On Friday 25 November 2022, the Economic Crime and Corporate Transparency Bill (the Bill) entered Parliament. The Committee Stage (Commons) was brought to a conclusion on Tuesday 29 November 2022. The Bill, as amended by the Public Bill Committee, was published on 30 November 2022. The Bill proposes various reforms designed to reduce economic and financial crime in the UK, primarily by:
- Proposing changes to the criminal law enforcement regime to strengthen the UK’s broader response to economic crime by increasing information sharing between regulators and authorities and expanding various law enforcement powers; and
- Introducing additional corporate measures to increase transparency, primarily by improving the reliability of the data on record at Companies House.
The Bill aims to achieve these objectives through a number of reforms, including:
Proposed changes to the criminal law enforcement regime
Information sharing between regulated firms
The proposed amendments are designed to encourage voluntary information sharing between firms, with the idea that this will assist in preventing or detecting economic crime, and in any subsequent investigations.
The Bill proposes that firms in the regulated sector will be able to share customer information with other firms in the regulated sector where a firm has requested customer information and the firm with that information has taken safeguarding action in relation to that customer as a result of economic crime concerns. The proposal is that any such disclosure would not risk civil liability for a breach of customer confidentiality provided that the disclosure of information would assist the firm receiving the information with customer due diligence / identity verification or deciding whether to take safeguarding action. However, data protection restrictions on the information would continue to apply.
Expanding the SFO’s powers
Currently, the SFO can only use its information gathering powers before a formal investigation has been opened in cases of international bribery. It cannot, for example, require information be provided in fraud-related investigations without opening a formal investigation. The Bill proposes to expand these powers to allow the SFO to seek information in all cases, without opening a formal investigation. This could significantly increase the number of information requests made by the SFO – and potentially the number of investigations then opened.
Currently, the National Crime Agency (NCA) is only able to make use of Information Orders on firms once the firm has submitted a suspicious activity report (SAR). The Bill will allow the NCA to make an Information Order before a SAR has been submitted, enabling proactive intelligence gathering – and likely sharing – by the NCA.
Additional reforms are also proposed designed to give enforcement agencies more expansive powers to seize cryptoassets where there is a suspicion that these may be the proceeds of crime.
Proposed corporate registration reforms:
Companies House has been criticised as a ‘gateway’ for economic crime: whilst it is a comprehensive database it lacks a number of checks which may go some way to preventing abuse by criminals. The proposed reforms would expand the powers of Companies House to query and reject filings, introduce additional verification processes and require additional information / filings. Whilst this will likely create an additional administrative burden on companies, when coupled with the proposals outlined above, it is expected that Companies House will work with law enforcement bodies through increased sharing of information in order to assist in the effort to reduce economic crime.
The Committee Stage was brought to a close on Tuesday 29 November. The date of the next stage, the Report Stage, is yet to be announced, as there is no set period between the end of Committee Stage and the start of the Report Stage. The Report Stage is usually followed immediately by debate on the Bill’s third reading. Subject to Parliamentary approval, Companies House has indicated that it expects the Bill to receive Royal Assent in Spring of 2023.
Whilst, if enacted, the Bill would strengthen the UK’s economic crime protections there are concerns that further financial support is needed for regulators in order to fund these reforms.
The Bill follows on from the Economic Crime (Transparency and Enforcement) Act passed earlier this year. For more information see our article here.