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Company Identity Fraud and UK Formations

 

There has been much commentary on the risks to the public of having their identities stolen and used to perform illegal acts against them or others. What remains relatively unknown to some are the challenges which face companies in ensuring that they are not the subjects of identity fraud.

Risks of Identity Fraud

The nature of the risk to companies exists largely in the way that changes within the business can be communicated to Companies House, the body which regulates UK company formations activities.

The appointment of a company director, for example require that a Form AP01 is sent to Companies House either electronically or in the traditional paper format. Once it is received, it is entered on the official register and available for all to see. Companies House does not confirm the appointment with the existing directors or in itself notify the company that the appointment has taken place.

It is the latter paper forms which have provided opportunities for unscrupulous individuals to appoint themselves as directors of companies without their knowledge.  They are then able to represent the company and conduct whatever business they are able to on its behalf.

The problems of company identity fraud have not gone unnoticed by the authorities who have introduced measures to authenticate changes made to companies. These measures are not however mandatory and rely on individual companies applying them.

Combating Company Identity Fraud

Every company formation undertaken in the England, Wales and Scotland today is provided with a Companies House Authentication Code. These were introduced to promote online filing of corporate documents and to ensure that each change made to a company was validated.

Once a company has set up this security feature, Companies House will not longer accept paper forms purporting to be sent on behalf of the business.

A company monitoring service is available from Companies House Direct customers (who are usually Accountants, Solicitors and Credit Agencies) which sends alerts in the event that any document is filed in relation to a specific company.

Thus, if an erroneous appointment were to be made, the existing directors could be alerted straight away and take the necessary corrective action.

I am aware of several companies where identity fraud has happened and it was not until the annual return was sent that they became aware of an unknown director on their board.

Companies House does have ambitions to withdrawn paper filing altogether, but until that becomes a reality, each company should access the risk and take appropriate steps to minimise them.

All of our UK company formations include a Companies House authentication code.

 
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