Saturday, May 18, 2019
In order to forfeit the proceeds of some crimes, the Government must prove the property is traceable to the underlying offense. While in most cases this is easily accomplished, courts are divided over whether tracing can occur when illicit funds are commingled with untainted funds. The Second Circuit in Banco Cafetero held that the Government can use accounting methods, including either the "lowest intermediate balance rule," which assumes that the illicit funds remain in the account, despite withdrawals, or the "drugs-in, first-out" rule, which assumes the illicit funds exit the account first through any withdrawal. The Third Circuit in Voigt rejected this approach and held that when funds are commingled, tracing becomes impossible because the Government can seek substitute assets in criminal forfeitures.
Different courts have followed Banco Cafetero and Voigt and developed arguments for and against each approach. This Article finds that neither approach is completely correct and looks to the law of tracing in money laundering and trust law for reasonable principles. This Article recommends that courts adopt the "Single Presumption Method" which states that, while accounting methods are permissible in forfeitures, the Government should be limited to applying a single accounting method when seeking any given asset. This method gives effect to the substitute assets provision in forfeiture, provides for greater certainty when tracing, and respects the risk of uncertainty the Government bears when tracing commingled funds.