Proposed introduction of discrepancy reporting requirements for all businesses

September 5, 2023

The Economic Crime and Corporate Transparency Bill first made its way into Parliament in September 2022. Just shy of a year later, final amendments have been made to the Bill during the third reading and it was returned to the Commons on Monday 4 September 2023 for consideration of Lords amendments.

The Bill contains a number of draft amendments and proposals to reform Companies House. This article will focus on the proposed introduction of a governmental power to require all businesses to carry out ‘discrepancy reporting’.

What is ‘discrepancy reporting’?

When carrying out their due diligence checks, if the information that a person obtains is significantly different to the information recorded at Companies House (i.e., there is a ‘material discrepancy’), that person must report it.

What difference will the proposed amendments make?

Currently, only those persons who are required to carry out due diligence checks under the Money Laundering Regulations[1] must report any material discrepancy they uncover to Companies House.

Under the Bill, the Government would be able to impose requirements on any person who is carrying on business in the United Kingdom to obtain specified information about their customers and report discrepancies, i.e., not just those persons required to do so under the Money Laundering Regulations.

This would represent a significant expansion on the number of businesses that must engage with discrepancy reporting, as well as widening the scope of information that must be verified.

This will obviously help to improve the reliability of information and strengthen the register of companies, however businesses that do not have sophisticated due diligence processes may see it as yet another onerous hoop to jump through slowing down the client onboarding process and potentially, slowing down workflow.

This is only one of a series of reforms that are being proposed. Please see the following articles for other proposals:

[1] The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017

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