The Economic Crime and Corporate Transparency Act (ECCTA), passed into law in October 2023, is set to reshape how organizations address corporate fraud and economic crime. While its primary focus is not charities, experts warn that the legislation will increase compliance costs and administrative burdens for UK-based nonprofits, especially smaller ones.
“This huge piece of legislation is not specifically aimed at charities, but they will undoubtedly face increased administrative costs and compliance burdens as a direct result of the new rules,” says Jonathan Brinsden, a partner at BDB Pitmans.
Brinsden will discuss these implications in greater detail at the upcoming ICAEW Charity Conference, where he will address key challenges facing nonprofit organizations.
Stricter rules spike costs for UK-based charities
One significant change under the ECCTA is the introduction of a corporate criminal offence of “failure to prevent fraud.” This new rule applies to large charitable companies meeting at least two criteria: more than 250 employees, over £36 million in turnover, or total assets exceeding £18 million.
“It follows the trend of other duties to avoid economic crime areas, including money laundering and bribery,” Brinsden explains. “Essentially, it creates a strict liability unless you’ve got policies and procedures in place that show you did everything reasonably possible to mitigate those risks.”
While most charities fall below the threshold for this offence, compliance concerns extend beyond fraud prevention. Companies House’s reform, for example, will give it powers to scrutinize, verify, and manage data more rigorously.
“There’s going to be much more vigor and rigor in managing company information,” Brinsden adds. “Mandatory digital tagging of accounts, as mandated by Companies House, may disproportionately impact charitable companies.”
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The Act also mandates ID verification for directors, company officers, and anyone filing information with Companies House. This change introduces a new layer of complexity, particularly for smaller charities that operate on tight budgets.
According to Brinsden, smaller charities must allocate more ongoing resources for administrative expenses. He warns that increased fines will be imposed for late filings and inaccurate or outdated company information; despite these challenges, experts see potential benefits in the long term.Â
Tightening regulations and enhancing public trust could make the registry more robust and transparent. Brinsden advises organizations to conduct thorough audits of their company information to ensure its accuracy and completeness.
 Organizations should also familiarize themselves with Companies House’s requirements to ensure compliance. He emphasizes that charities are already well-versed in reporting requirements, making them better positioned to adapt.
He notes that charities generally maintain good compliance standards but shouldn’t become complacent about these changes. While the transition may feel burdensome, Brinsden believes the effort will be worthwhile.Â
Though initially challenging, he maintains that implementing compliance measures will become a natural part of organizational operations, yielding significant benefits.