Economic Crime and Corporate Transparency Act 2023

The new Economic Crime and Corporate Transparency Act 2023 was published on legislation.gov.uk, the official UK platform for publicizing legal texts. The Act implements the corresponding Bill that was drafted in 2022 and which primarily provides for legislation to hold companies responsible for the prevention of fraud in an effort to combat financial crime, including money laundering.
#### „Failure to prevent fraud“
In detail, the Act introduces a „failure to prevent fraud“ offense, which holds organizations criminally liable if a person associated with them commits fraud to benefit the organization, and the organization didn’t have reasonable anti-fraud policies and procedures in place. This offense applies to large organizations only (as defined below). Conviction pursuant to a „failure to prevent fraud“ can result in unlimited fines. However, the Act does NOT hold organizations liable if they themselves were the intended victims of the fraud.
A large company towards which the new offense applies is thereby defined as follows: It is an organization that meets any two of the following conditions:
– the organization has more than 250 employees;
– its annual net turnover exceeds £36 million (gross £43.2 million); or
– its net assets exceed £18 million (gross £21.6 million).
#### Criminal liability
Furthermore, the Act brings about significant changes in corporate criminal liability. Traditionally, corporate liability was determined based on the „identification principle“ which required prosecutors to identify the „directing mind or will“ of a company responsible for any wrongdoing. This principle often made it challenging to hold companies accountable for illegal actions. Under the new Act, the identification principle is replaced with a new approach that simplifies and broadens corporate liability.
Specifically, the Act allows a company or unincorporated partnership to be found guilty of an offense if one of its „senior managers“ commits the offense while acting within the scope of the firm’s authority. This means that if a senior manager engages in certain economic crimes, the organization can be held accountable. Unlike the „failure to prevent fraud“ offense, these changes in corporate criminal liability are not limited to large organizations. They apply to a range of specified economic crimes, including bribery, money laundering, fraud, false accounting, fraudulent trading, and other related offenses. Additionally, various offenses under financial regulations and even non-financial crimes are covered.
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The Act also includes various miscellaneous changes to existing rules and Acts regarding – among others – the disqualification of directors, the information provided to the Company Registrar, the naming of an organization, or the identification of the identity of a person with significant control.