Economic Crime and Corporate Transparency Act 2023—latest update

Following publication of the Economic Crime and Corporate Transparency Act 2023 Regulations on 29 February 2024, partner Frances Murray, associate Emily Russell, and legal assistant Edward Griffin delve into the key reforms brought forth by the Act.

The Economic Crime and Corporate Transparency Act 2023 (ECCTA 2023) received royal assent on 26 October 2023 and contains a range of measures to tackle economic crime and improve corporate transparency. The Act introduces a Failure to Prevent Fraud offence (FTPF) and an array of reforms to Companies House to address the transparency of corporate structures in the United Kingdom. The CEO of Companies House, Louise Smyth has stated that: “These new and enhanced powers are the most significant change for Companies House in our 180-year history. We’ve known for some time that criminals have misused UK companies to commit fraud, money laundering and other forms of economic crime.” 

On 1 March 2024, the Economic Crime and Corporate Transparency Act 2023 (Commencement No.2 and Transition Provision) Regulations 2024 (the Regulations) were published. The Regulations were made on 29 February 2024 and bring into force certain provisions of the ECCTA 2023.  Regulation 2 states that most of the provisions of Part 1 of the ECCTA 2023 will come into effect on 4 March 2024; these include numerous changes to the Companies Act 2006 to increase transparency and reduce the risk of individuals abusing the previous opaqueness of Companies House. 

Reforms to Companies House

The reforms to Companies House which have taken effect from 4 March 2024 are as follows:

• Greater powers to query information provided and request supporting evidence. Companies House now has enhanced authority to seek additional information and material related to company registrations. 
• Stronger checks on company names, with the ability to remove offensive names or those that falsely imply connections with a foreign government or international organisation. 
• New rules for registered office addresses. All companies must now have an ‘appropriate address’ suitable for the service of documentation at all times, which can be formally acknowledged and come to the attention of the person acting on behalf of the company. This address cannot be a PO Box or other unstaffed address. Companies House will have the power to change any inappropriate address to a default address and any failure to comply could lead to the commencement of strike-off proceedings by Companies House. 
• A registered email address must be provided on incorporation of a new company, whilst all existing companies will need to provide a registered email address when they file their next confirmation statement after 4 March 2024. This registered email address will not be published on the public register. Failure to maintain a registered email address will result in the company and any officer committing an offence. 
• Statement of lawful purpose. On incorporation the shareholders of a new company will need to confirm that they are forming the company for a lawful purpose. Existing companies will need to make a lawful purpose statement when they file their next confirmation statement after 4 March 2024.
• Thereafter, companies must confirm annually that all future activities of the company will be lawful. 
• Sharing of data with other government departments and law enforcement agencies to improve collaboration to combat economic crime in the United Kingdom.
• Greater powers to tackle and remove factually inaccurate information.

There are substantial parts of the ECCTA 2023 that have not yet come into force, with further significant reforms expected throughout the year. In total, implementing the measures of the ECCTA 2023 will require some 50 statutory instruments. 

Companies House officials have confirmed that full identity checks on company directors will not come in to force for some time. Similarly, some of the provisions regarding crypto assets and money laundering will not come into effect until 26 April 2024. 

Furthermore, the FTPF which is intended to hold large companies and partnerships to account if they profit from fraud has not yet taken effect. Organisations in all sectors will need to consider undertaking a risk assessment as they will be liable where a specified fraud offence is committed by an ‘associated person’ that performs services on behalf of the organisation. FTPF is a strict liability offence, which does not require management to have sanctioned or even been aware of the fraud to be found liable. However, having reasonable prevention procedures in place will operate as a defence. The Government first needs to publish guidance on reasonable prevention procedures before the offence will come into effect. A consultation on this is due to launch later this year. 

We will publish further updates as the remaining provisions of the ECCTA 2023 come into force.

Frances Murray is a partner in the financial crime team, representing individuals, limited companies and PLCs from the investigatory stage to court proceedings, as well as matters relating to account freezing orders, unexplained wealth orders and suspicious activity reports. Emily Russell is an associate in the financial crime team, and has a varied case load specialising in financial crime on multi-jurisdictional matters with her clients involving high-net-worth and ultra-high-net-worth individuals as well as large corporate organisations. Edward Griffin is a legal assistant in the  financial crime team.