On 22 September 2022, the UK government published the Economic Crime and Corporate Transparency Bill (the “Bill”). The Bill builds on the Economic Crime (Transparency and Enforcement) Act 2022 which was recently enacted. The Bill is part of the Government’s aims to tackle economic crime such as fraud and money laundering and improve corporate transparency.
The Bill includes reforms to Companies House, reforms to prevent the abuse of limited partnerships, additional powers to seize and recover suspected criminal cryptoassets, reforms to give businesses more confidence to share information in order to tackle money laundering and other economic crime and new intelligence gathering powers for law enforcement and removal of nugatory burdens on business.
Companies House Reforms
The reforms introduced by the Bill are designed to tighten up on the misuse of legal entities and to increase transparency and improve the accuracy of the data filed with Companies House.
- Identity verification: The Bill introduces an amendment to Section 12 of the Companies Act 2006 (statement of proposed officers) and requires all new and existing company directors, People with Significant Control, and those delivering documents to the Registrar to verify their identity. The measure is designed to identify those responsible for setting up, managing, and controlling corporate entities.
- Broadening the Registrar’s powers: The Registrar is intended to become a more active gatekeeper for the data it holds. This includes being given new powers to check, remove or decline information submitted to, or already on, the register. This will ensure that the data held is more accurate.
- Improving the financial information: This is likely to see changes to the way accounts are filed at Companies House to ensure that the register is more reliable and complete.
- More effective investigation and enforcement powers: The Bill establishes greater cross-checking of data with other public and private sector bodies and the ability to proactively share information with law enforcement bodies where they have evidence of suspicious behaviour.
- Enhanced protection of personal information: Designed to help protect individuals from fraud and other harms by removing the restrictions to enable personal information to be removed from the register.
Limited partnership reform
The law surrounding Limited Partnerships has not been changed substantially for over 100 years. The Bill introduces a range of measures designed to enhance regulation and oversight of limited partnerships, including Scottish limited partnerships, and curb their misuse by aligning them more closely with the transparency requirements for registered companies.
The Bill will:
- tighten registration requirements
- require limited partnerships to maintain a connection to the UK
- increase transparency requirements
- enable the Registrar to deregister limited partnerships which are dissolved, no longer carrying on business, or where a court orders that it is in the public interest to do so
Powers to seize and recover suspected criminal cryptoassets
There has been an increased use of cryptoassets to launder the proceeds of criminal activities in recent years. Currently, these assets cannot be recovered as easily as other criminal property. The Bill provides supplementary powers to law enforcement to enable cryptoassets to be more quickly and easily seized and recovered.
The Bill will:
- Amend criminal confiscation powers in Parts 2, 3 and 4 of the Proceeds of Crime Bill 2002 (POCA); and
- Modify the civil recovery powers in Part 5 of POCA to enable enforcement agencies to more effectively tackle criminal use of cryptoassets.
Tackling money laundering and other economic crime
The Bill is aimed at enabling enhanced information sharing between businesses, in order to better detect and prevent money laundering, fraud and other economic crimes.
The reforms will:
- Disapply civil liability for breaches of confidentiality for firms who share information to combat economic crime.
- Remove the requirement for a Suspicious Activity Report to have been submitted before an Information Order can be made.
- Expand the types of case in which businesses can deal with clients’ property without having to first submit a Defence Against Money Laundering (DAML) Suspicious Activity Report.
The new measures introduced by the Bill form the second part of a legislative package introduced by the UK government. It is still unclear when these changes are likely to come into effect and it remains to be seen whether they will have the desired effect of tackling economic crime and improving transparency over corporate entities in order to strengthen the UK’s reputation as a place where legitimate business can thrive.