The London Laundromat in 2022: Pressure Grows on UK Government to Tackle Economic Crime

Pressure is growing on the U.K. government to tackle economic crime, following the resignation of the government’s anti-fraud minister Lord Agnew.

Lord Agnew cited the government’s failure to tackle fraud as a key reason for his resignation. His concerns echo similar sentiments expressed by various stakeholders[i] regarding the broader Economic Crime Plan, which the government issued in 2019.[ii]

In particular, Lord Agnew has criticised the government’s rejection of the Economic Crime Bill (the “Bill”) as a candidate bill for the next parliamentary session. Commentators, such as Transparency International UK, have claimed that failure to implement the Bill would be “careless.[iii] The Treasury Committee, in its Economic Crime Report published on 2 February 2022, stated that “Work being done by Government is still not enough and not urgent enough to stem the rise, let alone start to bring it under control” and urged the government to assess measures that might be required through the Bill.[iv]

Following intense public scrutiny over the Bill, Prime Minister Boris Johnson has now confirmed that the government is “bringing forward the Economic Crime Bill, and it will be voted on in the third Session of this Parliament”.[v] The Bill could therefore be introduced as soon as May 2022, although much of the detail is yet to be revealed.

Economic Crime Bill

The Bill is expected to include long-overdue reforms to Companies House in order to tackle the abuse of shell companies. The government’s 2019 Consultation on Corporate Transparency and Register Reform indicated that options could include[vi]:

1. Enabling Companies House to query, amend, or remove information and share it with law enforcement partners, subject to certain conditions; and
2. Compulsory ID checks for all directors, persons with significant control and those filing information on behalf of a company.

A report by the Parliament’s Intelligence Committee in 2020 concluded that London was a “laundromat” for tainted money[vii], made easier by the U.K.’s relatively lax approach to checking company registration documents and corporate filings. On its website, Companies House acknowledges that it does not “have the statutory power or capability to verify the accuracy of the information that companies send to us.”[viii]

The Bill also proposes introduction of a beneficial ownership register for U.K. property owned by overseas entities. The mayor of London, Sadiq Khan, has also called for such a register citing the lack of transparency around foreign-owned property in London. Mr Khan has stated that the lack of transparency around property ownership could weaken U.K. sanctions against Russia.[ix]

Ultimately, the Bill’s proposals should be read alongside the Law Commission’s report on corporate criminal liability reform, which is itself expected in Spring 2022.[x] Among other things, the report will consider whether the corporate ‘failure to prevent’ offence, seen in both the Bribery Act 2010 and Criminal Finances Act 2017, could be extended to cover offences such as fraud.

Economic crime will therefore continue to be a central theme to the U.K. government’s objectives this coming year, particularly as the situation regarding Russia intensifies. Overseas entities and individuals with business interests and property in the U.K. would therefore be advised to keep abreast of these developments and make plans to meet any disclosure obligations that may be imposed as a result of the Bill.

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[i] Treasury Committee, Oral Evidence, Economic Crime, HC 145, Q200, dated 8 July 2021: (https://committees.parliament.uk/oralevidence/2532/html/ ).

[ii] Economic Crime Plan 2019 to 2022, dated 12 July 2019: (https://www.gov.uk/government/publications/economic-crime-plan-2019-to-2022)

[iii] Transparency International UK Press Release dated 25 January 2022 ( https://www.transparency.org.uk/uk-economic-crime-bill-latest-lord-agnew-resignation)

[iv] Treasury Committee, Eleventh Report of Session 2021-2022, dated 2 February 2022 (https://committees.parliament.uk/publications/8691/documents/88242/default/)

[v] Hansard, Prime Minister Engagements, Volume 708, dated 2 February 2022, link: (https://hansard.parliament.uk/Commons/2022-02-02/debates/41AF283E-4832-47D5-9C10-339B965FB2E7/Engagements#contribution-6C295522-646A-4AEE-BC00-89A17FB8D0C1)

[vi] Consultation on Corporate Transparency and Register Reform dated 5 May 2019 (https://www.gov.uk/government/consultations/corporate-transparency-and-register-reform)

[vii] Intelligence and Security Committee of Parliament Press Notice dated 21 July 2020, link: (https://isc.independent.gov.uk/wp-content/uploads/2021/01/20200721_Russia_Press_Notice.pdf)

[viii] Companies House, Service Information ( https://resources.companieshouse.gov.uk/serviceInformation.shtml)

[ix] “Sadiq Khan calls for foreign-owned properties register”, BBC News, dated 6 February 2022 (https://www.bbc.co.uk/news/uk-england-london-60278470)

[x] “Law Commission seeks views on corporate criminal liability”, dated 9 June 2021 (https://www.lawcom.gov.uk/law-commission-seek-views-on-corporate-criminal-liability/#:~:text=The%20company%20is%20liable%20unless,place%20to%20prevent%20the%20conduct.&text=It%20has%20been%20suggested%20that%20these%20corporate%20'failure%20to%20prevent,which%20a%20company%20might%20benefit)