Economic Crime (Transparency and Enforcement) Act updated

The Government has promised to step up efforts to prevent the flow of what has been described as “dirty money” entering the UK, with Prime Minister Boris Johnson pledging that there will be “nowhere to hide your ill-gotten gains”.

With the Russian invasion of Ukraine and economic sanctions being placed on Russia, the Government has recently revamped its Economic Crime (Transparency and Enforcement) Act, with a second economic crime bill being introduced later this year.

The Act will require anonymous foreign owners of UK property and companies to reveal their identities, to ensure that they cannot hide behind shell companies.

It will also cap the adverse legal costs that can be recovered from law enforcement agencies trying to seize oligarchs’ assets and will allow prosecuting authorities more time to consider the material that is provided to them.

The Act also updates the rules around Unexplained Wealth Orders (UWOs) while imposing transparency on offshore companies that own property in the UK. A new Register of Overseas Entities, requiring those behind foreign companies which own UK property to reveal their identities, will also be created. Entities that refuse to reveal their ‘beneficial owner’ will face tough restrictions on selling the property and those that break the rules could face a fine of up to £2,500 per day or up to 5 years in prison. This will be a valuable tool for law enforcement agencies in investigating suspicious wealth. Companies House and the UK’s 3 land registries have already begun work to implement the register.

According to the National Crime Agency, money laundering costs the UK more than £100 billion a year, so this increased transparency will undoubtedly be welcomed by prosecutors.

Concerns about the lack of transparency about property ownership in the UK and the way that this contributed to economic crime has been recognised for several years.

Parliament’s intelligence and security committee recently highlighted that the UK’s openness to Russian investment offers “ideal mechanisms by which illicit finance could be recycled through what has been referred to as the London ‘laundromat’”.

Roger Isaacs, Forensic Partner at Milsted Langdon, said: “The new Act will apply to any foreign company selling properties after 28 February so even sales in the recent past will be exposed to new scrutiny.

“Time will tell whether the Government provides the resources to the National Crime Agency so that it can make the most of its new powers. However, fact that the proceeds from confiscated assets can be used to fund prosecutions is likely to be a strong incentive for a slew of new applications for Unexplained Wealth Orders.

“Those who have previously been able to hide behind opaque trusts and corporate structures may find themselves suddenly exposed to public scrutiny but not every case will be clear cut and forensic accountants are likely to play a pivotal role in helping the courts determine whether UK assets have been acquired legitimately or from ill-gotten gains.”

Posted in Blog, The Forensic Blog.