Cryptocurrency as a proceed of crime in the UK

Can cryptocurrency be confiscated as means of The Proceeds of Crime Act of 2002 (POCA 2002)?

The legislation of the United Kingdom states that the cryptocurrency can be a subject of financial limitations. It is within the power of the judiciary based on circumstances to freeze, apply arrest or apply other restrictions and then eventually confiscate crypto currencies. The Proceeds of Crime Act of 2002 (POCA 2002) forms the basis for these actions.

Cryptocurrency is a digital asset that is used as a means of exchange around the world.

The process of using cryptocurrency involves cryptography to secure payments and manage the transfer of assets. Given the widespread acceptance of cryptocurrency around the world, de facto it is treated as having characteristics of money.

Many experts believe it can be argued that since cryptocurrency possess most of the characteristics of money and is widely accepted as a means of payment in most online sites, it can be considered as money. There is a possibility that cryptocurrencies will have a leading role in the finance sector in future and they even replace the national currencies.

This section of the Act gives the courts the power to confiscate cryptocurrency on the grounds that it is a monetary property that was obtained from crime.

 

Courts’ power to confiscate cryptocurrency

Property in the Act is defined as all property, no matter where it is situated. According to s84(1) of the POCA 2002 this includes:

  • (A) Money,
  • (B) All forms of real and personal property,
  • (C) Things in action and other intangibles.

Another section of the POCA 2002 that empowers the court to confiscate cryptocurrency is s41(7) which provides that the court may order the confiscation of money with the purpose of ensuring that the restraint order is effective. Section 41 of the POCA 2002 gives the court the power to put restraint orders on any convicted individual. This would prevent the convicted person from dealing with or in any property that is owned by an individual. Furthermore, the subsection s41(7) also states that restraint orders imposed by courts can be done so when and wherever the court deems appropriate.

In highlighting these important aspects of the POCA 2002, it can easily be determined that the courts have the power to confiscate cryptocurrency from a convicted individual. The courts also have the ability to ensure that the convicted individual no longer has access to their cryptocurrency. The courts, therefore, have the power to decide whether to keep the cryptocurrency in a dedicated “police wallet” or sell it through public auctions.

In addition, s47(1) of the POCA 2002 indicates that the following can apply under the registration acts when dealing with restraint orders:

(A) May apply in relation to restraint orders as they apply in relation to order which affects lands and are made by courts for purpose of enforcing judgments or recognisances.

(B) Apply in relation to applications for restraint orders as they apply in relation to other pending land actions.

This section of the Act clarifies that the restraint orders which the court places on proceeds of crime should apply in the same way that is applied in land acts. Through this section, it is clear that the courts have the power to order the confiscation of the proceeds of crime in the same way it can order for confiscation of lands in order to enforce judgments. In other words, the courts have the authority to confiscate cryptocurrency of a person convicted of a crime.

Cryptocurrency confiscation: Practical application

The practical application of cryptocurrency confiscation by the courts can be seen in the case law between R v Teresko (Sergejs). The defendant was convicted of drug and money laundering offences and the CPS made an application to the court for a restraint order over the defendant’s assets as prescribed in section 41 of the proceeds of crime act.

The CPS also made an application based on section 41(7) of the POCA act 2002 to convert the seized Bitcoin into sterling due to the volatility of Bitcoin. In the case law, the 295 Bitcoin which was recovered in the defendant’s house was ordered by the court to be converted into sterling. The court cited the s41 of the POCA act 2002 which granted it the power to make that order as it deemed appropriate.

The POCA allows the courts to seize and manage cryptocurrencies from the convicted individuals. The pertinent question here is whether its conversion to another portfolio is justified. Since a convicted person can seek redress and might lead to overturning of the verdict.

Written by: Michael Iatsukha (e-mail: michael.iatsukha@sterlinglawyers.co.uk)