Emerging evidence of companies “squatting” at the addresses of accountancy firms – using their address as their registered office address without permission – is fuelling support for the proposed overhaul of the powers of Companies House, as the government prepares to publish the results of a consultation on major reform of the register.
Under current rules, Companies House has limited powers to reject or amend the information submitted to them. However, experts warn that the absence of checks by Companies House coupled with limited powers of amendment opens the system to abuse. ICAEW’s Economic Crime Sub-committee strongly supports the proposal to extend the Register’s powers so that, for example, errors or deliberate misuse of addresses can be more easily corrected.
Angela Foyle, a Partner at BDO and chair of the ICAEW sub-committee, believes accountancy firms are popular targets for this form of information abuse because using a professional firm’s address and thus their reputation can provide a veneer of legitimacy to fraudsters.
In one recent incident when a firm identified a company incorrectly registered at its address, it took several months and a slew of documents including a copy of their office lease and a recent office electricity bill to have the registered office changed from the firm’s address. The position is worse if the company incorporates using the firm’s address, where firms have been told that a Court order is required to have the record changed.
A government consultation on whether the powers of Companies House should be extended closed on 3 February, as part of far-reaching reforms currently being explored by BEIS. Proposals include allowing Companies House to conduct additional checks on account filings before they are accepted onto the register and giving it greater authority to scrutinize and reject them. They also include provisions that make it easier for third parties to apply to have information changed where it is incorrect.
Foyle said reform of Companies House, first created in 1844, was desperately needed to keep pace with new ways of working and emerging threats. Its current powers did not extend sufficiently far in relation to correcting and investigating information on the register, which Foyle said doesn’t sit comfortably against a broader government desire to clampdown on fraud and ensure transparency of corporate ownership.
The Fifth Money Laundering Directive, now part of UK law, requires all regulated entities including accountants to notify Companies House if their due diligence identifies that the person recorded on the register as the Person of Significant Control (PSC) is not the person they think it is. However, once presented with that information, Companies House currently has limited power to act.
“We would very much welcome some of the things being proposed by the consultation including giving Companies House greater powers to deal with cases where there is concern over who the PSC is. Companies House should also join up more with other parts of the regulatory and law-enforcement framework so where there is a clear concern about criminal abuse that they have the powers to share the information and act promptly to correct the records or otherwise act against the company,” Foyle said.
Foyle said a search capability that made it easy for firms to identify any companies on the register using their address would be a good starting point, as would some form of notification or alert when a firm’s address was registered with Companies House. She also welcomed the idea of users of the Companies House register having to do so via an account. “It would give a much greater level of accountability and, subject to safeguards, would allow them to suspend login accounts if problems arose,” Foyle said.
Sophie Wales, Director, Technical Strategy of ICAEW’s Tax, Ethics and Law Group, said: “ICAEW is engaging with BEIS and Companies House on a number of the proposed reforms and will continue to work with government to address the issue of misuse of accountancy firm names and addresses by criminals.”
Beefing up Companies House powers would help to address growing concerns that the limited information provided by micro-entity accounts is being used by criminals to conduct economic crime. At the same time, there is a growing imperative to improve the quality and value of the financial information submitted to Companies House. In 2019, register data was accessed 9.4bn times, government says, and research suggests it’s currently worth up to £3bn per year to users.
Read ICAEW’s responses to the BEIS consultation on improving the quality and value of financial information on the UK companies register and the parallel consultation on reform of powers of the register
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