24 Set Companies House Reform: The Case for Verifying Identities
Companies House are now committed to verifying the identities of directors, People with Significant Control (PSCs) and individuals filing information (presenters), to improve transparency and counter financial crime. However, there is a key balance between accuracy of information and ease of doing business which will be hard for Companies House to manage.
Corporate transparency and register reform: Government Response
In the first of a series of articles examining the recently published government response to the consultation on options to enhance the role of Companies House and increase the transparency of UK corporate entities, we review the case for verifying identities.
91% of respondents to the consultation supported the basic principle of Companies House verifying the identities of individuals who appear on the register.
For many it will come as a shock that this does not already happen. It is a criminal offence to submit false information to Companies House and, ensuring the accuracy of the information at Companies House is one of the key roles of a company secretary. However, the current register is open to abuse as this is not frequently enforced. Companies House itself admits:
“We carry out basic checks on documents received to make sure that they have been fully completed and signed, but we do not have the statutory power or capability to verify the accuracy of the information that companies send to us. The fact that the information has been placed on the public record should not be taken to indicate that Companies House has verified or validated it in any way.”
Many individuals and companies treat the information that appears on the Companies House register as verified, particularly those based in foreign jurisdictions. In that respect these reforms feel long overdue and are to be welcomed.
The challenge of verifying data
The pros of verifying data re the increased accuracy of Companies House data and the prevention of economic crime. But difficult questions remain. In particular, how will any new verification requirement relate to existing requirements under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017? The government and legal sector agree that Client Due Diligence and AML checks will have to continue, leading some to suggest that the ability to register a company should rest with an AML-regulated agent. This suggestion has not been taken up by the government at the moment.
The cons of verifying data include additional costs and delays to businesses and an economy that is on its knees thanks to COVID. Starting a new business in the UK is simple (although some would argue too simple). The faster and more efficient any new verification process is the better, or the UK risks becoming uncompetitive at a time when, as it gets used to life outside of the EU, it needs to be as attractive to new business as possible.
Under the new regime, identity verification will be required for company directors, People with Significant Control (PSCs) and individuals filing information (presenters).
The Government intends to develop a fast and efficient process to prevent verification from causing significant delays in the incorporation and filing processes. The Government expects the majority of verifications to be conducted through digital processes and that for most individuals this process will take a matter of minutes.
Creating such a verification system is no easy task, as any Money-Laundering Reporting Officer will attest to. The worry is that any individual whose verification is not plain vanilla will face problems and delays.
Companies House has been tasked with exploring the identity market to identify to procure the systems, services and expertise that will meet the new requirements. It will be no easy task and will have a huge impact on UK business.
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