The UK’s new economic crime and corporate transparency bill

Tina Whitington Date published: Nov 05, 24

The Economic Crime and Transparency Act was passed into UK law on 26 October, 2023 to address the country's exposure to the risk of fraud and money laundering. For many years, the UK has been one of the world’s largest and most open economies. Although this has made it attractive for global businesses, it has also increased its exposure to organized crime and the abuse of its financial system.

This Act attempts to try and reduce the ‘dirty money’ available for serious and organized crime organizations in the UK and reduce their facilities for overseas corruption. It also aims to crack down on kleptocrats, criminals and terrorists who threaten to weaken the UK’s reputation as a legitimate place to do business.

Some of the key features of the Act are designed to significantly enhance the robustness of the UK's financial and corporate landscapes:

Reforms to Companies House

These reforms involve several critical changes aimed at enhancing the integrity and trustworthiness of corporate data.

• Introduce ID verification for all new and existing registered company directors, significant shareholders and those delivering documents. This measure is intended to ensure that all individuals in positions of authority or significant financial interest within a company can be accurately identified and held accountable.

• Broaden the Registrar’s powers to be able to check, remove or decline information submitted, or already on, the companies register. By empowering the Registrar with these capabilities, the Act ensures a more proactive approach to maintaining the quality and reliability of corporate information.

• Improve financial information on the register. Accurate financial data is crucial for transparency and these improvements will ensure better tracking and auditing of financial transactions.

• Provide Companies House with more effective investigation and enforcement powers. These enhanced powers will allow for swifter action against non-compliance and fraudulent activities.

• Enhance the protection of personal information. Balancing transparency with privacy, these measures are designed to protect personal data from misuse, ensuring compliance with data protection laws.

• Clamp down on misuse of corporate entities. Addressing this challenge head-on, the Act seeks to prevent shell entities and other corporate abuses that facilitate economic crime.
  
  

Reforms to prevent the abuse of limited partnerships:

The increased scrutiny on limited partnerships focuses on ensuring these business structures are not exploited for illicit purposes.

• Tighten registration requirements. This ensures that only legitimate businesses are able to register as limited partnerships in the UK.

• Require a connection with the UK. This mandates that limited partnerships must demonstrate a meaningful link to the UK to operate, thereby deterring international entities from leveraging UK laws for nefarious operations.

• Increase transparency requirements. Enhanced transparency mandates will shed more light on operations, beneficiaries and activities of partnerships, reducing the opacity typically associated with such entities.

• Enable the Registrar to deregister limited partnerships. This additional power acts as a deterrent and a corrective measure for partnerships that are found in violation of prescribed norms.
  
  

Additional powers to seize and recover suspected criminal cryptoassets

As digital currencies become increasingly enmeshed in economic crime, granting authorities the power to confiscate and recover these assets is essential to staunching the flow of illicit funds.

Reforms to give businesses more confidence to share information to tackle money laundering and other economic crime

• Enable businesses to share information more easily. By simplifying the process for information exchange, the Act ensures businesses can more actively participate in the fight against financial crime.

• Enable proactive intelligence gathering by law enforcement. Empowering law enforcement with timely, detailed and actionable intelligence improves their ability to preemptively curb economic crime.

• Strengthen the ability of the National Crime Agency’s Financial Intelligence Unit to obtain information from businesses. This augmentation of power is designed to close the information gap, increasing law enforcement's effectiveness in investigating and prosecuting offenders.
  
  

For more information on the UK and other European markets, read Ideagen Audit Analytics' recent report on European regulated exchanges and listed company audits. The report provides a comprehensive overview of the regulatory landscape, offering insights into how such measures are transforming corporate governance and compliance practices across the continent.

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