During the recent local elections, the process of identity checks was called into question and making headlines. The idea that a person has to confirm their identity is said to deter many young voters from taking part. The government have taken this one step further and are introducing identity checks for the Companies House Register. This measure, if passed by Royal Assent, is intended to increase corporate transparency. It will also make it more difficult for fraudulent directors and beneficial owners to make appointments via the Companies House register.
The new reforms will apply to all new and existing registered company directors, people with significant control (PSCs), and anyone else filing with the registrar. It will mean companies that are registered on the UK Companies House register, as well as new registrations going forward, will need to comply with the new verification process. Currently, there are approximately 4.5 million companies registered in the UK. It’s worth noting that at Nordens we’re here to help our clients no matter what. We can confidently say that should the new identity check reforms become legislation, it won’t affect our clients at all. Our specialist Company Secretarial division will take care of any issues or concerns related to the new identity checks, with details of how disclosed below.
We also explain exactly what the new identity verifications will entail, what happens if not complied to, and how Nordens can support you…
What Are The New Companies House Reforms To Identity Verification?
The reforms to identity verification are part of the Economic Crime & Corporate Transparency Bill (ECCT) 2022. It’s claimed that identity verification will be a simple, quick process without significantly adding to the existing requirements on business. All businesses will benefit from greater assurance from the Companies House register when consulting to research potential suppliers and partners.
There will be two types of identity verification: direct verification via Companies House, and an indirect route through an Authorised Corporate Service Provider (ACSP).
Companies House Direct Verification
For verification directly with Companies House, identity verification will link a person with a primary identity document. For example, a passport or driving licence. The person undergoing verification will take a photograph or scan of their face and the identifying document. The two will be compared, using likeness matching technology, and the identity verified. If successful, the person will be notified in a matter of minutes.
Primary identity documents may also be checked against government databases as part of the identity checking process. Alternative methods will be available for individuals without photographic ID. Digitally assisted / non-digital identity verification will be available for users who cannot use the digital identity verification system.
Authorised Corporate Service Provider (ACSP) Verification
People might decide to use an ACSP to file with the Registrar, form a new registerable entity, or verify their identity. These are often intermediaries such as accountants like Nordens, legal advisers, and company formation agents. They must be registered with a supervisory body for anti-money laundering (AML) purposes and already have an existing obligation to carry out customer due diligence checks on all of their clients; identity verification will build on these existing checks. These third parties must register with the Registrar and demonstrate that they are supervised for AML purposes.
ACSPs are committed to ensuring a high level of assurance in verifying identities. These identity verification checks are designed to be just as reliable as the direct verification route. In order to operate, ACSPs must meet certain criteria, including being supervised for anti-money laundering (AML) compliance and registering with the Registrar. These requirements apply to their formation of companies or partnerships, as well as filing on behalf of clients.
To maintain transparency, ACSPs are obligated to confirm that they have completed all necessary identity verification checks when interacting with the Registrar and Companies House. Compliance with AML regulations is mandatory for ACSPs, who are also required to maintain records. If needed, the Registrar has the authority to request additional information regarding the identity verification checks.
What Happens If These Identity Checks Aren’t Complied To?
During a transition period, existing companies will be given a specific timeframe to meet new requirements, ensuring a smooth adjustment. However, those who fail to comply within this period may face serious consequences, such as criminal sanctions or civil penalties. Additionally, their status as “unverified” will be annotated in the companies register.
The repercussions for not meeting identity verification requirements vary depending on the circumstances. For directors, failing to verify could also result in being prohibited from acting as a director. An individual who was under a requirement to verify their identity with the Registrar, and failed to comply with it, could be subject to:
- criminal proceedings – which could result in a level 5 fine
- civil penalties issued by the Registrar of Companies
- incorporations/registration of a new company being rejected
- being unable to file statutory filings
- the public register being annotated to show the individual’s status as ‘unverified’
How Can Nordens Help?
The news of identity verification checks has expectedly enabled many business owners and beneficiaries to worry. We can confidently say do not panic however, as at Nordens we have this fully in control. We are regulated by Institute of Chartered Accountants in England and Wales (ICAEW), meaning we are already an Authorised Corporate Service Provider (ACSP). This allows us the capacity to complete the identity verification checks outlined. We also have direct contact with Companies House, so for any of our clients nothing will change whatsoever.
It’s also worth mentioning that this proposal by the government hasn’t passed through parliament or royal assent as of yet. However, when this is expected to do so, we’ll be able to take care of any issues or concerns that this may bring.
We hope this has outlined to you what the proposed new reforms to Companies House identity checks are, and how they will work. If you’d like to know any further information on anything mentioned, or anything accounting related for that matter, please do not hesitate to get in contact with us at Nordens, where one of our trusted advisors would be happy talking you through your query.