The Government’s Crackdown on organised criminals abusing the UK’s Economy

Posted Wednesday 8th February 2023

The Government is currently legislating the Economic Crime and Corporate Transparency Bill. This follows the Economic Crime (Transparency and Enforcement) Act which was fast-tracked through Parliament in March 2022 in response to Russia’s invasion of Ukraine. The Bill attempts to reduce financial crimes including money laundering and fraud. After entering Parliament late last year, the Bill is due to have its second reading in the House of Lords on the 8 February 2023.

The main objectives of the bill are:

• To raise the Government’s response to economic crime and stop organised criminals, fraudsters and terrorists from using companies and other corporate entities to abuse the UK’s open economy.
• To increase transparency by introducing reforms to improve the reliability of data held by Companies House.
• Enhancing Companies House powers to enable them to deliver a better service for over four million UK companies and improve enterprise.

The bill is intending to deliver:

Companies House Reforms

Companies House is not a regulator and therefore does not have powers to query information submitted to it. Currently it is also not able to investigate companies that it suspects are being used for fraud or money laundering. The Bill proposes the “biggest upgrade to Companies House” since its formation in 1844. Some of the significant changes proposed are:

• the requirement of all directors, People with Significant Control (beneficial owners), and those delivering documents to verify their identity;
• abolishing the requirement for companies to maintain their own registers of directors, directors’ residential addresses, secretaries and People with Significant Control, providing instead that this information is only held centrally;
• requiring all companies to file a profit and loss account showing their profits and turnover; and
• giving the registrar greater powers to share information to and reject documents with inaccuracies.

Reforms to prevent the abuse of limited partnerships

Research from Transparency International UK has revealed that 14% of all LLPs ever incorporated show money laundering red flags.

The Companies House reforms will therefore also tighten LLP registration requirements and will enable Companies House 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. Limited partnerships will also be required to maintain a connection to the UK.

Cryptoasset Provisions

The City Watchdog estimates that 2.3 million UK adults now hold Cryptoassets, however Cryptocurrency activity is currently not regulated by the UK’s Financial Conduct Authority.

The bill will provide additional powers to law enforcement agencies so they can more efficiently seize and recover Cryptoassets which are the proceeds of crime or associated with illicit activity, such as, ransomware attacks. The bill also amends the criminal confiscation powers and civil recovery powers of the Proceeds of Crime Act 2002.

So when do we expect the Bill to become law?

The commencement dates for these provisions have not yet been confirmed and are subject to Parliamentary approval. However, Companies House has indicated that it expects the Bill to receive Royal Assent in Spring of 2023.

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This article is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.

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