The UK's free trade agreement with India marks a new stage of economic collaboration, making the UK a desirable country for Indian investments. The deal is expected to take effect in April 2026, but requires ratification. This trade agreement supports a bilateral trade relationship worth approximately GBP 47.2 billion (goods and services).
Increasing geopolitical instability and more stringent enforcement are increasing risks in cross-border trade. Indian operators that expand into the UK have significant compliance requirements under the Economic Crime and Corporate Transparency Act 2023 (UK ECCTA). The UK ECCTA sets out many regulatory obligations applicable both to UK-domiciled firms and Indian firms that have business exposure to the UK.
Indian firms frequently address global risk management through the use of anti-bribery frameworks; however, the UK ECCTA has changed this by shifting the focus from preventing bribery to preventing fraud through the introduction of the new offence of failure to prevent fraud. Under this new statute, the expectation is that all businesses will be able to demonstrate that they have established adequate internal controls with respect to discharging their obligations under the UK ECCTA. This applies regardless of where a particular business's employee or third-party intermediary is based.
Under the UK ECCTA, businesses will be held criminally liable due to the fraudulent conduct of their respective employees or through the fraudulent conduct of those people acting on behalf of the business, if such conduct benefited the business, effective September 1, 2025.
Liability may exist without senior management knowing or participating in the act of non-compliance. As a result, the area of compliance is enlarged to include risks outside of the area of bribery, for instance, sales fraud, manipulation of revenue, procurement fraud, invoice irregularities, expense reporting fraud, false representation of facts, and improper use of incentive programmes. Many of those types of acts have already been addressed by Indian law, but the introduction of a UK law greatly increases the exposure for all global businesses operating in foreign jurisdictions.
Who does this apply to?
The crime extends to large corporations that meet certain criteria in terms of size - GBP 36 million or greater in annual turnover, GBP 18 million or greater in assets, and/or 250 or more employees. It is also extremely important to note that companies do not need physical presence in the UK to fall within the scope of the UK law if there is some UK connection to the company, such as customers, transactions or other financial impacts that are related to the country.
For Indian businesses, this would apply to businesses that have a UK subsidiary, businesses that export goods or services to UK companies, companies that provide technology or services to UK-based companies remotely, and any other company doing business with agents/or intermediaries that are based in the UK.
Compliance or Reasonable Procedures
A business can avoid liability by demonstrating that there were "reasonable procedures" in place to prevent a non-compliance or fraudulent act. This puts the emphasis of compliance from one of intent to preparedness, meaning that companies must demonstrate that adequate controls were implemented and operated effectively.
Companies need to go beyond generic compliance and implement targeted frameworks, including fraud risk assessment, internal audit, whistleblower mechanisms, due diligence third-party protocol and a strong investigative process to meet. In addition to increased auditor scrutiny, regulatory scrutiny is also likely to increase, which will put more pressure on their governance and internal controls.
How to prepare for the change
Indian companies should assess the compliance regime at their group level, particularly those operations that are connected with the UK as part of a larger entity. A fraud risk assessment of key business processes (Revenue, Procurement, and Payment) should be done on all levels.
Additionally, the Act has implications for mergers and acquisitions as well, as due diligence and post-acquisition integration will be crucial in identifying and managing the associated risks.
As India and the UK strengthen their economic ties, this presents a greater opportunity for businesses to grow; however, if they build compliance into their overall business strategy, they will be much more likely to realise success. Companies that can proactively build upon their fraud prevention frameworks and align UK regulatory requirements with Indian governance will be in a better position to respond to potential risks and to capitalise on new growth opportunities in this market.