Cracking down on dirty money in the UK

The government has accelerated legislation in response to the Russian invasion of Ukraine

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On 14 March 2022, the Economic Crime (Transparency and Enforcement) Act 2022 became law. The government accelerated the legislation in response to the Russian invasion of Ukraine to crack down on dirty money in the UK and the corrupt elites who attempt to launder their money in the UK.

The act has enabled the following:

Creation of a register of overseas entities to be maintained by Companies House

Overseas companies owning or purchasing property in the UK are required to provide information about their beneficial owners to Companies House. For property in England and Wales the requirements of registration will apply to property acquired since 1 January 1999. For property in Scotland, it is property acquired since 8 December 2014.

Overseas entities are required to state that they have complied with a duty to take reasonable steps to identify (and provide information about) their registrable beneficial owners. Providing false or misleading information is a criminal offence.

Amendment of HM Treasury’s sanctions powers

The government is able to impose sanctions on a wider range of persons, including by specifying certain groups rather than individuals. It also allows the UK to align the designation of individuals 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.

Reform of 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.

Further information can be found on GOV.UK.

Criminals are attracted to property purchases as a method to launder illicit funds due to the large amounts that can be moved, together with low transparency of ultimate beneficial owners when corporate structures or trusts based in jurisdictions with high levels of secrecy are used. Once in place, the register will help mitigate this.

Firms should remain vigilant of criminals looking to evade the newly created Register by amending ownership structures and diluting ownership of corporate structures, and be aware of any risk indicators that a client may be engaged in money laundering.

Firms should report any suspicions of money laundering via a suspicious activity report (SAR) to the UKFIU.

Firms should be aware of and document any money laundering risks posed by their clients and document the mitigating controls in the Firm Wide Risk Assessment (FWRA) and the firm’s AML Policies and Procedures – paying particular attention to its customer due diligence and identifying client risk processes.

ACCA has created a factsheet to provide guidance and help firms understand what is required of them.