Long overdue changes and new powers are being introduced to the UK’s venerable Companies House. But will they be enough to drive effective change, ask Martin Kenney and Tony McClements?

The UK’s National Economic Crime Centre (NECC) is embracing changes in law enforcement powers brought about by last month’s enactment of the Economic Crime and Corporate Transparency Act (ECCTA). The changes were long overdue and those affecting (bolstering) Companies House are most welcome.

We have been regular critics of Companies House over the years. It has been held up as the go-to format for those advocating for open, public access to company ownership data. In particular, the British Virgin Islands and other Crown Dependencies and Overseas Territories have been regularly admonished for failing to implement a similar system. Meanwhile, other jurisdictions seeking to pacify the call for an unlimited model of corporate ownership transparency have held up the Companies House template as the one to follow.

Adrian Searle, the head of the NECC, recently made some extremely positive-sounding claims about the changes coming in with the ECCTA. He told Law360 that law enforcement agencies would benefit from changes to corporate privacy rules and an overhaul of information sharing agreements with the private sector under the ECCTA, which received royal assent on 26 October.

“It’s been a long time coming. But it really will help with a significant sort of step change in how we respond to economic crimes, and the ability criminals have had to exploit, basically, the open economy we have,” Searle said.

The changes in the law would encourage businesses to share information “in a way that hasn’t been possible to date,” he added. That, in turn, would help ease pressure on law enforcement following up on leads, allowing overstretched agencies to prioritise the highest-value cases.

How true this turns out to be remains to be seen. We intend no criticism of Mr Searle: he is merely maximising the positives in his message like any good organisational head, focusing in part on the changes being implemented at Companies House, brought about by the ECCTA. These are claimed to be the largest in the organisation’s history, since it was created in 1884.

Up until now, Companies House has merely been a repository for information provided by those opening and maintaining limited liability companies. This warehousing role meant that Companies House often collected whatever false information fraudsters and money launderers wished to use. Fake names, false address and unverified records have been rampant, meaning that Companies House records have suffered from the proverbial “garbage in, garbage out” maxim.

Business records were often rendered useless in any subsequent investigations because of the misinformation that crooks provided. Genuine businesspeople have provided reliable information, but they are not the problem. Crooks lie for a living: why would they voluntarily provide accurate company ownership information that could prove incriminating?

The new powers provided by the ECCTA will endeavour to turn Companies House from simple repository to gatekeeper. There were 753,168 new UK companies created between March 2021 to March 2022. To conduct meaningful due diligence on that number of companies will prove impractical, even for the revamped Companies House.

Is it a step in the right direction, though? Of course it is. But claiming that loopholes will be closed, thus preventing crooks from exploiting ultimate beneficial ownership (UBO) filing options, requires context. The context being that Companies House’s newly acquired ability to act as a gatekeeper – and thereby police its own records – is optimistic at best, given the sheer volume of companies being opened each year.

Being able to flag suspect companies to law enforcement is another step in the right direction. But again, we need to apply context to the sheer size of this undertaking.

When one reads media reports in isolation, as members of the public may do, the news here appears all positive. But taken out of context, this news is in danger of becoming a political statement, rather than a statement of intent. 

We appreciate the need for governments and law enforcement to maximise the positive message they are seeking to send out. However, those of us whose professional lives are intertwined with the issue of corporate ownership, and with the need to root out crooked ultimate beneficial owners, will take the recent claims with a huge pinch of salt. 

It is not my intention to appear: all we are endeavouring is to be realistic. After all, context is everything.

Martin Kenney and Tony McClements are Head of Firm and Head of Investigations, respectively, at Martin Kenney & Co (MKS).