From March 4, Companies House will have new powers to investigate suspected economic crimes committed by UK-registered companies.
The new remit for the UK government agency in charge of company registrations comes as part of the ongoing implementation of the Economic Crime and Corporate Transparency Act (ECCTA). Passed into law in October 2023, the ECCTA will eventually introduce a range of measures aimed at tackling fraud, money laundering, corporate corruption and other ‘white collar’ crimes. These will include a number of extra obligations placed on organisations.
As part of the latest phase of implementation, Companies House now has the legal authority to query and challenge submissions and filings, and has extended powers to share information with law enforcement, regulators and other public authorities if there is a suspicion of wrongdoing.
From March 4, anyone registering with Companies House will be required to submit an ‘appropriate’ registered email and postal address which can be used to communicate directly with a company representative. In this context, ‘appropriate’ means that addresses must be linked directly to persons acting on behalf of the company. This excludes the use of PO boxes and automated email addresses. The change in status of PO boxes is something that charitable organisations in particular need to be aware of.
At a later date, and subject to the passing of secondary legislation, Companies House will also gain powers to verify the identity of company directors. Criminals have long abused the system by setting up fake businesses under fake identities to hide illicit gains.
Timeline of change
To date, changes introduced under the ECCTA have centred around extending liability for who can be prosecuted for corporate crimes within an organisation, and also expanding the powers of the Serious Fraud Office (SFO). Since January, the SFO has had the authority to compel companies and individuals to submit information at a ‘pre-investigation’ stage in all cases under its remit. Previously, this had only applied in large international and bribery cases.
March 4 therefore represents the first time that new obligations for companies, directors, people with significant control (PSCs) and anyone who files on behalf of a company come into force.
Future changes will include an increase in Companies House fees, due in May 2024, followed by the phasing out of paper submissions, new requirements to provide information on shareholders along with restrictions on use of company directors, and a requirement for limited liability partnerships (LLPs) to make filings via authorised agents.
One of the most significant changes introduced by the Act, to come into force at a date yet to be fixed, is a new Failure to Prevent Fraud offence. This new strict liability offence will hold organisations criminally responsible for fraud committed by employees that the organisation profits from. While companies can be held responsible for fraud carried out by employees under existing legislation, the rules relate to a relatively narrow set of circumstances and contain several known loopholes.
Under the new rules, organisations will be held liable simply if they are deemed not to have adequate anti-fraud measures in place. It’s hoped this stricter interpretation of liability will stamp out a culture of turning a “blind eye” to corporate fraud. The new rules will apply to large corporations only, not SMEs.
