Home / Latest News And Updates / Understanding the New Economic Crime Act
07 Nov 2023
Practicing accountants like you should be aware of the Economic Crime and Corporate Transparency Act 2023 (ECCTA). Enhancing the Economic Crime and Corporate Transparency Bill was a government priority to tackle economic crime. This new legislation received Royal Assent on 23rd October 2023 and will transform filing and ID requirements.
This article explores the range of measures that the new ECCTA will implement to tackle things like:
Most of the measures will be implemented through secondary legislation. At the time of writing the timing is unclear. The key is to understand how the ECCTA will impact you, as a practicing accountant.
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The ECCTA is a robust piece of legislation created to limit economic crime and manage crypto assets in the UK. Widely speaking this is a transparency and enforcement Act.
The Act will provide new laws to combat corruption and fraud, emphasising legitimate businesses. UK authorities will have powers to tackle organised criminal groups who target the UK's open economy. Key takeaways of the ECCTA include:
Full details of the ECCTA are available at the gov.uk website.
The impact of the ECCTA on accountancy firms will be huge. As said, this will transform the way we look at filing and ID requirements.
Some of the more basic elements to consider are introducing identity verification requirements. There are, however, more complex things to consider:
The ECCTA strives to create a simplified filing approach for small companies. Namely, by removing the option to prepare and file abridged accounts. This option was not universally adopted by firms so there may be minimal practical impact.
The ECCTA eradicates the option to remove profit and loss accounts and directors’ reports from a small company set of financial statements before filing. This was previously very popular. Similarly, micro-companies will no longer be able to remove their profit and loss account before filing.
This might seem like a huge increase in sensitive information that would be available to the public, however in a change to the original Bill, the ECCTA includes provisions allowing the Registrar to make the profit-and-loss accounts of small or micro-entities (or parts of them) unavailable for public inspection. So statutory profit and loss accounts will be help at Companies House, but this information will not be available to the public.
The ECCTA includes requirements for all new and existing registered company directors, people with significant control, and those who file on behalf of companies to have their identity verified. This is a big change in process for company secretaries and Companies House, therefore implementation will need to be prepared for carefully. It seems likely that this will be rolled out for new companies, directors, and beneficial owners in the first instance, but we will need to watch for details to be made available.
It is acknowledged that agents have a part to play in this ID process and the ECCTA creates a role called an “authorised corporate service provider” which is registered with Companies House and can perform the verification and declare it on behalf of the company to Companies House. As accountancy firms are already regulated for Anti-Money Laundering and most firms belong to a professional body, the registration process should be fairly straightforward.
The ECCTA has created a new corporate offense of the “Failure to Prevent Fraud” which will mean organisations (rather than just individuals) can be held to account if they profit from fraud.
The offence applies to companies in all sectors but only if they are large (using the standard Companies Act 2006 definition). This means they meet two out of three of the following criteria:
The ECCTA has the power to make several substantial changes to the way firms prepare and file accounts and in the work / filing needed before an individual can be a director or beneficial owner.
Due to the need for secondary legislation and in some cases for Companies House to update its systems, it is likely to be some time before all the requirements are implemented. However, firms need to stay alert for future announcements to ensure they are ready to advise clients when the time comes.
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