UK Makes Record Cryptocurrency Seizure in Money Laundering Investigation | Vinson & Elkins LLP

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On June 24, 2021, UK law enforcement seized a record £ 114million (nearly $ 160million) in cryptocurrency as part of an ongoing money laundering investigation . Representing the largest cryptocurrency seizure in UK history and one of the largest in the world, this case signals law enforcement’s willingness to pursue money laundering cases regardless of the kind of assets involved, as well as the ability of regulators to track digital currency. Money services businesses, virtual asset service providers, and other businesses serving the cryptocurrency market need to prepare for increasing enforcement attention and ensure that they have implemented a robust anti-money laundering compliance framework.

In a press release, the Metropolitan Police Service (the “Met”) announced that the seizure of £ 114 million in cryptocurrency was made by the Met’s Economic Crime Command. According to the statement, “[c]Ash remains king, but as technology and online platforms develop, some are adopting more sophisticated methods of laundering their profits. The press release does not offer details on the type of cryptocurrency involved or the investigation, which remains ongoing, other than that the case involves potential money laundering offenses.

The seizure coincides with a growing trend for the use of cryptocurrencies to launder illicit proceeds. According to the Cryptocurrency Enforcement Framework released last year by the US Department of Justice (“DOJ”), the ability to anonymously move and exchange cryptocurrencies over the Internet may facilitate the commission of money laundering offenses by criminals. The DOJ executive also noted that unlicensed or unregistered cryptocurrency exchanges that do not comply with anti-money laundering (“AML”) requirements can facilitate money laundering.

In response to the increased risk of money laundering created by cryptocurrencies, anti-money laundering regulators around the world have focused on cryptocurrencies. As we reported earlier, many European countries including the UK and Germany have implemented the 5th EU Anti-Money Laundering Directive, which extends AML obligations to cryptocurrency providers. .

In the United States, Congress passed the Anti-Money Laundering Act of 2020, which expands the scope of AML reporting requirements under the Bank Secrecy Act to cover cryptocurrencies and service providers. When asked about this law in a recent confirmation hearing, the administration’s choice to head the Treasury Department’s Bureau of Terrorism and Financial Intelligence, which oversees FinCEN, reportedly indicated that the cryptocurrency would be a priority in the fight against money laundering.2

Law enforcement agencies have demonstrated their ability to track and seize cryptocurrency representing the proceeds of criminal behavior, despite the widespread belief that cryptocurrency transactions cannot be found. For example, the DOJ seized 63.7 bitcoins ($ 2.3 million) from the payment made in the Colonial Pipeline ransomware attack to the hacker group known as DarkSide less than a month later. payment. The combination of the priority given by regulators to combating money laundering in cases involving cryptocurrency, coupled with the ability of law enforcement agencies to effectively trace crypto transactions, makes this emerging field of Law enforcement activity is an important area to watch in the years to come.

What it means for you

The focus of international cryptocurrency regulation likely predicts an increase in AML enforcement actions involving companies that serve the cryptocurrency market. Cryptocurrency service providers should prepare for enhanced anti-money laundering control by taking the following steps:

Carefully review new legal and regulatory reporting requirements involving cryptocurrency transactions, including the Anti-Money Laundering Law of 2020 and (for cryptocurrency service providers operating in Europe) implementation by any applicable European country of the 5th European Union Anti-Money Laundering Directive; Confirm that the company has a strong AML compliance framework in compliance with these recent legal and regulatory changes, with particular attention to ensuring that cryptocurrency transactions do not violate applicable AML requirements; and Going forward, monitor legal and regulatory changes impacting the rapidly evolving cryptocurrency market.

1 See William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, Pub. L. n ° 116-283, § 6102 (d) (2021).

2 See Christopher Condon, Treasury Nominee Says Crypto Is Anti-Money Laundering Priority, Bloomberg News, June 22, 2021, https://www.bloomberg.com/news/articles/2021-06-22/treasury-nominee-says- crypto -is-anti-money laundering-priority.

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