Article by: Rohit Sharma and Thekla Sorokkou
The UK government has been criticised for several years about the lack of transparency in relation to economic crime which has allowed individuals to launder money through the UK.
John Penrose, the prime minister’s anti-corruption “champion” acknowledged that it has taken too long for the UK government to get moving on this. However, the wait is over, as the long-awaited Economic Crime Bill received Royal Assent this week and was therefore enacted into law. The Bill was initially announced earlier this month following the prime minister’s remarks that there is “No place for dirty money in the UK”.
There are three main aspects to the newly enacted Act:
What does the Act aim to tackle?
Register of overseas entities
The aim is to make it harder for foreign criminals to launder money through UK property market by preventing them to hide their identities behind shell companies.
The Act establishes a new register of foreign owners of UK property, which will be held by Companies House. To this effect, anonymous foreign owners of property in the UK will be required to reveal who their ‘beneficial owners’ are and this information will have to be verified by Companies House.
Entities that fail to reveal their beneficial owner will be prevented from selling the property while those who break the rules could be jailed or face a fine.
Unexplained wealth orders
The Act also introduces key changes to the unexplained wealth orders (UWOs).
Where there are reasonable grounds to suspect that a person with involvement in serious crime or a politically exposed person (PEP) holds an asset (or assets) valued over £50,000 that appears disproportionate to their known legitimate income, a number of UK enforcement agencies (i.e. the National Crime Agency (NCA), the Serious Fraud Office (SFO), HM Revenue and Customs (HMRC), the Crown Prosecution Service (CPS), and the Financial Conduct Authority (FCA)) may apply to the High Court for a UWO requiring the individual to explain how they obtained those assets.
The aim of the Act, is to expand the scope of the existing legislation and tackle some of the barriers that have in practice discouraged law enforcement agencies from pursuing cases.
Enforcement of sanctions
The Act introduces a ‘strict civil liability test’ in relation to sanction breaches. The result is that it should be much easier for the Office for Financial Sanctions Implementation (OFSI) to impose fines for sanctions breaches as well as publicly naming organisations that have breached financial sanctions but have not yet received a fine.
Concluding remarks
Law Society President I. Stephanie Boyce said that “The Economic Crime Act will help the government uncover potential criminal activity in the UK and we welcome the amendments which have improved the legislation for the benefit of consumers and professionals alike”.
Read the Economic Crime (Transparency and Enforcement) Act 2022 here.
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