Brian Sims

New crackdown on fraud and money laundering to protect UK economy

WIDE-RANGING reforms designed to bear down on kleptocrats, organised criminals and terrorists looking to abuse the UK’s open economy have been introduced to Parliament by the Conservative Government. The Economic Crime and Corporate Transparency Bill will strengthen the UK’s reputation as a place where legitimate businesses can thrive, while in parallel driving dirty money out of the nation.

Through the package of reforms, anyone who registers a company in the UK will need to verify their identity, which then tackles the use of companies as a front for crime or foreign kleptocrats.

The reforms to Companies House – representing its biggest upgrade in 170 years, in fact – will also see the organisation armed with new powers to check, challenge and decline incorrect or fraudulent information, in turn making it a more active ‘gatekeeper’ over company creation.

Investigation and enforcement powers of Companies House will also be upgraded, thereby enabling the organisation to cross-check data with public and private partners, as well as reporting suspicious activity to security agencies and law enforcement bodies.

The Economic Crime and Corporate Transparency Bill will also help to prevent the abuse of limited partnerships – including those registered in Scotland for money laundering and other nefarious purposes – by tightening registration and transparency requirements for these entities.

Law-abiding businesses and investors across the UK will benefit from simplified filing requirements and a more reliable companies register to inform business and lending decisions. The reforms are specifically designed to ensure that small business owners, consumers and the public are better protected from fraudulent use of their identities and addresses.

End to exploitation

Business Secretary Jacob Rees-Mogg said: “We want the UK to be the best place in the world to invest and start a business, but we must not allow this openness to be exploited by fraudsters misusing the identities of innocent people or corrupt elites attempting to disguise their dodgy dealings.”

Rees-Mogg continued: “This historic Bill will equip Companies House and law enforcement with the tools they need to root out criminals attempting to hide their activities without burdening law-abiding companies with unnecessary bureaucracy. Above all, via strict enforcement measures, we are telling investors that the UK is open for legitimate business only.”

Home Secretary Suella Braverman stated: “The UK is no home for dirty money. The Government has taken unprecedented action to prevent kleptocrats and organised criminals from abusing our open economy and this Bill will go even further. Through this Bill, we are affording our law enforcement agencies greater powers and intelligence capabilities to remain one step ahead of those criminals intent on keeping their corrupt assets out of reach.”

Security Minister Tom Tugendhat explained: “As the former chair of the Foreign Affairs Committee, I commended the Government on the swift legislative action it took on dirty money following the invasion of Ukraine, but I implored them to go even further. I’m delighted that we are introducing reforms that will make it much harder for kleptocrats to shield their ill-gotten gains and treat the UK as their safe deposit box. I’m committed to delivering this vital piece of legislation that strengthens our fight against economic crime.”

Greater powers

Law enforcement will also benefit from greater powers to compel businesses to hand over information which could be related to money laundering or terrorist financing. Red tape around confidentiality liability will be eased to enable businesses to share information in order to more proactively prevent and detect economic crime (including fraud and sanctions evasion).

The new law will make it easier and quicker for law enforcement agencies such as the National Crime Agency to seize, freeze and recover cryptoassets – the digital currency increasingly used by organised criminals to launder profits from fraud, drugs and cyber crime.

The use of this digital currency has significantly increased in recent years, with the Metropolitan Police Service reporting a big rise in cryptocurrency seizures last year alone. Strengthening powers in the Proceeds of Crime Act will modernise the legislation to ensure agencies can keep pace with the rapid technological change and prevent assets from funding further criminality.

The package of measures will build upon the earlier Economic Crime (Transparency and Enforcement) Act brought in following Russia’s invasion of Ukraine. The Act has made it much quicker to impose tough sanctions on Putin’s ‘cronies’ – freezing their UK assets and cutting off funds to the Kremlin’s war machine – as well as establishing the Register of Overseas Entities in a determined bid to root out corrupt oligarchs attempting to hide their ill-gotten gains through UK property.

National Crime Agency view

Graeme Biggar, recently appointed director general at the National Crime Agency, explained: “For years, domestic and international criminals have laundered the proceeds of their crime and corruption by abusing UK company structures and are now increasingly using cryptocurrencies. These Government-led reforms, which are long awaited and much welcomed, will help us to crack down on both.”

Companies House CEO Louise Smyth observed: “We welcome the measures outlined in this Bill, which represent the most significant and far-reaching changes to the UK’s company register in over 170 years of history and will enable us to play a much stronger role in making the UK a great place to do business.”

Smyth went on to state: “If agreed, these changes will allow us to actively improve and maintain the integrity of the register like never before. They will inspire greater trust in our data, help to crack down on economic crime and further drive confidence in the UK’s economy.”

In conclusion, Smyth noted: “While the scale and scope of these changes should not be underestimated, the work already transacted through our wide-ranging and ongoing transformation programme puts us in a strong position to implement them as quickly and efficiently as possible.”

Extended powers for SFO

The Bill includes provisions to expand the Serious Fraud Office’s (SFO) Section 2 powers, which the SFO uses to compel suspected criminals, financial institutions like banks and/or technology companies to share information or documents in relation to a suspected crime.

The Economic Crime and Corporate Transparency Bill outlines changes that would allow these powers to be used in all potential SFO cases at the pre-investigative stage. In other words, before an investigation has been formally opened by the SFO.

This amendment would remove the limitations placed upon use of these powers in Section 2A of the Criminal Justice Act 1988, which only permits the SFO to use these powers at the pre-investigation stage in cases of international bribery and corruption, but currently not in relation to suspected fraud or domestic bribery and corruption.

If granted, the new powers would mean evidence can be gathered at an earlier stage in any SFO case, reducing the agency’s reliance on third parties voluntarily providing information and enabling the organisation to obtain material from institutions such as banks, who are currently unable to share certain information due to confidentiality obligations.

That will speed up the process for gathering information, allowing the SFO to open investigations more quickly. This, in turn can, lead to freezing proceeds of crime more quickly in order to protect that money for victims.

John Kielty, chief intelligence officer at the SFO, said: “The expansion of our ‘Section 2A powers’ as set out in this Bill is a welcome step for the SFO in the challenging fight against fraud, bribery and corruption. These legislative changes would have a positive impact on our operating capability, not only in terms of shortening the length of our cases, meaning that justice for victims is delivered more quickly, but also reducing the number of potential investors at risk and helping us to secure key evidence at pace.”

The SFO is prosecuting six cases in the courts this year totalling £564 million worth of fraud. Three of these cases have already concluded, duly sentencing four criminals to a total of 36 years’ imprisonment.

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