceeds of fraud in the jurisdiction in which they were stolen.'
Traditionally the Dominican Republic has used common remedies for asset recovery, such as compensation for damage, restitution for fraudulent misrepresentation inducing the sale of a company at an inflated price, fraudulent misuse of funds to which the wrongdoer has legal title to or control of to the detriment of the beneficial owner, criminal acts and money laundering.
In an effort to strengthen the Dominican legal system against money laundering, on 31 May 2017, the Anti-Money Laundering and Terrorist Financing Law No. 155-17 (the Money Laundering Law) was enacted. This Law and its implementing regulations2 include provisions for transparency and sharing of available information among economic agents, and for asset forfeiture.
The Dominican Criminal Code3 and Dominican Criminal Procedure Code set out general provisions prohibiting fraud. Additionally, the Commercial Companies and Limited Liability Individual Enterprises Law No. 479-08 establishes specific legal provisions concerning:
- fraudulent misrepresentation;
- fraudulent company incorporation and material fraudulent statements;
- fraudulent use of the company assets against the best interest of the company; and
- the transfer of company assets while in a liquidation process.
Other relevant sectoral laws are the Monetary and Financial Law No. 183–02 and its implementing regulation, the Securities Exchange Law No. 19-00 and its implementing regulation, Law 189-11 on Mortgage Development and Trusts, the Corporate Restructuring and Judicial Liquidation Law No. 141-15 and the Law for the Eradication of Illicit Trade, Contraband and Falsification of Regulated Products No. 17-19.
The Dominican Republic is signatory to the United Nations Convention against Transnational Organized Crime and its protocols dated 15 November 2000 (ratified on 12 September 2006), which promotes international legal cooperation to prevent and effectively combat transnational organised crime. International legal cooperation and its procedures are set out in the Money Laundering Law, and act against money laundering arising from illicit trafficking in drugs and controlled substances and other serious infringements.
II LEGAL RIGHTS AND REMEDIES
i Civil and criminal remedies
The Dominican Criminal Procedure Code provides that criminal action may be public, private or combined, enabling victims to initiate actions in order to obtain compensation through both civil and criminal proceedings. In the Dominican Republic, civil proceedings are more suitable for private entities seeking to pursue asset recovery.
Therefore, any injured party can bring a civil lawsuit for damages and losses incurred as a result of a crime. In order for civil liability to arise, three requirements must be met: fault, damage and causation thereof.
The civil action for the compensation of damage caused, or for the restitution of assets, may be filed by all those who have suffered as a result of this damage, including their heirs and their legatees, against the defendant and the person that is civilly liable.
Moreover, civil lawsuits can be brought and adjudicated by the competent criminal court as part of the criminal proceedings. The plaintiff can also bring a civil action in the competent civil court. The criminal proceedings have to be decided first or jointly with the civil lawsuit.
Ordinary legal remedies are also available, including disgorgement of illegal profits and the seizure of assets employed for money laundering activities.
The Money Laundering Law gives powers to the Dominican authorities to cooperate with other governments and their agencies in the investigation and prosecution of crimes and the recovery of the illegal proceeds. The Dominican Republic, through the Dominican Republic Attorney General's Office, has signed mutual legal assistance agreements with several countries, including the United States, Colombia and Brazil, among others. In addition, the Dominican Attorney General's Office has provided assistance to the United Kingdom, Italy, Switzerland, Canada, the Netherlands, Germany, Spain and Romania, among other countries, in this regard.
Interim and enforcement measures of protection are available and recommended to the parties to secure a fraudster's or debtor's assets. The interim measures of protection available to the parties to secure such assets include:
- attachment of movable property;
- freezing of bank accounts and other financial instruments;
- establishment of compulsory mortgages establishing a prohibition on selling or encumbering real property; and
- the filing of a lis pendens on the title deed to the property.
These measures are available to any party with credible grounds and a legal interest in being granted security. However, unless the requesting party has a secured credit, an authorisation must be requested before the competent judge in order to apply one or more of the interim measures of protection indicated above.
The Criminal Code considers the following to be accomplices (who are thus subject to the penalties established therein): those who, through gifts, promises, threats, abuse of power or authority, machinations or guilty plots, provoke a crime or give instruction to commit it, as well as those who have knowingly helped or assisted the perpetrator or perpetrators of the crime, either in facilitating or carrying out the crime. The Criminal Code also considers as accomplices those who knowingly have hidden, in whole or in part, assets stolen or acquired by means of a crime.
Claims and criminal proceedings
An investigation may be initiated if there is evidence that the perpetrator has acquired illicit proceeds as a result of a criminal activity. Indictments presented by the Dominican Republic Attorney General's Office are normally accepted by the courts. The success of a claim for asset recovery depends on the interim measures taken in the investigation process or pretrial, in order to prevent the dissipation of the assets.
Judicial processes in criminal courts in the Dominican Republic may take from 18 to 24 months, depending on the complexity of the case. Cases are tried in two tiers of courts: first instance and appellate courts. Cases are also regularly tried in the Supreme Court of Justice.
Those who have suffered a direct harm may participate as plaintiff in criminal proceedings. The Dominican Criminal Procedure Code4 considers as victim:
(i) the person directly offended by the punishable act; (ii) the spouse, cohabiting partner, biological or adoptive parents, relatives within third degree in a family or second degree in affinity, the heirs, in punishable acts whose result is the death of the offended directly; (iii) partners, associates or members, regarding punishable acts that affect a company, committed by those who direct, administer or control the company.
The Dominican Republic has no insurance or fund for the restitution of victims.
The Money Laundering Law has imposed obligations on certain institutions and professionals and named them as obligors whether they are from the financial or non-financial sector (financial and non-banking financial institutions, lawyers, accountants and public notaries, etc.) intended to prevent, deter and detect money laundering. This includes reporting suspicious activities, such as certain cash transactions and unusual or suspicious transactions, among other things. These institutions or professionals must therefore voluntarily report any activity or transaction where there is evidence or certainty that it is related to money laundering to the Financial Analysis Unit (UAF). The UAF is the technical unit of the National Committee against Money Laundering and Terrorism Financing, which is ascribed to the Ministry of Finance. This unit will analyse all reports of suspicious transactions and elevate reports to the Dominican Republic Attorney General's office.
Once an investigation regarding money laundering or capital gains derived from criminal activities has been initiated, the competent judicial authority may request interim measures, without prior notification or hearing, a provisional restraining order or immobilisation, in order to preserve the availability of assets, products or instruments related to the alleged infringement, until a final ruling is issued.
ii Defences to fraud claims
The statute of limitations on the criminal legal action shall be effective:
- upon the expiration of a term equal to the maximum penalty, in offences carrying a prison sentence. In any case, this period shall not exceed 10 years or be less than three years; and
- at the expiration of the one-year period in the case of offences punishable by non-custodial sentences or arrest.
However, the statute of limitations for money laundering infractions depends on the severity of the infraction. For very serious infractions, the prescribed statute of limitations is within five years, serious infractions within three years and minor infractions within one year of the date on which the infraction would have been committed. In cases of continued activity, the limitation period will start on the date of finalisation of the activity or the date of the last act. The infractions are described in the Money Laundering Law.5
A liable third party has the same rights as the defendant with regards to his or her defence, concerning his or her civil interests. The ruling is subject to appeal.
Criminal proceedings may be discontinued for the following reasons, among others: defendant's death; the statute of limitation has elapsed; amnesty; and abandonment of the legal action (for civil proceedings).
III SEIZURE AND EVIDENCE
i Securing assets and proceeds
The Dominican Civil Code provides that when there is danger of dissipation of assets to elude payment of a debt a conservatory attachment order may be placed upon a debtor's assets, prior to a final ruling on the case.
Interim measures are established in the Dominican Civil Procedure Code, the Dominican Criminal Procedure Code and the Law establishing the Supreme Administrative Court, respectively. The main objective is to ensure the availability of assets in order to satisfy a claim and personal attendance to proceedings.
In addition, the Money Laundering Law provides that when a person is convicted for a violation under this Law the court will order the assets, products and instruments related to the offence be seized and allocated as established under this Law. Also, the Money Laundering Law provides that during the proceedings the competent judicial authority may issue a provisional seizure or restraining order to preserve relevant assets up until a final ruling has been issued.
With regards to the seizure of assets or the proceeds of money laundering activities, the judge of the competent investigation, at the request of the Dominican Republic Attorney General's Office, shall order, at any time and without a service of process or prior hearing, an order for the seizure or restraining of movable properties or banking products, or a preventive annotation and an opposition to the transfer of real properties, in order to preserve the assets, products or instruments related to the infraction, pending a judicial final decision with the force of res judicata.
The Dominican Republic Attorney General's Office may exceptionally adopt, by means of a reasoned decision, the precautionary measures indicated above when the delay may jeopardise the investigation or distract the assets.
ii Obtaining evidence
The Constitution is the main legal provision regarding evidence in the Dominican Republic; stating that all evidence must be obtained according to the legally prescribed provisions, under penalty of nullity.6 Also, the Dominican Civil Code,7 the Dominican Civil Procedure Code and the Dominican Criminal Procedure Code8 establish the general provisions concerning evidence, including the types of admissible evidence.
Pursuant to the Criminal Procedure Code,9 'evidence will only have value if it is obtained and incorporated to the process in accordance with the principles and norms of this code'. The two principal criteria are: that the evidence has been legally obtained and in accordance with the applicable formalities and procedures.10 Punishable offences and their circumstances may be proven by any means of evidence allowed, except express prohibition.11 The admissibility of evidence is subject to its direct or indirect reference and its usefulness in discovering the truth, with respect to the subject matter under investigation, as provided therein.
Pursuant to the Dominican Civil Code, there is liberty of evidence in civil proceedings. Therefore, any type or means of evidence is considered admissible, unless specifically prohibited by law. The legally provided forms of admissible evidence are:
- written evidence;
- confession; and
For criminal procedures, the Criminal Procedure Code also establishes the freedom of evidence and indicates the following, among others, as means of evidence:
- inspections (of public places, residences and other private spaces);
- expert witnesses;
- seizure of documents and articles; and
- interception of communication.
In order to obtain evidence, parties to a claim may submit a motion to compel the production of documents held by a third party, as provided for in the Civil Procedure Code.
Other provisions, such as the Law on Free Access to Public Information No. 200-04, establish the right to obtain public information from any government agency.
IV FRAUD IN SPECIFIC CONTEXTS
i Banking and money laundering
Financial and Exchange Intermediation Entities have established internal procedures and control for the preparation, approval and application of the policies related to 'Know Your Customer', in compliance with the provisions of the Monetary and Financial Law No. 183-02 and the Money Laundering Law. Pursuant to the Money Laundering Law, banks and financial entities are parties that are obligated to prevent, detect, evaluate and mitigate the risk of money laundering and the financing of terrorism. Other obligated parties are lawyers, notaries, accountants and real estate agents, among others.
However, because of the recent enactment of the Money Laundering Law, which repeals the Anti-money Laundering Act No. 72-02 of 7 June 2002, banks and other financial entities are currently reviewing their procedures to prevent and detect money laundering, in order to adhere to the new requirements.
The Restructuring and Liquidation of Companies and Business Entities Law No. 141-1512 provides that, upon recognition of a foreign proceeding, the foreign representative is entitled to request the verifier, conciliator or liquidator to initiate actions for the recovery of assets belonging to the estate, and for the annulment of acts entered into for the defrauding of creditors. To date, there has not been an insolvency proceeding in the Dominican Republic pursuant to Law No. 141-15.
Law No. 141-15 is not applicable to entities controlled by the state, to financial entities ruled by the Monetary and Financial Law, to stockbrokers, investment fund management companies, securities centralised deposits, stock exchanges, securitisation companies and any other participant in the securities markets, except for publicly traded companies and companies governed by Law on Securities Market No. 19-00.
Law No. 489-08 for Commercial Arbitration (the Commercial Arbitration Law) provides that disputes on matters of free disposition and transaction, which is where parties have the power to enter into an agreement in accordance with applicable civil and commercial provisions, including those in which the state is a party, may be submitted to arbitration.
The Commercial Arbitration Law provides that cases involving public policy cannot be subject to arbitration.13 This does not prevent arbitrators from applying public policy measures, nor the parties from agreeing to include arbitration clauses in contracts for matters regulated by the state.
The Dominican Civil Code establishes that parties may enter into an agreement upon the civil interest that results from a crime; nevertheless, this settlement agreement does not prevent the public action. In addition, parties may require precautionary measures to the courts before and after the constitution of the arbitral tribunal. The arbitral tribunal is also entitled to order precautionary measures, at the request of a party. The decision rendered by the arbitral tribunal may be subject to an annulment action and to the requirements of recognition and execution of arbitral awards.
The Commercial Arbitration Law provides the procedure for the enforcement of arbitration awards and the Private International Law (No. 544-14) establishes the provisions for the recognition of foreign judgments, including the parties' obligations and the limits of the court proceedings. However, generally Dominican courts do not distinguish between the procedures for foreign arbitration awards and court judgments.
iv Fraud's effect on evidentiary rules and legal privilege
Evidence must be obtained according to the legally prescribed provisions. Evidence not obtained in accordance with the means and processes established in the relevant laws is illegal or unlawful and has no effect or validity. For the same reason, evidence obtained through violence, coercion or criminal methods is unlawful and shall be dismissed by the judge.
The Dominican Republic enacted the Code of Ethics of the Law Profession in 1983 (Decree No. 1290 of 2 August 1983). However, professional legal privilege can be waived by the judge.
V INTERNATIONAL ASPECTS
i Conflict of law and choice of law in fraud claims
The judicial authorities in the Dominican Republic are competent to exercise criminal jurisdiction against persons who have been charged with committing illicit acts in the territory in which they exercise their jurisdiction.
The Private International Law No. 544-14 regulates in matters of conflicts of laws:
- jurisdiction of local courts;
- applicable law; and
- recognition and enforcement of foreign decisions in the Dominican Republic.
ii Collection of evidence in support of proceedings abroad
The Dominican Republic provides legal assistance and requests based on multilateral and bilateral treaties and based on rules of international reciprocity. The Criminal Procedure Code, as well as the Money Laundering Law, provide for international legal cooperation.
When interaction with foreign authorities or regulators is required, the Dominican Republic Attorney General's Office interacts with those authorities, making use of the options available under the rules applicable to mutual legal assistance and international cooperation,14 in addition to the applicable international treaties ratified by the Dominican Republic.
iii Seizure of assets or proceeds of fraud in support of the victim of fraud
The Dominican Republic is signatory to:
- the United Nations Convention Against Transnational Organized Crime;
- the Inter-American Convention on the Taking of Evidence Abroad, executed on 19 July 1977 by the Members of the Organisation of American States;
- the Model Treaty on Mutual Assistance in Criminal Matters;
- the Inter-American Convention Against Corruption;
- the Inter-American Convention Against Terrorism; and
- the United Nations Convention Against Corruption.
Decree No. 288-96, establishing the Regulation of Law No. 50-88 for Drugs and Controlled Substances of the Dominican Republic, provides for international cooperation and the seizure or forfeiture of assets, products or instruments relating to an offence of illicit traffic or related offences.
Also, pursuant to the Money Laundering Law, the Dominican Republic Attorney General's Office may conduct or respond with appropriate measures in relation to the request for assistance of a competent authority of another state, to identify, locate, detect and seize goods, products or instruments related to infractions provided for in that Law. Measures such as the distribution, repatriation and recovery of assets of illicit origin can also be conducted.
iv Enforcement of judgments granted abroad in relation to fraud claims
Article 91 of the Private International Law provides that:
For the process of exequatur of foreign decisions of a contentious nature, the Civil and Commercial Chamber of the Court of First Instance of the National District shall be competent.
Proceedings are conducted ex parte, which implies that the plaintiff is not obligated to inform the defendant of the claim, and no hearings are conducted. The plaintiff empowers the court by means of a simple motion with the appropriate exhibits that serve to prove the grounds that the judge should inspect on the merits. The court must limit its intervention to review due process principles and public policy consistency between the foreign decision and the local system. The local decision on the exequatur claim may be subject to an ordinary remedy of appeals before the competent court of appeals, once an appeal is submitted the challenged decision is stayed until a definitive decision from the court of appeals is issued. In any case, if the original judge rejects the exequatur claim the plaintiff may reinsert the claim, as ex parte decisions lack res judicata.
v Fraud as a defence to enforcement of judgments granted abroad
Dominican courts may refuse to execute a foreign judgment if the decision does not meet the requirements in the country in which it was issued to be considered as authentic, or those that Dominican laws require for its validity.
VI CURRENT DEVELOPMENTS
Currently the Dominican Congress is studying a bill on Extinction of Ownership of Illicitly Acquired Assets and Civil Forfeiture, by which assets that have been used to, or intended to hide or mingle proceeds from a crime, or are a product of a wrongful act, will be subjected to a court decision on forfeiture of illicit goods even before there has been a ruling to determine criminal liability.
For the past few years, Congress has also been looking into a new Criminal Code and a new Civil Code.
1 Aimee Prieto is a partner at Prieto Cabrera & Asociados SRL.
2 (1) Regulation No. 407 for preventive freezing of assets or assets related to terrorism and its financing and the proliferation of weapons of mass destruction, dated 16 November 2017; (2) Regulation No. 408 for the application of Law 155-17, dated 16 November 2017; (3) Rule issued by the Tax Administration (DGII) No. 01-2018 regarding lawyers, notaries, accountants and factoring companies; (4) Rule issued by the Tax Administration (DGII) No. 02-2018 regarding natural or legal persons who engage regularly to the purchase and sale of vehicles, boats and planes; (5) Rule issued by the Tax Administration (DGII) No. 03-2018 regarding real estate agents, non-financial construction and fiduciary companies or public offering companies; (6) Rule issued by the Tax Administration (DGII) No. 04-2018 regarding jewellers, armoury and pawnshops; and (7) Rule issued by the Tax Administration (DGII) No. 05-2018 regarding the sanctioning regime.
3 Articles 401–409.
4 Article 83.
5 Articles 69–71.
6 Article 68.
7 Articles 1315 et seq.
8 Book IV, Titles I–V.
9 Article 22.
10 Article 166.
11 Article 171.
12 Article 213.
13 Article 3.
14 The Dominican Constitution, Article 26; the Criminal Procedure Code, Article 155; the Money Laundering Law, Articles 17–21.