While the introduction of the Economic Crime (Transparency and Enforcement) Act 2022 (“the Act”) was welcome – and in many ways overdue – opportunities remained for exploitation of the UK financial sector and wider economy by nefarious actors. 

As a result, the government committed to bring forward the Economic Crime and Corporate Transparency Bill to tackle some of these further challenges, many of which were envisaged in the government’s White Paper published in February 2022. This Bill has been tabled and will be heard in Parliament during October 2022.

The Act was brought in as a response to the Russian invasion of Ukraine. In broad terms, it 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.

Now, 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 crypto assets;
• 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. 

ICAEW welcomes these further measures and notes the importance of the proposed reforms to Companies House. The government aims to deliver this through introducing identity verification for all new and existing registered company directors, People with Significant Control, and those delivering documents to the Registrar. 

This seeks to improve the accuracy of Companies House data, to support business decisions and law enforcement investigations. In addition, the legislation aims to broaden the Registrar of Companies House’s powers so that the Registrar can become a more active gatekeeper over company creation and custodian of more reliable data, including new powers to check, remove or decline information submitted to, or already on, the companies register.

In order to reinforce the effectiveness of these changes, the Bill will, when enacted, provide Companies House with more effective investigation and enforcement powers and introduce better cross-checking of data with other public and private sector bodies. Companies House will also be able to proactively share information with law enforcement bodies where they have evidence of anomalous filings or suspicious behaviour. 

Additionally, new exemptions from the principal money laundering offences will be created to reduce unnecessary reporting by businesses carrying out transactions on behalf of their customers.

“It is clear to ICAEW that these changes are necessary to improve the effectiveness of countering the manipulation and exploitation of the UK’s financial system,” says Mike Miller, ICAEW’s Economic Crime Manager. “The ability to implement these changes will, however, be dependent on a sufficient level of resource to ensure that these new powers can be utilised effectively. 

“We have long supported reforms to Companies House and the need for firms to provide clear, accurate information, and we note that ICAEW members will be at the forefront of delivering these changes, working closely with Companies House on the effective implementation of the reforms. ICAEW will continue to play a leading role to support the government in clamping down on money laundering in the UK, and we will work constructively with stakeholders and members to maximise the effectiveness of these new measures.”

Miller notes, however, the need to address challenges in the implementation of the new Register of Overseas Entities (ROE), specifically concerning the verification process of an overseas entity. 

ICAEW members are concerned that the liability around an offence is particularly strict, so that a firm could be liable for a false verification even if the firm was unaware the information was false at the time of verification. Therefore ICAEW, as well as other professional bodies, are advising firms to take an extremely cautious approach to offering verification services. 

Amendments may be made during the Parliamentary process for the Bill, and ICAEW will be providing input to BEIS, parliamentarians, and other stakeholders to ensure that its views, including feedback from members are duly noted, with the objective of promoting amendments and clarifications to lead to a suitable outcome that allows our members to be confident in their ability to satisfactorily provide verification services, where appropriate. 

“Overall, we very much welcome the Government’s commitment to reducing the attractiveness of the UK as a hub for criminal economic activity,” says Miller. “The measures in the original Act, plus the updated reforms in the subsequent Bill, make substantial progress towards ensuring that there is a robust legal framework in place for both public and private sector organisations to work to reduce economic crime in the UK. 

“This is a critical step on a longer journey to safeguarding the financial integrity of the UK, and one which will require further work and close collaboration between key industries and Government moving forward. We look forward to supporting our members in communicating and implementing these new measures while collaborating closely with the government on future initiatives to further reduce the threat from economic crime to the UK.”