Banks face risks as Companies House begins ID checks rollout

Companies House has begun a 12-month phased implementation of its mandatory identity verification regime. The new process aims to verify the identity of company directors and officers as part of measures under the Economic Crime and Corporate Transparency Act (ECCTA).

Impact on banks

The phased approach to verification leaves a significant period in which companies and their officers can remain unverified. This situation could have consequences for financial institutions that rely on Companies House records when conducting their own due diligence.

"The 12-month phased rollout for mandatory identity verification leaves a clear window for criminals to abuse," said Jonathan Frost, Director of Global Advisory for EMEA, BioCatch.

"With six million companies and officers still to be verified, it seems likely that banks will continue to shoulder a disproportionate burden, investing vast sums into double-checking Companies House data," he said.

Before joining BioCatch, Frost worked in law enforcement, leading the development of the UK's National Fraud and Cybercrime Reporting system during his time with the City of London Police. 

He has also worked on projects for the Foreign, Commonwealth and Development Office and the Home Office, and served as Director of Technical Collaborations at Stop Scams UK, working with Meta, Google, and BT to combat fraud.

Risk of economic crime

The effectiveness of verification procedures at Companies House will be closely observed by financial institutions. Banks could face additional challenges in identifying potential fraud or economic crime if the verification measures prove insufficient.

"This will distract from their efforts to tackle economic crime, and depending on how effective Companies House's processes prove to be, there could be worse to come. If ineffective, banks will need to treat each company with a degree of scepticism that the ECCTA provisions were supposed to remove," said Frost.

Technology recommendation

Frost recommends that Companies House adopt the same types of behavioural biometric technology currently in use by many banks.

He said this technology, which analyses device and user behaviour, is designed to flag suspicious patterns and deny access to potential fraudsters. It can also streamline identity checks for legitimate directors by reducing manual compliance obstacles.

"Companies House should focus on using the same technology as banks, excluding bad actors from the register by tracking behaviours and devices. This will enable them to detect suspicious activity, whilst also streamlining the process for genuine directors."