UK: UK expands cryptoasset seizure powers to combat crypto-enabled crime

As published on: scottishfinancialnews.com, Friday 26 April, 2024. 

The UK government has granted greater powers for the National Crime Agency (NCA) and police to seize, freeze and destroy cryptoassets used by criminals, effective today.

Criminals, including drug traffickers, fraudsters, and terrorists, are increasingly exploiting cryptoassets for money laundering and fundraising, with the NCA’s National Assessment Centre estimating illicit transactions to have surpassed £1.2 billion in 2021 alone.

To tackle this emerging threat, the government has updated proceeds of crime and terror legislation, making it easier for UK law enforcement to effectively investigate, seize and recover illicit cryptoassets.

Changes include:

  • Police will no longer be required to make an arrest before seizing crypto from a suspect. This will make it easier to take assets which are known to have been criminally obtained, even if sophisticated criminals are able to protect their anonymity or are based overseas
  • Items that could be used to give information to help an investigation, such as written passwords or memory sticks, can be seized.
  • Officers will be able to transfer illicit cryptoassets into an electronic wallet which is controlled by law enforcement, meaning criminals can no longer access it.
  • UK law enforcement will be able to destroy a crypto asset if returning it to circulation is not conducive to the public good. Privacy coins, for example, are a form of cryptocurrency that grant an extremely high degree of anonymity and are often used for money laundering.
  • Victims will also be able to apply for money belonging to them in a cryptoassets account to be released to them.

The new powers are intended to stop criminals from undermining the legitimate use of crypto, while also supporting the development of crypto as a potential driver of economic growth.

Home Secretary James Cleverly said: “Criminals should never be able to benefit from breaking the law which is why we are making it much easier for law enforcement to stay on top of a new and developing threat.

“These reforms will also enhance our national security. Terrorist organisations like Daesh are known to raise funds through crypto transactions and these updated powers will enable our agencies to more easily strip them of their assets.”

Security Minister Tom Tugendhat said: “These reforms are bad news for criminals, they send a clear message we will never let crime pay.

“Our agencies have already shown they have the expertise to target sophisticated criminals and deprive them of their ill-gotten gains. These new measures will help them take the fight to the next level.”

In January 2024, the NCA worked with the United States Drug Enforcement Administration to investigate a multi-million drug enterprise which led to $150 million (around £120m), in cash and crypto, being seized.

Cryptoassets were also seized in a case where three men sold counterfeit drugs on the dark web and accepted crypto as payment, amassing £750,000 in the process. They were jailed for more than 20 years between them.

In a separate case, HMRC seized three non-fungible tokens (NFTs) as part of an investigation into VAT fraud, with three people arrested on suspicion of attempting to defraud the agency of £1.4m.

A small number of counter-terror investigations have also found terror groups are using crypto to raise funds. In 2021, a British man was sentenced to 12 years’ imprisonment after he used Bitcoin to send around £55,000 to Daesh.

Adrian Searle, director of the National Economic Crime Centre, said: “Criminals are increasingly using crypto assets to conceal and move the proceeds of crime at scale and pace, pay for other criminal services and as a means to defraud victims.

“These new powers are very welcome and will enhance law enforcement’s ability to restrain, recover and destroy crypto assets if required.

“They will enable a more effective pursuit of the criminals and ultimately deny them the financial gain they crave.

Adrian Foster, Chief Crown Prosecutor, added: “The economic crime threat is continuously growing and evolving with criminals exploiting advances in technologies like cryptocurrency.

“Crypto assets are often used by criminal gangs to launder their criminal profits internationally at the touch of a button.

“It is vital that investigators and prosecutors have the capability and agility to keep pace with this changing nature of crime which these new measures will greatly assist our ability to restrain, freeze, or eliminate crypto assets from illegal enterprise.

“These powers allow the director of public prosecutions to assist law enforcement in crypto forfeiture cases where our expertise can add real value.”


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