Law enforcement agencies are set to receive extended powers to seize, freeze and recover cryptoassets used to launder the proceeds of crime.
The Economic Crime and Corporate Transparency Bill was introduced to Parliament for a first reading on 22 September 2022. Schedule 6 of the proposed legislation makes a number of amendments to the Proceeds of Crime Act 2002 (POCA).
If enacted, the Bill would create a number of provisions granting law enforcement agencies, such as the National Crime Agency, increased powers to seize and recover cryptoassets they believe are being used by criminals.
The new Bill expands the scope officers have to search for cryptoassets. Under the new legislation, so long as an enforcement officer is lawfully on any premises and has reasonable grounds for suspicion, the Bill would enable them to search a suspect's person, or to enter and search a vehicle. Officers would be able to search premises with the requirement “that any information which is stored in any electronic form and accessible from the premises be produced,” including “in a form in which it can be taken away and in which it is visible and legible.” (Schedule 6, Paragraph 3 (5D)).
The proposed legislation includes a crucial amendment allowing officers to seize crypto asset-related items even if they are "exempt property" as defined by POCA. Defendants had formerly been protected by this definition, which prevented officers from seizing property necessary to the defendant for use in employment, business or a vocation. Should the new Bill be enacted, officers will now be able to detain cryptoassets pending the making or variation of a Restraint Order, regardless of their necessity to the Defendant (Schedule 6, Paragraphs 5 and 6).
One change to the existing POCA legislation removes the requirement for a suspect to have been arrested before officers can exercise their power to search and seize cryptoassets. Previously officers could only exercise powers to seize assets in circumstances where the Defendant had been arrested for the offence (Section 47B (1) of POCA). The new Bill removes that protection, instead allowing the seizure of “any free property where an officer has reasonable grounds for suspecting that it is a cryptoasset-related item.” (Schedule 6, Paragraph 7).
Some amendments bring powers over the detention of cryptoassets in line with already stringent provisions for the detention and freezing of cash, tangible items and money held in bank accounts. The new provisions include granting Magistrates’ Courts the power to extend the period for which the property is to be detained for six months, and to make account freezing and forfeiture orders against cryptoassets.
Magistrates Courts would also be able to make orders for cryptoassets to be disposed of or destroyed by officers. Such powers would apply in cases where “there are reasonable grounds to believe that the realisation of the cryptoassets would be contrary to the public interest,” or if it is not “reasonably practicable” to realise the cryptoassets in question. (Schedule 6, Paragraph 10).
Another significant provision widens the jurisdiction of the UK criminal justice system, ensuring powers can be used against all crypto wallet and exchange services that provide their services in the UK, who have UK persons as customers or have UK governing law clauses. (Schedule 6, Paragraph 12).
The Bill, which will have its second reading in October, comes amidst an apparent increase in cryptoassets being used to launder the proceeds of crime. On 13 July 2021 the Metropolitan Police seized £180m worth of Bitcoin believed to be linked to money laundering. The seizure came mere weeks after the Police confiscated the previous record set of £114m worth of cryptoassets on 24 June 2021.
The government and its enforcement agencies have acknowledged this trend. The Director General of the National Crime Agency, Graeme Biggar, said in a statement: “Domestic and international criminals have for years laundered the proceeds of their crime and corruption by abusing UK company structures, and are increasingly using cryptocurrencies. These reforms—long-awaited and much welcomed—will help us crack down on both.”
The PoCA and Financial Crime department at IKP Solicitors, led by James O’Hara and Paul O’Donnell, possess the necessary expertise to assist Defendants to navigate the complex, changing nature of PoCA powers. Both James and Paul are members of an elite group of Solicitors in the UK ranked by Chambers and Partners in the area of ‘PoCA Work & Asset Forfeiture’.