What are the key highlights of the Economic Crime and Corporate Transparency Bill?

The Economic Crime and Corporate Transparency Bill (“the Bill”) represents the second element of a UK government reform package aimed at preventing the abuse of corporate structures and tackling economic crime.  The bill, spanning an extensive 250 pages, brings forth a host of pivotal changes, each contributing to the overarching goal of transparency and accountability.

Key aims of the bill in summary:

• Deliver reforms to Companies House to expand its role and power 
• Introduce reforms to prevent the abuse of limited liability partnerships 
• Roll out identity verification measures for relevant stakeholders  
• Bring in additional powers to seize and recover suspected criminal cryptoassets 
• Give businesses more confidence to share information to tackle money laundering and other types of economic crime 
• Introduce new intelligence gathering powers for law enforcement 
• Remove inconsequential burdens on business  

Reforms to Companies House

Companies House is currently tasked with storing information on corporate entities in the UK and its ability to query or flag that information is very limited. The aim of the bill is to change this passive role and help Companies House actively flag suspicious activity or inaccurate data.

This will be achieved through the introduction of identity verification for all new and existing registered company directors, individuals with significant control, limited liability partnership (LLP) members and people delivering documents to the registrar.

Companies House will also receive new powers to check, remove or decline information submitted to, or already on, the companies register.

Identity verification requirements

Directors

Before they begin to act, a director must provide verification of their identity along with a confirmation that they have not been disqualified. Before the director begins his or her role, the company must ensure that the verification process has concluded. Applications for the formation of a company will also need to state that the identity of all involved directors has been verified.

Persons with significant control (PSC)

A PSC has to verify their identity within 14 days of appointment and all relevant legal entities have to verify the identity of their relevant officer within 28 days of appointment.

LLP members

While the requirements of the bill apply to all entities registered at Companies House, including LLP members, the bill does not directly cover them and this is expected to be addressed by secondary legislation.

Individuals delivering documents to the registrar

Individuals delivering documents on behalf of themselves or another person need to verify their identity and the documents themselves must be accompanied by a statement of verification.

Limited liability partnerships and crypto assets

The new bill will also modernise the law governing limited liability partnerships and tackle their misuse.  The stated aim of the bill is to make registration requirements more stringent, increase transparency and oblige limited liability partnerships to maintain a connection to the UK. In addition, the new measures will enable the deregistration of dissolved limited liability partnerships that no longer carry on business, or where a court has ordered that doing so is in the public interest. 

Under the bill, law enforcement will receive more powers to seize and recover crypto assets that are associated with illicit activity or that constitute the proceeds of a crime such as money laundering, fraud or ransomware attacks. For example, the police will be able to seize crypto assets during an investigation without the need to arrest an individual for committing an offence. 

Anti money laundering

The bill will also strengthen anti money laundering powers and help facilitate better information sharing about suspected offences. In certain situations, businesses will be able to share information more easily for the purpose of preventing, investigating or detecting economic crime. Civil liability will not apply to breaches of confidentiality for businesses supplying information about economic criminal offences. 

The National Crime Agency’s Financial Intelligence Unit will have an expanded ability to obtain information from businesses related to money laundering or terrorist financing. This will be achieved through the removal of the requirement for a pre-existing Suspicious Activity Report to have been submitted before an Information Order can be made. The private sector and law enforcement will focus their resources on high value activity while the reporting burden for businesses will be reduced. 

Offences and penalties

The new measures apply to all large corporate bodies and partnerships which means that incorporated public bodies and large not for profit organisations such as charities also fall within its scope. While the rules apply to all sectors, organisations must meet certain thresholds to ensure the burden on businesses remains proportionate.

Entities must fulfil two out of three criteria. They must have more than 250 employees, more than £36 million turnover and more than £18 million in total assets. When it comes to investigations, companies will be able to avoid prosecution if they can prove they have reasonable procedures in place to prevent fraud. If found guilty, however, an organisation can face an unlimited fine. 

While individuals in companies can already be prosecuted for committing, encouraging or assisting fraud, individual liability will not be introduced for a failure to prevent these offences. Once the bill has received Royal Assent, the government will need to publish guidance on reasonable fraud prevention procedures for companies. 

The bill is in its final stages having passed through the Commons and the House of Lords, to keep up to date on progress you can view up to date information here:https://bills.parliament.uk/bills/3339