Updates to the new Financial Crime Bill – What could they mean for your business?
On Monday, March 14th, members of the Lords will begin a detailed examination of the Economic Crime (Transparency and Enforcement) Bill during committee stage – and all subsequent stages.
In 2018, a draught Economic Crime Bill was created, and aspects of the Bill have been considered for several years – most notably, the registry of offshore organisations owning UK property, which was initially announced by then-Prime Minister David Cameron in March 2016. The Bill’s passage into law had stalled as the government focused on other reforms, leaving the public in the dark about what the bill would contain and criticising the government for not doing enough to tackle financial crime.
Why was the bill created and why has it been updated now?
The Economic Crime (Transparency and Enforcement) Bill aims to create a database of foreign businesses and their beneficial owners, revise financial sanctions legislation, and change the UK’s Unexplained Wealth Order (UWO) to give criminal investigators more power.
Due to the recent unfolding of the events in Ukraine, the government has accelerated the Bill and promised that additional measures, including a broader Economic Crime Bill, will be introduced in the coming months.
At committee stage, members have proposed amendments to the bill on a variety of topics, including:
- Preventing sanctioned individuals from selling or transferring their funds and economic resources or moving them outside of the UK.
- Where an application for registration as an overseas entity discloses that a registrable beneficial owner is a trustee, it must also include additional information about the trust.
- RBO’s will have to provide any former names
- A whistle-blower office to collect and safeguard whistleblowing complaints and the sharing of information by HMRC in connection with offences forcing overseas entities to identify the beneficial owners of UK property they possess.
The bill proposes improvements that are likely to increase the vigilance with which sanctions are enforced. Currently, the UK’s sanctions enforcer, the Office for Financial Sanctions Implementation (“OFSI”), can only impose monetary penalties on someone who violates financial sanctions if the OFSI is convinced that they knew or had “reasonable cause to think” that they were doing so. The Bill eliminates this criterion, allowing OFSI to levy monetary fines based on ‘strict culpability’. Companies that have violated sanctions but have not been penalised to be named publicly by OFSI.
Following the completion of the committee stage, the report stage and third reading are likely to follow.
This flurry of economic crime measures will allow for more vigorous enforcement, and the Government’s declarations suggest that they will be heavily used in support of the UK’s reaction to the crisis in Ukraine in the short term.
However, while those recent events have undeniably prompted their implementation, they are not targeted at Russia alone (unlike the UK’s recent financial sanctions) but are part of a broader reshaping of the UK’s economic crime landscape.
It remains to be seen how successful this will be, how long current levels of political will and enforcement appetite will last, and what influence these measures will have outside of the current regulations.
How can a contingent workforce help you keep up with the pace of change?
Due to increased regulatory obligations and uncertainties, many UK businesses are faced with the task of implementing still more regulatory compliance into their systems and processes to successfully detect and deter financial crime.
With most firms already struggling to meet current AML requirements, as stated directly by the regulator, the prospect of increased regulatory scrutiny and processes because of increased sanctions and updates from the bill, combined with an ever-changing set of rules to keep up with, means that firms must always have the right resource in place in their compliance teams.
Ensuring that the skills and suitability of the individuals you retain are just as imperative, if not more so than the technology automation you implement. The human element is still the single most crucial aspect of your compliance function and regardless of what technological development or trend comes to play, this will always be true.
Ultimately, hiring the right talent should be at the forefront of ensuring your compliance team is as resilient and prepared as it can be.
Works Cited:
- www.whitecase.com. (n.d.). UK Government Introduces New Legislation to Tackle Economic Crime and Sanctions Evasion | White & Case LLP. [online] Available at: https://www.whitecase.com/publications/alert/uk-government-introduces-new-legislation-tackle-economic-crime-and-sanctions [Accessed 15 Mar. 2022].
- www.parliament.uk. (n.d) Lords debates economic crime transparency and enforcement bill| [online] Available at:https://www.parliament.uk/business/news/2022/march-2022/lords-debates-economic-crime-transparency-and-enforcement-bill/ [Accessed 15 Mar. 2022].
