Can cryptocurrency be restrained under the Proceeds of Crime Act 2002 (Cth) and Confiscation Act 1997 (Vic)?

Authors
simon-tsapepas
Managing Principal
Category
Corporate & Commercial
Published
2 June 2023

Cryptocurrency is a form of digital currency (such as Bitcoin) that uses blockchain technology, which in its simplest form is a distributed digital ledger that stores data by linking together blocks of information. Blockchain is decentralised by spreading identical copies of the data in the chain across multiple computers, which computers are referred to as nodes. Every node on the system has a complete copy of the chain of information, meaning there is no central control point. As all records on the blockchain are recorded and decentralised, transactions are traceable and capable of being verified, albeit largely anonymously. Despite this element of anonymity, cryptocurrencies can be restrained by a Court order if the acquisition is suspected to have arisen in connection with criminal offences. Although, the decentralised structure of the network(s) on which cryptocurrencies exist has made it difficult for central authorities to take control or restrain that property.

Pursuant to the Proceeds of Crime Act 2002 (Cth) (‘POCA’) and Confiscation Act 1997 (Vic) (‘Confiscation Act’), property that is derived or suspected of being derived unlawfully can be frozen, restrained and ultimately forfeited to the Government. More information can be found on proceeds of crime and confiscation law here

Pursuant to section 338 of the POCA, property means real or personal property of every description, including tangible or intangible property, in Australia or elsewhere and includes an interest in such real or personal property. Pursuant to section 3 of the Confiscation Act, property is defined as real or personal property of every description, including tangible or intangible property, in Victoria or elsewhere and includes any interest in such real or personal property. These effectively identical definitions in both Acts include all tangible and intangible property domestically or overseas. Having regard to the intangible nature of cryptocurrency, Courts have the power to restrain property of that kind as it is captured by each of the definitions of property under the POCA and Confiscation Act. 

Pursuant to the POCA, the Commissioner of the Australian Federal Police (‘Commissioner’) has standing to apply for a restraining order over property. Similarly, new surveillance powers introduced by the Surveillance Legislation Amendment (Identify and Disrupt) Act 2021 empowers the Australian Federal Police, on application by the Commissioner, to take control of online accounts if a warrant is ordered by a Court. These require ‘reasonable suspicion’ that offences are being, about to be, or are likely to be, committed, that an investigation into offences is being, will be, or is likely to be conducted and, taking control of one or more online accounts is necessary, in the course of that investigation, for the purpose of enabling evidence to be obtained of the commission of those offences. They do not require a criminal conviction or charge.

Using the powers described above, the Australian Federal Police can take control of a crypto ‘wallet’ and move any cryptocurrency in that wallet to their own account, although the Commissioner will not clarify how that is achieved, noting only that it is complex and that they rely on data analytics and intelligence. 

The ability to take control of online accounts under this new power is complemented by the POCA and Confiscation Act, which permit the relevant authority to apply for a restraining order in respect of the property contained in those accounts for the ultimate forfeiture to the Government. More information on the different types of restraining orders pursuant to the POCA and the Confiscation Act can be found here.

It is evident that, despite the decentralised nature of cryptocurrencies and their anonymity, central authorities are still capable of taking control of that property to interrupt criminal activity and forfeit the proceeds from that activity to the Government. If your property is affected by a warrant or other Court order, such as a restraining order, it is critical that you seek legal advice and assistance as soon as possible.

Madison Branson Lawyers is a member of Blockchain Australia, a group of industry leaders and experts who are invested in the further development and adoption of blockchain technology. We assist our clients with blockchain related legal matters, such as licensing and structuring. This area of expertise is further complemented by our specialisation in confiscation and proceeds of crime law. 

Madison Branson Lawyers’ Managing Principal Simon Tsapepas is a member of the Supreme Court of Victoria Proceeds of Crime & Confiscation List User Group.

If you require assistance, do not hesitate to contact us.

The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information is for general informational purposes only.

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