Why does Companies House help scammers?
Tens of thousands of people have businesses started in their name by scammers who then use the details to take loans or defraud consumers.
Victims live forever in fear of debt collectors and the police who associate them with bad companies and loans. This growing type of fraud, which is part of a larger criminal epidemic sweeping the country, is meeting no resistance from Companies House, the country’s official registry of more than four million public limited companies.
Despite government promises to strengthen its powers, Companies House is powerless to verify the veracity of information provided by anyone starting a new business.
Increase: Tens of thousands are seeing businesses started in their name by scammers who then use the details to take 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 jumped 30% in the first half of this year to reach £ 754million. For months, the Department of Defense campaigned for urgent action for “Nail the Scammers”, including coordinated action by police, government and banks to tackle the wave of crime head-on.
Identity fraud – the kind perpetrated by those who start businesses on behalf of innocent consumers – has increased.
Registered cases increased by a quarter in the first half of this year. Experts believe this is in part because scammers are finding ways to get their hands on financial aid available to legitimate businesses struggling during the pandemic.
One of the victims is Michael Waller, 77, director of a printing company in Kent. “I was shocked to receive a letter from Companies House in May congratulating me on becoming the manager of the new venture Capital Financing Ltd,” he says. “It said that as a manager, I was legally responsible for its management.”
Michael had never heard of capital funding, doesn’t know what he’s doing (if anything), or who’s behind it, and now faces a battle to have his details removed. So far, Michael is not aware of any loans taken out on his behalf. But he fears it’s only a matter of time.
How can this happen?
Facilitating this increase in identity fraud is the ease with which anyone can set up a business in the UK.
Anyone can register a business at Companies House in minutes for just £ 12 – without having to provide proof of identity. There is also little to prevent fraudsters from entering information they like – for example, details of alleged directors of the company and their addresses.
The register is littered with false and fraudulent information. Quick research reveals that registered business directors include Adolf Tooth Fairy Hitler and Stalin Stalin. Companies House simply records all information provided – it has no legal authority to verify or question it.
In fact, Martin Swain, director of strategy, policy and external communications at Companies House, recently admitted: “Even though sometimes we know that the information is incorrect or potentially fraudulent, the registrar is legally obligated to keep it. save.
After Michael Waller was fraudulently registered as a business manager, he decided to start a business on his own to see how easy it was to do. He was not asked for any ID and, with the help of his computer savvy grandson, the company, called Fraud Prevent Limited, was registered within 29 minutes. Tony Hetherington, the Mail on Sunday consumer champion, said: “The flaw with Companies House is that it is just a library. Everyone has to be honest, which is not the case.
Telling Companies House that a registered company information is incorrect is a waste of time, he said. Once the information is accepted by Companies House, it acquires an air of legitimacy. Banks, for example, will often use it to help them verify a company’s details, accounts, and administrators. Helena Wood is Associate Researcher at the Center for Financial Crime and Security Studies at the Royal United Services Institute in London. She says: “The Companies House register is inadequate and we need to take action to fix it.
“The government was very hesitant, which left victims exposed to identity fraud. It has undermined the reputation of the UK as a place to do business.
There is a plan to strengthen the powers of Companies House. Wood says details are to be included in the Queen’s speech next year.
She adds: “Either the government does not understand that the poor oversight of Companies House is fueling a fraud problem, or it understands, but is willing to prioritize the ease of doing business in the UK.”
Wood believes more people will find out that they have businesses fraudulently registered in their name in the coming months.
“It is likely that companies were created on behalf of others to fraudulently claim billions of pounds in rebound loans and other financial support during the pandemic,” she said. “It would not have been so easy to abuse the system if Companies House had been able to carry out proper checks.”
Lenders typically don’t rely on Companies House data to make a loan. But during the pandemic, when it was vital to provide a lifeline of cash to struggling businesses, standards fell. Loan fraud will cost taxpayers tens of billions of pounds, the MPs’ public accounts committee has warned.
How fraudsters exploit their scams
Once a fraudster sets up a business on behalf of someone else, suddenly a multitude of opportunities for criminal activity open up.
They can use the new business to apply for loans or scholarships that they do not intend to pay back. Fraudsters remain anonymous, so they will not be responsible for the loans. Fortunately, victims will not be asked to repay the loans once they demonstrate that their information has been used fraudulently without their knowledge. But if someone appears to be associated with a bogus company, it can damage the reputation of any real company they are a director of.
WE NEED ACTION TO STOP THE SCAMS NOW
If Companies House were to verify the information received from those wishing to start a business, it would go a long way in combating fraud.
Readers’ champion Tony Hetherington believes anyone who registers a business should be required to provide their National Insurance Number. Companies House could then use it to verify with Revenue & Customs that they are who they claim to be. “It would also prevent fraudsters from registering business leaders who died or emigrated years ago, as is the case today,” he said.
James Jones, of credit reference agency Experian, said anyone who is concerned that their personal information has been used to commit fraud can contact the Cifas fraud prevention department to request that a warning flag be made. added to their credit report – held by the primary credit reference. agencies. He adds: “A warning signal can delay a real credit application, but it can be worth it if it prevents someone from fraudulently taking out a loan on your behalf.”
Companies House offers a free service, PROOF, which allows administrators to protect their business against unauthorized changes to its records. Go to gov.uk/guidance/protect-your-company-from-corporate-identity-theft.
Victims also find it difficult to have fraudulent information removed from the registry. In some cases, Companies House will delete the information, although this will take weeks. Some fraudulent information can only be removed with a court order.
Amber Burridge is the Financial Intelligence Officer in the Cifas Fraud Prevention Department. She warns that there is a second sinister reason why fraudsters can start companies on someone else’s behalf. She says, “Criminals can use a company’s listing at Companies House to add an air of legitimacy to a fraud campaign they are running.
“Many consumers trust the organizations listed. Thus, by registering a business, criminals can often defraud more individuals. ‘ The most at risk are the real business leaders, including Michael Waller. They are targeted because they often have good credit records – so a loan applied for on their behalf has a good chance of being approved.
Company executives also have their personal details – last name, first name, address, month and year of birth – listed at Companies House. These are available for free for anyone to see and use.
Nearly one in five victims of identity theft is a business owner, according to a study 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 worried that a loan will be taken out in her name – or that the police will knock on her door because she is the manager of a fraudulent company.
“It was overwhelming,” she says. “I contacted Companies House, but it would not take any responsibility. He directed me to Action Fraud, but he was not interested because no crime had yet been committed.
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