Cryptocurrency and blockchain technology present both unique challenges and innovative solutions to the asset recovery world. How are the provisions in the UK Proceeds of Crime Act (POCA) used in practice in the crypto space?
FRA Director of cryptocurrency investigations Meredith Fitzpatrick recently joined 5SAH’s Barnaby Hone, to discuss how the UK’s Proceeds of Crime Act (POCA) 2002 applies to crypto assets. As crypto fraud becomes more sophisticated, the core message of the session was clear: speed is critical when tracing and freezing stolen digital assets.
POCA now provides three key mechanisms for recovering crypto assets:
- Expanded Seizure Powers: The Economic Crime and Corporate Transparency Act 2023 amended POCA to allow seizure of crypto assets under Chapters 3C to 3F. These wide-ranging provisions, processed through the magistrates' courts, enable quick action against exchanges with a UK nexus.
- Section 47 Powers: These allow rapid seizure of crypto assets, typically from cold wallets, for smaller recoveries.
- Restraint Orders: Used to freeze assets likely to be confiscated later.
Challenges remain
Despite these tools, enforcement faces hurdles:
- Limited resources: There’s a shortage of law enforcement officers and forensic experts trained in blockchain analysis.
- Delays: Tracing should begin within 24-48 hours to be effective, as illicit actors move the funds very quickly once they’ve received the funds from the victim. Delays reduce the chances of recovery.
- High legal costs: Especially in the High Court, costs can be prohibitive.
- Cross-border cooperation: International exchanges may not always comply with UK court orders.
That said, a collaborative approach – combining law enforcement, forensic accountants, and legal counsel – has proven effective. In some cases, assets have been recovered in under four months.
The Role of Blockchain Analytics
Tools like Chainalysis allow investigators to cluster wallet addresses and track stolen assets through centralized exchanges. These exchanges, which hold custodial wallets and cooperate with law enforcement, are key points in the recovery chain. A good starting point is to review bank records for transfers to crypto exchanges, then contact those exchanges, as there’s now an investigative lead that the user has an account at that exchange.
By contrast, recovering funds from decentralized exchanges or non-custodial wallets is far more difficult. These wallets lack a central authority, making it rare to serve court orders or freeze assets – unless the perpetrator voluntarily discloses private keys after arrest. Searches of devices may uncover passwords or seed phrases, so thorough digital forensics is essential. This typically requires heavy law enforcement involvement.
Criminal Behavior and Exchange Liquidity
While some criminals attempt to use obscure or unregulated platforms, larger transactions often force them onto centralized exchanges with greater liquidity. However, time is critical with tracing as criminals exploit crypto’s speed and liquidity, often moving stolen funds across hundreds of wallets within hours. With decentralized exchanges, there is limited traceability beyond entry and exit points.
Three Key Takeaways:
- Act immediately – contact law enforcement and initiate tracing within 24 hours.
- Gather identifiers early – wallet addresses, hashes, and transaction records.
- Collaborate – forensic experts, lawyers, and law enforcement must coordinate to succeed.
By acting decisively and evoking the evolving powers under POCA, victims can significantly improve their chances of freezing and recovering assets.
Contact Meredith to continue the discussion.
With thanks to FRA's Loretta Rice and Clara Harrison for their support with this summary.
