Impacts of the 2023 U.K. Economic Crime and Corporate Transparency Act

The U.K. Economic Crime and Corporate Transparency Act (ECCTA) aims to reshape the business landscape, safeguard national security and ensure the integrity of Companies House records by curbing illicit business practices. This proposed reform was the subject of a panel discussion at the 2024 ACFE Fraud Conference Europe hosted in London.  

Lloydette Bai-Marrow, the founding partner of Parametric Global Consulting, moderated this session alongside three industry experts to break down the proposed reform’s implications and impacts.

Measures and Reforms Introduced by This Act

Paul Duester, Associate General Counsel at the U.K. Serious Fraud Office (SFO), noted that the reform the SFO is most interested in is “the extension of our section two powers.”  He explained that since the ECCTA has been enacted, the SFO has the “legal ability to compel individuals to provide documents or to answer questions in interview” as part of their investigations. While the SFO cannot use those interviews to prosecute, they can use them to “further get evidence against other individuals.”

Prior to ECCTA coming into force, Duester pointed out that those powers were only available after the director had formally opened an investigation or before an investigation in relation to overseas bribery and corruption. Now that ECCTA has removed that limitation, the SFO can use section two powers for any pre-investigation and improve their ability to investigate beforehand and prepare their cases at the earliest opportunity.

Laura Dunseath, Senior Legal Counsel for Anti-Bribery, Corruption and Anti-Money Laundering at Shell added how the ECCTA created an exception to the money laundering offense. She explained how it’s no longer required to disclose when returning funds to a customer if the total is anything less than GBP 1,000. Dunseath pointed out that this is “quite minor, but still quite helpful, I’m sure, to a lot of financial institutions.”

Camélia Gardot, Compliance Partner at Airbus Defense and Space, said that the most important impact of the ECCTA is “even though the extraterritoriality principle is not explicitly set forth in the act, it flows from the U.K. government fact sheets.” This means that the U.K. authorities can enforce offenses if the fraud qualifies as a U.K. offense, regardless of where it occurred, but especially if it affects U.K. victims. Therefore, Gardot anticipates significant implications from the act for companies that have a parent company based in one country and subsidiaries in the U.K.

What Fraud Examiners Should Know About Changes to the Identification Doctrine

Dunseath said that some of the key changes people need to be aware of in the identification doctrine is that it “relates only to financial crime offenses. Schedule 12 has a number of offenses within it, about 50 of them or maybe more, that this applies to.” She added that “it is not just everything; it is only those specified offenses.”

Dunseath provided an example of what that key change might look: “If a senior manager, acting within the actual apparent scope of their authority, whenever they are doing that and committing one of those offenses, the liability passes up to the company.” She added that if the senior manager paid a bribe, for example, “[An organization] would expect to be prosecuted for a section seven offense.” However, under the changes made in the identification doctrine, “[An organization] could now be prosecuted as a company for a section one offense.”

This change adds to the extra level of risk, especially since a senior manager title is such a broad scope. According to Dunseath, “Senior manager is anybody who plays a significant role in the organization or management of the company.” She’s interested to see how that all plays out, but for fraud prevention companies, they should ensure everyone is aware that their actions can lead to corporate liability going forward.

How to Demonstrate Sufficient Efforts to Prevent Fraud

“You’re already going to have anti-bribery procedures in place that hit those key elements of top-level commitment, such as risk assessments,” Duester said, pointing out measures organizations should have in place. “It would be a continuation of those policies and showing that they’ve been adapted to the specific risks of your business or organization. That’s what the prosecutor will be looking for.”

Duester added that the ECCTA is different than the Bribery Act because it “specifically provides that it might be reasonable for the company not to have any procedures in place at all.” He emphasized how this area of the ECCTA is interesting when considering the size of certain businesses, such as Shell and Airbus, who already have significant compliance programs in place. Duester said that some frauds will be difficult to anticipate and put procedures in place to respond appropriately. While there are unknowns ahead, he believes that the Home Office will be able to provide clarity on what U.K. businesses will need to focus on to stay protected.