Curtailing Crypto Crime: UK’s Push to Freeze Assets Before Arrests or Convictions

When it comes to freezing illicit funds related to crypto-related crime, authorities in the United Kingdom (UK) have their hands tied. To perform this action, the suspects must already be in custody, or already convicted of a crime. 

A new bill, the Economic Crime and Corporate Transparency Bill, adds new provisions to the Proceeds of Crime Act 2002 to streamline this process of freezing crypto assets. These provisions would apply to any crypto linked to crimes, including everything from drug trafficking and cybercrime to money laundering and terrorist financing.

Instead of requiring an arrest or a conviction, which gives criminals more time to move and launder funds, the bill would give courts the power to freeze assets with an appropriate court order. The fine print is that this power is only for freezing funds, not actually seizing them. While courts can freeze funds to prevent their movement, they still cannot seize them without an arrest or conviction.

Nonetheless, the ability to efficiently freeze funds may be a major boon for UK investigators in fighting crypto-related crime. With this ability, the value of illicit funds recovered can further shoot up from the US$371 million confiscated in 2022 and US$223 million confiscated in 2021, closing the gap on the estimated US$1.3 billion in crypto linked to crime that same year. This jump is likely given the length of time that the current legal hurdles add to the recovery process. 

Given the transnational nature of crypto-related crime, the criminals who victimize citizens in the United Kingdom may not even be in the same country. For example, while the shell companies for pig-butchering schemes are often registered in the UK, the directors and employees are usually based abroad, in far-flung locations like China. Apprehending international criminals will require a manhunt that spans multiple jurisdictions and involves the coordination of several countries, assuming they are even cooperative in the first place.

The same goes for charging criminals in a UK court of law. Giving them due process takes months and sometimes even years. As some of these criminals are backed by large syndicates or criminal groups - such as one 39-year old UK woman who was a central part of a sprawling money laundering operation that led to capture of 180 million pounds - they may have the financial resources to fight extensive legal battles and drag out the legal process. 

This long duration gives criminals more time with which to launder money with the aid of various privacy-concealing technologies. They may use coin mixers like Tornado Cash to mix their coins with those of others, obfuscating their rightful origins. They may use privacy coins like Monero to conceal the identity of those involved in a transaction as well as the transaction amounts. Finally, they may use chain-hopping to complicate tracking illicit funds, a process they can even automate and accelerate through smart contracts. 

In short, when it comes to laundering, criminals have both time and technology on their side. The implementation of the Economic Crime and Corporate Transparency Bill, which may go into effect later this year if passed, would mitigate the element of time and give it back to authorities. Investigators would be able to act swiftly in freezing accounts, which not only gives criminals fewer resources with which to operate but also acts as a deterrent against others who may want to use digital assets as a conduit for their crime.