Navigating New Regulations to Combat Economic Crime

On 19 February 2024, the draft Economic Crime and Corporate Transparency Act 2023 (Financial Penalty) Regulations 2024 were published and laid before Parliament.

These draft regulations empower the Registrar of Companies to impose financial penalties on those found guilty of economic misconduct amounting to relevant offences under section 1132A of the Companies Act 2006, as amended by the ECCTA 2023.

It is anticipated that this will provide a more direct and potentially more expedient recourse to penalise economic crime than criminal prosecution, which has traditionally been relied upon.

The key features of the regulations for businesses to be aware of are as follows:

• Powers of the Registrar: the Registrar can now impose financial penalties where specific offences are committed. However, these penalties are not to overlap with ongoing criminal proceedings or post-conviction scenarios.
• Warning and penalty notices: the process for issuing these notices (including content and timelines) has now been clearly defined in the regulations.
• Enforcement: the Registrar has the authority to vary or revoke penalty notices (albeit up to a maximum of £10,000). This ensures that penalties can be adjusted to fairly reflect the severity of the offence.
• Appeals process: those accused of economic crimes are entitled to appeal against penalty notices within specific time limits. The intention is to strike a balance between enforcement and the right to challenge accusations.
• Recovery of penalties: if, after the expiry of the period in the penalty notice, no appeal is brought or if an appeal is concluded, the Registrar can recover the imposed financial penalties along with accrued interest.

By bolstering the mechanisms by which economic crime is penalised, the ECCTA 2023 and its associated regulations mark a significant shift towards enhancing corporate transparency and accountability to tackle economic misconduct.

For businesses, this means navigating a regulatory landscape where compliance is essential, not only to avoid exposure to legal difficulties but also to contribute to a more transparent market environment.

It is a critical time to adapt to emerging regulatory requirements and remain informed about the evolving legal context. There is a clear need to reevaluate compliance strategies, budget for increased costs for registration and filings, and ensure that all operations are aligned with the new regulatory framework and the now-heightened standards expected of corporate behaviour.