One year since Global Witness’ biggest-ever analysis of the UK company register, we did it again and found thousands of companies can still avoid revealing their real owners or have money laundering risks associated with them. The root of the problem? Companies House doesn't actually have the powers or resources to ask questions.
UK companies and partnerships have been at the heart of some of the worst money laundering scandals of recent years involving hundreds of billions of pounds - not least at Danske Bank in Estonia and the Troika Laundromat. While the Government led the world when it created the first fully open register of the real owners behind companies in 2016, it hasn’t finished the job by ensuring the information is checked and that the rules are enforced.
Credit: John Mcconnico/Bloomberg via Getty Images
But it doesn’t have to be this way. The Government should change the law and give more resource so that Companies House can do its job properly. Just now the Government has launched a consultation on improving Companies House and a statutory review of the Register of Persons with Significant Control is expected this summer. There has never been a better time to empower Companies House and fix the register.
So what did we find?
There is a continued problem with potential loopholes through which the real owners of companies (also known as beneficial owners) can remain anonymous, which include:
- 336,224 companies simply say they have no beneficial owner - which is allowed if no individual holds more than 25% of the shares of the company
- 6,711 companies are controlled by a beneficial owner who themselves control over 100 companies, suggesting likely nominees
- 487 companies are part of circular ownership structures, where they appear to control themselves
- 8,872 companies name another foreign company as their ultimate owner which is unlikely to be listed on a recognised stock exchange (and therefore be compliant with the rules)
We also looked at red flags for money laundering and corruption and found thousands of companies have red flags associated with them. While none of these red flags in themselves indicate wrongdoing, they should serve as a starting point for further scrutiny and can help focus investigative resources. We found:
- 2,083 company owners are disqualified directors - people who previously failed in their responsibilities and are banned from being a director in future
- 1,519 company officers or beneficial owners are politicians - who as a result of their public positions may be at greater risk of corruption
- 136,682 officers or beneficial owners are based in secrecy jurisdictions e.g. British Virgin Islands
- 228,295 companies are registered at a company factory or mailbox address, with little or no connection to the actual place of business or owner
A reason for optimism
There will be people who will want to use these findings to undermine the validity of this type of transparency in the first place (i.e. public registers of beneficial ownership). But this would be the wrong conclusion. The only reason we know anything about the weaknesses of the UK register is because it is available as open data.
And even despite the lack of checks on the data, the register has already had an important positive impact. Not only has it made it possible for people everywhere to know more about the real people behind the UK businesses they interact with (with information on beneficial owners being accessed over 0.5 million times a month), it has already made a tangible difference in the fight against money laundering and other crime - whether that’s through new investigative stories coming to light, an increase in collaboration between Companies House and law enforcement or the huge drop off in new Scottish Limited Partnerships being set up - a vehicle previously associated with major international money laundering scandals.
Once Companies House is afforded the powers to do its job, we also have thoughts on what the checks should look like. Coupled with a more proactive and risk-based approach to suspicious companies, we would expect to see ID checks, looking into proof of control (e.g. shareholder information), cross-checking with other datasets, and verifying the status of foreign companies listed as owners.
Continued foot dragging by Government will only risk UK companies being implicated in the next major money laundering scandal, and do nothing to address the UK's reputation as an enabler of global corruption. While the flaws of the company register are serious, the UK Government has every opportunity to fix these now.
Find out more – read our new report Getting the UK’s House in Order.
