The Economic Crime Bill
In the wake of Russia’s invasion of Ukraine there was a raft of secondary legislation passed by the government that prohibited the export, supply and delivery of various goods to Russia. Now that more time has passed, the government is hoping to enact primary legislation that will target individuals and shed more light on a part of the UK economy that has, up to this point, been worryingly opaque.
The Economic Crime (Transparency and Enforcement) Bill is due to be pushed through Parliament this week but what does it do and, more importantly, is it a good change to the law?
Section 3 of the new Act would require the registrar of companies for England and Wales to maintain a register of ‘overseas entities’. The concern at the moment is that there are a lot of shell companies of dubious origin who own land in the UK and use it as a way to launder money. The new register will not only name the company but it will also identify any beneficial owners as well; in other words, the names of the actual people behind the corporation. Failure to do so would be a criminal offence punishable by up to five years in prison. To create transparency this register will be maintained by Companies House and be available to the public.
Meanwhile Part 2 of the Bill reworks so-called Unexplained Wealth Orders. ‘UWOs’ currently allow the courts to compel a person to reveal the source of their wealth and, if they fail to do so, then their property can be confiscated. The proposed reforms would ensure that the police are able to do more to investigate the origins of property and recover proceeds of crime.
Finally Part 3 of the Bill would make it easier for ministers to impose sanctions on individuals by amending both the Policing and Crime Act 2017 and the Sanctions and Anti-Money Laundering Act 2018.
It is certainly the case that some aspects of this legislation will be more effective than others. Making it easier to impose sanctions will be popular amongst the UK’s allies in the present crisis because this country has currently imposed far fewer sanctions than counterparts in the EU or the US.
On the other hand it seems like the new register of overseas entities will not be as watertight as some might hope. Adam Bienkov of the Byline Times points to the proposed section 18 and describes it as an ‘oligarch loophole’. It is true that this does allow for ministers to grant exceptions to registration but that is subject to limitations. What is more worrying is that owners of property who are required to register would be granted a grace period and therefore a chance to dispose of assets that might get them in trouble. Originally that grace period was due to be 18 months but, at the time of writing, looks like it will be reduced to six months. Labour would like to reduce it further to 28 days but that may not happen.
The changes to UWOs are also not likely to be very effective in practice. While the orders can be useful to law enforcement, they are only used very rarely and so the changes will not be very meaningful unless that fact changes. In late 2020 it was reported that there was reluctance to use UWOs because the legal costs could end up being exorbitant.
Overall this lack of effectiveness might be by design. The government wants to be seen to be doing something in response to Russia’s invasion and sanctions are the most politically palatable way to do that. A new Act of Parliament that looks powerful but doesn’t change a lot is a good way to meet that objective.
In a strange way that might not be a bad thing. Knee-jerk legislation in response to big news events is often full of holes and tends to do more harm than good. It is nevertheless worrying to see a bill fly through Parliament in a week because what is gained in speed is lost in proper scrutiny. This is especially concerning in this instance because the Economic Crimes Bill would give ministers much greater powers and imposes new criminal sanctions.
It is vital that this country does more to stop oligarchs using the UK as fertile ground to hold and launder their illicit gains but doing so while gifting the government more powers and potentially undermining core liberal principles is worth thinking twice about.
In this week’s episode of the podcast we discuss a particularly controversial policy of the Home Office. In order for a child to apply for British citizenship it currently costs them/their family more than £1,000. For many this is simply unaffordable and so one child took the government to court.
Episode link: http://uklawweekly.com/2022-uksc-3/
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Marcus