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If you have been able to safely make your way through the minefield of the possibilities of being de-banked, finding yourself the subject of probing questions by the NCA, or having your assets frozen (and if any of those happens then you should really be speaking to our criminal team) then you might be wondering whether you are able to use your profits to invest in a much less volatile and more traditional asset – a property. In theory, yes you can, but not all conveyancers will be prepared to take receipt of your funds for fear that those funds could be directly or indirectly the proceeds of criminal activity, despite your best intentions.
The UK’s anti-money laundering legislation (primarily the Proceeds of Crime Act 2002) makes it a criminal offence to deal in any way with assets that a person knows or suspects are the proceeds of crime. This applies to those whose property it is, and in certain scenarios their professional advisors. Therefore conveyancers, who on a daily basis receive funds from clients and transfer them to another firm’s client account, find themselves centre stage.
With the negative connotations surrounding cryptocurrency and the repercussions for conveyancers who become unknowingly involved in money laundering, it is no surprise that only small number of conveyancers may prepared to accept funds that are the output of divested cryptocurrency.
The Risk
Investment in cryptocurrency and the use of profits from those investments are considered by UK law enforcement and regulatory bodies to be high risk. This is due to the perceived association of cryptocurrency with criminality and money laundering.
These days, cryptocurrency investment and trading is becoming increasingly mainstream and is bring brought to a certain extent within the remit of regulators, with cryptocurrency exchanges operating in the UK (for example) being required to register with the FCA. This has served to boost its profile as a legitimate and lawful form of investment.
Given the perception of higher risk however, and given that a conveyancer will need to take a risk-based approach when looking to verify its client’s crypto-derived funds are not the proceeds of crime, it behoves them to satisfy themselves that neither they, nor their client, will commit a money laundering offence if the property transaction proceeds.
What Conveyancers Need To Do
The assessment of the danger of committing a money laundering offence will involve obtaining a detailed understanding of a client’s source of wealth for their initial investment into cryptocurrency, how they have dealt with their cryptocurrency investments and then how and where they intend to divest their investments into fiat (government issued currency) in readiness for funding a property acquisition.
A detailed analysis of the available data on the client’s investment activities is therefore necessary if a conveyancer wants to be certain of discharging their obligations. This may require instructing a firm with the technical expertise to trace the movements of the client’s assets through the crypto asset ecosystem, with a view to identifying any particular transaction risks.
All being well, the crypto asset tracing exercise in combination with careful analysis of the ultimate source of wealth will allow the conveyancer to conclude that they can proceed with the transaction without concern.
Further Information
If you would like to discuss anything raised in this article, or you are considering purchasing a property using funds that have derived from a crypto, then please contact Daniel Browne, Anna Holmes or Lucy Reast.
about the authors
Daniel is a Partner in our Real Estate team. He has experience in most areas of commercial and residential real estate matters, acting for national and SME developers, local authorities, landowners, borrowers, lenders, investors, landlords and tenants.
Anna is an experienced criminal defence lawyer whose practice encompasses general crime, white collar crime and financial services matters.
Lucy is a trainee solicitor at Kingsley Napley and is currently sitting in Real Estate and Construction as her second seat.
We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
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