Company Directors: Identification

Question

Asked by

To ask His Majesty’s Government whether they plan to introduce legislation to require company directors to provide identification of who they are and where they live.

The Economic Crime and Corporate Transparency Act will require that directors, people with significant control and the majority of those who file information with Companies House verify their identity. As part of that process, individuals will be required to provide their usual residential address. Today, we have laid regulations that establish the procedure for identity verification. The new requirements will be introduced in phases, beginning in spring next year.

Before spring next year, 700 new Chinese fake companies will be registered every day. There are streets that have been targeted literally hundreds of times—dozens of times per property. People who have never dealt with this kind of thing before are being threatened with fake invoices. Credit referencing by the credit reference agencies has been impaired, as has the ability to sell houses. Can we have a simple, fast-track system so that householders who are being deluged by this horrendous onslaught of fake companies can remedy it with Companies House and cleanse their records immediately—within days—rather than in the six or eight months that it currently takes?

I am grateful to the noble Lord for making those points. As I said, today we have introduced the statutory instrument that will enable us to clean up the register, but since 4 March we have already removed details that we thought were erroneous to the tune of 12,600, which is slightly more than we thought. If you are called, for instance, Jack Hanson and your name is being erroneously used from your address in Worcestershire, that is now being corrected by the registrar of Companies House. I have communicated with Companies House today and it is progressing extremely rapidly in solving this problem.

Since 1904, no such significant reform of Companies House and how people register their companies, their addresses and their verifications has been undertaken. The Government have done more than any other for over 120 years to make sure that we crack down on fraud and corporate crime and ensure that our companies register is indeed verifiable.

The Minister will remember that during the passage of the Economic Crime and Corporate Transparency Act last year, we had a lot of debates on how to tackle the problem of nominees being used to hide shareholders’ real identities. During ping-pong on the Bill, he rightly referred to

“what we perceive to be an industry of nominee service providers prone to acting unlawfully”.—[Official Report, 11/9/23; col. 685.]

As a result, the Government introduced a power to make regulations that would impose obligations on nominees to enable companies to find out who their persons of significant control are. Can the Minister please tell us whether HM Government still intend to make such regulations? If so, when? If not, why not?

I thank the noble Lord for his question and his extremely collaborative input in the ECCT Bill over the past year or so. The statutory instrument that we are introducing today looks at the identity verification checks that ACSPs will have to undertake. As he will know, ACSPs are well covered by their various industry bodies, and, as I said, we have done an enormous amount to ensure that information on the register in Companies House is now true and verifiable. He will also know that we have gone even further to ensure that people with significant control are caught by the new regulations.

My Lords, the previous Parliament passed an amendment to extend to the overseas territories of the United Kingdom the legal obligation to have a company register show beneficial ownership and to make that register open to public inspection. Can the Minister let the House know what progress there has been in making the British Overseas Territories, such as the Cayman Islands and the British Virgin Islands, comply with our obligations and open a register of beneficial ownership?

I thank my noble friend for that point. We are making very good progress and we collaborate with all such jurisdictions. There is more work to be done. A consultation on how much identity can be published has concluded recently, and we will report back to the House when we have our own findings that are appropriate for these measures.

My Lords, sunlight is the best disinfectant. Andrew Mitchell said recently that over 40% of laundered money globally passes through London. How satisfied are the Government that the overseas territories and the Crown dependencies are indeed making progress on registers? Surely they are defying the Government.

I am afraid that I will push back slightly on the noble Lord’s point. We have had extremely high degrees of collaboration with the overseas territories. We are now very clear on who the beneficial owners are of land in this country, and, as I said, we have just completed a consultation that will allow us to go further in ensuring that everything is extremely transparent. I truly believe that real progress has been made, without impinging on the ability of legitimate businesspeople to open companies, run their businesses, make profits and grow the economy.

My Lords, I agree with the Minister that some progress has been made, but a great deal more is required. There are somewhere between 4.5 million and 5 million companies registered with Companies House, and they also need to be cleaned up. Can the Minister tell us how Companies House is getting on with that and when we will know for sure that all those companies are what they say they are?

I appreciate the noble Lord for pointing back to my previous answer about the 12,600 or so companies that have had their identities checked, expunged, changed or verified. That is clearly a significant starting number, which we expect will increase over the next year or so as Companies House deploys the £50-odd million that we gave it to introduce new systems to hire new people. That goes hand in hand with the 475 new economic crime prevention officers we have hired and the £400 million we have dedicated to fight economic crime between 2023 and 2026.

My Lords, I congratulate the noble Lord, Lord Mann, on his Question. I stand here today as a victim of identity theft. I was listed as a director of a bogus company back in 2021 and became aware of that only recently. I can tell the House that it was not an easy exercise to have my name removed from the Companies House register. Will the Minister outline to the House what assistance the Government provide to the many people who find themselves in a similar position? I declare that unfortunately I have no interest in the goldmines in Ukraine which are listed.

I apologise to the noble Lord for the discovery that he does not have a significant interest in a goldmine. I am sure it will be something he would not want corrected on the register but I am pleased to say that now Companies House actually has the power to make common-sense changes, effective immediately. I assume that there is a process that requires some additional verification but Louise Smyth, the registrar, is particularly focused on this issue. It was something that was raised continually in the debates. For many people, the situation where they found themselves erroneously registered as directors or their address as a company’s address has been extremely traumatic. I am glad that we have now solved this problem with the 12,600 or so companies that we have taken action on, which is a good start, and we expect more to continue. I appreciate the anecdote.

My Lords, registering a UK company costs as little as £50. Companies House, as at today, does not verify the names and addresses supplied by applicants. It was recently reported that nearly 40% of money laundered in the world is going through the UK, and London in particular. Can the Minister tell the House how much of this laundered money goes to shell or ghost companies?

I am grateful for that question. It is certainly work that we continue to do. I do not have that information to hand. The figure mentioned by the noble Lord seems like an incredibly high amount and a surprisingly large number. But the reality is that there is clearly economic crime in the system and we have done everything we can to remove that. I stress to the House the incredible cross-party consensus that we built around the Economic Crime and Corporate Transparency Bill to ensure exactly this. We have gone further than any Government for the past 120 years and I think we should get some credit for it.

My Lords, there are thousands of people in this country now of whom there is no identification by the state. It applies not just in companies but in so many areas. If you know anything about the Chinese community, you will know that there are literally scores and scores of people there who do not exist as far as the UK is concerned. As we are seeking to work together, is it not time that we return to trying to produce a proper digital identity scheme for the whole of the country?

I am delighted to say that the introduction of ID cards is not a component of this Question, as far as I am concerned. However, I should say that Companies House now will require electronic verification, so one will have to provide registered, nationally approved identity. One has to have one’s photograph taken. Importantly, to make life easier for businesses, we are going to have an effective digital system. So one has one login ID, however many directorships one has or companies one is involved in, whereby we can track people. For businesses and individuals, the system will be extremely simple.

My Lords, one area where open registers and public registers do not exist is for companies in freeports. Have the Government taken another look at this set of issues? Of course, those companies also do not have the normal tax and customs checks over their various activities. Does the Minister intend to link up registers of freeports with Companies House?

I beg to push back against the noble Baroness’s question. All companies in this country have to register and all have to go through similar processes. Freeports are no different and it is important to quash the idea that somehow there is a free-for-all in freeports. There are still checks. There is still our own English national law framework and all the other components that make sure that these are very exciting opportunities for companies which want to set up in this country. They cannot avoid their obligations. What they can do is profit from the opportunity.