Brian Sims

Economic Crime and Corporate Transparency Act receives Royal Assent

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

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 crypto assets, while groundbreaking legal reforms will allow the courts to dismiss spurious lawsuits which seek to stifle freedom of speech. Prosecutors will be better able to hold large corporations accountable for malpractice.

These changes are set to level the playing field for all businesses, in turn ensuring the UK’s open economy remains a world-class centre for businesses to both grow and prosper.

Landmark Act of Parliament

Home Secretary Suella Braverman noted: “I’m committed to ensuring criminals don’t profit from their offending. This landmark Act of Parliament will help law enforcement agencies to clamp down on the tactics used by criminals. It will have a big impact on our ability to fight organised crime, including terrorist funding, fraud and money laundering. Ultimately, that will help in keeping us all safe.”

Kevin Hollinrake, Parliamentary Under Secretary for Enterprise and Markets, commented: “We’re providing Companies House with the tools to take a much harder line on criminals who take advantage of the UK’s open economy, ensuring the reputation of our businesses is not tarnished by the UK playing host to the world’s scammers.”

Hollinrake continued: “These reforms will remove the ‘smoke and mirrors’ around companies hiding behind false identities, provide further protection for members of the public from companies fraudulently using their addresses and deliver better data to support business and lending decisions across the economy, thereby enhancing the UK’s reputation as a great and safe place in which to do business.”

Lord Chancellor Alex Chalk explained: “We will not stand by while wealthy individuals abuse our courts with malicious lawsuits designed to gag reporters from exposing their misconduct. This Act of Parliament reinforces our unwavering commitment to protect freedom of speech and end the brazen exploitation of our legal system by corrupt elites.”

New powers for Companies House

The new powers afforded to Companies House represent the biggest shake-up to the service it offers in the organisation’s entire 180-year history. Once the powers come into force, Companies House will take immediate steps to improve the quality of information on the company register.

Invalid registered office addresses, such as those used fraudulently to establish companies, will be removed. Verification checks will assess the identities of people setting up and managing companies, in turn stopping criminals from hiding behind false names or registering companies with fictional characters. This will assist in preventing fraudulent appointments and avoid those individuals involved in money laundering from hiding behind false names.

Changes to public beneficial ownership registers will also close loopholes that allow corrupt actors to use opaque companies to move and hide money.

Additionally, this move provides businesses with greater clarity on whom they are working with, while allowing civil society organisations to expose corrupt actors.

Tackling illicit finance is a global issue with 30 other countries, including Nigeria and France, having public registers of beneficial ownership. Canada, Australia and New Zealand are also implementing their own commitments.

Lord (Tariq) Ahmad of Wimbledon, Minister of State for the Middle East, North Africa, South Asia, United Nations and the Commonwealth, stated: “Tackling illicit finance requires global co-operation. The UK will continue to work with its international partners to strengthen their registers of beneficial ownership, reduce money laundering and create a level playing field for businesses, while also bolstering national security.

Companies House CEO Louise Smyth observed: “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 and clean up the register by removing information we know to be incorrect.”

Smyth concluded: “All of 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.”

Strategic lawsuits

The Economic Crime and Corporate Transparency Act affords judges new powers to deal with strategic lawsuits against public protection, known as SLAPPS, involving economic crime. These are court cases used by powerful individuals to intimidate opponents. Russian oligarchs seeking to prevent public interest journalism are prominent users of such lawsuits.

Major reforms to corporate criminal liability will also provide prosecutors with game-changing powers to hold companies criminally liable for malpractice.

The creation of a criminal offence – ie ‘failure to prevent fraud’ – will hold a large organisation criminally liable if it benefits from a fraud that’s found to have been committed by a member of staff.

An update to a legal principle known as the ‘identification doctrine’ will also ensure businesses can be held criminally liable for the actions of any senior managers who commit an economic crime.

Both changes remove the ability for a large company to hide behind complex management structures in an attempt to evade scrutiny. This ensures a level playing field for all businesses and will help remove criminal money from the economy.

Andrew Penhale, Chief Crown Prosecutor for the Crown Prosecution Service (CPS), said: “Economic crime can have a devastating impact on individuals, businesses and our economy. The CPS is supportive of all reforms which help to improve transparency and drive better corporate behaviours. The introduction of a ‘failure to prevent fraud’ offence and reform of the identification doctrine will better enable prosecutors to hold large companies to account for offences committed under their watch. It should result in greater care around preventing fraud before it happens.”

Nick Ephgrave, director of the Serious Fraud Office, commented: “This is the most significant boost to the Serious Fraud Office’s ability to investigate and prosecute serious economic crime in over ten years. This new law will help to prevent crime as big businesses can no longer turn a blind eye to fraud. We welcome the expansion of our search powers, which will help to speed up our investigations.”

National Crime Agency

The National Crime Agency (NCA) will gain greater powers compelling businesses to hand over information which is suspected to be used for money laundering or terrorist financing.

Unnecessary reporting by businesses will also be reduced, enabling the private sector and law enforcement to focus their existing resources on tackling high value and priority activity.

New powers will allow law enforcement to target illicit crypto assets. The NCA’s National Assessment Centre estimates that over £1 billion of illicit cash was transferred overseas using crypto assets in 2021 alone.

The Economic Crime and Corporate Transparency Act has introduced provisions for the police and the NCA to seize crypto assets more easily and convert them into money before a forfeiture hearing has taken place. In exceptional circumstances, there will also be a power to destroy seized cryptocurrency.

Graeme Biggar, director general of the National Crime Agency, noted: “This Act of Parliament is long awaited and very welcome. For too long now, criminals and corrupt elites have abused UK company structures to launder their illicit wealth. The new powers given to Companies House will help us to tackle those who abuse our economy.”

Biggar concluded: “This Act of Parliament also affords the NCA and the police service greater powers to seize and recover cryptocurrencies. We also welcome the creation of a criminal offence which holds organisations criminally liable if they fail to prevent acts of fraud by their employees.”

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