Understand the aims of the Economic Crime and Corporate Transparency Bill 2022 and the key changes it may make to existing legislation.
Update: The Economic Crime and Corporate Transparency Bill received Royal Assent on 26 October 2023 and is now officially an Act.
The Economic Crime and Corporate Transparency Bill 2022 has the potential to significantly change how companies treat corporate governance, financial crime prevention, and transparency.
Following in the footsteps of the Economic Crime (Transparency and Enforcement) Act 2022, the Economic Crime and Corporate Transparency Bill 2022 (or ECCT 2022) has five primary stated objectives:
The bill aims to make it tougher for criminals to use companies to launder money or commit other economic crimes by increasing corporate transparency and making it easier for law enforcement to identify and investigate financial crime. In more detail:
Financial crime has a significant impact on individuals, businesses, and the economy as a whole.
According to the government, ECCT 2022 will "bear down further on kleptocrats, criminals and terrorists, strengthening the UK's reputation as a place where legitimate business can thrive, whilst driving dirty money out of the UK."
Rhetoric aside, the bill's new requirements and responsibilities are likely to significantly impact businesses of all sizes. Given the potential legal, financial and reputational damage of economic crime, it’s crucial organisations understand what’s required when the bill becomes law.
The Bill represents the second part of significant reform building on the Economic Crime (Transparency and Enforcement) Act 2022 (ECTE 2022).
Following Russia’s invasion of Ukraine, the government introduced ECTE to stop dirty money from Russia or other foreign powers entering the UK. The main aims of the ECTE included:
The Economic Crime and Corporate Transparency Bill 2022 builds on this in several ways.
Specifically, it ensures the ROE is more comprehensive and accessible to law enforcement, makes it harder for criminals to use limited partnerships to hide their activities, and smooths the way for businesses to share information about suspected financial crime.
Overall, the intention behind the Economic Crime and Corporate Transparency Bill 2022 is to make the UK a more hostile place for economic criminals and a safer place to do business.
As the bill completes its parliament journey, businesses should stay on top of precisely what's required and how to stay compliant once it becomes law.
In particular, amendments proposed during the second reading debates may expand the number of corporate criminal liability offences. In fact, one of the main reasons that the ECCT 2022 has not been sent for Royal Assent as yet is that the House of Commons and the House of Lords have disagreed on the extent of change to the law on corporate criminal liability.
The current trend in the law removes some of the burden from regulators by challenging large corporate entities to self-regulate. The current ‘failure to prevent’ corporate offences only applies to larger corporate entities covering tax evasion and bribery. There is also an ongoing requirement under section 54 of the Modern Slavery Act 2015 requiring large companies to publish an annual modern slavery statement.
It is almost certain that the ECCT 2022 will build on this by creating a corporate criminal offence for ‘failure to prevent fraud’. If the Lords have it their way, the ECCT may even include some form of offence for a failure to prevent money laundering, and the law could be extended to all corporate entities, not just larger corporations.
Corporate criminal liability is currently treated as a strict liability offence, where intention does not come under consideration, but allowing the corporation to present a defence that it had put reasonable controls in place to ensure the criminal act did not take place.
This has the effect of shifting the burden of enforcement away from the regulator towards companies themselves. It is also important to note that the ECCT is unlikely to signal the last change to corporate criminal liability.
Although it is unlikely that we will see a general ‘failure to prevent financial crime’ offence in the near future, the Law Reform Commission, in a 2022 report, suggested several possible new offences, reporting requirements and methods of penalising corporate actors for compliance failings, including:
All of this shows how important it is at present, and will be in the future, for companies to have strong controls in place to spot and help prevent financial crime and report any suspicions.
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