The draft bill for the Economic Crime and Corporate Transparency Act (ECCTA), which first made its way into Parliament in September 2022, has now received Royal Assent.
We have previously covered the changes the ECCTA seeks to make, such as providing Companies House with more extensive capabilities to make it more reliable and robust, and introducing new regimes to counter corruption, increase transparency and bolster legitimate business. All of our previous articles can be found here:
- Introduction to Proposed Companies House Reforms
- Identity Verification Reform
- Proposed civil and criminal sanctions for breach of the Companies Act
- Proposed introduction of discrepancy reporting requirements for all businesses
- Expanding the role of the Registrar
Failure to prevent fraud
As well as the areas covered above, the ECCTA introduces a new failure to prevent fraud offence, which will hold a ‘large organisation’ criminally liable (and potentially face an unlimited fine) if it benefits from a fraud that is committed by an ‘associated’ person, for example a member of staff. A large organisation is defined as one that meets at least two of the following criteria: more than 250 employees, more than £36 million of turnover and/or balance sheet total of more than £18 million.
This new offence clearly has significant implications for businesses, which will now need to implement or improve measures to ensure they have clearer oversight over what their employees or agents are doing. Prosecution can be avoided, however, if reasonable procedures are put in place to prevent fraud. Government guidance of such procedures is expected to be published early next year, when the offence will also come into force.
Companies House Chief Executive, Louise Smyth has welcomed the changes, labelling them “without doubt the most significant change for Companies House in our long history”.