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May 20, 2019updated 28 Sep 2022 2:39pm

“Chameleon” Fraudsters Exploiting Companies House: Are New ID Proposals the Answer?

800+ disqualified directors still active, warns HooYu

By CBR Staff Writer

The government is consulting on proposals that would require all of the UK’s existing 6.7 million company directors – as well as new applicants – to provide proof of identity to Companies House; something that they are not currently required to do under current free-wheeling legislation that was intended to make it easy to register a limited liability company.

The consultation [pdf] by the Department for Business, Energy & Industrial Strategy opened on May 5 and closes August 5. Its key recommendations are that individuals who have a key role in companies should have their identity verified. This would apply to company officers (directors), People with Significant Control (PSCs) and those filing information

It also calls for third-party registrants of new businesses in the UK (e.g. accountants, banks and other specialist company formation agents) to share the results of their customer due diligence work – required under 2017 Money Laundering Regulations –with Companies House. This is not currently mandatory, meaning despite red flags being raised, suspect individuals can still easily set up companies and trade in the United Kingdom.

See also: Procurement Fraud Rampant in the UK, SAS Warns

The recommendations, which BEIS hopes will reduce fraud and improve corporate transparency in the UK, include calls for:

  • “High compliance rates backed by an effective and respected investigation and enforcement regime for non-disclosure and false filing offences;
  • The removal of technological and legal barriers to allow enhanced cross checks on corporate data with other public and private sector bodies
  • Continued investment in technology and the skills of Companies House staff to make the register more efficient, effective and resilient.”

HooYu director David Pope fully supports the proposals.

His company provides a cloud-based data visualisation and mapping tool to primarily public sector clients, including Tower Hamlets and the Department for Education.

HooYu’s platform collates and analyses large datasets from Companies House, the Land Registry, electoral roll and a range of other private databases to map relationships between those in the business world and weed out fraudsters, as well as provide business intelligence to commercial clients.

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He told Computer Business Review: “Because it’s a government database, too often trading standards or other officers just take it as fact that it [Companies House] is reliable. But Companies House has no mandate to cross-check data, confirm identities, etc; it’s a real bug bear for them: disqualified directors can just tweak the spelling of their name; call themselves ‘Eddy’ instead of ‘Ed’ for example. There’s no diligence…”

HooYu’s David Pope

Recent HooYu analysis showed that of the 6,700 currently disqualified directors, there are over 800 (one in every 8) that still appear to have an active directorship, he said.

The analysis also uncovered over 500 so-called “chameleon”  directors who have been disqualified as a director, then subsequently made changes to their name or date of birth to register a “clean” directorship.

Pope told Computer Business Review: “We’d been wanting to build a mapping tool like this for 20 years but the data crunching power and visualisation toolkits have only got there. But not everybody has the resource to use tools like ours: there’s a systemic fault in how Companies House was set up. It needs more resource and there needs to be a change in the legislation to stop this happening.”

Companies House Could Use Tech “like Monzo”

Richard Osborne, founder of the lobbying group Robust, agrees. He said: “Last year I formed Robust to raise awareness of how criminals are abusing Companies House data and our YouGov survey revealed that 84 percent of business leaders would want to see more robust identity checking procedures carried out by Companies House. This data analysis from HooYu reveals the level of abuse of records at Companies House and underlines our call for the Government to act”.

“Banking, and other sectors, are leading the way in deploying the latest technology
to obtain greater assurance over the identity of potential customers or suppliers”, the consultation notes, adding: “The online bank Monzo and KBC Bank Ireland use such technology to allow their customers to verify their identity using a smartphone.”

“A key driver for most of the organisations doing this is having greater confidence in knowing who they are dealing with. The introduction of similar identity checks within the company registration framework offers significant benefits, including in the reliability of information on the register, and in controlling access to the register. Overall trust in the register will improve if users have full confidence that only verified individuals are filing information on the register and that only verified individuals can be a director of, or file on behalf of, a company. It should help deter those that may seek to use UK companies for illicit purposes.”

Read more: Digital reforms are coming to Companies House. Campaigners are worried they won’t stick.

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