Recommendation 12

HM Government · verbatim extract Not Addressed

Since the committee published its report, the government has made several announcements about future legislation. A summary of key legislative activity is provided below. In response to Russia’s invasion of Ukraine the government urgently brought forward the Economic Crime (Transparency and Enforcement) Act to crack down further on dirty money and corrupt elites in the UK. The Act passed through Parliament on an expedited basis to receive Royal Assent on 15 March. This Act introduces a new register which will require anonymous foreign owners of UK property to reveal their real identity, ensuring that they can’t hide behind secretive chains of shell companies. In an amendment to the draft legislation, the act also now requires reporting of trustees, beneficiaries, settlors and protectors of trusts and trust like structures that run offshore companies that own UK property through the register. The legislation will level the playing field with property owned by UK companies, who already need to disclose their beneficial owners to Companies House. The Act will also enable Unexplained Wealth Orders (UWOs) to be sought against property held in trust and other complex ownership structures such as opaque foundations. It also removes key barriers to the use of UWOs by increasing time available to law enforcement to review material provided in response to a UWO and reforming cost rules to protect law enforcement incurring substantial legal costs following an adverse ruling. Reforms made through the Act to section 146(1) of the Policing and Crime Act 2017 will change the basis on which HM Treasury can impose a monetary penalty for a breach of financial sanctions. There will no longer be a need for the Treasury to prove that those who breach financial sanctions knew or had reasonable cause to suspect that they were doing so. Amending the current civil legal test will strengthen the Office of Financial Sanctions Implementation (OFSI’s) ability to take appropriate enforcement action against companies that fail to ensure they are not dealing with sanctioned individuals or entities. This change to the civil legal test will bring the provisions for financial sanctions closer to those for the import and export of arms and that used by US sanctions enforcement. The government believes that a strict liability test accompanied by guidance best allows for robust enforcement of financial sanctions whilst also allowing OFSI to take into consideration a wide range of factors, including self-disclosure, proportionality, public interest, and steps taken by companies and individuals to ensure they do not breach financial sanctions. The Act will allow the government to move faster when sanctioning oligarchs and businesses, as well as intensifying its sanctions enforcement. The Act will allow the UK to align more rapidly with the individual designations imposed by our closest allies via an urgent designation procedure. It also simplifies the legal tests for the UK’s own designations, allowing the government to act more quickly and make changes to further facilitate the designations of groups of individuals. The government has meanwhile published details of further legislation that is planned in the Third Session of this Parliament. This legislation will deliver fundamental reform of Companies House, enhanced information sharing powers to give businesses more confidence to share information on suspected money laundering, and new powers to seize crypto assets from criminals, as the proceeds of crime are increasingly held in the form of cryptoassets. These powers are designed to clamp down further on money laundering and illicit finance. While the government is preparing the Economic Crime and Corporate Transparency Bill at pace, more time is needed as it will feature substantial changes to UK company and partnership law, which we need to get right. The reforms to Companies House amount to the largest change to the UK’s system of setting up and operating companies since the companies’ register was created over 170 years ago. The Corporate Transparency and Register Reform White Paper published on 28 February provides considerably more detail on the way the reforms will operate, and it will help the UK’s business community, law enforcement agencies and all stakeholders to start to prepare for the changes to come. 10 The White Paper sets out, for the first time, the new statutory function for the Registrar to maintain the integrity of the register of Companies. Company agents from overseas will no longer be able to create companies in the UK on behalf of foreign criminals or secretive oligarchs and new proposals will void the appointment of directors of UK companies who are disqualified, undischarged bankrupts or sanctioned under the Sanctions and Anti-Money Laundering Act 2018. The upcoming primary legislation will also feature the widest changes to limited partnership law since 1907. It is vital that the UK maintains ease of doing business