The Economic Crime (Transparency and Enforcement) Act

The Economic Crime (Transparency and Enforcement) Act was recently brought into effect very quickly.  The haste with which this went through Parliament was due to the Russian invasion of Ukraine and the massive concern about the origins of funds held by wealthy Russian oligarchs in this country.  There have been calls for a crackdown on oligarch money for a number of years and all sorts of concerns that the funds of the oligarchs have been welcomed to the UK to buy property and political influence.

Will this Act make any difference?

The flagship provision is a register of foreign ownership.  No longer will foreign owners be able to hide behind an arcane web of corporate ownership and law enforcement agents will be able to work out in a straightforward manner who owns what.  There are severe penalties if you do not comply with the Act and very difficult hurdles to overcome if you try to argue that you do not have to comply.

Let me make a prediction.  This legislation will have the same puny effect that Unexplained Wealth Orders have had.  They were introduced by an Act of Parliament in 2017.  These were touted almost as a nuclear weapon against organised criminals including Russians closely aligned with Vladimir Putin.  The legislation has been a complete damp squib.  It has not even been used against Russian oligarchs.  The new Act changes how Unexplained Wealth Orders can be granted and against whom.  In theory, there are more people who might be caught by the Orders, longer periods to freeze assets whilst investigations are ongoing, less risk of enforcement agencies having to pay costs if they do not succeed, and a watering down of the evidential basis for obtaining an Order.  The provisions in relation to financial penalties, the reporting of breaches, and the requirement for those against whom proceedings are brought to provide information also suggests, in theory, that the Government is serious in its intention.

Use of the legislation

But as they say “fine words butter no parsnips “  And so another prediction.  This legislation will not be so widely used that it makes any great difference.  Those who are on the receiving end of it are still likely to have deep pockets.  There are potential avenues open to make Human Rights Act challenges even though the Government seems hellbent on diminishing the human rights provision in the European Convention and the Human Rights Act. Also if you do not have more enforcement officers and more funding to bring such actions and if the whole Justice System (criminal and civil) is not funded beyond its paltry current level then all of this will largely be noise rather than action.

I wonder, for example, what funds will be provided for Companies House to gain the ability to effect the necessary changes the new law brings.

A very laudable initiative.  I just don’t see the funding being there, law enforcement being able to make much of an impact, or the Courts dealing with matters in a speedy manner.  Therefore it is likely that this legislation, welcome as it might well be in most quarters, will not make anything more than a minimal splash.  Maybe I am wrong.  Time will tell. I wouldn’t bet any 500 Euro notes on it though.

John Goodwin June 2022