Economic Crime and Corporate Transparency Bill

Amplified by calls for action against Russian oligarchs, the UK government has moved apace to clamp down on corporate fraud. But in fact, the dealings of ultra-wealthy Russians represent only a tiny fraction of the economic crime committed by high-net-worth individuals active in the UK.

Phase one of the government’s reform package was the Economic Crime (Transparency and Enforcement) Act 2022, which, among other measures:

• created a beneficial ownership register for any overseas entity holding UK real estate.
• strengthened unexplained wealth orders, which previously had limited impact.
• made the prosecution of anyone involved in sanctions-busting easier.

Economic Crime and Corporate Transparency Bill

Introduced into the House of Commons in September 2022, phase two of the reform package, the Economic Crime and Corporate Transparency Bill (the Bill), should receive Royal Assent shortly. At a whopping 250 pages, the Bill is a significant and wide-ranging piece of legislation. Increased powers for regulators and law enforcement agencies are among a host of changes.

Companies House

The Bill also creates new registration and transparency requirements for companies and limited liability partnerships (LLPs). Research published in 2022 by Transparency International UK suggests that an incredible one in ten LLPs bears the hallmarks of a shell company used in the commission of serious financial crime.

So, gone is the role of Companies House as a passive repository. In the future, the agency will actively flag suspicious activity and inaccurate data. To help achieve this, there will be:

• an identity verification requirement for all company directors and persons with significant control.
• new powers to check information already on the register or submitted to it.
• an improvement in the quality of the financial information required on the register.
• provision for more effective investigation and enforcement powers, including facilitating inter-agency data sharing.
• provisions to help crack down on the misuse of corporate entities.

How will the new law affect my business?

Many of the finer details and interpretations are currently unknown. For example, we are told to expect greater scrutiny of registered office addresses, which must be “appropriate”. But there’s little clarity yet on what that means. However, it’s clear that a change of registered office address will require a statement confirming the new address is “appropriate”.

It is expected that once the Bill receives Royal Assent, all new and existing directors or persons with significant control must verify their identity.

Also, expect to be challenged on any inconsistent information filed at Companies House.

But a change that small businesses in particular will welcome is new, simplified rules for filing financial information. Perhaps not so welcome though are expected fee increases for incorporation and annual filing requirements.