The Economic Crime & Corporate Transparency Bill (“the Bill”) is now going through the House of Lords having been passed by the House of Parliament. The Bill, first introduced to UK Parliament on September the 22nd 2022, has had a relatively swift passage through the Commons and the House of Lords and is likely to obtain Royal Assent later this year once it has completed the last reporting and 3rd reading stage.
The Bill covers a broad range of provisions relating to economic crime, including cryptoasset confiscation orders and other broad reforms associated to existing money laundering legislation. The main focus being on improving the control of UK Companies House to "prevent organised criminals and kleptocrats from abusing our open economy".
COMPANIES HOUSE REFORM
There have been calls for reform of Companies House for years. A UK company can be set up online for £12 in less than 15 minutes without a passport. According to Gov.UK, there are over four million companies incorporated in the UK with over c.500,000 companies being incorporated each year.
With the failure to undertake effective checks on Company Directors and Ultimate Beneficial Owners (UBOs) of UK incorporated companies, criminal gangs have for long exploited the system for financial gain; according to the National Crime Agency, c.£100bn is laundered through the UK, much of which would pass through UK incorporated companies.
The current function of Companies House is to maintain a corporate register of UK companies and to make this information available to the public. This limited remit curbs the ability of Companies House to verify the information and effectively identify and report suspicious or bogus registrations to law enforcement agencies.
KEY OBJECTIVES OF THE REFORM
The bill introduces key objectives which will provide Companies House with new powers to identify and combat illicit activity. These will be achieved by requesting additional information concerning Companies House filings; having the ability to proactively share information submitted to the register with public authorities and law enforcement agencies; and, expanding the power Companies House has to remove information from the register.
Once the Bill obtains Royal Assent, secondary legislation is likely to be required to introduce further guidance relating to the implementation of these new reforms for Companies House.
RECOVERY OF CRYTPOASSETS
The Bill also amends parts of the Proceeds of Crime Act 2002 (POCA) by providing law enforcement agencies with further powers to recover and seize cryptoassets which have been identified as being associated to criminal activity including money laundering, fraud and theft through hacking.
Whilst the NCA is unable to provide exact figures relating to the amount of cryptoassets being stolen or laundered with criminal intent, the agency does estimate that over $1billion of illicit cash is transferred overseas from the UK using cryptoassets. By providing additional powers of seizure and recovery to law enforcement agencies, criminals will be deterred from laundering illicit assets from the UK.
BROADER MONEY LAUNDERING REFORMS
A number of broad reforms to existing anti-money laundering legislation are contained within the bill. These include increasing the ability of businesses to share information, most notably between financial institutions; providing the NCA’s Financial Intelligent Unit (FIU) power to obtain information from businesses relating to money laundering without the requirement of an Information Order (IO) or a Suspicious Activity Report (SAR). Another example of more broader reforms relate to enhancing due diligence measures on customers located in certain countries which will be on a list of high risk countries maintained by the Treasury.
BRISK PACE OF CHANGE IN REGULATION
The Economic Crime & Corporate Transparency Bill showcases the pace of change of financial and economic crime legislation. Whilst this pace has been mooted in the past 15 years, this current Bill is estimated to bring about such broad changes and increased powers to law enforcement agencies within a year; this is a true example of the increased pace of change which we are now facing.
The reforms contained within the Bill will impact all financial institutions and other regulated industries, including sectors subject to the UK Money Laundering Regulations. All AML and financial crime policies and procedures, including operational controls, will need to be amended to ensure on-going compliance.
DIGITISING REGULATIONS & POLICY
Digitising policies and having automated lineage to changes in legislation and regulation removes the manual process of updating policies and procedures. Creating standardised taxonomies and normalising global requirements allows for a more streamlined change control process.
Cerebro is the first ever Digital Policy Management platform, delivered by JJCFinTech. It offers a unique service bringing together Regulatory Obligations, Policy Authoring and an associated Rules Repository under one roof. Cerebro has developed a structured architecture which has been mapped to existing policies and obligations detailed in global legislations and other regulatory repositories such as the FCA Handbook. When changes occur to these obligations Cerebro will automatically update the relevant sections of policies and procedures, automating the documentation of changes and controls which new and amended regulations bring in.
Cerebro is also unique in “horizon scanning” changes in regulatory legislation, such as the Economic Crime & Corporate Transparency Bill, allowing firms to plan changes to internal control documents automatically and accurately without the need for manual mapping to the amended Bill.
REDUCING THE CHALLENGE OF THE BILL
The amendments proposed in the Bill will require all regulated and registered firms in the UK to make amendments to a wave of internal policies and procedures. By utilising new and innovative technology solutions, these amendments can be automated thereby reducing the challenges the Bill, and subsequent legislation, introduces.