Economic Crime and Corporate Transparency Act 2023: guidance on recent implementation updates

We have previously written about the Economic Crime and Corporate Transparency Act 2023 (ECCTA), a key piece of legislation forming part of the package of reforms aimed at preventing the abuse of UK corporate structures and tackling economic crime. In our first publication we explained the key changes that will be introduced when the provisions in ECCTA are brought into force (there will be a staggered implementation over an extended period of time). In March this year, the first set of changes were introduced (see our briefing here).

This briefing collates three further recent ECCTA developments.

• The Department for Business and Trade published a progress report on the implementation and operation of ECCTA and the timing of further ECCTA measures coming into force.
• Companies House published draft rules for directors, persons with significant control (PSCs) and others needing to verify their identity under changes that will be implemented in due course.
• The Government published draft regulations including (i) how individuals will be able to verify their identity and (ii) a proposal to extend the ability for individuals to protect their usual residential address from view at Companies House.
  
  

We discuss these developments in more detail below.    

Comment

Publication of these documents indicates that the implementation of the ID verification regime remains a priority. While these updates don’t bring any additional ECCTA provisions into force at this stage, they provide a helpful indication of the direction of travel and some guidance on what the ID verification regime is likely to look like when it is introduced. However, these provisions remain in draft and are subject to the parliamentary timetable which may now be interrupted by the upcoming election.   

Further information on the specific developments is set out below.

Department for Business and Trade progress report (the Report)

The Report covers Parts 1 to 3 of ECCTA which implement reforms to company law and make additional changes to legislation relating to the Register of Overseas Entities (ROE). It reiterates ECCTA’s objectives to prevent companies from carrying out unlawful activities, ensure the integrity of information held on the register at Companies House and reduce fraud and money laundering whilst sustaining economic growth.

The Report anticipates that more than 50 pieces of secondary legislation are required to bring the provisions of ECCTA into force. So far regulations have been made to deal with matters such as rectifying the register where information is incorrect and giving the Registrar additional powers to annotate and remove material from the register. As of 1 April 2024, Companies House has already used some of these new powers to remove 4,000 registered office addresses, 2,100 officer addresses and 2,300 PSC addresses, and it has redacted 3,600 incorporation documents that use personal data without consent.

Much more is needed though, and since the Report was released we have seen the next tranche of draft regulations which include the process for identity verification (IDV) and the operational framework for Authorised Corporate Service Providers (ACSPs). Further regulations will be published in the coming months which align with the operational transformation of Companies House but, as the Report acknowledges, the existing systems and technology infrastructure will need to be much improved to be able to implement certain of the ECCTA provisions. Companies House is currently working to develop additional capabilities and capacity in order to modernise and automate its existing systems and implement new digital platforms.

At time of writing, the Report promises to publish a full implementation timetable shortly. It sets out a rough timeframe that ACSPs will be able to start registering in winter 2024, IDV will be introduced in the first half of 2025, and Limited Partnership reforms will be rolled-out in 2026. You can read the Progress Report here.

Companies House draft rules on PSCs and identity verification (Draft Rules)

As set out in our first publication, certain individuals will need to verify their identity either directly with Companies House or via an ACSP. Whilst the requirements are not yet in force (as above, the systems and technology at Companies House need to be upgraded first), the Draft Rules set out the information an individual will need to provide to complete the IDV process. 

Applicants will need to submit contact information (email address and current residential address), personal information and certain types of evidence when applying for verification of their identity. The evidence will typically include documents such as biometric passports but exact requirements will depend on the citizenship of the individual so a combination of documents may be needed. 

You can read the Draft Rules here.

Government Draft Regulations on Identity Verification (Draft Regulations)

The Registrar (Identity Verification and Authorised Corporate Service Providers) Regulations 2024 (the IDV and ACSP Regs) contain provisions relating to the verification or re-verification of an individual’s identity. Individuals will need to provide personal information and supporting documentary evidence (as set out in the Draft Rules) and, once verified, will be assigned a “unique identifier”. The IDV and ACSP Regs also offer more information about the role of the ACSP:

• Detailing its record-keeping obligations (records must be kept for seven years irrespective of whether or not the ACSP ultimately verifies an individual’s identity),
• Setting out information sharing obligations, and
• Providing a framework for suspending and terminating an ACSP’s status.
  
  

The draft Companies and Limited Liability Partnerships (Protection and Disclosure of Information and consequential Amendments) Regulations 2024 extend the circumstances in which individuals can apply to protect their usual residential address from public disclosure. These circumstances include instances where the residential address has previously been used as a registered office address. If made, these Regulations will come into force on 30 September 2024.

The draft Information Sharing (Disclosure by the Registrar) Regulations 2024 provide a mechanism for when Companies House can share targeted information with insolvency practitioners and those involved in insolvency proceedings. 

Conclusion

We will continue to monitor developments and provide further updates so that you can consider how any new changes might affect you and your business. In the meantime, you may wish to conduct an internal audit to establish who will need to complete the IDV process when it does come into force.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, June 2024