Accusation of fraudulent conveyance of assets: when this offence is committed

Someone with outstanding debts transfers a property to a relative, empties their accounts or takes out a mortgage on their real estate. The creditor, who sees the debtor’s assets evaporate just as they were about to enforce their claims, files a complaint for fraudulent conveyance of assets (alzamiento de bienes). This offence sits on the border between the legitimate exercise of rights over one’s own assets and fraudulent conduct that harms creditors, and there are people who commit it without knowing exactly what they are doing.

Fraudulent conveyance of assets is the offence by which a debtor, with the aim of harming their creditors, conceals, transfers or destroys elements of their assets to prevent those creditors from collecting their claims. It is regulated in Article 257 of the Criminal Code. What is relevant is that it does not require the creditor to have attempted to enforce their claim unsuccessfully: it is enough for the debtor to have carried out acts of disposition with the intention of frustrating collection.

For the conduct to be criminal, several elements must concur. The existence of an enforceable payment obligation, which need not be recognised in a judgment but must be real at the time of the acts of disposition. The acts of disposition of assets, which can be very varied: donations, sales below market price, mortgages, transfers to relatives, emptying of accounts. The result of insolvency or difficulty of collection: if after the acts the debtor still has sufficient assets to pay, there is no offence. And the subjective element, the most important for the defence: the intention to harm creditors, which is proven through indications such as the temporal proximity between the acts of disposition and the debts, transfers to relatives at suspiciously low prices or the correlation with enforcement proceedings under way.

The most frequent forms are the transfer of assets to direct relatives at a symbolic price, the constitution of fictitious mortgages, the emptying of companies, massive transfers to third-party accounts just before a seizure and the simulation of sales to front men.

The penalties of Article 257 are one to four years’ imprisonment and a fine for the basic offence, which may also be applied to those who knowingly collaborate, such as the relative who receives the donation knowing its purpose. The penalties are aggravated, up to six years, when the harmed creditor is the Public Treasury or Social Security, or when the harm is of special seriousness.

The defence can demonstrate the absence of one of the elements of the offence: the non-existence of the debt at the time of the acts of disposition; the residual sufficiency of assets, if after the acts the debtor retained sufficient assets; the absence of intention to harm, by establishing an objective economic justification; or the transfer to a good-faith third party who paid a fair price.

It is worth knowing that this offence gives rise not only to the criminal process but also to the possibility for creditors to exercise the actio pauliana or rescissory action in the civil courts, which allows the fraudulent acts of disposition to be annulled. Appearing as a private prosecution in the criminal process and exercising civil liability within it is usually the most effective way for the creditor to obtain both the conviction and the restitution.