‘Dysfunctional’ Companies House facilitates fraud, finance chiefs say

Companies House makes business fraud easy, say finance chiefs

The UK Finance trade body’s fraud chief said the government must fix the ‘dysfunctional’ Companies House because it helps to facilitate business fraud.

Nick Van Benschoten, director of international illicit finance at UK Finance, and bank fraud bosses NatWest and HSBC have targeted the online register of UK-based companies.

Mr Van Benschoten said: “Companies House is meant to be a key part of the information infrastructure that underpins the business environment.

“At the moment it’s a dysfunctional part, and the others can’t make up for it.

“The government needs to get it right the first time, then we can help and build on that.

“But at the moment, I’m afraid it’s not an effective feature.”

The remarks came during a Business, Energy and Industrial Strategy (BEIS) committee reviewing fraudulent business registrations, particularly fraudsters using victims’ home addresses to register a fake business.

Graham Barrow, a money laundering expert who runs The Dark Money Files podcast, pointed out that a large proportion of people are harmed by fake companies that register on Companies House and steal identities to do so.

He said: “We have a very significant problem of shell, or ‘hot’, companies that engage in fraudulent activity in the short term and then disappear.

“Some people find their homes being robbed right under their noses.”

He said around half of the companies registered in the database are lost after just a few years, suggesting that many were set up under fraudulent circumstances.

“You must provide proof of your identity to borrow a library book,” he added.

“You don’t have to do this to start a business that could cause tens of thousands of pounds of damage to our economy.”

Chief fraud officers at HSBC and NatWest have reiterated that the lack of checks for people setting up a business through Companies House makes it harder for banks to crack down on fraud.

Donald Toon, head of threat mitigation at NatWest, said: “We have a real problem here because we are required to verify accounts, we are reviewing Companies House data as part of this verification process.

“And then the obligation then falls to us to tell Companies House if there is a difference between what we are being told and what is in their database.”

Mr. Toon pointed out that about 6,000 employees, or 9% of its workforce, work every day to prevent economic crime in the bank.

It spends around £500million a year on fraud prevention and also has to pay an economic crime tax on top of those costs.

“Please don’t go with any suggestion that banks don’t spend money and don’t put a lot of effort into it,” he said.

A new Economic Crimes Bill is currently before the House of Commons and proposes major reforms to Companies House.

Martin Swain, director of Companies House, responded to the discussion: “I would like to see in three or four years that we don’t get the negative media coverage that we get and that we are a ‘fraud enabler’.

“That’s not where we want to be as an agency, we want to be a fraud preventer.”


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