Author: Syedur Rahman
20 May 2022
3 min read
Syed Rahman summarises the main points of the government’s attempt to halt the flow of dirty money to the UK.
The Economic Crime (Transparency and Enforcement) Act 2022, which received Royal Assent on March 15, aims to bring more transparency to the often secretive issue of asset ownership and halt the use of money of dubious origins to buy property in the UK.
It is looking to do this through a number of measures.
One of the most notable aspects of the Act is the creation of a register of overseas entities that will show the genuine owners of the overseas companies that have control of some of the UK’s most valuable assets within the land registries. It will cover any purchases of property in England and Wales over the last 20 years – and since December 2014 in Scotland – by any non-UK entity.
The retrospective nature of this means it will be useful for targeting funds of dubious origins and bring greater openness to such transactions. Yet while this is a notable development, it should be remembered that legislation to introduce such a register was drafted and then dropped in 2018.
Learn more about the Overseas Ownership Register.
It is four years since unexplained wealth orders (UWOs) became an option for law enforcement agencies. Critics of them would argue that UWOs – like the legislation for an overseas ownership register - may as well have also been shelved in 2018, as they have had little impact.
Brought in as part of the Criminal Finances Act 2017 and available to the National Crime Agency (NCA), Serious Fraud Office (SFO), Financial Conduct Authority (FCA), HM Revenue and Customs and even the Director of Public Prosecutions from the following year, hopes were high for UWOs.
Allowing the authorities to target assets believed to have been obtained illegally, UWOs can be used against individuals who have not been convicted or even charged with an offence. Yet so far, they have been used in only four cases. Only the NCA has used them – and the last time it obtained one was in 2019.
It now remains to be seen if the new Act’s efforts to make UWOs a more attractive option have the desired effect - or is simply a belated effort to breathe life into an idea that has had its day. A quick glance at the track record of UWOs until now indicates that a carefully-planned and conducted response can nullify the threat of one.
If the Act’s UWO Version 2.0 approach proves to be stacking the odds in favour of the authorities, we may see UWOs on a more regular basis. But that, at this stage, is one nighty big “if’’.
But the new Act has certainly strengthened the UWO regime. The time agencies have to investigate material received in response to a UWO before discharging any interim freezing orders or property freezing orders over the assets in question is rising from 60 to 186 days. Procedures have been put in place to ensure these organisations do not face the prospect of paying unlimited legal costs if an application for a UWO is not successful.
This latter change will be a good incentive to utilise UWOs, as law enforcement agencies will not be penalised when their application fails. But given the history of UWOs to date, it may well have been better to have these measures in place from the time they became a reality.
Learn more about Unexplained Wealth Orders.
The government is looking to move quicker and more effectively when it comes to sanctions, and this Act will be of use in doing this.
One aspect of the Act that will be of particular help is the removal of the need to show that a corporate or individual knew or had reasonable cause to suspect that their conduct breached a sanction, in order for them to be penalised by OFSI (the Office of Financial Sanctions Implementation).
This could lead to more civil enforcement action against companies and individuals. Financial institutions, such as banks, may also now find themselves in the spotlight, with law enforcement agencies asking them why their own due diligence procedures didn’t pick up on the allegedly illicit finance or funds.
Learn more about Sanctions.
The Act seems to have fast-tracked a number of existing ideas in a race to tackle the problem of dirty money in the UK and as a response to Russian aggression in Ukraine. The Act certainly represents a tightening of the screw by a government that is looking at the most viable means of helping enforcement authorities target those with Kremlin links.
But there can be no escaping the fact that some of the measures that have now become law under the Act could have been in place much earlier. The Act may well prove to be effective and of great value. But it represents, nonetheless, a very hurried and overdue attempt to play catch-up.
If you would like to speak to us regarding these matters or need advice in relation to UWOs or Sanctions in the UK or overseas, then please feel free to contact us via our London switchboard on +44 (0)203 947 1539, send us a message online or send an email to: email@example.com.
Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, international arbitration, civil recovery, cryptocurrency and high-stakes commercial disputes.