In a significant development for corporate governance and accountability, the Economic Crime and Corporate Transparency Act (ECCTA) has received Royal Assent. ECCTA, which aims to combat economic crime and enhance corporate transparency, is set to have an impact on companies and their directors.
ECCTA was introduced as a response to mounting concerns regarding the ease with which financial activities could be concealed within UK corporate structures. The Act’s primary objective is to create a more robust system for detecting and preventing economic crimes, such as money laundering, corruption, and tax evasion.
One of the most significant aspects of ECCTA is the establishment of a public register of beneficial owners. This register will require companies to disclose information about individuals who ultimately own or control the business. This move will make it more challenging for criminals to hide behind complex corporate structures.
ECCTA introduces measures that strengthen the UK’s ability to disqualify directors who have been involved in economic crimes. The Act empowers authorities to take action against directors found guilty of such offenses, enhancing accountability at the executive level.
ECCTA imposes more stringent due diligence requirements on companies, especially when dealing with politically exposed persons (PEPs). This ensures that businesses are better equipped to identify and prevent financial wrongdoing.
The Act bolsters financial services regulation by giving regulators more authority to take action against institutions that do not adhere to anti-money laundering and counter-terrorist financing regulations.
In a bid to disrupt economic crime, the measures encompass:
ECCTA will hold companies and their directors more accountable for their actions. The public register of beneficial owners will leave little room for individuals to hide behind corporate structures, making it challenging for wrongdoers to go unnoticed.
Companies will need to implement more robust due diligence and compliance measures to meet the Act’s requirements. Failure to do so could result in fines, penalties, or even disqualification for directors.
Businesses that prioritise transparency will likely benefit from an improved reputation in the eyes of consumers and investors. ECCTA encourages companies to adopt a more ethical approach, which can be a competitive advantage.
With a more stringent focus on identifying and preventing economic crime, companies can expect improved financial security. This can help safeguard assets and protect shareholders’ interests.
The ECCTA receiving Royal Assent represents a significant shift toward greater corporate accountability and transparency in the UK.
By addressing economic crime and promoting open disclosure of beneficial ownership, ECCTA seeks to protect the integrity of the business environment and strengthen the country’s financial security. For companies and their directors, this Act signals the need for heightened compliance, ethical conduct, and a commitment to combating economic crime, ultimately leading to a more secure and transparent corporate landscape.