Criminal Finances Act 2017 and Economic Crime and Corporate Transparency Act 2023 (Consequential Amendments) Regulations 2024

Lord Sharkey Excerpts

Monday 11th November 2024 Grand Committee

[The Minister of State, Home Office (Lord Hanson of Flint) (Lab)]

It is a pleasure to be here today, with the interest in the instrument before us, and I am pleased to see members of the Front Benches here with us this afternoon.

I shall give a little background to the regulations, if possible. The Economic Crime and Corporate Transparency Act 2023 contained a wide range of measures of reforms to reduce economic crime and increase transparency over corporate entities conducting business in the United Kingdom. That included a range of measures enabling targeted information-sharing, tackling money laundering and removing reporting burdens on businesses. Additionally, the Act introduced new intelligence-gathering powers for law enforcement and reform of outdated criminal corporate liability laws. It also introduced reforms to unexplained wealth orders, corporate liability laws and targeted information-sharing, which are already in force.

More recently, guidance for the new offence of failure to prevent fraud was published last week, and I was pleased to support that on 6 November. The offence itself comes into effect in September 2025, helping to support fraud prevention measures before this offence comes into force. The Act also introduced the new regime to tackle criminal and terrorist crypto assets; this is relevant to the debate today. The use of crypto assets in illegal activity is sadly increasing and, when introducing and reviewing legislation, we want to consider the emerging technologies and how they can be harnessed by criminals to commit crime or indeed hide their illegal gains.

The previous Government introduced a bespoke regime to the Proceeds of Crime Act 2002, which allowed effective seizure of both criminal and terrorist crypto assets. This regime was introduced in the Economic Crime and Corporate Transparency Act 2023 to make it easier to confiscate crypto assets from criminals and to forfeit crypto assets obtained from, or indeed to be used in, crime or terrorism. On 26 April, the crypto assets measure that this debate relates to came into force. The powers are operational in England and Wales and, as of the end of October, over 80 cases have exercised the new powers, including crypto asset seizures or confiscation cases involving crypto assets.

I want briefly to outline the purpose of this instrument, however. The regulations here will make a set of amendments that are consequential on the Criminal Finances Act 2017 and on the Economic Crime and Corporate Transparency Act 2023. The regulations make consequential amendments to the Proceeds of Crime Act 2002 and will ensure that the investigative powers of that Act include, for example, reference to crypto asset investigations in all the necessary sections for the powers to function properly and in accordance with their policy intention.

This draft instrument is required to complete that commencement of the Economic Crime and Corporate Transparency Act 2023, and will ensure that all the necessary legislation is now in place and there is legal certainty about how cases will be dealt with. I hope that noble Lords will see that this is an important aspect in the fight against crime, and particularly in the use of crypto assets. I commend the statutory instrument to the Committee.

[Lord Sharkey (LD)]

We support this statutory instrument but have a few observations and questions. It is clear that more needs to be done to combat fraud, now our most frequent crime. Fraud accounts for around 40% of all crimes in England and Wales, with an estimated 3.2 million offences per year, and was said by the previous Government in February to cost society about £6.8 billion a year. There are, in fact, much larger estimates. The Annual Fraud Indicator estimated that UK annual losses to fraud could be £219 billion in total, with £8.3 billion coming from individuals.

It is also clear that our current armoury needs extending. Both POCA and the Economic Crime and Corporate Transparency Act are either defective or inadequate, or both. It is not surprising that POCA 2002 requires updating—22 years is an aeon when it comes to the more exotic and newer means of being scammed. However, it is rather surprising that the Economic Crime and Corporate Transparency Act 2023, which received Royal Assent on 26 October last year, did not incorporate some of the variations introduced by this SI. The Act did, after all, deal with the seizure of assets, including crypto assets, in its Schedule 8. The Explanatory Memorandum, at paragraph 5.1, says that,

“a huge rise in the use of digital technologies in crypto assets has provided new methods to conduct crime and deposit gains from criminality”.

Paragraph 5.3 says that,

“consequential amendments are required … so that search and seizure are exercisable and effective for the purpose of crypto asset investigations”.

Could the Minister expand on all this? Where were the provisions of the ECCT Act inadequate? What events or information triggered the realisation that the amendment was needed? The fact that the amendments were needed raises the question of what else was wrong or missing from POCA or the ECCT Act. What reassurance can the Minister give us that all the defects in these Acts are remedied by this SI? Do further aspects of either Act need at least an attempt at future-proofing?

I would be grateful for an explanation from the Minister of some of the detailed provisions in the SI. The term “substantial value” is used as a qualifier four times in Regulation 2(4); it is obviously an important qualification. What is the test for

“is likely to be of substantial value”,

and is it the same test—or tests—in all four appearances of the phrase in this instrument? Who decides what the threshold is in each case?

I have a couple more questions about interpretation. Regulation 2(4)(b) inserts new subsection (7G)(a), which refers to

“any other question as to its derivation”.

Does “derivation” here mean provenance, or has it some alternative meaning? The same question applies to the use of “derivation” in Regulation 2(6). Is not the phrase “any other question” in itself extremely wide in scope? What questions, if any, are excluded by this phrasing?

I was pleased to see the attempt at an impact assessment incorporated in the EM. I wondered, however, what weight to give to the assessment of benefits. The range offered is very large, even if the lower bound quoted in the EM, of £107.60, is a misprint of £107.6 million. The difficulty in assessing the usefulness and reliability of these estimates is exacerbated by the qualifying sentences in paragraph 9.2 of the EM, which say:

“The data and assumptions surrounding cryptoassets are limited due to the technology being relatively new and rapidly changing. It is also sensitive, and many figures and police data are not suitable for the public domain”.


This seems rather opaque. Can the Minister say whether enforcement authorities are significantly disadvantaged when it comes to dealing with likely crypto asset issues? Can he be a little less mysterious about that final sentence in paragraph 9.2 of the EM—in particular, is it reasonable to rely on unspecified and apparently secret data whose reliability we cannot estimate or properly qualify? After saying all that, I should repeat that we support this SI.

[Lord Murray of Blidworth (Con)]

My Lords, I apologise to the Committee for not attending promptly. I am glad to say that I welcome these regulations and I very much hope that they will allow the police to act decisively against criminals who abuse our corporate frameworks, ensuring that Britain remains an inhospitable environment for illicit financial activity.

The regulations extend two previous pieces of legislation designed to cover crypto asset investigations. Under the regulations, search and seizure powers will be able to be exercised for the purposes of investigating crypto assets. This is an entirely necessary move, born of the fact that many criminals use new and innovative ways to avoid detection in their illegal activities.

The National Crime Agency’s national asset centre estimates that illicit crypto transactions linked to the United Kingdom are likely to have reached at least £1.2 billion in 2021 and are surely even higher now. Recent figures from the law firm RPC and Action Fraud show that losses from crypto asset fraud increased 41% last year. Can the Minister provide the latest figures on the cost to the UK economy of crypto asset fraud and the number of illicit transactions estimated to be taking place?