The new Economic Crime (Transparency and Enforcement) Act received Royal Assent on 15 March 2022 (the Act), following an expedited passage through Parliament. After repeated delays to the progression of the legislation amid much criticism, the bill has now been fast tracked through UK Parliament following the invasion of Ukraine by Russia and the focus of Russian money in the UK. The Act is aimed at strengthening the UK's fight against economic crime.
New measures introduced by the Act include:
- a beneficial ownership register for overseas entities holding UK real estate;
- strengthening of unexplained wealth orders (UWOs); and
- making it easier to prosecute anyone involved in sanctions-busting
REGISTER OF OVERSEAS ENTITIES
The most notable change from a Jersey perspective is that a new Register of Overseas Entities, requiring those behind foreign companies which own UK property to reveal their identities, will also be created under the Act. An overseas entity that owns such property will be required to register with Companies House (the UK registrar for companies), take reasonable steps to identify its beneficial owners and provide verified information about them to Companies House. Some information on the register – including the identities of overseas entities and beneficial owners – will be open for public inspection. There will also be ongoing requirements for overseas entities to provide annual updates.
The register will apply to future acquisitions of UK land but also retrospectively, to property bought by overseas owners since January 1999 for property in England and Wales, and since December 2014 in Scotland.
Whilst there are exemptions from registration for beneficial owners, these are limited and specific and advice should be obtained before seeking to rely upon an exemption.
We understand that entities who refuse to reveal their beneficial owner(s) will face tough restrictions. If, when the property registered in the name of the overseas entity, there is a failure to identify the beneficial owner, the property will effectively be frozen, with the owner unable to lease it, sell it or raise a mortgage.
Penalties for non-compliance include criminal liability which, depending on the offence, can be punishable by up to five years' imprisonment for the most serious breaches and fines. The Act allows for the imposition of a financial penalty, which may also include a charge on a property.
Jersey structures that already own UK property, or are about to acquire UK property, need to consider their obligations under the Act carefully and take appropriate advice in order to avoid inadvertently falling foul of the new requirements. There is a grace period of 6 months for overseas entities to ensure compliance with the obligations under the Act.
We anticipate that any transactions that involve the disposal or acquisition of UK property will be subject to heightened scrutiny and due diligence, with a particular focus on beneficial owners.
We understand that these measures form part of a wider package of legislative proposals to tackle illicit finance which will be introduced by UK Parliament in the coming months, including reforming Companies House and introducing new powers to seize crypto assets more easily.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.