The threat of economic crime

CILEx Regulation highlights recent changes in economic crime legislation and how to meet your obligations under it

Economic crime, in particular money laundering, continues to pose a substantial threat and significant challenge in the UK. Estimates suggest that up to £90bn was laundered through the country in 2024, making the UK the second-most exploited economy for money laundering after the USA. The UK government has introduced measures to combat this issue, reflecting a robust approach to tackling economic crime.

Reforms under the Economic Crime and Corporate Transparency Act 2023 have been implemented to promote a more secure and transparent business environment in the UK and to tackle the misuse of UK business and financial systems for criminal activities.

The reforms strengthen the role of Companies House, bringing enhanced powers including stricter checks and the ability to query and reject any information it suspects to be incorrect or fraudulent.

Key changes under the Act

The changes aim to make it more difficult for criminals to exploit corporate entities, including new measures to improve the verification process for company directors and people with ‘significant control.’ 

It also requires third-party agents to register their business and verify their identity, allowing Companies House to act against agents not acting ‘with a lawful purpose’ and thus help protect lawful businesses and the public.

These enhanced powers and the requirement for more ‘accurate and reliable’ information will allow Companies House to work more effectively with regulators and supervisory bodies. Enhanced information around companies and their ownership will strengthen its role in preventing the misuse of corporate structures. The measures are supported by new enforcement capabilities, including the authority to impose civil financial penalties, making it easier to enforce compliance without lengthy court proceedings.

Your role in economic crime prevention

Individuals and firms should help in the active detection and prevention of economic crimes by ensuring regulatory compliance and implementing stricter controls. Continuous vigilance, collaboration and adaptation are necessary to combat evolving criminal tactics.

“Continuous vigilance, collaboration and adaptation are necessary to combat evolving criminal tactics” 

To comply with the Economic Crime and Corporate Transparency Act 2023 and ensure regulatory compliance, businesses should focus on the following key areas:

  • Customer due diligence

Identity verification: Implement robust identity verification processes for company directors, beneficial owners, and Persons with Significant Control, especially in complex ownership structures. Continuously monitor transactions and update customer information as necessary.

  • Information sharing

Utilise the new provisions for sharing customer information to prevent, detect and investigate economic crime. This includes direct and indirect sharing with other regulated firms. When sharing information, it is important to comply with the UK General Data Protection Regulation (GDPR).

  • Corporate transparency

Maintain transparency in company accounts, names, and ownership structures. This includes adhering to new requirements for filing and updating information with Companies House.

  • AML compliance

It is important to regularly assess business risks, paying particular attention to factors such as transactions with high-risk countries or non-face-to-face transactions.

Developing robust AML policies is essential and should include regular employee training and maintaining detailed records of customer due diligence, transactions and risk assessments (for at least five years). Regular reporting and audits also help demonstrate compliance with AML regulations.

CILEx Regulation (CRL) and AML supervision

Our annual Sectoral Risk Assessment of regulated firms ensures that potential risks are identified, so that CRL, as a supervisory body, can target its supervision to address the risks and advise the supervised community how to mitigate these.

We also monitor the activities of our wider regulated community to identify whether their activities bring them within the scope of the Money Laundering Regulations 2017.

The assessment also informs firms of the risks they should consider and mitigations they can put in place when they carry out their practice-wide risk assessments (as required by regulation 18 of the 2017 regulations). 

In addition, our AML Supervision Report details CRL’s responsibilities in supervising those we regulate for anti-money laundering activities and the duty to promote the economic crime objective to a much wider audience and how CRL has discharged those responsibilities.

We are working to ensure that law firms and practising individuals comply with UK money laundering legislation in order to safeguard themselves and consumers against financial crimes, as well as contributing to a safer UK financial system.

Additional CRL resources 

 

 

 

 

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