On June 24, 2021, UK law enforcement seized a record-setting £114 million (nearly $160 million) 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 genre of assets involved, as well as regulators’ ability to trace digital currency. Money services businesses, virtual asset service providers, and other businesses servicing the cryptocurrency market should prepare for growing enforcement attention and ensure they have implemented a robust anti-money laundering compliance framework.
In a press release, the Metropolitan Police Service (the “Met”) announced that the £114 million cryptocurrency seizure was carried out by the Met’s Economic Crime Command. According to the release, “[c]ash remains king, but as technology and online platforms develop, some are moving to more sophisticated methods of laundering their profits.” The press release does not offer details about the type of cryptocurrency involved or the investigation, which remains ongoing, other than that the matter involves potential money laundering offenses.
The seizure coincides with an increasing trend in the use of cryptocurrencies to launder illicit proceeds. According to the Cryptocurrency Enforcement Framework published last year by the U.S. Department of Justice (“DOJ”), the ability to anonymously move and exchange cryptocurrencies over the internet can make it easier for criminals to commit money laundering offenses. DOJ’s Framework also noted that unlicensed or unregistered cryptocurrency exchanges that don’t comply with anti-money laundering (“AML”) requirements can facilitate money laundering.
In response to the heightened money laundering risk created by cryptocurrencies, regulators around the world tasked with AML enforcement have honed in on cryptocurrencies. As we have previously reported, numerous European countries including the UK and Germany have implemented the European Union’s 5th Anti-Money Laundering Directive, which extends AML obligations to cryptocurrency providers.
In the U.S., 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 cryptocurrency service providers.1 When asked about this statute in a recent confirmation hearing, the Biden administration’s pick to lead the Treasury Department’s Office of Terrorism and Financial Intelligence, which oversees FinCEN, reportedly indicated that cryptocurrency would be an AML enforcement priority.2
Law enforcement agencies have demonstrated their ability to track and seize cryptocurrency representing the proceeds of criminal conduct, despite the widespread belief that cryptocurrency transactions are untraceable. For example, DOJ seized 63.7 bitcoins ($2.3 million) of the payment made in the Colonial Pipeline ransomware attack to the hacker group known as DarkSide less than one month after the payment was made. The combination of regulators’ prioritization of AML enforcement in cases involving cryptocurrency, coupled with law enforcement’s ability to effectively trace crypto transactions, makes this emerging area of law enforcement activity a significant one to watch in the coming years.
What This Means for You
The international regulatory focus on cryptocurrencies likely foretells an increase in AML enforcement actions involving companies that service the cryptocurrency market. Cryptocurrency service providers should prepare for heightened AML enforcement scrutiny by taking the following steps:
- Carefully review the new statutory and regulatory reporting requirements implicating cryptocurrency transactions, including the Anti-Money Laundering Act of 2020 and (for cryptocurrency service providers operating in Europe) any applicable European country’s implementation of the European Union’s 5th Anti-Money Laundering Directive;
- Confirm that the company has a robust AML compliance framework that complies with these recent legal and regulatory changes, taking particular care to ensure that cryptocurrency transactions don’t subvert applicable AML requirements; and
- On a going-forward basis, monitor for legal and regulatory changes that impact the quickly evolving cryptocurrency market.
1 See William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, Pub. L. No. 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.
