Amidst the devastating events in Ukraine and the flurry of daily (and sometimes hourly) sanctions announcements and activity over the past week, it would have been easy to miss the fact that the UK government finally unveiled the Economic Crime (Transparency and Enforcement) Bill. The Bill – which has been on the cards for many years, to the frustration of many – proposes to make some crucial changes to improve the UK’s ability to tackle economic crime generally, and the menace of foreign illicit financial flows in particular.  Mid-February, the government had announced rather vaguely that it intended to put the Bill forward at some point before the end of the year, but its arrival has been turbo-charged by Russia’s invasion of Ukraine on 24 February 2022.

In a nutshell, the Bill proposes to:

  • Establish a publicly accessible register of beneficial ownership for property owned by overseas entities (as planned since 2016).
    • The registration requirements will apply retrospectively to property bought by overseas entities within the last 20 years in England and Wales, or since December 2014 in Scotland. Failure to comply will result in restrictions on the registration of sales or related transactions and may lead to fines or up to five years in prison.
  • Strengthen the unexplained wealth orders (UWOs) regime.
    • UWOs can be used by authorities to compel individuals and companies around the world to explain how they have obtained UK assets seemingly out of proportion to their legitimate income. Failure to comply or provide legitimate explanation will result in forfeiture. The Bill will expand the types of asset holders who can be targeted and give authorities more time to review the responses and information they receive. 
    • A particularly crucial change is the proposed protection of enforcement authorities from the prospect of potentially significant costs bills where UWOs are used unsuccessfully.
  • Strengthen the sanctions regime, including by moving to a ‘strict liability’ test, similar to that in the US
    • At the moment, individuals or businesses will only be liable for a sanctions breach if they actually knew or had reasonable cause to suspect that their transactions or activities were in breach of sanctions laws.  
    • The Bill also proposes to empower the Office for Financial Sanctions Implementation (OFSI) to ‘name and shame’ firms that have breached financial sanctions but not received fines.

Taken together, this package of proposed changes could enhance global corporate transparency and see economic crime enforcement step up a gear – and not just in the UK, given the increasing levels of international cooperation and collaboration by enforcement agencies.

Greater transparency begets better intelligence, which begets more effective enforcement. At least in theory. It remains to be seen whether these changes are enough for the UK’s enforcement agencies to make a significant impact on the UK’s dirty money problem. A critical determinant of the outcome will be resourcing, but it remains unclear as to whether these legislative developments are going to be accompanied by an increase in resources for the UK’s enforcement agencies and infrastructure.

For a more comprehensive explanation of the Bill, please see the alert we sent out, here

I also discussed some of my thoughts on this development with the Global Investigations Review (GIR) for their article, here.

The Economic Crime (Transparency and Enforcement) Bill 2022 is available here.

Worried about the new sanctions? We have been producing (very!) regular updates on the fast-evolving US, UK, and EU sanctions landscape - you can find all of them here