Digital Identity Verification plans following reforms

Following the Economic Crime and Corporate Transparency Bill as it continues to make its way through parliament, Companies House announced it’s de-velopment of a new digital identity verification process which will be introduced as an additional safeguard following numerous reports of fraudulent company registration in recent years.

What will digital identity verification involve?

Writing in a blog post from the 12th of December, Andrew Williams, Identity Verification Im-plementation Lead for Companies House, stated that going forwards anyone setting up, run-ning, owning or controlling a company in the UK will need to verify their identity. 

Existing company directors (or equivalent) will also need to verify their identity within a limited time window which will be dictated in secondary legislation. 

There will be two options for verifying identity: 

• Directly with Companies House - This will be done through a digital service which links an individual’s primary identity document (such as a passport or driving license) to the individual. For those who cannot access or use the digital method, an alternative will be provided. This route will incorporate digital face matching technology, and is expected to be a very quick process in the majority of cases.
  
  
• Through an Authorised Corporate Service Provider (ACSP) - This method will utilise an intermediary such as a legal adviser, accountant or a company for-mation agent instead.
  
  In order to act as an ACSP, these intermediaries must be registered with a supervisory body for the purposes of meeting anti-money laundering regulation, and must also have an existing du-ty to perform due diligence on all clients. ACSPs should also register with Companies House to confirm their qualification to provide such services, before they can submit any new company formations or filings.
  
  On successful completion of your identity verification, Companies House will hold your verified status for all future filings, with re-verifications only required under certain circumstances such as a change of name. 

What if I don’t verify my identity with Companies House?

Criminal sanctions and civil penalties will be carried out for individuals who do not comply, in addition to annotations to the register indicating as such.

Why is identity verification important?

All organisations will benefit from the new requirements, as they can be assured that information on the register has been verified, is accurate, and most importantly, is genuine. 

It is also hoped that this will prevent the vast majority of fraudulent or-ganisations from being created in the first place, and in addition, identi-fy those that already exist which are likely to be. 

Companies House Fraud

Transparency International UK, an anti-corruption group, conducted research between 2017 and 2019, finding that 929 British companies on the register during this time had been involved in 89 cases of money laundering and corruption. In addition to this, 17,000 legal entities were involved in some kind of economic crime. The estimated cost of this damage so far is approximately £137 billion. 

Until now, Companies House had no powers to verify, question or check information which was used to form a company on the register, it is hoped that the new identity verification measures will have a profound effect on Companies House going forwards. 

Due Diligence, AML, KYC Checks

These measures will also assist other organisations who use Companies House data as part of their due diligence process, anti-money launder-ing or know-your-customer (KYC) checks, giving them greater confi-dence and trust in the data that is provided. 

The Advisory Bureau will continue to monitor for updates in relation to the implementation of the new Companies House checks and the pas-sage of the Economic Crime and Corporate Transparency Bill through parliament.