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4000 - Advisory Opinions

Insurance Coverage Afforded Funds Seized and Held by Law Enforcement Authorities Subject to Forfeiture Pursuant to Statutory Proceedings or Following Completed Forfeiture Actions


February 14, 1991

Walter P. Doyle, Counsel

Thank you for your January 24 letter inquiring about deposit insurance coverage of two types of Illinois State Police custodial accounts.

As we understand, the type of account entitled "Illinois State Police, Custodian of Seized Funds" comprises funds seized and held in a custodial capacity by law enforcement authorities that are subject to forfeiture pursuant to statutory proceedings. The funds in this type of account are held pending completion of forfeiture action and remain the property of various defendants during that time. Accordingly, the respective interest of each defendant in such funds deposited in any one insured institution would be insured up to $100,000, so long as the account records of the institution clearly indicate that the funds are held in a custodial capacity and the custodian's records evidence the amount of each defendant's interest therein.

The other type of account you mention is entitled "Illinois State Police, Custodian of Forfeited Funds." Under the Illinois statute you forwarded, this account represents funds as to which forfeiture actions have already been completed, thereby constituting the state as owner of such funds (rather than the defendants). The statute sets forth a distribution formula to various state and local governmental entities that participated in the legal actions involved. While the broad parameters of the statutory distribution formula are mandatory, the precise method of determining just which agency gets how much depends to a considerable degree on the circumstances of each case. It is pending such a determination that the funds are held in this type of account. Therefore, it does not appear to be possible at any given instant to determine just how much of such funds is actually owned by which particular agency, since when that is determined the funds would presumably be promptly disbursed from the account. Accordingly, because of this apparent unascertainability of precise ownership at the exact moment when the depository institution is declared insolvent, the total insurance coverage for this type of account would be limited to $100,000 per insured institution located in Illinois as to time and savings deposits of each official custodian acting for the Illinois State Police and an additional $100,000 for demand deposits of each such official custodian at the same bank.

If our understanding of the facts is incorrect in any significant respect, or if we can be of any further assistance in this matter, please do not hesitate to let us know.

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