An acquittal no longer protects property because the Proceeds of Crime Act No. 5 of 2025 allows forfeiture without any conviction. Under section 125 the proceedings are civil, run against the property, are decided on the balance of probabilities, and survive an acquittal or discharge.
The Act was certified on 30 April 2025 and published in the Gazette on 2 May 2025. Its preamble is explicit that it supplements what already existed, naming the Penal Code, the Code of Criminal Procedure Act, the Offences Against Public Property Act, the Convention on the Suppression of Terrorist Financing Act, the Prevention of Money Laundering Act, the Financial Transactions Reporting Act and the Anti-Corruption Act.
What it adds is the part that changes how a case has to be defended. Under this Act the State can take property without convicting anybody of anything.
The proceedings are civil, and they run against the property
Section 125(1) describes non-conviction based forfeiture as civil proceedings instituted in the High Court against the property itself. Three consequences follow, and they compound.
- Section 125(2) provides that it is not necessary to prosecute and obtain a conviction against the person who committed the unlawful activity which yielded the proceeds.
- Section 125(7) requires the High Court to be satisfied on a balance of probability that the property is proceeds of crime. That is the civil standard, not proof beyond reasonable doubt.
- Section 125(8) permits proceedings even where criminal proceedings were brought against the accused and he was acquitted or discharged, whether at trial or at the appellate stage.
The third of those is the one to sit with. A client can win the criminal case and still lose the house. An acquittal disposes of the prosecution; it does not answer a civil claim against the asset, brought on a lower standard, in separate proceedings.
The section 68 notice is where the case actually starts
Long before any forfeiture application, section 68 allows an Investigation Officer who has reasonable grounds to believe an identified property is proceeds of crime to serve a notice calling for an explanation. The officer must record reasons contemporaneously and obtain the approval of the Designated Officer. The notice takes the form in Schedule I and may be served on the person in possession, custody, control or dominion of the property, the registered or apparent owner, anyone with a beneficial interest, or their agent, nominee, representative, manager, principal officer or attorney.
Section 68(2) sets out what the recipient must provide:
- how the property was acquired, possessed, owned, controlled or used
- the lawfulness of that acquisition or possession, including the sources of the consideration provided for it
- the identity of the person from whom the property was received and the circumstances of that receipt
- any other information pertaining to the property
That notice deserves more care than its length suggests, because of what section 127(3) does with it. The Attorney-General may not institute non-conviction based forfeiture proceedings unless a section 68 notice was served and either the recipient defaulted in providing an explanation, or the explanation was rejected by the Investigation Officer for reasons recorded, with that rejection approved.
So the explanation is a statutory gate. A complete, documented, properly sourced response can stop the matter there. An ignored notice opens the door.
Restraint, seizure and judicial freezing
Part II governs investigation, restraint and seizure. Part III governs judicial freezing, and section 75 sets the timetable. Where an Investigation Officer considers seized property should be frozen, he must apply to the High Court within seven working days of the seizure, with the approval of the Designated Officer, having first given notice in the form of Schedule V to the person from whom the property was seized, anyone served with a restraining order, anyone identified as affected, and anyone he believes would have been directly affected.
The application goes to the High Court of the judicial zone where the property is situated, or to the High Court of Colombo where the location cannot be established. Where the seizure was made by an Investigation Officer of the Commission to Investigate Allegations of Bribery or Corruption, the application is made by an officer of the Commission.
That seven working day limit is worth diarising from the moment property is seized.
The two forfeiture routes
Part VI provides for forfeiture after conviction. Under section 117(1), where an unlawful activity has been investigated, the suspected perpetrator prosecuted and convicted, post-conviction forfeiture proceedings may be brought against the frozen proceeds or to recover their corresponding value. They may be brought against the convicted person or against any other person from whom the proceeds were recovered.
Section 117(3) adds a detail that matters to timing: those proceedings commence following conviction and need not await the determination of an appeal against it. A pending appeal does not hold up the forfeiture.
Non-conviction based forfeiture under sections 125 and 126 is the other route, and the broader one.
When the State can proceed without a conviction
Section 126(1) lists the circumstances in which non-conviction based proceedings may be instituted, and states that the list is not exhaustive. They include:
- the perpetrator is dead, dies during the trial, is a fugitive, has immunity from prosecution, cannot otherwise be prosecuted, or cannot be identified
- the proceeds have been inherited, otherwise received or procured, or are held by a third party
- prosecution is barred because the offence has prescribed under the Prescription Ordinance
- there is no or insufficient evidence to prosecute the perpetrator successfully
- no investigation has been conducted, or an investigation has not been possible
- the unlawful activity was committed abroad and the offender has not been prosecuted or convicted there, and the proceeds are found in Sri Lanka or elsewhere
- the proceeds are found outside Sri Lanka
Read alongside section 125(8), the picture is that forfeiture does not depend on the criminal process succeeding, or on it happening at all. Insufficient evidence to charge is itself a listed ground.
Sections 125(9) and (10) extend the reach further. Where the proceeds are outside Sri Lanka, or where a person has been convicted abroad and the proceeds are found here, proceedings may be instituted without any prior restraint, seizure or judicial freezing. Section 125(11) allows the Attorney-General to proceed without those steps where action under the Act might otherwise cause a serious impact on the national economy or the public interest, though the Attorney-General must still satisfy the High Court that the property is prima facie proceeds of crime.
Under section 127(2) the application is supported by an affidavit of the Investigation Officer, with documents or other evidence attached to establish that prima facie case.
Directors and office bearers
The Act reaches individuals behind corporate structures. Where an offence is committed by an incorporated body, its directors face liability, and the Act states expressly that it is not necessary to first prosecute and convict the body corporate. The equivalent provision for unincorporated bodies makes every office bearer at the time individually liable, notwithstanding that a particular office bearer was not responsible for the act constituting the offence.
There is a defence, and it is worth reading closely. An office bearer is not to be deemed guilty if he proves before court, on a balance of probability, that the offence was committed without his knowledge, or that he exercised all due diligence to prevent it. There is also an earlier off-ramp: no such office bearer is to be prosecuted if he satisfies the Investigation Officer who conducted the investigation.
Due diligence is therefore not merely good governance here. It is a statutory defence, and the burden of establishing it sits on the officer.
Where forfeited property goes
Part V establishes the Proceeds of Crime Management Authority, which protects, preserves and manages restrained property. That function matters in practice: a business or an asset under restraint has to be run by someone while proceedings continue.
Part VII provides a civil remedy for victims of crime, and Part IX establishes a Victims of Crime Reparation Trust Fund. Part X deals with international cooperation, which is the machinery behind the cross-border provisions in section 125.
Practical points
- Treat a section 68 notice as the substantive first step, not an administrative formality. Section 127(3) makes the quality of that explanation the gate to everything that follows.
- Evidence the source of funds. Section 68(2)(b) asks for the sources of the consideration, and that is where most explanations will succeed or fail.
- Diarise seven working days from any seizure. That is the section 75 window for a judicial freezing application.
- Do not advise a client that an acquittal ends the matter. Section 125(8) says otherwise, and the standard in the separate proceedings is the balance of probabilities.
- For corporate officers, contemporaneous records of oversight are the material for the due diligence defence, and they cannot be assembled afterwards.
The Act is long, at eleven Parts, and much of it concerns machinery: management of restrained assets, disposal, reparation, international cooperation. The parts that change how a matter is defended are narrower. Property can be taken on the civil standard, in proceedings against the asset rather than the person, whether or not anyone is convicted and whether or not anyone is even charged. That is the shift, and it means the defence of the property is a separate exercise from the defence of the client.
