Transparency is vital for a robust and healthy economy.
However, there is substantial evidence of companies registered with Companies House being used to facilitate money laundering through a combination of simple incorporation and inadequate due diligence.
Despite recent improvements to the UK's corporate transparency framework legal entities are still vulnerable to abuse by money launderers. The Department for Business, Energy and Industrial Strategy (BEIS) has this month closed the Corporate Transparency and Register Reform consultation on options to enhance the role of Companies House and increase the transparency of UK corporate entities. These steps are part of a plan to mitigate the risk of corporate structures being used to launder the proceeds of corruption and organised crime, including where the structures are operated and controlled overseas
The Association of International Accountants (AIA) has responded to the consultation published in May 2019 on behalf of our members and in the wider public interest. As a professional body supervisor under Schedule 1 of the Money Laundering Regulations 2017 we supervise and monitor accountants for compliance with the regulations and act where necessary to remove the benefits of non-compliance and deter future non-compliance.
Overall, AIA argues that these reforms should work to improve transparency and strengthen the fight against fraud and money laundering. The reforms suggest a positive step forward towards improving the accuracy of the information held at Companies House and combating economic crime. There could, however, be additional burdens raised on businesses regarding identity verification and filing, which may increase costs both in terms of time and money.
The proposed reforms are arguably the most significant since the UK company register was created in 1844 and therefore due consideration should be given to the timescales required to pass legislation that will include appropriate sanctions for individuals or companies failing to adhere to additional filing and verification regulations. The suggested reforms will require significant amendment to the existing Companies Act 2006 and a radical overhaul of the current Companies House structure and practices.
Substantial practical implications could be experienced by individuals with a responsibility for administering or filing on behalf of companies in the UK. Nevertheless, AIA stresses that the proposed reforms should not place a prohibitive burden on users of Companies House that would affect both the cost and timing of processing documents, applications and registrations: a significant implementation period will be required.
AIA considers that the majority of the changes proposed within the consultation are necessary to ensure that the UK further improves its reputation for corporate transparency and retains its global status as a trusted, transparent place to do business.
Additionally the consultation recommends that Companies House have a greater role in checking registrations and director identities. The introduction of the 5th EU Anti-Money Laundering Directive brings an additional requirement for accountants to check that a client has filed beneficial ownership details with Companies House and report any discrepancies identified, and these reforms link directly to these amendments.
Read the full response here.