The Economic Crime and Corporate Transparency Act 2023 (‘The Act’) is intended to reform corporate liability for economic crime, holding corporations liable in their own right for economic crime. The Act is in line with the direction of travel can be seen in other legislation and steps taken by government in the last couple of years.
The notion of increasing liability of corporations is not a new phenomenon. Since 2010 the Bribery Act 2010 has required organisations to have adequate anti-bribery measures in place. The Corporate Manslaughter and Corporate Homicide Act 2007 made companies criminally liable for failings resulting in death. And, the Criminal Finances Act 2017 created the offence of failure to prevent tax evasion. The Act along with other legislation and initiatives have however created something of a minefield for business.
The thinking behind the legislation is that whilst the UK has a large and open economy, making it a very attractive place for global business – the same openness carries risk, specifically the risk of bad actors taking advantage, including to perpetrate fraud and money laundering, which, in turn, funds serious and organised crime here in the UK, and facilitates corruption overseas.
The Economic Crime and Corporate Transparency Act 2023 includes:
Companies House Reform
The Act reforms the role of Companies House improving transparency and delivering a more reliable companies register to underpin business activity. The reforms include the introduction of identity verification for registered company directors, as well as those with ‘Significant Control’, and those delivering documents to the Registrar.
Companies House will have more effective investigation and enforcement powers and better cross-checking of data with other public and private sector bodies. Companies House will be able to share information with law enforcement bodies where they have evidence of anomalous filings or suspicious behaviour.
We also see wider reforms to clamping down on misuse of corporate entities.
Limited Partnership Reform
The Act tackles misuse of limited partnerships, modernising the law governing them. It tightens registration requirements, and requires limited partnerships to maintain a connection to the UK as well as increases transparency requirements
Crypto assets
The Act provides additional powers to investigators to seize and recover crypto assets which are the proceeds of crime or associated with illicit activity. The Act also amends both criminal confiscation powers under the Proceeds of Crime Act 2002 (POCA) and civil recovery powers in POCA in respect of crypto assets.
Strengthening Anti-Money Laundering powers
The Act strengthens anti-money laundering powers and enables better information sharing on suspected money laundering and other economic crimes. Businesses will be able, in certain situations, to share information more easily for the purposes of preventing, investigating or detecting financial.
The Act sees the strengthening of the National Crime Agency’s Financial Intelligence Unit’s (FIU) ability to obtain information from businesses in relation to money laundering and terrorist financing. There will no longer be a requirement for a Suspicious Activity Report (SAR) to have been submitted prior to an Information Order (IO) being made.
Failure to Prevent Fraud Offence:
The Act has created a new failure to prevent fraud offence to hold organisations to account if they profit from fraud committed by employees. An organisation may be liable where a fraud offence is committed by an employee or agent, for the benefit of the organisation, and the organisation did not have reasonable fraud prevention procedures in place.
Identification Doctrine:
The Act reforms corporate criminal liability laws for economic crimes holding corporations liable in their own right for economic crime.
Strategic Lawsuits Against Public Participation (SLAPPs): The Act increases protection for defendants faced with SLAPPs, including an early dismissal mechanism and a new cost protection regime.
Other legislation
The Economic Crime and Corporate Transparency Act 2023 is not a stand-alone piece of legislation – the direction of travel it can be seen across other legislation and steps taken by government in the last year or so. See below.
The Economic Crime (Transparency and Enforcement) 2022 Act allows, the Government to move faster and harder when imposing sanctions. It also created a Register of Overseas Entities to helps prevent overseas criminals from using UK property to launder money. It also strengthened the UK’s Unexplained Wealth Order regime.
The Finance Act 2024 sees an increase in maximum terms for certain tax offences, the disqualification of Directors promoting tax avoidance schemes, and provisions relating to the failure to comply with a ‘stop notice’
The Property (Digital Assets) Bill of September 2024 whereby digital assets such as bitcoin, NFT’s can be considered property
We also see, in 2024, fresh HMRC initiatives in relation to ‘tackling tax evasion in the high street and online retail’ (National Audit Office Report) and a more aggressive approach to Serious Fraud Office investigations as promised by new Serious Fraud Office Director, Nick Ephgrave QPM.
Contact Olliers Solicitors – specialist fraud lawyers
If you or your company face investigation or prosecution, please contact Matthew Claughton or one of our team – we can help.
We have offices in both London and Manchester and our specialist team of lawyers can advise and represent you in relation to your case.
