Graham Barrow has been highlighting the misuse of the UK Companies House for years now. Today, he announced on Linkedin that as of yesterday, 18 April 2023, 11,069,109 companies are registered with the UK Companies House Register. Out of these 11 million registered entities, only 5,227,447 are active.
Founded in 1844, UK Companies House was run on the good faith principle; neither ID checks nor Due Diligence efforts were made when registering new companies or changing their details.
London is a hub for financial crime
The Wolf of Sofia set up and acquired several UK sham companies to operate his online scams. The engaged money launderers offered to launder the stolen funds of Barak´s investment scams via UK sham companies. T1 Payments LLC—a business partner of Payvision BV, a Dutch payment institution—offered a service to set up UK sham companies for US high-risk cannabis merchants.
These are just a few examples of UK sham companies (having no website, no employees), as the good faith principle applied by the UK Companies House so far results in these companies showing up in about every criminal file for any transnational criminal or money laundering organization.
Identity Theft is thrieving!
The Consumer magazine “Which” reported recently about the evolving threat of Identity Theft, as individuals discover they’ve been listed as the director of a company they’ve never heard of. Between April 2021 and April 2022, Companies House received 2,432 applications for removal by directors who have ‘not consented to act’ – up 59% in just three years.
According to Which, there is also a massive rise in the use of unconnected addresses—often ordinary homes—as a company’s registered address: a staggering 10,387 people applied in 2021-22 to change a company’s ‘disputed registered office address.’ This number has tripled in three years.
Using incorrect names and addresses results in failing law enforcement proceedings when complaints are filed.
New UK acts for tackle economic crimes !
As already described in the discussion about the issues of the UK payment industry, online fraud in the UK has reached an unprecedented size in recent years. By now, the British authorities are alerted and are working on new rules.
The Economic Crime (Transparency and Enforcement) Act was passed in 2022. This act:
- allowed the government to move faster when imposing sanctions
- created a register of overseas entities (ROE) to target foreign criminals using UK property to launder money
- reformed the UK’s unexplained wealth order (UWO) regime.
The House of Lords is additionally debating the planned Economic Crime and Corporate Transparency Bill, designed to introduce new compulsory identity checks for potential company directors before a company is formed and grant Companies House investigative powers. Companies House´s employees can query filed information they believe is ‘suspicious, misleading or fraudulent.’
Regarding the backlog of fraudulent and misleading information already on the register, the plan is to eventually impose identity checks on longstanding companies.
Directors and officers who fail to verify themselves are expected to face an escalating series of measures. Possible penalties range from an ‘unverified’ status displayed next to their name on the register to unlimited fines and criminal proceedings.
It may take years for existing companies to be checked the same way as new ones, so users must exercise caution when the new rules come into force.
The government is committed to bringing this latest bill forward as soon as possible to deliver reforms on tackling economic crime and improving transparency over corporate entities.
Let us hope that the planned steps in cleaning up the Companies are taken decisively and quickly for the sake of innocent customers.
