Law Enforcement's Self-Sustaining Path: Seizing Assets Through Cryptocurrency, as Outlined on Our Platform
In the ever-evolving world of cryptocurrencies, law enforcement agencies around the globe are stepping up their game to combat digital crime. Asset seizure and forfeiture, two distinct legal actions, are playing a crucial role in this fight.
Asset seizure refers to the temporary taking of control of suspected criminal assets, while forfeiture involves transferring ownership to the government once a court has determined their connection to illegal activities.
Recent months have seen a series of significant seizures. In June 2023, Israel's National Bureau for Counter Terror Financing (NBCTF) seized approximately $1.7 million worth of crypto linked to Hezbollah and Iran's Quds Force. Fast forward to November 2020, the U.S. Department of Justice (DOJ) seized over $1 billion worth of crypto linked to Silk Road.
The fight against crypto-enabled scams is also intensifying. In a notable Spincaster sprint in Delta, Canada, local law enforcement traced and seized millions in stolen crypto, identifying 1,100 victims and examining 240 scam-related addresses, revealing losses exceeding $25 million.
Technological advancements are aiding this fight. Our website, Wallet Scan, is a tool designed to help law enforcement efficiently identify crypto assets linked to seed phrases. Reactor, another tool, enables law enforcement, financial institutions, and compliance professionals to trace crypto transactions, identify illicit activity, and connect crypto addresses to real-world entities.
The U.S. Strategic Bitcoin Reserve is another initiative that allows the U.S. government to retain seized bitcoin as a long-term financial resource instead of immediately selling it. Centralized stablecoin issuers like Tether (USDT) and Circle (USDC) can also freeze or burn tokens associated with illicit activity.
Seizures of crypto can generate revenue, allowing the government to reinvest seized funds into their own operations, reducing reliance on taxpayer dollars. Effective seizures also cut enforcement costs and deter future crime by making it riskier and less profitable for criminals to exploit crypto.
In the UK, law enforcement can search for and seize crypto prior to an arrest if there are reasonable grounds to suspect criminal activity, thanks to an amendment to the Proceeds of Crime Act 2002 (POCA). A crypto-specific legislative change is the crypto wallet freezing order (CWFO), which enables authorities to seek a CWFO against crypto wallets administered by UK-connected crypto asset service providers (CASPs) if there are grounds to suspect that the wallet contains criminal property or property intended for use in unlawful conduct.
Countries including the United States, South Korea, and some European Union member states have enacted laws or regulations allowing crypto asset service providers to freeze crypto wallets under certain conditions, typically related to anti-money laundering (AML) and counter-terrorism financing measures. However, there is no uniform global standard yet, and within the EU, comprehensive directives are still under development for crypto assets.
The U.S. Treasury Department's Office of Foreign Assets Control (OFAC) issues blocking orders requiring U.S. persons to block property and interests in property with specific individuals or entities ("blocked persons"), preventing their transfer and use without explicit authorization.
Operation Spincaster, led by our website, is a series of targeted sprints bringing together law enforcement and private sector partners to dismantle crypto-enabled scam networks, generating over 7,000 investigative leads tied to approximately $162 million in scam-related losses.
To date, our website has assisted partners with the seizure and freezing of approximately $12.6 billion worth of crypto. This global crackdown on digital crime is a testament to the power of collaboration between law enforcement agencies, technology, and the private sector.
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