Economic Crime Act Receives Royal Assent

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The Economic Crime and Corporate Transparency Act received Royal Assent on 26 October 2023. The new Act contains laws to “fight fraud, counter corruption and bolster legitimate business” and introduces world-leading powers which will allow UK authorities to “proactively target organised criminals and others seeking to abuse the UK’s open economy”.

It imposes new requirements on companies, limited partnerships, and other corporate entities, including the registration of overseas businesses, and is being introduced as part of the UK Government’s push to improve corporate transparency.

The reforms have been dubbed by Companies House as “the biggest changes for our work since we began registering companies in 1844” and will strengthen the role of the Department for Business and Trade’s executive agency in a bid to tackle economic crime.

Companies House will receive enhanced abilities to verify the identities of company directors, remove fraudulent organisations from the company register and share information with criminal investigation agencies.

Law enforcement agencies will benefit from greater powers to seize, freeze and recover cryptoassets, while groundbreaking legal reforms will allow the courts to dismiss spurious lawsuits which seek to stifle freedom of speech. Prosecutors will also be better able to hold large corporations accountable for malpractice.

Companies House Chief Executive Louise Smyth said: “These new powers are without doubt the most significant change for Companies House in our long history.

“We have known for some time that UK companies have been misused by criminals to commit fraud, money laundering, and other forms of economic crime and our thoughts have always been with those affected.

“We will now play a much greater role in preventing further abuse of the register. We will be taking unprecedented steps to crack down on fraudulent activities, help victims quicker and clean up the register by removing information we know to be incorrect.

“This will underpin our efforts to improve the quality and reliability of our data, which will in turn hugely increase the value of the register for businesses across the UK and beyond.”

Graeme Biggar, Director General of the National Crime Agency (NCA), said: “This act is long-awaited and welcome. For too long, criminals and corrupt elites have abused UK company structures to launder their illicit wealth; the new powers given to Companies House will help us tackle those who abuse our economy.

“This act also gives the NCA and police greater powers to seize and recover cryptocurrencies, and we welcome the creation of a criminal offence which holds organisations criminally liable if they fail to prevent fraud by their employees.”

The main provisions of the Economic Crime and Corporate Transparency Act include:

Companies House Reform

  • Introducing identity verification for all new and existing registered company directors, People with Significant Control, and those delivering documents to the Registrar.
  • Broadening the Registrar of Companies House’s powers so that the Registrar can become a more active gatekeeper over company creation and custodian of more reliable data.
  • Improving the financial information on the register so that the register is more reliable, complete and accurate.
  • Providing Companies House with more effective investigation and enforcement powers and introducing better cross-checking of data with other public and private sector bodies.
  • Enhancing the protection of personal information provided to Companies House to protect individuals from fraud and other harms.

Limited Partnership Reform

The Act attempts to modernise the law governing limited partnerships by:

  • Tightening registration requirements.
  • Requiring limited partnerships to maintain a connection to the UK.
  • Increasing transparency requirements.
  • Enabling the Registrar to deregister limited partnerships which are dissolved, no longer carrying on business, or where a court orders that it is in the public interest to do so.

Strengthening Anti-Money Laundering Powers

The Act strengthens anti-money laundering (AML) powers by:

  • Enabling businesses in certain situations to share information more easily to prevent, investigate or detect economic crime by disapplying civil liability for breaches of confidentiality for firms who share information to combat economic crime.
  • Enabling proactive intelligence gathering by law enforcement and strengthening the NCA’s Financial Intelligence Unit’s (FIU) ability to obtain information from businesses relating to money laundering and terrorist financing by removing the requirement for a pre-existing Suspicious Activity Report (SAR) to have been submitted before an Information Order (IO) can be made.
  • Focusing private sector and law enforcement resources on high-value activity, reducing the reporting burden on businesses and enabling greater prioritisation of law enforcement resources by expanding the types of cases in which businesses can deal with clients’ property without having to first submit a Defence Against Money Laundering (DAML) SAR.

The Act is expected to come into force in the next couple of months. Companies should familiarise themselves with the proposals and undertake a risk review at the earliest opportunity to ensure they meet the required standards.

It is always wise to make any changes well in advance of any deadlines being imposed to ensure your company and its policies, controls, and procedures are compliant.

Failure to act could result in serious sanctions.

Compliance Services For Businesses

If you want to know more about the reforms and what they mean for your business, AML & Compliance can help.

We offer a full range of services focused on ensuring businesses across all regulated sectors create, maintain and evidence their compliance with the requirements of their regulators and legislation. We work with businesses of all sizes, from the smaller high street or niche businesses to the large multi-office and multinationals.

Our Packaged Services include:

AML Policy and Procedures including auditing and reporting

AML and Compliance Administration Management

These packages have been designed to provide a core compliance service to regulated businesses in the most cost-effective way to manage and control their AML and Compliance processes.

We adopt a sensible and pragmatic approach to fees, ensuring that we are competitive and always add value. As necessary, we will agree on packaged services to control cost and enable clients to spread payments to alleviate cash flow, yet ensure services are provided when needed.

If you want to discuss our services in more detail, contact us at 0203 985 8553, email us info@amlandcompliance.co.uk or complete an enquiry form.