Bad Companies House data puts accountants at AML risk

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Accountancy firms are working from false data from Companies House when they conduct their AML checks, meaning they are at risk of working for disqualified directors.

Fraud investigation technology provider HooYu has claimed that “chameleon fraudsters” are abusing the commercial register, enabling them to register as a director despite being disqualified.

The disqualified directors are simply altering their date of birth or the spelling of their name and then they can continue as before.

False data frustrates accountants' AML checks

HooYu claims through using graph theory and data visualisation that that of the 6,700 currently disqualified directors, there are over 800 (one in every eight) have an active directorship. And the analysis also found 500 disqualified directors changed their name or date of birth to register a clean directorship.

Of course, this loophole would frustrate accountants’ AML checks, which rely on Companies House checks as part of the customer due diligence process.

David Pope, HooYu’s marketing director, said the loophole still exists because filing company, director and PSC records at Companies House is taken on trust. “The staff at Companies House are keen to be able to perform due diligence on the commercial register but it requires a legislative change to allow this process to take place,” he said.

New Companies House consultation may be the answer

HooYu is, therefore, calling for there to be more identity verification. A step towards this happened earlier this month when the Department for Business, Energy and Industrial Strategy issued the corporate transparency and register reform consultation.

This consultation considers new proposals that would enhance the role of Companies House such as allowing the government agency to undertake checks on the information submitted to the register.

'The level of abuse of records at Companies House'

The consultation is the result of lobbying from organisations such as Robust, Transparency International and Global Witness. Robust’s founder Richard Osborne is no stranger to identifying Companies House failings. He formed Robust to raise awareness of criminals abusing Companies House data.

And in 2017 he flagged a loophole in anti-money laundering regulations that allows criminals to incorporate directly with Companies House.

Osborne today says this new research “reveals the level of abuse of records at Companies House and underlines our call for the Government to act”. He said it also reaffirms the results of his organisation’s YouGov survey which found 84% of business leaders would want to see more robust identity checking procedures carried out by Companies House.

'A worrying loophole open to fraudsters and criminals'

But, as HooYu’s Pope pointed out, the results of the consultation won’t be released until 2020 and won’t be another year before legislation is published that allows Companies House to perform due diligence on the register.

However, Pope is concerned that HooYu’s analysis of Companies House data just represents “the tip of the iceberg”.

“Until Companies House information is properly screened at the point of submission, and ongoing due diligence is undertaken to remove disqualified directors, it leaves a worrying loophole open to fraudsters and criminals for them to exploit.”

Companies House is 'a powerful tool for identifying fraudulent information'

A Companies House spokesperson told AccountingWEB that it operates one of the world’s most open company registers, and this means that company information is under constant scrutiny by law enforcement agencies and "is a powerful tool for identifying inaccurate or fraudulent information".

The spokesperson continued: “Where economic crime and other offences are suspected, we work closely with law enforcement partners to assist their investigations.

“Although we don’t currently have the statutory power or capability to verify the accuracy of the information that companies provide, the government has recently announced a consultation on a series of reforms which seek to address these matters. We encourage all stakeholders to give their views by taking part.”

Accountants already under AML scrutiny

HooYu’s research should come as a concern to accountants who are already expecting an increase in AML scrutiny. A recent report from the newly formed Office of Professional Body Anti Money Laundering Supervision (OPBAS) has kicked open the doors on the lack AML enforcement from professional bodies, and this public shaming is likely to lead to the supervisors ramping up their supervision.

Meanwhile, accountants who are supervised by HMRC are also expecting similar scrutiny thanks to the government departments more robust approach. HMRC has backed this AML crackdown through a series of investigations, which have resulted in an increase of non-compliance fines dished out last out.

About Richard Hattersley

Richard Hattersley

Richard is AccountingWEB's Practice Editor. If you have any comments or suggestions for us get in touch.


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21st May 2019 10:11

Good article. There have been several threads on Accounting Web about Companies House data. I know from using an identity checking company that they widen the search to include mis-spellings and slight changes that can hide the full extent of someone's activities at Companies House.

Thanks (1)
21st May 2019 10:59

If I want to engage an accountant, or a solicitor I will have to provide photo-proof of ID and proof of address. Yet I can register as a company director with no checks at all. If I registered a company with Mickey Mouse and Donald Duck as directors I bet it would pass. It is insane! Why the dickens do we need a consultation on this? We know that many companies are used for ML by crooks. This is not a new problem, it has been the same for many years. And various organisations have highlighted the issues - BBC did a documentary on this issue a few years back. So why have governments not done anything about it? Am I being cynical if I suggest that a) it is not an issue that the general public are clamouring about so why bother, and b) MPs probably quite like the situation because some of them are crooks who abuse the system themselves. If I am disabled, living on the breadline, trying to decide whether to pay the electric bill to be warm or buying something to eat, and I tell a little lie on my benefit claim, the system will be on me like a ton of bricks. But if I am blessed with a little intelligence and start up a company with some wheeze to defraud suppliers, customers, and anyone else; perhaps even float it on AIM and bring in gullible investors to pay me a fat salary for digging a few holes looking for oil, or some fictious research that is bringing a miracle cure for cancer, I am almost certain to go unpunished. It stinks!

Thanks (2)
By CJaneH
21st May 2019 11:38

I have thought for many years that as well as date of birth directors should be obliged to give their NI number. I am sure the government could authorise access between HMRC and Co House to check that name, date of birth and home address match. The NI number like the home address could be kept out of public domain.

This would allow Companies House to perform a policing function rather than just clerical and could be useful for HMRC as well.

Thanks (2)
to CJaneH
21st May 2019 16:01

NI numbers? What about overseas directors who are non-UK nationals?

Thanks (1)
to JessicaRain
22nd May 2019 09:14

There's an argument that they should be subject to more rigorous checks. Either way, they're likely to have some tax ID which can be verified - if the Government genuinely has the will to prevent fraud.

Thanks (2)
to JessicaRain
23rd May 2019 11:30

For people who are not in the UK, maybe they should implement that if they want to be a director of a Ltd Company in the UK (as they will then be an employee of that company), they should be made to obtain an NI number first. Maybe that would work in conjunction with the earlier comment of having to input your NI number to be cross checked with HMRC.

Thanks (0)
21st May 2019 11:44

“Although we don’t currently have the statutory power or capability to verify the accuracy of the information that companies provide"

Jersey has a robust accurate, regularly checked register (by the Jersey Financial Services Commission) of companies where any changes need to be supplied speedily using online forms, and which has automatic exchange of data with UK and other countries regulatory authorities for AML / tax evasion etc.

It's a pity the UK was in such a rush to get its "open register" in place that they didn't focus at the start on the quality of the data. Recification will be time consuming.

Thanks (3)
By tedbuck
21st May 2019 11:54

It's a great thought but surely with all this publicity and HMG doing nothing (as usual) the situation can only get worse. Here I am reading this article and thinking to myself 'Gosh here's an opportunity - what mischief can I get up to?'
It's a bit like Companies House putting up a notice saying 'Crooks welcome'. Not their fault, I agree, but the message is still there. Never mind HMG will diligently pursue the usual suspects who didn't cross their Ts on a SARs report - after all we haven't got the court time or the police time or the prisons to deal with criminals when we are chasing up all the people who are ...ists of one sort or another.
Whom the Gods would destroy they first drive mad!

Thanks (1)
21st May 2019 12:52

Can't get Enough.

Thanks (0)
21st May 2019 16:12

I don't see the problem here. Anyone - banks, creditors, customers, accountants, etc - dealing with directors should perform checks akin to KYC. Why should they be done when a company is formed? The company is after all an independent standalone entity. I fail to understand why Cos Hse should perform the tasks that stakeholders should undertake. When are we going to discard this 'government must do everything for us' apron?

Thanks (1)
to JessicaRain
22nd May 2019 09:17

JessicaRain wrote:

I don't see the problem here. Anyone - banks, creditors, customers, accountants, etc - dealing with directors should perform checks akin to KYC. Why should they be done when a company is formed? The company is after all an independent standalone entity. I fail to understand why Cos Hse should perform the tasks that stakeholders should undertake. When are we going to discard this 'government must do everything for us' apron?

Because if I do all the checks, it doesn't protect me against others who don't do the checks.

Thanks (2)

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