HomeAMLPlaying catch-up with the UK’s dirty money

Playing catch-up with the UK’s dirty money

Syed Rahman, Partner at financial crime experts Rahman Ravelli, runs the rule over the new Economic Crime Act, which came into force in March 2022 to tackle dirty money in the UK

The much-lauded, heavily-anticipated economic crime bill has become law. To give it its full title, the Economic Crime (Transparency and Enforcement) Act 2022 has become the government’s considered attempt to halt the flow of dirty money to these shores.

Given that everyone with a passing interest in financial crime has been aware of the situation for years, the fact that it took one nation invading another to make the Act a reality doesn’t reflect well on anybody involved.

But what we do, finally, have is the creation of a register that will show the genuine owners of the overseas companies that have control of some of the UK’s most valuable assets. It will cover any purchases of property in England and Wales over the last 20 years – and since December 2014 in Scotland – by any non-UK entity.

The retrospective nature of this will certainly make it more useful in targeting funds of dubious origins and bring greater openness to such transactions. Any praise that could be given for this, however, should be tempered by the fact that legislation to introduce such a register was drafted and then dropped in 2018.

It is also four years since unexplained wealth others (UWOs) became an option for law enforcement agencies. Critics of them would argue that they may as well have been shelved in 2018 also, for all the impact they have had. And yet the new Act has given more steel to the UWO regime.

The time agencies have to investigate material received in response to an unexplained wealth order before discharging any interim property freezing order over the assets in question is rising from 60 to 186 days. And procedures have been put in place to ensure these organisations do not face the prospect of paying unlimited legal costs if an application for a UWO is not successful. This latter change will be a good incentive to utilise UWOs, as law enforcement agencies will not be penalised when their application fails. But given the history of UWOs to date, it may well have been better to have these measures in place from the time they became a reality.

Jump start

The Act seems to have attempted to jump-start two vehicles for the authorities in their race to catch up with the dirty money in the UK. In the case of one of these – the comprehensive overseas register – it is the first time it has been up and running. UWOs, however, have been an idea that appears to have stalled in recent years.

Brought in as part of the Criminal Finances Act 2017 and available to the National Crime Agency (NCA), Serious Fraud Office (SFO), Financial Conduct Authority (FCA), HM Revenue and Customs and even the Director of Public Prosecutions from the following year, hopes were high for UWOs. Allowing the authorities to target assets believed to have been obtained illegally, UWOs can be used against individuals who have not been convicted or even charged with an offence. Yet so far, they have been used in only four cases. Only the NCA has used them – and the last time it obtained one was 2019.

It now remains to be seen if the new Act’s efforts to make UWO’s a more attractive option has the desired effect – or is simply a belated effort to breathe life into an idea that has had its day. A quick glance at the track record of UWOs until now indicates that a carefully-planned and conducted response can nullify the threat of one. If the Act’s UWO Version 2.0 approach proves to be stacking the odds in favour of the authorities, we may see UWOs on a more regular basis. But that, at this stage, is one mighty big if.

Tightening of the screw

As a response to Russian aggression, the Act represents a tightening of the screw by a government that is looking at the most viable means of targeting those with Kremlin links. The government is looking to move quicker and more effectively when it comes to sanctions, and this Act will be of use in this.

One aspect of the Act that will be of particular help is the removal of the need to show that a corporate or individual knew or had reasonable cause to suspect that their conduct breached a sanction, in order for them to be penalised by OFSI (the Office of Financial Sanctions Implementation). This could lead to more civil enforcement action against companies and individuals. Financial institutions, such as banks, may also now find themselves in the spotlight, with law enforcement agencies asking them why their own due diligence procedures didn’t pick up on the allegedly illicit funds.

But there can be no escaping the fact that some of the measures that have now become law under the Act could have been in place much earlier. The Act may well prove to be effective and of great value. But it represents, nonetheless, a very hurried and overdue attempt to play catch-up.

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