Understanding the Economic Crime and Corporate Transparency Act

Overview of the ECCTA's Impact on Corporate Liability

The Economic Crime and Corporate Transparency Act 2023, while less publicised than its name might suggest, is a crucial piece of legislation broadening the scope of corporate criminal liability. Its primary aim is to bolster the UK's capabilities in detecting and sanctioning significant economic crimes, including the estimated £100 billion laundered annually through the UK.

Corporate Responsibilities under ECCTA

ECCTA targets corporate entities, mandating them to implement stringent compliance and fraud prevention procedures. The legislation facilitates easier prosecution of companies for various corporate offences, though a defence remains for organisations that can prove they had reasonable prevention procedures in place.

Expanded Investigative Powers under ECCTA

Before ECCTA, investigative bodies lacked the authority to obtain information from companies or individuals in fraud investigations. However, since January 15, 2024, these powers have expanded, enabling investigators to acquire relevant material and information for operations, including fraud. The Serious Fraud Office has indicated its intention to use these powers for obtaining financial data to restrain assets preemptively.

Section 196: Liability of Senior Managers

Section 196, effective December 2023, removes the necessity for prosecutors to prove a person was the 'directing mind and will' of a company. Instead, they only need to demonstrate the individual was a 'senior manager.' This change raises the possibility of prosecuting a corporate body even without a conviction of a 'senior manager', known as an 'empty chair prosecution.'

Section 199: Failure to Prevent Fraud

Section 199 holds 'large organisations' criminally liable if they fail to prevent associated individuals from committing fraud, benefiting either the corporate body or a client. A 'large organisation' is defined by specific criteria regarding employee numbers, turnover, and balance sheet total.

Crypto asset Provisions in ECCTA

ECCTA introduces new powers for investigators to freeze, seize, and forfeit cryptocurrencies linked to illegal activities. These powers aim to facilitate quicker recovery of crypto assets connected to crimes like money laundering or fraud, supplementing existing PoCA legislation.

Key Proposals of ECCTA in Crypto asset Management

1. Law enforcement agencies can control and recover crypto assets found during searches.

2. Direct seizure of crypto assets from exchanges and wallet providers.

3. Conversion of seized or frozen crypto assets into cash to preserve value.

4. Destruction of certain crypto assets, particularly those used on dark web platforms.

5. Release of crypto assets or equivalent funds to victims of crimes like fraud.

Legislative Goals of ECCTA

The Act's intentions include deterring foreign criminals from using the UK for money laundering, enhancing government response to sanctions, and strengthening the unexplained wealth order regime in the UK.

By James O’Hara
+44 (0)7523 272 226
james.ohara@ilaw.co.uk

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