On 2 February 2022 the Treasury Select Committee published its Economic Crime Report ("the Report"). This Report is the result of the Select Committee's inquiry into Economic Crime that commenced in 2020. The Report makes interesting reading, and gives some insight into the direction that efforts to combat economic crime might take in the years to come.
Fight against fraud: Economic Crime Bill
One of the key recommendations made in the Report is for the Government to put forward an Economic Crime Bill to aid the fight against fraud and other forms of economic crime. Lord Agnew, who recently resigned from his role as Treasury Minister over the Government's handling of fraud in the UK, argued in a post-resignation article that an Economic Crime Bill would help plug the regulatory gaps that currently exist. Whilst the content of the Bill is yet unclear, the Treasury Select Committee's Report does give further insight.
Corporate criminal liability reform
One area highlighted by the Report is the role that companies play in economic crime. The Select Committee expressed some disquiet that the Government had not yet implemented reform of the principle of corporate criminal liability. With the Law Commission due to report on corporate criminal liability in the spring the Report urges the Government to swiftly enact the legislative recommendations which flow from that review.
The Report goes on to highlight the alleged widespread exploitation of UK company registration to facilitate economic crime. Despite the introduction of the People with Significant Control register, which aims to identify the true ownership of companies, the UK Company structure regime is still thought to be open to widespread abuse. Companies House, the UK Government agency responsible for the maintaining of such records in the UK, does not have powers to verify information on the register and cannot reject an application for registration for reasons other than non-compliance with its registration requirements. There are calls to tighten the rules, on the basis that the current system is being widely abused with shell companies being set up in the UK by nominee owners that provide anonymity to beneficiaries by virtue of lesser regulation of companies in other jurisdictions.
Beneficial ownership of property
Linked to this is the issue, also identified by the Select Committee, of the beneficial ownership of property. With the purchase and/or sale of real estate being widely regarded as one of the traditional vehicles through which money is laundered, there is a view that more can be done to close any loopholes that facilitate such activity.
Although there is no certainty over how the Government may respond, the Report suggests steps which could be taken to combat economic crime. A Registration of Overseas Entities Bill was drafted in 2018 with the aim of increasing the transparency of property ownership in the UK. It is now at the second reading stage in the House of Commons.
Additionally the Government could look to increase the costs of company registration and introduce powers allowing Companies House greater to scrutiny of applications. Separately the Government has already held three consultations concerning the reform of Companies House and implementation of measures to reduce the risk of exploitation of the registration system. In light of this developed process, implementation of any measures should not be far away.
Tackling financial crime
In the last year there has been increased focus on how the UK can maintains its position as a global financial centre, whilst at the same time doing more to tackle financial crime. One of the interesting points raised by the Report is whether there ought to be a single law enforcement agency that has clear mandate and objectives for fighting economic crime. This would be in place of what the Select Committee regards as the more disparate arrangements that are currently in place whereby multiple agencies such as the SFO, HMRC, FCA and NCA all bear the responsibility of fighting economic crime alongside other crime fighting and regulatory objectives. It remains to be seen whether such thinking will lead to the significant step to create a single agency, but what is clear is that there is likely to be a significant increase in enforcement (and perhaps even legislative) activity that is designed to tackle the issue of economic crime.
Comment by Matthew Ewens, Partner in White Collar Crime & Investigations at Mishcon de Reya:
"With law enforcement and the Government separately coming under fire recently for the lack of enforcement and prevention with regards to economic crime, we should expect to see those bodies using all available powers to prosecute and recover the proceeds of crime, with the Government complimenting these efforts with tighter regulation. This will bring with it increased scrutiny of financial dealings in the UK as well as a greater burden for those wishing to transact."