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Economic Crime And Corporate Transparency Act 2023

Contents

Schedules

Schedule 1 – Register of members: consequential amendments

  1. Paragraph 1 states the Companies Act 2006 is amended as per the below.
  2. Paragraph 2 states subsection (3) of section 112 (members of a company) is omitted, because a company will no longer be able to "elect" to keep information about its members on the "central register", kept by the Registrar.
  3. Paragraph 3 states section 127 (register to be evidence) is amended to clarify that whilst information about the members was held on the "central register", the "central register" is to be considered prima facie’ evidence about the members of the company. : When the "central register" is abolished by this Act, then the prima facie evidence about the members can be found in the company’s own register held under s113 of the Companies Act 2006.
  4. Paragraphs 4-25 are consequential amendments to omit existing references in the Companies Act 2006 to the "central register". The "central register" regime is being abolished by this Act. The references contained in these paragraphs repeal the relevant provisions about the "central register".

Schedule 2 – Abolition of certain local registers

Part 1 – Register of directors

  1. The following are amendments to the Companies Act 2006. Sections 161A to 167F are repealed by paragraph 2. Paragraph 3 inserts the following provisions:
167G: Duty to notify registrar of change in directors
  1. This section states that a company must inform the Registrar if person becomes or has ceased to be a Director of the company.
  2. The company must do this by way of notice within 14 days beginning with the day on which the person becomes or ceases to be a director.
  3. The company must specify the date on which the change occurred, and deliver the required information about the person.
  4. This section introduces a requirement that a notification of director appointment is accompanied by a statement that their identity is verified.
  5. A statement must also be made that the appointed director is not disqualified or otherwise ineligible to be a director. If a proposed director is disqualified, but has received a permission of a court to act as a director, the application for registration must contain a statement to this effect, specifying the court that gave the permission. If the proposed director is disqualified as a result of being designated under new section 3A of the Sanctions and Anti-Money Laundering Act 2018, but has been issued with a licence providing them with authority to act as director, the application for registration must contain a statement to that effect, specifying the date on which the licence was issued, and by whom it was issued.
  6. This section also allows transitional provisions to be made under by regulations. The transitional provision may require companies to deliver statements as under section 167G(3)(i) or (ii) of the Companies Act, in relation to any individual who became a director of the company after the company’s incorporation, at the same time as they their file the company’s annual confirmation statement.
167H: Duty to notify registrar of changes in information
  1. This section states that a company must inform the Registrar if there has been any change in a Director’s required information
  2. The company must do this by way of notice within 14 days starting with the day the company the change occurred.
  3. The company must specify the date on which the change occurred.
  4. A statement must be provided should there be a change in a director’s service address but not their residential address to confirm the residential address is unchanged.
167I: Notification of changes occurring before company’s incorporation
  1. This section states that should there be a change about the proposed directors that occurs after the application for incorporation is delivered to the Registrar, but before the company is incorporated, then the company must inform the Registrar of the change.
  2. The company must do this by way of notice within 14 days starting with the day the company was incorporated.
  3. If a person did not become a director, then the company must inform the Registrar.
  4. If the required information of any of the directors has changed, then the notice to the Registrar must specify the date on which the change occurred.
167J: Required information about a director: individuals
  1. This section sets the requirements for the information that must be provided to the Registrar about a director, be it an active or proposed director, that is an individual.
  2. This section includes a power for the Secretary of State that by regulations can change the required information about a director be it an active or proposed director who is an individual.
167K: Required information about a director: corporate directors and firms
  1. This section sets the requirements for the information that must be provided to the Registrar about a director, be it an active or proposed director, where the director is either a body corporate or a firm that is a legal person under the law by which it is governed.
  2. This section includes a power for the Secretary of State that by regulations can change the required information about a director be it an active or proposed director where the director is either a body corporate or a firm that is a legal person under the law by which it is governed.
167L: Directors: offence of failure to notify of changes
  1. This section outlines the penalty, should the company fail, without reasonable excuse, to comply with the requirements in sections 167G, 167H or 167L.

Part 2 – Register of secretaries

  1. Paragraph 5 repeals sections 274A to 279F of the Companies Act 2006. The following is inserted before section 280 by paragraph 6:
279G: Duty to notify registrar of change in secretary or joint secretary
  1. This section states that a company must inform the Registrar if a person becomes or has ceased to be a Secretary or Joint Secretary.
  2. The company must do this by way of notice within 14 days beginning with the day on which the person becomes or ceased to be a Secretary or Joint Secretary.
  3. The notice must specify the date on which the change occurred.
  4. This notice must include a statement of required information about the secretary or joint secretary and a separate statement of consent that the individual has agreed to the act as secretary or joint secretary.
  5. This section states that, if a person has been named as a proposed secretary or joint secretary, on the application for incorporation, then there is no further required in s279G to inform the Registrar about that.
279H: Duty to notify registrar of changes of information
  1. This section states that a company must inform the Registrar if the required information about the secretary or a joint secretary has changed.
  2. The company must do this by way of notice within 14 days beginning with the day on which the change occurred.
  3. The notice must specify the date on which the change occurred.
279I: Notification of changes occurring before company’s incorporation
  1. This section states that should there be a change about the proposed secretary or joint secretary that occurs after the application for incorporation is delivered to the Registrar, but before the company is incorporated, then the company must inform the Registrar of the change. The company must do this by way of notice within 14 days starting with the day the company was incorporated.
  2. If a person did not become a secretary or joint secretary, then the company must inform the Registrar.
  3. If the required information of any secretary or joint secretary has changed, then the notice to the Registrar must specify the date on which the change occurred.
279J: Required information about a secretary etc: individuals
  1. This section sets the requirements for the information that must be provided to the Registrar about a secretary or joint secretary, be it an active or proposed secretary, that is an individual.
  2. This section includes a power for the Secretary of State that by regulations can change the required information about a secretary or joint secretary, be it an active or proposed secretary or joint secretary who is an individual.
279K: Required information about a secretary etc: corporate secretaries and firms
  1. This section sets the requirements for the information that must be provided to the Registrar about a secretary or joint secretary, be it an active or proposed secretary or joint secretary, where the secretary or joint secretary is either a body corporate or a firm that is a legal person under the law by which it is governed.
  2. This section includes a power for the Secretary of State that by regulations can change the required information about a secretary or joint secretary be it an active or secretary or joint secretary where the secretary or joint secretary is either a body corporate or a firm that is a legal person under the law by which it is governed.
279L: Firms all of whose partners are joint secretaries
  1. This section applies where all the members of a firm are joint secretaries (or proposed joint secretaries) and the firm is not a legal person under its governing law.
  2. This section states that, should that be the case, then the required information about the members of the firm as joint secretaries (or proposed joint secretaries) may be satisfied as if that firm was a legal person.
279M: Secretary or joint secretary: offence of failure to notify of changes
  1. This section outlines the penalty, should the company fail, without reasonable excuse, to comply with the requirements in sections 279G, 279H or 279L.

Part 3 – Register of people with significant control

  1. Paragraph 8 makes consequential amendments to section 790A (overview of Part) of the Companies Act 2006 to reflect the abolition of local registers.
  2. Paragraph 9 amends section 790C (key terms) of the Companies Act 2006 by omitting subsection 10, as companies are no longer required to keep their own PSC register.
  3. Paragraph 9A inserts new section 790CA (references to "confirmation" etc. of information) into the Companies At 2006. This defines what is meant by "a company obtaining confirmation of information", which is important, as a company which knows of a PSC is only under a duty to notify the Registrar about them under section 790LA if it has had "confirmation" from the person. A company has had confirmation if the person has supplied the following information:
    1. Their status as a PSC,
    2. Their required particulars, e.g. for an individual, their date of birth and usual residential address - see section 790K,
    3. Any other information about them.
  4. Paragraph 10 omits section 790D (company's duty to investigate and obtain information) and section 790E (company’s duty to keep information up to date) of the Companies Act 2006 and inserts section 790CB (duty to find about persons with significant control), section 790D (company’s duty to give notices to persons with significant control), section 790DA (obtaining information from third parties), section 790E (company’s duty to find out about changes in PSC information), section 790EA (company’s duty to find out about persons ceasing to be PSCs), section 790EB (company’s duty to notify failure to comply with notices) and section 790EC (company’s duty to notify of late compliance with notices).
  5. The substituted and new sections contain similar provisions to those in existing sections 790D and 790E, as well as regulations 14 and 15 of the 2016 PSC regulations (S.I. 2016/339). Provisions in existing section 790D are split into new section 790D and 790DA and those in existing section 790E are split into new section 790E and 790EA. Powers to make further provision about the giving of notices, including provision about their form and content and the manner in which they must be given are provided under each section.
  6. The existing provisions are refashioned to reflect the fact that a company’s duty will be to update a register held centrally by the Registrar rather than a register it holds locally.
  7. New section 790CB states a company in scope of the PSC regime must take reasonable steps to find out if there is anyone who is a PSC in relation to the company and, if so, to identify them. This is a refashioning of existing section 790D(1).
  8. New section 790D sets out when a company is under a duty to give a notice to its PSCs. This is a refashioning of existing section 790D(2)-(4) and (8)-(9), but a company now has a deadline to send a notice, which aligns with the deadline in existing section 790E:
    1. as soon as reasonably practicable after the company becomes subject to the duty to give a notice under this section, and
    2. in any event before the end of the period of 14 days beginning with the day on which the company becomes so subject.
  9. New section 790DA partly refashions existing section 790D(5)-(9) which set out when a company may give notice to a third party to obtain information about its PSCs. It also sets out a new requirement that a company must send the same notice to a third party, if it:
    1. knows or has cause to believe that a person is a suspected PSC,
    2. is under a duty to give the suspected PSC a notice under section 790D but does not have the information that it needs in order to contact them,
    3. knows or has cause to believe that the third party-
      1. knows the identity of the suspected PSC, or
      2. knows the identity of someone likely to have that knowledge.
  10. New sections 790E and 790EA refashion existing section 790E and require companies to find out about changes in PSC information and persons ceasing to be PSCs respectively. Companies are then required to then notify the Registrar of those changes:
    1. as soon as reasonably practicable after the company becomes subject to the duty to give a notice under this section, and
    2. in any event before the end of the period of 14 days beginning with the day on which the company becomes so subject.
  11. New sections s790EB and 790EC refashion regulations 14 and 15 of the 2016 PSC regs. Companies mut report failure to comply with notices and late compliance with notices, within 14 days.
  12. Paragraph 11 amends section 790F(1) (failure by company to comply with information duties) of the Companies Act 2006 so that an offence is committed for the failure to comply with the duties contained in the new section numbers as per paragraph 10.
  13. Paragraph 12 substitutes section 790G (duty to supply information) and section 790H (duty to update information) of the Companies Act 2006 for new section 790G (duty to notify company on becoming PSC), new section 790H (duty to notify company of changes in PSC information) and new section 790HA (duty to notify company of ceasing to be a PSC). These changes are made to reflect the fact that a person’s duties will be to supply and update information where it is absent from the register held centrally by the Registrar rather than from a register a company holds locally.
  14. Paragraph 12A updates the references to various section numbers in section 790L (enforcement of disclosure requirements), in line with the amendments made by paragraphs 10 and 12.
  15. Paragraph 12B inserts new section 790IA (power to impose further duties involving nominee shareholders) into the Companies Act 2006. New section 790IA allows the Secretary of State to make further provision for the purpose of enabling a company to find out about anyone who has become or ceased to be a PSC, where shares are held by a nominee. A nominee is a person who holds shares on behalf of another.
  16. To reflect the abolition of local PSC registers, paragraph 13 deletes reference to them from section 790J (power to make exemptions) of the Companies Act 2006 and replaces it with reference to provisions in the ECCT Act which facilitate the central register to be held by the Registrar. Paragraph 13 also updates the references to various section numbers in section 790J, in line with the amendments made by paragraphs 10 and 12.
  17. Paragraph 14 amends section 790K (required particulars) of the Companies Act 2006 to:
    1. remove the requirement to state if, in relation to that company, restrictions on using or disclosing any of the individual's PSC particulars are in force under regulations under section 790ZG,
    2. Substitute subsection (4) for a new subsection (4) and (4A), to align name requirements with amendments to name requirements, so that "name" in relation to an individual means the individual’s forename and surname. An individual usually known as a title will be able to provide that title rather than that individual’s forename and surname.
  18. Paragraph 15 amends section 790L of the Companies Act 2006 to replace the existing Secretary of State regulation making power with a new formulation which clarifies the range of persons and entities from whom additional or modified information may be required.
  19. Paragraph 16 inserts the following provisions after section 790L of the Companies Act 2006:
790LA Duty to notify registrar of confirmed persons with significant control
  1. This section states that a company must inform the Registrar if it has had confirmation of a person’s status as a registrable person or a registrable relevant legal entity, and the required particulars of the person.
  2. The company must do this by way of notice within 14 days starting with the day the company had confirmation. The notice must include a statement of the required particulars.
  3. The company does not have to do this if the person was included in the statement of initial significant control, as a person who would, on the company’s incorporation, become a PSC in relation to the company, and the company has no cause to believe that at any time since its incorporation the person has ceased to be a PSC in relation to the company.
790LB Option to provide ID verification information in notice of change
  1. This section permits a notice under section 790LA(1)(a) to the Registrar about changes in the company’s People with Significant Control to be accompanied by an identity verification statement as defined in section 1110A.
  2. In the case of a registrable person, the notice states that their identity has been verified. In the case of a registrable relevant legal entity, it must specify the name of one of its relevant officers as defined by section 790LJ(6) and must confirm that their identity is verified. The notice must also be accompanied by a statement from the relevant officer confirming that they are the relevant officer of the registrable relevant legal entity. This is to help avoid registrable relevant legal entities taking the names of identity verified individuals who have nothing to do with them and naming them as their relevant officer.
790LBA Duty to notify registrar of unconfirmed persons with significant control
  1. This section states that a company must inform the Registrar if it knows or has cause to believe that a person has become a PSC, but it has not yet had confirmation as per new section s790LA. The notice must state that fact.
  2. The company must do this by way of notice within 14 days starting with the day the company first knows or has cause to believe a person has become a PSC.
  3. A company does not need to give notice in relation to a person listed in the statement of initial significant control under section 12A.
  4. This ensures the Registrar is notified where there is an unconfirmed PSC, but the person’s particulars do not appear publicly until they have been confirmed. This caters for the scenarios currently catered for by regulations 11 and 12 of the 2016 PSC regulations (SI 2016/339).
790LC Duties to notify of changes in required particulars
  1. This section states that a company must inform the Registrar if it has had confirmation:
    1. that there has been a change in the required particulars of a PSC in relation to the company, and
    2. of how the required particulars have changed and the date on which they changed.
  2. The company must do this by way of notice within 14 days beginning with the day on which the company had confirmation. The notice to the Registrar must contain the required particulars and specify the date on which the change occurred.
790LCA Duty to notify of pre-incorporation changes in required particulars
  1. This section states that a company must inform the Registrar if it has had confirmation:
    1. that there was a pre-incorporation change in the required particulars of a "proposed PSC" – a person named in the statement of initial significant influence or control as a person who would become a PSC upon incorporation, and
    2. of how the required particulars have changed and the date on which they changed.
  2. The company must do this by way of notice within 14 days beginning with the day on which the company had confirmation.
  3. The notice to the Registrar must contain the required particulars and specify the date on which the change occurred.
  4. The company does not need to inform the Registrar about such a person if it has given a notice under section 790LD in respect of the person.
  5. In this section, pre-incorporation change means a change occurring after the application for incorporation was delivered to the Registrar, but before the company was incorporated. This could occur if there were a delay in incorporating a company, for example, if the Registrar had queries about the application.
790LCB Duty to notify registrar when person ceases to have significant control
  1. This section states that a company must inform the Registrar if it has had confirmation:
    1. that a person has ceased to be a PSC, and
    2. of the date on which the person so ceased.
  2. The company must do this by way of notice within 14 days beginning with the day on which the company had confirmation.
  3. The notice to the Registrar must contain the person’s name and service address, and the date on which they so ceased.
790LD Notification of someone not becoming person with significant control on incorporation
  1. This section states that should a PSC named in the application for incorporation not become such a person, then the company is required to inform the Registrar.
  2. The section also states that should there be a change in particulars of a PSC after the application for incorporation is delivered to the Registrar, but before the company is incorporated, then the company must inform the Registrar of the change.
  3. The company must do this by way of notice within 14 days starting with the day on which the company becomes aware of the change. For a change in a person’s particulars, the company must deliver a notice to the Registrar within 14 days of becoming aware of the change and having all the required particulars.
790LDA Duty to notify registrar if company cease to have persons with significant control
  1. This section states that a company must inform the Registrar if it knows or has cause to believe that confirmation:
    1. that there has at some time been a person who is a PSC, and
    2. there has ceased to be anyone who is a PSC.
  2. The company must do this by way of notice within 14 days beginning with the day on which the company first had that knowledge or cause to believe.
  3. The notice to the Registrar must contain the date on which the company first had that knowledge or cause to believe.
790LE Power to create further duties to notify information
  1. This section provides a power for the Secretary of State to make Regulations to impose further requirements on a company to deliver information in relation to PSCs, including whether or not it has any, and compliance by the company or any person with the requirements.
790LF Persons with significant control: offence of failure to notify
  1. This section outlines the sanction should a company, without reasonable excuse, fail to comply with the notification requirements about PSCs in sections 790LA, 790LBA, 790LC, 790LCA, 790LCB, 790LD or 790LDA or in Regulations under section 790LE.
790LG Power of court to order company to remedy defaults or delay
  1. When a company is in default of its notification requirements, 790LG provides that a person aggrieved, member of the company or any other person who is a PSC may apply to the court. The court may make an order requiring the company to make the necessary notifications to the Registrar.
  2. Subsections (3) and (4) set out the actions the court may take in response to such an application. Subsection (5) provides that nothing in 790LG affects a person’s rights under sections 1094 & 1096 of the Companies Act 2006.
790LH Information as to whether information has been delivered
  1. Section 790LH is based on section 120 of the Companies Act 2006 (‘Information as to state of register and index’) and provides that a company must inform a person that all of the information required to be delivered to the Registrar has been delivered.
  2. A company has 14 days, from the date of receiving the request, to comply and failure to do so is a summary offence committed by the company and every officer of the company in default, punishable by a fine.
  3. Paragraph 17 removes Chapters 3 and 4 of Part 21A of the Companies Act 2006 which will be rendered redundant following the abolition of locally held PSC registers.
  4. Paragraph 17A amends Schedule 1B (enforcement of disclosure requirements in relation to persons with significant control) to the Companies Act 2006. Paragraphs 13 and 14 of Schedule 1B are substituted for new paragraphs 13, 14, 14A and 14B, each of which contain an offence. The offences in new paragraphs 13 and 14 relate to the failure to provide information, each with a reasonable excuse defence. The offences in new paragraphs 14A and 14B relate to the provision of a statement that is misleading, false or deceptive in a material particular. New paragraph 14A provides a reasonable excuse defence against committing a "basic" offence, whereas new paragraph 14B provides an "aggravated" offence, where a person provides a false statement knowingly.

Part 4 – Consequential amendments

  1. Paragraph 18 states that the Companies Act 2006 is amended as below.
  2. For the purposes of consistency throughout the Companies Act 2006, paragraph 19 replaces references to "particulars of" in s.12 of the Act with the term "information about".
  3. Paragraph 20 amends sections 12A (Statement of initial significant control) of the Companies Act 2006 to provide that the requirements of a statement delivered to the Registrar will no longer be dependent upon information held or appropriately contained within companies’ locally held PSC registers (which are to be abolished).
  4. For the purposes of consistency throughout the Companies Act 2006, paragraph 21 amends section 95 (Statement of proposed secretary) to replace references to "particulars of" with the term "information about" (and "particulars" with "information").
  5. Paragraph 22 amends section 156 of the Companies Act 2006 to replace its references to s.167 (which will be repealed with the abolition of local registers of directors) with references to new s.167G.
  6. Paragraph 23 amends section 156B of the Companies Act 2006 (yet to be brought into force) by deleting subsection (5) which will fall redundant upon the abolition of local registers of directors.
  7. Paragraph 24 removes from section 156C of the Companies Act 2006 (yet to be brought into force) by deleting provisions which will be rendered redundant upon the abolition of local registers of directors. It replaces them with a similar power for the Registrar to annotate the central register of directors which she will hold and maintain.
  8. Paragraph 25 introduces a range of amendments to section 835B of the Companies Act 2006 to reflect the manner in which duties to notify relevant events will apply upon the abolition of local registers of directors, secretaries and PSCs.
  9. Paragraph 26 amends section 1079B (duty to notify directors) of the Companies Act 2006 to replace its references to section 167 and 167D (which will be repealed with the abolition of local registers of directors) with references to new section 167G.
  10. Paragraph 27 deletes from section 1136 of the Companies Act 2006 provisions relevant to the place where a local register may be expected. These will be redundant upon the abolition of local company registers.
  11. Paragraph 28 amends paragraph 4 of Schedule 5 (communications by a company) of the Companies Act 2006 to delete references to companies’ local registers of directors which will become redundant upon the abolition of those registers.
  12. Paragraph 29 amends Schedule 8 of the Companies Act 2006 to delete defined expression definitions which will cease to be relevant following abolition of local registers.

Schedule 3 – Disclosure of information: consequential amendments

  1. This schedule makes amendments to the Companies Act 2006, adding a subsection at section 242 to enable the Registrar to disclose usual residential addresses using the new disclosure power created at section 1110E. Consequently, section 243 and section 1087B are also amended so that they cater for disclosures made by the Registrar to credit reference agencies only.
  2. It also makes amendments to the Economic Crime (Transparency and Enforcement) Act 2022 ("the ECTE Act"). Paragraph 5 omits the words "or the registrar" from section 40 (sharing of information by HMRC) of the ECTE Act, so that HMRC can only share information with the Secretary of State. Paragraph 6 amends section 44 of the ECTE Act to provide that references to delivering a document are to be read in accordance with section 1114(1)(b) of the Companies Act 2006. This means that references to delivering a document include forwarding, lodging, registering, sending, producing or submitting it or (in the case of a notice) giving it.

Schedule 4 – Required information

  1. This schedule inserts a schedule into the Limited Partnerships Act 1907 which sets the requirements for the information that must be provided on partners who are individuals and bodies corporate or firms. There is currently limited information collected on partners so this schedule will increase the information that the Registrar holds and provide greater transparency on who exactly is in charge of a limited partnership and how they can be contacted.

Schedule 5 – Limited partnerships: consequential amendments

  1. This schedule amends the Limited Partnership Act 1907 by inserting new headings which reflect the amended legislation, and which clarify the meaning of the existing legislation.

Schedule 6 – Duty to deliver information about changes in beneficiaries

  1. This schedule requires an overseas entity that has a beneficial owner who is a trustee to provide information about changes in beneficiaries under the trust that take place during an update or other period (rather than just providing a snapshot of the beneficiaries at the end of the period).
  2. This Schedule amends the Economic Crime (Transparency and Enforcement) Act 2022 (ECTE Act 2022).
  3. Paragraph 2 amends Section 7 of the ECTE Act 2022 by first making consequential changes to section 7, subsection 3 and subsection 4, and by inserting a new subsection 4A into section 7. Subsection 4A sets out the information that is to be provided by an overseas entity when it submits its annual update and is required to provide information about a trust. The overseas entity must provide a statement about trust beneficiaries, and where a change has occurred during the update period, the overseas entity must provide the required information (as set out in paragraph 8(1)(d) of Schedule 1 to the ECTE Act 2022) about each change. Information must be provided about anyone who has become, or ceased to be, a beneficiary under the trust during the update period.
  4. Sub-paragraph (6) substitutes subsections (6) and (7) of section 7 of the ECTE Act 2022. New subsection (6) sets out that any statements required by subsection (1)(a) or (b) must relate to the state of affairs as at the end of the update period. New subsection (7)(a) provides that any information required by subsection (1)(a) or (b) as a result of a person having become, or ceasing to be, a beneficiary under a trust or (b) required by subsection 1(b) as a result of a person having become, or ceasing to be, a registrable beneficial owner of an overseas entity must relate to the time when the person attained that status, or ceased to hold that status.
  5. New subsection (7A) to section 7 sets out that any other information required to be provided by subsection (1)(a) must relate to the state of affairs at the end of the update period.
  6. Paragraph 3 amends section 9 (application for removal) of the ECTE Act 2022. Sub-paragraphs (2) and (3) make consequential changes to subsections (1)(b) and (c) and to subsection (3) of section 9.
  7. Sub-paragraph (4) amends subsection (4) of section 9 to provide that where the information provided under subsection 1(c0 includes information that a person who ceased to be a registrable beneficial owner was a trustee, a statement, or statement and information, as the case may be, must be provided as set out in new subsection (4A) to section 9.
  8. Sub-paragraph (5) inserts new subsection (4A) into section 9. The table in new subsection (4A) sets out what is required to be provided where a person who has ceased to be a registrable beneficial owner was a trustee.
  9. Sub-paragraph (6) amends subsection (6) of section 9, substituting the words "subsection (2)" for the words "this section".
  10. Sub-paragraph (7) substitutes subsections (7) and (8) of section 9. New subsection (7) sets out that any statements required by subsection (1)(b) or (c) must relate to the state of affairs at the time of the application for removal.
  11. New subsection (8) provides that any information (a) required by subsection (1)(b) or (c) as a result of a person having become or ceasing to be a beneficiary under a trust, or (b) required by subsection (1)(c) as a result of a person having become or ceasing to be a registrable beneficial owner of an overseas entity, must relate to the time when the person attained, or ceased to hold, that status.
  12. New subsection (8A) to section 9, inserted by sub-paragraph (7), sets out that any other information required to be provided by subsection (1)(b) must relate to the state of affairs at the time of the application for removal.
  13. Paragraph 4 substitutes section 12 (duty to take steps to obtain information) of the ECTE Act 2022. New section 12 sets out that before making an application for registration under section 4(1), overseas entities must take reasonable steps to obtain all of the information it is required to submit to the Registrar under that section, if it is able to obtain it (subsection 1). Subsections (2) and (3) provide for the same duty on overseas entities before they comply with section 7 of the ECTE Act 2022, and before they make an application for removal under section 9.
  14. Subsection (4) sets out the steps that an overseas entity is required to take by virtue of subsections (1), (2) or (3). These steps must include the provision of a notice to any person that the overseas entity knows, or has reason to believe, is a registrable beneficial owner in relation to the entity. The notice requires the person receiving it to (a) state whether or not they are a registrable beneficial owner in relation to the entity, and (b) if they are, to provide or confirm the information mentioned in subsections (1), (2) or (3) so far as they relate to the person, or a trust of which they are, or were, a trustee.
  15. Subsection (5) provides that the steps that the overseas entity must take by virtue of subsections (2) or (3) also include giving notice to any person that it knows, or has reasonable cause to believe, has ceased to be a registrable beneficial owner in relation to the entity during the update period (within the meaning of section 7) or relevant period (within the meaning of section 9). The person must (a) state whether or not they are a person that has ceased to be a registrable beneficial owner of the entity, and (b) if they are, provide or confirm the information mentioned in subsection (2) or (3) as far as relating to that person, or a trust of which they are or were a trustee.
  16. Subsection (6) sets out that any notice given under subsections (4) or (5) must require the person to whom it is given to comply with it within a period of one month beginning with the day on which the notice is given.
  17. Subsection (7) provides that a person given a notice under subsection (4) or (5) is not required to disclose any information in respect of which a successful claim to legal professional privilege (or, in Scotland, confidentiality of communications) could be made.
  18. Paragraph 5 inserts new subsection (6) into section 13 of the ECTE Act 2022. New subsection (6) sets out that a reference to a person who is a registrable beneficial owner in relation to the overseas entity includes, in relation to obtaining information required by section 7(1)(b), 9(1)(c) or 42(1)(c)(i), a reference to a person who has ceased to be a registrable beneficial owner.
  19. Paragraph 6 inserts new section 17A into the ECTE Act 2022: Exceptions to duty to provide change of beneficiary information. This section provides a power for the Secretary of State to make regulations providing for exceptions to the requirement to deliver information by virtue of section 7(3)(c), 4(c), 9(3)(c) or 4(c)(subsection (1)). Before making regulations, the Secretary of State must consult the Scottish Ministers if the regulations contain provision that would be within the legislative competence of the Scottish Parliament if contained in an Act of that Parliament (subsection (2)). Subsection (3) provides that the Secretary of State must consult with the Northern Ireland Department of Finance before making regulations under the power in subsection 1, if the regulations contain provision that (a) would be within the legislative competence of the Northern Ireland Assembly if contained with an Act of that Assembly, and (b) would not, if contained in a Bill for an Act of the Northern Ireland Assembly, result in the Bill requiring the consent of the Secretary of State under section 8 of the Northern Ireland Act 1998.
  20. Regulations made under the power in subsection (1) are subject to the negative procedure.
  21. Paragraph 7 inserts a new subsection (1A) into section 43 (transitional information) of the ECTE Act 2022. New subsection (1A) provides that in subsection (1) of section 43, the reference to section 12 is to that section as it had effect before the amendments made by Schedule (Duty to deliver information about changes to beneficiaries) to the Economic Crime and Corporate Transparency Act 2023 (duty to deliver information about changes in beneficiaries).
  22. Paragraph 8 amends section 44 (interpretation) of the ECTE Act 2022 by omitting subsection (2).

Schedule 7 – Overseas entities: further information for transitional cases

  1. This schedule inserts a new Schedule 6 into the Economic Crime (Transparency and Enforcement Act) 2002 (ECTE Act 2002) which requires overseas entities to deliver to the Registrar further information about events occurring during the period beginning on 28 February 2022 and ending with 31 January 2023.
  2. Paragraph 2 amends section 16 of the ECTE Act 2022 (verification of registrable beneficial owners and managing officers) to provide that information provided to the Registrar under this Schedule must be verified.
  3. Paragraph 3 inserts a new section 43A (duty to deliver further information for transitional cases) into the ECTE Act 2022. The new section sets out that new Schedule 6 imposes further duties on overseas entities to deliver information.
  4. Paragraph 4 inserts Schedule 6 into the ECTE Act 2022, after Schedule 5.
  5. Sub-paragraph (1) of Paragraph 1 of new Schedule 6 sets out the application of Schedule 6. It applies in relation to an overseas entity if (a) the entity is (i) registered as an overseas entity when new Schedule 6 comes into force, or has been registered as an overseas entity at any earlier time, and (ii) was registered as the proprietor of a relevant interest in land in England and Wales or Scotland at any time during the relevant period; or (b) has committed an offence under paragraph 5 of Schedule 3 or paragraph 10 of Schedule 4 (duty to register as overseas entity in certain transitional cases) to the ECTE Act 2022.
  6. Sub-paragraph (2) sets out the meanings of the terms used in sub-paragraph (1). For the purposes of sub-paragraph (1), an overseas entity is registered as the proprietor of a relevant interest I land in England and Wales if they are registered in the register of title kept by HM Land Registry under the Land Registration Act 2002 as the proprietor of a qualifying estate as defined in Schedule 4A of that Act. An overseas entity is registered as the proprietor of a relevant interest in land in Scotland if the entity (a) is entered (on or after 8 December 2014) as proprietor of a plot of land registered in the Land Register of Scotland; in relation to a lease that was recorded in the General Register of Sasines, or registered in the Land Register of Scotland before that date is the tenant under the lease by virtue of an assignation of the lease recorded in the Land Register of Scotland on or after 8 December 2014; or is the tenant under a lease that was registered in the Land Register of Scotland on or after that date.
  7. Sub-paragraph (3) sets out that expressions used in sub-paragraph (2)(b) are to be construed in accordance with section 9(11) and 9(12) of the ECTE Act 2022.
  8. Sub-paragraph (4) defines the meaning of "the relevant period" for the purposes of new Schedule 6. It means the period beginning with 28 February 2022 and ending with 31 January 2023.
  9. Paragraph 2 of new Schedule 6 imposes a new duty to deliver statements and information. Sub-paragraph (1) sets out what must be delivered by the overseas entity to the Registrar. The overseas entity must deliver (a) any statements or information required by paragraph 3 (changes in beneficial ownership of overseas entity, paragraph 4 (information about trusts and changes in beneficiaries under trusts, and paragraph 5 (information about changes in trusts in which beneficial owners are trustees); (b) a statement that the entity has complied with paragraph 8 of new Schedule 6, which is a duty to take steps to obtain information; (c) anything required under section 16 of the ECTE Act 2022 (verification) to be delivered to the Registrar; and (d) the name and contact details of an individual who can be contacted about the statements and information provided.
  10. Sub-paragraph (2) sets out when the information required under new Schedule 6 must be delivered if an overseas entity is registered as an overseas entity when new Schedule 6 comes into force. This is (a) at the same time as it delivers the statements and information required by section 7 (updates) the first time that it is required to deliver such information after the end of the period of three months beginning with the day new Schedule 6 comes into force or (b) if it applies under section 9 for removal before then, at the same time as it delivers the statements and information required by section 9.
  11. Sub-paragraph (3) provides that if an overseas entity is not registered as an overseas entity when new Schedule 6 comes into force, it must deliver the statements and information required under new Schedule 6 within the period of three months beginning when new Schedule 6 comes into force.
  12. Paragraph 3 of new Schedule 6 concerns information about changes in beneficial ownership. Sub-paragraph (1) includes a table detailing the statement and information that must be provided. This consists of either a statement that the entity has no reasonable cause to believe that anyone became or ceased to be a registrable beneficial owner during the relevant period (as defined in Paragraph 1(4) of new Schedule 6), or a statement that the entity has reasonable cause to believe that at least one person became or ceased to be a registrable beneficial owner during the relevant period. Where this is the case, the overseas entity must provide the required information (as set out in Schedule 1 of the ECTE Act 2022) about each person who became or ceased to be a registrable beneficial owner during the relevant period (or so much of that information as the entity has been able to obtain), and the date on which each person became or ceased to be a registrable beneficial owner, if the entity has been able to obtain that information.
  13. Sub-paragraph (2) sets out that where the information provided under sub-paragraph (1) includes information that a registrable beneficial owner by virtue of being a trustee, further information is required to be delivered to the Registrar. The information that must be delivered is (a) the required information about the trust (or so much of that information as the entity has been able to obtain), and a statement as to whether the entity has reasonable cause to believe that there is any information about the trust that it has not been able to obtain.
  14. Sub-paragraph (3) provides that the statements required to be delivered under Paragraph 2 must relate to the time when they are delivered. The information required under Paragraph 2 as a result of a person having become or ceasing to be a registrable beneficial owner must relate to the state of affairs when the person became or ceased to be a registrable beneficial owner (sub-paragraph (4)).
  15. The required information is that detailed in Schedule 1 to the ECTE Act 2022 (sub-paragraph (5)).
  16. Paragraph 4 of new Schedule 6 relates to information about trusts and changes in beneficiaries. Sub-paragraph (1) provides that the overseas entity must deliver to the Registrar either (a) a statement that the entity has no reasonable cause to believe that there is any person who, at the end of the relevant period (as defined in Paragraph 1(4)), was a registrable beneficial owner of the entity by virtue of being a trustee, or (b) a statement that the entity has reasonable cause to believe there is at least one person who was a registrable beneficial owner of the entity by virtue of being a trustee.
  17. A statement delivered under sub-paragraph (1)(b) must be accompanied by (a) the required information about each trust ("a relevant trust") that led to a trustee being a registrable beneficial owner of the entity at the end of the relevant period, (b) in relation to each relevant trust, a statement stating whether the entity has reasonable cause to believe there is required information about the trust that it has not been able to contain, and (c) in relation to each relevant trust, either the statement described in row 1 of the table in sub-paragraph (3) , or the statement and information described in row 2 of the table in sub-paragraph (3).
  18. Sub-paragraph (3) contains the table referred to in sub-paragraph (2)(c). The statement in row 1 is a statement that the entity has no reasonable cause to believe that anyone became or ceased to be a beneficiary under the trust during the relevant period. The statement in row 2 is a statement that the entity has reasonable cause to believe that at least one person became or ceased to be a beneficiary under the trust during the relevant period. Where this statement is provided to the Registrar, it must be accompanied by the information set out in row 2. The required information is (1) the information specified in paragraph 8(1)(d) of schedule 1 about each person who became or ceased to be a beneficiary under the trust during the relevant period (or so much of the information as the entity has been able to obtain), and (2) the date on which each person for whom information is provided became or ceased to be a beneficiary under the trust (if the entity has been able to obtain the information).
  19. Sub-paragraph (4) explains that statements required by paragraph 4 must relate to the time at which they are delivered. Information required by sub-paragraph 2(a) must relate to the state of affairs at the end of the relevant period (sub-paragraph (5)).
  20. Sub-paragraph (6) provides that information required by sub-paragraph 2(c), required because a person has become or ceased to be a beneficiary under a trust, must relate to the time at which the person became or ceased to be a beneficiary.
  21. Sub-paragraph (7) clarifies that the required information referred to in paragraph 4 is set out in Schedule 1 to the ECTE Act 2022.
  22. Paragraph 5 relates to information about changes in trusts of which registrable beneficial owners are (or were) trustees and sets out the information requirements in relation to events in the relevant period (see paragraph 1(4)). Under sub-paragraph (1)(a), the overseas entity must deliver a statement stating that it has no reasonable cause to believe that there is any person who (i) at the end of the relevant period, was a registrable beneficial owner of the entity by virtue of being a trustee of a trust; (ii) at any time during the relevant period was a registrable beneficial owner of the entity by virtue of being a trustee of a different trust; and (iii) at the end of the relevant period was not a registrable beneficial owner of the entity by virtue of being a trustee of the trust mentioned in sub-paragraph (ii), or (b) a statement that the overseas entity has reasonable cause to believe that there is at least one such person.
  23. Sub-paragraph (2) sets out that where a statement is delivered under sub-paragraph (1)(b), the overseas entity must also deliver further information. This information is (a) the required information about each trust which caused a trustee to be a registrable beneficial owner of the entity at any time during the relevant period, or as much of that information as the entity has been able to obtain, and (b) in relation to each such trust, a statement stating whether the entity has reasonable cause to believe there is required information about the trust that it has not been able to obtain.
  24. Statements required by paragraph 5 must relate to the time when they were delivered. Information required by sub-paragraph (2)(a) must relate to the state of affairs (a) at the beginning of the relevant period, if the registrable beneficial owner was a trustee of the trust at that time, and (b) otherwise, at the time at which the registrable beneficial owner became a trustee of the trust. (sub-paragraphs (3) and (4)).
  25. The required information is set out in Schedule 1 (sub-paragraph (5)).
  26. Paragraph 6 of new Schedule 6 provides that a requirement imposed by paragraphs 2 to 5 of new Schedule 6 may be met (in whole or in part) by confirming information already provided.
  27. Paragraph 7 of new Schedule 6 applies section 8 of the ECTE Act 2022 (failure to comply with updating duty) to a failure to comply with a duty imposed by paragraphs 2 to 5 of new Schedule 6 as it applies to a failure to comply with section 7 of the ECTE Act 2022.
  28. Paragraph 8 of new Schedule 6 imposes a duty on the overseas entity to take reasonable steps to obtain the information required to be delivered by Schedule 6 before it complies with paragraphs 2 to 5. The entity must take reasonable steps (a0 to identify anyone who became or ceased to be a registrable beneficial owner during the relevant period, and (b) if it identifies any such person, to obtain (i) the information mentioned in row 2 of column 2 of the table in paragraph 3(1) of Schedule 6, and (ii) in the case of anyone mentioned in paragraph 3(2), the information mentioned there (sub-paragraphs 1 and 2).
  29. Sub-paragraph (3) imposes a further duty on the entity to take reasonable steps (a) to identify any person who, at the end of the relevant period, was a registrable beneficial owner by virtue of being a trustee of a trust, and (b) if it identifies any such person, to obtain (i) the information set out in paragraph 4(2)(a) about the relevant trust, (ii) information as to whether anyone became or ceased to be a beneficiary under the relevant trust during the relevant period (a "relevant beneficiary"), and (iii) the information mentioned in row 2 of column 2 of the table in paragraph 4(3) of new Schedule 6 in relation to any relevant beneficiary.
  30. Under sub-paragraph (4), the entity must also take reasonable steps (a) to identify any person falling within paragraph 5(1)(a)(i) to (iii), and (b) if it identifies any such person, to obtain the information set out in paragraph 5(2)(a).
  31. The steps that the entity must take include giving an information notice under this paragraph to any person that it knows, or has reasonable cause to believe, falls within sub-paragraph (2)(a), (3)(a) or (4)(a). (sub-paragraph (5)). Sub-paragraph (6) provides that an information notice under this paragraph (Paragraph 8) is a notice requiring the recipient to provide the information set out in sub-paragraph (2)(b), (3)(b) or (4)(b).
  32. Sub-paragraph (7) applies sections 15 to 15B of the ECTE ACT 2022 (offences) in relation to information notices as they apply to information notices under section 12 of the Act.
  33. Paragraph 9 of new Schedule 6 includes a power to make regulations exempting certain registrable beneficial owners from the requirements of the Schedule. This power cannot be used after the end of the period of two years beginning with the day on which the Act received Royal Assent (sub-paragraphs (1) and (2).
  34. The Secretary of State must also consult the Scottish Ministers before making regulations under paragraph 9 of Schedule 6 that contain provision that would be within the legislative competence of the Scottish Parliament (sub-paragraph (3).
  35. Sub-paragraph (4) sets out that regulations made under the power in sub-paragraph (1) are subject to the negative resolution procedure.

Schedule 8 – Cryptoassets: confiscation orders

Part 1 – England and Wales

  1. Paragraph 1 provides that Part 1 of Schedule 8 to the Act amends Part 2 of the Proceeds of Crime Act 2002 (POCA) (confiscation: England and Wales).
  2. Paragraph 2 removes sections 47B(2)(b) and 47B(3)(b) from POCA. This removes the requirement in the first and second conditions of section 47B for a person to have been arrested for an offence before property may be seized under the power conferred by section 47C of POCA.
  3. Paragraph 3 amends section 47C of POCA (power to seize property) in order to support the seizure of "cryptoassets" by appropriate officers. "Cryptoasset" is given the meaning provided in new section 84A(1) of POCA. Sub-paragraph (3) inserts subsections (5A) to (5F) into section 47C and sub-paragraph (2) amends subsection (2) of that section.
  4. Subsections (5A) and (5B) of section 47C introduce the concept of a "cryptoasset-related item" as a new class of seizable property. Such items are described in subsection (5B) as property that is, or that contains or gives access to any information that is, likely to assist in the seizure of any cryptoassets under the power in this section. That definition would cover a number of different types of property. For example, it could include pieces of paper that have a cryptoasset recovery seed phrase written on them, an electronic hardware wallet (these tend to be similar in appearance and operation to a USB pen-drive), or a piece of electronic hardware such as a mobile phone, tablet computer, laptop computer or desktop computer that has relevant information on it, or which has an application which gives the user control over a software cryptoasset wallet. Subsection (5A) allows an appropriate officer to seize any free property if he or she has reasonable grounds to suspect that such property is a cryptoasset-related item. Paragraph 3(2) amends section 47C(2) so that the restriction in that subsection preventing officers seizing cash or exempt property only applies to seizures under to subsection (1), and does not apply to the seizure of cryptoasset-related items under subsection (5A).
  5. Subsection (5C) clarifies that the act of seizing a cryptoasset includes transferring it into a "crypto wallet" controlled by an appropriate officer. "Crypto wallet" has the meaning given in new section 84A(2) of POCA.
  6. Subsection (5D) provides officers with the power to require a person to provide information which is stored in electronic form. The information in question must be accessible from the premises. Officers can make such a requirement for the purposes of either determining whether an item is a "cryptoasset-related item" or for enabling or facilitating the seizure of a cryptoasset. The person must provide the required information in a form in which it can be taken away and in which it is visible and legible (or from which it can readily be produced in a visible and legible form). If a person fails to comply with a requirement, then they may have committed an obstruction offence. The relevant offence will depend on which type of officer has made the requirement. Those offences are set out in POCA and other enactments, where relevant.
  7. Subsection (5E) limits the power in subsection (5D). It provides that the power in subsection (5D) does not authorise an officer to require a person to provide information that is subject to legal professional privilege.
  8. Subsection (5F) provides that any information obtained from a cryptoasset-related item, seized using the powers conferred under section 47C(5A), may be used to identify or gain access to a crypto wallet and by doing so enable or facilitate the seizure of cryptoassets (including their transfer to a crypto wallet controlled by an appropriate officer).
  9. Paragraph 4 amends section 47R(3)(b) so that the detention condition in section 47R(2) can also be met where there are reasonable grounds to suspect that the property is a cryptoasset-related item (and so long as any of the conditions in section 47B are met).
  10. Paragraphs 5 and 6 amend the detention of property provisions in sections 47K and 47L of POCA. Paragraph 5 inserts subsections (5) and (6) into section 47K. Paragraph 6 inserts subsections (4) and (5) into section 47L. They provide for the further detention of cryptoasset-related items which are exempt property, pending the making or variation of a restraint order. Here, "exempt property" is that which is necessary either: for the holder of the property’s employment, business, or vocation; or for satisfying the basic domestic needs of them or their family. Further detention in these circumstances must be authorised by a "senior officer", which has the meaning given in section 47G(3).
  11. Paragraph 7 amends section 47M of POCA. It inserts provision for the magistrates’ court to make an order authorising the further detention of cryptoasset-related items. Such orders may be sought by officers in situations where seized property is not subject to a restraint order, and no application has been made for a restraint order authorising its detention. Sub-paragraph (3) inserts new subsections (2A) to (2D).
  12. New subsection (2A) sets out the conditions which a magistrates’ court must (in most circumstances) be satisfied of before making a further detention in respect of cryptoasset-related items.
  13. Subsection (2B) sets out an extra condition where the cryptoasset-related item is "exempt property". In those cases, the magistrates’ court must also be satisfied that the officer applying for the order for further detention is working diligently and expeditiously to determine whether the property in question is a cryptoasset-related item. Or, if it has already been established that it is such an item, the court must be satisfied that the officer is working diligently and expeditiously to seize any related cryptoassets using it.
  14. Subsection (2C) sets the maximum period for which a magistrates’ court can order the further detention of cryptoasset-related items. Cryptoasset-related items which are not exempt property may be further detained for up to a period of six months, whereas cryptoasset related items which are exempt property may only be further detained for a period of up to 14 days. Both periods of detention can be renewed by a further order where the relevant conditions continue to be met.
  15. Paragraph 8 inserts subsections (6) to (9) into section 47R of POCA. It makes provision to deal with property which has been released, but where there is no intention on the part of the owner to collect it. Property which is seized under Part 2 of POCA with a view to realising it will always be seized on the basis of officers perceiving it to have a monetary value. Hence, if investigations or proceedings cease and property is released back to the owner, then they have an incentive to collect it. With the introduction of powers to seize cryptoasset-related items, property may be seized which might have no value, or may only have a nominal value. It is therefore foreseeable that a defendant may not want to collect such items. Subsection (6) makes provision for officers to retain, dispose of or destroy such property if it is not collected within a year of its release. But under subsection (7) officers may only do so where they have approval from a senior officer and have taken reasonable steps to notify people with an interest in the property of its release.
  16. Paragraphs 9 to 17 make provision about the powers of the court to enforce confiscation orders. Principally, the provisions address powers of the court to order the realisation and payment into court (or destruction of) of cryptoassets. They also make connected provision in relation to enforcement receiverships, and enforcement in respect of money held in accounts maintained with electronic money institutions and payment institutions.
  17. Paragraph 9 amends section 10A of POCA, which confers on the Crown Court a power to make a determination as to the extent of the defendant’s interest in particular property. Paragraph 9 ensures that any determination as to the extent of the defendant’s interest in a particular cryptoasset is binding on a court which later authorises the destruction of the cryptoasset, using the powers in section 67AA which are inserted by paragraph 13.
  18. Paragraph 10 expands the powers which the Crown Court may confer on enforcement receivers in section 51 of POCA. It includes provision for the destruction of cryptoassets which are subject to an enforcement receivership. The court may only confer such a power on an enforcement receiver where it is either not reasonably practicable for the enforcement receiver to arrange for the realisation the cryptoassets in question, or where there are reasonable grounds to believe that the realisation of the cryptoassets would be contrary to the public interest (having regard in particular to how likely it is that the re-entry of the cryptoassets into circulation would facilitate criminal conduct by any person). The realisation of a particular cryptoasset may be contrary to the public interest in cases where it is (or is part of a class of cryptoassets which are) used predominantly or exclusively for criminal purposes such as money laundering. Subsection (9B) provides that detained cryptoassets may only be destroyed up to the amount outstanding under the confiscation order. Subsection (9C) provides that the market value of any destroyed cryptoassets, as assessed by the court, will be treated as having been paid towards satisfaction of the confiscation order.
  19. Paragraph 11 amends section 67 of POCA, to enable a magistrates’ court to order a "relevant financial institution" to pay a sum over to the court on account of money which is payable by a defendant under a confiscation order. A relevant financial institution means a bank, building society, electronic money institution or a payment institution. Previously the powers were only available in relation to bank and building society accounts.
  20. Paragraph 12 inserts new section 67ZA into POCA. Section 67ZA is inserted to make similar provision in relation to cryptoassets held with "cryptoasset service provider" as is already made in section 67 for money held with banks and building societies (now "relevant financial institutions" as a result of paragraph 11). A cryptoasset service provider is a businesses that administer so-called "crypto wallets" which provide access to cryptoassets for their customers and is defined in new section 67ZB(3). The definition is amendable by regulations made under section 67ZB(5). "Crypto wallet" is defined in new section 84A(2). The court can only make an order under section 67ZA where such a provider has a UK connection. The conditions setting out the relevant connections are set out in new section 67ZB(1) and (2). Section 67ZA will enable a magistrates’ court to order said businesses to realise cryptoassets and pay the resulting sum over to the court. Subsection (5) makes provision for circumstances where a crypto wallet may be held in the name of a person other than the person against whom the confiscation order is made (for example a spouse or company), but where the person against whom the confiscation order is made nonetheless holds an interest in some or all of those cryptoassets. In those circumstances, subsection (5) requires the court to have regard to a section 10A determination of interests before making an order. Subsection (6) contains equivalent provision to existing section 67 to enable the magistrates’ court to fine non-complying businesses up to £5,000, and for the Secretary of State to amend that sum by order in order to take account of changes in the value of money. Subsection (8) absolves a business captured by the provisions from liability for realising a sum different to that specified in an order provided that it took reasonable steps to obtain proceeds equal to the values specified.
  21. Paragraph 13 inserts new section 67AA into POCA. It enables the magistrates’ court, as part of the confiscation order enforcement process, to order that seized cryptoassets may be destroyed. This is to cater for the scenario whereby those assets would ordinarily be realised, but in the circumstances it is either not reasonably practicable to do so (for example where no legitimate cryptoasset service provider offers the option of realising that particular type of cryptoasset on their platforms), or where there are reasonable grounds to believe that the realization of the cryptoassets would be contrary to the public interest (similarly to the situations described in the note on paragraph 10). Subsection (3)(b) provides that seized cryptoassets should only be destroyed up to the amount outstanding under the confiscation order. New subsection (4) affords third parties who have, or may have, an interest in the property the right to make representations before an order is made. Subsection (5) provides that the market value of any destroyed cryptoassets, as assessed by the court, will be treated as having been paid towards satisfaction of the confiscation order.
  22. Paragraph 14 amends section 67C, which provides a right of appeal to the Crown Court against a magistrates’ court’s order authorising the sale of the property, to take account of new sections 67ZA and 67AA. The right of appeal is available to third parties affected by the order but not to the person against whom the confiscation order is made. There is also a right of appeal for an appropriate officer to appeal against a magistrates’ court’s decision not to authorise the sale of the property. In addition, the officer may appeal against a decision by the magistrates’ court not to award costs or against the amount of costs awarded under new section 67B. Sub-paragraph (4) also ensures that a person against whom the confiscation order is made, is not afforded the right to appeal a section 67A order in relation property held by them.
  23. Paragraph 15 amends section 67D – which specifies how sums from the sale of the property authorised under section 67A are to be disposed of by the appropriate officer – so that it similarly applies in relation to the proceeds of cryptoassets realised under new section 67AA. Accordingly, any sums from the sale of cryptoassets must first meet the expenses of an insolvency practitioner that are payable under section 432 of POCA. They must then be used to meet any payments directed by the court and the remainder must be remitted to the designated officer of the magistrates’ court responsible for enforcing the confiscation order. Where the confiscation order has been fully paid and the officer has any sums remaining, section 67D(3) requires the appropriate officer to distribute that money as directed by the court.
  24. Paragraph 17 amends section 69 of POCA. Section 69 sets out a number of general steers to the court and receivers in the exercise of various powers under Part 2. Specifically, subsection (2)(a) provides that the court must exercise its powers with a view to preserving the value of assets with a view to their ultimate realisation to satisfy any confiscation order made against the defendant. New subsection (2A) disapplies the steer in subsection (2)(a) in relation to the new powers for the courts to authorise the destruction of cryptoassets, in appropriate cases.
  25. Paragraph 18 inserts new section 84A into POCA which defines terms introduced by the preceding paragraphs.

Part 2 – Scotland

  1. Paragraph 19 provides that Part 2 of Schedule 8 to the Act amends Part 3 of the Proceeds of Crime Act 2002 (POCA)(confiscation: Scotland).
  2. Paragraph 20 removes sections 127B(2)(b) and 127B(3)(b) from POCA. This removes the requirement in the first and second conditions of section 127B for a person to have been arrested for an offence before property may be seized under the power conferred by section 127C of POCA.
  3. Paragraph 21 amends section 127C of POCA (power to seize property) in order to support the seizure of "cryptoassets" by appropriate officers. "Cryptoasset" is given the meaning provided in new section 150A(1) of POCA. Sub-paragraph (3) inserts subsections (5A) to (5E) into section 127C and sub-paragraph (2) amends subsection (2) of that section.
  4. Subsections (5A) and (5B) of section 127C introduce the concept of a "cryptoasset-related item" as a new class of seizeable property. Such items are described in subsection (5B) as property that is or that contains or gives access to any information that is, likely to assist in the seizure of any cryptoassets under the power in this section. That definition would cover a number of different types of property. For example it could include pieces of paper that have a cryptoasset recovery seed phrase written on them, an electronic hardware wallet (these tend to be similar in appearance and operation to a USB pen-drive), or a piece of electronic hardware such as a mobile phone, tablet computer, laptop computer or desktop computer that has relevant information on it, or which has an application which gives the user control over a software cryptoasset wallet. Subsection (5A) allows an appropriate officer to seize any free property if he or she has reasonable grounds to suspect that such property is a cryptoasset-related item. Paragraph 21(2) amends section 127C(2) so that the restriction in that subsection preventing officers seizing cash or exempt property only applies to seizures under subsection (1), and does not apply to the seizure of cryptoasset-related items under subsection (5A).
  5. Subsection (5C) clarifies that the act of seizing a cryptoasset includes transferring it into a "crypto wallet" controlled by an appropriate officer. "Crypto wallet" has the meaning given in new section 150A(2) of POCA.
  6. Subsection (5D) provides officers with the power to require a person to provide information which is stored in electronic form. The information in question must be accessible from the premises. Officers can make such a requirement for the purposes of either determining whether an item is a "cryptoasset-related item" or for enabling or facilitating the seizure of a cryptoasset. The person must provide the required information in a form in which it can be taken away and in which it is visible and legible (or from which it can readily be produced in a visible and legible form). If a person fails to comply with a requirement, then they may have committed an obstruction offence. The relevant offence will depend on which type of officer has made the requirement. Those offences are set out in POCA and other enactments, where relevant.
  7. Subsection (5E) limits the power in subsection (5D). It provides that the power in subsection (5D) does not authorise an officer to require a person to provide information that is subject to legal professional privilege.
  8. Subsection (5F) provides that any information obtained from a cryptoasset-related item, seized using the powers conferred under section 127C(5A), may be used to identify or gain access to a crypto wallet and by doing so enable or facilitate the seizure of any cryptoassets, to a crypto wallet controlled by an appropriate officer (including their transfer to a crypto wallet controlled by an appropriate officer).
  9. Paragraph 22 amends section 127Q(3)(b) so that the detention condition in section 127Q(2) can also be met where there are reasonable grounds to suspect that the property is a cryptoasset-related item (and so long as any of the conditions in section 127B are met).
  10. Paragraphs 23 and 24 amend the detention of property provisions in sections 127K and 127L of POCA. Paragraph 23 inserts subsections (5) and (6) into section 1277K. Paragraph 6 inserts subsections (4) and (5) into section 127L. They provide for the further detention of cryptoasset-related items which are exempt property, pending the making or variation of a restraint order. Here, "exempt property" is that which is necessary either: for the holder of the property’s employment, business, or vocation; or for satisfying the basic domestic needs of them or their family. Further detention in these circumstances must be authorised by a "senior officer", which has the meaning given in section 127G(3).
  11. Paragraph 25 amends section 127M of POCA. It inserts provision for the sheriff to make an order authorising the further detention of cryptoasset-related items. Such orders may be sought by officers in situations where seized property is not subject to a restraint order, and no application has been made for a restraint order authorising its detention. Sub-paragraph (3) inserts new subsections (2A) to (2D).
  12. New subsection (2A) sets out the conditions which a sheriff must (in most circumstances) be satisfied of before making a further detention in respect of cryptoasset-related items.
  13. Subsection (2B) sets out an extra condition where the cryptoasset-related item is "exempt property". In those cases, the sheriff must also be satisfied that the officer applying for the order for further detention is working diligently and expeditiously to determine whether the property in question is a cryptoasset-related item. Or, if it has already been established that it is such an item, the court must be satisfied that the officer is working diligently and expeditiously to seize any related cryptoassets using it.
  14. Subsection (2C) sets the maximum period for which a sheriff can order the further detention of cryptoasset-related items. Cryptoasset-related items which are not exempt property may be further detained for up to a period of six months, whereas cryptoasset related items which are exempt property may only be further detained for a period of up to 14 days. Both periods of detention can be renewed by a further order where the relevant conditions continue to be met.
  15. Paragraph 26 inserts subsections (6) to (9) into section 127Q of POCA. It makes provision to deal with cryptoasset-related items which have been released, but where there is no intention on the part of the owner to collect them. Currently, property which is seized under Part 3 of POCA with a view to realising it will always be seized on the basis of officers perceiving it to have a monetary value. Hence, if investigations or proceedings cease and property is released back to the owner, then they have an incentive to collect it. With the introduction of powers to seize cryptoasset-related items, property may be seized which might have no value, or may only have a nominal value. It is therefore foreseeable that an accused may not want to collect such items. Subsection (6) makes provision for officers to retain, dispose of or destroy such property if it is not collected within a year of its release. But under subsection (7) officers may only do so where they have approval from a senior officer and have taken reasonable steps to notify people with an interest in the property of its release.
  16. Paragraphs 27 to 35 make provision about the powers of the court to enforce confiscation orders. Principally, the provisions address powers of the court to order the realisation and payment into court (or destruction) of cryptoassets. They also make connected provision in relation to enforcement administrators, and enforcement in respect of money held in accounts maintained with electronic money institutions and payment institutions.
  17. Paragraph 27 expands the powers which the court may confer on enforcement administrators in section 128 of POCA. It includes provision for the destruction of cryptoassets by enforcement administrators. The court may only confer such a power on an enforcement administrator where it is either not reasonably practicable for the enforcement administrator to arrange for the realisation of the cryptoassets in question, or where there are reasonable grounds to believe that the realisation of the cryptoassets would be contrary to the public interest (having regard in particular to how likely it is that the re-entry of the cryptoassets into circulation would facilitate criminal conduct by any person). The realisation of a particular cryptoasset may be contrary to the public interest in cases where it is (or is part of a class of cryptoassets which are) used predominantly or exclusively for criminal purposes such as money laundering. Subsection (13B) provides that detained cryptoassets may only be destroyed up to the amount outstanding under the confiscation order. Subsection (13C) provides that the market value of any destroyed cryptoassets, as assessed by the court, will be treated as having been paid towards satisfaction of the confiscation order.
  18. Paragraph 28 amends section 131ZA of POCA, to enable a relevant court to order a "relevant financial institution" to pay a sum over to the court on account of money which is payable by an accused under a confiscation order. A relevant financial institution means a bank, building society, electronic money institution or a payment institution. Previously the powers were only available in relation to bank and building society accounts.
  19. Paragraph 29 inserts new section 131ZB into POCA. Section 131ZB is inserted to make similar provision in relation to cryptoassets held with "cryptoasset service provides" as is already made in section 131ZA for money held with banks and building societies (now "relevant financial institutions" as a result of paragraph 28). A cryptoasset service provider is a business that administer so-called "crypto wallets" which provide access to cryptoassets for their customers and is defined in new section 131ZC(3). The definitions is amendable by regulations made under sections 131ZC(5). "Crypto wallet" is defined in new section 150A(2). The court can only make an order under section 131ZB where such a provider has a UK connection. The conditions setting out the relevant connections are set out in new section 131ZC(1) and (2). Section 131ZB will enable a sheriff to order said businesses to realise cryptoassets and pay the resulting sum over to the court. Subsection (5) makes provision for circumstances where a crypto wallet may be held in the name of a person other than the person against whom the confiscation order is made (for example a spouse or company), but where the person against whom the confiscation order is made nonetheless holds an interest in some or all of those cryptoassets. Subsection (6) absolves a business captured by the provisions from liability for realising a sum different to that specified in an order provided that it took reasonable steps to obtain proceeds equal to the values specified.
  20. Paragraph 30 inserts new section 131AA into POCA. It enables the sheriff, as part of the confiscation order enforcement process, to order that seized cryptoassets may be destroyed. This is to cater for the scenario whereby those assets would ordinarily be realised, but in the circumstances it is either not reasonably practicable to do so (for example where no legitimate cryptoasset service provider offers the option of realising that particular type of cryptoasset on their platforms), or where there are reasonable grounds to believe that the realisation of the cryptoassets would be contrary to the public interest (similarly to the situations described in the note on paragraph 27). Subsection (4)(b) provides that seized cryptoassets should only be destroyed up to the amount outstanding under the confiscation order. New subsection (5) affords third parties who have, or may have, an interest in the property the right to make representations before an order is made. Subsection (6) provides that the market value of any destroyed cryptoassets, as assessed by the court, will be treated as having been paid towards satisfaction of the confiscation order.
  21. Paragraph 31 amends section 131C, which provides a right of appeal to the Court of Session against a sheriff’s order authorising the sale of the property, to take account of new sections 131ZB and 131ZB. The right of appeal is available to third parties affected by the order but not to the person against whom the confiscation order is made. There is also a right of appeal for an appropriate officer to appeal against a sheriff’s decision not to authorise the sale of the property. In addition, the officer may appeal against a decision by the sheriff not to award costs or against the amount of costs awarded under new section 131ZB.
  22. Paragraph 32 amends section 131D – which specifies how sums from the sale of the property authorised under section 131A are to be disposed of by the appropriate officer – so that it similarly applies in relation to the proceeds of cryptoassets realised under new section 131ZB that exceed the amount payable under the confiscation order. Such sums are first paid over to an appropriate officer identified in the order. The officer must first distribute such sums to meet the expenses of an insolvency practitioner that are payable under section 432 of POCA. They must then be used to meet any payments directed by the court and the remainder will be distributed to those with an interest in the money, as directed by the court.
  23. Paragraph 35 amends section 132 of POCA. Section 132 sets out a number of general steers to the court and administrators in the exercise of various powers under Part 3. Specifically, subsection (2)(a) provides that the court must exercise its powers with a view to preserving the value of assets with a view to their ultimate realisation to satisfy any confiscation order made against the accused. New subsection (2A) disapplies the steer in subsection (2)(a) in relation to the new powers for the courts to authorise the destruction of cryptoassets, in appropriate cases.
  24. Paragraph 36 inserts new section 150A into POCA which defines terms introduced by the preceding paragraphs.

Part 3 – Northern Ireland

  1. Paragraph 37 provides that Part 3 of Schedule 8 to the Act amends Part 4 of the Proceeds of Crime Act 2002 (POCA) (confiscation: Northern Ireland).
  2. Paragraph 38 removes sections 195B(2)(b) and 195B(3)(b) from POCA. This removes the requirement in the first and second conditions of section 195B for a person to have been arrested for an offence before property may be seized under the power conferred by section 195C of POCA.
  3. Paragraph 39 amends section 195C of POCA (power to seize property) in order to support the seizure of "cryptoassets" by appropriate officers. "Cryptoasset" is given the meaning provided in new section 232A(1) of POCA. Sub-paragraph (3) inserts subsections (5A) to (5F) into section 195C and sub-paragraph (2) amends subsection (2) of that section.
  4. Subsections (5A) and (5B) of section 195C introduce the concept of a "cryptoasset-related item" as a new class of seizeable property. Such items are described in subsection (5B) as property that is or that contains or gives access to any information that is, likely to assist in the seizure of any cryptoassets under the power in this section. That definition would cover a number of different types of property. For example it could include pieces of paper that have a cryptoasset recovery seed phrase written on them, an electronic hardware wallet (these tend to be similar in appearance and operation to a USB pen-drive), or a piece of electronic hardware such as a mobile phone, tablet computer, laptop computer or desktop computer that has relevant information on it, or which has an application which gives the user control over a software cryptoasset wallet. Subsection (5A) allows an appropriate officer to seize any free property if he or she has reasonable grounds to suspect that such property is a cryptoasset-related item. Paragraph 39(2) amends section 195C(2) so that the restriction in that subsection preventing officers seizing cash or exempt property only applies to seizures under subsection (1), and does not apply to the seizure of cryptoasset-related items under subsection (5A).
  5. Subsection (5C) clarifies that the act of seizing a cryptoasset includes transferring it into a "crypto wallet" controlled by an appropriate officer. "Crypto wallet" has the meaning given in new section 232A(2) of POCA.
  6. Subsection (5D) provides officers with the power to require a person to provide information which is stored in electronic form. The information in question must be accessible from the premises. Officers can make such a requirement for the purposes of either determining whether an item is a "cryptoasset-related item" or for enabling or facilitating the seizure of a cryptoasset. The person must provide the required information in a form in which it can be taken away and in which it is visible and legible (or from which it can readily be produced in a visible and legible form). If a person fails to comply with a requirement, then they may have committed an obstruction offence. The relevant offence will depend on which type of officer has made the requirement. Those offences are set out in POCA and other enactments, where relevant.
  7. Subsection (5E) limits the power in subsection (5D). It provides that the power in subsection (5D) does not authorise an officer to require a person to provide information that is subject to legal professional privilege.
  8. Subsection (5F) provides that any information obtained from a cryptoasset-related item, seized using the powers conferred under section 195C(5A), may be used to identify or gain access to a crypto wallet and by doing so enable or facilitate the seizure any cryptoassets (including their transfer to a crypto wallet controlled by an appropriate officer).
  9. Paragraph 40 amends section 195R(3)(b) so that the detention condition in section 195R(2) can also be met where there are reasonable grounds to suspect that the property is a cryptoasset-related item (and so long as any of the conditions in section 195B are met).
  10. Paragraphs 41 and 42 amend the detention of property provisions in sections 195K and 195L of POCA. Paragraph 41 inserts subsections (5) and (6) into section 195K. Paragraph 42 inserts subsections (4) and (5) into section 195L. They provide for the further detention of cryptoasset-related items which are exempt property, pending the making or variation of a restraint order. Here, "exempt property" is that which is necessary either: for the holder of the property’s employment, business, or vocation; or for satisfying the basic domestic needs of them or their family. Further detention in these circumstances must be authorised by a "senior officer", which has the meaning given in section 195G(3).
  11. Paragraph 43 amends section 195M of POCA. It inserts provision for the magistrates’ court to make an order authorising the further detention of cryptoasset-related items. Such orders may be sought by officers in situations where seized property is not subject to a restraint order, and no application has been made for a restraint order authorising its detention. Sub-paragraph (3) inserts new subsections (2A) to (2D).
  12. New subsection (2A) sets out the conditions which a magistrates’ court must (in most circumstances) be satisfied of before making a further detention in respect of cryptoasset-related items.
  13. Subsection (2B) sets out an extra condition where the cryptoasset-related item is "exempt property". In those cases, the magistrates’ court must also be satisfied that the officer applying for the order for further detention is working diligently and expeditiously to determine whether the property in question is a cryptoasset-related item. Or, if it has already been established that it is such an item, the court must be satisfied that the officer is working diligently and expeditiously to seize any related cryptoassets using it.
  14. Subsection (2C) sets the maximum period for which a magistrates’ court can order the further detention of cryptoasset-related items. Cryptoasset-related items which are not exempt property may be further detained for up to a period of six months, whereas cryptoasset related items which are exempt property may only be further detained for a period of up to 14 days. Both periods of detention can be renewed by a further order where the relevant conditions continue to be met.
  15. Paragraph 44 inserts subsections (6) to (9) into section 195R of POCA. It makes provision to deal with cryptoasset-related items which have been released, but where there is no intention on the part of the owner to collect them. Currently, property which is seized under Part 4 of POCA with a view to realising it will always be seized on the basis of officers perceiving it to have a monetary value. Hence, if investigations or proceedings cease and property is released back to the owner, then they have an incentive to collect it. With the introduction of powers to seize cryptoasset-related items, property may be seized which might have no value, or may only have a nominal value. It is therefore foreseeable that a defendant may not want to collect such items. Subsection (6) makes provision for officers to retain, dispose of or destroy such property if it is not collected within a year of its release. But under subsection (7) officers may only do so where they have approval from a senior officer and have taken reasonable steps to notify people with an interest in the property of its release.
  16. Paragraphs 45 to 53 make provision about the powers of the court to enforce confiscation orders. Principally, the provisions address powers of the court to order the realisation and payment into court (or destruction) of cryptoassets. They also make connected provision in relation to enforcement receiverships, and enforcement in respect of money held in accounts maintained with electronic money institutions and payment institutions.
  17. Paragraph 45 amends section 160A of POCA, which confers on the Crown Court a power to make a determination as to the extent of the defendant’s interest in particular property. Paragraph 45 ensures that any determination as to the extent of the defendant’s interest in a particular cryptoasset is binding on a court which later authorises the destruction of the cryptoasset, using the powers in section 215AA which are inserted by paragraph 49.
  18. Paragraph 46 expands the powers which the Crown Court may confer on enforcement receivers in section 199 of POCA. It includes provision for the destruction of cryptoassets which are subject to an enforcement receivership. The court may only confer such a power on an enforcement receiver where it is either not reasonably practicable for the enforcement receiver to arrange for the realisation the cryptoassets in question, or where there are reasonable grounds to believe that the realisation of the cryptoassets would be contrary to the public interest (having regard in particular to how likely it is that the re-entry of the cryptoassets into circulation would facilitate criminal conduct by any person). The realisation of a particular cryptoasset may be contrary to the public interest in cases where it is (or is part of a class of cryptoassets which are) used predominantly or exclusively for criminal purposes such as money laundering. Subsection (9B) provides that detained cryptoassets may only be destroyed up to the amount outstanding under the confiscation order. Subsection (9C) provides that the market value of any destroyed cryptoassets, as assessed by the court, will be treated as having been paid towards satisfaction of the confiscation order.
  19. Paragraph 47 amends section 215 of POCA, to enable a magistrates’ court to order a "relevant financial institution" to pay a sum over to the court on account of money which is payable by a defendant under a confiscation order. A relevant financial institution means a bank, building society, electronic money institution or a payment institution. Previously the powers were only available in relation to bank and building society accounts.
  20. Paragraph 48 inserts new section 215ZA into POCA. Section 215ZA is inserted to make similar provision in relation to cryptoassets held with "cryptoasset service provides" as is already made in section 215 for money held with banks and building societies (now "relevant financial institutions" as a result of paragraph 47). A cryptoasset service provider is a business that administer so-called "crypto wallets" which provide access to cryptoassets for their customers and is defined in new section 215ZB(3). The definition is amendable by regulations made under section 215ZB(5). "Crypto wallet" is defined in new section 232A(2). The court can only make an order under section 215ZA where such a provider has a UK connection. The conditions setting out the relevant connections are set out in new section 215ZB(1) and (2). Section 215ZA will enable a magistrates’ court to order said businesses to realise cryptoassets and pay the resulting sum over to the court. Subsection (5) makes provision for circumstances where a crypto wallet may be held in the name of a person other than the person against whom the confiscation order is made (for example a spouse or company), but where the person against whom the confiscation order is made nonetheless holds an interest in some or all of those cryptoassets. In those circumstances, subsection (5) requires the court to have regard to a section 160A determination of interests before making an order. Subsection (6) contains equivalent provision to existing section 215 to enable the magistrates’ court to fine non-complying businesses up to £5,000, and for the Secretary of State to amend that sum by order in order to take account of changes in the value of money. Subsection (8) absolves a business captured by the provisions from liability for realising a sum different to that specified in an order provided that it took reasonable steps to obtain proceeds equal to the values specified.
  21. Paragraph 49 inserts new section 215AA into POCA. It enables the magistrates’ court, as part of the confiscation order enforcement process, to order that seized cryptoassets may be destroyed. This is to cater for the scenario whereby those assets would ordinarily be realised, but in the circumstances it is either not reasonably practicable to do so (for example where no legitimate cryptoasset service provider offers the option of realising that particular type of cryptoasset on their platforms), or where there are reasonable grounds to believe that the realisation of the cryptoassets would be contrary to the public interest (similarly to the situations described in the note on paragraph 46). Subsection (3)(b) provides that seized cryptoassets should only be destroyed up to the amount outstanding under the confiscation order. New subsection (4) affords third parties who have, or may have, an interest in the property the right to make representations before an order is made. Subsection (5) provides that the market value of any destroyed cryptoassets, as assessed by the court, will be treated as having been paid towards satisfaction of the confiscation order.
  22. Paragraph 50 amends section 215C, which provides a right of appeal to the Crown Court against a magistrates’ court’s order authorising the sale of the property, to take account of new sections 215ZA and 215AA. The right of appeal is available to third parties affected by the order but not to the person against whom the confiscation order is made. There is also a right of appeal for an appropriate officer to appeal against a magistrates’ court’s decision not to authorise the sale of the property. In addition, the officer may appeal against a decision by the magistrates’ court not to award costs or against the amount of costs awarded under new section 215B.
  23. Paragraph 51 amends section 215D – which specifies how sums from the sale of the property authorised under section 125A are to be disposed of by the appropriate officer – so that it similarly applies in relation to the proceeds of cryptoassets realised under new section 215ZA that exceed the amount payable under the confiscation order. Such sums are first paid over to an appropriate officer identified in the order. The officer must distribute such sums first to meet the expenses of an insolvency practitioner that are payable under section 432 of POCA. They must then be used to meet any payments directed by the court and the remainder will be distributed to those with an interest in the money, as directed by the court.
  24. Paragraph 53 amends section 217 of POCA. Section 217 sets out a number of general steers to the court and receivers in the exercise of various powers under Part 2. Specifically, subsection (2)(a) provides that the court must exercise its powers with a view to preserving the value of assets with a view to their ultimate realisation to satisfy any confiscation order made against the defendant. New subsection (2A) disapplies the steer in subsection (2)(a) in relation to the new powers for the courts to authorise the destruction of cryptoassets, in appropriate cases.
  25. Paragraph 54 inserts new section 232A into POCA which defines terms introduced by the preceding paragraphs.

Part 4 – Regulations

  1. Paragraph 55 provides that Part 4 of Schedule 8 to the Act amends section 459 of the Proceeds of Crime Act 2002 (POCA). It makes for provision for the new regulation making powers inserted by Parts 1, 2 and 3 of this Schedule to be subject to the affirmative parliamentary procedure.

Schedule 9 – Cryptoassets: civil recovery

Part 1 – Amendments of Part 5 of the Proceeds of Crime Act 2002

  1. This schedule inserts, into Part 5 of POCA, new Chapter 3C (recovery of cryptoassets: searches, seizure and detention), which makes provision for the seizure of cryptoassets (and cryptoasset-related items) and the recovery of cryptoassets where they are recoverable property or are intended for use in unlawful conduct ("unlawful conduct") is defined in section 241 of POCA. The provisions build on existing powers in Chapters 3, 3A and 3B of POCA, to seize and recover cash, listed assets and funds in accounts that are the proceeds of unlawful conduct or intended for use in such conduct.
  2. "Cryptoassets" are defined in new section 303Z20, as are "crypto wallets"-devices used for storing cryptoassets (and which sometimes function a little like a bank account). This section also provides that the Secretary of State, following consultation with Scottish Minister and the Department of Justice Northern Ireland, may by regulations amend the definition of "cryptoasset" or "crypto wallet".
  3. Section 303Z21 provides that powers to search for a "cryptoasset-related item" are only exercisable on the proviso that an enforcement officer has lawful authority to be on the premises and has reasonable grounds to suspect that there is an item of property there that is, or that contains or gives access to information that is, likely to assist in the seizure of cryptoassets under Part 5 of POCA. Subsection (3) provides that constables, HMRC officers, SFO officers and AFIs are enforcement officers for the purpose of these provisions. Subsections (7) and (8) include the power to search vehicles and persons. Subsection (11) provides that SFO officers and AFIs cannot use these provisions to search for cryptoasset related items in Scotland.
  4. Section 303Z22 sets out further detail as to the conditions under which the powers of search may be used.
  5. Section 303Z23 provides that the search powers may only be used where prior judicial authority has been obtained or, if that is not practicable, with the approval of a senior officer. "Senior officer" is defined in subsection (4) for all of the agencies permitted to use these powers. Section 303Z23(6) provides that, where the search powers are not approved by a judicial authority prior to the search and either no cryptoasset-related items are seized, or any seized items are not then detained under a court order for more than 48 hours, the officer exercising the power must prepare a written report and submit it to an independent person. This means that a report is needed whenever search powers are exercised without any judicial oversight before or after the search. The independent person is appointed by the Secretary of State, in relation to England and Wales, by the Scottish Ministers in relation to Scotland, or by the Department of Justice in relation to Northern Ireland. Subsection (7) provides that a written report to the appointed person is not necessary if cash or listed assets were seized as a result of the search and the cash or listed assets are detained for more than 48 hours, under an order of the relevant court.
  6. Section 303Z24 provides that the appointed person must provide a report after the end of each financial year, to be laid before Parliament, the Scottish Parliament, and the Northern Ireland Assembly as appropriate. This report must give the appointed person’s opinion as to the circumstances in which the search powers were exercised in cases where the relevant officer was required to make a report under section 303Z23(6). The appointed person must submit their own report as soon as possible at the end of each financial year, giving their opinion as to the way in which search powers under these provisions are being exercised, and making recommendations where appropriate.
  7. Section 303Z25 provides that the exercise of powers of search are subject to guidance issued in Codes of Practice. The requirements for making a Code of Practice are the same as those set out in sections 303G, 303H and 303I of POCA, namely:
    1. A Code of Practice must be made by the Secretary of State in connection with the exercise of the search powers in section 303Z21 and the Secretary of State must also consult the Attorney General about the code draft in its application in relation to the use of the powers by the SFO and the Director.
    2. A Code of Practice must be made by the Scottish Ministers in connection with the exercise of the search powers in section 303Z21 in Scotland.
    3. A Code of Practice must be made by the Department of Justice in connection with the exercise of the search powers in section 303Z21 in Northern Ireland.
  8. Section 303Z26 provides that enforcement officers may seize any item found, if they have reasonable grounds for suspecting that it is a cryptoasset related item: namely, an item that is, or that contains or gives access to information that is, likely to assist in the seizure of cryptoassets under Part 5 of POCA. Subsection (2) provides officers with the power to require a person to provide information which is stored in electronic form. The information in question must be accessible from the premises. Officers can make such a requirement for the purposes of either determining whether an item is a "cryptoasset-related item" or for enabling or facilitating the seizure of a cryptoasset. The person must provide the required information in a form in which it can be taken away and in which it is visible and legible (or from which it can readily be produced in a visible and legible form). If a person fails to comply with a requirement, then they may have committed an obstruction offence. The relevant offence will depend on which type of officer has made the requirement. Those offences are set out in POCA and other enactments, where relevant.
  9. Subsection (3) limits the power in subsection (2). It provides that the power in subsection (2) does not authorise an officer to require a person to provide information that is subject to legal professional privilege (as defined in subsection (4)).
  10. Subsection (5) provides that any information obtained from a cryptoasset-related item may be used to identify or gain access to a crypto wallet and by doing so enable or facilitate the seizure of cryptoassets (including their transfer to a crypto wallet controlled by an enforcement officer).
  11. Subsection (6) provides that SFO officers and AFIs cannot use these provisions to seize items found in Scotland.
  12. Section 303Z27 provides that any cryptoasset-related item seized by a enforcement officer may only be detained for an initial period of 48 hours. Subsection (1) authorises the detention of property only for so long as an enforcement officer continues to have reasonable grounds for suspicion.
  13. Section 303Z28 provides that the detention of any cryptoasset-related item may be extended by a judicial authority for up to six months at a time. Subsection (2) authorises the detention of a cryptoasset-related item up to a maximum of two years (from the date of the first order), except that under subsection (4) detention may be extended up to a maximum of three years if the court is satisfied that a request has been made for evidence to be obtained from overseas (often referred to as "mutual legal assistance"), in connection with the cryptoasset-related item, and that request is outstanding.
  14. Section 303Z29 provides that an enforcement officer may seize "cryptoassets" (defined in section 303Z20) where there are reasonable grounds for suspecting that those assets are proceeds of unlawful conduct or intended for use in such conduct. Subsection (2) clarifies that the act of seizing a cryptoasset includes transferring it into a "crypto wallet" controlled by an enforcement officer. "Crypto wallet" has the meaning given in new section 303Z20 of POCA. Subsection (3) provides that SFO officers and AFIs cannot use these provisions to seize cryptoassets using information obtained from an item found in Scotland.
  15. Section 303Z30 provides that, where an order is made under section 303Z28 for the detention of any cryptoasset-related item, a judicial authority may, at the same time, authorise the detention of any cryptoassets seized as a result of information obtained from the cryptoasset-related item. This means that the detention of the cryptoassets can be authorized in advance of their seizure. Section 303Z31 will not then apply to those cryptoassets.
  16. Section 303Z31(1) provides that any cryptoasset seized by a relevant officer may only be detained for an initial period of 48 hours, except where detention has been authorized in advance under section 303Z30. Subsection (1) authorises the detention of property only for so long as an enforcement officer continues to have reasonable grounds for suspicion.
  17. Section 303Z32 provides that the detention of any cryptoasset may be extended by a judicial authority for up to six months at a time. Subsection (2) authorises the detention of a cryptoasset up to a maximum of two years (from date of the first order), except that under subsection (4) detention may be extended up to a maximum of three years if the court is satisfied that a request has been made for evidence to be obtained from overseas (often referred to as "mutual legal assistance"), in connection with the cryptoassets, and that request is outstanding.
  18. Section 303Z33 provides that an enforcement officer must safely store detained cryptoassets and cryptoasset-related items.
  19. Section 303Z34 provides for the release of cryptoassets and cryptoasset related items from the person from whom they were seized where a judicial authority is satisfied, on application by the person from whom the property was seized, that they are not recoverable property or are not intended for use in unlawful conduct. Where a cryptoasset-related item is not claimed within a year from the date of its release and reasonable steps have been taken to notify any interested parties, an enforcement officer may decide to: retain the property; dispose of; or destroy the property, with the approval of a senior officer. Subsection (8) provides that where property is disposed of, any proceeds are to be paid into the Consolidated Fund or the Sottish Consolidated Fund.
Chapter 3D: Recovery of cryptoassets: freezing orders
  1. Sections 303Z35 to 303Z40 insert, into Part 5 of POCA, new Chapter 3D, which makes provision for the freezing and forfeiture of cryptoassets, held by a third party, in crypto wallets, where the assets are recoverable property, or are intended for use in unlawful conduct ("unlawful conduct" is defined in section 241 of POCA and "crypto wallet" is defined in new section 303Z20 of POCA).
  2. Section 303Z35(1) defines "cryptoasset exchange provider"; "custodian wallet provider"; "cryptoasset service provider". Subsection (3) provides that the definition of a "cryptoasset exchange provider" includes firms or sole practitioners who provide exchange services involving cryptoassets, or rights to or interests in cryptoassets, in the course of their business. This section also provides that the Secretary of State, following consultation with Scottish Minister and the Department of Justice Northern Ireland, may by regulations amend the definitions in this section.
  3. Section 303Z36 provides that the powers to seek a "crypto wallet freezing order" are exercisable by an enforcement officer (defined in section 303Z20) if there are reasonable grounds to suspect that the crypto wallet administered by a "UK-connected cryptoasset service provider" contains recoverable property, or property that is intended for use in unlawful conduct. Subsection (3) provides that an enforcement officer may not apply for a crypto wallet freezing order unless authorised to do so by a senior officer (defined in section 303Z20). Subsection (7) restricts SFO officers’ and AFIs’ use of the powers in relation to Scotland. A crypto wallet freezing order can be made without notice, if notice of the application would prejudice the taking of any steps to later forfeit cryptoassets under Part 5 of POCA.
  4. Section 303Z36(6) provides that an application for an order to freeze a crypto wallet may be combined with an application for an account freezing order where a single entity is both a relevant financial institution (within the meaning of 303Z1 of POCA) and maintains for the same person both cryptoassets and money (above the minimum amount specified in 303Z8-currently set at £1000). The definition of a "UK-connected cryptoasset service provider" is found in subsection (8) and (9) and includes entities which:
    1. Have a registered or head office in the United Kingdom and their day-to-day affairs are carried out by that office or another establishment in the United Kingdom.
    2. Have terms and conditions with the persons to whom they provide services which provide for a legal dispute to be litigated in the United Kingdom courts.
    3. Hold data in the United Kingdom relating to the persons to whom they provide services.
  5. Section 303Z37 specifies that a judicial authority may make a crypto wallet freezing order if satisfied that the crypto wallet contains recoverable property, or property that is intended for use in unlawful conduct. A crypto wallet freezing order prohibits each person by or for whom the wallet is operated from making withdrawals or payments or using the wallet in any other way, unless permitted under the exclusions authorised by the court (in accordance with section 303Z39). Any cryptoassets frozen in a wallet remain in the custody of the cryptoasset service provider while an order remains in place. Subsection (3) specifies the circumstances in which a crypto wallet freezing order ceases to have effect.
  6. Subsections (4) to (7) provide the maximum period permitted for a judicial authority to freeze a crypto wallet. Subsection (4) authorises the freezing of the crypto wallet for up to a maximum of two years from date of the freezing order, except that under subsection (5) the freezing order may be extended up to a maximum of three years if the court is satisfied that a request has been made for evidence to be obtained from overseas (often referred to as "mutual legal assistance"), in connection with the cryptoassets, and that request is outstanding.
  7. Section 303Z37(8) provides that a crypto wallet freezing order must make provision for persons affected by the freezing (that will include persons by or for whom the wallet is administered, similar to an account holder at a bank) to be notified of the order.
  8. Section 303Z38 confers the powers on a judicial authority to vary, set aside, or recall a crypto wallet freezing order at any time, including upon application by any person affected by such an order. The power to apply for an order may not be exercised by an enforcement officer unless authorised to do so by a senior officer (defined by 303Z20). Subsection (3) provides that any party likely to be impacted by a decision to vary or set aside a crypto wallet freezing order must have an opportunity to consider the implications of such order and be able to make representations, if so desired.
  9. Section 303Z39 confers a general power on a judicial authority to make exclusions from the restriction on activity on the wallet. Subsection (2) specifies that exclusions may be granted, in particular, for the purpose of meeting reasonable living expenses or to allow a person to carry on a business, trade, or occupation. For example, this would allow a court to make a freezing order that applies to a proportion of the cryptoassets in a wallet – those which are regarded as recoverable property - while allowing the business to continue to use the remainder of the cryptoassets. Subsection (5) also permits exclusions for legal expenses, except in Scotland (as detailed in subsection (7)).
  10. Section 303Z40 provides the powers for a judicial authority to stay proceedings (or, in Scotland, sist), at any stage, once a crypto wallet freezing order is made. The court may also order that the proceedings can continue on any terms it thinks are appropriate.
Chapter 3E: Forfeiture of cryptoassets following detention or freezing order
  1. Section 303Z41 provides that a judicial authority may order the forfeiture of some or all of the cryptoassets detained in pursuance of an order under Chapter 3C, or frozen in a wallet under an order made under Chapter 3D, if satisfied that the cryptoassets are recoverable property or intended for use in unlawful conduct. Subsection (5) provides for the payment of reasonable legal expenses that a person has (or may reasonably incur in), except in Scotland. Subsection (8) provides that a judicial authority may not order the forfeiture of cryptoassets pursuant to subsection (4) if section 303Z45(1) applies. That section deals with joint and associated property. In those circumstances, where no agreement can be reached regarding the interests of associated or joint property holders of the relevant cryptoassets and the case must be transferred to the High Court, or Court of Session, the powers conferred on a magistrates’ court or sheriff cease to apply.
  2. Section 303Z42 sets out further detail about the forfeiture of cryptoassets. Subsection (4) specifies that an order for the forfeiture of cryptoassets held in a wallet administered by a cryptoasset service provider requires the provider to transfer those assets into a crypto wallet nominated by an enforcement officer. Once the transfer is executed the freezing order will cease to apply and the prohibition on making withdrawals or payments, or using the crypto wallet in any other way, will no longer apply. Subsections (7) to (10) provide for consequential amendments, in order to provide for an alternative means by which cryptoassets can be forfeited when held by a cryptoasset service provider. The powers would provide a contingency to overcome future technical barriers around the forfeiture of cryptoassets administered by a third party. Subsections (10) to (12) provide for certain consultation requirements to apply prior to the Secretary of State making regulations under subsection (7) regarding cryptoasset forfeiture orders.
  3. Sections 303Z43 to 303Z46 set out how associated and joint property is to be dealt with when forfeiture is applied for.
  4. Section 303Z43 sets out the circumstances in which the provisions on associated property and joint property in sections 303Z44 and 303Z45 apply. The term "associated property" is defined in subsection (3) and subsection (2) specifies how property is jointly owned in England and Wales and Northern Ireland.
  5. Section 303Z44 provides that a judicial authority may order that a person who holds associated property or who is an excepted joint owner may retain the property but must pay the law enforcement agency a sum equivalent to the value of the recoverable share. This section applies where there is agreement amongst the parties as to the extent of the recoverable portion of the cryptoassets. Subsection (6) also permits exclusions for legal expenses, except in Scotland.
  6. Section 303Z45 describes how a judicial authority can deal with a person who holds associated property or who is an excepted joint owner but where there is no agreement under section 303Z44. If an order for forfeiture of part of the cryptoasset (including the associated property) is made, and the court considers it is "just and equitable" to do so, it may also order that the excepted joint owner’s interest will be extinguished, or that the excepted joint owner’s interest will be severed, and it may order that a payment be made to that individual.
  7. Section 303Z46 provides that, where a judicial authority makes an order for the forfeiture of only some of the cryptoassets or decides not to make a forfeiture order at all, and the law enforcement agency appeals, it may also apply to the judicial authority which made that decision for an extension of the account freezing order pending the appeal. The application continues the wallet freezing order may be made without notice.
  8. Section 303Z47 provides for a right of appeal against a forfeiture decision made under sections 303Z41 to 303Z45. The time-period for the lodging of an appeal is 30 days from the day that the court makes the order. If the appeal is upheld, it may order the release of the whole or part of the funds. If a forfeiture order is successfully appealed, and the cryptoassets are released, any interest which accrued during the time that the assets were held by the enforcement officer must also be returned to the person from whom they were seized, or the person by or for whom the crypto wallet was administered immediately before the freezing order was made.
  9. Section 303Z48 makes provision for the realisation or destruction of cryptoassets. Subsections (2) to (4) provide that the enforcement officer must realise the cryptoassets or make arrangements for their realisation, subject to any appeal rights against the forfeiture being exhausted. Subsection (6) provides that, where it is either not reasonably practicable for the enforcement officer to arrange for the realisation of the cryptoassets in question, or where there are reasonable grounds to believe that the realisation of the cryptoassets would be contrary to the public interest (having regard in particular to how likely it is that the re-entry of the cryptoassets into circulation would facilitate criminal conduct by any person), the cryptoassets may be destroyed. The realisation of a particular cryptoasset may be contrary to the public interest in cases where it is (or is part of a class of cryptoassets which are) used predominantly or exclusively for criminal purposes such as money laundering.
  10. Section 303Z49 provides for the order in which the proceeds should be realised.
  11. Section 303Z50 makes provision for the release of detained cryptoassets to their true owner. Two cases are provided for. Subsection (4) relates to a person who claims that some or all of the cryptoassets rightfully belong to them, and they were deprived of them through unlawful conduct. An example of this would be a person who claims that the cryptoassets were stolen from them. If the court is satisfied, it may order the applicant’s cryptoassets to be released to that individual.
  12. Subsection (6) relates to the case of any other true owner who is not the person from whom the cryptoassets was seized. Here, if the court is satisfied, the cryptoassets may be released – but only if the person from whom they were seized does not object. That proviso is intended to prevent the court from becoming involved in a complicated ownership dispute between the person from whom the cryptoassets were seized and the rightful owner of those assets. Unlike subsection (4) the court will have to be satisfied that the cash is not recoverable property or intended for use in unlawful conduct before it can release to a claimed owner.
  13. Section 303Z51 makes provision for the release of cryptoassets held in a crypto wallet to their true owner. As with section 303Z50, two cases are provided for.
  14. Section 303Z52 provides that where no forfeiture is made, following seizure, or from the date upon a prohibition was imposed on the use of cryptoassets held in a crypto wallet, the person from whom the cryptoassets were seized, or the person by or for whom the crypto wallet was administered immediately before the freezing order was made, may apply to the court for compensation, where the circumstances are exceptional.
  15. Section 303Z53 provides that the Director of Public Prosecutions or the Director for Public Prosecution in Northern Ireland may appear in proceedings on behalf of a constable or an accredited financial investigator, if asked to do so and if it is considered appropriate for them to do so.
Chapter 3F: Conversion of cryptoassets
  1. Section 303Z54 provides for detained cryptoassets to be converted into money, on application to a relevant court. Provision is made for two distinct applicants: an enforcement officer; or the person from whom the assets were seized. In deciding whether to make an order under this section, the court must have regard to whether the cryptoassets (as a whole) are likely to suffer a significant loss in value during the period before they are released or forfeited (including the period during which an appeal against an order for forfeiture may be made). Subsections (5) and (11) provide that any anyone likely to be impacted by a decision to convert cryptoassets into money must have the opportunity to consider the implications of such order and be able to make representations, if so desired, and the order must provide for affected people to be notified. Where the court authorises the conversion of cryptoassets, an enforcement officer is responsible for arranging for the proceeds to be paid into an interest-bearing account for safekeeping, until the conclusion of proceedings. Subsection (10) provides that if cryptoassets are converted into money after a forfeiture application under section 303Z41 has been made, but not yet decided, then the application is treated as having been made under section 303Z60. This means that the forfeiture application process does not have to re-start as a result of the conversion to money. Subsection (12) prohibits appeals against an order made for the conversion of cryptoassets.
  2. Section 303Z55 makes similar provision for the conversion of cryptoassets subject to a crypto wallet freezing order into money, on application to the relevant court. Provision is made for two distinct applicants: an enforcement officer; or the person by or for whom the crypto wallet is administered. Subsections (5) to (8) outline the process for conversion, if authorized by the court. The obligation to convert the assets, or arrange for their conversion, rests with the cryptoasset service provider that administers the wallet in question. Upon conversion, the cryptoasset service provider must then transfer the proceeds into an interest-bearing account chosen by the enforcement officer. The money will remain in the interest-bearing account until the conclusion of proceedings. Subsection (9) permits a cryptoasset service provider to deduct any costs it incurs in compliance with subsections (5) to (8).
  3. Subsections (1) and (2) of section 303Z56 makes provision for how forfeited cryptoassets are to be applied, if conversion takes place after forfeiture but before they are realised or destroyed. In those cases, the converted forfeited cryptoassets are to be applied in accordance with subsections (1) and (2) of section 303Z62. Subsections (3) and (4) ensure that the right of appeal in relation to a forfeiture order over cryptoassets is continued after a conversion and that a party may appeal instead under section 303Z61.
  4. Section 303Z57 provides the maximum period permitted for a judicial authority to detain the proceeds of converted cryptoassets. Subsection (4) authorises the freezing of the crypto wallet for up to a maximum of two years from date the cryptoassets were originally detained under Chapter 3C, except that under subsection (5) the freezing order may be extended up to a maximum of three years if the court is satisfied that a request has been made for evidence to be obtained from overseas (often referred to as "mutual legal assistance"), in connection with the cryptoassets, and that request is outstanding.
  5. Section 303Z58 makes provision equivalent to section 303Z57 for the detention of the proceeds of converted cryptoassets converted under section 303Z55.
  6. Section 303Z59 makes provision for the release of converted cryptoassets where a relevant court is satisfied that the test for detention can no longer be met.
  7. Sections 303Z60 to 303Z62 make provision for the forfeiture of converted cryptoassets.
  8. Section 303Z60 provides that a judicial authority may order the forfeiture of some or all of the proceeds of converted cryptoassets, if satisfied that the funds are recoverable property or intended for use in unlawful conduct.
  9. Section 303Z61 provides for a right of appeal against a forfeiture decision made under section 303Z60. The time-period for the lodging of an appeal is 30 days from the day that the court makes the order.
  10. Section 303Z62 provides for the order in which the proceeds should be realised.
  11. Section 303Z63 makes provision for the release of converted cryptoassets to their true owner.
  12. Section 303Z64 makes provision for a relevant court to award compensation in respect of assets detained under Chapter 3F. Where no forfeiture is made, the person from whom the cryptoassets were seized, or the person by or for whom the crypto wallet was administered immediately before the freezing order was made, may apply to the court for compensation, where the circumstances are exceptional.
  13. Section 303Z65 provides that the Director of Public Prosecutions or the Director for Public Prosecution in Northern Ireland may appear in proceedings on behalf of a constable or an accredited financial investigator, if asked to do so and if it is considered appropriate for them to do so.
  14. Section 303Z66 provides interpretation of the terms used in this Schedule.

Part 2 – Consequential and other amendments of the Proceeds of Crime Act 2002

  1. Paragraph 6 of Schedule 9 to the Act amends Part 5 of POCA to make various consequential amendments to reflect the insertion of new Chapter 3C to 3F into POCA.
  2. Sub-paragraph (5) of Paragraph62 inserts new section 303Z17A into Part 5 of POCA, to make provision for the release of money frozen under Chapter 3B to its true owner. Two cases are provided for. New subsection (4) relates to a person who claims that some or all of the funds rightfully belong to them, and they were deprived of them through unlawful conduct. An example of this would be a person who claims that the funds were stolen from them. If the court is satisfied, it may order the release of the funds to that individual.
  3. New subsection (6) relates to the case of any other true owner who is not the person from whom the money was seized. Here, if the court is satisfied, the funds may be released – but only if the person from whom they were seized does not object. That proviso is intended to prevent the court from becoming involved in a complicated ownership dispute between the person from whom the money was seized and the rightful owner of those funds. Unlike subsection (4) the court will have to be satisfied that the funds are not recoverable property or intended for use in unlawful conduct before it can release to a claimed owner.
  4. Paragraph 8 amends Part 8 of POCA to make various consequential amendments to reflect the insertion of new Chapter 3C to 3F into POCA. These amendments introduce the concept of a "cryptoassets investigation" – defined in new subsection (3D) of section 341 - as the basis for making production orders; search and seizure warrants; and account monitoring orders available to support the new proceedings.

Schedule 10 – Cryptoassets: Terrorism

Part 1 – Amendments to Schedule 1 to the Anti-Terrorism, Crime and Security Act 2001

  1. Schedule 10 to the Act inserts new Parts 4BA-4BD (covering paragraphs 10Z7A to 10Z7DL) into Schedule 1 to the Anti-Terrorism, Crime and Security Act (ATCSA) 2001. They make provision for the seizure and detention of cryptoassets and cryptoasset-related items, and for the freezing of cryptoassets, where the cryptoassets are suspected of being intended to be used for the purposes of terrorism, consisting of resources of an organisation which is a proscribed organisation, or being, or representing, property obtained through terrorism. They also make provision for the forfeiture of cryptoassets which are shown to meet one of those tests.
  2. The new provisions build on the existing powers in Schedule 1, Parts 1-4B of ATCSA, to seize and detain or freeze, and forfeit, terrorist cash, terrorist assets, and terrorist funds in bank accounts.
Part 4BA: Seizure and Detention of Terrorist Cryptoassets
  1. "Cryptoassets", "crypto wallet" devices (which are used for storing cryptoassets and can function similarly to a bank account), "terrorist cryptoassets", "cryptoasset-related item" and "senior officer", are all defined in new paragraph 10Z7A. This paragraph also provides that the Secretary of State may, by regulations, amend the definitions for these terms.
  2. Paragraphs 10Z7AA to 10Z7AD provides for an authorised officer to seize any cryptoasset-related item found when executing a search warrant, when there are reasonable grounds for suspecting that the cryptoassets, which the items will assist them in seizing, are terrorist cryptoassets. When seizing the cryptoassets, the authorised officer can transfer the cryptoassets into a crypto wallet controlled by the authorised officer.
  3. Paragraph 10Z7AA provides an obligation for a person to provide electronically stored information to an authorised officer to assist in determining whether an item is likely to assist in the seizure of terrorist cryptoassets, or in enabling or facilitating their seizure. This information must be produced in a visible and legible form and is not required to be provided if it is privileged information.
  4. Paragraph 10Z7AE provides that where an order is made in respect of a cryptoasset-related item, the court may also make an order to detain any suspected terrorist cryptoassets that may be found as a result of information obtained from the cryptoasset-related item. This means that the detention of the cryptoassets can be authorised in advance of their seizure.
  5. Paragraphs 10Z7AB, 10Z7AC, 10Z7AF, and 10Z7AG provide the timelines for the initial detention of cryptoassets and/or cryptoasset-related items as 48 hours, which can be extended by a court for a period of up to six months and up to two years, provided there are reasonable grounds for suspecting that the cryptoassets are terrorist cryptoassets, and therefore continued detention is justified. A maximum of three years detention can be approved if the court is satisfied that a related international request for assistance in obtaining evidence is outstanding.
  6. Paragraph 10Z7AH provides that an authorised officer must arrange for any detained cryptoassets and cryptoasset-related items to be safely stored throughout the period they are detained. This includes the storage of cryptoassets in a law enforcement controlled crypto wallet.
  7. Paragraph 10Z7AI provides for the release of cryptoassets and cryptoasset-related items where the court is satisfied, and following an application made by the person from whom they were seized, that the detention of the property is no longer justified.
  8. Paragraph 10Z7AI (6) provides that where a cryptoasset-related item is not claimed within a year from the date of its release, and reasonable steps have been taken to notify any interested parties, an authorised officer may decide to retain, dispose of, or destroy the property, with the approval of a senior officer. Where the property is disposed of, any proceeds are to be paid into the Consolidated Fund or, for Scotland, the Scottish Consolidated Fund.
Part 4BB: Terrorist Cryptoassets: Crypto Wallet Freezing Orders
  1. "Cryptoasset exchange provider", "custodian wallet provider", "cryptoasset service provider", "enforcement officer", "relevant court" and "UK-connected cryptoasset service provider", are all defined in new paragraph 10Z7B. This paragraph also provides that the Secretary of State may, by regulations, amend the definitions for these terms.
  2. Paragraphs 10Z7BA to 10Z7BE provide the powers to seek a "crypto wallet freezing order" which is exercisable by an enforcement officer (with a senior officer’s authorisation – and the senior officer must consult with the Treasury before making the application), if there are reasonable grounds to suspect that some or all of the cryptoassets held in the crypto wallet administered by a "UK-connected cryptoasset service provider" are intended for the purposes of terrorism. A crypto wallet freezing order can be made without notice if the circumstances of the case are such that any notice given of the application would prejudice the later forfeiting of terrorist cryptoassets.
  3. Paragraph 10Z7BA provides that an application for a crypto wallet freezing order can be combined with an application for an account freezing order, in circumstances where a single entity is both a relevant financial institution (within the meaning of 10Q of ATCSA) and maintains both cryptoassets and money for the same person.
  4. Paragraph 10Z7BB provides that a court may make a crypto wallet freezing order if satisfied that all or part of the assets contained in the crypto wallet constitute terrorist cryptoassets. A crypto wallet freezing order prohibits the person by, or for whom the wallet is operated, from making withdrawals or payments, and using the crypto wallet in any other way, unless permitted to do so under court-authorised exclusions. Any cryptoassets frozen in a crypto wallet will remain in the custody of the cryptoasset service provider unless the crypto wallet freezing order ceases to have effect. This paragraph also provides for a court to permit the freezing of a crypto wallet for up to two years from the date of the freezing order. It can authorise the freezing order to be further extended up to a maximum of three years if the court is satisfied that a related international request for assistance in obtaining evidence is outstanding. Any crypto wallet freezing order must provide notice to any persons affected by the freezing order, including prohibitions on withdrawals etc., as well as exceptions to the order. Some reasons for these exceptions might be, for example, for the purpose of meeting reasonable living expenses or to allow a person to carry on any trade, business, profession, or occupation.
  5. Paragraph 10Z7BC provides that a court may vary or set aside a crypto wallet freezing order at any time. In addition, any person affected by the decision to vary or set aside the crypto wallet freezing order, must have an opportunity to consider the implications of such an order and can make representations, if desired.
  6. Paragraph 10Z7BE provides that a court may stay proceedings (or in Scotland, "sist"), at any stage, once a crypto wallet freezing order is made. The court may order that the proceedings can continue on any terms it thinks appropriate.
Part 4BC: Forfeiture of Terrorist Cryptoassets
  1. This Part makes provision about "associated property" which is defined in new paragraph 10Z7CC, the "appropriate court" defined in new paragraph 10Z7CE, and a "deproscription order" defined in new paragraph 10Z7CH. Part 4BC also includes a delegated power which will allow updates to the means by which a cryptoasset service provider will be required to forfeit cryptoassets. This provides that the Secretary of State may, by regulations, amend the provisions to overcome any future technical barriers around the forfeiture of cryptoassets administered by a third party.
  2. Paragraphs 10Z7C to 10Z7CM provide that a court may order the forfeiture of some, or all, of the cryptoassets detained or frozen by a crypto wallet freezing order, if satisfied on the balance of probability that the cryptoassets are terrorist cryptoassets.
  3. Paragraph 10Z7CB provides that an order for the forfeiture of cryptoassets held in a crypto wallet and administered by a cryptoasset service provider requires the provider to transfer those assets into a law enforcement crypto wallet nominated by an authorised officer.
  4. Paragraph 10Z7CD provides that a court may, instead of making a forfeiture order, order that a person who holds associated property or who is an excepted joint owner may retain the property but must pay the law enforcement agency an amount equivalent to the value of the forfeitable property, less the value of the excepted joint owner’s share, and where there is agreement amongst the parties as to the extent of the forfeitable portion of the cryptoassets.
  5. Paragraph 10Z7CE provides that in circumstances where no agreement can be reached regarding the interests in the associated or joint property holders of the cryptoassets, the case must be transferred to an appropriate court (either the High Court or, in Scotland, the Court of Session). This paragraph also provides that if an order for forfeiture of part of the cryptoasset (including the associated property) is made, and the court considers it is "just and equitable" to do so, it may also order that the excepted joint owner’s interest will be extinguished or severed and that a payment be made to that individual.
  6. Paragraph 10Z7CF provides that where a court makes a forfeiture order for some, but not all, of the cryptoassets in a crypto wallet, law enforcement officers may apply for an extension of the crypto wallet freezing order pending the appeal outcome.
  7. Paragraph 10Z7CG provides that any appeal against a forfeiture decision, by law enforcement or a person aggrieved by the order, must be lodged within 30 days except in deproscription cases (see paragraph 10Z7CH). If the forfeiture appeal is upheld, the court may order the release of the whole, or part, of the property. If a forfeiture order is successfully appealed, and the cryptoassets are released, any interest which accrued during the time that the assets were held by the enforcement officer must also be returned to the person from whom they were seized, or the person for whom the crypto wallet was administered for immediately before the freezing order was made.
  8. Paragraph 10Z7CI provides for an authorised officer to destroy cryptoassets, subject to any forfeiture appeal being exhausted and where it is either not reasonably practicable to arrange for the realisation of the cryptoassets, or where there are reasonable grounds to believe that the realisation of the cryptoassets would be contrary to the public interest (e.g., if they would facilitate criminal conduct by any person).
  9. Paragraphs 10Z7CK and 10Z7CL provides that any or all detained cryptoassets or, those cryptoassets held in a crypto wallet and subject to a crypto wallet freezing order, may be released to any victim by application if it appears to the court that they were deprived of the cryptoassets to which the application relates; deprived by criminal conduct of the property which the cryptoassets represent; if the cryptoassets were not obtained by or in return for criminal conduct; or the cryptoassets belong to the applicant.
  10. Paragraph 10Z7CM provides that in respect of cryptoassets either detained or subject to a crypto wallet freezing order, an affected person may apply to the court for compensation in exceptional circumstances.
Part 4BD: Conversion of Cryptoassets
  1. This Part provides for "converted cryptoassets" defined under new paragraphs 10Z7DC and 10Z7DD, and for "relevant financial institutions" to have the same meaning as in Part 4B (paragraph 10Q) of Schedule 1 to ATCSA.
  2. Paragraphs 10Z7D to 10Z7DL provide for detained or frozen cryptoassets to be converted into money (cash or money held in an account maintained by a relevant financial institution), on application to a relevant court. Provision can be made by two distinct applicants: an authorised officer or the person from whom the cryptoassets were seized.
  3. Paragraph 10Z7DA provides that the court must consider whether the cryptoassets (as a whole) are likely to suffer a significant loss in value while they are frozen or detained. Anyone who may be affected by a decision to convert cryptoassets into conventional currency must be able to make representations, if so desired, and the order must provide for affected persons to be notified. Where the court authorises the conversion of cryptoassets, an authorised officer is responsible for arranging for the proceeds to be paid into an interest-bearing account for safekeeping, until the conclusion of the proceedings.
  4. Paragraph 10Z7DB provides that if the cryptoassets are subject to a crypto wallet freezing order, the obligation to convert the cryptoassets, or arrange their conversion, rests with the UK-connected cryptoasset service provider that administers the crypto wallet in question. Upon conversion, the UK-connected cryptoasset service provider must then transfer the proceeds into an interest-bearing account chosen by an authorised officer, where it will remain until the conclusion of proceedings. The UK-connected cryptoasset service provider can deduct any reasonable expenses it incurs in compliance with these provisions.
  5. Paragraph 10Z7DC provides that if cryptoassets are converted into conventional money, the cryptoassets themselves should no longer be treated as being detained under Part 4BA. The converted assets will be treated as detained instead, and any application in relation to the cryptoassets which has not yet been determined or otherwise disposed of, is to be treated as if the application was made in relation to the converted cryptoassets. This means that the forfeiture application process does not have to re-start as a result of the conversion to money.
  6. Paragraph 10Z7DD provides that a request to convert cryptoassets into conventional money can be made at any stage of the forfeiture proceedings, and before the cryptoassets are realised or destroyed. The right of appeal in relation to a cryptoasset forfeiture order would continue after the cryptoassets have been converted. This paragraph also provides for a court to permit the detention of the proceeds of the converted cryptoassets for up to two years from the date the cryptoassets were originally detained under Part 4BA. It can authorise the detention to be further extended up to a maximum of three years if the court is satisfied that a related international request for assistance in obtaining evidence is outstanding.
  7. Paragraph 10Z7DF provides that if a relevant court is no longer satisfied that there are reasonable grounds for suspecting that the converted cryptoassets are terrorist cryptoassets it may order the release of the converted cryptoassets.
  8. Paragraph 10Z7DH provides that any appeal against a forfeiture decision, by law enforcement or a person aggrieved by the order, must be lodged within 30 days except in de-proscription cases (made under paragraph 10Z7DI). An appeal against a forfeiture decision must be made before the end of a 30-day period, starting with the day on which the court makes the order.
  9. Paragraph 10Z7DJ provides that reasonable expenses incurred by an authorised officer should be covered by any converted cryptoassets that have been detained and forfeited, and by any accrued interest on them. Reasonable expenses constitute the safe storage, conversion, or detention of the assets. The remainder should be paid into the Consolidated Fund or, in Scotland, the Scottish Consolidated Fund. Any converted cryptoassets should not be released before the end of the period within which an appeal may be made (30 days) and not before the outcome of the appeal has been determined, should an appeal be made.
  10. Paragraph 10Z7DK provides that any or all converted cryptoassets may be released to any victim by application if it appears to the court that they were deprived of the cryptoassets to which the application relates; deprived by criminal conduct of the property which the cryptoassets represent; if the cryptoassets were not obtained by or in return for criminal conduct; or the cryptoassets belong to the applicant immediately before they were seized or the crypto wallet freezing order was made in relation to the crypto wallet in which the relevant cryptoassets were held.
  11. Paragraph 10Z7DL provides that, in respect of converted cryptoassets detained under this Part, an affected person may apply to the court for compensation in exceptional circumstances.
Part 4B: Victims etc.
  1. Paragraph 4 amends Schedule 1, Part 4B (bank and building society accounts) of the ATCSA with respect to victims.
  2. New paragraph 10Z6A provides that a person who claims that money which is held under an account freezing order belongs to them may apply to the relevant court for the money to be released if it appears to the court that the applicant was deprived of the money, or of property which it represents, by criminal conduct; the money the applicant was deprived of was not, immediately before they were deprived of it, property obtained by or in return for criminal conduct and nor did it then represent such property, and the money belongs to the applicant.

Part 2 – Amendments to the Terrorism Act 2000

  1. Schedule 6 (financial information) of the Terrorism Act 2000 is amended to insert new categories of firm into the definition of "financial institution", from whom certain information may be obtained by law enforcement.
  2. "Cryptoasset exchange provider", "custodian wallet provider" and "cryptoasset service provider" are defined in new paragraph 10Z7B, sub-paragraphs 1(a), 1(b), and 1(c), and have the same meanings as in Schedule 9, section 303Z35(1). Schedule 10 also provides that the Secretary of State may, by regulations, amend the definitions.

Schedule 11 – Economic crime offences

  1. Schedule 11 sets out the offences included in the definition of "economic crime", as defined by section 193 for the purposes of sections 188 to 191 and sections 207 to 210.

Schedule 12 – Criminal Liability of Bodies: Economic Crimes

  1. Schedule 12 to the Act sets out the list of offences in relation to which liability may be attributed to the body in accordance with the new section introduced by section 196.

Schedule 13 – Failure to prevent fraud: fraud offences

  1. Schedule 13 sets out the list of "fraud offences" for the purpose of the new section introduced by section 199.

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