Millions of directors are not fully prepared for identity verification rules, with just 50 working days to go
With 50 working days until the ECCTA legislation deadline that makes identity verification a compulsory part of incorporation and new appointments for new directors and PSCs, and begins the 12-month transition phase to require more than 7 million existing directors and PSCs to verify their identity, the UK’s directors have their work cut out for them.
As we hurtle towards the deadline, only 58% of directors feel fully prepared to meet the identity verification requirements, 33% are only ‘somewhat’ prepared, and 9% are entirely unprepared. This raises concerns for many businesses, who could face significant consequences for failing to meet deadlines. With repercussions including – but not limited to – unlimited fines and criminal penalties, many are up against it to complete verification in time.
Concerningly, preparedness among small businesses is strikingly low. While bigger firms tend to have more robust and defined governance policies in place, compliance for small businesses can place a burden on directors who are juggling multiple duties. More than a quarter (28%) of businesses with nine or fewer employees are completely unprepared, which is also true for 25% of companies with between 35-49 employees, and 22% of those with between 10-24 employees. This indicates that smaller firms are struggling to keep up with governance requirements, and could be exposed to punishments which would take a severe toll on their bottom lines.
Chelsea Chivers, head of UK Entity Management, Law Debenture, commented: “ID verification is a simple, yet crucial, element of compliance under the new ECCTA legislation – yet there is clear evidence that many businesses are facing a race against time to meet the deadline.
“Good governance is not a nice to have – it’s an absolute necessity. The penalties for failing to comply cannot be understated, yet there appears to be a sense of inertia amongst many businesses. Directors of small businesses in particular, who are juggling many responsibilities already, seem to be struggling to untangle a web of compliance which is becoming increasingly difficult and complex to navigate. As businesses are inundated with ever-growing lists of responsibilities, support is on hand via specialist firms who can guide companies and directors through the various facets of new legislation; ensuring governance is in check and time is freed up to allow directors to focus on the day-to-day aspects of their roles.”