The next prime minister must prioritise fixing Britain’s broken corporate registry after a boom in fake and cloned companies, the SNP’s shadow chancellor Alison Thewliss has said.
Her remarks came after The Herald revealed a teenager had been able to create Britain’s a bogus transport empire by registering firms in the name of the country’s biggest bus and rail firms.
The young man, who we are not identifying, created scores of mock versions of businesses, including Scottish giants Stagecoach and Alexander Dennis. He made himself chief executive of the firms.
One of his bogus businesses had a list of directors which included the names of characters from ITV soap Coronation Street.
The fact the teenager was able to get clone firms officially registered has sent a chill through experts in the workings of the registry, Companies House. Real businesses now face legal costs to protect their names.
Yesterday The Herald on Sunday revealed bogus firms were being set up at homes across Scotland, often in the name of residents. Experts fear crime gangs are creating the fake businesses for fraud.
Ms Thewliss has been campaigning for tighter controls over UK companies for years.
She said: “These cases demonstrate just how woeful the system of company registration is in the UK.
“While there has been some progress from the UK Government and Companies House recently, this has been slow, and seems very much to be a reaction to the kinds of nefarious and fraudulent activity uncovered by the press.
“The Companies House register is riddled with error and misinformation following years of negligence – it’s hard to have any confidence in its contents.
“A system of ID verification is long overdue, but it has to be retrospective to tackle the shambles in the current register.
“If not, it will fail to deal with the problems caused by people registering cloned companies and using fake names, never mind rooting out those involved in serious and organised crime.
“Fixing the Companies House register must be a priority for the incoming Prime Minister – before the credibility of the UK, and of Scotland, as a place to do business is further undermined.”
The UK Government has long pledged to take action to sort out Companies House and earlier this year published a White Paper on proposed further reforms, including ID verification.
Conservatives want to to give Companies House new powers to reject applications to form companies if presenters provided false or unverifiable information. Tory proposals would also pave the way for Companies House to develop information-sharing schemes with law enforcement.
There are more 4.4m companies registered in the UK. Graham Barrow, a financial crime expert. reckons as many as one in five new registrations have not legitimate commercial function.
As we reported yesterday, ten transport firms were created at five flats in a six-flat block in Aberdeen on the first day of this month. Residents were unaware of this. There have been mass registrations of firms at private homes in Glasgow, Edinburgh, Paisley and elsewhere this summer.
Mr Barrow said: All across the four nations of the United Kingdom, and without their prior knowledge or consent, companies are being registered at people's addresses often using other people's names,” Barrow explained.
“Because this can be done from the comfort of a computer, anywhere in the world, there is no part of the Uk that is exempt from this problem.
And the real cause for concern is that, once a company is resident at your address, or once your name appears on the corporate register, either could be used to gain loans, overdrafts, state benefits or other financial products, often at the expense of your credit rating and, occasionally causing the appearance of the bailiffs at your front door to reclaim unpaid debts about which you know nothing.”
Companies House does not comment on individual cases. In a statement, it said: “Companies House is aware of the misuse of the Company register to support illicit activity and recognises the difficulties faced by those affected by this. Where potential criminal activity is identified, Companies House works closely with law enforcement agencies to refer matters and support investigations.”
A spokesman added: “To help tackle this type of abuse the Government has recently consulted on significantly enhancing the role and powers of the Registrar. The Government published a White Paper outlining reforms to Companies House and intends to bring forth these measures in this Parliamentary session. In combination, they will significantly strengthen the Registrar’s ability to know who is forming and running companies and will allow her to query information companies send her where she has reason to believe it is suspicious, misleading or fraudulent.”
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