A Guide to Anti-Money Laundering for Crypto Firms

Key Takeaways from the UK’s New Economic Crime and Corporate Transparency Bill 2022

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On September 22, the UK government published the Economic Crime and Corporate Transparency Bill 2022. Following the Economic Crime (Transparency and Enforcement) Act passed earlier this year, the bill is designed to tackle the growing problem of dirty money flowing into the UK. The National Crime Agency currently estimates that money laundering costs the UK more than £100 billion annually. 

The bill focuses on reforms to Companies House, the seizure of suspected criminal cryptoassets, the role of limited partnerships, and new intelligence-gathering powers. 

Companies House reforms

The proposed reforms to Companies House are the most significant changes to rules governing UK company creation in 170 years. The bill will increase the powers of Companies House to make it a more effective gatekeeper, including new powers to check, remove, or decline information submitted to the register. This includes introducing additional identity verification measures to make it clear who is setting up, managing, and controlling corporate entities. 

The bill also grants Companies House greater investigation and enforcement powers, including cross-checking and sharing data with other public and private sector bodies and law enforcement.

To cover the cost of enforcement and investigative activities that promote the integrity of the register, the government is expanding the fee-raising powers of the Registrar of Companies. These fees will apply to all companies wishing to become or remain incorporated on the Companies House register. 

The impact assessment for these proposed reforms can be found here.

Seizure of suspected criminal cryptoassets

As part of the government’s ongoing efforts to turn the UK into a global hub for crypto investments, the new bill calls for more control of digital coins as criminal groups increasingly use the asset class to launder the proceeds of illegal activities

At its core, the proposed legislative updates are designed to bring cryptoassets within the scope of civil forfeiture powers in Part 5 of the Proceeds of Crime Act 2002 (POCA).

Key proposals include:

  • Removing the requirement for an arrest to take place before seizure powers can be exercised 
  • Amending search, seize, and detention powers to clarify that officers have the authority to “recreate” transfer assets and cryptoasset wallets into a law enforcement-controlled wallet
  • Providing the magistrates’ court with the power to authorize the sale of any cryptoassets
  • Enabling law enforcement agencies to take control of and recover cryptoassets discovered when executing a search warrant
  • Providing for the destruction of cryptoassets in exceptional circumstances

The impact assessment for these proposed cryptoasset reforms can be found here.

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The role of limited partnerships

To mitigate further abuse of limited partnerships (LP), the government has introduced reforms to bring the legislation up-to-date while ensuring that LPs remain attractive to legitimate investors. The proposed updates include:

  • Tightening registration requirements
  • Requiring LPs to maintain a connection to the UK
  • Increasing transparency requirements
  • Enabling the Registrar of Companies to deregister LPs that are dissolved, no longer carrying on business, or where a court determines that it is in the public interest to do so

The new bill also introduces strict penalties for the general partners of LPs who do not comply with the legislation. This could include significant fines, deregistration, and, in some cases, prison sentences. 

The impact assessment for these proposed reforms can be found here.

New intelligence-gathering powers

At present, businesses cannot quickly share information between themselves when concerns arise about economic crime. To combat this, the government proposes the addition of new clauses in the POCA that will allow:

  • Direct sharing between two businesses in the anti-money laundering (AML) regulated sector
  • Indirect sharing through a third-party intermediary for businesses in the financial sector, including cryptoasset exchanges and custodian wallet providers

Furthermore, the bill expands the powers of the Serious Fraud Office (SFO). As it stands, Section 2A of the Criminal Justice Act 1987 only allows the SFO to compel entities to provide information during pre-investigation stages for suspected cases of international corruption and bribery. This expansion will enable the SFO to promptly determine whether a crime has occurred by giving it early access to information held by companies or individuals.

The impact assessment for these proposed intelligence-gathering reforms can be found here.

The bill’s second reading is scheduled in the House of Commons on October 13, 2022. 

Originally published September 30, 2022, updated October 11, 2022

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