The UK is planning to give Companies House more power to check information and the identities of people who set up businesses, following a number of high-profile money laundering and fraud scandals involving UK companies and partnerships.
A consultation launched by UK government also aims to give directors more control over their personal information to fight widespread identity theft. Almost 10,000 people have complained that their legitimate details on Companies House, which is the UK’s registrar of companies, had been stolen by fraudsters.
Despite the shortcomings, the UK government has in the past described its register as the “gold standard” and pushed the UK Overseas Territories to establish public registers of the owners of companies and other entities similar to Companies House.
Last year, UK parliamentarians added a clause to the UK Sanctions and Anti-Money Laundering Act, instructing the government establish these types of public registers in the territories directly through an order in council, if they have not done it themselves by the end of 2021.
In the debate over this controversial move and whether the true owners of companies and other vehicles should be public, Cayman Finance, the organisation representing Cayman’s financial services industry, has long claimed that the local system of having financial services providers verify beneficial ownership information was superior to the unverified but publicly available data on company owners in the UK.
Business Minister Kelly Tolhurst unveiled a package of reforms to Companies House on May 5 that would make it easier to trace company ownership and management, while offering business owners and businesses greater protection from fraud.
Under the proposed measures, Companies House will have the power and additional staff to verify people with a key role in companies and the ability to query and corroborate information before it is entered on the register.
To fight identity theft, directors will be given additional rights over their information, such as personal home addresses, “while ensuring this information is still available in a transparent manner to public authorities where appropriate”.
“The proposed reforms, unveiled today, will help increase the accuracy and usefulness of the information available on the companies register,” the UK government said in a press release.
Minister Tolhurst said the reforms would support the fight against the use of dirty money in the UK, and enhance the protections for entrepreneurs and directors from criminal activity.
International NGO Global Witness issued a report on the weekend calling the UK register “a paradox”. On the one hand it “leads the world” in making its beneficial ownership data public, while on the other hand “UK companies have increasingly become a conduit for scandal” with a host of recent money laundering cases involving UK companies and partnerships, the organisation said.
Global Witness “noted serious problems with the quality of information” held by Companies House and found that serious loopholes and weaknesses remain in the way the current regime is enforced.
About 8.1% of companies last year declared they had no person of significant control, the UK version of beneficial owner. Nearly 500 companies were part of a circular ownership structure and more than 6,700 companies were controlled by a beneficial owner who controls more than 100 companies. In addition, more than 8,800 companies named a foreign company as its beneficial owner and more than 2,000 company owners are disqualified directors, the advocacy group said in its analysis.
“The fact that critical information on company ownership is accepted at face value, without even the requirement for basic ID checks, hugely undermines the fight against corruption and money laundering. While the UK is a world leader in the way it makes information available to the public on its companies, the register will only prove its worth if people can trust the information and criminals are actually deterred from using UK companies in the first place,” said Nienke Palstra, anti-corruption campaigner at Global Witness.
“If the UK is serious about changing its reputation as a safe haven for dirty money, the Government must fix the company register by giving Companies House a clear mandate and resources to do its job. Today’s consultation on reforming Companies House is a welcome step and unique opportunity for Government to address the problem at its root, but the devil will be in the detail.”