Published on 22 September, the Economic Crime and Corporate Transparency Bill is the second significant legislative development of this type in 2022 (following the Economic Crime (Transparency and Enforcement) Act 2022, which was speedily enacted following Russia’s invasion of Ukraine).
The new Bill brings forward a host of additional reforms which had long been on the government’s agenda. Some are sensible and welcome, others less so, and this blog looks at both. But as ever, the proof of the pudding will be in the eating: the government can create new offences and increase investigative and enforcement powers to address a wide range of misbehaviours, but for any changes to be meaningful they must be backed up with appropriate financial support. The fear is that the public purse strings are so tightly drawn that truly effective reform is strangled.
First and foremost the Bill addresses Companies House. The changes are intended to improve the transparency of our national corporate register, and to transform it into “a more active gatekeeper over company creation” rather than the rather passive role of data repository that it currently fulfils. In practical terms this means:
- the introduction of identity verification for anyone who wishes to register a company (directors and People with Significant Control), something it is hard to believe has not already been in place for some time.
- enhanced powers to ensure the reliability of data held, so that Companies House may now check, challenge, remove or decline information provided or already recorded on the register.
- more effective investigation and enforcement, with the ability to pro-actively share with law enforcement agencies any concerns about suspicious activity.
New measures relating to corporate registration also target the abuse of limited partnerships (for example to facilitate money laundering) by introducing stricter registration, transparency and UK connection requirements.
Elsewhere, the Bill draws in cryptoassets to the confiscation and civil recovery regimes of POCA. While denial of criminally-generated assets is a laudable aim (and summary civil recovery is one of the true success stories in terms of volume of cases successfully brought), convictions are, of course, a prerequisite for confiscation. The much-publicised backlog of cases in the criminal courts as well as the long term decline in the number of criminal prosecutions do not inspire any great hope that expanding the prosecutorial armoury in the field of confiscation will herald any real change.
Similar hurdles may stand in the way of another reform in the Bill: the broadening of the SFO’s section 2A powers (created by a 2008 amendment to the Criminal Justice Act 1987), which compel the provision of information at the pre-investigation stage. Up to now, the powers have been exercisable only in cases of international bribery and corruption but the Bill extends them to all SFO cases. Unsurprisingly, the SFO has welcomed the change, which is intended to enable the agency to more effectively filter out cases that do not merit formal acceptance. However, if and when the SFO brings a prosecution it must grapple with the structural inefficiencies of the resource-starved criminal justice system. This, combined with a number of high profile failures and its own limited budget, acts as a disincentive to even open investigations in the first place, and recent years have seen a clear downturn in numbers.
Different aspects of the Bill have come in for criticism by the Law Society and Bar Council respectively. The former raising concerns about the removal of the £25,000 cap on SRA fines for economic crime, which may result in serious cases that would be more appropriately dealt with by the SDT not being escalated. Meanwhile the Bar Council opposes – on both financial and principled grounds - a new requirement for regulators to promote the prevention and detection of economic crime. It is feared this will increase costs to those subject to regulation and, more fundamentally, may conflict with a lawyer’s role in representing clients.
The Bill’s aims may well be laudable but it is by no means flawless. Moreover, even its positives are unlikely to have the desired effect without sufficient investment. The financially-straitened reality of recent years, compounded by the present turmoil in the UK economy, raises very real doubts that the necessary resources will be made available for the Bill to be a successful piece of legislation.