The Economic Crime and Corporate Transparency Act 2023 was heralded as transformative in the cryptocurrency world, as from 26 April 2024, Part 5 of the Proceeds of Crime Act 2002 (POCA) was amended to add chapters 3C, 3D, 3E, and 3F. These amendments significantly enhanced the scope of POCA in relation to cryptocurrency, granting the Police and other UK authorities the power to search, seize, and detain cryptocurrency linked to criminal activity.
The legislation introduced the ability to apply for freezing orders concerning cryptocurrency, enabling authorities to halt the movement of assets suspected of being involved in illicit transactions. Additionally, provisions for forfeiture allow authorities to seize assets permanently, while conversion orders give them the authority to convert cryptocurrency into traditional currency for proper handling in accordance with the law. These updates represented a monumental shift in the way authorities can address crimes involving digital assets, specifically targeting the increasingly pervasive threat of cryptocurrency-related fraud and money laundering.
Protection for Victims of Cryptocurrency Scams
Within these new chapters, specifically at Sections 303Z50 and 303Z63 of POCA, provisions are made for the victims of cryptocurrency scams in situations where the cryptocurrency frozen or detained by the authorities originally belonged to them. This is also a crucial safeguard for individuals who, through no fault of their own, may find their assets frozen as part of criminal investigations. These sections allow victims to make an application to the magistrates’ court to have the authorities transfer the frozen or detained cryptocurrency back to its rightful owner. This provision ensures that innocent parties are not penalised by the actions of criminals, allowing for a clear route to reclaim their assets, provided they can demonstrate ownership. The inclusion of such measures is particularly important in the world of cryptocurrency, where transactions are often anonymous, and proving ownership can be complex.
The Challenge: Lack of Procedural Guidance in the Original Legislation
Whilst this original legislation was extremely beneficial for the victims of cryptocurrency crimes, what it did not do is prescribe the specific way or set out any governing rules regarding how authorities or victims should make the relevant applications to the magistrates’ court. Without clear procedural guidelines, there was a significant risk of confusion, delays, and inefficiencies in the process. This gap in the legislation led to uncertainty surrounding the exact procedures for the return of frozen cryptocurrency or the forfeiture of assets and consequently, many found themselves struggling with the application process, which could vary significantly between different cases.
New Rules for Clarity: Magistrates’ Courts (Conversion of Cryptoassets) Rules 2024
This issue was recognised quite quickly, and as a result, the Magistrates’ Courts (Conversion of Cryptoassets) Rules 2024 were brought forward and came into force on 7 November 2024. These rules specifically address the procedural aspects of how applications made by both UK authorities and victims should be handled within the magistrates’ court system. The rules detail who should be served, ensuring that all parties involved are properly notified of the legal actions being taken. They also specify how hearings should be fixed, establishing a clear timeline for the process and reducing the potential for delays. Furthermore, the rules outline what directions should be made after hearings, providing judges and court officials with clear guidance on how to proceed with the disposition of frozen or seized assets. This development was a necessary step in ensuring that the rights of both the victims of cryptocurrency crime and the authorities were protected, and that the legal process ran as smoothly and efficiently as possible.
Appeals Process: Crown Court (Amendment No. 2) Rules 2024
Further, on 2 December 2024, the Crown Court (Amendment No. 2) Rules 2024 came into effect, which established the rules for appeals against any orders made by the magistrates’ courts concerning the seizure and forfeiture of crypto-assets. This amendment introduces a mechanism for challenging decisions made at the magistrates’ court level, allowing affected parties to take their case to the Crown Court. This provision is critical for ensuring that there is a recourse for individuals or organisations who may feel that their assets were wrongfully seized or frozen. The Crown Court rules offer a higher level of judicial oversight, providing a fairer avenue for appeal and ensuring that the process remains transparent and just. This development is an important part of the legal framework surrounding cryptocurrency recovery in the UK, offering protection to all parties involved in the process.
A Step Forward in Crypto-Asset Regulation
These developments late in the year are welcome guidance to both the UK authorities seeking to navigate this new legislation and solicitors representing victims and account holders who need to make applications to obtain the return of any seized cryptocurrency. The clarity provided by these new rules and regulations ensures that both the authorities and victims of cryptocurrency fraud can confidently navigate the legal process, reducing the likelihood of legal challenges and ensuring that justice is served. For authorities, the rules provide clear direction on how to properly handle seized assets, ensuring compliance with the law. For victims, the legislation offers a more straightforward path to reclaim their assets, which will undoubtedly help to boost trust in the legal system’s ability to manage cryptocurrency-related crimes.
How Edmonds Marshall McMahon Can Assist You
If you’re a victim of cryptocurrency fraud, where the police have frozen a relevant account, or if your cryptocurrency has been seized or frozen, and you require assistance; here at Edmonds Marshall McMahon, our specialised team is well-equipped to meticulously review the evidence and swiftly provide concise and clear advice on your options. We have extensive experience in navigating the complexities of the legal system surrounding cryptocurrency seizure and recovery and ensure that cases are handled with the utmost care and expertise. Whether you’re seeking to recover your cryptocurrency or need guidance on how to challenge the seizure of your cryptocurrency, we’re here to help every step of the way.
December 2024.
