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Companies House registration reform tackles fraud | accountingweb
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Companies House registration reform tackles fraud

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The days of businesses being registered as owned by Donald Duck are numbered, thanks to an overhaul of business creation checks at Companies House. The tougher registration process has been hailed by the government as “the most fundamental change” to the register’s purpose for over 170 years.

27th Sep 2022
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The most significant update to Companies House since its creation in 1844 has been introduced to stop widespread abuse of the business register.

Last Thursday, the government unveiled the long-awaited Economic Crime and Corporate Transparency Bill to stamp out “dirty money” and tackle business fraud

Companies House will be given powers to directly target economic crime and act as a gatekeeper to business formations with a more reliable source of information on the owners behind them. 

Under the new law, Companies House can compel anyone who registers a company in the UK to verify their identity and to check, challenge and reject false or fraudulent information. 

It will also receive improved investigation and enforcement powers enabling it to cross-check data with public and private partners and report suspicious activity to security agencies and law enforcement.

“I am delighted that we are introducing reforms that will make it much harder for kleptocrats to shield their ill-gotten gains and treat the UK as their safe deposit box,” said Security Minister Tom Tugendhat.

No more Mickey Mouse companies

A complex network of accountants, professional services firms, banks and lawyers in London’s financial services hub has enabled criminals to hide billions over the years, using Companies House as a simple vehicle to register shell companies. 

Concerns over suspect Russian cash washing through London as financial sanctions were placed on president Vladimir Putin’s circle following the invasion of Ukraine prompted ministers to hurry through the legislation. 

While it is illegal to use fake identities to set up British companies, until now Companies House had no statutory powers to verify the accuracy of information that it publishes. At present, companies can also be owned by nominees and many do not file full financial statements.

Anti-money laundering and Companies House expert Graham Barrow has been at the forefront of efforts to expose the ease with which fake companies can be set up on the register. 

He and other researchers found business owners named Adolf Tooth Fairy Hitler and Donald Duck were waved through. One director was named Holy Jesus Christ, with occupation given as Creator and country of residence as Heaven.

Barrow said he was “encouraged” by what he had seen in the new Bill prior to its official publication.

Anti-corruption Transparency International UK, an anti-corruption group, has found 929 British companies involved in 89 cases of corruption and money laundering, amounting to £137bn pounds in economic damage.

Director of policy Duncan Hames said the reforms, while welcomed, may not go far enough to counter Britain’s role as an international stash house for illicit money. Hames said better resourcing and a concerted crackdown on rogue company service providers were required.

Burden of proof

Under the new laws, individuals who register companies or file accounts will have to prove they are who they say they are by verifying their identity, according to the Business Ministry. “This will make it much harder to register fictitious directors or beneficial owners, stopping the vast majority of fraudulent appointments from reaching the Companies House register,” the government said.

Accountants responsible for forming LLPs and companies must be supervised by an anti-money laundering regulator and must register as Authorised Corporate Services Providers (ACSPs).

“Firms advising on company, LLP and limited partnership formation – whether as formation agents or advisers providing that service as part of a wider corporate transaction – will need to consider the steps they need to take to ensure they are (and remain) ACSPs,” said Corinne Staves of employment law specialists CM Murray. “Clients will also be interested in the privacy implications of these proposals for them.”

A government source told news agency Reuters that the Companies House register would be “sufficiently resourced” to meet its objectives, with investigation and enforcement powers to allow it to cross-check data with public and private partners and flag suspicious activity to authorities.

 

Replies (11)

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By Hugo Fair
27th Sep 2022 14:46

Not my area ... but AFAIK (P Eye et al) most of the 'big money' is handled through perfectly legal chains/networks of companies & trusts - leavened with substantial dollops of overseas bodies and nominee shareholders and corporate directors.
I say 'perfectly legal' not in their defence, but because they are careful (and can afford) to ensure that they stay just the right side of the line whilst driving a coach & horses through the Law's intentions.

I'm completely in favour of these extra rules, but they will merely make life a little harder for the small deliberately dodgy player - not the professional crooks or even the plutocrats.
But I guess that was always going to be the case in the LizKwazi era.

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By Paul Crowley
28th Sep 2022 00:36

'Accountants responsible for forming LLPs and companies must be supervised by an anti-money laundering regulator and must register as Authorised Corporate Services Providers (ACSPs).'
My clients do it all themselves, it is pish easy.

Is company and LLP formation now to become a restricted activity for accountants?
You know, the title any idiot can use.

As it is, a company can be registered, trade for a few of years, tell HMRC is is dormant, and safely sail under the radar penalty free

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Replying to Paul Crowley:
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By Paul Crowley
28th Sep 2022 16:14

Better still is for the company to be 'controlled overseas'
The Vaccination thing lead to a few foreign types being directors of numerous small companies, once EA used up start another.
Better still is that controlled abroad means no Corporation Tax

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Morph
By kevinringer
28th Sep 2022 10:44

I registered a company recently. Whereas it used to take hours from registration to certificate of incorporation, it now takes days (application made on a Tuesday, certificate received on Thursday). The new process permits registration for CT, PAYE and CIS (but not VAT) at the same time. Previously it took a few weeks to receive the UTR then about a week to receive the PAYE reference. Under the new process I've been waiting for over 2 weeks so far and received nothing at all. I suspect it will be some time yet by the time the company is registered for VAT.

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By LAMBERTCLERICAL
28th Sep 2022 11:01

And how much is ACSP registration going to cost me? Just on the off-chance a prospective client can't/won't do it themselves?

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Replying to LAMBERTCLERICAL:
David Ross
By davidross
28th Sep 2022 17:24

Me Too! I assume that in future we will just refer clients to a Registration Agent rather than do the job ourselves - we only do that as a favour because it is quick, cheap and easy.

I have to say that it makes sense to regulate this aspect - the UK will still be way ahead of Europe (it just cost a client €3000 to register a company in Cypress, for instance)

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Replying to davidross:
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By Paul Crowley
28th Sep 2022 17:58

Companies are just too cheap to set up

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By tonyaustin
28th Sep 2022 12:34

For the youngsters amongst you, there was a time (the 1970s when I started my training) when all company accounts had to be audited by a suitably qualified accountant and disclose pretty much what only the accounts of large companies now show. You knew who ran the company, roughly what they earned and how much profit the company made. That meant good work for accountants and generally only those who needed them for commercial reasons, other than tax, had companies. Oh the good old days!

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Replying to tonyaustin:
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By Paul Crowley
28th Sep 2022 16:09

Yes, I remember those days.
The only likeness to an audit was asking for a bank letter.
If those old things were audits, then it would appear that I am still auditing not just my company clients, but most of the traders, landlords and tax returns that I submit.
Never once saw any client preparing a risk assessment

But in those days we prepared accounts from clent paper records
We did not just believe the client Sage Xero QB

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Replying to Paul Crowley:
Pile of Stones
By Beach Accountancy
28th Sep 2022 18:12

I remember too.

Client would bring in a bag of bank statements and receipts.

Prepare the accounts in the morning, have lunch, audit the same accounts in the afternoon.

Funny how the audit never picked anything up...

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Replying to Beach Accountancy:
By turchyna582
28th Sep 2022 19:53

Given the underlying size and nature of the Company you describe (assumed by the 'bag of bank statements' and the time it took to prepare the accounts and then audit your own work) - who the HeXX would care what the audit revealed?
The shareholders (the ultimate beneficiaries or losers) where invariably the Directors; who also invariably knew their business inside out....(including the financials). The 'Auditor' role was seen as superfluous.........and because of the rules at that time, Auditing was perceived as an unnecessary additional expense for such business - no external shareholders to satisfy, and invariably an insignificant 'tax loss' compared to the £millions being uncovered as a result of unnacceptable audit standards evident in some of the big 4 now with some of their Company clients.

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