How the Economic Crime and Corporate Transparency Act is Shaping Compliance
The Economic Crime and Corporate Transparency Act (ECCTA) marks one of the most significant reforms to the UK’s corporate regulatory framework in decades. Designed to tackle economic crime, improve transparency, and restore confidence in the integrity of the corporate landscape, it fundamentally reshapes how companies are formed, managed, and monitored. What was once understood as a largely administrative obligation has evolved into a key strategic governance issue, with direct implications for risk, reputation and corporate accountability.
ECCTA has transformed and enhanced the role of Companies House from a passive recipient of information into an active and authoritative gatekeeper, with the ability to query, reject and even remove inaccurate, misleading or suspicious filings. Accuracy is no longer assumed, it must be demonstrated. New identity verification requirements for directors and persons with significant control (PSCs) signal a policy shift which is intentionally unfavourable to companies that have historically relied on minimal scrutiny of corporation information. Companies House now plays the role of an active regulator, with the authority to share information with law enforcement agencies.
For directors, the implications are substantial. ECCTA reinforces existing board duties by increasing personal accountability for corporate filings, governance standards, verification and ongoing monitoring. Directors must ensure that information submitted is not only complete, but a clear reflection of the true ownership, control, and (lawful) purpose of the company. Failure to do so, such as by providing inaccurate or misleading information, is no longer a minor compliance issue, it is a potential enforcement trigger and can result in civil penalties, reputational damage, and even criminal liability.
ECCTA also has far-reaching consequences for shareholders and investors, particularly in an M&A context. Greater transparency around ownership and control not only improves market confidence, but also raises expectations, as governance weaknesses are now more visible to buyers and investors. Compliance deficiencies uncovered during due diligence may affect valuation, require additional warranties or indemnities, delay, or even halt deals altogether.
One of the most impactful developments of ECCTA is the introduction of the ‘failure to prevent fraud’ offence for large organisations, which reflects a broader regulatory expectation that businesses must proactively identify, assess, and mitigate risks of economic crime. This growing alignment between corporate governance and economic crime necessitates robust internal controls, staff training, risk assessments, reporting mechanisms, and documented compliance procedures. These practices are no longer optional, they are expected.
From a practical perspective, businesses should be reviewing their governance arrangements immediately. This includes confirming the accuracy of Companies House filings, assessing beneficial ownership structures, refreshing internal policies, and ensuring that advisers are engaged early where issues arise. Legal advisers play an increasingly important role in helping businesses navigate these heightened obligations, through enhanced disclosure, deeper due diligence, and embedded compliance. Early engagement is often the striking difference between manageable remediation and costly intervention.
Overall, ECCTA represents a fundamental shift of corporate compliance in the UK. Businesses that successfully move beyond reactive compliance and adopt a proactive, risk-focused approach to governance will be far better positioned to operate, grow and transact with confidence, while their counterparts are likely to face heightened, more frequent, and increasingly unforgiving regulatory scrutiny. Businesses that strengthen their governance structures, invest in training, and seek early legal advice, will not only be best placed to navigate the new regime confidently, but will also strengthen their reputation and trust with investors, counterparties and regulators alike.
