Cryptocurrency and Crime- A legal Perspective

English courts have ruled in their first ever VAT carousel fraud case involving a cryptocurrency. Case [2017] UKFTT 602 (TC) was heard in Nottingham on 7 June 2017.

HMRC denied Navee Limited £99,783 input tax (VAT) deduction during the accounting period 12/14 to 06/15.

Payment for all the transactions was made and received in Bitcoin. There is no audit trail to prove payment had ever been received.

HMRC has aggressively lobbied banks  to deny banking facilities to companies they suspect engaged in VAT carousel fraud. It is interesting to note the use of Bitcoin as an alternative means of making and receiving payments.

Cryptocurrency exchanges and wallet providers are not currently obliged entities under the 4th Anti-Money Laundering Directive. This is likely to change.

In response to a parliamentary questions, a Treasury official responded:

The UK government is currently negotiating amendments to the 4th Anti-Money Laundering Directive that will bring virtual currency exchange platforms and custodian wallet providers into Anti-Money Laundering and Counter-Terrorist Financing regulation, which will result in these firms’ activities being overseen by national competent authorities for these areas. The government supports the intention behind these amendments. We expect these negotiations to conclude at EU level in late 2017/early 2018.