The Economic Crime and Corporate Transparency Act received Royal Assent on 26 October 2023.
The Act is part of the government’s push to improve corporate transparency by imposing new requirements on companies, limited partnerships, and other corporate entities in a bid to tackle criminals’ use of the UK’s corporate and real estate sectors.
In this article, our specialist Corporate lawyers consider the Act and look at its likely impact on businesses.
What is the Economic Crime Act?
The Economic Crime and Corporate Transparency Act 2023 is a landmark piece of legislation designed to “fight fraud, counter corruption and bolster legitimate business” by introducing world-leading powers that will allow UK authorities to “proactively target organised criminals and others seeking to abuse the UK’s open economy”.
It follows the Economic Crime (Transparency and Enforcement) Act 2022 as the second part of a legislative package aimed at preventing the abuse of UK corporate structures by improving the integrity of the information available about companies and other business entities.
Companies House has dubbed the reforms as “the biggest changes for our work since we began registering companies in 1844” and will substantially strengthen the role of the Department for Business and Trade’s executive agency in its bid to fight economic crime.
The Act received Royal Assent towards the end of last year, and while some of the new provisions came into effect immediately, others will be introduced over the coming months.
Who do the changes made under the Economic Crime Act affect?
The Economic Crime Act introduces new responsibilities for:
- New and existing company directors.
- People with significant control of a company (PSCs).
- Anyone who files on behalf of a company, such as accountants.
What are the main changes introduced under the Economic Crime Act?
The Economic Crime and Corporate Transparency Act includes reform in three main areas.
Companies House Reform
The Economic Crime Act includes provisions to:
- Introduce identity verification for all new and existing registered company directors, PSCs, and those delivering documents to the Registrar of Companies (the Registrar).
- Improve the financial information on the Register so that it is more reliable, complete and accurate.
- Provide Companies House with more effective investigation and enforcement powers and introduce better cross-checking of data with other public and private sector bodies.
- Enhance 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.
- Enabling proactive intelligence gathering by law enforcement and strengthening the National Crime Agency’s (NCA’s) Financial Intelligence Unit’s (FIU) ability to obtain information from businesses relating to money laundering and terrorist financing.
- Expanding the types of cases in which businesses can deal with clients’ property without first submitting a Defence Against Money Laundering (DAML) Suspicious Activity Report (SAR).
Muscatt Black Graf offers a wide range of legal advice on Corporate Law matters, including the changes to business practices expected under the Economic Crime Act.
If you need guidance on how the Economic Crime Act will impact your business and want to discuss your next steps, please contact us via email@example.com.
How will the Economic Crime Act affect businesses?
The Economic Crime Act introduces various changes to company law that will impact the day-to-day running of businesses. The most significant of these include:
- More powers for the Registrar. New powers under the Act aim to transform Companies House into a “more active gatekeeper over company creation and a custodian of more reliable data”. To this end, Companies House will be able to query and reject filings, request additional information, remove information from the Register and share data with regulators and public authorities.
- Identity verification. Under the Act, directors and PSCs must comply with new mandatory identity verification requirements. Failure to do so will be a criminal offence and/or incur a civil penalty.
- Filing information at Companies House. The Economic Crime Act restricts those who can file information at Companies House on behalf of corporate entities to ID-verified individuals and authorised corporate service providers.
- Registered office and email address. The Act requires all companies to have a registered email address and introduces a new requirement that a registered office is an “appropriate address”.
- Company registers. Companies will no longer need to keep their own register of directors, secretaries and PSCs. Instead, Companies House will become the single, verified source for such information.
- Failure to prevent fraud. The Act introduces a new criminal offence of “failure to prevent fraud”, which will make large companies and partnerships liable for failing to stop employees, agents or others acting on their behalf from committing fraud for the benefit of the organisation or its customers.
- Limited partnerships. The Act aims to increase transparency by introducing new registration and transparency requirements for limited partnerships.
For more information on how the Economic Crime and Corporate Transparency Act will affect your business, click here.
Corporate Lawyers London
Muscatt Black Graf’s Corporate Law team is highly experienced in advising clients on all aspects of law that might affect your business.
We act for company owners, individual entrepreneurs, lenders, investors, and other corporate clients on a wide variety of corporate legal matters and offer a bespoke service tailored to your needs.
Whether starting a business, entering into a joint venture, selling your business, merging, or getting ready to float, our specialist Corporate Law team provides shrewd, well-informed legal advice to help you achieve your goals quickly and cost-effectively.
To find out more about our Corporate Law team, click here.
This blog was prepared on 1 February 2024. It is not intended to be advice and should not be relied upon as such.