How to prepare for the Economic Crime and Corporate Transparency Act

The Economic Crime and Corporate Transparency Act (ECCT Act) received Royal Assent on 26 October 2023.

The ECCT Act is incredibly wide-ranging from the reforms to Companies House through to additional powers to seize and recover criminal cryptoassets. However, it is the introduction of the failure to prevent fraud offence and the extension of corporate liability for all economic crimes committed by senior managers that means the ECCT Act represents the biggest legislative shake up in the economic crime arena in the UK since the Proceeds of Crime Act 2002.

Failure to prevent fraud offence

Under the failure to prevent fraud offence, large organisations (companies or partnerships that satisfy two of the following conditions (i) turnover £36m+, (ii) balance sheet £18m+, (iii) employees 250+) will be automatically liable if an employee or third party acting on its behalf commits external fraud (not fraud against the organisation). It will be a complete defence for the organisation to show that it had in place at the time of the offence reasonable preventative procedures, or that it was reasonable not to have any preventative procedures.

The Government will issue guidance on what they expect reasonable procedures to be before this offence comes into force, which is expected to be the middle of 2024. However, organisations can get ahead now by looking at the guidance issued for the similar bribery and tax offences.

How TLT can help you prepare

• Assessment of the risk of outward fraud being committed.
• Map out your existing fraud controls and complete a gap analysis against the level of reasonable preventative procedures.
• Drafting or updating your policies and procedures.
• Third party review.
• Implementing the new or revised policies and procedures and delivering training.
• Provide sessions with senior management to discuss expectations within your firm.

Extension of corporate liability

The extension of corporate liability will make it easier for law enforcement for prosecution of economic crimes committed by its senior managers. Specifically, companies could face prosecution for money laundering, bribery, tax evasion, sanctions violations and terrorist financing offences committed by senior managers.

Unlike the failure to prevent fraud offence, this applies to all commercial organisations, irrespective of size, and there is no statutory defence to rely on. Organisations will have to rely on their compliance programmes to prevent such incidents from occurring or using them to mitigate penalties.

This offence will come into force on 26 December 2023, so now is the time to review and refresh your economic crime compliance programmes.

How TLT can help you prepare

• Economic crime risk assessments.
• Reviews and benchmarking of existing economic crime compliance programmes.
• Operational effectiveness reviews of existing economic crime compliance programmes.
• Review of existing policies and procedures.
• Updating training and communications.
• Offer full support in investigations and defending prosecution.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at November 2023. Specific advice should be sought for specific cases. For more information see our terms & conditions.