From a UK Government press release:
The UK’s register of company information will be reformed to clamp down on fraud and money laundering, the government has announced today (Friday 18 September).
Under the plans, directors will not be able to be appointed until their identity has been verified by Companies House.
The changes aim to increase the reliability of the data showing who is behind each company so that businesses have greater assurance when they are entering transactions with other companies, such as when small businesses are consulting the register to research potential suppliers and partners.
This a welcome reform – there is a general assumption that the register makes businesses and directors accountable, when it does nothing of the sort. Back in 2017 the accounting academic Prem Sikka noted that
Transparency Intentional investigated 52 large scale global corruption and money laundering cases involving £80bn and found that some 766 UK corporations were involved. Forming companies with fictitious shareholders/directors and non-existent addresses is all too easy.
Italian Mafia registered companies in the UK and gave officers name as “the Chicken Thief” resident at “Street of the 40 Thieves” in the town of Ali Babba”. Companies House accepted the documentation and government confirmed that it took “no action”.
As well as fictitious identities, the register has also failed to prevent identity theft: in 2018 the name of Esther McVey MP was fraudulently registered to a company called “Loyal Scots”, which then became the basis for a bogus “gotcha” published on Skwawkbox. For some reason, the left-wing website showed no interest in the real scandal they had stumbled on, which was that Companies House is not fit for purpose. McVey went on to make the subject an issue of particular concern to her, stating a few months later that “It is all well having a register, but it seems there is no compliance activity so what confidence can the public have in what appears on the register?”
There is still some other problems, though, that continue to undermine the credibility of Companies House and the accountability of British business. I discussed these previously here, after the then Minister for Small Business Andrew Griffiths (prior to his disgrace in a sex scandal) promised that “the government will come down hard on people who knowingly break the law and file false information on the company registry”. The only example Griffiths had was of a man who had filed false information quite openly to prove a point.
As regards director names, if you click on the name of a company director you are supposed to be able to see their other appointments, both current and going back a few years. However, quite often they are not cross-referenced in this way, particularly if a director used a different address or gave a different version of their own name (e.g. adding or leaving off a given name element). This linkage failure may happen quite innocently, but it benefits bad actors who want to conceal particular associations and activities.
And as regards addresses, a false address does not have to be a complete fabrication. One trick is to provide a service address where a lot of companies are properly registered; another is to find a genuine office block and give that location but leave off a specific suite number or floor number. A third strategy is to provide a genuine address, but then move away without submitting updated details. If the fraud is not completely blatant anyone caught out will get away with it by claiming that there has been some innocent error or oversight.
The upshot is that a director with business debts or some other problem can disappear quite easily – and if they have a common name they can create a new company with a new service address without there being any evident connection with a past business failure.
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