Companies House Publishes First Strategic Intelligence Assessment

24th October 2024

Analysis aims to help agency's understanding of the key threats and guide approach to tackling them.

Companies House has today published its first ever strategic intelligence assessment as the agency steps up its work to help tackle economic crime.

Strategic Intelligence Assessment

The strategic intelligence assessment gives an in-depth analysis of the key threats Companies House faces. It'll guide future prioritisation, decision making, risk identification and mitigation.

The assessment will be followed by a new control strategy, which will outline recommendations and action plans.

As part of the Economic Crime and Corporate Transparency Act, the company registrars for England and Wales, Scotland and Northern Ireland now have new and enhanced powers.

These include the power to proactively share data with other government departments and law enforcement agencies.

In her foreword to the assessment, Companies House chief executive Louise Smyth said, "I am pleased to introduce our first ever 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 more closely align to the National Intelligence Model and will underpin the work of our new and expanding Intelligence team.

"I'd like to thank our strategic partners for their valued insights, which have been used to shape our assessment and are helping us to continue our integration into the wider economic crime ecosystem."

A few extracts from the report

Chief executive's foreword
I am pleased to introduce Companies House's first ever 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 more closely align to the National Intelligence Model and will underpin the work of our new and expanding intelligence team.

I’d like to thank our strategic partners for their valued insights, which have been used to shape our assessment and are helping us to continue our integration into the wider economic crime ecosystem.

We are at an exciting developmental phase. The Economic Crime and Corporate Transparency Act 2023 (ECCT Act) fundamentally changes the role of Companies House. We will now have the powers to reject, remove or rectify information on the UK company register. We’ll also have wider ranging powers to analyse and share data and information. We will no longer be a passive acceptor of ‘duly delivered’ documents, but will be more proactive in ensuring the quality and accuracy of the company registers.

The Economic Crime and Corporate Transparency Act gives the 3 UK registrars clear objectives. To:

ensure that anyone who is required to deliver a document to the registrar does so (and that the requirements for proper delivery are complied with)
ensure information contained in the register is accurate and that the register contains everything it ought to contain
ensure that records kept by the registrar do not create a false or misleading impression to members of the public
prevent companies and others from carrying out unlawful activities or facilitating others to carry out unlawful activities
It has become even more clear in recent months that the scale of abuse of the UK company register continues to grow. I am determined that with our new powers we will act as quickly as possible to address these issues - taking action ourselves and supporting our law enforcement and other public partners.

Our strategic intelligence assessment provides analysis of the key threats being faced by Companies House. It will be followed by our control strategy outlining recommendations and action plans.

These plans will be based on a 4-part approach widely adopted in law enforcement called the ‘4P approach’, which focuses on:

preparing for the threat
preventing the threat wherever possible
pursuing those who undertake activities which contribute towards the threat
protecting against the threat
We know that we have gaps in our understanding of the threats. We’ll be looking to continue to engage with stakeholders and partners to help to fill these gaps.

This strategic intelligence assessment will drive the direction of Companies House and underpin the application of our new powers across the organisation. It will guide prioritisation, decision making, risk identification and mitigation. This will support businesses and the wider UK economy, by helping us provide an accurate, responsive register of corporate entities.

These are new and exciting times for Companies House. I am determined to play our part in ensuring the UK company registers are not abused.

Louise Smyth
Chief executive
Companies House

Register of Overseas Entities (ROE)
Thirty thousand entities were registered on the Register of Overseas Entities by December 2023 - over 90% of the total register. It’s almost certain that these registrations have:

reduced the threat posed by hiding or ‘obfuscation’ of foreign ownership of UK land and property
improved transparency, ensuring relevant data is available to law enforcement and other relevant public authorities
It’s almost certain that the success of the registration of overseas entities will be based on both:

effectively implementing the Register of Overseas Entities
rigorous ongoing enforcement activities against non-compliance
Neither aspect on its own will provide the solution.

It’s highly likely that the UK’s international reputation will be damaged by:

failure to adopt a risk-based approach to considering threats posed by beneficial ownership of legal persons
competent authorities not being able to access data relating to overseas ownership in a timely manner
Background
The Economic Crime (Transparency and Enforcement) Act 2022 gave us the powers to create the Register of Overseas Entities (ROE). This was a response to the sharp increase in overseas property ownership in the UK and international tensions resulting from Russia’s invasion of Ukraine.

Between 2010 to 2022, overseas property ownership in the UK tripled. By November 2022, 1% of all UK properties were owned by overseas entities.

Wealthy investors often buy property through corporate entities, including those offshore. This action, whether deliberate or not, can hide beneficial ownership and provides potential for money laundering opportunities.

A 2022 assessment estimated that money laundering accounts for up to 5% of global gross domestic product (GDP), equivalent to 2 trillion US dollars.

ROE scheme
The ROE scheme was introduced in August 2022. It’s part of the government’s strategy to tackle global economic crime and strengthen the UK’s reputation as a place where legitimate businesses can thrive.

The scheme requires all overseas corporate structures who buy, sell or transfer land or property in the UK to:

register with Companies House
declare its beneficial owners or managing officers
This also applies retrospectively to overseas entities who bought property or land on or after:

1 January 1999 in England and Wales
8 December 2014 in Scotland
These overseas entities had to register with Companies House and tell us who their registrable beneficial owners or managing officers are by 31 January 2023.

Overseas entities that have not registered cannot transfer, buy or sell land or property in the UK, preventing illegal activity. We’ve started taking enforcement action against entities that have not registered.

Scale and distribution of overseas entities
Approximately 46% of properties that are registered as owned by overseas entities in the UK are in the London area. Other significant groups of overseas property ownership correspond with different large cities.

What’s next
Threats remain following implementation of the Register of Overseas Entities. We’ll monitor these over the next 12 months.

Companies House is vital in implementing the Financial Action Task Force (FATF) standard in the UK. The next UK assessment is scheduled for 2027. The data collection period to inform this assessment has already started.

Implementing FATF standards also addresses issues of politically exposed persons and those individuals looking to evade sanctions control.

Limited liability partnerships and limited partnerships
Companies House also regulates limited liability partnerships and limited partnerships. We’ll keep monitoring threats specific to their operation. The ECCT Act gives us more power in this area, for example the power to deregister limited partnerships.

Other international influences
It’s highly likely that mass incorporations pose a threat to Companies House. Work is ongoing to fully understand the scale of the issue.

It’s highly likely that ‘company creation tourism’ and the personal details of foreign nationals are being used to:

deliberately hide the true ownership and control of UK limited company structures
assist money laundering and other criminality in the UK and overseas
Mass incorporations
Mass incorporation is when many companies – hundreds or even thousands – are registered in a short time and connected through an identical entity.

We’ve identified mass incorporations of UK limited companies in our records. They’re often dissolved 12 months later after minimal interaction with Companies House. Very often we’ve found no direct criminality in relation to these companies.

Work is ongoing to fully understand the scale and reasons for this behaviour. It is likely some partial explanations are:

limited companies using online sales platforms to sell counterfeit or poor quality goods – mass incorporations allow criminals to switch between companies when intervention activity occurs
potential sale or acquisition of personal details from overseas students prior to their return abroad
using UK corporate structures for global legitimacy, to appear respectable, which could help carry out legitimate business or criminality
a reaction to changes in government policy or legislative change – we’ve noticed increases in incorporations following domestic and international announcements or enactments
There’s a current general trend of increased incorporation. For example, an increase of 19.3% between comparative weeks in 2022 and 2023.

It’s a realistic possibility that at least some of this increase can be explained by individuals looking to create companies before legislative change. These individuals perhaps do not understand that new legislative requirements will still apply to their company, even if the company was created before the change.

Company creation tourism
Law enforcement have shared with us examples of ‘company creation tourism’. This is understood to involve organised crime groups (OCGs) offering holidays in the UK in exchange for letting their personal details be used to:

incorporate limited companies
hide who’s controlling the company by becoming ‘stooge’ directors
2. Money laundering and UK-based organised crime groups
It is almost certain that the scale of money laundering through UK limited companies is underestimated. There’s no assessment of its value currently available.

It is highly likely that limited company structures within the UK are widely used to facilitate many types of serious and organised criminality. Work is ongoing to fully understand the scale of the issue.

Money laundering describes how the money from illegitimate activities or crimes is transferred into the legitimate economy. Although no absolute figures are available, the National Crime Agency (NCA) has assessed that there is a realistic possibility that the scale of money laundering impacting the UK annually is over £100 billion per year.

The part that previous legal frameworks and UK corporate structures have played in the commission of money laundering is widely recognised.

In partnership with The Insolvency Service, we’re creating 2 new intelligence teams to tackle money laundering, supported by £20 million of funding between 2023 and 2026 from the Economic Crime Levy. These teams will improve our understanding of how UK companies are misused to launder the proceeds of crime.

Types of money laundering
The main types of money laundering are:

high-end money laundering
trade-based money laundering
cash-based money laundering
High-end money laundering
High-end money laundering involves the laundering of funds, wittingly or unwittingly, through the financial sector and related professional services.

Within Companies House, this threat can mean overseas entities purchasing land and property to:

obscure beneficial ownership
enable illicit funds to be transferred into the UK economy or financial sector
Trade-based money laundering
Trade-based money laundering means moving illegal funds through the international trade system to legitimise them, which we’ve identified as a threat.

This can include:

wrongly describing goods on purpose
invoice discrepancies
pricing irregularities
shipments that only exist in paperwork, known as‘ghost’ shipments
UK limited companies can facilitate trade-based money laundering by providing vehicles through which trade-based money laundering can be conducted.

Cash-based money laundering
Cash-based money laundering often uses couriers to transport physical cash and business activities to disguise the integration of funds into the legitimate economy.

Limited companies in the UK are used to integrate illegally acquired cash into the legitimate UK economy. Law enforcement give examples of cash-based limited companies being used in this way, such as nail bars and car washes.

We understand that abuse of corporate structures contributes towards the threat posed by terrorist financing. However, our understanding of the nature and scale of this activity is very limited.

Other serious and organised criminality
It is highly likely that limited company structures within the UK are widely used to facilitate many types of serious and organised criminality. Work is ongoing to fully understand the scale of the issue. Law enforcement give examples relating to:

Class A drug supply
fraud
organised immigration crime
modern slavery
Limited company structures also facilitate investment fraud.

Illegal drugs: case study
A UK limited company was established with the purpose of smuggling drugs. In 2021, 514 kilograms of cocaine worth £57 million was intercepted while being exported overseas from the UK. Assets of more than £3 million were identified and connected with these criminal activities.

Fraud: case study
A network of apparently unconnected limited companies were used in a business-to-business tele-sales scam concerning long-term energy contracts. Misleading details were provided to customers before the call was transferred to another operator who then formed a verbal contract with victim.

The business-to-business element ensured that no cooling off period was applicable. Organisations targeted included a charity offering support to children suffering from cancer.

Analysis revealed that one individual was connected to all the limited companies. According to press reports at the time, a juror was allegedly offered a bribe and threatened in exchange for a particular plea.

3. Exploitation of the public
It is highly likely that details from future external data breaches could be used in limited company incorporation activity. It is unclear the extent to which proposed identity verification will mitigate against this threat. This may depend on the sophistication of the data breach and details obtained.

It is highly likely that:

using someone else’s details when creating limited companies, whether that person is complicit or not, is an increasing problem
work is ongoing to fully understand the scale of the issue
Exploitation of members of the public occurs through the abuse of Companies House processes.

This can be seen directly in the use of personal details of others in the incorporation or director appointment processes.

The Economic Crime and Corporate Transparency Act will over time introduce identity verification processes for everyone who presents documents to Companies House. This will help to mitigate against this risk and it is highly likely that the scale of the issue will reduce.

Exploitation of the public is also seen indirectly through using Companies House structures and processes to facilitate organised immigration crime and human trafficking.

Work is ongoing to fully understand the scale of abuse of community interest companies. However, the community benefit element of the organisation provides opportunities for individuals or communities to be exploited.

Direct exploitation, including appointment of director or use of address without consent
Current lack of verification means that:

directors of limited companies can be appointed without consent
addresses can be used without confirmation of any association with a limited company
We recognise that the introduction of the Economic Crime and Corporate Transparency Act will bring new powers to Companies House. Over time this will enable us to introduce verification of identification to our processes.

Scale of data exploitation
In the period 2020 to 2023, requests to remove director details increased by 183%. This figure relates only to instances where a change has been requested. It is therefore highly likely that the true scale of the issue is significantly higher with many instances remaining undetected or unchallenged.

Data misuse issues of this scale pose a huge risk to Companies House. Identification verification and the opportunity to challenge information provided by the ECCT Act will help to improve our integrity.

Causes of data exploitation
Some of the known causes of this kind of data exploitation are:

identity theft
purchased identity details
malicious intent
identity details of people who have died
addresses
Identity theft
We received over 3 times more requests to change details between April and June 2022 compared to the same period in 2021.

It’s highly likely that this is because of 2 widely reported data breaches of external employee details. Details from these data sets were used to incorporate 1,020 limited companies without the individuals’ knowledge.

Purchased identity details
Law enforcement have provided examples of individuals being paid to operate as ‘company mules’.

We define ‘company mule’ as individuals being paid, or otherwise being complicit (with or without coercion) in activity which leads to their personal details being used in limited company incorporation or being appointed as director of such organisations.

We’ve seen some examples of foreign students’ details being purchased, especially in circumstances when departure from UK after graduation is anticipated. Exploitation in these cases is more limited as the individuals are considered complicit – although arguably it still exists.

We’re particularly concerned about payments to vulnerable individuals. For example, instances of individuals with learning difficulties who lacked the competence to understand the responsibilities of being a company director.

Malicious intent
There have been a few high profile examples where an individual holds a personal grudge against a corporate entity. They use Companies House processes to target the entity.

Identity details of people who have died
There are people who we understand have died showing as directors on the Companies House register, sometimes appointed after their death. Work is ongoing to identify the scale of the issue and relevant records, and rectify the register.

Addresses
There are examples of invalid addresses being used for fraudulent companies. Many agencies consider the selection of addresses to be indiscriminate, identifying no trends or patterns.

It is likely that vacant properties are attractive targets, as letters from us may not be identified for some time. For similar reasons, unoccupied residential premises such as flats above retail outlets have also featured as fraudulent addresses.

Victim care
Our response to fraudulent appointment of directors and addresses not associated to entities is very process driven.

The current position places the responsibility on the person who has been fraudulently appointed, which includes a lot of administrative effort. The speed with which registration is completed (and the proactive approach to maintaining this) is not matched when queries are raised regarding accuracy of details used to incorporate.

We recognise that this is a complex area and that all allegations of fraudulent appointment may not be genuine.

The ECCT Act gives us opportunities to change our approach and reduce the administrative burden of getting the register corrected.

Community interest companies
Community interest companies (CICs) are limited companies whose business relates to community benefit rather than private gain. CICs cannot be political in nature but can have socio-political objectives.

CICs now fall under the remit of Companies House. The Registrar of Companies for England and Wales also holds the position of Regulator of CICs.

CICs need to complete a community benefit statement when they incorporate. During their operation, a legal clause called an Asset Lock prevents the assets of the company being used for private gain, rather than the purpose stated on the benefit statement.

Companies House considers each application to form a CIC individually. About 3,000 CICs are created each year, totalling over 31,000.

Current threats in the area of CICs include:

allegations of financial mismanagement, including directors’ pay
CICs not engaging in their stated purposes
Other challenges relate to assessment of annual community benefit returns and enforcement issues.

For the whole report go to
Strategic Intelligence Assessment