Long Read  

UK money laundering landscape needs less talk and more action

UK money laundering landscape needs less talk and more action
(John Mcarthur/Unsplash)

On March 15 2022 the UK’s Economic Crime (Transparency and Enforcement) Act 2022 received Royal Assent.

At the time, the government announced the act would provide the legislative power needed for the UK government to respond to the Russian invasion of Ukraine. Specifically, it ensured Russian oligarchs with financial links to the UK could be sanctioned. 

While this stands true, the reality is that the legislation was not initiated in response to the invasion. Rather, the origins of the act can be traced back to December 2019 when the Treasury Committee flagged serious concerns over the state’s ineffectiveness in tackling economic crimes. 

The result was the drafting of an economic crime bill to counter fraud and money laundering in the UK. Yet in January 2022 progress stalled. There were claims the bill would be delayed until the next legislative session, resulting in the high-profile resignation of government minister Lord Theodore Agnew and general criticism of the state’s inability to combat financial crime. 

Russia’s invasion of Ukraine completely changed this dynamic, compelling the government to quicken the bill’s development and place economic crime at the top of the political agenda. What had initially seemed like an impossible legislative outcome at the beginning of the year soon became a reality with the economic crime bill fast-tracked through parliament. 

Since receiving Royal Assent, the act has introduced a new register of overseas entities, requiring overseas entities owning property in the UK to register the identity of the beneficial owners at Companies House. It has also changed the regime on unexplained wealth orders, and amendments to UK legislation governing the imposition of sanctions. 

The act is an important step in the UK’s long-term objective of fighting illicit financial activities in the country. However, the speed in which it was legislated has meant there are areas of financial crime that have been overlooked.

On top of this, the imposition of sanctions on Russian oligarchs revealed the extent in which questionable individuals have been regularly using the country’s open economy to facilitate illicit activities. 

It is questionable whether the act would have been passed if the Russia-Ukraine conflict had not occurred. Regardless, the government has now taken the front foot.

As part of the Queen’s Speech in May 2022, a second economic crime bill was announced for the 2022-23 parliamentary session, with the aim of driving dirty money out of the UK and strengthening the country’s reputation as a legitimate and open location for businesses to thrive. 

What do we know about the economic crime bill 2.0? 

Specific details of the economic crime bill 2.0 have not yet been released. However, the government has given some indication of the issues it seeks to address, covering the gaps left by the Economic Crime Act. A core focus is on reforms to Companies House.