The recently issued guidance on the Economic Crime and Corporate Transparency Act 2023 is expected to significantly boost demand for legal expertise in corporate crime, particularly among City law firms. With complex compliance requirements and an expansion of corporate criminal liability, businesses will increasingly turn to experienced legal teams for help in navigating these heightened obligations.
Quinton Newcomb, Head of Commercial Crime at Fieldfisher, remarked, “This Act marks a turning point in corporate accountability within the UK, creating both a challenge and a clear pathway for companies to bolster their compliance frameworks.” He noted that the law’s newly introduced “failure to prevent” offence for fraud committed by employees or associated third parties is a critical aspect that companies will need to address urgently.
The Act broadens its scope beyond fraud to include various economic crimes like sanctions evasion, money laundering, bribery, and corruption. It also covers certain financial services offences, such as benchmark manipulation, making it essential for companies to review and update their risk assessments and compliance measures comprehensively. For instance, businesses must now prepare to prevent fraud as well as false accounting and misleading statements by directors, all classified as “fraud” under the Act.
With enforcement set for September 2025, organisations have less than a year to carry out thorough fraud risk assessments and adapt compliance frameworks. Many companies were awaiting final guidance before taking decisive action, but now that the guidelines are available, they must align their policies with the new standards without delay. According to Newcomb, “City law firms with strong corporate crime practices are already observing a rise in demand as businesses seek to prepare for enforcement.”
The Act has major implications for overseas businesses with connections to the UK. Any fraud involving a UK nexus, whether it affects UK-based victims or involves actions taking place on UK soil, could make overseas companies liable. Newcomb advises that “overseas companies with a UK footprint must approach this guidance with particular diligence to mitigate significant risks.”
Large organisations, their subsidiaries, and even smaller entities tied to larger corporate parents may all face legal consequences if fraud benefits the subsidiary. Non-compliance risks are steep, with fines potentially reaching hundreds of millions of pounds, comparable to penalties levied for failure to prevent bribery.
City law firms’ corporate crime teams are expected to be instrumental in assisting clients with risk assessments, compliance upgrades, and comprehensive planning to meet the requirements of this far-reaching legislation.