ARTICLES
Green light at last for The Economic Crime Bill
October 2023

For so long it’s been so near, and yet so far. But the Economic Crime and Corporate Transparency Bill has finally passed through both Houses and is ready for Royal Ascent. It has been touted as a landmark piece of legislation with far-reaching implications for the business world. Its provisions are designed to combat various forms of economic crimes, including money laundering, fraud, corruption, and tax evasion.
Attempts to get it over the line in time for Royal Ascent for the New Year had been thwarted by a game of amendment tennis between the two Parliamentary Houses over fine but important differences.
However, on 26 October the Houses Of Parliament finally ratified the amendments and Royal Ascent was duly agreed, which means that if they have not done so already, companies should be preparing for wide-reaching changes.
The Economic Crime and Corporate Transparency Bill
The bill encompasses a wide array of provisions in the battle to clamp down on economic crime, ranging from comprehensive Companies House reforms through to extra powers for law enforcement to recover criminal crypto assets.
However, it is the inclusion of a new ‘failure to prevent fraud’ offence and the broadening of corporate liability for economic crimes carried out by senior executives that is at the heart of the legislation.
The differences between the House of Commons and the House of Lords had focused on two main areas, whether the failure to prevent fraud offence should only apply to large organisations or apply to all businesses and whether law enforcement should be protected against costs orders should they lose a civil recovery claim.
Amendments went back before the House of Commons on 26 October and despite the delays, the Houses were in agreement over the significance of the bill what represents a paradigm shift in corporate governance. It introduces several key changes that directly affect how companies operate, monitor their finances, and interact with the regulatory environment.
One of the central provisions of the Economic Crime and Corporate Transparency Bill is a focus on beneficial ownership transparency. Companies are now required to disclose their ultimate beneficial owners, making it more challenging for criminals to use corporate structures to hide illicit gains.
The governance implications here are significant, as companies must not only identify and disclose beneficial owners but also establish systems for continuous monitoring and reporting to remain compliant.
Companies will also be compelled to conduct enhanced due diligence when onboarding clients, engaging in mergers and acquisitions, or entering into high-value transactions. This heightened due diligence requirement necessitates a more vigilant and proactive governance approach.
Government statement
In its official statement, the Government said that the Economic Crime and Corporate Transparency Act introduces “world-leading powers” which will allow UK authorities to proactively target organised criminals and others seeking to abuse the UK economy.
Companies House will receive enhanced abilities to verify the identities of company directors, remove fraudulent organisations from the company register and share information with criminal investigation agencies
Law enforcement agencies will benefit from greater powers to seize, freeze and recover crypto assets, while legal reforms will allow the courts to dismiss spurious lawsuits which seek to stifle freedom of speech. Prosecutors will be better able to hold large corporations accountable for malpractice.
The powers given to Companies House form what the Government called the “biggest shakeup to the service in its 180-year history” and once the powers come into force, the agency will take immediate steps to improve the quality of information on the company register.
Invalid registered office addresses, such as those used fraudulently to set up companies, will be removed.
Verification checks will assess the identities of people setting up and managing companies, stopping criminals hiding behind false names or registering companies with fictional characters. This will help prevent fraudulent appointments and avoid people involved in money laundering hiding behind false names.
Changes to public beneficial ownership registers will also close loopholes that allow corrupt actors to use opaque companies to move and hide money.
It will additionally provide businesses with greater clarity on who they are working with, while allowing civil society organisations to expose corrupt actors, and for the public to increase their trust in governments.
Why companies need to prepare now
Potential fines, asset forfeiture, and even potential imprisonment of company officers underscore the seriousness of this legislation. As such, company boards and executives must ensure that robust compliance measures are in place to avoid legal repercussions.
Regulatory scrutiny: Regulators will be equipped with more power and resources to ensure compliance. Companies can expect increased scrutiny and enforcement and failing to act promptly to establish compliant governance systems could lead to investigations, penalties, and reputational damage.
Reputation management: Being associated with economic crimes can have devastating consequences. Companies must take immediate action to ensure that their operations are free from the taint of illicit financial activities.
Financial risk mitigation: Non-compliance carries severe financial risks, including substantial fines and the potential forfeiture of assets. By acting now to adopt robust compliance measures, companies can mitigate these risks.
Competitive advantage: Companies that proactively embrace the Act and demonstrate a strong commitment to ethical governance will gain a competitive edge. Clients, investors, and partners increasingly prioritise compliance and integrity in their business relationships.
Directors need to be prepared for what will be a huge shift in where corporate responsibilities lie and the consequences of inaction and Bridgehouse can help you navigate the new rules and regulations.

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