MHA | The Economic Crime and Corporate Transparency Act
Not for Profit e News April 2024 2

The Economic Crime and Corporate Transparency Act

· Posted on: April 12th 2024 · read

The Economic Crime and Corporate Transparency Act (ECCTA) has introduced significant reforms to address economic crime, prevent misuse of UK corporate structures, and enhance corporate transparency and oversight. Here is what charities should be aware of: 

1) Applicability

The provisions of ECCTA apply to charities which fall under the following categories:

  • Charities formed as a company limited by guarantee or company limited by shares
  • Charities with a trading subsidiary established as a company limited by shares
  • Charities with a corporate trustee

Note that certain parts of the Act only apply to large companies.

2) Expanded Powers of the Registrar

The Registrar of Companies (Companies House) now plays a more regulatory role, beyond being a mere registrar of information, as new objectives are introduced to improve the accuracy and integrity of register information. These objectives include safeguarding against misleading or unlawful activity related to corporate structures.

3) Offence of Failure to Prevent Fraud

ECCTA imposes a legal duty on organisations to prevent fraud and emphasises the importance of prevention measures. Charities must demonstrate due diligence in preventing fraud to comply with the law.

The following steps can be taken now to prepare for the changes being introduced by the ECCTA:

  1. Review Your Corporate Structure – Assess whether your charity falls into any of the categories covered by ECCTA, as described above.
  2. Update Internal Policies and Procedures – Review and update your charity’s internal policies related to financial transparency, anti-fraud measures, and money laundering prevention.
  3. Enhance Due Diligence Processes – Strengthen due diligence processes when dealing with financial transactions and be vigilant about identifying and preventing potential economic crimes.
  4. Train Staff and Trustees – Educate your charity’s staff, trustees, and key personnel about the changes introduced by ECCTA and provide training on fraud prevention, reporting obligations, and compliance.

Compliance with ECCTA is crucial for maintaining transparency, preventing economic crime, and ensuring the effective governance of your charity.

See last month’s edition of eNews, in which we noted the changes that ECCTA were bringing to Companies House.

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This insight was previously published in our Not for Profit April 2024 eNews

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