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UK’s Economic and Corporate Transparency Bill and MoJ’s Expansion of Crypto Fraud Claims Cross-border Scope

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UK Proposes Changes to Legislation to Support the Recovery of Stolen Crypto Assets

The Economic and Corporate Transparency Bill (‘the Bill’) introduces amendments to the Proceeds of Crime Act 2002 (POCA) that aim at supporting the recovery of crypto-assets.

Currently, UK law enforcement agencies can (under POCA) enforce a crypto-asset confiscation order against an individual who has benefited from crime. Once recovered, part of the seized assets can be reinvested to tackle crime.

The Bill

  • Broadens to recover crypto-assets under criminal regime
  • Introduced new forfeiture powers to recover assets using civil powers 

Under criminal regime, there are 4 key proposals:

  • To remove the requirement for a person to have been arrested before seizure powers can be used
  • To provide explicit authority for the recovery officers to ‘recreate’ crypto-asset wallets and transfer assets into a law enforcement-controlled wallet
  • Provide the magistrates’ court with the powers to authorise the sale of crypto-assets
  • Provide for the destruction of crypto-assets in exceptional circumstances (where the gain for the sale would be lower than the risk of the sold assets to continue to be used in criminal ways)

Under the civil regime, there are 5 key proposals to:

  • Enable law enforcement to take control of and recover crypto-assets discovered when executing a search warrant – these powers will be used where crypto-assets are ‘unhosted’ (e.g. stored in cold wallet)
  • Enable law enforcement to recover crypto-assets direct from crypto-asset exchange providers and custodian wallet provides
  • Enable detained assets to be converted to cash pending the outcome of the final forfeiture hearing (to safeguard against significant fluctuations in market value)
  • Provide for the destruction of crypto-assets in exceptional circumstances
  • Replicate provisions for detained assets to be released to victims

UK Ministry of Justice Expands Crypto Fraud Claims Cross-border Scope

UK‘s Practice Direction 6B of the Civil Procedure Rules defines the scope of the territorial jurisdiction of the Courts of England and Wales.

The Ministry of Justice expands its scope with the addition of gateway 25, in paragraph 3.1 which was thought out specifically due to cryptocurrency fraud claims. Its goal is to clarify situations where the English court can request a foreign non-party to provide documents or information in support of English proceedings, to identify the correct defendant or trace misappropriated assets.

Information orders against non-parties

(25) A claim or application is made for disclosure in order to obtain information—

(a) regarding:

(i) the true identity of a defendant or a potential defendant; and/or

(ii) what has become of the property of a claimant or applicant; and

(b) the claim or application is made for the purpose of proceedings already commenced or which, subject to the content of the information received, are intended to be commenced either by service in England and Wales or pursuant  to CPR rule 6.32, 6.33 or 6.36

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