The Economic Crime (Transparency and Enforcement) Act 2022 (the Act) was fast-tracked from the time the Bill was conceived in 2022 through the UK parliament following Russia’s invasion of Ukraine. The Act received Royal Assent on 15 March 2022, though some parts of the Act are yet to come into force. The Act aims to tackle concerns around “dirty money” being used to purchase UK property and improve transparency on ownership, which could previously be shrouded in layers of secrecy.
The Government has enacted legislation to introduce new measures to try to tackle “illicit finance” in the UK property market. The Act was fast-tracked partly in response to Russia’s invasion of Ukraine and became law on 15 March 2022. Part 1 of the Act provides for a new Register of Overseas Entities and their beneficial owners at Companies House. This aims to improve the transparency of overseas entities who invest in land in the UK and to assist in the Government’s drive to act against sanctioned individuals and their assets.
Whilst the Government’s immediate desire is undoubtedly to be seen to be acting against oligarchs and their assets, the new Act sits in the wider context of a move towards increased transparency. While the intended targets of the new regime are clear, the Act will nonetheless have a significant impact on legitimate overseas investors with the introduction of additional reporting obligations which will require close attention to ensure compliance.
The Act will apply to any overseas entities that are registered as the proprietor of significant interest in land. It will include non-UK incorporated companies, even if the company is a UK tax resident, and limited liability partnerships (LLPs); foreign foundations and non-UK partnerships that, under the laws of the country they are governed by, have a separate legal personality.
The three major components of the Act are as follows
- Creation of a Register of Overseas Entities (Part 1, sections 1 to 44 of the Act).
- Amendments to the Unexplained Wealth Order (UWO) regime (Part 2, sections 45 to 53 of the Act).
- Amendments to the existing legislation on UK sanctions (Part 3, sections 54 to 66 of the Act).
The Financial Times noted criticisms of the Government for omitting reforms of Companies House from the Bill, as well as for not providing more resources to tackle economic crime in the UK. Whilst some will claim this Act does not go far enough it is clearly an important development. The momentum set by this Act is clear – standards of diligence in overseas wealth entering the UK can no longer operate in isolation to that of the ordinary UK citizen. Authorities now have significant powers and offenders face both fines and custodial sentences.