Vesting schedule

A vesting schedule in AML is the legally defined sequence of dates, milestones, and conditions that determine when confiscated or otherwise restrained property becomes the full legal property of the state or a designated entity, following due process under proceeds‑of‑crime and asset recovery laws.

It usually starts from an interim restraint or freezing order and ends when a final confiscation or forfeiture order takes effect, after appeal periods and any victim or third‑party claims have been resolved, at which point the property is “vested” and can be managed, sold, or applied to restitution and public purposes.

Purpose and Regulatory Basis

The primary purpose of a vesting schedule is to ensure that the transfer of ownership of criminal proceeds is orderly, proportionate, and subject to judicial oversight, so that crime does not pay while legitimate property rights and victims’ interests are protected.

In policy terms, vesting schedules operationalise the asset recovery pillar of the FATF Recommendations, which promote conviction‑based and non‑conviction‑based confiscation, early restraint of assets, and effective management and disposal frameworks.

Key regulatory bases include:

FATF Recommendations and 2025 asset recovery guidance, emphasizing robust confiscation powers, management of frozen property, and safeguards for due process.
EU asset recovery and confiscation Directive (entered into force 2024), requiring Member States to establish rules for tracing, freezing, confiscation, and management of property, including sale of frozen property and national asset recovery strategies.
National proceeds‑of‑crime and confiscation laws (e.g., UK POCA, EU Member State transposition laws, Jersey Proceeds of Crime Law), which define when confiscation orders become enforceable, how appeals affect vesting, and how realised values are handled.
Related national frameworks (e.g., “proceeds of crime” reforms and incentive schemes that share recovered funds between agencies and, increasingly, victims).

For compliance officers, these frameworks dictate when institutions must continue to treat assets as customer property (under freeze) versus when they can reclassify them as state‑owned and implement disposal or transfer instructions.

When and How It Applies

Vesting schedules apply whenever competent authorities pursue freezing, seizure, or confiscation of assets suspected to be proceeds of crime, including money laundering, corruption, sanctions evasion, drug trafficking, or other serious offences.

Typical triggers include:

Interim freezing or restraint orders to prevent dissipation of assets during an investigation.
Confiscation orders following a criminal conviction, where the court calculates the “benefit” from criminal conduct and identifies realisable property.
Non‑conviction‑based confiscation, where confiscation is possible without a criminal conviction (e.g., where the suspect is dead, absconded, or beyond jurisdiction).
Civil recovery proceedings, where assets can be recovered through civil courts based on the civil standard of proof.

In each scenario, the vesting schedule sets:

The date from which a freeze or restraint takes effect.
The point at which a confiscation order becomes final (after appeals).
When title formally passes to the state or designated body, enabling management, sale, or distribution.

Types or Variants of Vesting Schedules

Vesting schedules in AML asset recovery can take several forms, usually defined in domestic law but aligned with FATF and regional standards.

1. Conviction‑based vesting schedules

Assets are frozen during investigation; after conviction, a confiscation order is made and becomes final once appeal periods expire.
Property vests in the state according to statutory rules; payment schedules and enforcement mechanisms (e.g., default sentences for non‑payment) may apply, especially for monetary orders.

2. Non‑conviction‑based (NCB) vesting schedules

Used where prosecution is impossible (death, absconding, immunity, etc.).
Courts may order confiscation in civil or quasi‑civil proceedings, with vesting triggered by a final order once procedural safeguards and third‑party claims are addressed.

3. Civil recovery and unexplained wealth regimes

Authorities seek civil orders to recover property suspected to be illicit, often relying on unexplained wealth or disproportionate assets tests.
Vesting occurs when the civil court order is final, and property is transferred to the state or a dedicated recovery fund.

4. Early disposal / pre‑confiscation sale schedules

Under the new EU Directive, frozen property can be sold before final confiscation in certain cases (e.g., perishable assets, disproportionate storage costs).
Vesting is structured so that proceeds of early sale are held under state control, subject to later allocation depending on the final judgment and victim claims.

5. Victim‑centred vesting and sharing schedules

Some regimes combine vesting with asset‑sharing or victim restitution schemes, directing a portion of realised proceeds to compensating victims or funding community projects.
The schedule may sequence: vesting to the state, calculation of distributable proceeds, and subsequent distribution according to statutory formulas.

Procedures and Implementation

For financial institutions, the operationalisation of a vesting schedule is embedded in asset freezing, restraint, and confiscation execution procedures.

Key procedural steps typically include:

Receipt and validation of legal orders: Banks and other obliged entities receive freezing, restraint, or confiscation orders, verify authenticity, and log them in case management systems.
Immediate freeze and protection of value: Accounts and assets are frozen to prevent transfers or dissipation, with controls ensuring interest accrual or valuation records where required.
Monitoring legal milestones: Compliance teams track the progression from interim orders to final confiscation, including appeal periods, third‑party claims, and any court directions on sale or management.
Execution of vesting: When notified that a confiscation order is final, the institution reclassifies the asset, transfers funds to specified government or asset management accounts, or cooperates in the transfer of title for non‑cash property.
Coordination with asset management offices: Under EU rules, Member States must set up asset management offices; institutions may interact with these bodies on valuation, maintenance, or sale of assets.
Documentation and audit trail: Detailed records of freezes, communications, transfers, valuations, and disposal actions are maintained to evidence compliance and support later audits or legal challenges.

Robust systems often include workflow tools, legal order registries, dedicated asset recovery modules, and clear internal policies describing roles of compliance, legal, and operations teams.

Impact on Customers and Clients

From the customer’s perspective, vesting schedules affect rights, access, and recourse during and after AML asset recovery actions.

Key impacts include:

Restrictions on access: Once assets are frozen or restrained, customers cannot freely dispose of them and may experience severe liquidity constraints.
Procedural rights: FATF guidance stresses that individuals and legitimate third parties must have timely notice and the opportunity to challenge freezing, seizure, confiscation, and disposal actions.
Protection of legitimate interests: Courts must consider claims from bona fide third parties and victims before property vests and is distributed, including situations where only part of the property is tainted.
Restitution and victim compensation: In some regimes, vesting is coupled with rules giving priority to victim claims over state revenue, particularly in EU asset recovery reforms.
Legal certainty: Clear vesting schedules provide predictability for customers, third parties, and creditors regarding when property is definitively lost and when legal remedies are exhausted.

Financial institutions must balance court‑ordered restrictions with customer communications, often referring customers to their legal representatives rather than providing legal advice.

Duration, Review, and Resolution

Vesting schedules are inherently time‑bound and subject to periodic review by courts and competent authorities.

Typical duration and review features:

Freeze duration: Freezing orders may have specified durations, subject to renewal based on ongoing investigations and judicial oversight.
Confiscation timeline: The period between conviction and final confiscation depends on court capacity, complexity of financial investigations, and appeal proceedings.
National strategies and review cycles: Under the EU Directive, Member States must adopt a national strategy on asset recovery and update it at least every five years, indirectly influencing vesting practices and timelines.
Resolution: Vesting is generally considered complete when all legal challenges, victim claims, and third‑party interests are resolved, and the asset is either transferred, sold, or otherwise disposed of in line with statutory rules.

Compliance functions must maintain “open item” tracking for all frozen and confiscated assets, ensuring no premature release or transfer, and closing cases only once final notifications from authorities are received.

Reporting and Compliance Duties

Vesting schedules intersect with multiple reporting and compliance obligations for financial institutions.

Core duties include:

Execution reporting: Institutions may need to confirm in writing that freezing, seizure, or confiscation orders have been fully executed, including dates and amounts.
Ongoing suspicious transaction reporting: Even after a freeze, further activity or related accounts may generate suspicious transaction reports (STRs/SARs) where new information arises.
Asset management reporting: When institutions hold frozen assets over extended periods, they may need to provide periodic statements to authorities on balances, valuations, and any incident affecting value.
Cooperation with asset recovery offices: EU rules require asset recovery and management offices; financial institutions must respond to information requests and operational instructions within prescribed timelines.
Record‑keeping: Detailed documentation of legal orders, correspondence, internal decisions, and transactions related to vesting is essential to demonstrate compliance during supervisory inspections or court proceedings.

Failure to respect vesting‑related orders—such as releasing funds in breach of a freeze or misdirecting confiscated assets—can lead to regulatory sanctions, criminal liability, and civil suits.

Vesting schedules connect closely with several other AML concepts that compliance officers must understand as an integrated framework.

Key related terms include:

Freezing/Restraint orders: Initial measures preventing transfers or disposal of suspicious assets, often the first step in the vesting timeline.
Seizure: Physical taking or control of property, frequently preceding or accompanying legal vesting.
Confiscation/Forfeiture: Judicial orders permanently depriving persons of property, forming the legal basis for vesting in the state.
Civil recovery / Unexplained wealth orders: Mechanisms for recovering assets through civil courts where criminal proceedings are not pursued or fail.
Asset recovery offices (AROs) and asset management offices (AMOs): Specialist bodies in the EU and other regions responsible for tracing, managing, and disposing of assets during and after vesting.
Asset‑sharing and victim compensation schemes: Frameworks that determine how realised proceeds are divided among states, agencies, and victims.

Understanding these terms helps institutions map their procedural obligations across the full asset recovery lifecycle.

Challenges and Best Practices

Implementing vesting schedules presents legal, operational, and ethical challenges for both authorities and financial institutions.

Common challenges:

Complexity of cross‑border cases: Multi‑jurisdictional structures and foreign legal orders complicate the timing and recognition of vesting, especially where legal systems differ on NCB confiscation.
Valuation and preservation: Maintaining the value of frozen assets, including volatile instruments and perishable goods, is difficult and may require early sale provisions.
Balancing rights and enforcement: Overly aggressive freezing or confiscation without adequate safeguards can undermine confidence and lead to legal challenges, while weak measures leave criminals’ assets intact.
Operational errors: Misinterpreting the stage of proceedings can result in premature release or transfer of assets, exposing institutions to liability.

Best practices include:

Clear internal policies and playbooks defining roles, escalation paths, and standard operating procedures for all stages of freezing, confiscation, and vesting.
Dedicated asset recovery teams or subject‑matter experts within compliance and legal departments to interpret orders and liaise with authorities.
Integrated case management systems that track legal milestones, deadlines, and documentation across jurisdictions.
Regular training on proceeds‑of‑crime frameworks, EU asset recovery developments, and FATF guidance, including case studies on confiscation failures and enforcement actions.
Strong cooperation agreements and information‑sharing protocols with FIUs, asset recovery offices, and foreign counterparts, consistent with privacy and data protection laws.

Recent Developments and Trends

Recent years have seen asset recovery, confiscation, and associated vesting schedules elevated to a central focus of global AML policy.

Key developments:

FATF’s 2025 asset recovery guidance reframes recovery of criminal proceeds as a core pillar of AML, calling for both conviction‑based and non‑conviction‑based confiscation, early restraint powers, and robust management of assets, including digital assets.
The 2024 EU Directive on asset recovery and confiscation strengthens minimum rules on tracing, freezing, confiscation, and management of property, mandates national strategies, and encourages use of confiscated property for public interest or social purposes.
Growing emphasis on victims’ rights, with reforms redirecting uplifted confiscation proceeds to victims and prioritising restitution over general revenue, reshaping how vesting outcomes are allocated.
Enhanced treatment of virtual assets, requiring states to ensure freezing, seizure, and management (including secure government‑controlled wallets) so that vesting can apply effectively to crypto‑based proceeds of crime.

For financial institutions, these trends mean more frequent interaction with complex confiscation frameworks, tighter expectations around execution quality, and increased scrutiny from supervisors on how vesting‑related orders are handled.

Vesting schedules in AML translate abstract asset recovery powers into concrete timelines and actions that strip criminals of illicit wealth while respecting due process, victims’ rights, and property protections. For compliance officers and financial institutions, understanding and operationalising these schedules is essential to executing freezing and confiscation orders correctly, avoiding liability, and supporting the global objective that crime should not pay.

Vesting schedule in Anti Money Laundering (AML)