The Economic Crime and Corporate Transparency Act (ECCTA) of 2023 introduces significant changes to the UK’s approach to combating economic crime, directly affecting how accountants must approach Anti-Money Laundering (AML) and Know Your Customer (KYC) processes. This legislation received Royal Assent in October 2023 and is aimed at improving corporate transparency and tackling economic crime by implementing new measures and requiring action from companies of all sizes​​.

Key aspects of the ECCTA include:

1. Identity Verification Requirements: A pivotal change is the introduction of identity verification requirements for all directors, Persons with Significant Control (PSCs), and those delivering documents to Companies House. This includes both direct verification by Companies House and indirect verification through an Authorised Corporate Service Provider (ACSP), affecting intermediaries like lawyers, accountants, and company formation agents. These changes aim to prevent the registration of fictitious entities and enhance transparency​​​​.
2. New Corporate Offences: The Act introduces a new corporate offence of failure to prevent fraud, alongside tightened registration and transparency requirements for limited partnerships. This signifies a broader responsibility for companies to ensure robust fraud prevention mechanisms are in place​​.
3. Impact on AML and KYC: While the Act’s focus is broad, its implications for AML and KYC practices are substantial. By requiring verified identities for key company roles, the Act reinforces the importance of due diligence in the client onboarding process. Accountants and other professionals will need to ensure their practices align with these new requirements, potentially adjusting their procedures for verifying client identities and maintaining records​​.
4. SMEs and Compliance Burden: Notably, the Act’s provisions regarding the failure to prevent offence do not impact SMEs below the large corporate threshold. However, the expectation of compliance and robust fraud risk management may trickle down to smaller organisations through their relationships with larger, in-scope businesses​​.
5. Implementation Timeline: Many of the Act’s measures will require secondary legislation and Companies House guidance for full implementation. It is anticipated that it will be at least a year until many of these provisions come into force, with companies advised to start preparing in anticipation of these changes​​.
6. Role of Accountants and Financial Advisors: With the introduction of these new requirements, accountants and financial advisors will play a crucial role in guiding their clients through the compliance process, ensuring that they understand and adhere to the new regulations. This includes advising on the identity verification process for directors and PSCs, as well as the implications of the new failure to prevent fraud offence​​.

The ECCTA represents a significant shift in the UK’s approach to economic crime, with a clear emphasis on improving transparency and accountability within the corporate sector. Accountants, in particular, will need to stay informed about these changes and their eventual implementation to ensure they and their clients remain compliant with the evolving regulatory landscape.