A maximum of one “layer” of corporate directors, who must be based in the UK, is also to be imposed, along with a crackdown on the use of overseas agents for forming UK companies.
Corporate governance expert Tom Proverbs-Garbett of Pinsent Masons said: “Generally, the final package of reforms follow those trailed in the government’s consultation. There will be no change to the point at which, legally, a person becomes a director and, as now, directors have to be registered at Companies House within a set period after appointment. Going forward, a director will not be able to be registered without a verified account with Companies House and verifying their identity. It is proposed that Companies House will carry out this verification by cross checking against a database of verified accounts. This will require up-to-date documentation, contributing to transparency, and an extra step in the current process.”
The government said in its white paper: “Intelligence from law enforcement suggests that those using UK corporate structures for criminal or corrupt activity often use formation agents. If based in the UK, such agents are required to be supervised by HMRC or a professional body under existing money laundering legislation. But there is currently nothing to stop agents based overseas, who may not be subject to equivalent supervision, from making filings with Companies House.”
“In future, agents will be required to evidence that they are adequately supervised before they can register with Companies House and file on behalf of their clients. This evidence will be cross-checked against information from HMRC and the Financial Conduct Authority to ensure its validity. In effect, overseas agents will no longer be able to access Companies House unless at some future date the government determines that any other jurisdiction should be deemed to have an equivalent supervisory regime,” it said.
Hamilton said: “While certain reforms have been introduced as part of the UK’s implementation of the Fifth Money Laundering Directive, a significant proportion of the proposals have yet to see the light of day, with the Economic Crime Bill controversially shelved earlier this year. The current crisis in Ukraine, which has shone the spotlight on the vast corporate empires of Russia’s oligarchy, has spurred the government into action.”
Also included within the future Economic Crime Bill will be “new powers to seize cryptoassets and bring them within scope of civil forfeiture powers”, the Treasury said. This, it added, would help “tackle the growing threat from ransomware and the use of cryptoassets for money laundering”.
Hamilton said: “The clear immediate focus is to pursue individuals and companies who have turned to crypto as an alternative means of hiding wealth as sanctions block access to traditional financial services. How these powers will be used in practice remains to be seen, however the move to strengthen civil forfeiture is the latest in a string of legislative changes designed to mitigate the risk of cryptoassets being used to further crime.”
“Crypto exchanges and digital wallet custodians have since January 2020 been subject to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and must be registered with the Financial Conduct Authority to continue doing business in the UK. In addition, the EU has recently announced plans to increase transparency of parties to crypto transactions, bringing them more in line with traditional bank wire transfers,” he said.
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