The UK’s ECCTA: What multinational companies need to know

The Economic Crime and Corporate Transparency Act (the ECCTA, or the Act), passed in October 2023, is a sweeping, multi-phase body of legislation, some of it still evolving. It’s the UK’s attempt to stem the rising tide of global financial fraud and cybercrime. In 2023 alone, fraudsters stole over US$1 trillion from victims around the world, according to the International Criminal Police Organisation (INTERPOL).

“For too long criminals and corrupt elites have abused UK company structures to launder their illicit wealth; the new powers given to Companies House [through the ECCTA] will help us tackle those who abuse our economy,” said Graeme Biggar, director general of the UK's National Crime Agency.

New requirements for businesses

The ECCTA changes the role of Companies House, the agency responsible for incorporating UK businesses and maintaining a registry of companies, giving it new powers to proactively question firms about the information they provide. Companies House can annotate information it deems incorrect, and, in some cases, remove it from the registry. It can also share information with public enforcement authorities, such as tax authorities and serious crime investigating authorities.

Initial rules state that companies and limited liability partnerships (LLPs) can no longer use a P.O. box as their registered address. Entities and those applying for incorporation must confirm on an annual basis that their business is for a lawful purpose and provide both a legitimate business address and an email address (which will not be made publicly available).

More measures to come

New requirements continue to be published, with rollouts expected to continue through 2025.

Multinationals should pay close attention to draft regulations published in May 2023, which propose to require identity verification with Companies House for all newly appointed and existing company directors, people with significant control (PSCs), directors of certain overseas companies and people delivering documents to Companies House, either directly or indirectly through an authorised corporate service provider. Failure to do so could mean a fine for the company; exemptions (such as on the grounds of national security) are rare.

Further measures will likely require corporate directors to be “natural persons,” in other words, actual human beings. In addition, for the first time ever, limited partnerships will be held to higher reporting standards and may need to submit more Companies House filings. Plans also include abolishing the requirement for companies to hold their own registers for PSCs, directors and secretaries. This information will be moved to the central Companies House registry.

There will also be changes to accounts filing. These should be considered carefully since certain small companies may now need to file more information than before.

New responsibilities and fees

The ECCTA expects businesses to have strict procedures in place to prevent fraud, and under a new proposed rule, large companies that fail to do so could face prosecution, with very limited options available as a defence.

The regulation will apply to multinational companies even if they do not have a permanent establishment or subsidiary in the UK. If an employee or agent commits or attempts to commit fraud against UK citizens, the corporation could be found liable for their actions.

The regulation applies to “large companies,” defined as those meeting two of three thresholds:

• Receiving more than £36 million in annual revenue
• Having more than £18 million in total balance sheet assets
• Having more than 250 employees. 

It is essential for multinational organisations with activities in the UK to start reviewing and updating their employment contracts, commercial agreements and fraud prevention rules. They should also carry out employee training to make sure everyone understands the importance of the Act and how to follow its rules and demonstrate compliance.

Multinationals should also be aware of related fee changes. Companies House has published a new fee schedule for corporate filings and other fees. The agency now has the power to assess fines of up to £10,000 for breaches of the Companies Act and does not have to take the companies to court first, as it was previously required to do. It is still unclear how strictly this provision will be enforced and whether it will be applied to minor infractions, such as missing a form-filing deadline. Some offences can include criminal sanctions, such as imprisonment for failing to comply.

Preparing for the future

With a new government in place, it is hard to predict the future for the ECCTA’s proposed additional measures. Unlike in the US, where a law requiring small businesses to disclose beneficial owners was recently ruled unconstitutional, the ECCTA seems to have generated little if any controversy. Prime Minister Keir Starmer promised during his campaign to crack down on corruption and financial crime and introduce stiffer penalties — including jail sentences of up to 10 years — for those who commit fraud against the government. 

Multinationals should familiarise themselves with the ECCTA, review all their UK group company registers and records, and try to keep a step ahead of the evolving rules. An authorised service provider can help guide firms through the changes and review and rectify records as needed to ensure compliance.