Economic Crime and Corporate Transparency Bill: Cryptoassets

This article forms part of a series looking at the measures to be introduced by the Economic Crime and Corporate Transparency Bill (“the Bill”), which intends to deliver a suite of wider-ranging reforms to tackle economic crime and improve transparency over corporate entities.

This article focusses on amendments to be made via the Bill to the Proceeds of Crime Act 2002 (POCA) to support the recovery of cryptoassets.

Asset recovery powers: Criminal

In relation to the asset recovery powers which sit within the criminal (Parts 2, 3 and 4 of POCA) regime the key proposals are:

• In certain circumstances, to remove the requirement for a person to have been arrested before seizure powers can be used earlier in the process, so that those assets can be more easily confiscated at a later date. These powers will apply to all assets but will be particularly useful in the context of cryptoassets.
• Specific provision for officers to recover cryptoassets (intangible items) in a broadly similar way provided for tangible property. This involves amending the search, seize and detention powers to make it explicitly clear that officers have the authority to ‘recreate’ cryptoasset wallets and transfer assets into a law enforcement-controlled wallet.
• Provide the magistrates’ court (as the authority responsible for enforcement of confiscation orders) the powers to authorise the sale of any cryptoassets, in the same way magistrates can already with cash, funds in bank accounts and other types of personal seized property.
• Provide for the destruction of cryptoassets in exceptional circumstances—where the financial gain for the sale of those assets would be outweighed by the loss to the public of allowing that circulation of funds to continue to be used in potentially criminal ways.

Asset recovery powers: Civil

In relation to the asset recovery powers which sit within the civil (Parts 5 of POCA) regime the key proposals are:

• Enable law enforcement agencies to take control of and recover cryptoassets discovered when executing a search warrant. These powers will be used in circumstances where cryptoassets are “unhosted” and not in the custody of a third-party, akin to a bank. Assets may be recovered where the magistrates court is satisfied—on the balance of probabilities—that they are recoverable property or are intended for unlawful conduct. In the case of a terrorist investigation, property that has been earmarked as terrorist property.
• Enable law enforcement to recover cryptoassets direct from cryptoasset exchange providers and custodian wallet providers. Assets may be recovered where the magistrates court is satisfied the above test applies.
• Enable detained cryptoassets, or those which have been frozen in a wallet, to be converted to cash pending the outcome of a final forfeiture hearing. This is to safeguard against significant fluctuations in market value.
• Provide for the destruction of cryptoassets (for example privacy coins more often than not to launder funds) in exceptional circumstances – where the financial gain for the sale of those assets would be outweighed by the loss to the public of allowing the circulation of funds to continue to be used in potentially criminal ways.
• Replicate provision for detained or frozen cryptoassets and related items to be released to victims at any stage of proceedings, ameliorating the negative impacts of fraud.

Additional measures

The Bill includes measures to amend the Anti-Terrorism, Crime and Security Act (ATCSA) 2001 and the Terrorism Act 2000 to mirror the new powers under POCA 2002 that are already in the Bill.