Life after crime: What happens to cryptocurrencies seized in criminal investigations?

Life after crime: What happens to cryptocurrencies seized in criminal investigations? – Mail Bonus

Earlier this year, during the UK’s annual Queen’s speech, Prince Charles briefed Parliament on two bills. One of them – a bill on economic crime and corporate transparency – would expand the government’s power to seize and recover cryptocurrencies.

At the same time, the IRS seized more than $ 3 billion worth of cryptocurrencies in 2021.

As the money supply of digital currencies increases and developers’ scrutiny of the maturing industry increases, the amount of money seized will inevitably increase.

But where do these funds go, provided they are not returned to the victims of fraud and deception? Are auctions, as for lost property? Or are these coins meant to be kept in some kind of special wallet, which could end up as the ultimate investment fund for law enforcement agencies? Cointelegraph tried to get answers.

Dark roots of civic recording

For newcomers to the room, cryptocurrency is money. In that sense, the fate of the seized cryptocurrency should not be much different from other confiscated money or assets. Civilian extortion, the forcible seizure of property by individuals or companies that are said to be involved in illegal activities, is a rather controversial law enforcement method. In the United States, it first became commonplace in the 1980s as part of the war on drugs, and it has been the target of vocal critics ever since.

In the United States, all seized property becomes permanent property of the government if the prosecutor can prove that the property is connected to a criminal act or if no one demands that it be returned. In some cases, the property is returned to its owner as part of a lawsuit with the prosecution. Some, however, estimate that only 1% of the seized property is ever returned.

How do law enforcement agencies use the money they do not have to return? They spend it on whatever they want or need, such as exercise equipment, group cars, prisons and military equipment. In 2001, for example, the police department used St. Louis County $ 170,000 to buy BEAR (Ballistic Engineered Armored Response) tactical vehicle. In 2011, it spent $ 400,000 on helicopter equipment. The Washington Post analyzed more than 43,000 extortion reports and reported that the seized funds were being spent on such diverse items as an armored truck ($ 227,000), a sheriff’s award party ($ 4,600) and even hiring a clown ($ 225) to “improve community communication.” . ”

Some states, such as Missouri, legally require that confiscated funds be allocated to schools, but as the Pulitzer Center points out, law enforcement agencies keep almost all of the money using the federal Equitable Sharing Program. In 2015, U.S. Attorney General Eric Holder issued a decree banning the inclusion of a federal agency, but his successor under President Donald Trump, Jeff Sessions, repealed it, calling it “a key tool that helps law enforcement prevent organized crime.” .

Payment of the fate of the coins in the United States, the United Kingdom and the EU

While none of the experts interviewed by Cointelegraph could talk about the technical aspects of storing seized cryptocurrencies, the rest of the process tends to be pretty much the same as non-cryptocurrencies.

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Don Fort, former head of the IRS’s investigative division, who heads the law firm Kostelanetz & Fink’s law firm, told the Cointelegraph that the only major distinction is the need to offer digital assets:

“At the federal level, seized cryptocurrencies go to either the Ministry of Justice or the Treasury Treasury. Once the cryptocurrencies have been auctioned off by one of the recording funds, the relevant federal law enforcement agencies can use the funds.

Fort explained that, as with non-encrypted funds, the institution requesting forfeited funds must submit a special plan or initiative to commend the money and spend it, and the plan must be approved by the Department of Justice before funds can be allocated. for establishment.

A similar approach governs the allocation of seized cryptography in the UK. The Crime Proceeds Act of 2002 describes how the proceeds of crime should be treated in cryptocurrency when seized. Tony Dhanjal, head of tax affairs at Koinly, explained to the Cointelegraph:

“When it comes to confiscated property in general – as opposed to cash – the Ministry of the Interior gets 50%, and the other 50% is divided between the police, the prosecution and the courts. There is also scope for some of the confiscated assets to be returned to victims of cryptographic crimes. “

However, Dhanjal believes that the legislation needs to be updated to specifically address cryptocurrencies, as they are “a unique challenge for criminal organizations like anything that has ever happened before. The aforementioned announcement of a bill on economic offenses and corporate transparency contained no information other than plans to “create authorizations to seize and recover cryptographic assets faster and easier,” but an update to the cryptographic allocation procedure is certainly something to be desired.

As is often the case with regulatory rules, the European Union is more complex. Although there is a system of mutual assistance in criminal matters within the EU, criminal law falls within the competence of the Member States and there is no single body to coordinate enforcement or detention.

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Therefore, there are various ways to handle seized cryptography. Thibault Verbiest, a member of the Paris law firm Metalaw in Paris, quoted several cases to the Cointelegraph. In France, for example, the Agency for the Recovery and Management of Seized and Seized Property (AGRASC) is responsible for the management of seized property. Verbiest said:

“Once the assets have been seized for forensic investigation, they are, according to the decision of the Attorney General, transferred to AGRASC, which will decide, in accordance with Articles 41-5. and 99.-2. Criminal proceedings, the fate of these assets; they will be sold at public auction or destroyed. “

But cryptographic assets can not always be seized. In 2021, 611 Bitcoin (BTC) was sold at auction by AGRASC after it seized the cold storage devices used by defendants who had stored their encryption keys on a USB key. As Verbiest explained:

“This was made possible because the aforementioned articles allow the seizure of liquid assets, so that the USB key (and its contents) could be seized. The situation would have been different if the cryptocurrency had been stored on a third-party server through a transferred storage service, as the aforementioned texts do not allow the confiscation of intangible assets.

As foreclosure practices are still highly controversial – with some even calling it a “highway robbery” – cryptocurrencies provide their owners with at least relative protection. Nevertheless, apart from technology, it is in the field of policy where both coin makers and moneylenders have to fight against a long tradition of persecution in law enforcement.