As a response to the Russian invasion of Ukraine, the Economic Crime (Transparency and Enforcement) Act 2022 became law in the UK in March 2022, following substantial amendments by the House of Lords.

In broad terms, the Act allowed the government to move faster and harder when imposing sanctions; created a Register of Overseas Entities to help crack down on foreign criminals using UK property to launder money; and reformed and strengthened the UK’s Unexplained Wealth Order regime to better support law enforcement investigations.

Building upon this, the government tabled the Economic Crime and Corporate Transparency Bill in September to tackle further challenges identified by stakeholders. This Bill is currently undergoing parliamentary scrutiny.

The Economic Crime and Corporate Transparency Bill commits to deliver:

• reforms to Companies House;
• reforms to prevent the abuse of limited partnerships;
• additional powers to seize and recover suspected criminal cryptoassets;
• reforms to give businesses more confidence to share information in order to tackle money laundering and other economic crime; and
• new intelligence gathering powers for law enforcement and removal of nugatory burdens on business.

Proposals to strengthen Bill

In October, Mike Miller, ICAEW’s Economic Crime Manager, and Angela Foyle, Chair of ICAEW’s Economic Crime Sub-Committee, appeared at the House of Commons Public Bill Committee to present ICAEW’s views on the key aspects of the Bill. During the session, ICAEW reinforced its dedication to effectively implementing the important measures of the Bill and proposed areas in which it feels the Bill can be strengthened, therefore making it more effective in practice.

“ICAEW welcomes the government’s current focus and series of legislative measures to strengthen its ability to tackle financial crime,” says Miller. “We have worked closely with the government and parliament, and will continue to do so to ensure that new legislation is thorough and able to be implemented successfully. Chartered accountants are effective gatekeepers to the UK’s financial systems and are able to play their part in the fight against economic crime.

"We have expressed to MPs that ICAEW continues to interact regularly with members and through the media to reinforce our dedication to adhering to sanctions and ensuring that the UK is not misused as a centre for money laundering and other financial crime.”

Miller adds: “We are pleased to see that the government has recognised that accountancy firms should be brought into the scope of the indirect information-sharing provisions contained within Clause 149 of the Bill, tabling Amendments 142 and 152. These Amendments apply to large and very large firms (more than £36m revenue) as defined by the Economic Crime Levy. This will help ensure that accountancy firms can more quickly identify, and therefore reduce, the likelihood of illicit transactions taking place. These amendments received cross-party support, and ICAEW was in regular contact with both the government and cross-party MPs to highlight the rationale for the accountancy sector to be included in this provision.”

However, there remain opportunities to further strengthen and clarify the Bill. In particular, the primary concern ICAEW members have is around the strict liability of providing verification services for any entity registering on the Register of Overseas Entities (ROE). As it currently stands, a firm could be liable to prosecution if they verify documents that turn out to be false, even though there is no malicious intent. To this end, ICAEW has encouraged aligning the legislation with the requirements of the Money Laundering Regulations, or to make the Department for Business, Energy and Industrial Strategy guidance statutory.

ICAEW has also proposed that auditor notification is strengthened in order to gain visibility of company auditors. This is to ensure audits filed are accurate and not being used for the purposes of fraud; and also to notify of any changes to auditors to allow regulatory oversight of the capacity of audit firms to capably audit a company.

“This takes place in a complex landscape for audit and we will work across ICAEW, with members and stakeholders, to ensure that concerns and suggestions are expressed to the government,” says Miller. “There is a particular need to address the challenges of providing verification for persons applying to be registered on the ROE. If verification is not a practical process that can be undertaken confidently by firms, then it risks allowing anti-competitiveness, with firms unable to register, or leaves the system open for potential abuse through the use of firms that may not understand the requirements or current legal consequences of providing the service.”

ICAEW will now engage with members, government stakeholders and representatives of the House of Lords to reinforce its message around the two aspects it believes should be modified, explains Miller. The original Act was passed in March following a substantial number of amendments made in the House of Lords, therefore ICAEW is hopeful that members of the Lords will be receptive to proposals to clarify areas of the Bill.

For more background about the Bill and ICAEW’s initial reaction and key messages in Insights in October, read: Economic Crime Bill 2: what it means for you.

Since the Russian invasion of Ukraine, ICAEW has released extensive guidance and other material to ensure that members are fully aware of their responsibilities under the sanctions regime. In 2022, ICAEW also released a training film, All Too Familiar, which was created in collaboration with HMRC as part of a public interest initiative. The film has been designed to raise awareness among ICAEW members and firms of the importance of compliance with the anti-money laundering regulations and the key role ICAEW Chartered Accountants can play in the fight against economic crime.