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Concerns Raised About Companies House ‘Money Laundering Loophole’

Sep 01, 2018 Red Flag Alert Updated On: October 10, 2023
Concerns Raised About Companies House ‘Money Laundering Loophole’

Serious concerns have been raised that a regulatory loophole could be enabling international money launderers to register their businesses with Companies House in the UK as part of their criminal activities.

The fear is that criminals have been able to incorporate directly with Companies House as a means of avoiding due diligence and making it easier to launder money from various parts of the world. 

Research carried out by Transparency International identified 766 companies registered in the UK that have been involved in laundering money out of at least 13 countries, with many of them having registered directly with Companies House.

Anyone wishing to officially form a company in the UK via an accountant, solicitor or formations agent must fulfil a number of due diligence requirements in line with the government’s recently introduced anti-money laundering legislation.

These requirements though are not made of anyone registering directly via Companies House, which makes it possible for companies to be formed without their creators having to properly identify themselves.

The result is a loophole that means criminals can potentially funnel money through companies they create online via government websites using false identity details and newly-created email addresses.

Speaking to AccountingWeb about the issue, David Stevens, integrity and law manager at the Institute of Chartered Accountants in England and Wales (ICAEW), said that his organisation has been concerned about the matter for some time.

“Regulation in the private sector is being ramped up, with TCSPs [Trust and Company Service Providers], accountants and other service providers diligently carrying out the checks required by law,” he said.

“And yet there is a ‘no-questions-asked’ approach when you go to Companies House directly.”

Mr Stevens went on to explain that there are potentially serious problems with Companies House’s software systems when it comes to incorporation applications, which apparently only check for full completion of the relevant forms rather than for accuracy or coherence of information. 

According to Transparency International’s investigations, a key part of the problem is a lack of resources being committed to Companies House to help it fight against money laundering attempts and the associated criminality.

Indeed, the organisation estimates that just six individual members of Companies House staff are currently responsible for overseeing activities among more than four million UK companies.  

Published by Red Flag Alert September 1, 2018

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