Economic Crime Act
As expected, the Economic Crimes Bill was passed and became the Economic Crimes (Transparency and Enforcement) Act 2022 on 14 March 2022 (the Act).
Simplified sanctions regime
Importantly, the law simplified the standard sanctions procedure by removing a series of hurdles that a minister must clear before issuing sanctions which, among othersare in the interests of international peace and security, promote the resolution of armed conflicts or promote respect for international human rights law and humanitarian law.
In addition, the Act introduces a new ‘urgent’ sanctions procedure which generally allows the UK to expedite the imposition of sanctions against individuals and entities already sanctioned by law. other territories, including the United States and the European Union, or, if it is in the public interest to impose sanctions under the emergency procedure.
This is designed to make it easier for the government to impose short-term sanctions and was introduced in direct response to the increasingly urgent stance with Russia and to combat criticism of the UK being ‘behind’ the United States and the EU on sanctions. This will allow them to piggyback on sanctions imposed by others.
Register of Foreign Entities
The Act also introduces a Foreign Entities and Beneficial Owners Register designed to require foreign entities to register information about their beneficial owners if they own land in the UK and which must be updated every 12 months. Non-registration and non-compliance with the obligation to update constitute an offense that will be committed by the entity and any defaulting manager.
The law also prohibits the sale of land by foreign entities, unless they are registered. This is designed to prevent foreign entities from selling land to avoid registration under the law. For more details on the new Registry, see our March 15 GT Alert.
Unexplained Wealth Orders
Unexplained Wealth Orders (UWO) are orders made by a UK court to compel the target of the order to reveal the sources of their unexplained wealth. The Act makes significant changes to the UWO plan, including:
allow entities (via their directors or other “responsible officers”), as well as individuals, to be targeted;
the introduction of a new ground for obtaining a UWO if the Court is satisfied that the property in question was obtained by unlawful behavior (provided that the defendant is a politically exposed person or that there are grounds reasonable suspicion that the defendant was or is involved in a serious crime or is related to someone so involved); and
limit the circumstances in which a costs order may be imposed against an enforcement authority to circumstances in which the authority acted unreasonably in bringing or resisting the application or acted dishonestly or improperly during of the procedure.
The use of UWOs, which have been little used so far, will likely increase as a result of these changes.
Other economic sanctions
The UK government also announced on March 15, 2022 that it would deny Russia and Belarus access to the “most favored nation” tariff. This will affect hundreds of their exports, including vodka, meaning they will face an additional 35% tariff on those exports. At the same time, the government banned British exports to Russia of high-end luxury goods, including luxury vehicles, high-end fashion and works of art. The export ban is supposed to “ensure that the oligarchs and other members of the elite, who have enriched themselves under the rule of President Putin and support his illegal invasion, are deprived of access to luxury goods.”
Additions to the Financial Sanctions List
The government has added 370 additional entities and individuals to the financial sanctions list. Individuals and entities on the list will have their assets frozen and banned from traveling to/from the UK. According to the government press release, 51 of those newly sanctioned are oligarchs and their family members. Others are believed to be President Putin’s political allies and propagandists, including President Putin’s press secretary Dmitry Peskov and Russian foreign affairs spokeswoman Maria Zakharova. All of those added to the list have already been sanctioned by the US, EU, Canada or Australia and have therefore been added as a result of the new mirror provisions of the sanctions regime discussed above .
Key points to remember
The British government seems to be doing what it promised and is tightening its sanctions against Russia.
Foreign entities, their beneficial owners and their directors can take steps now to determine whether they are required to apply for registration. The law provides a period of six months to comply, failing which an offense will be committed by the entity and each officer of the entity in default.
Law enforcement agencies in the UK will be encouraged to issue more UWOs now that they are largely free from paying court fees and the range of potential recipients has been widened. Therefore, a proliferation of UWOs in the coming months is likely given the current political climate.
©2022 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume XII, Number 75