The new Economic Crime and Corporate Transparency Bill 2022 (the “Bill”) is designed to combat money laundering and the influx of ‘dirty’ money to the UK from criminal sources.
Currently this costs UK businesses more than £100 billion in fraud, and £190 billion to the public sector, which all equates to 14.5% of the UK’s annual GDP1.
The Bill was published on 22nd September 2023. It follows a previous Act on the same subject and amends the Proceeds of Crime Act 2002. The second reading of the Bill is set to occur in the house of commons in October 20232. It affects all UK registered businesses (PLC’s, Limited companies, LP’s and LLP’s etc), large and small, as the measures will be applied to everyone with some heavier emphasis on larger companies to provide certain information.
Companies House powers
Information held at Companies House and Companies House powers to investigate are strengthened. Those Companies applying to be on the Companies register and those already on it will be impacted by the new legislation. Prior to the Bill, information at Companies House was taken ‘in good faith’. Going forward or when the Bill is enacted they will have greater powers to check, decline and remove information submitted where deemed to be appropriate.
Companies House’s new investigative powers will include cross checking and sharing data with other public and private sector bodies and proactively sharing information with the police. New identity verification measures will be put in place for all company directors, Persons of Significant Control (PSCs) and anyone submitting information to them.
Fraud prevention
The main aim is for improvements in the financial information provided to the registrar to occur (involving the check, remove or decline regime3), and improvements in the systems at Companies House to reflect latest advancements in digital technology, assisting overall with making better business decisions. There will be data protection improvements for individuals whose details are shared with Companies House to further prevent fraud, plus, a clamp down on the misuse of corporate entities.
Another aim is to strengthen anti money laundering powers, enabling businesses to share information more easily for the prevention of fraud/prevention of economic crime. There will be proactive intelligence gathering by the authorities.
We don’t know the details of the full effects of the Bill yet, or what is planned in all quarters, but Companies House is certainly set to become a more active gatekeeper, with more reliable data held on the public register. This may look like new verification codes, other forms of proof of connection with the company and further checks that information being submitted comes from reliable sources (accountants, company secretaries, auditors, legal advisors and the client).
Limited Partnerships are also undergoing a reform, with tighter registration requirements. They must now maintain a connection to the UK and have increased transparency requirements. They can now be deregistered or dissolved by Companies House in a quicker timeframe and there are stricter penalties where noncompliance with the legislation occurs, including fines and imprisonment.
Criminal crypto assets
Broader agency powers now include the seizing of crypto assets that are the proceeds of crime, without an arrest having taken place. The creation of law enforcement controlled crypto asset wallets, allowing magistrates to seize crypto assets and allowing further widened powers when dealing with crypto assets4. The Bill also removes any civil liability for the sharing of information/breaches of confidentiality where this is done to combat economic crime.
There will be a strengthening of the National Crime Agency’s Financial Intelligence Unit powers, removing the need for a suspicious activity report before action and before an Information Order can be made. There will be a removal of the requirement for a Defence Against Money Laundering Serious Activity Report (currently part of the anti money laundering process) to be submitted to businesses before additional information can be provided.
How Kin CoSec can help
We are here to support our clients during the implementation of these changes and beyond. Should you need assistance with maintaining your Company records, preparing responses to Companies House and collecting proof of the authenticity of information, we are happy to assist you. Along with preparing systems to ensure that you are in line with the regulation and ahead where possible we ensure that our client’s companies are maintained in the best of order and communications with Companies House are kept up to date.
If you are considering outsourcing the role of your Company Secretary, at Kin, we have a dedicated team of competent, modern governance professionals who can act as a trusted extension of your in-house team. Please reach out to us on companysecretary@kincosec.com if you would like to find out more.
Sources
- Closing the UK’s economic crime enforcement gap: Proposals for boosting resources for UK law enforcement to fight economic crime – Spotlight on Corruption (spotlightcorruption.org)
- Updates to its progress can be found at Economic Crime and Corporate Transparency Bill – Parliamentary Bills – UK Parliament
- Factsheet: Economic Crime and Corporate Transparency Bill overarching – GOV.UK (www.gov.uk)
- Key Takeaways from the UK’s New Economic Crime and Corporate Transparency Bill 2022 (complyadvantage.com)
