Note:
This guidance is advisory only. The guidance is not a substitute for reading the legislation or obtaining professional legal advice where appropriate or necessary.
Statutory guidance in relation to fraud prevention procedures is published by the Home Office at Economic Crime and Corporate Transparency Act 2023: Guidance to organisations on the offence of failure to prevent fraud (accessible version) - GOV.UK. All organisations should review the Home Office Guidance when establishing and reviewing their fraud prevention procedures.
See Section 1.4 of the Home Office Guidance for any conflict between alternative sources of guidance.
The Economic Crime and Corporate Transparency Act 2023 (ECCTA) aims to strengthen corporate governance and tackle economic crime in the UK.
It contains, among other things, a new corporate offence of failure to prevent fraud and the transformation of Companies House from a largely passive recipient of information to a much more active gatekeeper. The ECCTA has three key objectives:
- Prevent organised criminals, fraudsters, kleptocrats and terrorists from using companies and other corporate entities to abuse the UK’s open economy. This Act reforms the powers of the Registrar of Companies and the legal framework for limited partnerships in order to safeguard businesses, consumers and the UK’s national security.
- Strengthen the UK’s broader response to economic crime, in particular by giving law enforcement new powers to seize cryptoassets and enabling businesses in the financial sector to share information more effectively to prevent and detect economic crime.
- Support enterprise by enabling Companies House to deliver a better service for over four million UK companies, and improving the reliability of its data to inform business transactions and lending decisions across the economy.
The ECCTA received royal assent on 26 October 2023 and is effectively the second part of a legislative package to prevent the abuse of UK corporate structures and tackle economic crime. It follows on from the Economic Crime (Transparency and Enforcement) Act 2022, which received royal assent on 15 March 2022.
The passing of the ECCTA follows consultations in 2019 and 2020, a white paper containing the government’s final plans for reform published in February 2022 and the laying of the draft bill in September 2022.
Identification Doctrine
The ECCTA also amended the so-called ‘identification doctrine’ for economic crimes. It allows corporates or partnerships to be prosecuted if a senior manager commits economic crimes while acting in the scope of their authority. Thus the individual can be prosecuted for the economic crime, and the corporate can also be prosecuted.
Under section 196 of ECCTA, ‘if a senior manager of a body corporate or partnership (‘the organisation’) acting within the actual or apparent scope of their authority commits a relevant offence, the organisation is also guilty of this offence’.
A ‘senior manager’, in relation to a body corporate or partnership, refers to:
- an individual who plays a significant role in the making of decisions about how the whole or a substantial part of the activities of the body corporate or partnership are to be managed or organised
- or the actual managing or organising of the whole or a substantial part of those activities.
We recommend that NHS organisations familiarise themselves with these changes. Please refer to the Government fact-sheet on the ECCTA for further information.