UK toughens up on economic crime with new Act

The Economic Crime and Corporate Transparency Act 2023 (“ECCTA”) received Royal Assent on 26 October 2023 and aims to help combat economic crime and improve transparency over corporate entities.

We have previously discussed the ECCTA when it was going through the parliamentary process as a Bill, particularly in relation to the proposed wider powers of investigation and the proposed director verification reforms.

Whilst the ECCTA is now law, many of the reforms envisioned by it will not be implemented immediately, and many will require secondary legislation to be passed in due course in order to bring them into ‘substantive effect’.  It is expected that the Government and Companies House will release more information in advance of any such reforms being implemented.  Those changes in relation to corporate criminal liability will take effect at the end of December 2023, though it is expected that the new offence will not be in force until after the government has conducted a consultation and produced guidance on ‘reasonable procedures’ during 2024.

What reforms can be expected?

The ECCTA will introduce various new responsibilities for a range of people involved with a UK company or other corporate entity, including all new and existing company directors, people with significant control of a company, and anyone who files on behalf of a company, also known as Authorised Corporate Services Providers, such as lawyers, accountants or auditors.

In brief, reforms can be expected in relation to:

• identity verification (see our previous article on these proposed reforms here);
• wider powers of investigation for Companies House (see our previous article on these proposed reforms here) as well as increased Companies House fees to cover the increased costs associated with these wider powers;
• company administration - designed to lighten the administrative burden on UK companies (including a move towards filing of accounts by software only);
• limited partnerships - seeking to improve their transparency by requiring more information to be filed at Companies House and such information to be filed via authorised agents;
• corporate criminal liability for economic crimes - a new strict liability offence of failure to prevent fraud where a company does not have reasonable fraud prevention procedures in place (applicable only to “large organisations” for the time being – those organisations with at least two of the following criteria:
  • a turnover of more than £36 million;
  • total assets of more than £18 million; or
  • an average of more than 250 employees.