Author: Syedur Rahman 14 February 2022
Three NFT’s were taken by HMRC when it arrested three people on suspicion of attempting to defraud it. HMRC believes it is the first law enforcement agency to seize NFT’s.
HMRC said the suspects in the case are alleged to have used sophisticated methods in the fraud, including false and stolen identities, fake addresses, pre-paid unregistered mobile phones, virtual private networks (VPNs) and falsified invoices.
Nick Sharp, HMRC’s deputy director economic crime, said the first NFT seizure "serves as a warning to anyone who thinks they can use crypto assets to hide money from HMRC".
He added that HMRC was constantly adapting to new technology so that it kept pace with how criminals attempted to conceal their assets. HMRC said it had secured a court order to hold crypto assets worth about £5,000 and the three digital artwork NFTs, which have not been valued.
While NFT’s can be viewed as the digital answer to collectables, they have their doubters, Many feel the rise in their popularity is a bubble that could burst.
While their emergence and rapid rise in popularity over the past year or so has led to them giving a major boost to trading in digital assets, it is clear that NFT’s are already being used as a vessel for carrying out a number of different types of fraud.
As NFT’s are decentralised – meaning they involve peer-to-peer transactions as opposed to using an intermediary such as banks or government institutions - and unregulated, they provide a convenient way of laundering money. The current unregulated status of NFT’s means that the buying and selling of them is conducted with very little supervision from the authorities. As a result, criminals have the opportunity to launder their money through NFT trading without arousing as much suspicion as they would if they bought more traditional assets.
The rise of new virtual assets such as NFT’s and the current lack of comprehensive regulation means that there are issues and challenges to be faced by anyone who is involved in these rapidly-evolving markets. NFT’s pose compliance risks that will be new to many who have involvement with them. Managing those risks requires the devising and introduction of procedures that are capable of identifying, assessing and mitigating their effects – including reducing the potential for illicit activity.
Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, international arbitration, civil recovery, cryptocurrency and high-stakes commercial disputes.