Crime Commissions and the Confiscation of Bitcoin

Author: Nyman Gibson Miralis

Subject: Information Sharing

Keywords: Bitcoin, confiscation, proceeds of crime, money laundering, assets forfeiture order

 

First ever Bitcoin exchange in relation to organised crime detected

The New South Wales Crime Commission (‘the Commission’) published in its 2016-2017 annual report that it detected a Bitcoin transaction in relation to organised crime for the first time.

While the details of the investigation were unstated, the Commission reported that it was a joint investigation between the Commission and the Organised Crime Squad.

The transaction was conducted in a public area and a large quantity of cash was handed to one of the persons in return for Bitcoins. The seller of the Bitcoin was subsequently detained by the investigators.

The amount of the seized assets was not identified and no other details were published. However, the Commission predicted that it was unlikely to be the last illegitimate Bitcoin transaction that they will detect.

One of the reasons for making such a prediction was the introduction of the Anti-Money Laundering and Counter Terrorism Financing (Commonwealth) Act which regulates the digital currency exchange providers. The regulation is likely to assist the Commission and law enforcement agencies with intelligence regarding suspicious cryptocurrency transactions.

 

Channelling Proceeds of Crime

The Commission identified that the proceeds of organised crime are being injected into various types of businesses, including:

  1. Restaurants;
  2. Construction companies, both large and small;
  3. Logistics and transport firms;
  4. Earthmoving businesses;
  5. Crane hire firms;
  6. Labour hire firms;
  7. Gyms;
  8. Landscaping material suppliers;
  9. Panel beater repair businesses;
  10. Scaffolding companies; and
  11. Mining companies.

Through the use of legitimate business enterprises, the proceeds of organised crime are laundered. It has been identified by the Commission that such methods pose a significant problem for agencies in the confiscation of proceeds of crime, as they are difficult to trace.

 

Confiscation of Proceeds of Crime

During the financial year 2016 – 2017 (hereinafter ‘reporting period’), the Commission has principally focused on investigating:

  1. Organised crime related murders;
  2. Organised crime involvement in drug importations and the subsequent distribution of narcotics in NSW; and
  3. Money laundering.

The Commission indicated that the estimated realisable value of confiscation orders made against proceeds of crime during the reporting period was $30,095,309.

This figure was the third highest recorded by the Commission and significantly higher than the average for the preceding five reporting periods.

The Commission, in conjunction with the NSW police organised crime squad, seized over $8 million in cash from 1 January to 30 June 2017.

The Commission noted that proceedings against 83 out of 92 defendants were finalised during the reporting period.

The main source of income for organised criminals was identified to be from importation and distribution of illicit drugs.

 

Estimated realisable value by order

The total estimated realisable value of $30,095,309 of the confiscation orders was broken down by the type of order.

Most notably, the estimated realisable value of the assets forfeiture orders constituted 57% of the total estimated realisable value of the confiscation orders.

Considering that all 38 assets forfeiture orders were finalised during the reporting period, this means that the interest in assets worth $17,234,389  in estimated realisable value were surrendered to the State during the reporting period.

 

Type of orderNo. of ordersEstimated realisable value ($)
Assets Forfeiture Order3817,234,389
Proceeds assessment order258,901,900
Unexplained wealth order73,228,117
Breach of warranty00
Order to compensate victims1730,901
Total7130,095,309

 

Estimated realisable value by referrals

The table below suggests the proximate relationship between the Commission and other law enforcement agencies.

 

Source of referralsNo. of ordersEstimated realisable value ($)
NSW police6023,703,438
Commission – NSW Police joint investigation73,948,015
Commission, NSW Police, Australian Federal Police & Australian Border Force1999,920
NSW Police & Australian Federal Police1785,000
Commission2658,936
Total7130,095,309

 

Conclusion

The estimated realisable value of confiscation orders during the reporting period clearly indicates the significant extent of the Commission’s investigative powers and their capacity to confiscate proceeds of crime.

It is significant to note that the Commission had discovered the first ever Bitcoin exchange as part of their organised crime investigations.

It is envisioned that multi-agency cooperation and the regulation of the exchange providers will equip the Commission to increasingly detect and confiscate proceeds of crime involving cryptocurrencies.

 

 

Nyman Gibson Miralis are experts in challenging the NSW Crime Commission’s power of compulsory examination in the Court of Appeal, Court of Criminal Appeal and the High Court of Australia. If you require assistance, contact one of our expert criminal defence lawyers.