UK Economic Crime
(Transparency and Enforcement) Bill

Public register of beneficial owners of non-UK entities that buy or own property in the UK

Part 1 of the Bill will require all non-UK entities that own or buy real property in the UK to join a public register listing the entity’s beneficial owner(s). Each such entity will, once it joins the register, become a “registered overseas entity.” 

• The Bill defines property — that is, rights in land — as any freehold interest, or a leasehold interest granted for more than seven years.
• A person will be a beneficial owner of an entity if they (i) hold more than 25% of the shares or voting rights in that entity; (ii) have the right to appoint or remove the majority of the directors of that entity; or (iii) have the right to exercise or actually do exercise significant influence or control over that entity. 

Non-UK entities that already own property in the UK will have six months from the date of the Bill’s commencement to either apply for registration or dispose of their property. This is a significant reduction from the original proposed grace period of 18 months.

Failure to comply with the registration obligations set out in the Bill will constitute a criminal offense for both the entity and, importantly, every officer (i.e., every director) of that entity. The offense will be punishable by a fine, imprisonment of up to five years, or both. 

In addition, subject to certain narrow exceptions, the UK’s land registries will not

• register a non-UK entity as the proprietor of a property unless the non-UK entity is a registered overseas entity or
• if a non-UK entity is already the registered proprietor of a property, register any registrable dispositions unless the non-UK entity is a registered overseas entity, meaning that the property cannot be sold or mortgaged.

The Secretary of State may exempt a person from registration if it considers that it is necessary to do so “in the interests of the economic wellbeing of the United Kingdom.” 

Unexplained Wealth Orders (UWOs)

The Bill also makes wide-ranging amendments to the framework that governs UWOs (a type of investigatory order an English court can make to compel the respondent to reveal the source of unexplained wealth, where a respondent’s assets appear disproportionate to its income). Despite being introduced in 2018, UWOs have been little used by law enforcement agencies.

These amendments include

• making it possible for certain “responsible officers” of a company to receive a UWO even if it is the entity that owns the property and not the directors themselves
• establishing a lower test for the grant of a UWO: Instead of the court being satisfied that the known sources of lawful income would be insufficient to obtain the property, it will now be sufficient if the court is satisfied that there are reasonable grounds for suspecting that the property has been obtained through unlawful conduct
• giving enforcement authorities the ability to apply for an interim freezing order alongside an application for a UWO
• limiting an enforcement authority’s liability for costs in proceedings about UWOs or interim freezing orders 

Sanctions

The Bill amends the existing law in respect of sanctions by

• removing the requirement that to receive a fine for sanctions breaches, a person must have known or suspected they were breaching sanctions law
• no longer requiring personal review by the appointed government minister for sanctions penalties 
• providing for the publication of notices by the Treasury stating that it considers that a person has breached sanctions law even if no fine has been imposed
• increasing the scope of information-sharing powers as they relate to sanctions 

Although the catalyst for expediting the Bill through Parliament is the crisis in Ukraine, it is important to note that the provisions do not just affect, for example, entities or persons connected with Russia but have a much wider impact. All overseas beneficial owners of UK real property should consider their reporting obligations under the Bill.

We will continue to monitor developments as the Bill passes through Parliament but anticipate further strengthening of the provisions in the Bill or additional legislation to address any gaps that become apparent in due course. Companies operating in the UK should continue to monitor their compliance with UK sanctions law but, in anticipation of the Bill becoming law, should also consider the following actions.

• Foreign companies that presently or will own UK real property should begin to consider whether they will need to register their ultimate beneficial owners. Affected entities should note that the requirement to register extends back to property purchased since 1999 in England and 2014 in Scotland.
• Those entities at risk of being investigated for unexplained wealth and their directors should expect greater scrutiny from police and prosecutors.