In this episode of Smart Sessions, Oliver Telfor and Joe Morris break down the ECCTA bill and its far-reaching implications.
They discuss what the new legislation means for businesses, focusing on the new powers given to Companies House and the critical requirement for director ID verification.
Joe explains why compliance should now be viewed as an enabler rather than a blocker, and how SmartSearch’s comprehensive solutions can help companies reduce the operational burden of staying compliant and preventing financial crime.
Oliver Telfor: Hi. Welcome to another episode of SmartSessions, a podcast by SmartSearch where we talk about all things AML, RegTech, and everything that interacts with our industry. Today we're going to be talking about ECCTA again, third episode on this just because of the complexity of the topic. Joining me today is Joe Morris. Joe, you want to introduce yourself when we get into the show?
Joe Morris: Sure, yeah. Good, good to be speaking to you again. Yeah. So my name's Joe. I'm the Sales Director here at SmartSearch. I've spent the last 11 years, that seems like quite a long time when I say it out loud, 11 years in the AML and KYC space, across a couple of different companies. This is my second time around with SmartSearch. But this this this topic I'm, I'm super passionate about. Our customers are super passionate about, so I'm looking forward to hopefully sharing a few nuggets with you today. Okay.
Oliver Telfor: So we've, we've spoke about it quite a lot on this podcast, you and I have spoke about it already. But can we just sort of reiterate the message in terms of what ECCTA is, what it sort of means, and actually why Companies House have brought it in?
Joe Morris: Sure. Yeah. So I think in, in three points, what, what we can take from the bill is it gives Companies House more, role and responsibility when we talk about financial crime. It's a bit of the Wild West at the moment and people can set companies with very little resistance, and it turns out those directors don't exist or those addresses don't exist. So we're hopeful that this bill gives Companies House more powers to clamp down on that. And we're also hopeful, and the second point is that it's going to allow us to share information about anti-money laundering more freely. It's a bit of a black box at the moment, so we're very hopeful that this can encourage cross-department and cross-company information sharing to reduce the impact of financial crime. And I think from, from a cryptocurrency perspective, it gives companies a lot more power to go and seize, crypto assets that have been illegally obtained. It's a huge change. We know crypto for a long period of time has had question marks over it about how safe it is, what processes to have in place. But we're very, very hopeful that this bill will bring a focus on it, and we're already seeing more, more inquiries come through from compliance conscious crypto companies.
Oliver Telfor: Okay. And then one of the, one of the things that's coming in that's sort of like new to this as well is this prevention of fraud. What does that entail? Whether you're a large company or small company and, and sort of what are your obligations now?
Joe Morris: Yeah, that, that's, that's a great point actually. And at the moment, it's specifically focused on large corporates. And it, and the ask is that large corporates need to be very, very aware of their ability to prevent fraudulent activities happening. Now, we imagine that this is just the start and, and it won't be much longer until all corporates are focusing on the, the ability to prevent fraud. Now, fraud comes in many forms, and we won't get into all of them today, but one of them being, digital identity theft. This is one of the ways that we're introducing the director ID checks, not only just to say you've collected a document, but to say that that's a real and authentic piece and not a synthetic identity.
Oliver Telfor: And I think one of the things we spoke about last time was all about business operations and how, you know, SmartSearch helps with operations not just from an AML perspective, but from a, from a, making sure that everything you're doing is in line with compliance. Whether or not you need to be in on ECCTA or not, is kind of irrelevant here. Why is it good practice to have these processes in place, and how does it sort of protect you from 2026 and '27 onwards?
Joe Morris: Well, I think we've very briefly touched on this in the last podcast, but the, the shift that we've seen in people's mindsets is now viewing compliance as an enabler and not a blocker. It can speed up your time to onboard customers, it can improve your customer satisfaction, it can improve your internal processes, and therefore your retention of your staff. So, I think we're at a position now where we can move away from this is a tick in the box to a huge part of the world's push to combat financial crime whilst being a benefit to your company. So if that vision's too far away, think about what it can mean for you individually in your company and improving the way that you go about your processes.
Oliver Telfor: Perfect. I mean, something that isn't too far away is, is is a big change that's coming on the 18th of November. From an ECCTA perspective, what is that change? How does it affect companies?
Joe Morris: Sure. So, so in its simplest form, the requirement is that you now have to verify the IDs that you collect from your directors. Before that wasn't a requirement. You didn't have to do that when you was filing your, your, your accounts or you was working on behalf of the company. You didn't need to collect their IDs. Now you do. So a lot of companies are contacting us, asking us what that means to them, how they can go about it, how they can reduce the operational burden that this might present to them. But then coupled onto that is the, the failure to prevent fraud. So it's, it's not good enough, unfortunately, anymore just to say you've collected a document, but how do you know that's not been stolen? Or how do you know that's not a deepfake, sounds very James Bond, but that's a world that we're living. Or how do you know that that's not a stolen identity that's been purchased in the black market? Using cryptocurrencies. These are all the risks that companies need to start to consider and need to put a process in place to address.
Oliver Telfor: So I guess from, from then, our perspective on that, on the side of that, from SmartSearch's point of view, can we sort of talk about like, you know, how we can sort of help companies and then in what way we do it, and then from a, from a, from a SmartSearch perspective, why SmartSearch over another provider?
Joe Morris: Sure. Yeah. I think from our perspective, we, we bundle a lot of these processes together. An element that we haven't spoken about yet is sanction screening. One of the big parts of the bill is to understand if anybody's manipulating the sanction process and if any of these crypto assets are being obtained or being sold through sanctioned individuals or entities. So now we've got two elements of it. So we've got an element where we have to collect the director's ID and verify that that's a real and authentic piece. But how can we go about verifying if they're on a sanction list or not? Again, it seems really far fetched. You think, oh, I know my customers, I know they're not on a sanction list, but they could be associated with someone who is. So one of the core benefits of SmartSearch is that we couple this process in the most automated manner possible. In up to 90% of your cases, we're going to be able to get the doc ID through and limit the amount of false positives that you're seeing from your sanction screening. Just using the HMT list, your regulator won't deem that as a reasonable process to prevent fraud and financial crime, they're looking for you to use multiple lists, check in multiple times to make sure that that individual's not on a list.
Oliver Telfor: That's fine. I mean, I think from, from our perspective, we have, you know, we have SmartDoc, we have source of funds, which is sort of coming in. We, you know, we're working on NFC, which is also coming in as well. And we have like a whole suite of products that isn't just one particular thing. It's actually covers quite a lot. Just to kind of close off on sort of like two-pronged question, we've covered what it is, but like from a Company's House perspective, what it really means to them and what these punishments can be. But also from a, from a client perspective, why should they feel like us as a provider give them the trust that they are going to be compliant? And they're not going to be, as you said, working with customers. They think they know but actually do they actually know them?
Joe Morris: Yeah. And I think one of the words that you mentioned there is trust. And that's something that, we're here quite a lot. We work with one in three of the top 100 accountants in the UK. We have a trusted brand and a trusted presence from regulators that this is one of the best ways that you can go about your checks. We have testimonials that are worth a read through to give you the confidence that this solution can not only keep you watertight from your compliance perspective, but also improve your processes. The, the bill should encourage every company to take a step back and to think about how they're going to service this requirement. And I would strongly suggest, and this is what a lot of our clients are doing, carrying out a bit of an internal audit. If we implement the, the need to collect director's IDs, how are we going, how are we going about it? Who's involved, what do they need to do? A solution like SmartSearch can reduce the human touch points to the absolute minimum, therefore saving you time, saving you energy, saving you resource to put it back into the things that you're really good at. Let us worry about the ECCTA bill, and then we'll let you worry about your day-to-day business.
Oliver Telfor: Well, Joe, that was a really good overview as always. And if you want to know more about ECCTA and sort of what that means for your business, and it is a changing topic, so it's not something that is just going to stick and stay. There's actually loss of evolution with that. Make sure you head to smartsearch.com and you can find about all of our solutions and how we can help you in your business stay compliant and hit more AML regulations and make sure you are compliant within them from a Company's House perspective. Make sure you check out their website 'cause they do post a lot of updates about ECCTA and things that you need to know about. And until next time, see you later.