The Integrated Review 2021: new UK sanctions and money laundering regimes to be introduced
On 16 March 2021, the UK Government published a delayed integrated review of security, defence, development and foreign policy, setting out in general terms the UK's approach to national security and international policy over the next five years (the "Integrated Review").
While the majority of the press coverage of the Integrated Review has focused on the Government's intention to lift the cap on the UK's nuclear stockpile by over 40% and the strategic 'tilt' towards the Indo-Pacific region, embedded within the Integrated Review was commentary on two new legal regimes with a financial crime focus that the Government plans to introduce.
The Government enacted the Global Human Rights Sanctions Regulations in July 2020 (the 'Magnitsky-style' sanctions regime), which marked the first time the UK independently sanctioned people and organisations for human rights violations and abuses under a UK-only regime.
As we flagged at the time, this regime built on the UK's status as historically one of the EU's most aggressive sanctions advocates. As part of the Integrated Review it was emphasised that the UK's "departure from the EU means [the UK] can move more quickly than through multilateral channels where it is in our interests to do so." In this same spirit, a "second global sanctions regime on corruption" is planned to be launched in 2021, with the intention of preventing individuals involved in corruption from either moving money through the UK's financial system or entering the UK freely.
In January 2021, Graeme Biggar, director general of the National Economic Crime Centre ("NECC"), told MPs that it was considered “too easy to set up companies" in the UK and that Russian “laundromats” were exploiting the UK’s corporate framework to launder billions connected with the proceeds of crime.
Back in 2017, the government published a call for evidence seeking views on the introduction of a public register of beneficial owners of overseas legal entities that own UK property. Subsequently, a draft 'Overseas Entities Bill' was introduced on 23 July 2018 – which has not yet been brought into force (although the government did previously commit to establishing a beneficial ownership register by 2021). The Integrated Review outlines the intention to expand this proposed legislation, as soon as time permits, to introduce legislation aimed at tackling economic crime, "including the use of UK corporate structures in facilitating high-end money laundering." The legislation will 'reform' Companies House registration in addition to introducing the aforementioned register of overseas entities.
The level of detail provided within the Integrated Review in respect of these regimes is limited. It remains hard to assess what the UK's approach to tackling financial crime will be following its exit from the EU. Balancing an ambitious 'Global Britain' trade policy with potentially introducing company incorporation barriers and/or imposing new sanctions remains a difficult path to tread. It will be important to examine exactly how expansive these regimes are once details are published later in 2021, as this should help to provide a clearer indication of the Government's appetite for tackling financial crime and corruption both in the UK and abroad at the same time as trying to encourage inward investment and economic growth.