Economic Crime and Corporate Transparency Act

On 26th October 2023 the Economic Crime and Corporate Transparency Act (ECCTA) received Royal Assent. Several of the measures will not be introduced right away as they will require secondary legislation, guidance, and system development.

The act will deliver:

reforms to Companies House
reforms to prevent the abuse of limited partnerships
additional powers to the NCA to seize and recover suspected criminal crypto assets
Improved information sharing to tackle money laundering and other economic crime

Reforms to Companies House

The Economic Crime and Corporate Transparency Act brings enhanced powers to Companies House including introducing identity verification, improvements to the Companies House register, and measures to prevent the abuse of limited partnerships.

Identity verification and Authorised Corporate Service Providers (ACSPs)

The Act will introduce identity verification checks for:

all new and existing UK company directors
people with significant control (PSC)
those delivering documents to the Companies House register

All new and existing registered company directors, People with Significant Control (PSCs) and anyone else filing with the Registrar in the UK will need to verify their identity to prove that they are who they claim to be.

At present it is envisaged that verification will be a one-off requirement although reverification may be required if, for example, there are concerns about the validity of the identity verification such as a suspicion of fraud.

Verification can either be undertaken directly via Companies House or via an indirect route through an Authorised Corporate Service Provider (ACSP). ACSPs will deliver documents on behalf of clients, identity verify clients and declare that they have completed the necessary identity verification checks to Companies House. Many tax advisers and accountants already assist clients with filing documents at Companies House but will need to become authorised as an ACSP.

To provide ACSP services to clients, agents must be registered with a supervisory body for Anti-Money Laundering (AML) purposes and already have an existing duty to carry out customer due diligence checks on clients. Identity verification will build on these existing checks. Further information on identify verification and authorised corporate service providers is available on the gov.uk website here. We are expecting a large number of our AML supervised firms and members will want to register with Companies House as ACSPs. As further details become available about this process and the evidence needed to confirm AML supervision details to Companies House we will issue guidance to members.

Members should also note that there will be a new offence applying to the director (or equivalent) of an ACSP where they fail to notify Companies House of changes to their supervisory body within 14 days.

Improvements to the Companies House register

As the Act will introduce identify verification, this will create a verified public register of beneficial ownership (compared with the current register which is based purely on what is reported and is not checked or verified) and improve the accuracy and reliability of Companies House information. This will strengthen to the quality of information on the company register and seek to prevent bad actors from fraudulently setting up companies under false information and hiding their true identities.

Improved information will enable firms to make better business decisions about potential customers and suppliers. It will also assist CIOT members when undertaking AML checks in relation to clients. Firms should however be aware that some measures will not be introduced right away and will be implemented through secondary legislation.

Though the Act brings in new measures of transparency regarding company information, there will be scenarios in which individuals can apply to have certain personal information suppressed from public disclosure. This will apply to personal information such as residential address, signatures, business occupation etc, further information can be found on the gov.uk website here.

Reforms to prevent the abuse of limited partnerships

Further reforms aim to tackle the misuse of limited partnerships and Scottish limited partnerships through tightening registration requirements, introducing requirements to maintain a connection to the UK, increase transparency and allow the Registrar of Companies to deregister LPs where in the public interest to do so.

Additional powers to the NCA to seize and recover suspected criminal crypto assets

The Act brings amendments to the Proceed of Crime Act (POCA) 2002 to support the recovery of crypto assets, this brings greater powers to law enforcement agencies in relation to seizing and recovering crypto assets which are proceeds of crime or associated with illicit activity.

Improved information sharing to tackle money laundering and other economic crime

The ECCTA seeks to improve information sharing measures through disapplying civil liability for breaches of confidentiality in certain situations when sharing customer information for the purpose of preventing, investigating, and detecting economic crime.

This Act also removes the requirement for a Suspicious Activity Report (SAR) to have been submitted for an information order to be obtained by the NCA’s Financial Intelligence Unit (FIU).

Failure to prevent fraud, Strategic Lawsuits Against Public Participation (SLAPPs) and reforms to corporate criminal liability laws

In addition to the above, the government have introduced a number of key measures including the new ‘failure to prevent fraud offence’. This will hold organisations accountable for failing to prevent specific fraud offences committed by employees if the organisation profits from the fraud and did not have reasonable measures to prevent fraud in place. The offence applies to all large corporate bodies including not-for-profit, charities and incorporated public bodies. The organisation must meet two out of three of the following criteria to be in scope:

more than 250 employees
more than £36 million turnover
more than £18 million in total assets

Liability can be attached to either the entity which was directly responsible for failing to prevent the fraud or their parent company if the parent company profits from the fraud and did not have reasonable measures to prevent fraud in place.

The reforms also introduce measures to hold businesses criminally liable in their own right for economic crimes, as well as changes to Strategic Lawsuits Against Public Participation (SLAPPs) which involve economic crimes to provide greater protection to defendants.

Further information can be found on the gov.uk website here. We will keep this webpage updated as secondary legislation and guidance is introduced.