The Economic Crime and Corporate Transparency Act: What it is and what firms should be doing

The Economic Crime and Corporate Transparency Act (ECCTA) received Royal Assent on 26th October 2023. A proportion of the Act, mainly that relating to Companies House, came into effect on 4th March 2024.

In this article, Bruce Viney discusses what ECCTA is and what it means for your firm.

ECCTA is intended to provide a response to the increasing volume, sophistication and networking of global criminals and serious organised crime groups that take advantage of the UK’s large and open economy and financial industry.

The Act incorporates a range of reforms to tackle these growing problems, and specifically introduces legislation to provide:

• Reforms to Companies House,
• Reforms to prevent the abuse of limited partnerships,
• Additional powers to seize and recover suspected criminal crypto assets,
• Reforms to give businesses confidence to share information to tackle money laundering and other economic crime,
• New intelligence gathering powers for law enforcement and removal of unnecessary burdens on business,
• A new offence of a Corporate Failure to Prevent Fraud,
• A change to the ‘Identification Principle’.
  
  

While some of the Act is currently awaiting further secondary legislation and / or government guidance before coming into effect, many of the reforms to Companies House and limited partnerships came into effect earlier this month. 

In summary, the reforms to Companies House include:

• Creating an ‘active gatekeeper’ role for the Companies House Registrar, in particular over company creation and greater powers to check relevant data.
• Powers of investigation and enforcement, which includes the option, where there is evidence of anomalous filings or suspicious behaviour, to proactively share information with law enforcement bodies.
• Introducing identity verification for all new and existing registered company directors, people with significant control (PSC) and those delivering documents to Companies House. This verification may be carried out either by Companies House, or by an Authorised Corporate Services Provider (ACSP).  Implementation is dependent on new secondary legislation, guidance, and system development.
• Enhanced protection of data held by Companies House.
• Changes that will enable a ‘clamp down’ on the misuse of corporate entities.
  
  

There are also reforms designed to stop the misuse of limited partnerships and Scottish Limited Partnerships.

To achieve these corporate reforms to Companies House, the Act introduces several specific requirements, with the aim of improving transparency of information held there.  The reforms with arguably the most relevance to regulated firms include the following:

• Companies will be required to record the full names of shareholders who are individuals, or the names of corporate members, in their registers. Note that, historically, there has been a requirement to provide members’ names, but the new Act makes explicit what is to be included in the ‘full name’.
• Companies will need to provide, on a one-off basis, a full shareholder list.
• There are powers provided to companies to ensure that membership information is provided and kept up to date. It is an offence to fail to comply with this requirement.
• Non-traded companies will be required to retain old information about a member where it changes.
• It is an offence to make a statement which is false, misleading or deceptive in a material particular.
  
  

Whilst these may not appear at first glance to have direct impact to firms, senior management in regulated firms need to consider these changes with, among other things, reference to their potential impact on the requirement to report material discrepancies between the firm’s client data and the data held at Companies House.  A reminder of this requirement is below.

• Reconsider the firm’s Financial Crime Risk Assessment in the light of these changes.
• Check existing data held on customers, including names of entities, individual customers, directors and direct or indirect beneficial owners. Is the information up to date, accurate and in in the new format required under the act?
• As appropriate, amend existing policies and procedures to ensure that the capture and checking of client data meets the new requirements.
• Check that relevant policies and procedures ensure that staff are aware of and apply the requirements relating to the reporting of material discrepancies between data held by your firm and that held by Companies House. This will be particularly important during this period of transition when new format and rules are being introduced.
• Train staff as appropriate to reflect the new requirements.

For more information and in-depth training regarding ECCTA, get in touch.

Bruce has been working in financial services for nearly 40 years, 25 of these as a learning professional focusing on compliance for a wide range of financial services companies, mainly through the analysis, design, creation and implementation of global training programmes for Tier 1 Banks and FTSE 100 companies. He has been Global Head of Compliance Learning for such firms three times and has provided compliance learning consultancy to similar companies many times. 

Bruce has also provided compliance training and consultancy in other fields such as real estate, industrial supply chains, charities, payment services providers, gambling and casinos and many others.  

A former Director of Training for CISI, Bruce has extensive experience of compliance and financial services-related qualifications and qualified as a Chartered Accountant with Price Waterhouse (as it was then known).

Bruce provides excellent training events on compliance, with a specific focus on financial crime, including all aspects of anti-money laundering, anti-bribery and corruption, fraud and sanctions.