The anti-fraud leader of trade body UK Finance has said the government needs to fix the “dysfunctional” Companies House because it is helping to facilitate trade fraud.
Nick Van Benschoten, director of international illicit finance at UK Finance, and the anti-fraud chiefs of NatWest and HSBC banks took aim at the online registration of UK-based companies.
Van Benschoten said: “Companys House is supposed to be a key part of the information infrastructure that underpins the business environment. At the moment it’s a dysfunctional part, and other people can’t make up for that.
“The government needs to get it right the first time, and then we can help and build on that. But at the moment I’m afraid it’s not an efficient feature.”
The comments were made to MPs from the Business, Energy and Industrial Strategy (BEIS) committee, in a session that examined the records of fraudulent businesses, in particular fraudsters who use victims’ home addresses to register a bogus business. .
Graham Barrow, a money laundering expert who runs The Dark Money Files podcast, emphasized that a large proportion of people were harmed by fake companies that registered with Companies House and stole identities to do so.
He said: “We have a very significant problem of shell companies, or ‘burner’ companies, that are doing fraudulent activity in the short term and then disappear. Some people find that their homes are being robbed right under their noses.”
He said that about half of the companies registered in the database are lost after a few years, suggesting that many were established under fraudulent circumstances.
“You have to provide verification of your identity to borrow a book from the library,” he added. “You don’t have to do that to create a company that could cause tens of thousands of pounds worth of damage to our economy.”
The fraud directors of HSBC and NatWest reiterated that a lack of controls for people setting up business through Companies House is making it difficult for banks to crack down on fraud.
Donald Toon, Head of Risk Threat Mitigation at NatWest, said: “We have a real problem here because we are required to verify accounts and we look at Companies House data as part of that verification process.
“And so we have an obligation to tell Companies House if there is a difference between what they tell us and what is in their database.”
Toon emphasized that around 6,000 employees, or 9% of its workforce, work to prevent economic crime at the bank every day. He spends around £500m a year on fraud prevention, and will also pay an economic crime tax on top of those costs.
“Please don’t walk away with any suggestion that banks don’t spend money and don’t put a lot of effort into this,” he said.
A new Economic Crimes Bill is pending in the House of Commons and proposes major changes in the Companies House.
Martin Swain, director of Companies House, responded to the discussion: “I would love to see that in three or four years we don’t get the negative press coverage that we do, that we are a ‘facilitator of fraud’. That is not where we want to be as an agency, we want to prevent fraud.”