The Criminal Finances Bill, which was published yesterday, will also introduce unexplained wealth orders (UWOs) which will force people suspected of serious crime to explain where their wealth comes from or risk having it seized.
It creates new powers, which will enable the authorities to seize money stored in bank accounts, precious metals and stones, and works of art on the grounds of “reasonable suspicion that the property is either the proceeds of crime or that it is intended for use for unlawful conduct”.
It will also enhance the suspicious activity reports (SARs) regime, giving additional powers to the National Crime Agency and increasing the amount of time senior officers are allowed to investigate transactions.
Security minister Ben Wallace
We will not stand by and watch criminals use the UK to launder their dirty money or fund terrorism
Regulated bodies such as banks will be able to share information, including data on financial transactions, and the Bill will extend disclosure orders – which require someone suspected of having information or documents relevant to an investigation to disclose them – to money laundering and terrorism financing cases. These orders are already used in corruption and fraud investigations.
“The UK is one of the best places in the world to do business but it will only stay that way if we take steps to protect the integrity of our financial systems and the security of our citizens,” said security minister Ben Wallace.
“We will not stand by and watch criminals use the UK to launder their dirty money or fund terrorism.”
Not surprisingly, there are no reliable figures on the amount of crime-related money laundered through the UK. In April this year, the Home Office warned that, because of the size of the UK’s financial and professional services sector, its open economy, and the attractiveness of the London property market to overseas investors, the UK was “unusually exposed” to the risk of international money laundering.
“Substantial sums from crimes committed overseas are laundered through the UK,” it said. “There is no definitive measure of the scale of money laundering, but the best available international estimate of amounts laundered globally would be equivalent to some 2.7% of global GDP or $1.6trn (£1.3trn in todays prices) in 2009."
In drafting the proposed legislation, the government has worked closely not just with the national law enforcement agencies but also with the regulated sector, including banks and other financial institutions.
The Bill has generally been welcomed by the business community. BDO partner Angela Foyle said its aims were “laudable” and welcomed the opportunity to work with government, regulators, law enforcement agencies, financial institutions and other firms to “ensure that the objectives of the Bill are met in an efficient and effective way”.
ICAEW also approved much of the new Bill. lntegrity and law manager David Stevens said, “We are supportive of Government efforts to improve the AML regime and see many of the measures in the Criminal Finances Bill as a step in the right direction."
He added that ICAEW was particularly pleased to see legislative evidence of the government’s commitment to information sharing. "That said, we believe that more can and should be done in this important area, and have some doubts as to how effective the draft s10 will be in practice.”
The proposal which has caused the most comment so far is the proposed UWO, which transfers the onus of proving their wealth is legitimate from the state to the individual. It has been designed, in particular, to deter corrupt overseas public officials from using the UK to hide and launder ill-gotten gains.
Law enforcement agencies will have to apply to the High Court for permission to put an order in place but this will be comparatively easy since, under the proposal, they only need to suspect the targeted person of serious criminality, rather than prove it.
Lawyers Kingsley Napley described the UWO as a “draconian measure” and pointed out that a large number of people would be caught because the definition of politically exposed persons (PEPs) under the UK’s money laundering regulations includes immediate family and known close associates.
“They will be obliged to explain their financial circumstances even though there is no actual suspicion of them being involved in serious criminality.”
PwC is more concerned about the new corporate offence of failure to prevent facilitation of tax evasion.
The Big Four firm warns that making sure they have reasonable procedures in place to prevent people intent on concealing assets and cheating tax will prove challenging for companies.
“It will be important for companies to carefully consider the level of risk they face and ensure that procedures are appropriate and properly implemented,” said tax partner Stephen Morse.
“If not, the criminal acts of individual employees could result in criminal liability and significant financial penalties for the company.”