More than half of UK law firms are unprepared for the new ‘failure to prevent fraud’ offence coming into force under The Economic Crime and Corporate Transparency Act (ECCTA) in September, according to a new report from compliance training provider Skillcast.
The legal sector ranks among the least prepared industries, with major governance and transparency gaps flagged in the analysis of 2,000 UK companies. With enforcement just weeks away, the report warns firms are at serious risk of prosecution, reputational damage and regulatory scrutiny.
Skillcast analysed the publicly available Companies House data of 2,000 private limited companies in 10 sectors to assess a range of indicators linked to corporate governance risks, including control and ownership transparency, filing and compliance behaviour, company structure and activity, and director patterns.
The resulting information was used to create an overall ‘readiness score’ to highlight which industries may need to strengthen internal practices to meet the new standards – with the legal sector’s score of just 605 out of 1,200 making it the third least prepared industry.
The analysis found significant weaknesses in compliance, governance and transparency measures in the sector, with over half of the 200 law firms analysed either failing to name a person with significant control (PSC) or incorrectly naming a company as the PSC – breaching the transparency requirements of the ECCTA and opening the firms up to prosecution.
The legal sector was also identified as having the weakest governance stability, with firms averaging 19 directorship changes since incorporation – the highest turnover rate of any industry in the report. ‘This may indicate structural instability or frequent changes in corporate management, which could hinder compliance oversight’, Skillcast said.
The financial services industry was identified as the least prepared for compliance with the new requirements, scoring just 453.4 out of 1,200. The analysis found the best prepared industries to be technology, property and real estate, and construction.
Vivek Dodd, CEO at Skillcast, commented on the findings:
“The ECCTA places a clear legal obligation on large organisations to demonstrate they have reasonable procedures to prevent fraud, and that does not just mean having policies on paper. Businesses must be able to evidence undertaking detailed risk assessments, embedding fraud controls into daily operations, and ensuring visible, top-level commitment to compliance.
“The findings from our ECCTA Regulations Report should serve as a wake-up call for the legal sector. With less than three months to go until the new ‘failure to prevent fraud’ corporate offence requirements are enforced, many companies are operating in high-risk conditions that leave organisations exposed to serious criminal liability.
“While firms in some sectors like technology and construction are already taking clear steps to strengthen governance, the legal sector is falling dangerously behind. Without urgent action, these firms risk severe reputational damage and financial fallout, making strong governance, due diligence, and company-wide fraud prevention training business-critical.”
