Why Does Companies House Help Fraudsters?

Tens of thousands of people have companies registered in their name by fraudsters who then use the data to take out loans or defraud consumers.

Victims live forever in fear of collection agencies and the police linking them to untrustworthy companies and loans. This growing fraud, part of a wider criminal epidemic sweeping the country, has met no resistance from Companies House, the country’s official registry of more than four million public companies.

Despite government promises to strengthen its powers, Companies House is unable to verify the veracity of information provided by anyone setting up a new company.

Increase: Tens of thousands of people have companies registered in their name by fraudsters who then use the data to take out loans or defraud consumers

Increase: Tens of thousands of people have companies registered in their name by fraudsters who then use the data to take out loans or defraud consumers

The result, an expert told The Mail on Sunday, is a fraudster’s paradise.

Fraud is now reaching shocking levels in the UK. The amount stolen by such scams rose 30 percent in the first half of this year to £754 million. The MoS has been campaigning for months for urgent action to defeat the scammers, including concerted action by police, government and banks to deal with the crime wave.

Identity theft – the type perpetrated by those who set up businesses on behalf of innocent consumers – has skyrocketed.

The number of registered cases has increased by a quarter in the first half of this year. Experts believe this is partly due to fraudsters finding ways to get financial aid offered to legitimate, struggling businesses during the pandemic.

One victim is Michael Waller, 77, a director of a specialist print shop in Kent. “I was shocked to receive a letter from Companies House in May congratulating me on my appointment as a director of the newly formed Capital Financing Ltd,” he says. “It said that as director I was legally responsible for running it.”

Michael had never heard of Equity Finance, doesn’t know what it does (if anything), or who’s behind it, and now faces a battle to have his data removed. So far, Michael is not aware of any loans taken out in his name. But he fears it is only a matter of time.

How can this happen?

Facilitating this rise in identity fraud is the ease with which anyone can set up a business in the UK.

One can register a company with Companies House in minutes for as little as £12 – without having to present any ID. There is also little to stop fraudsters from entering information they want, for example details about the alleged directors of the company and their addresses.

The registry is littered with false and fraudulent information. A quick search reveals that Adolf Tooth Fairy Hitler and Stalin Stalin are registered business leaders, among others. Companies House simply records all information provided – it has no legal authority to verify or question it.

Martin Swain, director of strategy, policy and external communications at Companies House, recently admitted, “While we sometimes know the information is inaccurate or potentially fraudulent, the registrar is required by law to register it.”

After Michael Waller was fraudulently registered as a company director, he decided to start his own company to see how easy it was. He was not asked for identification and with the help of his computer-savvy grandson, the company, called Fraud Prevent Limited, was registered in 29 minutes. Tony Hetherington, consumer champion of The Mail on Sunday, says: ‘The lack of Companies House is that it’s nothing more than a library. It’s about everyone being honest, which isn’t the case.’

Informing companies that information about a registered company is incorrect is a waste of time, he believes. Once information is accepted by Companies House, it gains legitimacy. For example, banks will often use it to verify details about a company, its accounts and directors. Helena Wood is an associate fellow at the Center for Financial Crime and Security Studies at the Royal United Services Institute in London. She says: ‘The Companies House register is not fit for purpose and we need to take action to fix it.

“The government has gone to great lengths, exposing victims to identity theft. It has jeopardized the UK’s reputation as a place to do business.”

There is a plan to strengthen the powers of Companies House. Wood says details should be included in the Queen’s Speech next year.

She adds: “Either the government doesn’t understand that poor oversight by Companies House creates a fraud problem, or it understands it but is willing to prioritize the ease of doing business in the UK.”

Wood thinks more people will discover in the coming months that companies are fraudulently registered in their name.

“It’s likely that companies were set up on behalf of other people to fraudulently claim billions of pounds in bounce back loans and other financial aid during the pandemic,” she says. “It wouldn’t have been so easy to abuse the system if Companies House had good controls.”

Lenders do not normally rely on Companies House data to grant a loan. But during the pandemic, when it was vital to fund ailing companies, standards dropped. Loan fraud costs taxpayers tens of billions of pounds, the Public Accounts Committee of MPs warned.

How Fraudsters Run Their Scams

Once a fraudster sets up a business in someone else’s name, a wealth of opportunities for criminal activity suddenly opens up.

They can use the new company to apply for loans or grants that they have no intention of paying back. The fraudsters remain anonymous, so they will not hook up for the loans. Fortunately, victims will not be asked to repay the loans once they prove that their information has been used fraudulently without their knowledge. But if someone appears to be associated with a bogus company, it could jeopardize the reputation of a real company that he is a director of.

WE NEED ACTION TO STOP SCAMS NOW

If Companies House verified the information it has received from those looking to set up a business, it would go a long way in helping to fight fraud.

Readers’ champion Tony Hetherington believes that anyone registering a business should be required to provide their National Insurance number. Companies House could then use this to check with the tax authorities whether they are who they say they are. “It would also prevent fraudsters from registering business leaders who died or emigrated years ago, as happens today,” he says.

James Jones, of credit reference agency Experian, says anyone concerned that their personal information has been used to commit fraud can contact fraud prevention service Cifas to ask to add a warning flag to their credit file – in possession of the main credit reference. agencies. He adds, “A warning flag can delay an actual loan application, but it can be worth it if it prevents someone from fraudulently taking out a loan in your name.”

Companies House offers a free service, PROOF, that helps executives protect their business from unauthorized changes to records. Go to gov.uk/guidance/protect-your-company-from-corporate-identity-theft.

Victims also struggle to have fraudulent data removed from the registry. In some cases, Companies House will remove information, although this may take weeks. Some fraudulent information can only be removed with a court order.

Amber Burridge is head of financial intelligence at fraud prevention service Cifas. She warns that there is a second sinister reason why fraudsters can set up businesses in someone else’s name. She says: ‘Criminals can use a company’s listing in Companies House to add a semblance of legitimacy to a fraud campaign they run.

‘Many consumers trust organizations that are on the list. By registering a company, criminals can often defraud more individuals.’ The greatest risk is real business leaders, one of whom is Michael Waller. They are targeted because they often have good credit – so a loan applied for in their name has a high probability of approval.

Company directors also have their personal information – full name, address, month and year of birth – listed with Companies House. These are freely available for everyone to see and use.

Nearly one in five victims of counterfeit fraud is a business leader, according to research by the fraud prevention service Cifas.

Helen Shorthouse, 59, from London, is a director of several legitimate real estate companies. She recently discovered that she had been fraudulently appointed director of a new company, Helen ST Ltd.

She is now very concerned that a loan in her name will be taken out – or that the police will knock on her door because she is the director of a fraudulent company.

“It was disturbing,” she says. “I contacted Companies House, but they wouldn’t take responsibility. It referred me to Action Fraud, but it was uninterested because no crime had been committed yet.”

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