The Economic Crime and Corporate Transparency Bill will be having its Second Reading in the House of Lords today (8 February). In advance of this reading, ICAEW reached out to sitting Lords to draw attention to two areas where the government can take further action to strengthen Companies House and tackle economic crime.

The Bill outlines reforms to Companies House, as well as other provisions to prevent the abuse of limited partnerships. It will introduce additional powers to seize and recover suspected criminal cryptoassets. Reforms elsewhere aim to give businesses more confidence in sharing information to tackle economic crimes such as money laundering, and law enforcement will be given new intelligence gathering powers.

ICAEW has broadly welcomed the measures outlined in the Bill, in particular the proposed reforms to Companies House, which are aimed at preventing the manipulation and exploitation of the UK financial system.

“However, the ability to implement them will be dependent on a sufficient level of resource to ensure that these new powers can be utilised effectively,’ ICAEW outlines in its briefing to the Lords. “We have long supported reforms to Companies House and the need for firms to provide clear, accurate information, and we note that ICAEW members will be at the forefront of delivering these changes, working closely with Companies House on the effective implementation of the reforms.”

ICAEW worked cross-party with MPs during the Bill’s passage through the House of Commons in order to strengthen the role of chartered accountants as effective gatekeepers to the UK’s financial markets. It proposed amendments to expand indirect disclosure of information provisions to include large audit, insolvency accountancy and tax firms, to ensure that firms could quickly identify and reduce the likelihood of illicit transactions taking place. These amendments were accepted by government.

ICAEW is now emphasising two points to the House of Lords:

Register of Overseas Entities

“ICAEW members are concerned that the liability around an offence is particularly strict, indicating that a firm would be liable for a false verification even if the firm was unaware the information was false at the time of verification,” states the briefing. “Therefore ICAEW, as well as other member bodies, is advising firms to take an extremely cautious approach to offering verification services.”

Notification of change in auditor

There are currently no requirements for companies to file a notification of an appointment or reappointment of an auditor with Companies House. The Bill should introduce a statutory requirement to report this information within 10 working days. 

ICAEW notes: “This would enable firms to monitor their own audit clients and identify fraudulent appointments before accounts are filed and potentially relied on by stakeholders, as well as help regulators to undertake proactive engagement with their firms that may – possibly unwittingly – take on challenging, or unsuitable, audits.”

During the Bill’s Report Stage in the House of Commons, Minister for Security the Rt Hon Tom Tugendhat MP announced that the government looked to make an amendment to the Economic Crime and Corporate Transparency Bill during its passage through the House of Lords that introduced corporate ‘failure to prevent’ offences. This was a response to work by the Law Commission and recommendations from Sir Robert Buckland MP.

ICAEW is liaising with government officials to get a strong understanding of the intended specific policy outcomes through these amendments. It is engaging with members to support the design and delivery of workable reforms.