Economic Crime and Corporate Transparency Act 2023

Economic Crime and Corporate Transparency Act 2023
Written by Caroline Walters AICA, Director of Operations, FCS Compliance

The Economic Crime and Corporate Transparency Bill received Royal Assent on 26th October 2023, becoming the Economic Crime and Corporate Transparency Act 2023 (ECCTA). This is yet another law designed to tackle the estimated money laundering cost to the UK economy of £1billion a year.

FCS Compliance has received many enquiries asking how this new law will affect the property market. This article is a summary of the salient points from the act.

Most of the measures that will be introduced under this law will be secondary legislation. One of the most significant changes will apply to Companies House for which there will be considerable reforms.  These reforms will mean that ultimately Companies House will have broader powers to ensure that company creation has more reliable data in terms of providing effective identification of registered company directors, people of significant control and those who are filing company documents on behalf of the companies.

A deadline for the implementation of these measures has not yet been announced however, it is possible in early 2024 that query powers and more stringent checks on company names will be rolled out.  This is likely to mean that in the future, the information held at Companies House and required by estate agents as part of the customer due diligence process, will be more reliable than the current information.

Register of Overseas Entities

As you may be aware The Register of Overseas Entities (ROE) aims to create a new global standard for transparency, particularly around aspects of ownership.  Entities that do not declare their “beneficial owner” currently have restrictions over selling their property, and those people who break the rules could face up to five years in prison.

An update statement must be filed every year by all overseas entities on the Register of Overseas Entities.  It requires that all the information about the overseas entity (OE) on the register is still correct and that any changes are updated.  Importantly, an updated statement must be submitted even if nothing has changed.

Companies House has stated that it will send email reminders about the requirement to file an annual update statement to the email addresses it holds on file for each OE. Restrictions on selling a property will be put in place if information is not updated annually. The new act will incorporate additional requirements for OEs and the information they need to provide for the register.

The scope of registrable beneficial owners will be expanded.  Where nominees are used to hold UK land and where trusts are involved, there will be a requirement to submit this information.  The aim is to identify the true beneficial owners of UK land.

Cryptoassets

Currently, any transactions funded with cryptoassets are regarded as high risk. This is due to the difficulty in not just obtaining the source of funding, but a lack of transparency. Although the Act does not specifically deal with this element, new powers will allow law enforcement to target illicit cryptoassets.

The National Crime Agency’s (NCA) National Assessment Centre estimates that over £1 billion of illicit cash was transferred overseas using cryptoassets in 2021.  The act has introduced provisions for police and the NCA to seize crypto assets more easily and convert them into money before a forfeiture hearing has taken place.

In exceptional circumstances, there will also be a power to destroy seized cryptocurrency and law enforcement agencies will benefit from greater powers to seize, freeze and recover crypto assets.

In summary, below is a list of the new measures being introduced by this Act:

• reforms to prevent the abuse of limited partnerships;
• additional powers to seize and recover suspected criminal crypto assets;
• reforms to give businesses more confidence to share information to tackle economic crime;
• the introduction of a Failure to Prevent Fraud offence;
• introducing identity verification for registered company directors, people with significant control and those who file on behalf of companies;
• improving the financial information on the register so that it is more accurate;
• providing Companies House with more effective investigation and enforcement powers, and introducing better cross-checking of data with other bodies;
• enhancing the protection of personal information provided to Companies House; and
• changing the filing requirements for smaller companies.

^{Article written January 2024}