The legislation had actually been contemplated for several years but Russia’s military intervention in February led to a dramatic acceleration of transforming the Act in law.

The new legislation is designed to make it more difficult for people, especially those from overseas, to hide wealth in the UK. Not only is this aimed at those involved in criminal activity but it also puts the focus on specific groups, including Russian oligarchs, seeking to shelter earnings by investing them into UK property and other assets.

There are currently a number of high-value UK properties owned by overseas-based shell companies. The implementation of the Act and the establishment of the new Companies House register, which will be updated annually, now obliges these companies and other structures which own UK properties to declare who the "beneficial owner” is or, in simpler terms, who the person is who ultimately owns or controls the asset.

Russia’s invasion of Ukraine in February led to a dramatic acceleration of the process of transforming the Act in law.

Failure to properly register such details will be a criminal offence, with a potential punishment of up to five years in prison or with fines of £2,500 per day. Non-compliance will also prevent overseas entities from having any dealing with any of their UK real estate holdings which are not registered.

Following its passage into law in March, the UK Government recently announced the transitional period for the Act would run from August 1 for six months where individuals and entities are required to get their property registered.

There is little doubt that the Economic Crime Act comes with some severe implications. Combined with the fact that the legislation prevents property transactions from proceeding without the overseas purchaser and, in six months’ time, the seller from having to register, gives it real teeth.

While it’s hoped the Act will discourage people from using the UK as a place to hide money in the future, the implementation of the legislation does raise some key questions.

There are concerns about the impact that this could have upon the real estate market. The implementation of the transitional period could result in stalling some property transactions in the short term.

Within the legal world there are specific concerns about the complexities involved in completing the registration process as well as questions of who will verify the companies’ information. While lawyers may be able to do this, many are reluctant and the Law Society of Scotland has also advised firms to "exercise caution” with regards to the Register of Overseas Entities, especially in respect of the verification requirements.

There are also additional gaps which could further weaken the overall impact of the legislation. This includes the fact that it doesn’t actually focus on individuals and is therefore unlikely to dissuade wealthy overseas individuals from acquiring property and other assets directly if they choose to do so.

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The beneficial owners of properties and assets that will be disclosed through the new Companies House register will also only cover those which hold more than 25 per cent of shares or voting rights, or are deemed to be persons exercising significant control. Because the rules fail to drill down further than this, it means that within deliberately complex overseas structures, the ultimate identity of the parties will not be revealed, contradicting one of the key aims of the legislation.

The Act also doesn’t look at UK entities. It should be noted that there are plans for a second economic crime bill which has been proposed by the Government but whether this will fill in the gaps that the initial Act has left remains unclear. It is, however, believed that the focus of the new bill will be on UK companies, which are currently exceedingly easy to set up, with greater powers for Companies House to analyse and challenge the establishment of domestic entities.

With much clarity still required over the new Economic Crime Act, the second bill, planned for the 2022-23 session of Parliament, provides an opportunity to enable the effective combating of economic crime and greater transparency over who owns UK real estate.

Laura King is a Senior Associate, CMS

Legal industry concern over law on economic crime - Laura King