Economic Crime Act: a vital tool or meaningless reform? | Fieldfisher
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Economic Crime Act: a vital tool or meaningless reform?


United Kingdom

Our previous article on the Economic Crime (Transparency and Enforcement) Act 2022 examined the potential utility of the new legislation for the purposes of asset tracing. The Act introduced a new Register of Overseas Entities which requires overseas companies and individuals to declare the beneficial ownership of all property bought in England in Wales over the past 20 years. Those who do not declare their beneficial ownership will face penalties.

The Register of Overseas Entities may serve as a useful tool for lawyers and investigators to trace assets owned or control of defendants and prospective defendants. It is typical for claimants to  have to grapple with complex asset structures globally, where the defendant has deployed different methods to hide such assets and make enforcement difficult. What is particularly useful about the register in this respect is that it requires information relating to properties acquired over the past 20 years. This means that historic judgments that have not been enforced owing to lack of identifiable defendant assets, could be given a new lease of life.

But whilst there are benefits to claimants in principle, the practical reality may be altogether different. Since the deadline for registration on 31 January 2023, some 13,000 offshore companies have failed to declare their ultimate owner. The Act provides that those who fail to comply with the deadline could be liable to fines, imprisonment or both. However, the sheer number of unregistered entities indicates that a vast majority of overseas property owners are unflustered by this threat.

There also remains a notable loophole which debilitates the impact of the register. An overseas property owner can use an offshore trust to indirectly own the property. Whilst this does have to be reported this to the Trust Registration Service at HMRC, where the authorities will know about the true ownership, ordinary members of the public will have no such visibility.

The Act's purpose was to provide transparency to the ownership of UK based properties. The untroubled approach overseas owners appear to have taken with reporting, coupled with the lack of transparency in relation to properties owned through overseas trusts, highlights the Act's deficiencies.