In October 2023, the UK implemented the Economic Crime and Corporate Transparency Act (ECCTA), setting stringent identity verification (IDV) mandates for shareholders, directors, and persons of significant control (PSCs). This legislation, crafted to enhance the integrity of company data at Companies House, represents a significant pivot towards more rigorous corporate governance.
FullCircl, a customer lifecycle intelligence platform, recently delved into the costs companies will soon face for the identity verification of shareholders.
Financial organizations, previously acquainted with the contours of ECCTA and Companies House reforms, are now confronting the financial realities of these regulations, it said. The IDV requirement is notably the most burdensome financially, consuming about 75% of the total estimated costs linked to the reform package. The Department of Business and Trade’s analysis underscores the scale of this financial impact, projecting a net annual direct cost to businesses close to £154m.
In its first year, the expense of adapting shareholder records for compliance is pegged at an overwhelming £787m, with subsequent annual costs around £89m.
At the core of the ECCTA is an expansion of Companies House’s role from a passive repository to an active overseer, empowered to verify the identities of company directors and eliminate fraudulent entities. This transition not only increases the administrative load but also the financial burden on companies, which must now furnish detailed shareholder information beyond just names and share percentages.
The ongoing expenses include collecting and submitting extensive shareholder data, costing approximately £18 per company each year. Furthermore, shareholders themselves must either undergo identity verification or validate existing verifications, a process estimated to cost between £54m and £130m for existing shareholders and between £6m and £21m annually for new shareholders.
However, there lies a potential to mitigate these costs. A significant number of corporate risk and compliance professionals—65%—suggest that automating manual IDV processes could substantially reduce compliance costs and complexity.
W2 by FullCircl offers a comprehensive IDV platform that leverages advanced technology to streamline compliance processes, ensuring financial institutions can meet ECCTA requirements more efficiently. Their services include a plethora of checks, from ID and age verification to PEPs and sanctions screening, thus providing a robust framework to support compliance with the new regulatory landscape.
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