Money laundering has long been allowed to slip through the cracks due to a lack of corporate transparency.
However, as of March 2024, the Economic Crime and Corporate Transparency Act (2023) was brought in as an attempt to lessen money laundering.
The main aim of the act is to improve the data held by Companies House so that there is less chance of the Companies Register being misused.
As a result of the changes, Companies House is no longer seen as a passive recipient of information; rather, it takes on more of a gatekeeper role, ensuring the information added to the Companies Register is correct.
What are the main changes to the Companies House powers?
There are three main changes you need to be aware of in the powers that Companies House has:
-
Enhanced powers to query information submitted to, or already on, the Companies Register. This power also allows for challenges to filings that have been identified as suspicious or fraudulent or that might otherwise impact the integrity of the Register.
-
When registering a company, you must now provide a registered email address and confirm that the company has been created for a lawful purpose.
-
Companies House can now share information with law enforcement, regulators and other public authorities.
Also introduced is the obligation to verify the identity of People with Significant Control (PSCs) or other individuals filing on behalf of the company.
The overall purpose of these changes is to prevent businesses from using opaque trading structures in an attempt to commit fraud by moving and hiding money.
What do you need to know in terms of KYC checks?
As a company that carries out KYC (Know Your Customer) checks, you need to know the following about your own company and any companies you are doing business with.
Rather than just knowing who’s running the company and, therefore, has ultimate control of it, you also now need to know who the senior managers are, as these are the individuals responsible for the day-to-day running of the company.
Who are senior managers?
Senior managers are individuals who either actively manage the company’s activities and decisions or manage how these decisions are made.
These roles include, but are not limited to, company directors, senior officers, and in-house lawyers. If any of these individuals are found to have failed to prevent fraud, they can be held liable.
What offences can be committed by senior managers?
Within the Act, there are a few “relevant offences” listed, including, but not limited to, money laundering, failing to disclose money laundering, “tipping off”, fraud, false accounting, tax evasion, bribery, and breaches of sanctions regulations.
What is the failure to prevent fraud offence?
Currently, the “failure to prevent fraud” offence has not been given Royal assent, so it’s not currently in force (as of 1st March 2024).
However, when it has been passed and comes into force, it will make it an offence for large organisations to turn a blind eye to the fraud being committed by employees or other agents acting on their behalf.
To be classed as a large business, you have to meet two of the following conditions:
- Have more than 250 employees
- Have a turnover of more than £36 million
- Have a balance sheet total of more than £18 million
A large organisation can be found guilty of the failure to prevent fraud offence if an individual commits fraud intending to benefit the organisation or while they are acting on behalf of the organisation.
To avoid prosecution, the organisation will have to demonstrate that they had reasonable measures in place to prevent fraud at the time the offence took place.