Today, we're delving into the significant changes brought about by the Economic Crime and Corporate Transparency Act, which received Royal Assent on October 26, 2023. This legislation marks a pivotal shift in the UK's approach to combating economic crime and enhancing corporate transparency. It's particularly relevant for our clients in the FinTech and traditional financial sectors, who must now navigate this new regulatory environment.

Key Provisions of the Act

Corporate Criminal Liability Reforms:

New Offence of Failure to Prevent Fraud: This provision, akin to the Bribery Act 2010's failure to prevent bribery and the Criminal Finances Act 2017's failure to prevent the facilitation of tax evasion offences, holds firms accountable if an associated person commits fraud. A defense exists for those with reasonable prevention procedures. Firms should hence revisit the Fraud Risk Management Frameworks and ensure their procedures and controls are appropriate.

Expansion of the 'Identification Principle': Now, firms can be held criminally liable if a senior manager is involved in economic crime. This broadens the scope of accountability, encompassing a variety of economic crimes including bribery, money laundering, and fraud.

Expanded Powers for the Serious Fraud Office (SFO):

The Act grants the SFO enhanced powers to compel information provision in pre-investigation stages for all cases, not just international bribery and corruption. This is a significant expansion from its previous scope under the Criminal Justice Act 1987.

Companies House Reforms:

Companies House is transforming from a passive entity to a proactive regulator, with new identity verification requirements, restrictions on filing documents, and the authority to act against non-compliant companies.

New Powers to Seize Cryptoassets:

Law enforcement can now freeze and seize cryptoassets associated with illicit activities, a crucial update reflecting the evolving nature of economic crime.

Customer Information Sharing:

The Act facilitates easier information sharing between businesses in the anti-money laundering regulated sector, aiming to enhance the detection and prevention of economic crime.

Implications for FinTech and Traditional Financial Institutions

Enhanced Due Diligence: Organizations must now implement robust procedures to prevent fraud, requiring a deeper understanding of their internal operations and associated persons.

Proactive Compliance Measures: With the SFO's expanded powers, firms should be prepared for more frequent and early-stage investigations. This necessitates a proactive approach to compliance.

Adapting to Digital Changes: The inclusion of cryptoassets underlines the need for firms to stay abreast of digital financial trends and incorporate them into their compliance strategies.

Collaborative Efforts in AML: The new provisions for information sharing represent an opportunity for firms to collaborate more effectively in anti-money laundering efforts.

What next?

‍The Economic Crime and Corporate Transparency Act is a game-changer, signaling a more aggressive stance against economic crime and a shift towards greater corporate accountability. At ComplyEasy, we are committed to helping our clients understand and adapt to these changes, ensuring they not only comply but also lead the way in ethical business practices. Stay ahead of the curve with ComplyEasy, where compliance is not just a requirement, but a strategic advantage.