On 12th July 2019, the Government published the Economic Crime Plan 2019-2022 (the Plan). This was the first plan since the Fraud Review Plan some 15 years ago. The Plan signalled a new intent to combat economic crime in its broadest sense; it endorsed a step change and whole system response by UK PLC to tackling economic crime.
The Plan adopted a public and private partnership approach, and built on previous commitments made by the Government, including the 2016 Anti-Money Laundering and Counter-Terrorist Financing Action Plan; the 2017 Anti-Corruption Strategy; and the 2018 Serious and Organised Crime Strategy.
The intention behind the Plan was to produce a greater understanding of the threats and diversity of economic crime; improve transparency of ownership; contribute to better sharing and usage of information; and to enable the public and private sectors to target resources efficiently and effectively. Key to these aims were reform of the UK’s Suspicious Activity Reporting regime and the UK’s Financial Intelligent Unit; and development of the role of “good corporate citizens”.
Criticisms of the plan
When the Plan was initially published, concerns were expressed in some quarters that the Plan was too focused on money laundering rather than fraud. As such, this might be perceived to be putting the cart (the need to crack down on the laundering of the proceeds of economic crimes) before the horse (tackling the crimes themselves).
There was concern about a potential flaw in the public/private approach: because the plan was created in cooperation with UK Finance, it makes the banks responsible for developing and overseeing the very AML/CTF regulations that are supposed to bind them.
In January 2022, Lord Agnew raised a number of concerns in his resignation speech. These included concerns about the operation of the Covid-19 Bounce Back Loan scheme (duplicate applications, companies incorporated post Covid etc); concerns about the role of banks in making claims against the 100% State Guarantee for non-payment. Lord Agnew emphasised the value of adopting a more pro-active and preventative approach to counter-fraud.
In February 2022, the Treasury Select Committee published its report on Economic Crime. The report concluded that since 2019, economic crime had not reduced but had continued on an upward trend; and that the achievements of the SARS reform programme thus far were “unclear.” The report noted that there were too many agencies involved in fighting economic crime’ and called for single law enforcement agency. The report emphasised the need for an economic crime bill; action to tackle on-line fraud and fraudulent adverts; and mandatory compensation for authorised push payment fraud. The report also called for the Companies House Reforms and Registration of overseas entities to be brought forward.
Recent legislative development
In February 2022, the Government published a White Paper on Corporate Transparency and Register Reform. The proposals include:
Power to challenge information:
New powers for CH Registrar to
- query suspicious appointments or filings;
- request further evidence or reject the filing;
- share information with law enforcement and other bodies.
Restriction on use of overseas agents:
Company agents from overseas will no longer be able to create companies in the UK on behalf of foreign criminals or secretive oligarchs.
Filing process improvements:
Legislative changes will enable Companies House to require companies to file digitally.
Protection of personal information
Improving information quality:
- proposals to promote the transition to digital reporting, support better business and credit decisions, and help wider efforts to combat economic crime;
- a new requirement to file a single set of accounts and simplifying accounts filing options should lead to more consistent financial information across different datasets e.g. Companies House and HMRC. This should reduce discrepancies and enable quicker identification of suspicious patterns in company accounts;
- requirement to file enough information to accurately identify which accounting category they belong to, making it far more difficult to abuse the accounting framework and file accounts under the wrong regime to hide income levels.
Of particular interest to Members in Practice, is the potentially increased ability to tackle the issue of accountancy firms being fraudulently registered. Mandatory digital filing and i-XRBL tagging will allow anyone to search information on the Register much more quickly and easily. Firms can report suspicious filings to Companies House, who could then engage the new querying power to challenge the filing and, if fraudulent, use enhanced removal powers to remove the information from the Register.
On 15 March 2022, the Economic Crime (Transparency and Enforcement) Act 2022 received Royal Assent. The legislation was expedited through Parliament in response to the situation in Ukraine. A full analysis of the legislation can be found at the following link:
However, in brief, the Act establishes a Register of Overseas Entities, to be held by Companies House; makes changes to the Unexplained Wealth Orders regime (including by bringing property held in trust within scope and capping the costs associated with applications); and makes changes to the Sanctions regime (including by introducing strict liability provisions for breach of sanctions; and removing the requirement to consider the requirements of proportionality and the impact on a person before making a designation order).
Further developments anticipated in Summer 2022
During the Parliamentary debates on the Economic Crime Act in March, the Government indicated that it intends to introduce further economic crime legislation in the next Parliamentary session, with the specific intent of implementing reforms to Companies House.
In June, it is anticipated that amendments to the Money Laundering Regulations will be introduced.
And in the summer, it is anticipated that the Government will publish a second Economic Crime Plan and the Home Office has indicated that it intends to convert the 3 year Fraud Action Plan for 2022 to 2025 into a ten year Fraud Strategy, to be published later this year.
