The Economic Crime (Transparency and Enforcement) Act 2022 ( 'the Act' ) came into effect on 15 March 2022.

This had been on the agenda since 2016. In 2018, a draft Economic Crime Bill was prepared and then placed on the backburner for several years. The invasion of Ukraine on 24 February 2022 put an end to the policy of drift and lack of political enthusiasm. The Economic Crime Bill was rescued and with lightening speed, the Act received royal assent on 15 March 2022.

The objective of the Act is to make it easier to identify and trace illicit wealth in money laundering and economic crimes. The Act contains three key parts: 

Part 1: Companies House will be required to operate a 'Register of Overseas Entities' 

Part 2: Amendments to the Unexplained Wealth Order (UWO) regime

Part 3: Amendments to the existing legislation on UK sanctions.

Part 3 comes into force today. The Office of Financial Sanctions Implementation (OFSI) will now be able to impose a civil monetary penalty on a new strict liability basis.  The Act removes the requirement for OFSI to demonstrate that a designated person (individuals and entities) had knowledge or reasonable cause to suspect they were in breach of a financial sanction in order to issue a monetary penalty.

This amendment applies only to consideration of civil liability and the imposition of a monetary penalty and is not relevant to any assessment of whether a criminal offence has been committed under sanctions regulations.  

It is still necessary for OFSI to establish a breach of sanctions to the civil standard of proof ie. on the balance of probabilities.

OFSI has now gained the additional power to publicly name persons, including companies where satisfied, on the balance of probabilities that they have breached financial sanctions but where no civil monetary penalty has been imposed. This may become an alternative to the imposition of penalties but the power carries huge reputational risks for affected businesses.

OFSI's updated guidance can be read here.

As with previous guidance, OFSI sets a premium on self-reporting. Firms will have to consider submissions of suspected breaches to OFSI, whether inadvertent or not, with great care.

OFSI's Director, Giles Thompson, has indicated that the policy drivers are to create a regime more in line with the American model. That suggests there will be increasing enforcement activity by OFSI through penalties and publication over the coming months.