On 15th March 2022, the Economic Crime (Transparency and Enforcement) Act 2022 received Royal Assent, signalling that the UK intends to get tougher on financial crime. Some of the new pieces of legislation in this Bill have been mooted for many years (at least since 2016 when David Cameron was Prime Minister), but the Russia/Ukraine conflict appears to have been a catalyst to push the Economic Crime (Transparency and Enforcement) Act through parliament. In this article, we will explain what is included in the new Economic Crime (Transparency and Enforcement) Act 2022.
What is the background to the Economic Crime (Transparency and Enforcement) Act 2022?
In 2016, then Prime Minister, David Cameron, outlined the idea of a register of overseas entities with a stake in UK property. As a result, a draft Economic Crime Bill was drafted in 2018, but this made no substantial progress within the House of Commons. Fast forward to January 2022 when Lord Agnew (who was Minister of State at the Cabinet Office and Her Majesty’s Treasury) tended his resignation citing the government’s poor handling of the COVID loans scheme. Lord Agnew stated that the government should have proceeded earlier with the economic crime bill to fill the regulatory gaps which allowed the fraud to occur. He said the Bill was “foolishly rejected last week as a candidate bill for the next parliamentary session”. While some believed the Bill might never eventuate, the Russia Ukraine conflict forced it to be urgently reconsidered, gaining Royal Assent in the early hours of 15th March 2022. This Economic Crime (Transparency and Enforcement) Act 2022 (ECA 2022) adds to the Policing and Crime Act 2017 (PCA 2017), which overhauled the legal framework for enforcing financial sanctions, and the Criminal Finances Act 2017, which provided unexplained wealth orders (UWOs) to seize the proceeds of crime by using civil, as opposed to criminal, powers.
What are the main provisions in the ECA 2022?
The ECA 2022 has three main sections:
- Requirement for a register of overseas entities and their beneficial owners and require overseas entities who own or wish to acquire land to register in certain circumstances (Part 1).
- New provisions for UWOs (Part 2).
- New provisions for financial sanctions (Part 3).
Requirements for a register of overseas entities and their beneficial owners (Part 1)
Part 1 of the ECA 2022 states that it will become a requirement to establish a “register of overseas entities, which will include information about their beneficial owners (sections 3 to 32), and (b) makes provision that, broadly speaking, is designed to compel overseas entities to register if they own land (sections 33 and 34)”.
In practical terms, this means overseas entities (body corporate, partnership or other entity that is a legal person under the law) with property and land interests in the UK will have six months from when the register goes live to lodge their details with Companies House as a beneficial overseas owner. Information provided by overseas entities will be publicly available. The ECA 2022 also creates two new criminal offences of making a false statement when submitting information to the registrar; it will be an offence to provide misleading, false or deceptive information to Companies House, and it will be considered an aggravated offence if a person knows this is the case.
New provisions for UWOs (Part 2)
The main aim of the ECA 2022 in part 2 is to make UWOs easier to use and less of a cost burden on law enforcement bodies. Specifically, the ECA 2022 will:
- Make it possible for UWOs to be sought where property is held in trust or is in a complex ownership structure (e.g. an opaque foundation).
- Amend the Proceeds of Crime Act 2002 to make it possible for UWO applications to specify a responsible officer of the respondent
- Increase the amount of time available to law enforcement authorities to review material provided in response to a UWO, and
- Limit the costs to authorities that are not successful in gaining a UWO.
New provisions for financial sanctions (Part 3).
Part 3 of the ECA 2022 will beef up the UK’s current sanctions enforcement regime. It removes the limitation whereby the Office for Financial Sanctions Implementation (OFSI) can only impose financial penalties on a person who knew or had “reasonable cause to suspect” they had breached an imposed sanction. OFSI will have broader legal powers allowing them to name (and potentially share with other law enforcement agencies) companies that have breached sanctions but have not been fined.
In addition, the ECA 2022 amends the Sanctions and Money Laundering Act 2018 (SAMLA), creating a two-tier system; standard and urgent. Sanctions will follow the urgent process where they meet the following conditions:
- Condition A: the Minister has reasonable grounds to suspect that that person is an “involved person”.
- Condition B: relevant provision (whenever made) applies to, or in relation to, the person under the law of the USA, EU, Australia, Canada or any other country specified in regulations made by an appropriate Minister.
- Condition C: the Minister considers that it is in the public interest to make designations under the urgent procedure.
It will also be possible to meet the criteria for an urgent sanction if condition A is not met, but conditions B and C are met.
The timing of the ECA 2022 certainly suggests the government is now taking financial crime more seriously and requires stronger powers to control the interests of overseas entities, use UWOs, and impose sanctions. While the changes will have some impact, they are not as hard-hitting as some may have wished. The anticipated 2nd Economic Crime Bill confirmed in the Queen’s speech will become law later this year, and will introduce a wider and more impactful set of changes to deter financial crime.
If you are facing an investigation or prosecution in relation to a financial crime, our specialist regulatory Criminal Law Barristers and Solicitors can help. You can contact us through our contact page here.