28/10/22

UK: Government gives assurances that new economic crime Bill will achieve transparency aims.

As published on step.org/industry-news, Thursday 27 October, 2022.

The UK government has published some factsheets explaining how certain measures in the recently published Economic Crime and Corporate Transparency Bill will ensure the maximum amount of transparency about the involvement of a legal entity trust in a chain of ownership.

The Bill was published in August 2022, received its second reading in early October 2022 and has now entered the committee stage. At the second reading, a number of MPs in the House of Commons raised concerns that the Bill was not stringent enough in tackling the misuse of corporate structures.

The new factsheets from HMRC are intended to provide reassurance on how the Bill will achieve its aims. It will amend the Economic Crime (Transparency and Enforcement) Act, enacted in March 2022, with the aim of countering complex arrangements that attempt to circumvent the provisions requiring overseas entities that own UK property to disclose their beneficial ownership on the new register of overseas entities.

HMRC gives the example of an overseas entity that is owned by a UK company that would meet the criteria to be recorded as a registrable beneficial owner, as it is subject to its own disclosure requirements. The UK company may, in turn, be owned by a legal entity trustee but, as the law stands, only the UK company would be required to register as a registrable beneficial owner and information about the trust would not need to be disclosed. The new Bill amends this so that overseas entities must record a legal entity trustee as a registrable beneficial owner, regardless of whether it is 'subject to its own disclosure requirements'. Another amendment will ensure that, wherever there is a trustee in the chain of ownership of an overseas entity, it will fall under the definition of registrable beneficial owner.

A further amendment to the Bill will authorise the Secretary of State of the Home Department? to further expand the description of persons who are registrable beneficial owners, where the overseas entity is part of a chain of entities that includes a trustee.

Other measures in the new Bill will require existing and new persons with significant control and relevant officers of relevant legal entities to verify their identities with the Registrar of Companies. Failure to maintain a verified status when registered with the registrar will be a criminal offence. This will make it much harder to register fictitious beneficial owners, says HMRC.

The registrar will be able to send an overseas entity a notice requiring additional information if there is evidence suggesting that a nominee has been recorded as the beneficial owner. If the overseas entity does not comply with the notice, it will be removed from the register of overseas entities and will lose its rights to deal with UK property.

The amendments will need new guidance and some secondary legislation and the government has not fixed a date for their enactment.