Economic Crime (Transparency and Enforcement) Act 202203/15/2022The Economic Crime (Transparency and Enforcement) Act 2022 has received Royal Assent. The Act is designed to increase transparency and enhance the U.K.'s mitigation of money laundering and sanctions evasion. The Act will establish a register for overseas entities and their beneficial owners who own land in the U.K., enhance the sanctions regime and reform measures on unexplained wealth orders. The government has also published a white paper, "Corporate Transparency and Register Reform", setting out its proposals for enhancing the Registrar's powers with a view to improving the transparency and accuracy of the Companies House Register.
The key measures included in the Act are set out below.
Enhancements to the U.K. sanctions regime
Amendments to the Policing and Crime Act 2017 and the Sanctions and Anti-Money Laundering Act 2018 will be made to improve the sanctions regime. These include provisions to:
- Remove the obligation for the Office of Financial Sanctions Implementation to prove that a person had knowledge or reasonable cause to suspect their activity breached sanctions. The OFSI obligation to prove that there was a breach of a prohibited act or failure to comply remains. This measure is intended to assist the OFSI to impose monetary penalties for breaches of sanctions. This change only applies to the civil enforcement of sanctions and does not affect the mental element required for criminal offences.
- Amend the obligation for a minister to conduct administrative reviews of financial sanctions monetary penalties personally, allowing other officials in the department to do so, where appropriate.
- Allow the OFSI to publish notices detailing breaches by persons of financial sanctions where it has decided not to impose a penalty (i.e., public censure).
- Enhances intelligence and information sharing powers to give the OFSI better tools to enforce breaches through greater access to information from other agencies.
The introduction of a 'Register of Overseas Entities'
These measures will require overseas entities which own U.K. real property to register their beneficial owners with Companies House, with details going onto a publicly available register. Registrants will be required to make annual updates to the register. Since 2016, most U.K. entities have been required to provide information for the People with Significant Control (PSC) register.
The requirement will apply to: (i) overseas entities (i.e., any company or similar legal entity that is governed by the law of a country or territory outside the U.K.) and (ii) beneficial owners of an overseas entity (i.e., individuals who have significant influence or control over the entity).
The measures will apply retrospectively to real property purchased after January 1999 in England and Wales, and since December 2014 in Scotland.
Failure to register with Companies House will prevent an overseas entity from: (i) acquiring a legal title to land as it will not then be able to register as the owner and (ii) selling or leasing the land or creating a charge over the land because the buyer, tenant or mortgagee would be unable to register the disposition.
It will be a criminal offence to make any disposition without registration, to fail to annually update the register or to provide misleading or false information to the registrar. Breaches of obligations could lead to criminal sanctions, including daily fines of up to £2,500 (this was £500 in the original Bill) or prison sentences of up to five years.
A transitional period allows 6 months for registration from the day that the requirement for a register to be kept enters into force, which date will be set in regulations to be brought in. The original Bill had allowed a transitional period of 18 months, which was heavily criticized. Overseas entities that dispose of land between February 28, 2022 and the end of the transitional period must provide details of that entity's beneficial ownership at the time of the transfer.
Reforms to Unexplained Wealth Order Measures
An Unexplained Wealth Order requires the recipient to explain the origin of assets that appear to be disproportionate to their known lawfully obtained income. A UWO does not allow for the recovery of assets, but a response may lead to recovery proceedings.
The reforms are intended to improve law enforcement authorities' ability to investigate the origin of property and recover the proceeds of crime by: (i) enabling UWOs to be sought against property held in trust and other complex ownership structures; and (ii) removing barriers to the use of UWOs by increasing the time available to law enforcement to review material provided in response to a UWO (i.e., the time that courts can allow property to be frozen in relation to a UWO will be extended) and reforming cost rules to protect law enforcement from incurring substantial legal costs.
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