The events in Ukraine and the subsequent issues that have arisen globally in relation to Russian oligarchs has prompted the UK Government to pass the Economic Crime (Transparency and Enforcement) Act 2022 (the Act).
Whilst the Act received royal assent on the 15th March 2022, it has not been subject to the usual level of scrutiny that normally befalls a new Act and is therefore likely to be further amended in the Autumn.
How does the Economic Crime (Transparency and Enforcement) Act 2022 affect me?
The Act will directly affect you if you are involved in some capacity with an ‘overseas entity’. An ‘overseas entity’ is defined as a legal entity that is governed by the law of a country or territory outside the United Kingdom, including a body corporate, partnership or other entity that is a legal person under the law by which it is governed.
The Act tackles three key areas:
1. The creation of an overseas register;
2. Unexplained wealth orders; and
You can read the full details of the Act by clicking here.
The Act creates a new register of overseas entities. The register will include information about beneficial owners and will hold all documents delivered to the registrar or regulations made under it.
Notably, every overseas entity must have verified ID allocated to the entry – this will allow the registrar to easily contact the entity and will remove the ability for individuals to register a company under a false identity.
If you make false statements on behalf of the overseas entity, then you could be charged with a criminal offence. Under the Act, the following are the new criminal offences that you could be charged with:
s.32(1) It is an offence for a person, without reasonable excuse to deliver or cause to be delivered to the registrar any document that is misleading, false, or deceptive in a material particular, or to make to the registrar any statement that is misleading, false or deceptive in a material particular.
s.32(2) It is an aggravated offence if, when the document or statement is delivered, the person knows that it is misleading, false, or deceptive in a material particular.
If found guilty of these crimes, the individual is liable to pay a fine and / or could be imprisoned.
S.34 of the Act compels overseas entities to register if they own land, are planning on purchasing land or if they are looking to dispose of land in the United Kingdom. The Act applies retrospectively to property bought by overseas entities either on or after 1st January 1999. Therefore, all property bought by an overseas entity since this date will need to be registered under the Act.
Unexplained Wealth Orders
The Act expands the definition of a respondent that is currently found in s.362A of the Proceeds of Crime Act 2002 to include a ‘responsible officer’ of a legal entity. This term can be defined as including a director of a company, a manager, a body equivalent to a board of directors, a partner or a member of the partnership.
Therefore, if you are involved in a company in a governance or shareholding capacity, you could be at risk of being charged under the Proceeds of Crime Act 2002 regardless of whether you as an individual have committed a crime.
The Sanctions and Money Laundering Act 2018 has also been amended in order to create a two-tier designation system: standard and urgent.
The urgent designations are designed to make it easier for the UK to impose sanctions and permits the UK to adopt sanctions imposed by the USA, the EU, and other countries.
The Foreign Secretary has already used the urgent designation system to sanction over 370 individuals already sanctioned by the EU.
Corporate Transparency White Paper
The Government is also looking to enact into legislation the Corporate Transparency White Paper (the CTW) later this year.
The CTW will expand the role of the Registrar of Companies and will allow them to query suspicious appointments or filings, to request further evidence to support a filing, or to even reject the filing.
Furthermore, it will require a person setting up, managing and controlling companies to have a verified identity with Companies House or to have registered and verified their identity via an AML supervised third-party agent.
This will have repercussions on how companies are operated on a governance level and will result in greater scrutiny of company operations.