PIMFA
Economic Crime (Transparency and Enforcement) Act 2022 (ECA)
The Economic Crime Act made a number of reforms to address foreign criminals using UK property to launder money and to better support law enforcement and investigations. The reforms contain three key aspects:
- Register of Overseas Entities
The Register (to be operated by the Companies House registrar) aims to act as a deterrent to those who attempt to launder the proceeds of bribery, corruption and organised crime.
Any overseas entity intending to own UK land would need to identify their beneficial owners and register them to enable Companies House to allocate an “overseas entity ID”. Failure to register or submitting false information will be a criminal offence.
- Unexplained Wealth Order Regime amendments
An unexplained wealth order (UWO) requires the respondent to provide an explanation of their interest in that property and how they obtained it. The respondent has a fixed period (designated by the court) to respond. The amendments impacting UWOs are set out below:
- A new category of those who can receive a UWO. The amendment to now include “responsible officers” of the entity that owns the property intends to navigate the use of “complex structures” that aim to hide the true owner of property. A “responsible officer” includes a director, manager or partner of a partnership (in or outside the UK).
- A new alternative test to grant UWOs. The provisions in the Act augment the grounds to grant a UWO with “there are reasonable grounds for suspecting that the property has been obtained through unlawful conduct”.
- The relevant enforcement authority can simultaneously apply for an interim freezing order when applying to the court for a UWO to prohibit the selling of the property.
- Limited liability of enforcement authorities to pay costs in legal proceedings relating to UWOs or interim freezing orders.
- UK Sanctions
Existing sanctions legislation such as the Policing and Crime Act 2017 and the Sanctions and Anti-Money Laundering Act 2018 are amended as below:
- The requirement that people must have known or suspected that they breached sanctions law to receive a monetary penalty has been removed.
- The requirement that a minister must personally undertake reviews of penalties for breaches of sanctions law has been removed.
- The Act enables the Treasury to publish notices on cases where it thinks a person has breached sanctions law but it has not imposed monetary penalties.
- The Act expands information-sharing powers relating to sanctions.
Firms should be aware of the introduction of a “strict civil liability” test for monetary penalties alongside new measures for OFSI to impose significant fines. Businesses will still be liable for a transaction that breaches sanctions even if they have no knowledge or reasonable cause to suspect a breach. Firms may wish to refer to OFSI Monetary Penalty and Enforcement Guidance (August 2023) for further advice relating to breaches of financial sanctions.
- Further resources
- DAC Beechcroft – The Economic Crime (Transparency and Enforcement) Act 2022 (“ECA”) – What You need to know
- DAC Beechcroft – The Economic Crime (Transparency and Enforcement) Act 2022 (“ECA”) – What You need to know (Pt 2)
- Herbert Smith Freehills – Economic Crime Act – Register Of Overseas Entities Holding UK Property Ushered In
Find out more about the Economic Crime Plan 2.
