Economic Crime and Corporate Transparency Act 2023: What does it mean for UK businesses
The Economic Crime and Corporate Transparency Act has now been given Royal Assent, beginning the most significant changes in the history of Companies House and increasing its abilities to tackle companies set up for fraudulent or criminal purposes. The legislation aims to increase the transparency of UK companies and other legal entities.
The main changes regarding Companies House include identity verification for all company directors, people with significant control and those delivering documents to the registrar.
There are also measures that strengthen law-enforcement powers to fight fraud and money laundering, particularly around information sharing and the seizure and recovery of cryptoassets.
What are the key changes affecting Companies House?
One of the significant new powers is the introduction of enhanced ID verification checks, which will target criminals who try to register companies under fictional names. Previously, Companies House had no powers to verify the accuracy of the information it received or published.
The Government believes the Act will prevent those setting up companies under fake identities from hiding ill-gotten gains behind these fictitious names. It has said that the new powers mean that Companies House becomes “a more active gatekeeper over company creation and custodian of more reliable data”. Practically, the Registrar will have powers to check, remove or decline information submitted to, or already on, the companies register.
Additionally, Companies House will also be given more powers for investigative and enforcement actions. This includes information sharing and cross checking of data with other public and private sector bodies.
What about money laundering?
The new Act also makes some provisions for further addressing money laundering. The main focus of the AML reforms is enabling the flow of information in certain circumstances to help prevent money laundering and to improve the investigation of economic crime. This will be done by disapplying civil liability for breaches of confidentiality clauses by firms who share information in order to help in the fight against economic crime.
The Act also removes the requirement for a pre-existing suspicious activity report (SAR) to have been submitted to the National Crime Agency before the NCA’s Financial Intelligence Unit is able to make an information order.
What are the provisions on fraud prevention?
The Act includes new measures that hold companies liable if they profit from the fraudulent actions of their employees. It places the emphasis on the company to stop such practices and creates a new corporate offence of failure to prevent fraud.
An organisation will be liable where a specified fraud offence is committed by an associated person for the benefit of the organisation or a person who receives services from the organisation.
The maximum penalty an organisation can receive is an unlimited fine.
Conclusion
The Economic Crime and Corporate Transparency Act represents the most significant change to company law since the Companies Act 2006. It aims to help the authorities fight financial and corporate crime by increasing the powers of Companies House, enabling information sharing and introducing new corporate offences. It will be implemented in stages during the next 2 years.
Written by Paul Murphy
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How can we help?
If you need to know more about this new and important legislation then UK Training can help. We have a 2-hour course explaining The New Offence of Failure to Prevent Fraud and a half-day course, Preparing for the Companies House Reforms. We also have regular presentations of our full-day course AML: Anti-Money Laundering & Financial Crime.
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