- Companies House to ‘increase transparency’ and clamp down on fraud and money laundering
Companies House to ‘increase transparency’ and clamp down on fraud and money laundering
Companies House to ‘increase transparency’ and clamp down on fraud and money laundering22nd September 2020 - Published by Kuits Corporate team
Companies House and International Money Laundering
The UK has established a reputation in global finance as a country very susceptible to international money laundering. In fact, it has long been complained that Companies House and its poor due diligence practice gives credibility to fraudulent data through its filing process. This has made it easier for organised crime gangs and fraudsters to disguise dirty money within the corporate structures of UK registered companies.
In fact, after the “Danske Bank Money Laundering Scandal” which arose in 2017-2018, it unfolded that all of the bank accounts that triggered the suspicions of whistle-blower Howard Wilkinson belonged to companies registered in the UK.
In response to criticism and in its consultation paper of last year, the BEIS made proposals in five main parts, with a collective aim to ‘increase the transparency of UK corporate’ entities and enhance the role of Companies House in turn.
Last week, the UK government published its response to the BEIS proposals, with possibly the most significant change being the introduction of an identity verification check for all directors and PSCs (this includes designated members in LLPs, general partners in limited partnerships and individuals filing on behalf of a company). If the director’s identity is not verified, then their appointment will not proceed.
This is particularly significant because it is common practice for criminal enterprises to set up “front” companies with fictitious directorships and a fake company structure. This simple change should help businesses and individuals establish who they are dealing with (“corporate transparency”) and dissuade criminals from using the Companies House framework to launder their money.
Outside of the above mentioned identification checks the UK government also proposes, amongst other things, to:
- Reform the Registrar’s powers, so that it is no longer obliged to accept any application to register a company just because it is validly submitted. It is proposed that a statutory discretion will be introduced to allow the Registrar to query information before it is placed on the register.
- Put in place a system whereby Companies house data can be cross-referred to other sets of governmental data.
- Bring forward proposals to give Companies House the power to query, and possibly reject, company names before they are registered. It will also consider strengthening the powers that are available to remove a company name once it has been registered.
At the moment, the above proposals are a mix of considerations for reform within the backdrop of a broad plan. Notably, the reforms will require primary legislation to bring them into enactment and therefore it remains to be seen how stringent these reforms will be and how strictly they will be applied.
Get in touch with a corporate lawyer in Manchester
If you are looking for advice in relation to company incorporation, restructuring, reorganisation or the appointment of company officers at Companies House, then please contact Kirsti Pinnell on 0161 838 7847 or email email@example.com.