New Legislation to Tackle Global Economic Crime

The Government Has Brought Forward New Legislation (Economic Crime – Transparency and Enforcement- Bill) To Tackle Economic Crime And Improve Corporate Transparency

The Economic Crime (Transparency and Enforcement) Bill has been introduced in Parliament this week for its first reading. Following the commitments announced by the Prime Minister, Boris Johnson, last week (21 February 2022), the government has brought forward the new legislation to tackle economic crime following Russia’s invasion of Ukraine. Legislation to crack down on dirty money in the UK and corrupt elites was introduced in Parliament on 1 March 2022, and the new Policy paper is out already. The new legislation will help the National Crime Agency prevent foreign owners from laundering their money in UK property and ensure more corrupt oligarchs can be handed an Unexplained Wealth Order (UWO).

As part of this, a Register of Overseas Entities will be developed to crack down on foreign criminals using UK property to launder their money. The Register of Overseas Entities will be at the heart of a new global standard for transparency and significantly contribute to improved ownership transparency. Prime Minister Boris Johnson said: “There is no place for dirty money in the UK. We are going faster and harder to tear back the facade that those supporting Putin’s campaign of destruction have been hiding behind for so long. Those backing Putin have been put on notice: there will be nowhere to hide your ill-gotten gains.” The new register will require anonymous foreign owners of UK property to reveal their real identities to ensure criminals cannot hide behind secretive chains of shell companies, setting a new global standard for transparency. Entities who do not declare their ‘beneficial owner’ will face restrictions overselling their property. Those who break the rules could face up to 5 years in prison.

What does this mean for Companies?

Under the reforms being brought in on UWOs, those who hold property in the UK in a trust will be brought within the scope. The definition of an asset’s ‘holder’ will also be expanded to ensure individuals can’t hide behind opaque shell companies and foundations. The reforms will also remove critical barriers to the use of UWOs by increasing the time available to law enforcement to review material provided in response to a UWO and reforming cost rules to protect law enforcement agencies from incurring substantial legal costs if they bring a reasonable case that is ultimately unsuccessful.

The Treasury will also intensify sanctions enforcement by introducing a more wide-ranging ‘strict civil liability test’ for monetary penalties, rather than the current one, which requires firms to have knowledge or a ‘reasonable cause to suspect’ sanctions are being breached. This will make it easier for the Office for Financial Sanctions Implementation (OFSI) to impose significant fines. A further change will mean OFSI will publicly name organizations that have breached financial sanctions but have not received a fine.

These new measures are being introduced as one part of our response to tackling the scourge of economic crime in the UK and will safeguard our reputation as a clean and safe place for legitimate investment. In addition, the government is today (4 March 2022) publishing a detailed White Paper setting out its plans to upgrade Companies House, which will mean:

• Anyone setting up, running, owning or controlling a company in the UK will need to verify their identity with Companies House;
• Companies House will be given the power to challenge the information that appears dubious and will be empowered to inform security agencies of potential wrongdoing;
• Company agents from overseas will no longer be able to create companies in the UK on behalf of foreign criminals or secretive oligarchs;
• The quality of the information provided by companies to Companies House will be improved so that the thousands of small companies who rely on it to make business decisions can trust who they are doing business with;
• Filing processes for small businesses will be streamlined and digitalised; and
• Company directors will be better able to protect personal information published by Companies House, which might put them at risk of fraud or other harm.

Reform of Companies House will form part of further legislation which will be introduced in the coming months via an additional Economic Crime Bill to clamp down on illicit finance and improve corporate transparency, which will also include:

• New powers to seize crypto assets and bring them within the scope of civil forfeiture powers to tackle the growing threat from ransomware and the use of crypto assets for money laundering;
• Strengthened AML powers to give businesses more confidence to share information on suspected money laundering and other economic crime; and
• Reforms to bear down on the use of limited partnerships as vehicles for facilitating international money laundering (including illicit Russian finance) and illegal arms movements.

How to comply with the new Economic Crime (Transparency and Enforcement) Bill?

As a global business entity with a range of subsidiary partner operations that cross several distinct business sectors (including but not limited to telecommunication, financial services, petrochemicals, energy production/ distribution, chemicals, fertilizers and food), your organization needs to recognize that it is targeted by hostile entities seeking to take advantage of your market presence. The government has taken unprecedented action in the face of barbaric Russian aggression and we are all in this together. This new legislation is a reminder of how important it is to protect your business and the world.

Money that is unknowingly, unwittingly or (in the case of fraud and corruption) even consciously ‘laundered’ through the organization could ultimately support, finance and promote international terrorism and the drugs trade. One of the key challenges is corporate finance’s control and movement and ensuring that effective AML Framework procedures and practices are in place. Refusal to accept the risks and your organization is openly exposed to:

• corporate fraud
• corruption
• exploitation from the theft of money and other assets

Our CRI™ AML advisory services can help you analyze systems and develop effective solutions that not only make sure you comply with the new legislation but also reduce your company’s risk of falling prey to employee, supplier or outside corporate and financial crimes. Our vast Anti-Corruption and Compliance network provides the protection you need when making critical bottom-line decisions crucial to your organization’s success. An effective AML framework is a testament to your organization’s position against crime. As global corporate citizens aware of their responsibilities, any international organization must comprehensively address these concerns and implement policies, procedures, and associated risk assessment mechanisms.

Leave it for experts. Ensure you have the 360-degrees analysis of your challenges – get in touch with the experienced CRI Group’s AML team for a bespoke quote.

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 Engage Due Diligence Services to Protect Your Business!

Business Secretary Kwasi Kwarteng said: “The new register will shine a light on who owns what in the UK so we can flush out the oligarchs, criminals and kleptocrats who think they can use UK property to hide their illicitly obtained wealth.” At CRI Group™, we specialize in Integrity Due Diligence, working as trusted partners to businesses and institutions worldwide. Our global integrity DueDiligence360^TM investigations provide your business with the critical information you need to reduce risks – including risks arising from the FCPA (Foreign Corrupt Practices Act) and the UKBA (UK Bribery Act) and comply with the new legislation. Unlike other kinds of control (audits, market analysis, etc.), it must be completely independent and rely as little as possible upon information provided by the researched subject.

The other significant difference lies in the methodology: commercial or financial due diligence analyses available information, investigative type provides reliable and pertinent, but raw, information. Our people work with energy, insight and care to ensure we provide a positive experience to everyone involved – clients, reference providers and candidates. CRI Group’s unique identity and vision evolved from our fundamental desire to support our clients and candidates. Safeguard your business and its integrity with DueDiligence360™.

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Our DueDiligence360™ expose vulnerabilities and threats that can cause serious damage to your organization and can significantly reduce business. CRI™ is trusted by the world’s largest corporations and consultancies – outsource your due diligence to an experienced provider. You will only ever have to look forward, never back. CRI™ investigators employ a proven, multi-faceted research approach that involves a global array of databases, courts and public record searches, local contacts, industry and media resources, and in-depth web-based research. Our resources include: 

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More Details on the New Policy Paper Corporate Transparency and Register Reform

This white paper sets out the government’s position on reforming Companies House ahead of introducing legislation into Parliament. It concludes the results of further consultation and policy development since September 2020. It contains responses to the following talks:

• Corporate transparency and register reform: powers of the registrar
• Corporate transparency and register reform: implementing the ban on corporate directors
• Corporate transparency and register reform: improving the quality and value of financial information on the UK companies register

The white paper is accompanied by 2 impact assessments:

• Corporate Transparency and Companies House Register Reform Impact Assessment
• Exceptions to prohibition of corporate directors set out in the SBEE Act (2015)

About CRI Group™

For short, Corporate Research and Investigations Limited, or CRI Group™, has been safeguarding businesses from fraud, bribery, and corruption since 1990. Globally, we are a leading Compliance and Risk Management company licensed and incorporated entity of the Dubai International Financial Center (DIFC) and Qatar Financial Center (QFC). CRI™ protects businesses by establishing the legal compliance, financial viability, and integrity levels of outside partners, suppliers and customers seeking to affiliate with your business. Based in London, United Kingdom, CRI™ is a global company with experts and resources located in key regional marketplaces across the Asia Pacific, South Asia, the Middle East, North Africa, Europe, North and South America. Our global team can support your organisation anywhere in the world.

CRI Group™ invites you to schedule a quick appointment with us to discuss in more detail how our risk management solutions can help you and your organisation. 

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