Economic Crime Bill finally published

On 28 February, the UK Government published its proposed Economic Crime (Transparency and Enforcement) Bill. Amongst its draft provisions are requirements in relation to overseas entities (legal entities governed by law other than UK). The Companies Registry will keep a register of such overseas entities. They will be required to apply to be registered and in doing so, identify beneficial owners and managers. This is coupled with an updating duty and penalties for non-compliance, as well as the ability to impose information requirements.

In addition, the Bill includes requirements in relation to ownership of land including land transactions involving overseas entities. This includes overseas entities which acquired land prior to the Bill coming into force including, for England and Wales, transactions going back to 1 January 1999. 

There has been long-running disquiet among campaigners and commentators that the UK's corporate registration arrangements are inadequate to prevent money laundering, and that the UK is seen as a 'soft touch' when it comes to the tolerance of, and failure to enforce against, launderers.  The Government has said that these measures are intended to crack down on foreign criminals using UK property to launder money, requiring anonymous owners to reveal their real identity to ensure criminals cannot hide behind secretive chains of shell companies.  The Bill – if it becomes law – may go some way towards filling the gap.

The Bill has teeth against individuals: if a foreign company does not comply with the new obligations, its managing officers can face criminal sanctions including a prison sentence of up to 5 years, civil financial penalties and potential restrictions when trying to sell or lease land and, if already registered, restrictions on dealing with land. Other aspects of the Bill include enhancements to the rules around Unexplained Wealth Orders, which are a valuable tool in law enforcement's armoury, if they are deployed effectively. 

The Bill also covers sanctions which are obviously very topical right now, and proposes a significant change in liability to pay financial penalties: it proposes the removal of the requirement under Section 146 of the Policing and Crime Act 2017, in relation to financial penalties, to prove that "the person knew, or had reasonable cause to suspect, that the person was in breach of the prohibition or (as the case may be) had failed to comply with the obligation").  This has the effect of moving financial penalties for breach of sanctions closer towards a strict liability model  (and closer to the US model). It instead provides that in determining for those purposes whether a person has breached a prohibition or failed to comply with an obligation imposed by or under financial sanctions legislation, any requirement imposed by or under that legislation for that person to have known, suspected or believed any matter is to be ignored. This proposal is likely to prove controversial, and in the current febrile sanctions climate, should rightly receive anxious scrutiny during the Bill's passage through Parliament.