- The UK parliament just made criminals’ lives a bit harder with a new law on financial crime.
- The passing of the Economic Crime and Corporate Transparency bill will empower law enforcement to more easily seize and recover illicit crypto funds.
- The law has limitations.
UK lawmakers have agreed on a bill to tackle economic crime, enabling local authorities to more quickly react to criminals trying to abscond with crypto thefts.
Once the bill receives formal approval on Thursday’s prorogation, the laws should come into force after a six-month transitional period.
The Economic Crime and Corporate Transparency bill hands local authorities more power to seize and recover funds stolen in hacks, scams, money laundering or terrorism financing that plague crypto’s users and tarnish the sector’s reputation.
Altogether, the FBI estimates that crypto scams cost victims more than $2.5 billion in 2022.
The bill stems from a government push to tackle economic crime and fraud, led by Suella Braverman — the Home Secretary behind the UK’s scheme to send asylum seekers to Rwanda and who has pitched herself as the Conservative party’s next leader should Prime Minister Rishi Sunak be defenestrated from Number 10 at the next election.
Crypto regulation watchers welcome the new provisions, saying they may improve authorities’ ability to keep up with the fast pace of cybercriminals.
“The technology itself moves so quickly — far quicker than the law can,” said Jordan Wain, UK policy lead at blockchain analysis firm Chainalysis.
‘What can be achieved when you have really good criminal and civil asset recovery powers is huge’— Isabella Chase, TRM Labs
At the moment, in a criminal case, law enforcement needs to wait for a successful prosecution before they can seize the assets.
But the new rules offer an alternative, civil route that can speed up the process and allow local units to carry out crypto recovery actions.
“It will be easier for law enforcement to recover assets earlier in the investigation process,” Wain told DL News. “They don’t have to wait for a conviction. As long as there is a suspicion that can be proven, then they have a route to getting to those assets.”
However, experts warn that the bill, even when implemented, will have limitations for how effective it can be against the scourge of hacks haunting decentralised finance.
Digital heists involving crypto is a race against time.
From the moment criminals have stolen crypto, they try to move it around and hide their tracks, by using a mix of bridges, mixers and other tools.
Even if police are made aware of a crime, legal restraints have until now held them back from moving swiftly to claw back the digital dosh.
“You wait so long for a confiscation order or conviction that the assets that were in question at the start of the process have since been dwindled away, sold off, or used elsewhere,” Wain said.
“So these powers will allow law enforcement to go by the civil route, as well as the criminal route.”
The provisions also give businesses more abilities to share intel on anti-money laundering and counter terrorism financing suspicions.
This could potentially “massively improve the bridge of information between crypto businesses but also between crypto and businesses and the banking sector,” Isabella Chase, senior policy advisor at crypto investigation firm TRM Labs, told DL News.
“And this will help them in the case of economic crime to better identify suspicious activity.”
The UK’s economic crime plan
The new rules are part of the UK government’s Economic Crime Plan 2, which has been championed by the Home Secretary.
“Economic crime undermines the integrity of our financial system and weakens our national security,” Braverman said in a government statement.
“Backed by our partnership with the private sector, we have the resources and expertise we need to identify criminal networks and confiscate the proceeds of their illicit activities.”
Setting up robust regulation for crypto is part of the policy ambition to “make the UK an attractive destination for crypto assets and crypto asset innovation in the world,” according to a government report on the UK’s Economic Crime Plan for the coming three years.
However, the Economic Crime and Corporate Transparency law won’t solve all problems for crime fighters. When it comes to DeFi hacks, there isn’t much authorities can do.
“A lot of DeFi hacks are carried out by foreign adversaries so it would be difficult to go after the physical artefacts that this bill has in mind,” Chase said. “If the hacked funds went through a centralised exchange then you would have more luck recovering them, but this bill doesn’t really target that issue.”
The new rules will enable law enforcement agencies to ask for help from other jurisdictions, when it comes to suspects using crypto platforms to exchange or store assets linked to UK victims, but it wouldn’t be as easy as domestic routes, Wain said.
“It still needs a sign-off from the Home Secretary and an assistance agreement to be in place between the countries, so potentially this is still a high bar,” Wain said.
“What can be achieved when you have really good criminal and civil asset recovery powers is huge,” Chase said.
In the US, for example, laws already allow for both criminal and civil seizures of crypto assets.
One of the bigger success stories, according to Chase, is how the US Department of Justice was able to seize $3.6 billion worth of stolen Bitcoin last year from a hack on crypto exchange Bitfinex. The married couple behind the 2016 hack pleaded guilty in August.
Around the world
The passing of the Economic Crime and Corporate Transparency bill comes as law enforcement around the globe fight to strip criminals of their abilities to get away with stolen funds.
The UK’s Crown Prosecution Service recovered £750,000 of stolen money, including cryptocurrencies, from a convicted computer hacker in July.
Similarly, Norwegian police reported in February that it has seized $5.8 million from North Korean hackers.
Elsewhere, people like California prosecutor Erin West have fought back against crypto scams by clawing back the stolen assets from online grifters.
While regulators and police forces have cracked down on crypto-related crimes, digital crooks are constantly evolving their scams to stay ahead of the long arm of the law.
While ransomware crimes have declined, cybersecurity firm SonicWall recently detected a nearly five-fold surge in cryptojacking attacks globally in the first half of 2023, representing more than 300 million attacks — reaching a record that exceeded the full year totals for the previous three years.
Cryptojacking attacks involve the criminal installing malware into the victims’ devices that turn them into a small crypto mining rig.
Security experts have also warned that digital grifters have tapped in artificial intelligence tools that are similar to ChatGPT to trick more victims.
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