UK Law Enforcement's New Powers to Seize Cryptocurrencies: A Boon or a Cause for Concern?
Summary:
In the UK, updated regulations enacted on April 26 allow law enforcement to confiscate cryptocurrencies from individuals without charges or arrest. These changes emanate from the Economic Crime and Corporate Transparency Act 2023, giving the police and the National Crime Agency the authority to seize digital and related physical assets when criminal activity is suspected. Despite the potential benefits in combating money laundering, concerns have been raised about a presumed guilt, potential misuse of power and the possible premature sale of confiscated digital assets.
In what may be perceived as an unjust governmental move, the updated law in the UK now gives law enforcement the power to confiscate cryptocurrency from individuals without requiring to arrest or charge them with a crime. This change, implemented on April 26, is a result of alterations to the Economic Crime and Corporate Transparency Act 2023 (ECCTA). As a result, The National Crime Agency and police forces can now seize digital assets from suspects without arresting them.
Translating it to lucid terms, the updated legal provisions mean that law enforcement can confiscate digital currency from anyone under suspicion of criminal activity. Additionally, they have the authority to obtain physical items linked with crypto-related probes, such as written passwords or flash drives. Law enforcement can also 'destroy' a digital asset if it is believed that its reintegration into the public domain would not serve the common good.
Yet, it remains uncertain how these assets will be destroyed. Regulatory bodies have circulated a guideline detailing when the power to 'destroy' can be exercised; however, it provides no insight on how this destruction would be undertaken.
Cryptocurrencies have long been exploited by criminal networks to conceal illicit gains. Proponents of the tweaked regulations assert that these measures could better combat criminal activities. However, any attempts by law enforcement to confiscate cryptocurrencies without legally charging the suspect appear more like an unjust presumption of guilt than a fight against economic crime.
The tweaked law means that law enforcement can seize assets like digital currencies, cash, or vehicles that they believe are linked to criminal activity without necessarily charging the suspect. Seizures not tied to formal charges have been a debatable issue in the UK for a long time.
While it's not entirely unexpected that such practices would extend to digital currencies, it could also open the doors to potential misuse of power for personal or political agendas.
The new regulations allow these seizures to become a part of the earlier stages of the investigations even without the required evidence for an arrest, increasing the probability of seizing crime-related proceeds. However, the early application of these rules can also increase the chances of seizures with little or no evidence, leading to mistakes.
These new regulations also authorize law enforcement to convert confiscated digital assets into cash, overlooking the fluctuating nature of the cryptocurrency market. This approach might lead to the premature sale of assets. Although it facilitates law enforcement to liquidate assets before a probable devaluation, it also poses a risk that an asset may be sold right before its value surges. This situation could potentially deprive the original victims of any gains in value of the held assets.
While hoping that these new rules will facilitate law enforcement's actions against fraud and drug-related crimes, it's crucial to note that civil recourse for fraud victims can be lengthy and costly. However, these new powers might address these issues and could prove useful in preventing the rapid dispersion of assets raised from large-scale drug operations.
On a concerning note, the ECCTA lacks provisions to facilitate information sharing globally between law enforcement agencies when digital assets are transferred to other jurisdictions, potentially rendering UK police powerless to regain control of assets moved out of their reach.
In conclusion, while the new laws are concerning from a civil liberties standpoint, it remains to be seen how aggressively the authorities will wield their powers and the potential impact on due process.
Syed Rahman is a regular contributor to Cointelegraph and a partner at the UK-based law firm Rahman Ravelli, specializing in financial and commercial disputes, as well as representing clients in major white-collar crime cases. After earning his law degree from the University of Huddersfield, he went on to obtain a post-graduate diploma from York Law School. Additionally, he is a founding member of the Crypto Fraud and Asset Recovery network (CFAAR). His perspective in this article should not be perceived as legal or investment advice but merely as his personal opinion.
Published At
5/14/2024 8:43:07 PM
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