The UK government has brought forward the introduction of its draft Economic Crime (Transparency and Enforcement) Bill in response to the events in Ukraine. There had been concerns earlier in the year that the Bill might not be included in the Queen’s speech.

Economic sanctions against Russia have become increasingly stringent as the invasion of Ukraine has escalated. Most recently, the UK, US, EU and Canada have agreed to cut some Russian banks from the SWIFT financial network.

Recent events in Ukraine have provided an impetus for the introduction of key reforms that ICAEW has long been calling for.

“Economic crime is a scourge on society, so we strongly support the government’s decision to expedite publication of the Economic Crime Bill,” says Michael Izza, ICAEW Chief Executive. “These reforms will improve transparency, which will help accountancy firms carry out customer due diligence checks, while important measures – including on unexplained wealth orders, overseas entities and the enforcement of sanctions – will aid work to tackle economic crime.”

However, as serious criminals are likely to provide false information, Izza stressed that it’s vital that resources to enforce reforms on overseas entities are provided. “Chartered accountants are on the front line in the fight against economic crime, and stand ready to support the implementation of these reforms.”

Key aspects of the Bill are outlined below:

Register of Overseas Entities

Article 3 of the Bill establishes a new Register of Overseas Entities. This will require anonymous foreign owners of UK property to reveal their real identities. It will apply retrospectively to property bought by overseas owners up to 20 years ago in England and Wales and since December 2014 in Scotland.

There will be a duty on overseas entities to keep their entries in the Register periodically updated (Article 7). Failure to do so is a criminal offence, punishable by a fine. The Bill creates powers for the Secretary of State to make regulations specifying the content and format of data required to identify beneficial owners and managing officers of overseas entities.

The new Register will be held by Companies House, with support from the UK’s Land Registries. Entities that do not declare their beneficial owner will face restrictions over selling their property, and those that break the rules could face up to five years in prison. The new Register will be available for public inspection (article 21). However, some information, such as dates of birth and residential addresses, will be redacted from the public version of the register.

Unexplained Wealth Orders

Part two of the Bill makes changes to the Unexplained Wealth Orders (UWO) regime. The definition of an asset’s holder will be expanded to ensure the individuals are unable to hide behind opaque shell companies and foundations.

UK property held in Trust will also be brought within the scope of Unexplained Wealth Orders. The reforms will increase the time available for enforcement agencies to review material provided in response to an UWO. It will reform cost rules to protect from incurring substantial legal costs, apart from where the agency acted unreasonably or dishonestly, which is a potential deterrent to regulatory action.

Enforcement of Sanctions

Article 48 of the new Bill amends the Policing and Crime Act 2017 to introduce a “strict civil liability test” in relation to sanctions breaches. This will replace the current requirement for firms to have actual knowledge or reasonable cause to suspect that sanctions have been breached.

This will make it easier for the Office for Financial Sanctions Implementation (OFSI) to impose fines where sanctions breaches have occurred. OFSI will also be given a power to publicly name and shame organisations that have breached sanctions but not received a fine.

The draft Bill can be found here.

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