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Companies House: a cornerstone in the fight against economic crime

Author: ICAEW Insights

Published: 12 Jul 2023

Barring any major bumps in the road, the Economic Crime and Corporate Transparency Bill should gain Royal Assent this month. Companies House Chair John Clarke explains what the new powers mean for the Register and how businesses should benefit.

John Clarke, who stepped into the role of Chair of Companies House in February this year, joins the organisation at a pivotal moment in its 179-year history. 

As the Economic Crime Bill and Corporate Transparency Bill wends its way through the parliamentary machine, transformation of the Register is a cornerstone of the government’s ambition to both enhance the UK’s economic capability while also tackling rising economic crime, the precise scale of which remains unknown but could – the government says – run to tens or hundreds of billions of pounds per year. 

That transformation will see the Registrar morph from a passive recipient of information to an active gatekeeper over company creation and a custodian of more reliable information. In practical terms, more effective compliance and enforcement powers, and the introduction of better cross-checking of data and intelligence sharing with other organisations engaged in tackling economic crime are promising to prevent the misuse of corporate entities.

New measures include the introduction of identity verification for all new and existing registered company directors, people with significant control, and those who file on behalf of companies. “We’re part of the fabric of all the institutions that work together to create the right environment for business. How do we make the UK the best place to do business? To do that, you want to have the most open and trusted Register in the world,” Clarke says.

The scale of change is not to be underestimated. But with a 30-year track record in business including senior roles with household name consumer-facing businesses including Tesco, Nokia and Primark plus advisory firms Accenture and EY, Clarke is adamant that a focus on the customer experience, and the ability of Companies House to configure its capabilities will help the push into new territory.

“My background is data and retail working in complex, large, well-known organisations managing the whole customer journey and delivering fairly significant holistic transformation, requiring better systems, new behaviours and better collaboration with partners and colleagues,” Clarke says. “It’s about bringing in those same principles of the customer journey and what we do with their data to make their experience better. There are a lot of commonalities with my previous experiences and learnings to be gained.”

At the same time, Clarke says Companies House staff are hungry for change. “Frankly, we are empowering them to do what they have wanted for many years. But we must take things iteratively, as we apply new policies and measures.” 

Balancing the needs of those creating legitimate companies with pressure to tackle the growing scourge of economic crime is tricky, Clarke admits. “You want a place where the reporting is easily done and you know what you need to comply with. But we’re in an unpredictable world where there is significant economic crime. We plan to disrupt this and make it more difficult for the criminals.”

Clarke is reluctant to be drawn on the failings of the existing system. “We will start to triangulate our data with other parties, so it is correct and more trustworthy. My job is to make life better for others, including other organisations and accountants, so there’s less operational friction and greater integrity.”

Technology has a pivotal role to play in not only streamlining services and boosting performance and data useability, but also in mitigating growing cyber risks, not to mention the introduction of new identity verification services, Clarke says. “You have to take the friction and duplication out of the system so that when people are filing with Companies House as well as HMRC, it’s no extra burden, we can cross reference and make sure it all syncs. The idea of having a single cost-effective and secure way of filing accounts is tremendously valuable.”

Barring any major bumps in the road, the Economic Crime and Corporate Transparency Bill should gain Royal Assent this month, or by early autumn at the latest, with secondary legislation and enhancements to policy to follow. 

Clarke’s remit includes working with government to influence the policy landscape. The accountancy profession is key to informing those discussions, he says. “I think we have a reasonable set of understandings. But we will also learn where there are things to still be improved, where new policy or secondary legislation might be required.”

In anticipation of concrete changes, Companies House is gearing up by growing its operations and intelligence capability. Use of artificial intelligence and machine learning techniques to spot anomalies and patterns as well as bottlenecks in the user experience is inevitable, but they will be used “progressively”, Clarke says. 

“We are already recruiting for 241 new posts in those two areas and there are other leadership roles to be filled.” Meanwhile, plans for “end-to-end digitisation” of Companies House mean the organisation is looking to bring in a surge capability of about 60 or 70 technology experts to bolster its 360-strong digital data function. There’s always a risk with new technology and that is a core part of my career DNA. The board and I have collectively encountered a number of challenges and learning from these will help us minimise that risk.”

But Clarke is also adamant that improvements in the quality of data on the Register cannot be the sole responsibility of Companies House. “You can’t do it in isolation,” he says. “We will move towards almost pure digital filing and we’re working with software providers and others to minimise the impact of that step. But the rate of transformation is as much driven by the whole ecosystem as by what Companies House is doing.”

Fortunately, Clarke is confident that an appetite for collaboration and data sharing will oil the cogs. “ I will sit down with the banks, and others and see how we collectively start to improve this data. It's a collective responsibility. I feel a lot of my role is trying to join the dots and getting other partners to work with Companies House to enhance corporate transparency and fight economic crime.”

Clarke says the Government’s £63m commitment to Companies House reform at the last spending review – on top of a £20m investment in 2021/22 – shows just how important transformation of the Register is to the UK economy. A report commissioned by Companies House and BEIS in 2019 estimated the value of Companies House data to users at up to £3bn per year.

Already, a new register of overseas entities (ROE), introduced on 1 August last year as part of the Economic Crime (Transparency and Enforcement) Act 2022, is showcasing the benefits of a digital register and a more proactive approach. It is also serving as a useful learning experience for further reform across Companies House. In July 2022, some 32,440 overseas entities were identified as owning property in the UK and therefore needing to register. By the end of June 2023, more than 85% (28,442) had done so.

“First and foremost, we want people doing business legally. For those who are not, I'm quite happy that we will be working to stop them,” Clarke says. “The question is, how do we take a similar cadence into aspects of the Economic Crime and Corporate Transparency Bill as we took into implementing ROE, which was done in 109 working days?”

The Economic Crime Bill sets out extensive provisions to reform Companies House. Find out all about them at ICAEW’s dedicated Companies House reform hub.

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