ICAEW: Companies House data a “gaping hole in AML defences”

ICAEW: Companies House data a “gaping hole in AML defences”

New research quantifies the extent of Companies House inaccuracy as the ICAEW urges the Treasury and BEIS to shore up defences

ICAEW: Companies House data a “gaping hole in AML defences”

New research quantifies the extent of Companies House inaccuracy as the ICAEW urges the Treasury and BEIS to shore up defences.

“We’ve been saying for some years now that it’s quite a gaping hole in AML defences,” says Sophie Falcon, integrity and law manager for The Institute of Chartered Accountants of England and Wales (ICAEW).

Companies House, which finds its origins in the 1844 Registrar of Joint Stock Companies, is mandated to publicly record UK business information including companies and directorships.

Firms perform know your customer (KYC), due diligence and anti-money laundering (AML) checks on the 4.2m companies that are on the register, resulting in 5.6bn searches in 2018, according to Companies House.

“As accountants we are regulated for AML,” says Falcon, “and we have to make sure we do client due diligence and understand source of funds and business rationale and have some level of comfort.”

However, new research from investigation technology provider HooYu reveals that of the 6,700 disqualified directorships, 800 still appear to have active directorships. A further 500 so-called ‘chameleon’ directors who have been disqualified altered their Companies House details in order to register a clean directorship.

“It’s getting the right balance – you still want the UK economy to be open for business and limit bureaucracy, admin and red tape but in a way that’s not making it easy for criminals,” says Falcon.   

A worrying loophole

“Until Companies House information is properly screened at the point of submission,” said marketing director at HooYu, David Pope, “and ongoing due diligence is undertaken to remove disqualified directors, it leaves a worrying loophole open to fraudsters, criminals and terrorists for them to exploit.”

The Department for Business, Energy & Industrial Strategy (BEIS) issued a public consultation open until August 5 to “increase the transparency of UK corporate entities and help combat economic crime” by enhancing the role of Companies House.

“What we would hope would come out of [the consultation] is that the government agrees to implement and start to give Companies House the resources and ability to actually start doing identity verification checks,” says the ICAEW’s Falcon, adding that the register is “not that much use” for accountancy firms KYC procedures.

When asked how long it might take to action the results of the public consultation, BEIS were not forthcoming.

But for Falcon, actions cannot come soon enough, especially with the fifth EU anti-money laundering directive (5AMLD) coming into force on January 10, 2020.

5AMLD will require accountancy firms to report discrepancies between Companies House data and their own client dealings.

“If we need to report on discrepancies,” says Falcon, “we’re very happy to do that but it’s got to work both ways. We must be able to rely on the information that’s there.”

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