Economic Crime and Corporate Transparency Bill - proposed changes to UKs AML regime

The new Economic Crime and Corporate Transparency Bill, published on 22 September 2022, has been hailed as a tool to tackle economic crime and improve transparency over corporate entities.  While the headline in the Bill goes to reforms to Companies House (to capture more and better quality data on directors), we highlight three new provisions which will be welcomed by regulated businesses. 

Exemptions from POCA offences

The Bill proposes two new exemptions from the principal money laundering offences under the Proceeds of Crime Act 2002 for financial institutions from current restrictions in account closure situations, which create time-consuming and complex issues for both the firms and the NCA.  They feed into one of the aims of the Bill, which is to better focus the NCA's – and firms' – resources on the high value criminal activity which so desperately needs to be tackled.

New "exiting and paying away" exemptions are proposed for firms in the regulated sector who would not commit an AML offence if they pay away criminal property in the sum of up to £1000 in value, if  they are handing over to a customer or client money or other property owing to them, for the purposes of the termination of the firm's business with them (subject to certain other conditions, including that the firm must have first complied with its customer due diligence obligations).

Separately, an exemption is proposed for "mixed-property transactions" for firms in the regulated sector who operate an account or accounts for a customer or client, where they know or suspect that part - but not all - of the funds in the account or accounts, or of the property held, is criminal property. Where it is not possible to identify the part of the funds or property that is criminal, the firm may not commit an offence if it pays out funds that are less than the value of the relevant criminal property at that time.  This exemption has the potential for significant practical benefits for firms who will be able to deal with funds in accounts without having to tackle the practical challenge of first identifying and ring-fencing suspected criminal property.   

These two measures will assist firms holding small sums or mixed funds to escape what would otherwise involve notifications and the seeking of defences from the NCA, as well as removing additional workload from the NCA.  

Inter-firm information sharing

The Bill includes a new provision which, if enacted, will disapply the duty of confidentiality owed by a firm where it makes a direct disclosure to another firm regarding an existing or former customer for the purposes of preventing, detecting and investigating economic crime.  While similar information-sharing provisions were previously introduced under the Criminal Finances Act 2017, they have been of limited use.  The new mechanism will allow firms to share information directly among themselves without having to involve law enforcement and, therefore, has the potential to significantly increase the cross-sector flow of information regarding suspected criminality in the financial system.  

We watch the progress of the Bill with interest, and will keep clients updated as it progresses.                

Authors: Ruby Hamid, Partner, David Capps, Senior Consultant and Neil Donovan, Senior Associate