Companies House director of policy, strategy and planning, Martin Swain, has given Richard Osborne, founder of Business Data Group and UKBF (UK Business Forums), an update about the positive steps that are being made to tackle rising levels of economic crime in the UK.

Martin’s update on the Companies House Five Year Plan, which is available to watch or read online on UKBF and via its YouTube channel, includes important news about how it will improve corporate transparency and register reform. He also answers questions from small and micro business founders in the UK’s largest and most active online community for small businesses, UKBF, about the impacts of corporate crime and what they can do.

Richard Osborne, CEO and founder, Business Data Group, said: “UK business owners are rightfully concerned about the growing levels of economic crime in this country. It’s an issue we have long campaigned to be addressed, and this exclusive interview with Companies House provided some reassurance that practical steps are being taken to close down the loopholes that are being exploited through corporate crime.”

“Since the Companies Act was last updated, the world has become smaller and fraud has become more complex and easier in our digital world. It’s not just business owners that are impacted by economic crime. Every member of our society is affected either directly or indirectly as the repercussions filter down into public services. As we are still reeling from the pandemic, and widespread abuse of Covid business support has been exposed, it’s all the more vital that efforts are stepped up to quash the illegal efforts of those involved in economic crime.”

The issues with economic fraud partially come from the intent of the Companies Act, which aimed to cut red tape and make it easier to set up businesses. That was successful, but the regulatory scheme had unintended consequences and created loopholes. Martin billed the upcoming changes as the biggest Companies House has been through since it was formed in 1884. Topics included impacting economic crime and the quality of data.

“We’re increasingly becoming more active in tackling economic crime because unfortunately the UK register is used for illegal purposes,” Martin said. “It can be extremely frustrating because these people aren’t even customers of Companies House, they’ve been affected by someone using their details for illicit purposes,” said Martin. “That’s why the law has to be changed.”

The Companies Act requires Companies House to register data that’s submitted correctly. That has led to instances where people’s addresses have been used or they’ve been appointed as a director without giving their permission. A UKBF member asked about instances where people appear on Companies House with slightly different versions of their name.

“This is one of the loopholes we’ve talked about. I can register a company with Martin Swain spelt with an ‘i’ and register another company spelt with a ‘y’ and I’m the same person doing all of that. At the moment, that’s not illegal. In the future, verification will solve this,” said Martin.

“Unfortunately, this is where the fraudulent people exploit the register and do exactly this kind of thing. It doesn’t go unnoticed, we do have integrity and intelligence teams that track these people within our powers.”

The Department for Business estimated that fraudulent loans amounted to £4.9bn – 11% of the total – as of March. In some cases, this fraud relied on shell companies. Asked about the issue, Martin said: “We’ve been working really closely with the Cabinet Office and HMRC because we recognise there was significant growth in incorporations during the pandemic. Some of those are completely legitimate, but we do know a significant number have been used to exploit government schemes.”

Many of these issues could be helped by ID verification and it’s a key part of the reform. WaveJumper mentioned the point in a thread about Companies House: “A corporate register that fails to undertake even basic checks is a problem. When all that is needed to set up a company is £12, with not even a passport required and it can be done online in under 15 minutes.”

Martin said Companies House is working on the issue, including talking to ID providers, other government departments and countries that have ID systems in place. The speed of the changes is subject to legislation. If that happens in the next 12 to 18 months, it’s likely ID checks will be introduced a year after that, said Martin. At that point, everyone on the register would have to verify within a specific time period.

“We want to simplify the accounts that are filed. There’s a view that there are too many types of accounts. There’s also criticism that they don’t include relevant information for people to form a view on the company,” said Martin, adding they will be able to share more information on the plans after government consultations. The more we can move people to file digitally, the more information that becomes available. So, Companies House is looking at ways to incentivise people to do that too. There’s also the possibility of the “file once” concept, which would connect HMRC and Companies House filings. Martin said that the issue is still being discussed.

Transparency And Trust: An Interview With Martin Swain is available to view or read online at UKBF and via its YouTube channel.