The Economic Crimes (Transparency and Enforcement) Act 2022 ushers in the new Foreign Entity Registry with some notable late changes | Bryan Cave Leighton Paisner

Summary

The Economic Crimes (Transparency and Enforcement) Bill, published on February 28, 2022 and after accelerated passage through Parliament, received Royal Trump on March 15, 2022 to become the Act. Some of the provisions relating to the imposition of penalties are immediately effective, including the streamlined process for developing penalty regulations and the urgent designation of persons by name or description, the rest of the law (including the Introduction of Foreign Entity Registry and Proceeds of Crime Legislation Amendments) to come into force on a date fixed by regulation.

The Act has impacted UK land holdings of foreign owners since January 1999 and requires disclosure by a foreign entity of UK land transactions from 28 February 2022. We recommend that those affected prepare and implement agreements immediately compliance.

This briefing note examines the few significant changes made as the Bill progressed through Parliament. For a summary of the initial proposals and their application to real estate and financial services activities in particular, see our information note of March 2, 2022 The government is fast-tracking legislation on a register of foreign entities that own property in the UK in its Economic Crimes (Transparency and Enforcement) Bill 2022. Our previous briefing also sets out preliminary actions to consider, which remain relevant.

Additional information requirements to be provided by a foreign entity upon registration

The changes mean that the Foreign Entity Registry will show where individuals and corporations that are recordable beneficial owners meet a beneficial ownership requirement as a fiduciary. In addition, it will record where a recordable beneficial owner (including a government or public authority) is a designated person in accordance with the Anti-Money Laundering Sanctions and Anti-Money Laundering Act 2018, where such information is publicly available .

Provision of information on trusts (to be kept off the public register)

Where an individual or entity that is a recordable beneficial owner is a trustee, the application for registration of the foreign entity must include specific information about the trust and a statement as to whether the entity has reasonable grounds to believe that ‘there is required information about the trust he was unable to obtain. Disclosures include details of the trust, the trustees who are or were (at all times) the recordable beneficial owners of the foreign entity as trustee, the beneficiaries of the trust and any person entitled, in under the terms of the trust, to appoint or remove trustees or to perform trusteeship. As part of their annual update obligation and when applying for removal from the register, foreign entities will also be required to provide Companies House with this information and this Declaration of Trust (updated as necessary).

These provisions appear to fill a gap in the bill (which we previously identified), so that now details of the economic and controlling interests behind trusts holding property will have to be disclosed, even if the information is not to be made public. . . However, these new requirements significantly increase the compliance burden on the industry. We hope that future regulations clarify the circumstances under which trusts do not need to register in order to avoid duplicate registration requirements under other transparency laws. In addition, the law provides that regulations must follow to specify which non-UK arrangements shall or shall not be treated as being of a trust-like character for these purposes.

Restricted public access to trust information register

Companies House cannot disclose on the public register the trust information that has been provided. However, Companies House may disclose this information where it is already publicly available on the register by including it in another publicly available document without restriction. In addition, to HMRC or any other person or body having functions of a public nature and specified in the regulations. Apart from the specific disclosure to HMRC, the same applies to the disclosure of protected date of birth and domicile information.

Transitional requirements for holdings of foreign entities in qualifying immovable property in England and Wales

A foreign entity that became the registered owner of a qualifying domain on or after January 1, 1999, but before the entry into force of the relevant part of the law (on a date to be confirmed) (the Effective date), will now have six months (from 18 months) from the effective date to apply to become a foreign registered entity or to dispose of the eligible estate. There are separate rules for Scotland and Northern Ireland.

When applying for registration of an overseas entity, the entity will now also have to make a declaration covering the period between February 28, 2022 and the date of its application confirming either that: (a) it does not has made any relevant disposition of qualifying real estate; or (b) he has made arrangements and gives details thereof. The details required will be the date of disposition and the registered title number of the qualifying estate. This provision is clearly designed to catch those who rush to dispose of their assets without control.

Failure to meet this application deadline (unless exempted) will result in a default daily fine of £2,500 which, in the event of continued contravention, may be imposed on each officer of the entity, regardless of their role in the application process, on a cumulative daily basis. These officers could also, if convicted, face up to two years in prison.

Meanwhile, the Land Registry will have six months from the effective date to enter a restriction on each of the affected titles, although the restriction will not bite until those six months have expired.

Limitation of Exempt Foreign Entities

The act includes a power that allows the Secretary of State to specify, by regulation, a description of a foreign entity that is exempt. Only when necessary: ​​(a) in the interest of national security or (b) to prevent or detect a serious crime. The suggested third basis of exemption on “the interests of the economic well-being of the United Kingdom” was removed from the law.

An exempt overseas entity will be able to conduct land transactions without having to be registered in the register of overseas entities.

Offenses

There are provisions for increased financial penalties, which are cumulative in nature, for a variety of offenses and offenses set out in the Act. This is in addition to criminal penalties, including potential penalties of up to two years in prison. Such penalties and/or fines may be imposed upon conviction for having made a misleading, false or misleading statement in any material respect for the purposes of the provisions of this Act, or for failing to comply with a notice of registration.

Financial Sanctions Compliance

From 15 March 2022 in the UK, the imposition of sanctions is possible on the basis of an emergency procedure where another jurisdiction (to which the UK aligns its sanctions policy) has designated a person or entity, and the Minister considers it to be in the interest of the United Kingdom to designate the same person or entity. For the UK, this is an entirely new basis on which sanctions designations can be made and is intended to ensure equivalence with these jurisdictions. However, it removes the requirement (at least for an initial period of 56 days) for the Minister to have reasonable grounds to suspect that the person is an implicated person (in accordance with a sanctions regime established under the law of 2018 on Sanctions and Anti-Money Laundering).

Finally, it should be noted that the following original provisions of the Bill have been incorporated into the Act:

  • to extend the existing scheme for unexplained wealth orders (UWO) to those who hold property in corporate structures, including trusts; to extend the time limits for interim freezing orders and procedural rulings and to cap the costs of a successful party in resisting a UWO; and
  • UK primary legislation giving rise to a breach of the financial sanctions regime to introduce a strict civil liability test for financial sanctions should be applied.

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