Schedules Schedule 9 – Cryptoassets: civil recovery Part 1 – Amendments of Part 5 of the Proceeds of Crime Act 2002
This schedule inserts, into Part 5 of POCA, new Chapter 3C (recovery of cryptoassets: searches, seizure and detention), which makes provision for the seizure of cryptoassets (and cryptoasset-related items) and the recovery of cryptoassets where they are recoverable property or are intended for use in unlawful conduct ("unlawful conduct") is defined in section 241 of POCA. The provisions build on existing powers in Chapters 3, 3A and 3B of POCA, to seize and recover cash, listed assets and funds in accounts that are the proceeds of unlawful conduct or intended for use in such conduct.
	"Cryptoassets" are defined in new section 303Z20, as are "crypto wallets"-devices used for storing cryptoassets (and which sometimes function a little like a bank account). This section also provides that the Secretary of State, following consultation with Scottish Minister and the Department of Justice Northern Ireland, may by regulations amend the definition of "cryptoasset" or "crypto wallet".
	Section 303Z21 provides that powers to search for a "cryptoasset-related item" are only exercisable on the proviso that an enforcement officer has lawful authority to be on the premises and has reasonable grounds to suspect that there is an item of property there that is, or that contains or gives access to information that is, likely to assist in the seizure of cryptoassets under Part 5 of POCA. Subsection (3) provides that constables, HMRC officers, SFO officers and AFIs are enforcement officers for the purpose of these provisions. Subsections (7) and (8) include the power to search vehicles and persons. Subsection (11) provides that SFO officers and AFIs cannot use these provisions to search for cryptoasset related items in Scotland.
	Section 303Z22 sets out further detail as to the conditions under which the powers of search may be used.
	Section 303Z23 provides that the search powers may only be used where prior judicial authority has been obtained or, if that is not practicable, with the approval of a senior officer. "Senior officer" is defined in subsection (4) for all of the agencies permitted to use these powers. Section 303Z23(6) provides that, where the search powers are not approved by a judicial authority prior to the search and either no cryptoasset-related items are seized, or any seized items are not then detained under a court order for more than 48 hours, the officer exercising the power must prepare a written report and submit it to an independent person. This means that a report is needed whenever search powers are exercised without any judicial oversight before or after the search. The independent person is appointed by the Secretary of State, in relation to England and Wales, by the Scottish Ministers in relation to Scotland, or by the Department of Justice in relation to Northern Ireland. Subsection (7) provides that a written report to the appointed person is not necessary if cash or listed assets were seized as a result of the search and the cash or listed assets are detained for more than 48 hours, under an order of the relevant court.
	Section 303Z24 provides that the appointed person must provide a report after the end of each financial year, to be laid before Parliament, the Scottish Parliament, and the Northern Ireland Assembly as appropriate. This report must give the appointed person’s opinion as to the circumstances in which the search powers were exercised in cases where the relevant officer was required to make a report under section 303Z23(6). The appointed person must submit their own report as soon as possible at the end of each financial year, giving their opinion as to the way in which search powers under these provisions are being exercised, and making recommendations where appropriate.
	Section 303Z25 provides that the exercise of powers of search are subject to guidance issued in Codes of Practice. The requirements for making a Code of Practice are the same as those set out in sections 303G, 303H and 303I of POCA, namely:
A Code of Practice must be made by the Secretary of State in connection with the exercise of the search powers in section 303Z21 and the Secretary of State must also consult the Attorney General about the code draft in its application in relation to the use of the powers by the SFO and the Director.
A Code of Practice must be made by the Scottish Ministers in connection with the exercise of the search powers in section 303Z21 in Scotland.
A Code of Practice must be made by the Department of Justice in connection with the exercise of the search powers in section 303Z21 in Northern Ireland.
	Section 303Z26 provides that enforcement officers may seize any item found, if they have reasonable grounds for suspecting that it is a cryptoasset related item: namely, an item that is, or that contains or gives access to information that is, likely to assist in the seizure of cryptoassets under Part 5 of POCA. Subsection (2) provides officers with the power to require a person to provide information which is stored in electronic form. The information in question must be accessible from the premises. Officers can make such a requirement for the purposes of either determining whether an item is a "cryptoasset-related item" or for enabling or facilitating the seizure of a cryptoasset. The person must provide the required information in a form in which it can be taken away and in which it is visible and legible (or from which it can readily be produced in a visible and legible form). If a person fails to comply with a requirement, then they may have committed an obstruction offence. The relevant offence will depend on which type of officer has made the requirement. Those offences are set out in POCA and other enactments, where relevant.
	Subsection (3) limits the power in subsection (2). It provides that the power in subsection (2) does not authorise an officer to require a person to provide information that is subject to legal professional privilege (as defined in subsection (4)).
	Subsection (5) provides that any information obtained from a cryptoasset-related item may be used to identify or gain access to a crypto wallet and by doing so enable or facilitate the seizure of cryptoassets (including their transfer to a crypto wallet controlled by an enforcement officer).
	Subsection (6) provides that SFO officers and AFIs cannot use these provisions to seize items found in Scotland.
	Section 303Z27 provides that any cryptoasset-related item seized by a enforcement officer may only be detained for an initial period of 48 hours. Subsection (1) authorises the detention of property only for so long as an enforcement officer continues to have reasonable grounds for suspicion.
	Section 303Z28 provides that the detention of any cryptoasset-related item may be extended by a judicial authority for up to six months at a time. Subsection (2) authorises the detention of a cryptoasset-related item up to a maximum of two years (from the date of the first order), except that under subsection (4) detention may be extended up to a maximum of three years if the court is satisfied that a request has been made for evidence to be obtained from overseas (often referred to as "mutual legal assistance"), in connection with the cryptoasset-related item, and that request is outstanding.
	Section 303Z29 provides that an enforcement officer may seize "cryptoassets" (defined in section 303Z20) where there are reasonable grounds for suspecting that those assets are proceeds of unlawful conduct or intended for use in such conduct. Subsection (2) clarifies that the act of seizing a cryptoasset includes transferring it into a "crypto wallet" controlled by an enforcement officer. "Crypto wallet" has the meaning given in new section 303Z20 of POCA. Subsection (3) provides that SFO officers and AFIs cannot use these provisions to seize cryptoassets using information obtained from an item found in Scotland.
	Section 303Z30 provides that, where an order is made under section 303Z28 for the detention of any cryptoasset-related item, a judicial authority may, at the same time, authorise the detention of any cryptoassets seized as a result of information obtained from the cryptoasset-related item. This means that the detention of the cryptoassets can be authorized in advance of their seizure. Section 303Z31 will not then apply to those cryptoassets.
	Section 303Z31(1) provides that any cryptoasset seized by a relevant officer may only be detained for an initial period of 48 hours, except where detention has been authorized in advance under section 303Z30. Subsection (1) authorises the detention of property only for so long as an enforcement officer continues to have reasonable grounds for suspicion.
	Section 303Z32 provides that the detention of any cryptoasset may be extended by a judicial authority for up to six months at a time. Subsection (2) authorises the detention of a cryptoasset up to a maximum of two years (from date of the first order), except that under subsection (4) detention may be extended up to a maximum of three years if the court is satisfied that a request has been made for evidence to be obtained from overseas (often referred to as "mutual legal assistance"), in connection with the cryptoassets, and that request is outstanding.
	Section 303Z33 provides that an enforcement officer must safely store detained cryptoassets and cryptoasset-related items.
	Section 303Z34 provides for the release of cryptoassets and cryptoasset related items from the person from whom they were seized where a judicial authority is satisfied, on application by the person from whom the property was seized, that they are not recoverable property or are not intended for use in unlawful conduct. Where a cryptoasset-related item is not claimed within a year from the date of its release and reasonable steps have been taken to notify any interested parties, an enforcement officer may decide to: retain the property; dispose of; or destroy the property, with the approval of a senior officer. Subsection (8) provides that where property is disposed of, any proceeds are to be paid into the Consolidated Fund or the Sottish Consolidated Fund.