Anti-fraud protocols at Companies House have been called into question after hundreds of
rogue filings sparked fears that the UK’s business register had been targeted by scammers.
UK Finance, the trade body of the UK’s banking and financial services industry, issued an urgent alert to members after 800 falsified filings were identified relating to the discharging of financial liabilities.
It is understood that a single account submitted the large batch of MR04 forms in February. MR04 forms are used to declare satisfaction in part or in full or a mortgage or other debt charged against a company.
In this case, the forms claim to show that 190 different companies had charges settled which could have led to the repossession of property in the event of non-payment.
According to the briefing note from UK Finance, the forms were “erroneous”. Further details about the nature of the submissions haven’t emerged, and Companies House has pointed out that the declaration of settlement on an MR04 form isn’t legally binding. This means creditors can still claim the charges if a filing is made in error.
But the suspicion is that the filings form part of some kind of attempted fraud. Evidence to support this includes the fact that one of the ‘entitled’ creditors listed on some of the forms was an organisation incorporated in 1902, but which ceased trading in 2018.
Soft Touch
This incident once again throws the spotlight on problems that have plagued Companies House for years. As well as being the legal register for incorporated organisations in the UK, Companies House handles filings related to transactions worth an estimated £3bn a year.
Yet it’s widely accepted that Companies House is a soft touch when it comes to security. This is partly down to the fact that it has failed to grow and evolve in line with modern demands. In many respects, Companies House is more important to corporate administration and trade than it has ever been, with its website handling more than 10bn hits a year. But investment in its infrastructure has failed to keep pace with this growth, leaving it vulnerable in the face of highly sophisticated 21st century cybercrime.
Another issue is that there has long been an emphasis on making company registrations and administration as simple and streamlined as possible – cutting out all that ‘red tape’ that so often gets portrayed as the enemy of free enterprise.
But some red tape has a purpose. Like providing adequate checks and balances against fraud and crime. For too long, it’s been too easy for bogus operators to manipulate the Companies House registration system, and gain an undeserved veneer of legitimacy knowing there are few checks and balances in place to detect them.
Changes are being made. As part of the Economic Crime and Corporate Transparency Act passed last year, Companies House was given a range of new powers to verify registrations and filings and to investigate suspected wrongdoing.
But without sufficient funding, and perhaps without a more significant root and branch reorganisation of how Companies House operates, the fear is that new powers alone will fail to stop the abuse of the system that has become so endemic.