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Economic Crime and Corporate Transparency Act 2023 definition and meaning | AML glossary

What is the Economic Crime and Transparency Act?

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Economic Crime and Transparency Act (UK) definition: What it means in AML compliance.

The Economic Crime and Transparency Act 2023 is a key piece of UK legislation aimed at strengthening measures against financial crime and enhancing transparency in business operations. The Act plays a central role in improving the UK’s ability to detect, prevent, and punish economic crime, including money laundering, fraud, and corruption. It provides regulators and law enforcement agencies with new powers to investigate suspicious activity, ensure accurate company reporting, and safeguard the financial system.

Under the Economic Crime and Transparency Act, organisations are legally required to implement AML compliance measures, which typically include:

  • Customer Due Diligence (CDD): Verifying the identity of clients to ensure they are not involved in illegal activity.

  • Transaction monitoring: Identifying and reporting suspicious financial transactions.

  • Record keeping: Maintaining accurate records of client information and transactions for regulatory review.

  • Training and awareness: Ensuring staff are knowledgeable about AML regulations and can recognise potential risks.

The Act also reinforces the importance of transparency in business ownership. Companies must maintain accurate registers of beneficial owners: the individuals who ultimately control or benefit from a company’s assets. This reduces the risk of illicit funds being hidden behind opaque corporate structures.

The Economic Crime and Transparency Act ensures that UK businesses operate openly and responsibly, while AML compliance helps prevent illegal financial activity and protects both companies and consumers.

Why the Economic Crime and Transparency Act matters for compliance teams.

Compliance with the Economic Crime and Transparency Act 2023 is essential for all businesses operating in the UK, particularly those in the financial sector, professional services, and any industry handling significant transactions or customer funds. The Act strengthens the UK’s regulatory framework for tackling economic crime, including money laundering, fraud, tax evasion, and corruption, making adherence to its provisions not just a legal requirement but a critical part of responsible business practice.

Failing to meet AML (Anti-Money Laundering) obligations under the Act can have serious consequences:

  • Financial penalties: Regulators have the power to impose substantial fines on companies that fail to implement adequate AML measures. These fines can run into millions of pounds depending on the severity of non-compliance.

  • Reputational damage: Even minor breaches of AML obligations can harm a company’s reputation with clients, partners, and investors. Loss of trust can lead to a decline in business opportunities and long-term damage to brand credibility.

  • Criminal liability: In severe cases, directors or senior management may face criminal prosecution if negligence or complicity in financial crime is proven. This underscores the personal responsibility leaders have under the Act.

  • Operational impact: Non-compliance can lead to regulatory investigations, freezing of assets, or restrictions on trading activities, which can disrupt normal business operations.

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