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ECTEA continues to strengthen powers in the UK

ECTEA continues to strengthen powers in the UK

30 January, 2024
London Capital Markets Anti Money Laundering

The 2023 ECTEA (The Economic Crime (Transparency and Enforcement) Act) received Royal Assent in October and follows on from the 2022 Act of the same name that saw the introduction of the Register of Overseas Entities. The new measures set out will give Companies House in the UK a stronger legal ability to improve the quality and reliability of their data, including an enhanced role in investigations and enforcement. 

What changes does the 2023 ECTEA bring?

1. A wider remit of powers for Companies House, including;

  • Identity verification for all new and existing registered company directors, people with significant control, and those who file on behalf of companies
  • Ability to remove inaccurate or unverified material from the register and require inconsistencies to be resolved, failing which a company could be struck off
  • Sharing information in line with requests from criminal enforcement agencies
  • Analysis of company data to prevent and detect crime
  • Protecting personal information from fraud and other harms

2. A new Failure to Prevent Fraud offence (s.199)

This follows the failure to prevent bribery (Bribery Act 2010) and the failure to prevent tax evasion (Criminal Finances Act 2017).  Failure to prevent fraud applies to large companies and LLPs (as defined in the Companies Act 2006) However, there is still liability for corporate crime through the action of senior individuals, which applies to businesses of all sizes.

3. Reforms to the Identification Doctrine

An organisation will now be criminally liable when an economic crime (including fraud, bribery and tax offences) is committed in the UK by a senior manager of that company or partnership irrespective of size. This took effect from December 2023. It covers senior managers who are decision makers within the organisation.  If the senior manager is guilty, the business will also be guilty.  This change alone means that the risk profile of many companies may need revisiting.

What does this mean for businesses in 2024?

  • Stronger checks on company names
  • Greater powers for Companies House to query information as they take steps to clean up the register, using data matching to identify and remove inaccurate information
  • A requirement for all companies to confirm that the company is being formed for a lawful purpose when they incorporate, as well as an annual confirmation that its future activities will be lawful on their confirmation statement
  • New rules for registered office addresses which will mean all companies must have an appropriate address at all times. Companies will not be able to use a PO Box as their registered office address

Will identity verification change and who does it affect?

There will now be two types of identity verification.

1. Direct verification via Companies House which links a person with a primary identity document, such as a passport or driving licence.

2. An indirect route through an Authorised Corporate Service Provider. This new term Authorised Corporate Service Provider has been introduced under the act (s.66). The ACSP will be responsible for delivering documents to the Registrar on behalf of their client as well as complete the mandatory identity verification and confirm this to Companies House through a verification statement. LPs will have new additional filing requirements which will have to be made through an ACSP.

Checks apply to all directors and People with Significant Control (PSCs), including LLPs.

What are the risks of non-compliance with the 2023 ECTEA?

Companies and ACSPs that fail to comply could face significant penalties. A new financial penalty regime will be created to sit alongside existing criminal sanctions.

There is also the potential for reputational damage of being associated with money laundering or other criminal activity.

How can Ocorian support your company as an ACSP?

Ocorian will be registered as an ACSP, so we can continue providing corporate and fund administration services around the world. We’ll conduct due diligence on clients and PSCs and assess who needs an identification verification to be made to Companies House and what CDD and records will need to be on file or refreshed.