UK Companies House – 1st Strategic Intelligence Assessment Highlights Red Flags of Crime.

The UK's exceptional position as a global leader in company formations, with a staggering 783,678 in 2022, a remarkable 154% more than the following country, is a source of pride and reassurance. It is a testament to our country's robust business environment. However, this also underscores the urgent need to address significant ML/TF risks due to the low barriers to entry.

Given these facts, Companies House has published its first strategic intelligence assessment. This marks one of the major steps forward for the changes underway at Companies House. The assessment forms part of our work to align more closely with the National Intelligence Model and will underpin the work of our new and expanding intelligence team.

This assessment provides an in-depth analysis of Companies House's key threats and aims to guide future prioritisation, decision-making, risk identification, and mitigation.

Further, this strategic move is part of Companies House’s efforts to align more closely with the National Intelligence Model and integrate into the broader economic crime ecosystem.

Key highlights include:

• One of the key highlights is the Economic Crime and Corporate Transparency Act, which has significantly bolstered Companies House's powers. These new powers empower the agency to reject, remove, or rectify information on the UK company register, greatly enhancing its ability to combat economic crime. This is a reason for optimism in our fight against economic crime.
• Data Sharing: The agency can proactively share data with other government departments and law enforcement agencies to combat economic crime more effectively.
• The assessment underscores the importance of a strategy based on the ‘4P approach’—Prepare, Prevent, Pursue, and Protect—to effectively address threats. This comprehensive approach guides us in all aspects of combating economic crime.

The report also reveals alarming trends in corporate structure abuse. Here are the key red flags we all need to watch for:

1. SCALE OF MONEY LAUNDERING

1. Scale of UK company-facilitated money laundering is severely underestimated
2. NCA estimates a realistic possibility of £100+ billion annual ML impact
3. High-end ML through the financial sector, particularly concerning

2. MASS INCORPORATIONS RED FLAGS

1. 1. 183% increase in requests to remove director details (2020-2023)
   2. Surge in "company creation tourism"
   3. Pattern: Companies dissolved after 12 months with minimal interaction
   4. 19.3% year-on-year increase in incorporations (2022-2023)

3. EMERGING THREATS

1. 1. Identity theft escalating: 3x more requests to change details in Q2 2022 vs Q2 2021
   2. "Company mules": Vulnerable individuals paid to be directors
   3. Deceased persons' details are being used for directorships
   4. Community Interest Companies (CICs) increasingly exploited

4. PROFESSIONAL ENABLERS CONCERNS

1. 1. Formation agents offering services below the official £50 fee
   2. Due diligence is often treated as secondary to commercial interests
   3. Address "squatting" at formation agents' premises
   4. Lack of verification requirements enabling fraud

5. ACTIONS FOR FINANCIAL CRIME OFFICERS:

1. 1. Enhanced due diligence on UK companies less than 12 months old
   2. Verify director identities beyond Companies House records
   3. Cross-reference addresses against known formation agents
   4. Monitor for multiple companies linked to single directors. Watch for quick director/address changes post-incorporation.

Source

(1) Companies House publishes the first strategic intelligence assessment. https://www.gov.uk/government/news/companies-house-publishes-first-strategic-intelligence-assessment.

(2) Companies House strategic intelligence assessment - GOV.UK. https://www.gov.uk/government/publications/companies-house-strategic-intelligence-assessment/companies-house-strategic-intelligence-assessment.