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The UK Economic Crime and Corporate Transparency Hub

Keeping you up to date on the latest developments and what they mean for organisations doing business in the UK
The Economic Crime and Corporate Transparency Act

Click through the wheel to learn more about the different aspects of the Economic Crime and Corporate Transparency Act and how our teams can help you make sense of the new legislation. 

Failure to prevent fraud:

The ECCTA introduces a new corporate offence of failing to prevent fraud. An in-scope organisation will be criminally liable where an associated person (which includes employees, agents, subsidiaries and others) commits a fraud and the organisation did not have reasonable fraud prevention procedures in place. Prosecutors will not need to show that the organisation's leaders authorised or had knowledge of the fraud. 

The new offence will extend only to “large organisations” – those with at least two of the following criteria: a turnover of more than £36 million; total assets of more than £18 million; and an average of more than 250 employees. Limiting the offence in this way was quite controversial and a power is included in the ECCTA to extend the scope to other organisations in the future.

While increased enforcement is likely in the future, this new offence is as much about changing corporate culture and reducing fraud as raising the number of prosecutions.

Reform of the test for corporate criminal liability

The ECCTA introduces a new test for corporate liability which amends the “identification principle”, the legal construction under which responsibility for wrongdoing and other acts by individuals can be attributed a company. The principle, which required the identification of the “directing mind or will” of a company, had been criticised as being unrepresentative of how corporate entities are structured and operate nowadays. 

The changes are intended to make it easier to prosecute a company for criminal misconduct by focussing on the role and responsibilities of the senior manager who has committed the relevant crime, rather than just their job title. It is likely that we may see more corporate prosecutions for wrongdoing as a result.

 

Companies House and Corporate Reform:

The ECCTA includes legislation to enhance the role of Companies House and to make UK corporate entities more transparent. 

The reforms include: 

  • giving the UK company registrar new and stronger powers to query information and to amend or remove information from the companies register,
  • introducing identity verification requirements for new and existing directors, People with Significant Control (PSCs) and those delivering documents to the registrar, and
  • activating restrictions on the use of corporate directors.

The measures will apply to all corporate bodies caught by the disclosure requirements of the Companies Act 2006.

Companies will be familiar with the broad outline of the changes, as they have been under consideration for some time. Now that the legislation has been passed, however, companies will need to consider impacts on existing administrative practices and processes.

Limited Partnerships:

Limited partnership law reforms have been under consideration since a call for evidence in 2017 and follow-up consultation in 2018. The reforms are intended to address concerns that UK limited partnerships are being used for fraudulent purposes. 

Among other things, the ECCTA introduces: 

  • changes to the process for registering UK limited partnerships with Companies House
  • additional transparency obligations on general partners and limited partners
  • a new dissolution and deregistration procedure, and
  • greater sanctions for non-compliance.

The changes will impact all UK limited partnerships, including private fund limited partnerships. 

Real Estate:

Part 3 of the ECCTA introduces some important changes to the regime governing the Register of Overseas Entities (“ROE”), which is held at Companies House in respect of overseas entities which own UK Land and contains information on the overseas entities’ beneficial owners. The two principal changes are the expansion of (a) the scope of certain registrable beneficial owners (“RBOs”) where overseas nominees are used to hold UK land and where trusts are involved in ownership structures and (b) the information which must be provided to Companies House. The changes are seeking to reach a position where the “true” beneficial owners of UK land are registered as RBOs, in line with the transparency aim of the regime. In addition, the beneficial ownership “back story” should, in theory, be disclosed with updates going forwards, rather than just an annual snapshot. 

The ECCTA also contains various other administrative changes around the process for correcting, removing and verifying material contained on the ROE, and there have been changes to the penalties and offences (including the introduction of a new offence of failing to comply with an information notice served under the regime). These changes should not make much of a difference in practical terms - rather, they are principally designed to add more “teeth” and close loopholes in the original legislation.

 

Crypto Assets:

The ECCTA gives law enforcement new powers to seize and recover cryptoassets which are the proceeds of crime or associated with illicit activity. It does so by extending existing confiscation and civil recovery powers to cryptoassets. This means that cryptoasset service providers may in future be required to follow court orders relating to the cryptoassets they hold for customers, for example to realise confiscated cryptoassets and pay the resulting sum to the court. 

There are additional powers for the police to gain access to crypto wallets and transfer cryptoassets into a wallet controlled by the authorities. The Bill also provides for the destruction of cryptoassets in certain situations.

SLAPPS:

The ECCTA introduced legislation on strategic litigation against public participation (colloquially known as SLAPPs) for the first time in the UK.
SLAPPs are claims brought to harass, intimidate and/or financially or psychologically exhaust one’s opponent by improper means. They can be characterised as a misuse and abuse of the legal process, often being brought by wealthy individuals or corporations to stifle freedom of speech and prevent scrutiny in the public interest.

The ECCTA has legislated on SLAPPs in three key ways:

  • for the first time, it provides a legal definition for SLAPPs under the law of England and Wales;
  • it provides for the creation of a new process by which these types of claims can be quickly dismissed by the court; and 
  • it provides for the creation of new costs protection for defendants, which will limit the amount a defendant will have to pay towards a claimant’s costs in a SLAPP case unless the defendant’s own misconduct justifies otherwise.

The Lord Chancellor highlighted the inclusion of SLAPPs legislation in the ECCTA as the first step in “stamping out the brazen abuse of [the UK’s] legal system that has allowed wealthy individuals to silence investigators who are trying to expose their wrongdoing.”

Click through the wheel to learn more about the different aspects of the Economic Crime and Corporate Transparency Act and how our teams can help you make sense of the new legislation. 

Economic Crime

Failure to prevent fraud:

The ECCTA introduces a new corporate offence of failing to prevent fraud. An in-scope organisation will be criminally liable where an associated person (which includes employees, agents, subsidiaries and others) commits a fraud and the organisation did not have reasonable fraud prevention procedures in place. Prosecutors will not need to show that the organisation's leaders authorised or had knowledge of the fraud. 

The new offence will extend only to “large organisations” – those with at least two of the following criteria: a turnover of more than £36 million; total assets of more than £18 million; and an average of more than 250 employees. Limiting the offence in this way was quite controversial and a power is included in the ECCTA to extend the scope to other organisations in the future.

While increased enforcement is likely in the future, this new offence is as much about changing corporate culture and reducing fraud as raising the number of prosecutions.

Corporate Criminal Liability

Reform of the test for corporate criminal liability

The ECCTA introduces a new test for corporate liability which amends the “identification principle”, the legal construction under which responsibility for wrongdoing and other acts by individuals can be attributed a company. The principle, which required the identification of the “directing mind or will” of a company, had been criticised as being unrepresentative of how corporate entities are structured and operate nowadays. 

The changes are intended to make it easier to prosecute a company for criminal misconduct by focussing on the role and responsibilities of the senior manager who has committed the relevant crime, rather than just their job title. It is likely that we may see more corporate prosecutions for wrongdoing as a result.

 

Companies House and Corporate Reform

Companies House and Corporate Reform:

The ECCTA includes legislation to enhance the role of Companies House and to make UK corporate entities more transparent. 

The reforms include: 

  • giving the UK company registrar new and stronger powers to query information and to amend or remove information from the companies register,
  • introducing identity verification requirements for new and existing directors, People with Significant Control (PSCs) and those delivering documents to the registrar, and
  • activating restrictions on the use of corporate directors.

The measures will apply to all corporate bodies caught by the disclosure requirements of the Companies Act 2006.

Companies will be familiar with the broad outline of the changes, as they have been under consideration for some time. Now that the legislation has been passed, however, companies will need to consider impacts on existing administrative practices and processes.

Limited Partnerships

Limited Partnerships:

Limited partnership law reforms have been under consideration since a call for evidence in 2017 and follow-up consultation in 2018. The reforms are intended to address concerns that UK limited partnerships are being used for fraudulent purposes. 

Among other things, the ECCTA introduces: 

  • changes to the process for registering UK limited partnerships with Companies House
  • additional transparency obligations on general partners and limited partners
  • a new dissolution and deregistration procedure, and
  • greater sanctions for non-compliance.

The changes will impact all UK limited partnerships, including private fund limited partnerships. 

Real Estate

Real Estate:

Part 3 of the ECCTA introduces some important changes to the regime governing the Register of Overseas Entities (“ROE”), which is held at Companies House in respect of overseas entities which own UK Land and contains information on the overseas entities’ beneficial owners. The two principal changes are the expansion of (a) the scope of certain registrable beneficial owners (“RBOs”) where overseas nominees are used to hold UK land and where trusts are involved in ownership structures and (b) the information which must be provided to Companies House. The changes are seeking to reach a position where the “true” beneficial owners of UK land are registered as RBOs, in line with the transparency aim of the regime. In addition, the beneficial ownership “back story” should, in theory, be disclosed with updates going forwards, rather than just an annual snapshot. 

The ECCTA also contains various other administrative changes around the process for correcting, removing and verifying material contained on the ROE, and there have been changes to the penalties and offences (including the introduction of a new offence of failing to comply with an information notice served under the regime). These changes should not make much of a difference in practical terms - rather, they are principally designed to add more “teeth” and close loopholes in the original legislation.

 

Crypto assets

Crypto Assets:

The ECCTA gives law enforcement new powers to seize and recover cryptoassets which are the proceeds of crime or associated with illicit activity. It does so by extending existing confiscation and civil recovery powers to cryptoassets. This means that cryptoasset service providers may in future be required to follow court orders relating to the cryptoassets they hold for customers, for example to realise confiscated cryptoassets and pay the resulting sum to the court. 

There are additional powers for the police to gain access to crypto wallets and transfer cryptoassets into a wallet controlled by the authorities. The Bill also provides for the destruction of cryptoassets in certain situations.

SLAPPS

SLAPPS:

The ECCTA introduced legislation on strategic litigation against public participation (colloquially known as SLAPPs) for the first time in the UK.
SLAPPs are claims brought to harass, intimidate and/or financially or psychologically exhaust one’s opponent by improper means. They can be characterised as a misuse and abuse of the legal process, often being brought by wealthy individuals or corporations to stifle freedom of speech and prevent scrutiny in the public interest.

The ECCTA has legislated on SLAPPs in three key ways:

  • for the first time, it provides a legal definition for SLAPPs under the law of England and Wales;
  • it provides for the creation of a new process by which these types of claims can be quickly dismissed by the court; and 
  • it provides for the creation of new costs protection for defendants, which will limit the amount a defendant will have to pay towards a claimant’s costs in a SLAPP case unless the defendant’s own misconduct justifies otherwise.

The Lord Chancellor highlighted the inclusion of SLAPPs legislation in the ECCTA as the first step in “stamping out the brazen abuse of [the UK’s] legal system that has allowed wealthy individuals to silence investigators who are trying to expose their wrongdoing.”

Podcasts

Our Publications

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The Economic Crime and Corporate Transparency Act – What you need to know

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New powers for Companies House from 4 March

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A slap in the face for free speech? How SLAPPs are being brought to book

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New rules to combat economic crime: company law changes from March 2024

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UK limited partnership law reforms are finalised

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The Economic Crime and Corporate Transparency Act receives Royal Assent – now the hard work begins

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New rules to combat economic crime: what’s the impact on UK companies?

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Real Estate Talking Points: Register of Overseas Entities: Introducing the next act...

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The proposed reform of the identification principle from the Bill that keeps on giving

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Revealed at last: The government publishes its proposals for a new failure to prevent fraud offence

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London

UK limited partnership law reform

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Legislation will take forward Companies House shake-up

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Real Estate Talking Points: New Beneficial Ownership Register for UK Land launched on 1 August 2022

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