Click through the wheel to learn more about the different aspects of the Economic Crime and Corporate Transparency Act and how our teams can help you make sense of the new legislation.
The ECCTA introduces a new corporate offence of failing to prevent fraud. An in-scope organisation will be criminally liable where an associated person (which includes employees, agents, subsidiaries and others) commits a fraud and the organisation did not have reasonable fraud prevention procedures in place. Prosecutors will not need to show that the organisation's leaders authorised or had knowledge of the fraud.
The new offence will extend only to “large organisations” – those with at least two of the following criteria: a turnover of more than £36 million; total assets of more than £18 million; and an average of more than 250 employees. Limiting the offence in this way was quite controversial and a power is included in the ECCTA to extend the scope to other organisations in the future.
Guidance published on 6 November 2024 sets out recommendations for procedures that in-scope organisations can put in place to prevent persons associated with them from committing fraud offences. It also confirms that the new offence will come into effect on 1 September 2025.
While increased enforcement is likely in the future, this new offence is as much about changing corporate culture and reducing fraud as raising the number of prosecutions.
The ECCTA introduces a new test for corporate liability which amends the “identification principle”, the legal construction under which responsibility for wrongdoing and other acts by individuals can be attributed a company. The principle, which required the identification of the “directing mind or will” of a company, had been criticised as being unrepresentative of how corporate entities are structured and operate nowadays.
The changes are intended to make it easier to prosecute a company for criminal misconduct by focussing on the role and responsibilities of the senior manager who has committed the relevant crime, rather than just their job title. It is likely that we may see more corporate prosecutions for wrongdoing as a result.
The ECCTA includes legislation to enhance the role of Companies House and to make UK corporate entities more transparent.
The reforms include:
The measures will apply to all corporate bodies caught by the disclosure requirements of the Companies Act 2006.
Companies will be familiar with the broad outline of the changes, as they have been under consideration for some time. Now that the legislation has been passed, however, companies will need to consider impacts on existing administrative practices and processes.
Limited partnership law reforms have been under consideration since a call for evidence in 2017 and follow-up consultation in 2018. The reforms are intended to address concerns that UK limited partnerships are being used for fraudulent purposes.
Among other things, the ECCTA introduces:
The changes will impact all UK limited partnerships, including private fund limited partnerships.
Part 3 of the ECCTA introduces some important changes to the regime governing the Register of Overseas Entities (“ROE”), which is held at Companies House in respect of overseas entities which own UK Land and contains information on the overseas entities’ beneficial owners. The two principal changes are the expansion of (a) the scope of certain registrable beneficial owners (“RBOs”) where overseas nominees are used to hold UK land and where trusts are involved in ownership structures and (b) the information which must be provided to Companies House. The changes are seeking to reach a position where the “true” beneficial owners of UK land are registered as RBOs, in line with the transparency aim of the regime. In addition, the beneficial ownership “back story” should, in theory, be disclosed with updates going forwards, rather than just an annual snapshot.
The ECCTA also contains various other administrative changes around the process for correcting, removing and verifying material contained on the ROE, and there have been changes to the penalties and offences (including the introduction of a new offence of failing to comply with an information notice served under the regime). These changes should not make much of a difference in practical terms - rather, they are principally designed to add more “teeth” and close loopholes in the original legislation.
The ECCTA gives law enforcement new powers to seize and recover cryptoassets which are the proceeds of crime or associated with illicit activity. It does so by extending existing confiscation and civil recovery powers to cryptoassets. This means that cryptoasset service providers may in future be required to follow court orders relating to the cryptoassets they hold for customers, for example to realise confiscated cryptoassets and pay the resulting sum to the court.
There are additional powers for the police to gain access to crypto wallets and transfer cryptoassets into a wallet controlled by the authorities. The Act also provides for the destruction of cryptoassets in certain situations.
The new powers come into effect on 26 April 2024.
The ECCTA introduced legislation on strategic litigation against public participation (colloquially known as SLAPPs) for the first time in the UK.
SLAPPs are claims brought to harass, intimidate and/or financially or psychologically exhaust one’s opponent by improper means. They can be characterised as a misuse and abuse of the legal process, often being brought by wealthy individuals or corporations to stifle freedom of speech and prevent scrutiny in the public interest.
The ECCTA has legislated on SLAPPs in three key ways:
The Lord Chancellor highlighted the inclusion of SLAPPs legislation in the ECCTA as the first step in “stamping out the brazen abuse of [the UK’s] legal system that has allowed wealthy individuals to silence investigators who are trying to expose their wrongdoing.”
The long-awaited guidance to organisations on the new failure to prevent fraud offence has been issued. Its publication paves the way for the offence to come into effect in just over nine months’ time; by 1 September 2025, all in-scope organisations will need to have in place reasonable procedures to prevent fraud being committed by their associated persons so that they have the best chance of raising a defence if prosecuted for failing to prevent such wrongdoing.
We review the key elements of the guidance and consider the actions businesses can take now to prepare.
Companies House has published a policy paper on the outline transition plan for reforming its role in relation to the Economic Crime and Corporate Transparency Act 2023. This includes timing for the new requirements for directors and People with Significant Control (or PSCs) to have their identity verified.
UK criminal authorities now have new powers to investigate, freeze, seize and recover crypto assets. The powers result from amendments made by the Economic Crime and Corporate Transparency Act 2023 and are intended to improve the civil and criminal investigative regimes for crypto assets. These reforms reflect the concern that crypto assets are being used by criminals to launder illicitly obtained funds and other assets and are intended to safeguard the development of crypto assets as a source of economic growth while attempting to limit their use for criminal purposes.
The Economic Crime and Corporate Transparency Act brings in new obligations to prevent fraud, reframes corporate criminal liability, introduces a major overhaul of company administration and makes other changes, including to the regimes around registration of beneficial ownership of UK real estate by overseas entities, limited partnerships and cryptoassets.
Join our cross-practice team of experts to find out what the changes are and what they mean for organisations doing business in the UK.
Regulations giving new powers to the Registrar of Companies have been published and laid before Parliament. They are expected to take effect from 4 March 2024.
The ECCTA introduced legislation on strategic litigation against public participation (colloquially known as SLAPPs) for the first time in the UK.
SLAPPs are claims brought to harass, intimidate and/or financially or psychologically exhaust one’s opponent by improper means. They can be characterised as a misuse and abuse of the legal process, often being brought by wealthy individuals or corporations to stifle freedom of speech and prevent scrutiny in the public interest.
Companies House has confirmed that some of the changes being made to company law by the Economic Crime and Corporate Transparency Act 2023 (see here) will be introduced in March 2024.
The UK government has enacted its long-awaited reforms to UK limited partnership law in the Economic Crime and Corporate Transparency Act 2023. Following over a year of debate and amendment as it progressed through Parliament, the Act is the latest stage in the government's pledge to increase transparency and prevent corporate and other UK structures being used for illegal purposes. For more information on the changes, timing, and what you should be doing now, see our note.
The Economic Crime and Corporate Transparency Act (the ECCTA) received Royal Assent on 26 October 2023, following over a year of debate and amendment as it progressed through Parliament. It is a broad and comprehensive piece of legislation which aims to tackle the use of the UK’s corporate, real estate and business sectors by criminals for nefarious purposes and address the reputation London sometimes has as a place where money laundering and fraud are commonplace.
The Economic Crime and Corporate Transparency Act 2023 has been passed. The Act introduces a new corporate offence of failure to prevent fraud, and reforms to the test for corporate criminal liability which will make it easier to prosecute companies for economic crime offences. It will also amend the Companies Act to make administrative reforms including requirements for director identity verification and greater powers for Companies House.
The Economic Crime and Corporate Transparency Act 2023 received Royal Assent on 26 October 2023. Once in force, Part 3 of this Act will make some important changes to the regime for registration of beneficial owners of overseas entities owning UK land on the Register of Overseas Entities held at Companies House.
The reform of corporate criminal liability - and in particular, the identification principle - has been a topic of debate for some years now. Just as the Economic Crime and Corporate Transparency Bill was about to start Report stage in the Lords, and rather out of the blue, the government proposed an amendment that would significantly change how the identification principle applies in the context of economic crimes.
The UK government has published long-awaited proposals which would introduce a new corporate offence of failing to prevent fraud. The proposals have been welcomed by Lisa Osofsky, Director of the Serious Fraud Office, as “a game changer for law enforcement”. However, just as important to the government will be its objectives of building an anti-fraud culture within organisations generally, deterring wrongdoing and driving change in corporate ethos.
The UK government is progressing its long-awaited reforms to UK limited partnership law. The proposals form part of a new Economic Crime and Corporate Transparency Bill, which is the latest stage in the government's pledge to increase transparency and prevent corporate and other UK structures being used for illegal purposes.
The Economic Crime and Corporate Transparency Bill is being considered by Parliament. It includes draft legislation to implement a major overhaul of the role and powers of Companies House, new obligations to verify the identity of directors and people with significant control, restrictions on the use of corporate directors, and limited partnership reforms. The Bill is the latest stage in the Government's pledge to increase transparency and prevent corporate structures being used for illegal purposes.
Siobhan Burton and Kathryn Griffiths set out who needs to take action now, what steps need to be taken and the information that needs to be supplied. The Talking Point also sets out the sanctions for non-compliance.
