The UK Government is to crack down on fraud by reforming Companies House and strengthening anti-money laundering powers.
Proposals contained in a new Bill – the Economic Crime (Transparency and Enforcement) 2022 Act (ECTE) – specifically targets “foreign elites” and other bad actors. That will entail making the ownership of limited companies and partnerships more transparent.
“These provisions will bear down further on kleptocrats, criminals and terrorists who abuse our financial system,” the Government said, “strengthening the UK’s reputation as a place where legitimate business can thrive, whilst driving dirty money out of the UK.”
The Government aims to achieve better control over the data held at Companies House. That includes identity verification of new and existing registered company directors and those with significant control over businesses. In addition, the power of the Registrar (who oversees the organisation) is boosted so that he or she can check, remove or decline information submitted to the organisation.
In fact, the BBC uncovered a lack of controls in an investigation during the summer. Criminals registered over 150,000 companies at homeowners’ addresses throughout the UK. Those individuals had to deal with overdraft demands, loans, insurance demands and credit card debts associated with companies they were supposed to own or run. They had no connect to those companies.
Financial crime expert Graham Barrow told the BBC it was “quite hard to describe how bad and how enormous this problem is”. He said about a fifth of all the companies set up in the UK in the last year were fraudulent – none had economic value.
The new Bill also targets money-laundering. First, it opens the door for companies to share information more easily when potential crime is involved. Second, it provides crime agencies with better intelligence gathering powers. Finally, it will focus resources on high-value activity.
Separate measures in the Bill target crypto assets that are linked to crime.
The Government currently advises businesses take a risk-based approach to protecting themselves against potential money laundering. Organisations need to take a separate assessment to discover whether they are covered by the rules.