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Companies face fines and prison if they do not comply with the Economic Crime Act 2022

06 December 2022

Companies must ensure they are compliant with the Economic Crime (Transparency and Enforcement) Act 2022 (“ECTEA”). Otherwise, they will be committing a criminal offence which could lead to a fine of £2,500 a day or prison. With the deadline of the end of January 2023 approaching, time is running out. Apex Group can assist your business, helping you stay compliant with the new regulations so you can focus on growing your firm.

The ECTEA received Royal Assent in March 2022 and is part of the UK Government’s strategy to combat crime and make the ownership of assets more transparent.

The ECTEA introduced a new register of overseas entities to capture information about the beneficial ownership of UK land. It sets out that overseas entities that are registered proprietors of UK land, or who wish to acquire UK land are in scope and must register with UK Companies House and provide details of its beneficial owners including in some cases managing officers to obtain an Overseas Entity ID.

An overseas entity is defined in the ECTEA as a legal entity that is governed by the law of a country or territory outside the United Kingdom. Under the Act, a legal entity means a body corporate, partnership or other entity that is a legal person under the law by which it is governed.

Who is a registrable beneficial owner?

A “beneficial owner” is defined in the ECTEA as a legal entity, a government or public authority or a trustee of a trust.

If an overseas entity is not able to provide the beneficial ownership information because there are no beneficial owners falling within the categories described above, it will need to provide information about its ‘managing officers’, who will include directors, managers and secretaries.

Registration

Before making an application to register, an overseas entity must take reasonable steps to identify its beneficial owners.

Once an overseas entity has gathered all the information needed about its registrable beneficial owners or managing officers, they must have it verified by an independent UK-based agent who is supervised under the UK’s Money Laundering regime.

All registrations require the agent’s assurance code to be submitted within 14 days of the registration. Upon successful registration at Companies House, the entity will be provided with a unique overseas entity ID number, to be used on all land registry applications.

Information on the Register will need to be updated annually.

What are the penalties for non-compliance?

Overseas entities that fail to register by the end of the six-month transitional period on January 31, 2023, will commit a criminal offence which could lead to both civil and criminal sanctions against the entity and / or its managing officers. A person found guilty of an offence may be liable to a fine of up to £2,500 per day and the risk of up to five years in prison or both. The penalties are different in England and Wales to Scotland.

Unregistered overseas entities will effectively be prevented from registering any acquisition, disposal, transfer, grant of a lease of seven years or more, or grant of a charge over such interests with the UK's Land Registry. If disposals are made despite the restrictions, the overseas entity and each of its officers will commit a criminal office punishable by a fine and/or imprisonment.

Although overseas entities owning UK property should have received a formal letter advising about the Register, our experience is that our clients have been generally slow to understand the importance of this legislation and the need to register. If you are an overseas entity owning UK property, our advice, even if you are not intending a transaction with your property, is not to delay registering as you may have difficulty with registering and obtaining the necessary verification if you leave this until nearer to the January deadline.

It is essential that clients register by the end of January 2023.

How can we help you?

At Apex Group, we understand that your business needs a fast and reliable service to ensure that it remains compliant with regulations – thereby avoiding potential fines and prison. This is particularly true when you are faced with tight deadlines. That’s why we take pride in the speed and quality of our service.

Once your firm has provided us with ID information of the Ultimate Beneficial Owner of a structure, we will need to verify it. We are authorised as a verification agent for the Registration of Overseas Entities by Companies House, so we can take care of this issue in a timely manner.

Contact us today

 

 

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