The UK’s Companies House has released its third report on the implementation and operation of Parts 1 to 3 of the Economic Crime and Corporate Transparency Act 2023 (ECCTA). The report covers progress over the last 12 months, including its enhanced collaboration with the Insolvency Service and His Majesty’s Revenue and Customs. ECCTA introduced important changes in the fight against financial crime, and Companies House is expected to play an increasing role in combatting and seeking to reduce the UK’s exposure to fraud. These periodic reports from Companies House shed some light on its enforcement priorities and actions.

Role of Companies House in tackling fraud

Practitioners are all too aware of the widespread attempts to use Companies House to provide cover for fraudulent activities, including through false filings, straw man directors, and use of shell companies to conceal criminal conduct. According to the report, 50% of Companies House register abuse relates to fraud and another 25% relates to illicit finance, including money laundering and sanctions evasion.

However, the introduction of updated enforcement guidance by Companies House in late 2024, alongside greater powers of investigation, enforcement, and the imposition of increased civil financial penalties has established a renewed and engaged Companies House that is responsive to company obligations and failings. The report provides an update on the steps taken to tackle economic crime and calls out address misuse (i.e. the registering of companies to an inappropriate address) as a particular compliance and enforcement focus.

In order to improve the proportion of legitimate users of Companies House, over 750,000 default letters in relation to mandatory ID verification have been sent by Companies House, with casework starting on potential Court action and some cases referred to the Insolvency Service. In addition, 783,000 Authorised Corporate Service Providers have been verified, and several thousand penalty warning notices have been issued for failing to register or update on the Register of Overseas Entities. To “cleanse the register,” Companies House has also removed from the register 119,000 officer and 95,200 People with Significant Control addresses; 22,900 documents; and 151,000 misused registered office addresses. It has also placed 920 companies on the pathway to expedited strike-off and issued 1,354 penalty warnings to “serially non-compliant companies” who have not filed an annual confirmation statement.

Dealing with the bad actors behind the kinds of enterprises that use Companies House to provide cover for fraudulent activities can be like playing whack-a-mole – as soon as one fraudulent entity is closed down, another appears. While practitioners may welcome progress in removing fraudulent entities from the Register, the key measure will be limiting the ability to make (mis)use of it in the future. 

With that in mind, it is worth noting the report’s emphasis on Companies House’s sharing of intelligence with other government agencies and law enforcement partners, and its reference to “developing tech capabilities” to help it fight fraud. Companies House, the Insolvency Service, and His Majesty’s Revenue and Customs are now working together in intelligence gathering, risk profiling, and early intervention. New powers introduced by ECCTA underpin this work, and together they are focusing on areas including intelligence sharing, pattern spotting, and “abusive phoenixism,” which is where companies are liquidated to avoid liabilities but continue their business through new entities.

What’s next

The report details some of the recent enforcement activity instigated by Companies House. For example, five companies were shut down by the High Court after filing false, and in some cases forged, accounts claiming turnovers of up to £642 million, despite having no genuine business activity. The Insolvency Service launched the investigation following referrals from Companies House, using its strengthened powers under the ECCTA. Several accounts have since been removed from the register after being deemed factually inaccurate and forged.

Proactive enforcement activity such as this may go some way to helping prevent genuine businesses from being misled by fabricated financial information and protect the integrity of the Companies House register. Accordingly, we should expect Companies House to continue to take an active role in combatting economic crime, with further enforcement action and increased cooperation with other entities.

Also on the horizon is further secondary legislation in relation to limited partnership reform, the Register of Overseas Entities and requirements regarding identity verification, and (in coordination with the Insolvency Service) a new threat-based and intelligence-led system for assessing new cases for investigation, which is a change from the prior insolvency-triggered or complaint-led position.