John Binns writes for Thomson Reuters discussing crypto-assets under the Proceeds of Crime Act 2002

John Binns writes for Thomson Reuters discussing crypto-assets under the Proceeds of Crime Act 2002

While crypto-assets are intangible, they can still be considered as ‘’property’’ and their value fluctuates significantly. They can also be used to commit fraud, to evade tax, to breach or circumvent financial sanctions, or to launder money. All of this means that they may have relevance to any of the various parts of Proceeds of Crime Act 2002.  BCL partner John Binns writes for Thomson Reuters exploring if crypto-assets can be seized under Proceeds of Crime Act 2002.

Here is a short extract from the article*. If you wish to read the full article, please visit Thomson Reuters website.

The criminal confiscation regime

It is certainly true that crypto-assets can be the subject of a restraint order, which can be made against a suspect or defendant in a criminal case, or someone who has received them from such a person at an undervalue (as a “tainted gift”). Arguably, that order might include a requirement for the holder of a private key to reveal it, for the purposes of ensuring that the order is effective ( s 41
PoCA). The fluctuating value of crypto-assets could prompt the court to appoint receivers, who would then be able to sell them if appropriate for the purpose of preserving value ( s 69 PoCA).

If that person is convicted, then the court’s calculation of the benefit they have obtained from criminal conduct, and/or the value of assets available to pay a confiscation order, can include the value of crypto-assets. For these purposes, they (and third parties, where they have an interest in assets that may be said to be “available” to them) could be ordered to disclose information, potentially including a private key ( s 18 PoCA).

Significantly, there are also provisions in PoCA that enable the seizure and detention of assets to ensure that a confiscation order can be paid ( s 47C PoCA). It is perhaps unclear whether these are genuinely broad enough to enable law enforcement agencies to seize, say, the physical record of a private key, or the crypto-assets themselves by accessing the holder’s electronic wallet. Nevertheless, agencies are using them for these purposes, and obtaining approvals from magistrates’ courts to do so ( s 47G PoCA).

The civil recovery regimes

It is also true that crypto-assets can be the subject of a property freezing order, where there is a good arguable case that they represent the proceeds of unlawful conduct, and/or a civil recovery order, where this is proven to the civil standard. For the time being, however, this must be via the High Court civil recovery scheme, as the three magistrates’ court schemes (enabling the seizure, detention and forfeiture of “cash” and “listed assets”, such as jewellery, and the freezing and forfeiture of “funds in certain accounts” — these now include e-money providers, but where fiat currency rather than cryptocurrencies are used) do not apply.

Technically, neither restraint orders which impose restrictions on the holder of the asset nor property freezing orders which impose restrictions on the asset itself amount to seizure. The holder is prevented from dealing with the asset — for instance, by moving or disposing of it — by the threat of being imprisoned for contempt of court. In neither case, however, does law enforcement take
possession of the asset, as it might be able to if it had a physical existence.

*This article was first published by Thomson Reuters on 19 April 2022. If you wish to read the full article, please visit Thomson Reuters website.

Please note that you will need a subscription with Thomson Reuters to access the article.

 

John Binns is a partner at BCL specialising in all aspects of business crime, with a particular interest in confiscation, civil recovery and money laundering under the Proceeds of Crime Act 2002 (“POCA”). His business crime experience includes representing suspects, defendants and witnesses in cases invoking allegations of bribery and corruption, fraud (including carbon credits, carousel/MTIC, land-banking, Ponzi and pyramid scheme frauds), insider trading, market abuse, price-fixing, sanctions-busting, and tax evasion. He has coordinated and undertaken corporate investigations and defended in cases brought by BEIS, the FCA, HMRC, NCA, OFT, SFO and others.

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