High Court of Justiciary upholds convictions of men ensnared by paedophile hunter groups

By Mitchell Skilling

John Quinn and Mark Sutherland argued that the evidence gathered by the groups had been unfairly obtained and their pleas in bar of trial based on oppression ought to have been sustained. Mr Sutherland also argued that the groups required statutory authorisation in order for their evidence to be used.

The appeals were heard together by the Lord Justice General, Lord Carloway, sitting with Lord Brodie and Lord Malcolm. Mungo Bovey QC and Dean of Faculty, Roddy Dunlop QC, appeared for the appellants and P Kearney, advocate depute, for the Crown.

Unregulated surveillance

Between 24 April and 7 May 2018, the first appellant had exchanged messages with a person he believed to be a 13-year-old girl called Mel Howard, who was in fact a member of a group called Child Protectors Scotland. After arranging a meeting with “Mel” at Paisley Cross, he was detained and later arrested for offences under sections 33 and 34 of the Sexual Offences (Scotland) Act 2009. The trial sheriff in Mr Quinn’s case distinguished the actions of paedophile hunter groups to those of state actors and ruled that they were not sufficient to amount to an abuse of process.

Mr Sutherland, who had been convicted of similar charges to Mr Quinn after he communicated with a volunteer from another group, had objected to evidence from the volunteer on the basis that he was a covert human intelligence source under the Regulation of Investigatory Powers (Scotland) Act 2000. The sheriff in his case ruled that the volunteer had not acted as a CHIS as the police had only become involved after he was confronted by the group at a bus station.

It was argued by the first appellant that he had been entrapped in a manner which meant that a fair trial could not take place. By proceeding against him, the Crown had acted incompatibly with his rights under articles 6 and 8 of the ECHR. The test for entrapment had been satisfied when he would not have acted as he did if the decoy had told him that her true age was 34.

The second appellant submitted that RIPSA did not require knowledge on the part of the authorities to be engaged, but simply set out a regime that had to be complied with for certain covert information gathering methods. The police were, in effect, using the groups as a means of circumventing RIPSA by operating an unregulated system of surveillance.

Free to investigate

Lord Carloway, delivering the opinion of the court, said of entrapment: “The essential vice of entrapment [per Jones v HM Advocate (2010)] is the creation of crime by the state for the purpose of prosecuting it. It has no relevance to the actings of non-state actors. A person who is persuaded to commit a crime by a private individual will still be guilty of that crime.”

He continued: “The fact that paedophile hunter groups are not regulated is of no relevance. The police, and other organs of the state, are regulated because of the extensive powers which they have. The private individual has no such powers and stands in the same position as any other member of the public.”

Addressing whether such groups were free to carry out their investigations, Lord Carloway said: “As matters stand, they are free to carry out their own investigations into criminal behaviour and to report it to the police or directly to the Crown. They are far from being alone in such activity. Security firms, shops, gamekeepers, [and] neighbourhood watch schemes all do so, even if the results of their activities are not normally published on social media.”

On the ECHR arguments, he added: “Given the lack of any longstanding pre-existing relationship between the appellants and those with whom they thought they were communicating, they had no reasonable expectation that these communications would remain confidential or private. Significantly, for Article 8 purposes, by the time at which the police were informed, the criminal activity had already been carried out.”

Lord Carloway concluded on RIPSA: “There could have been no application for authorisation because the police was unaware of the decoys’ activities until after the appellants’ allegedly criminal activities had been, to all intents and purposes, completed and recorded. Even if the police had been aware, they were not in a position to control these activities. The paedophile hunter groups are not ‘law enforcement agencies’ or agents whose activities fall to be regarded as those of a public authority.”

For these reasons, both appeals were refused.

British justice with Chinese characteristics no more as Lords Reed and Hodge resign from Hong Kong court

By Kapil Summan, editor

Lord Reed, who has submitted his resignation along with Lord Hodge, said that he has been “closely monitoring and assessing developments in Hong Kong” and that their position has become “increasingly finely balanced” since the introduction of the Hong Kong national security law last year.

It was agreed at the time of the Handover of Hong Kong in 1997 that the House of Lords would provide two sitting law lords for the new Hong Kong Court of Final Appeal. That practice was maintained following the establishment of the Supreme Court in 2009. Today’s resignations bring it to an end.

Lord Reed said: “The courts in Hong Kong continue to be internationally respected for their commitment to the rule of law. Nevertheless, I have concluded, in agreement with the government, that the judges of the Supreme Court cannot continue to sit in Hong Kong without appearing to endorse an administration which has departed from values of political freedom, and freedom of expression, to which the Justices of the Supreme Court are deeply committed.

“Lord Hodge and I have accordingly submitted our resignations as non-permanent judges of the HKCFA with immediate effect.”

Former judges Lord Sumption, Lord Hoffman, Lord Neuberger, Lord Walker, Lord Collins and Lord Phillips remain non-permanent members of the court.

Sir Malcolm Rifkind QC, who as foreign secretary oversaw the final negotiations with China before the Handover, told Scottish Legal News: “It was for the judges to decide whether the rule of law has been so far eroded in Hong Kong that they could not carry out their functions properly.

“It must be for each judge to decide but my personal view is that Lord Reed and Lord Hodge have reached the right decision.”

Foreign Secretary Liz Truss said: “We have seen a systematic erosion of liberty and democracy in Hong Kong. Since the National Security Law was imposed, authorities have cracked down on free speech, the free press and free association.

“The situation has reached a tipping point where it is no longer tenable for British judges to sit on Hong Kong’s leading court, and would risk legitimising oppression.

“I welcome and wholeheartedly support the decision to withdraw British judges from the court.”

Dr Stephen Thomson, senior lecturer at the ANU College of Law, The Australian National University, who worked in Hong Kong for eight years and is an expert in Hong Kong public law told SLN the resignations were “further evidence of confidence in Hong Kong’s rule of law credentials ebbing away”.

Dr Thomson, who is also an Edinburgh University graduate and authority on the nobile officium, added: “There comes a point at which the threshold is crossed between remaining in the system to do what one can to uphold the rule of law, and being seen to endorse by association a system that is increasingly at odds with it. Evidently their lordships felt that this time had come.”

Last month a court relied on ruling by judges including Lord Reed to jail a member of the territory’s parliament. Fernando Cheung, 64, a former Labour Party member of the Hong Kong legislative council (LegCo), was imprisoned for three weeks over a 45-minute anti-Beijing chant he delivered in 2020.

Scottish government to provide £48m for victims’ groups

More than 20 organisations spread across the country will benefit from the new Victim Centred Approach Fund over the 2022-25 period. They include Central Advocacy Partners which is receiving £167,000 to support its work with victims with learning disabilities and autism.

Victim Support Scotland is receiving just over £18m and organisations supporting women and girls, trafficking victims and people from ethnic minorities are also to benefit.

Justice Secretary Keith Brown said: “The level of funding being made available to a range of organisations across Scotland through the Victim Centred Approach Fund underlines our absolute commitment to putting victims very firmly at the centre of the justice system.

“This new fund will provide joined-up, accessible support to victims regardless of where they live in Scotland. It will help support specialist services for those bereaved by crime, provide court advocacy support for survivors of gender-based violence, extend support and assistance for victims of human trafficking and enable better long-term outcomes for victims, including improved mental and physical health.

“The Victim Surcharge Fund will also enable people impacted by crime to have access to funds when they need it most. Covering costs for emergency accommodation, food and clothing are just some of the ways that funding can be used.

“I want to thank all organisations for their continued commitment to supporting victims.

“We have also instigated an independent review of the Victim Notification Scheme to ensure victims are able to receive timely and compassionate information on the release of offenders.

“All of these steps reinforce my focus and commitment to ensuring those affected by crime are fully supported on their journey to recovery.”

Lords: Police use of AI must not undermine human rights and rule of law

In its report Technology rules? The advent of new technology in the justice system, published today, the committee notes the pace of the development of technologies, largely unseen by the public. Without sufficient safeguards, supervision, and caution, advanced technologies used in the justice system in England and Wales could undermine a range of human rights, risk the fairness of trials and damage the rule of law.

Facial recognition is the best known, but other technologies are in use, and more are being introduced. Development is moving fast, and controls have not kept up. The committee acknowledges the benefits: preventing crime, increasing efficiency, and generating new insights that feed into the criminal justice system.

However, it is concerning that there is no mandatory training for the users of AI technologies, such as facial recognition, particularly given their potential impact on people’s lives. Meanwhile, users can be deferential rather than critical. The committee is clear that ultimately decisions should always be made by humans.

There are risks of exacerbating discrimination. The report highlights serious concerns about the dangers of human bias contained in original data being reflected, and further embedded, in algorithmic outcomes. The committee heard about dubious selling practices and claims made as to products’ effectiveness which are often untested and unproven.

The committee calls for the establishment of a mandatory register of algorithms used in relevant tools. Without a register it is virtually impossible to find out where and how specific algorithms are used, or for Parliament, the media, academia, and, importantly, those subject to their use, to scrutinise and challenge them.

The report highlights that most public bodies lack the expertise and resources to carry out evaluations, and procurement guidelines do not address their needs. It recommends that a national body should be established to set strict scientific, validity, and quality standards and to certify new technological solutions against those standards. No tool should be introduced without receiving certification first, allowing police forces to procure the technological solutions of their choice among those ‘kitemarked’.

It is not possible to work out who is responsible for what, with more than 30 public bodies, initiatives, and programmes which play a role in the governance of new technologies in the application of the law, the committee notes that the system needs urgent streamlining. Reforms to governance should be supported by a strong legal framework. Without coordination between government departments, roles are unclear, functions overlap, joint working is patchy and where ultimate responsibility lies cannot be identified.

The committee also calls for a duty of candour on the police so that there is full transparency. AI can have huge impacts on people’s lives, particularly those in marginalised communities. Without transparency, there can be no scrutiny and no accountability when things go wrong.

Baroness Hamwee, chair of the Justice and Home Affairs Committee, said: “What would it be like to be convicted and imprisoned on the basis of AI which you don’t understand and which you can’t challenge?

“Without proper safeguards, advanced technologies may affect human rights, undermine the fairness of trials, worsen inequalities and weaken the rule of law. The tools available must be fit for purpose, and not be used unchecked.

“We had a strong impression that these new tools are being used without questioning whether they always produce a justified outcome. Is ‘the computer’ always right? It was different technology, but look at what happened to hundreds of Post Office managers.

“Government must take control. Legislation to establish clear principles would provide a basis for more detailed regulation. A ‘kitemark’ to certify quality and a register of algorithms used in relevant tools would give confidence to everyone – users and citizens.

“We welcome the advantages AI can bring to our justice system, but not if there is no adequate oversight. Humans must be the ultimate decision makers, knowing how to question the tools they are using and how to challenge their outcome.”

Burges Salmon re-elects managing partner Roger Bull

Mr Bull joined the firm in 1995 as a trainee solicitor, qualifying in 1997 and became a partner on 1 May 2003 and head of the firm’s employment team on 1 May 2011.

He said: “I am honoured that the partners have put their confidence in me for another four years. I have very much enjoyed seeing Burges Salmon go from strength to strength since 2018, and the firm’s success during this period has given us an excellent platform to progress our exciting and ambitious five year strategy that we launched in 2021.”

Burges Salmon’s senior partner, Chris Seaton, added: “I have had the pleasure of working alongside Roger for many years, both as partners in our employment law team and also in our respective roles as the firm’s senior and managing partners.

“I am delighted that Roger has been re-elected as the firm’s managing partner and I very much look forward to continue working closely with him to progress the firm’s ambitious growth strategy over the coming years.”

New guide for EU lawyers and law firms on AI

The guide is the result of two years of work in the framework of the AI4Lawyers project co-funded by the Justice programme of the European Union.

In the legal services and justice environment, legal tech providers have emerged throughout Europe and have brought, or are planning to bring, a range of tools on the market promising to facilitate legal practitioners with issues such legal analysis, reduction of repetitive and time-consuming tasks, and speeding up judicial processes. 

The guide aims to help lawyers better understand the use of AI and other novel IT technologies in their daily practice. The guide’s approach is educational and provides practical information on what tools to use and how to use them.

CCBE president James MacGuill said: “I am convinced that the guide will be of great assistance to the legal profession by offering them practical advice to better adapt to a more digital society.

“The use of new technologies can for instance facilitate the business processes of small firms, but also give rise to some challenges and risks. The guide offers an interesting insight into the exciting opportunities that AI tools may hold for the legal profession, with a focus on how small law firms can benefit, and the risks of which they should be mindful.”

Register by emailing: event@ccbe.eu indicating whether you wish to participate online or in person.

​​​Russia: Authorities launch witch-hunt to catch anyone sharing anti-war views

Marie Struthers, Amnesty International’s director for Eastern Europe and Central Asia, said: “The persecution of those opposed to Vladimir Putin’s invasion of Ukraine goes far beyond previous efforts to stifle protesters and activists. Those caught criticising the war face an absurd number of arbitrary charges merely for speaking out. They are not only charged with ‘discrediting’ the armed forces, but also with slander, fraud or accusations of ‘terrorism’.”

A month on from Russia’s invasion of Ukraine, at least 60 criminal cases have been initiated over peaceful protests against the war or public criticism of the Russian authorities, according to Agora, a Russian human rights group. They are being investigated under 14 separate articles of the Criminal Code.

At least 46 people have faced criminal charges, including nine who were taken into custody and three who were confined under house arrest. They have been charged with a myriad of “crimes”, including insulting government officials, libel, inciting extremist activities, inciting mass riots, hatred and fraud, and the desecration of burial sites, according to Agora.

At least 10 of these cases saw critics being investigated under a new law, for “discrediting” Russia’s armed forces. Under the new Russian law this is punishable by up to 10 years in prison — or 15 years if the comments caused “grave consequences”.

On 4 March, this legislation was passed unanimously by both chambers of the Russian Parliament and signed into law by President Vladimir Putin on the same day. On 22 March, the law was expanded to criminalise the sharing of “fake news” about any activities of Russia’s government officials abroad.

On 16 March, Veronika Belotserkovskaya, a gastronomy blogger with 850,000 Instagram followers, became the first individual charged under the new law. She was charged with sharing “knowingly false information about the use of the Russian Armed Forces to destroy cities and the civilian population of Ukraine, including children.”

Sergey Klokov, a technician at the Moscow City Police Department, was the first person taken into custody under this law after being arrested on 18 March. According to his lawyer, he was charged with spreading “fake news” during phone calls with residents of Crimea and Moscow region.

More cases followed. On 22 March, Aleksandr Nevzorov, a prominent journalist who gained popularity during perestroika, a state-approved series of political reforms in the 1980s, was charged with sharing “false information” about Russia’s strikes against a maternity hospital in Mariupol, after criticising the shelling in an Instagram post on 9 March.

Ms Struthers said: “Russia’s criminal justice system is being used as a tool to curb free speech, punish dissenting voices and instill fear in the wider population. By gagging all anti-war sentiment, the Kremlin seeks to crush those who oppose the conflict — or at least create the impression that such resistance does not exist.

“This heinous campaign of repression against critics of the state who are bravely standing up against Russia’s invasion of Ukraine must stop now. All charges brought against those who have expressed anti-war opinions must be urgently dropped, and all those detained must be immediately and unconditionally released.”

Lord Advocate to deliver Aberdeen Law Project’s Annual Lecture 2022

The event will be held in a hybrid format. In-person tickets are limited due to seating capacity, but the event will also be streamed online for those who cannot attend in person.

After the Lord Advocate’s speech there will be an awards ceremony recognising the contributions of ALP members. Following that will be an exhibition where attendees will be able to learn more about what ALP members have been working on.

The lecture will take place on 14 April from 5pm to 8.30pm at the University of Aberdeen.

Register here

Finnish court upholds right to free speech

In a unanimous ruling the court concluded that “it is not for the district court to interpret biblical concepts”. The prosecution was ordered to pay more than €60,000 in legal costs and has seven days to appeal the ruling.

The former minister of the interior had been charged with “hate speech” for sharing her faith-based views on marriage and sexual ethics, in a 2019 tweet, a 2019 radio debate, and a 2004 pamphlet.

The bishop faced charges for publishing Räsänen’s pamphlet for his congregation over 17 years ago. Their case has garnered global media attention this year, as human rights experts voiced concern over the threat this case posed to free speech in Finland.

“I am so grateful the court recognized the threat to free speech and ruled in our favour. I feel a weight has been lifted off my shoulders after being acquitted. Although I am grateful for having had this chance to stand up for freedom of speech, I hope that this ruling will help prevent others from having to go through the same ordeal,” said Ms Räsänen after her victory.

Her defence, supported by the legal advocacy organization ADF International, argued that finding Ms Räsänen guilty would significantly damage free speech in Finland. What Ms Räsänen said, they argued, was an expression of Christian teaching.

The court recognised that while some may object to Ms Räsänen’s statements, “there must be an overriding social reason for interfering with and restricting freedom of expression”. It concluded there was no such justification.

Singapore faces pressure to stay execution of man with IQ of 69

If he is not given clemency, Nagaenthran Dharmalingam, a 34-year-old Malaysian who has an IQ of 69, will be put to death.

He was arrested in 2009 at the age of 21 with 43g of heroin, worth a few thousand dollars on the streets, as he entered Singapore. According to his lawyers, he had agreed to be a drug mule after a smuggler in Malaysia threatened him and his girlfriend.

He was found guilty in 2019 and sentenced to death, the mandatory sentence for drug trafficking in the jurisdiction. Exemptions may be given for the intellectually impaired.

“Nagaenthran should be protected from the death penalty because of his intellectual disability,” said Maya Foa, director of Reprieve. “Allowing this travesty of justice to take place would fly in the face of those promises.

“We urge President Halimah Yacob to listen to the cries for mercy within Singapore and around the world, from the United Nations to global business leaders, and spare the life of this vulnerable man.”

Amnesty International’s southeast Asia researcher, Rachel Chhoa-Howard, said: “We urge the Singapore government to refrain from reinstating the use of this cruel punishment.

“The government must act immediately to stop a grave travesty of justice from taking place and end its inhumane, shameful strategy of using the death penalty to address drug-related problems.”

Quote of the day

Unlimited power is apt to corrupt the minds of those who possess it; and this I know, my Lords, that where law ends tyranny begins!

William Pitt, 1st Earl of Chatham, speaking in the House of Lords, 9 January 1770

And finally… losing their marbles

The Institute of Digital Archaeology (IDA), which wants to use technology to create a replica of the collection as a possible solution to the drawn-out international dispute over their ownership, told The Guardian it would apply for an injunction requiring the museum to allow the project to go ahead.

Museum authorities have accused the IDA of breaking visitor guidelines by carrying out some unauthorised scanning when their official request was denied.

For decades, Greece – latterly backed by Unesco – has called for the marble sculptures to be returned, disputing the legality of their removal from Athens to London in the early 19th century.

The Oxford-based IDA believes that the creation of a high-quality replica to remain in the British Museum could make the return of the originals to Greece possible.

Director Roger Michel previously told The Times: “The goal of the project is to find a way to break the 200-year logjam. When Charles takes the throne, he’ll be the great-grandson of the Greek king. I’d like to see an end to this dispute between these countries whose histories are interwoven.”

Why New Business Teams are catching on

Jose Mourinho famously said, “Good teams win titles, but great teams retain them”. Makes sense. And acquisition and retention, albeit in the form of clients, is definitely something we are seeing more law firms focusing on in 2022.

If it’s not broken, don’t fix it…?

It is far more complicated for champions to strengthen their side than it is for their rivals. Winning the league is a veil; it means that even a flawed team has a legitimacy, that even those players whom a manager believes might be improved upon most easily have a right to keep their place. Football has always believed that you do not change a winning formula, that if something is not broken, you do not fix it, even when actually it might be rather more broken than it first appears.

The same can be said for law firms. Firms sometimes don’t know there are better ways to work. They do quite well, they’re bringing in fees, so all is well. But not adapting to a changing environment can be costly. And as much as many lawyers and law firms have formed great relationships and in many cases friendships, the desire of your rivals is to win, to do better, to catch and overhaul the firm that did better than them the previous year. That is a powerful emotional impulse, particularly when combined with a freedom to change their working practices to address their problems.

A taste for success

Great football managers often talk about a hunger for trophies. Brian Clough always said that the most important triumph in his time at Nottingham Forest was not the league title or the European Cup, but the 1977 Anglo-Scottish Cup, because that was the one that set the team on the way to further glory, which included two European Cups. That first gave them a taste for success. This is called the “Champagne Effect.”

For law firms to change and succeed can be difficult. Mainly because as friendly as you might be with the firm at the opposite end of the High St, you really don’t know what they’re up to internally. You don’t know what they’re planning, the trends they are following or the work the backroom staff are doing to get their team ready to not just compete, but to potentially take the title! But what you can do is create small wins to give you that taste for success.

Structured success

Many of the law firms we speak to are gearing up and restructuring their business for a busy year. One even used the term, “Its Game On!”, hence the title of this article. The trend we’re seeing is that the introduction and/or expansion of ‘New Business Teams’ (NBTs) are going to be business critical for law firms.

We’ve heard so many law firms talking about this, and many are now adopting a dedicated New Business Team to enhance and structure their sales processes. Primarily because the importance of tracking the marketing spend and conversion values can’t be underestimated in today’s market. Firms are becoming laser focused on not only driving new business but improving comms and analysing their client data to ensure they retain them.

Change your tactics

The general rule that successful firms are following is that if the cost of client acquisition is too expensive for the work the client is paying you for then it’s time to change tactics.

The trouble with law firms is they are normally hired for a one off piece of work for a client and struggle to sell other services to enhance the income stream they worked hard to sign up. The enthusiasm to try and structure this process and retain business weans because most firms are busy and believe they don’t have the time. This may be true, but the amount of money being lost and the likelihood of you falling way down the law firm league table because you don’t focus on this growth area is going to make our break the long term success of your business.

Here are 3 key areas you need to consider to succeed in the NBT challenge:

1. Methodology and Process – how to do it within the context of your work types, legal knowledge and customers.
2. People and Organisation – are you structured in the right way for success, with the right people owning the right things?
3. Systems and Resources – using the right tech and resources is critical, and ensuring your software includes a dedicated way to Intake, Track & Convert enquires easily.

Denovo’s “Champagne Effect”

It’s a law firm leaders’ job to teach their team to be hungry for success. It’s Denovo’s job to give your team the “The Champaign Effect”. In other words, we’ll show you how using the right technology to manage new business and retain existing clients will help your law firm be successful. Coupled with great people and a structured process we’ll give you the efficiency and data you need to see success. We’ll give you some wins.

If you’re ready to change your tactics, visit denovobi.com, call us on 0141 331 5290, or if you would prefer to write to us our email is info@denovobi.com.

An Act of Economic Warfare? What to expect from the Economic Crime Act

Having been hailed by David Davis as an “economic warfare bill”, the Act is intended to provide the UK with tools to “better identify, investigate and sanction the illicit wealth of those who wish to abuse our open economy”. Expedited to assist worldwide attempts to target Russian wealth, it is of no surprise that the bill was quickly passed with cross party support. One could therefore be forgiven for thinking the proposed powers are newly conceived. However, for much of the Act, that is not the case.

The Act, split into three parts, covers:

1. the creation of a new register of overseas entities;
2. reform of unexplained wealth orders (“UWOs”); and
3. the streamlining of the Sanctions Act

Part One – register of overseas entities

Creation of a new register of overseas entities, requiring overseas companies owning or buying property in the UK to disclose their true owners to Companies House.

It is estimated that approximately £170 billion of UK property is held by overseas entities, however, foreign entities owning such property are not subject to the UK’s Persons with Significant Control (PSC) Register, which came into force for UK companies in 2016. The Act aims to remedy this. Any foreign company selling properties between 28 February 2021 and the full implementation of the register will be required to declare true ownership at the point of sale. For existing ownership, those that acquired land since (a) 1 January 1999 in England and Wales, and (b) since 8 December 2014 in Scotland will also be required to comply. Backed by restrictions on registering or disposing the title of the land until registration has occurred, and sanctions for non-compliance, including fines and custodial sentences of up to five years, the register is intended to assist law enforcement agencies identify and investigate those using UK property to launder money.

Origins

Although appearing to be in direct response to the war in Ukraine and a concerted attack on disguised Russian investment in the UK property market, this proposed register is not a new concept. The Overseas Entities Register was first announced in March 2016, around the same time the PSC Register was introduced. After consultation, a draft Bill was tabled in 2018, but slow progress ensued. Recent events have clearly forced the Government to expedite the legislation.

Early concerns and amendments

Although a welcome move, early concerns have been raised (and in some cases, partially addressed). The bill initially called for daily fines of £500 for non-compliance.   Considering the financial means of the individuals the legislation is intended to target, this was considered by many to be weak. The daily amount has now been set at £500, increasing to a maximum £2,500 per day.  

As the Register will be based on existing PSC requirements, there remains the possibility that companies will be able to hide their true owner by claiming that they have no beneficial owner. This is already a problem with the existing PSC register.

The transitional provisions initially proposed allowed a grace period of 18 months to comply (for existing property ownership), which was reduced to six months after concerns were raised. This continues to allow a reasonable timeframe for disposal, however, the Act now requires sales from 28 February 2021 to be registered at the point of sale. This is a positive move, but will require Companies House to be sufficiently resourced from the get go. As further widespread reform of Companies House is imminent, there are questions over its current capability and capacity to deal with the new register.  

Another change to the bill is the closing of a loophole which would have allowed the Secretary of State the right to exempt individuals from registration on the basis of “the interests of the economic wellbeing of the United Kingdom”. Seen as a widely termed “oligarch loophole”, the removal of the exemption has been widely welcomed.

Outlook

Whilst there are questions over the ability of the register to assist in the waging of economic warfare in the short term, the proposed register is likely to make a significant longer term impact.

Part Two - reform of UWOs

Reform aimed at improving the effectiveness of UWOs, particularly in relation to situations involving complex ownership structures.

Changes include the following:

• the definition of property being expanded to include homes held in trust or by shell companies;
• more time is to be made available to law enforcement to carry out investigations;
• reforms to the cost rules meaning agencies will no longer be liable for respondents’ costs unless they act dishonestly, unreasonably or improperly

Why were reforms needed?

UWOs have been around since January 2018 but have been used only nine times in relation to four cases. The early hopes of a strong weapon to improve civil recovery just haven’t materialised.   This is largely attributable to the costs (and public embarrassment) associated with failed attempts. In one case, the NCA was left with a bill of £1.5m after a UWO used to seize property assets was successfully challenged. Identifying ownership of assets has also often proved difficult.

Another obstacle has been the requirement that an agency proves the respondent did not have legitimate means with which to acquire the asset. When legitimate wealth is also held by a suspect (which it often is), it is difficult to point to a specific asset and categorically state that it was obtained via illegitimate means.  

Outlook

There is a clear political will to make better use of UWOs, and the Act will undoubtedly move some way towards this.

Part three – streamlining of the Sanctions Act

Reform to expedite sanctioning of oligarchs and businesses associated with the Russian Government and strengthen powers to impose monetary penalties on those who violate sanctions.

The Act introduces an urgent designation process to allow the UK to quickly impose sanctions in respect of entities already subject to sanctions by other specified countries (including the US and EU). This process includes the removal of the statutory test of appropriateness for making such designations. There does, however, remain a requirement to show reasonable grounds to suspect that the person to be designated is “an involved person”.

At present the Office of Financial Sanctions Implementation (“OFSI”) can only impose civil monetary penalties for contravention if the individual/institution knew or had reasonable cause to believe that they were breaching sanctions. This requirement has been removed, bringing the UK more in line with civil enforcement powers in the US.  

Potential concerns

Some commentators have expressed concern that the new rules will capture those who make honest mistakes. One industry capable of falling foul is the Fintech banking industry, with many newly established institutions not having sanctions monitoring capabilities in place to meet the new strict liability test.

Outlook

The sanctions proposals are considered significant and a welcome change to what has historically been perceived as a weak record of UK Sanctions enforcement. The Act will make it far easier to impose civil fines for non-compliance with obligations by applying strict liability. It is hoped that this will add teeth to the existing regime which has seen OFSI issue only six fines in the six years since it was created.

Shortly following the Act’s Royal Assent on 15 March, the UK Government announced a further 370 sanctions against Russian and Belarusian entities; 51 of which are believed to be oligarchs and their family members, with an estimated worth of £100bn.

Next Steps

The Act sets out the first set of measures in a wider package of legislative proposals intended to tackle illicit finance. Next to be addressed by Government in the coming months is the long overdue reforming of Companies House and the introduction of powers to seize crypto assets more easily.

Steps taken to tackle and reduce economic crime are certainly welcome, and the effectiveness of the Act will become clearer in due course. We eagerly await the next set of proposals and are interested to see whether these are delivered at such pace.

Emma Webster is a manager in the Forensic Accounting and Investigations team at Quantuma Advisory Limited

emma.webster@quantuma.com

Property Market – A Perfect Storm for Fraudsters?

A report on money laundering activity showed these fears to be well founded, as property fraud was a key theme with £200 Million of criminal activity in 2020.

Many of these cases relate to transactions where a criminal purports to sell a property without the knowledge or consent of the proper legal owner. Where they are successful, a legitimate buyer and their lender can face enormous losses.

Protection against this type of loss is provided by Stewart Title’s Fraud Solution Policy. This policy offers safeguards against losses arising from fraud for buyers and their lenders where a criminal successfully impersonates the owner of a property. Cover of up to £1,000,000 is available for residential properties in England, Wales and Scotland with premiums starting at £28 (inclusive of IPT).

Solicitors acting for buyers are also protected as all rights of subrogation are expressly waived so their Professional Indemnity Insurance is protected.

Policies can be ordered online at: www.stewartsolution.com. Where cover is required for all of a firm’s buyer and lender clients, it is also available as a Block Policy.

For more details, please contact:

John Logan
Country Manager
01698 833308
john.logan@stewart.com

Elizabeth Birrell
Business Development Executive
07940 513681
elizabeth.birrell@stewart.com

Your trusted partner for title indemnities

We can provide the following:

Online Ordering

Our Stewart Solution application enables you to get a quote for more than 150 title risks in three easy steps. Our technology can reduce time, costs and the risk of errors, streamlining your practice.

Bespoke Solutions

Our knowledgeable Underwriting Team is available for more complex matters or where you need to discuss your transaction.

Dedicated Service

We approach working with our clients as a partnership – responding quickly to your needs, understanding the problems you face and providing prompt solutions to help resolve potential issues.

Contact us to discuss your transaction. We would be pleased to assist you.

Elizabeth Birrell

07940513681

elizabeth.birrell@stewart.com

www.stewartsolution.com