Regulation Update: Progress of the Economic Crime and Corporate Transparency Bill

Here’s what we’re excited about…

Following its progress through the House of Commons, the Economic Crime and Corporate Transparency Bill (ECCTB) is now at committee stage in the House of Lords. The expectation is that the new legislation will receive royal assent by the summer.

Quick Recap - What is the Economic Crime and Corporate Transparency Bill?

As mentioned in our previous update, the ECCTB follows on from the Economic Crime (Transparency and Enforcement) Act, which was passed in March 2022 in response to the Russia/Ukraine conflict and served to significantly simplify the process for imposing sanctions, identifying, and tracing illicit wealth, and preventing ‘oligarchs’ from seeking damages.  

The new ECCTB legislation aims to further strengthen the UK’s approach to tackling economic crime, including fraud, money laundering, corruption, and other forms of organised crime. The Bill also seeks to increase the transparency and accountability of the corporate sector, by strengthening the powers of Companies House and increasing the amount and availability of information companies provide to ensure they operate in a responsible and ethical manner. In this regard there are four key objectives:

1. Ensure those required to deliver documents to Companies House do so, and that the requirements relating to proper delivery are complied with.
2. Ensure documents delivered to Companies House contain all the information they are required to, and that the information provided is accurate.
3. Minimise the risk of information on the register creating a false or misleading impression to members of the public.
4. Minimise the extent to which companies and other firms carry out unlawful activities or facilitate the carrying out of unlawful activities by others.

Current progress of the Economic Crime and Corporate Transparency Bill

In the most recent session, held on 27^th March, the committee approved amendments to the Sanctions and Money Laundering Act 2018 which would enable new regulations under the new ECCTB for imposing director disqualification sanctions on designated persons. This will also be complemented by approved amendments to the Directors Disqualification Act 1986, making it an offence under ECCTB for a person subject to sanctions to act as a company director.

In addition, the committee adopted amendments regarding the provision of requisite information to be provided by subscribers of registration of a company, and the delivery of documents to the registrar of companies - Companies House.

As the ECCTB progresses towards royal assent, here are three key things we are excited about:

Filing Exemptions:

The ECCTB makes provision for several Companies House filing exemptions to be removed. This means:

• Companies with shares admitted to trading on a regulated market will now be required to file a confirmation statement.
• Dormant companies with no significant accounting transactions will now be required to file accounts.
• Small companies will be required to file a profit and loss account and a director’s report.
• Certain community interest companies will now be required to file accounts and annual returns.

This is great news. With this additional information, small and medium sized businesses (SMBs) can be risk screened a lot earlier by banks and financial service providers, allowing for more accurate decision making about which companies they wish to enter into relationships with, as well as the opportunity to onboard them faster and monitor their activities for better product and service matching and improved in-life customer experiences.

Director identity verification:

The ECCBT sets out that all new and existing directors of UK corporates will be required to verify their identity, and that this obligation extends to all current directors irrespective of the date they were appointed. Annual confirmation statements will be required to include evidence of each director’s identity having been accurately identified and verified. UK companies will also be required to ensure that no person acts as a director unless their identity has been verified and filed.

Director identity verification will make it much harder to register fictitious directors or beneficial owners, thereby reducing the ability for people to use Companies House to legitimise nefarious business activities. Banks and financial service providers will benefit from greater assurance that the people behind the companies are who they say they are, thereby helping them meet regulatory requirements when entering into new, and maintaining existing, customer relationships.

Shareholder Information:

The ECCTB makes provision for new requirements on shareholder information including:

• Companies will be required to maintain a record of all individuals and entities with significant control over the company, and to file this information with Companies House.
• The definition of “significant control” will be expanded to include not only those who hold more than 25% of company shares or voting rights, but also those who exercise influence or control over the company in other ways.
• Companies will be required to update this information on a regular basis, and to notify Companies House of any changes to share ownership or voting rights information.
• Companies will also be required to provide information on their Ultimate Beneficial owners, including names, date of birth and address information.

Again, this is great news. The current Persons of Significant Control Register is a little sloppy, requiring banks and financial service providers to rely upon probabilistic matching to identify shareholders, persons with voting rights, or those with influence over a company. This is made even more difficult thanks to increasingly complex corporate structures and fragmented ownership data, making it harder to assess risk and meet regulatory requirements.

Helpful tip: FullCircl recently launched a new product that helps connect the dots on corporate ownership by providing a complete view including Summary of Ownership, Persons of Significant Control, shareholder data, corporate family tree, subsidiary data, portfolio companies and Ultimate Beneficial Ownership (UBO) data.  In addition, our UBO API endpoint is able to identify and throw back anomalies in ownership data.

What does this mean for banks and financial service providers today?

The transformation of Companies House from a passive library to a proactive gate keeper will not happen overnight. Realistically, it’s going to take considerable time for Companies House to manoeuvre through this, and we can likely expect a phased approach to both implementation and remediation.

Forewarned is forearmed, however. Staying ahead of ECCBT reform requires investment now. As the legislation progresses towards royal assent and reforms are rolled out, those able to achieve a greater focus on transparency and data quality will be ahead of the field and in position to take greatest advantage of the improvements the Bill delivers.

What does this mean for FullCircl customers?

We are excited about the ECCBT and the impact it will have in terms of greater transparency, accuracy, and reliability of data. After all, the more reliable the data, the more valuable our tools, applications and business logic become – helping our customers find customers that fit their risk profile, onboard them quicker and keep them for life.

Customer Lifecycle Intelligence is not static data - we deliver a multi-dimensional view that combines advanced data ingestion, validation, data matching, and augmentation with real-time media screening and more. All neatly delivered via web app or API.

Whether it’s automated data collection and critical checks, ensuring compliance, confidently targeting the right customers, or growing advocacy through frictionless onboarding and support, FullCircl is helping the UK’s leading banks and financial services providers do Better Business, Faster.

Get ahead of ECCBT reform

If you have questions about the potential impact of the Economic Crime and Corporate Transparency Bill and how to prepare for it, or indeed if you have regulatory or compliance concerns that impact how you acquire, onboard, and serve customers - we would love to talk to you. Just email us at letstalk@fullcircl.com.