One of the proposed amendments to the Companies Act 2006 aim to implement rigorous ID verification measures. This is for individuals establishing, managing, or controlling companies, to eradicate money laundering through the use of false identities.
Registrar Regulations
In May, a draft Statutory Instrument titled the Registrar (Identity Verification and Authorised Corporate Service Providers) Regulations was presented to Parliament. This instrument, under the Companies Act 2006 (‘the 2006 Act’), includes provisions regarding identity verification, authorised corporate service providers, and unique identifiers.
The Companies Act 2006, as amended by the Economic Crime and Corporate Transparency Act 2023 (‘the 2023 Act’), mandates identity verification for individuals involved in the formation and management of companies. Section 1110A(1) of the 2006 Act specifies the criteria for verifying an identity under the Act. As per the procedure outlined in the new statutory instrument, this status can be achieved through verification by either the registrar of companies or an authorised corporate service provider (ACSP). Once verified, each individual will be assigned a unique identifier in accordance with this instrument.
Proposed Regulation
Under the 2006 Act, individuals involved in establishing, managing, and controlling companies complete ID verification. Section 167M of the Act prohibits anyone from acting as a director of a company unless their identity is verified. Additionally, Section 790LQ of the 2006 Act requires persons with significant control (PSCs) over companies to maintain verified identity status for as long as they hold this position.
Individuals can verify their identity directly with the Registrar or through an ACSP. The identity verification requirements are designed to enhance the reliability of the information on the register. Also, to prevent individuals from creating a fictitious identity or fraudulently using another person’s identity.
Formally, there were no requirements for individuals appointed as directors of a company, notified as PSCs, or filing information with the registrar to have their identities verified.
Reasons for the change
The company registration framework was vulnerable, companies and others could falsely register individuals as a director or create fictitious identities. Furthermore, there were no restrictions on third parties filing documents or forming companies on behalf of others. While most of these are legitimate businesses, evidence suggested they were high risk of being exploited in money laundering schemes.
Following the 2023 Act, all directors, PSCs, and individuals submitting documents to the Registrar (except employees of ACSPs or those falling under specific exemptions outlined in separate regulations) must verify their identity. All agents must be registered as ACSPs with the Registrar and be supervised in the UK for anti-money laundering purposes to perform these tasks.
This instrument outlines the process that individuals must follow to verify their identity, either through the Registrar or an ACSP. The identity verification procedure established by this instrument specifies that an application must include specific information. Also, it grants the Registrar the authority to request additional types of information, evidence, and procedures through regulations.
This is essential to ensure the identity verification process remains adaptable to evolving technology and methods of proving identity. Although a draft version of the Identity Rules exists, not all requirements have been finalised.
To find out more about the changes to Companies House Act 2006, click here.
Future Actions
Companies House will provide supplementary non-statutory guidance to assist ACSPs in conducting effective identity verification checks, alongside the draft version of the Registrar’s rules. ICAEW will collaborate with Companies House and the Department for Business and Trade to develop comprehensive guidance for chartered accountants. This guidance will target those who must perform verification work for clients, as well as firms contemplating ACSP registration.
The implementation timeline for the new ID verification measures remains uncertain. While Companies House express an aim to enforce these measures by 2025, more details to be released following the election.
Further Information
If you would like further information on the upcoming changes, please contact your usual NRB advisor or accounts@nrb.co.uk.
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