What Is The UK Economic Crime (Enforcement and Transparency) Bill

| General

What Is The UK Economic Crime (Enforcement and Transparency) Bill?

The United Kingdom government has put forward a new Bill in Parliament entitled ‘the Economic Crime (Enforcement and Transparency) Bill it hopes will achieve the status of law.

What Is The Executive Hoping To Achieve By Passing the Bill?

The new Bill intends to ‘crack down’ on money laundering and fraud occurring in the United Kingdom. The new proposed legislation appears to be specifically aimed at those Russian Oligarchs and other connected persons allegedly laundering money from the Russian Federation and appears to be retaliatory following the Federation’s actions in Ukraine.

So What Are These New Measures?

The new proposed legislation will affect property owning individuals who possess their properties through shell companies or trusts if eventually enacted. The Government hope that these proposed new measures will beef up Unexplained Wealth Orders as it will bring the aforementioned property into the scope of the legal requirements for UWOs. The legislation is noteworthy for Enforcement Agencies as they will be given extra time to prepare for cases involving Unexplained Wealth Orders. They will also be happy to see reforms contemplated in the situation where an unsuccessful application is made for an Unexplained Wealth Order. Here the proposed new legislation would effectively protect Enforcement Agencies from paying legal fees. By way of exception this will be the situation unless an Enforcement Agency has acted unreasonably.

The Government appears to be increasingly tired of foreign nationals who own UK property, use elaborate webs of shell companies to hide their identities and are trying to introduce a transparent registration system mandating parties to reveal their identities. The new measures will apply to:

  • Persons and business from overseas
  • Possessing over a quarter of the company voting rights and shares.
  • Properties purchased in England and Wales within the previous two decades.

What Will Be The Consequences For Failing To Comply With The New Rules?

The UK Government have made known their disapproval of those failing to comply with the new rules. For instance, non-compliance with the registration requirements will apparently attract criminal penalties such as convictions, custodial sentence or fines at a daily rate not in excess of £2,500.

Will The Measures Be Complied With And Has There Been Any Criticisms?

Whilst the aims of the new legislation are laudable they have been criticised by the Chartered Institute of Taxation. It warned that the legislation can be circumvented legitimately as businesses can dilute their ownership by jointly owning the respective company in equal shares with five close relations. If one person’s share in an affected business was below one quarter of the total shares then this would not qualify as significant control.

The Chartered Institute also observed that under the new rules those affected can nominate a party to own the business. It is then possible for such a nominee to be the provider of a corporate trust vehicle. Why will this be useful? Well this will mean that the title documents will not name a specific person and instead they will show the name of the particular nominee.

The Institute also raised several concerns about the new legislation:

  • Affected persons are not required to provide any documentary evidence when registering their properties via the new system.
  • The authorities may struggle to enforce the new rule.
  • The miniscule and microscopic £500 daily level of fines will do precious little to alter the behaviour of [ targeted given the level of wealth at their disposal.

Anybody interested in how this story develops should follow the parliamentary process closely as it likely to be a huge legal development if passed into law.

The Legists Content Team

ASSESSING FIRMS

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SOURCES USED WHEN WRITING THIS ARTICLE

[1] Economic Crime (Transparency and Enforcement) Bill – UK Parliament - Economic Crime (Transparency and Enforcement) Bill - Parliamentary Bills - UK Parliament

[2] Firth, L. et al – Economic Crime (Enforcement and Transparency) Bill: how effective will it be? – 9 March 2022 - Economic Crime (Enforcement and Transparency) Bill: how effective will it be? | Feature | Law Gazette

[3] Chartered Institute of Taxation – Economic Crime (Transparency & Enforcement) Bill – Part One: Register of Overseas Entities - Economic Crime Bill CIOT Briefing Overseas Entities Register FINAL.pdf (kc-usercontent.com)

[4] Fact sheet: The Register of Overseas Entities – 4 March 2022 - Fact sheet: The Register of Overseas Entities (web accessible) - GOV.UK (www.gov.uk)

[5] Hansard - Corporate Transparency and Economic Crime – Volume 709: debated on Monday 28 February 2022 - Corporate Transparency and Economic Crime - Hansard - UK Parliament

 [6] Bullough, O. – The oligarch’s guide to getting round the UK’s economic crime bill – 9 March 2022 - The oligarch’s guide to getting round the UK’s economic crime bill | Oliver Bullough | The Guardian

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