The Economic Crime and Corporate Transparency Bill 2022 promises a medley of reforms, intended to strengthen 'the UK's reputation as a place where legitimate business can thrive, whilst driving dirty money out of the UK'. This article explores whether the proposed reforms would meet these objectives.
Reforms to Companies House
Companies House has long been criticised as a gateway for economic criminals operating in the UK and elsewhere, and an effective passport for criminal money entering the legitimate financial system. It is well regarded internationally and provides some legitimacy to UK-registered businesses, but it notoriously lacks checks to prevent widescale and systemic abuse by determined economic criminals. The proposals seek to introduce such checks, including by broadening the powers of the Registrar of Companies so they become a more active gatekeeper over company creation, and a custodian of more reliable data concerning companies and other UK-registered entities. While broadly sensible in principle, the reforms are unlikely to be more than an administrative hurdle for sophisticated economic criminals, not least because the Registrar's significantly expanded 'gatekeeper' role is highly unlikely to be adequately funded.
Cryptoassets can be useful in committing crimes, in evading tax, in breaching or circumventing financial sanctions and for laundering money. Cryptoassets have posed difficulties to law enforcement, mainly due to an uncertain legal route to 'seize' (as opposed to 'freeze' or 'restrain') cryptoassets. The proposals include reforming the Proceeds of Crime Act 2002 (POCA) to enable law enforcement to seize cryptoassets during an investigation without first having arrested someone for an offence; enable officers to seize cryptoasset-related items; and enable the courts to better enforce unpaid confiscation orders against a defendant's cryptoassets. It is also proposed to bring cryptoassets within the scope of civil forfeiture powers in Part 5 of POCA and to enhance investigative powers in Part 8 of POCA, similar to investigatory powers that exist to support the forfeiture of cash, listed assets and funds in certain accounts. These reforms could make a real practical difference in the increasing number of cases where cryptoassets feature. Again, however, the chronic under-resourcing of law enforcement is likely to limit their effectiveness.
SFO's Section 2 powers
Section 2 of the Criminal Justice Act 1987 ('CJA 1987') enables Serious Fraud Office (SFO) officers to compel persons to answer questions, furnish information, or produce documents – importantly, however, only once the SFO has formally opened an investigation – which in turn requires the director to have reasonable grounds to suspect an offence involving serious or complex fraud, bribery or corruption. This hurdle delays (and likely prevents) some cases from proceeding to a formal investigation, with the SFO having to rely on 'traditional' investigative tools while conducting preliminary enquiries. The s2 compulsory powers remove obstacles (including confidentiality obligations) and allow the SFO a direct and speedier route to key evidence. In 2008, SFO officers were granted access to their s2 powers at the 'pre-investigation' stage of international bribery and corruption cases (due to difficulties in obtaining evidence in such cases). The proposal is now to extend the use of s2 powers to all cases during the pre-investigation phase. Section 2 compulsory powers are exercisable without judicial scrutiny, are in tension with the rule against self-incrimination, and impact the ECHR Article 8 right to private and family life. When the CJA 1987 was enacted, s2 powers were not granted during the pre-investigation phase to strike a fair balance between rooting out fraud but not being oppressive toward those whose affairs are investigated. The proposed reform seeks to change that balance.
In terms of enhancing the SFO's effectiveness in the fight against economic crime, the far more important issue is resourcing, with additional questions of management and competence where the SFO is concerned.
Originally Published by Solicitors Journal
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