How will the new economic crime bill work?

The new Economic Crimes (Transparency and Punishment) Bill was presented to Parliament on 1 March.

The need for new legislation in this area has long been recognized by the government, but recent events have pushed the bill to the top of their priority list.

The provisions which have been proposed this week are the first step in the Government’s plan to improve transparency of business and asset ownership in a bid to deter criminals from investing the proceeds of crime in the UK.

Below are key takeaways from a bill that, as currently drafted, creates a registry for foreign entities, strengthens the scope of unexplained wealth orders and increases the risk of financial penalties if violation of financial sanctions. Financial advisors should take note of how these changes may affect both their business and that of their clients.

A new register of foreign entities

At present, there is an important distinction between the treatment of UK entities purchasing property in the UK and that of their overseas counterparts. Since 2016, companies registered in the UK have been required to provide information to Companies House about their ultimate owners and controllers through a register of persons exercising significant control (PSC), but entities registered overseas do not are not required to do so.

The new register aims to rectify this disparity and, while there may be a legitimate basis for a complex and opaque corporate structure, it will become more difficult for the ultimate beneficial owners of these foreign entities to hold property in the UK. and to remain anonymous.

Unless exempted, a foreign entity wishing to invest in a freehold or leasehold property (granted for a term of more than seven years) will need to apply for registration in the new register, indicating the details of the beneficial owners it has taken reasonable measures to identify, and failing that, the administrators, before they can register their title in the Land Registry. All foreign entities that purchased property on or after January 1, 1999 will also have to apply for registration within 6 months of the bill’s entry into force and will be prohibited from disposing of it in the meantime (except in limited circumstances).

In accordance with the definition used by the PSC register, a beneficial owner for the purposes of the draft law can be a natural person, a legal entity, a government or a public authority which directly or indirectly owns more than 25% of the votes or shares of the foreign entity. ; has the right, directly or indirectly, to appoint or remove the majority of the members of the board of directors of the foreign entity; or has the right to exercise or does exercise significant influence or control over the foreign entity. Trustees of a trust or members of a partnership and other entities that do not have legal personality are subject to other rules.

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