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The Economic Crime (Transparency and Enforcement) Bill
28 February 2022

Today, Government announced the new Economic Crime (Transparency and Enforcement) Bill.  This follows commitments announced by the Prime Minister last week to expedite legislation to tackle economic crime in the UK following recent events in the Ukraine.

The Bill, published in draft on gov.uk today ( https://www.gov.uk/government/publications/economic-crime-transparency-and-enforcement-bill-2022-overarching-documents )  and introduced in Parliament tomorrow, will:

·        introduce a ”Register of Overseas Entities” to crack down on foreign criminals using UK property to launder money; 

·        reform Unexplained Wealth Orders (UWOs) to target more corrupt elites; and

·        strengthen HM Treasury’s ability to take action against sanctions breaches.

 

Registration of Overseas Entities

The new register will require anonymous foreign owners of UK property to reveal their real identities to ensure criminals can’t hide behind secretive chains of shell companies.  Entities who do not declare their ?beneficial owner? will face restrictions over selling their property, and those who break the rules could face up to five years in prison. The new legislation will help the National Crime Agency prevent foreign owners from laundering their money in UK property. It will apply retrospectively to property bought by overseas owners up to 20 years ago in England and Wales and since December 2014 in Scotland. It will be held by Companies House, with support from the UK’s Land Registries. 

  

Unexplained Wealth Orders (UWO)

For those who hold property in the UK in a trust, these will be brought within scope and the definition of an asset’s ‘holder’ will also be expanded to ensure individuals can’t hide behind opaque shell companies and foundations.  The reforms will also remove key barriers to the use of UWOs by increasing time available to law enforcement to review material provided in response to a UWO and reforming cost rules to protect law enforcement agencies from incurring substantial legal costs if they bring a reasonable case that is ultimately unsuccessful.

 

Strengthening powers of the Office for Financial Sanctions Implementation (OFSI)

The Treasury will also intensify sanctions enforcement by introducing a more wide-ranging ‘strict civil liability test’ for monetary penalties, rather than the current one which requires firms to have knowledge or a ‘reasonable cause to suspect’ sanctions are being breached.  This will make it easier for the OFSI to impose significant fines. A further change will mean OFSI will be able to publicly name organisations that have breached financial sanctions but have not received a fine.

 

In addition, the Government is today publishing a detailed White Paper setting out its plans to upgrade Companies House ( https://www.gov.uk/government/publications/corporate-transparency-and-register-reform ).  These reforms will mean: 

·        Anyone setting up, running, owning or controlling a company in the UK will need to verify their identity with Companies House; 

·        Companies House will be given the power to challenge the information that appears dubious, and will be empowered to inform security agencies of potential wrongdoing; 

·        Company agents from overseas will no longer be able to create companies in the UK on behalf of foreign criminals or secretive oligarchs; 

·        The quality of information provided by companies to Companies House will be improved, so that the thousands of small companies who rely on it to make business decisions can trust who they are doing business with; 

·        Filing processes for small businesses will be streamlined and digitalised; and 

·        Company directors will be better able to protect personal information published by Companies House which might put them at risk of fraud or other harm. 

 

Reform of Companies House will form part of further legislation which will be introduced in the coming months to clamp down on illicit finance and improve corporate transparency.  The reforms will include:   

·        New powers to seize crypto assets and bring them within scope of civil forfeiture powers to tackle the growing threat from ransomware and the use of crypto assets for money laundering.

·        Strengthened anti-money laundering powers to give businesses more confidence to share information on suspected money laundering and other economic crime.

·        Reforms to bear down on the use of Limited Partnerships as vehicles for facilitating international money laundering (including illicit Russian finance) and illegal arms movements.


The Home Office and HM Treasury will be alerting stakeholders in parallel.  We are aware you may be hearing this information from other departments but if there are any aspects you wish to discuss please do not hesitate to get in touch and we can sign-post to officials leading on the various aspects. 

Best regards,

 

David Leitch

Business Frameworks Directorate, BEIS

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