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What the UK’s economic crime bills mean for the fight against money laundering

The Economic Crime (Transparency and Enforcement) Act focuses on property ownership. At its core, it recognizes that layers of secrecy and foreign-owned companies allow individuals to bypass sanctions by hiding the true ownership of property in the UK.

September 5th, 2022

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In August 2022, the UK’s long-awaited “Register of Overseas Entities” was implemented. 

This new piece of legislation is now widely seen as a cornerstone of the government’s Economic Crime Act. However, although it is revolutionary for the UK’s fight against money laundering, it’s actually just the latest move the country has made to stem the flow of illegal money, following a year of changes to relevant laws.

A timeline of the UK’s regulatory changes

Back in February 2022, following Russia’s invasion of Ukraine, the UK government began to bolster its ability to track illicit funds and prevent money laundering.

However, although they put various legal mechanisms in place in an attempt to stem the flow of dark money, it quickly became apparent that several weak points in the UK’s anti-money laundering (AML) armor were still in existence.

As a result, two acts of parliament have been tabled to further address perceived loopholes in the country's fight against money laundering. 

The first of those acts, the Economic Crime (Transparency and Enforcement) Act, has now been passed into law. The second piece of legislation, the Economic Crime and Corporate Transparency Bill (dubbed the Economic Crime Bill 2.0), was included in the Queen’s Speech in May. However, it did not pass through parliament in time for the summer recess.

The Economic Crime (Transparency and Enforcement) Act

The Economic Crime (Transparency and Enforcement) Act focuses on property ownership. At its core, it recognizes that layers of secrecy and foreign-owned companies allow individuals to bypass sanctions by hiding the true ownership of property in the UK.

The act corrects this. Now, any overseas entity that owns property in the UK has to register the identity of the beneficial owners of that overseas entity at Companies House. This register must also be continually updated.  

The register aims to limit the ability of people to own property through secretive offshore shell companies, a practice that has been widely associated with money laundering and tax evasion. However, the act has little to say about other ways that illegitimate funds are moved through the UK’s economy. To tackle those, the government has proposed a second economic crime bill.

The Economic Crime and Corporate Transparency Bill 

In May, the government listed the main elements of the second economic crime bill. This included reforms to Companies House.

As a result, Companies House will now become “a more active gatekeeper over company creation and custodian of more reliable data, including new powers to check, remove or decline information submitted to, or already on, the Company Register.”

On top of this, the Queen’s Speech also alluded to changes to information sharing laws. However, as the act was not passed before the summer recess, financial institutions remain uncertain about exactly what these data-sharing mandates involve.

However, it appears likely that financial institutions in the UK will soon be required to put data-sharing measures in place. This could cause huge changes to any given financial institution’s tech infrastructure.

Ensure AML compliance with Veriff

The events of the last year in the UK show just how quickly the AML landscape can change. As a result, financial institutions must continually stay aware of the regulatory landscape and have the ability to respond quickly. This is particularly the case as further regulatory changes seem likely when the summer recess of parliament ends.

Thankfully, when you employ the use of our AML screening tool, you can maintain regulatory compliance while also actively increasing your customer conversions. With Veriff, complying with KYC regulations and prioritizing user experience isn’t a compromise. To find out more, talk to the team today.

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