The most immediate impact of the legislation will be to enable the government to impose sanctions on a wider range of persons, including by specifying certain groups (rather than individuals). It can also align the designation of individuals by the UK more rapidly with designations made by the EU, Canada and the US via an urgent procedure. The requirement to consider issues of proportionality and the effect of designation on an individual has been removed. The Act introduces a new strict liability test in respect of sanctions breaches.
Register of Overseas Entities
The Act establishes a new register to be maintained by Companies House (CH). The register will consist of a list of registered overseas entities and documents delivered by such entities to the CH Registrar.
As part of their application, entities will be required to state that they have complied with a duty to take reasonable steps to identify (and provide information about) their registrable beneficial owners. Provision of false or misleading information in an application will be a criminal offence. Entities will be subject to an annual updating duty and failure by the entity (or its officers) to comply with this duty will also be a criminal offence, punishable by daily fines.
The Act provides a power for the Secretary of State to make supplementary regulations about verification of information on the new register. The CH Registrar can make an application to rectify the register (including in relation to material that is factually inaccurate or derived from forgery).
The register will be available for public inspection but certain personal information about individuals (such as date of birth and residential address) will not be made public.
ICAEW is pleased to note that a draft provision, which would have allowed individuals to be exempted from requirements relating to the new register – if the Secretary of State considered it to be in the economic interests of the UK – was removed before the Bill became law.
There will be a six-month transition period between the Act coming into force and the requirement for overseas entities to be registered. However, the Act includes a requirement for any overseas entity to confirm that it has not disposed of any property since 28 February (the date the draft legislation was first introduced into Parliament) or if it has disposed of property, to provide specified information about its beneficial ownership. Failure to comply with this requirement will be a criminal offence.
Unexplained Wealth Orders
The Act makes changes to the Unexplained Wealth Orders (UWO) regime, including by bringing property held in Trust in scope and providing protection for law enforcement agencies against potentially huge legal costs. The Act also provides power to extend the period for interim freezing orders pending determination of an application by the Court.
The Secretary of State must publish an annual report in Parliament that sets out the number of UWO applications made by law enforcement agencies and granted by the Court.
A further Economic Crime Bill
During the debate in the House of Lords, peers highlighted the need for more resources to ensure that Companies House is able to be more effective in verifying the data held on its registers and that law enforcement agencies are able to leverage their powers under the UWO regime and to increase the number of applications made significantly.
In response, the government indicated that some of these matters are likely to be addressed in a second Economic Crime Bill, which will be introduced in the next session of Parliament.
In the meantime, the government will provide an update on the progress in implementing the new legislation within six weeks.