The National Crime Agency has expressed concerns over the use of cryptocurrency to purchase assets including property in the UK.
Cryptocurrency can be used to covertly move funds between people and across countries and jurisdictions. The National Crime Agency has identified the property market as a route exploited by criminals, particularly in London. The funds used can often originate in other countries and large financial centres are favourite destinations for these proceeds of crime.
Property crime involves huge sums of money and the threat of using cryptocurrency to hide such transactions cannot be underestimated.
One such cryptocurrency, Bitcoin, was created in 2009 and has become popular with people trying to make a profit, in the same way you might speculate in share dealing. While it might seem great to make a profit, perhaps then attempting to use that profit towards buying a home, there may be some unforeseen circumstances.
While there is no real reason to suspect that everything purchased using cryptocurrency is suspicious, its use in property purchase does lead to questions over why it is being used to buy property.
With its inherent anonymity, cryptocurrency is one way in which the UK’s anti-money laundering legislation can be bypassed and, as such, has been linked to organised crime.
The Proceeds of Crime Act 2002 makes it a criminal offence to deal in any way with assets that a person know or suspects are the proceeds of crime. The law also applies to the professional advisers involved in a property transaction, not just those who buy the property. Thanks to this legislation, a number of conveyancing solicitors have been prosecuted for money laundering offences in recent years.
Not all professionals knowingly become involved with the proceeds of organised crime and it is possible for estate agents and legal professionals to become embroiled unwittingly, rather than through complicity or negligence. However, the fear that, even after exercising due diligence, it is possible to become involved in money laundering activity, has led to it being the policy of many mortgage lenders and legal professionals simply not to become involved in transactions involving cryptocurrency.
There are companies that can produce for you a ‘blockchain audit’, analysing the cryptocurrency to verify that it is not connected to anything illegal, although this comes at a cost. One firm charges £1,500 for a report that it says will satisfy a solicitor’s anti-money laundering requirements.
Cryptocurrency transactions hide the identity of the criminal, the location of money and the origins of the funds, in stark contrast to the more traditional finance where a system of due diligence creates a system aimed at excluding criminal proceeds.
It’s perfectly reasonable to say that some cryptocurrency transactions will be used for legitimate purposes, and many have legally profited from speculating on this market.
However, if property and legal professionals find themselves faced with a client wishing to invest in property in the UK, it is essential that they take great care to ascertain the identity of the person behind the transaction and the origin of the funds.