U.K. authorities have frozen around $7.7 million (£6 million) worth of illicit crypto assets since April 2024, according to an investigation by MailOnline.

Cryptocurrencies have become the asset of choice for criminals to launder illicit money and fund terrorism. To tackle this emerging threat, last year, the U.K. amended its rules to grant special power to the National Crime Agency (NCA) and police to freeze, seize, and destroy cryptocurrencies linked to crimes and criminals.

The power allows the police to freeze crypto wallets for up to three years. Officials can also seize the assets if the court is satisfied that the funds either originated from illicit sources or were going to be used for criminal purposes.

The special power also enables law enforcement to seize any crypto wallets that are suspected of having ties to criminal organizations, without requiring an arrest.

The authorities were also granted the power to destroy seized crypto assets if they deemed that returning it to circulation was “not conducive to the public good.” This may include privacy coins which criminals often use to obfuscate the origin of their funds.

Biggest frozen wallet was hosted on Coinbase

According to court documents analyzed by MailOnline, the biggest freeze order was issued against a single wallet hosted on Coinbase. The wallet contained $1.94 million (£1.5 million) worth of tokens.

The order was issued by the Newcastle Upon Tyne Magistrates’ Court on March 18. The court order was requested by His Majesty’s Revenue and Customs (HMRC), indicating that the case could be related to tax evasion.

The identity of the wallet’s owner remains a mystery.

More crypto freeze orders expected

Compared to the billions of dollars worth of crypto transacted each day worldwide or the amounts seized from traditional bank accounts, the figure of $7.7 million is not huge, Nick Barnard, a partner at law firm Corker Binning told MainOnline.

According to Barnard, the U.K. authorities got a ‘standing start’ with the new powers introduced last year. Therefore, officials require more time to “get up to speed.”

However, lawyer Siobhain Egan, who defends clients whose assets have been frozen, believes that the government is dedicating more resources towards freezing crypto to “aggressively” fight money laundering and terrorism financing. She said:

“We are fully expecting for a tsunami of crypto freezing orders down the track.”

Echoing Bernard’s views, Eagan said that the authorities are taking a “little while to catch up in a very fast-moving area.” She added that the HMRC is “getting their act together pretty well” and that the NCA has also become “very aggressive” towards combating illicit crypto.

Filling gaps in the investigative process

Eagan, the director of Lewis Nedas Law, said that the investigators put in a request to freeze crypto wallets of alleged criminals without their knowledge. This helps officials freeze the assets without giving the investigation targets any opportunity to transfer the funds.

In fact, the freeze takes place even before the investigators finalize their investigation. She noted:

“The recipient of that [freeze] order will have to respond to questions from the authorities which can in certain circumstances help them build a case against them, in an overarching investigation.”

According to Eagan, this process, enabled by the new powers, is helping officials plug the “gaps in the investigative process.”

Challenges persist

According to Eagan, most of the individuals whose crypto wallets have been seized or frozen in the U.K. are foreign nationals. This complicates the process of freezing.

Moreover, Bernard noted that it is only practically possible to freeze crypto that are held on centralized exchanges or wallet providers like Coinbase, Kraken, or Binance. Furthermore, it is only possible for the U.K. authorities to use their power to freeze wallets when such organizations have some connection to the U.K.

It is also possible for criminals to keep their illicit crypto safe by using private wallets that can only be accessed through their personal keys.

A lack of understanding of crypto and blockchain technology among regulators and investigative agencies is also a major hurdle. Bernard said:

”The vast majority of police police and finance investigators, don’t understand crypto so there’s not as much resource dedicated to understanding and investigating.”

Besides, Bernard believes that crypto forms a very small part of illicit funds that are laundered or used for criminal purposes. The vast majority of illicit funds are still laundered through abundant traditional methods.

Mentioned in this article

A Bank of America insider is pleading guilty to boosting a global money laundering conspiracy that aided drug traffickers and other illegal businesses, according to the U.S. Department of Justice (DOJ).

The DOJ says former Bank of America employee Rongjian Li was a member of a money laundering and drug trafficking outfit headed by Jin Hua Zhang.

According to prosecutors, Li used his position at the bank from 2021 through 2022 to help the criminal organization open several accounts.

Zhang’s organization then used the BofA accounts, some of which were registered using forged passports, to launder illicit funds.

“As part of his involvement, when the bank’s financial auditing systems flagged or froze accounts for suspicious activity, Li helped Zhang circumvent the bank’s anti-money laundering protocols and move illicit funds elsewhere.

In addition, Li was observed sitting next to Zhang at a dinner in New York, where Zhang discussed the different fee percentages he charged various criminal groups for drug trafficking and scams.”

Zhang’s organization is believed to have laundered millions of dollars in a span of months, according to the DOJ.

“The investigation revealed that, for a fee, Zhang laundered bulk cash for drug dealers and laundered profits from other illegal businesses. In less than a year, Zhang and his organization laundered at least $25 million worth of drug proceeds and funds from other illegal businesses through undercover agents.”

Li has pleaded guilty to the charge of conspiracy to commit money laundering. He faces a monetary fine and a prison sentence.

“The charge of money laundering conspiracy provides for a sentence of up to 20 years in prison, up to three years of supervised release and a fine of up to $500,000, or twice the amount involved, whichever is greater.”

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Illicit crypto addresses pocketed a staggering $40.9 billion worth of digital assets last year, and that number is likely to balloon even further, per a new report from the blockchain data firm Chainalysis.

Chainalysis notes in its annual Crypto Crime Report that 2024’s total is currently less than the $46.1 billion worth of crypto that flowed into illicit addresses in 2023.

The firm also says, however, that 2024’s total volume will likely exceed 2023’s as additional illicit addresses are identified.

“Since 2020, our annual estimates of illicit activity — which include both evidentiary attributions and Chainalysis Signals data — have grown by an average of 25% between annual reporting periods. Assuming a similar growth rate between now and next year’s Crypto Crime Report, our annual totals for 2024 could surpass the $51 billion threshold.”

The illicit total represented 0.14% of the total on-chain transaction volume last year.

Chainalysis notes that stablecoins represent 63% of all illicit transactions, while Bitcoin (BTC) is the top choice of asset for ransomware and darknet market (DNM) sales. The privacy coin Monero (XMR) has also become an “increasingly important” part of DNM sales.

The firm says the online marketplace Huione Guarantee illustrates the “professionalization” of crypto’s illicit ecosystem.

“Huione and all vendors operating on their platform have processed more than $70 billion in crypto transactions since 2021. This platform has provided infrastructure which facilitates the sale of scam technology and processed on-chain transactions for pig butchering and other fraud and scams, addresses reported as stolen funds, sanctioned entities such as the Russian exchange Garantex, fraud shops, child sexual abuse material, and Chinese-language gambling sites and casinos, among others.”

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