Research by fraud investigation technology provider HooYu has identified loopholes at Companies House that enables individuals to register as a director, to run businesses and to enable fraud and money laundering, even after they have been struck-off from holding company directorships.
Research into Companies House data conducted by HooYu showed that of the 6,700 currently disqualified directors, there are over 800 (1 in every 8) that still appear to have an active directorship. The analysis also uncovered over 500 so called “chameleon” directors who have been disqualified as a director, then subsequently made changes to their name or date of birth in order to register a “clean” directorship.
The criminals, termed “chameleon fraudsters”, have been uncovered using graph theory and data visualisation technology in the HooYu Investigate platform to find disqualified directors who illicitly hold an active directorship. This is despite the fact that “chameleon fraudsters” obfuscate their new directorships by subtly altering their date of birth, or the spelling of their name in an attempt to avoid detection.
The current registration processes undertaken by Companies House are enabling criminals to evade detection and are allowing fraud losses to consumers, businesses and the public purse alike, contributing to the estimated £96bn of fraud and money laundering that takes place each year in the UK.
Currently, when regulated firms use Companies House data, they are unlikely to spot chameleon fraudsters as directors are not verified when they register. As a consequence, HooYu is calling for there to be more identity verification and ongoing due diligence to be conducted to eliminate chameleon fraudsters who are currently able to operate undetected.
Richard Osborne, founder of the lobbying group Robust, commented, “Last year I formed Robust to raise awareness of how criminals are abusing Companies House data and our YouGov survey revealed that 84% of business leaders would want to see more robust identity checking procedures carried out by Companies House. This data analysis from HooYu reveals the level of abuse of records at Companies House and underlines our call for the Government to act”.
In light of the nature of how criminals are obfuscating their identity, many financial service investigators use the HooYu Investigate platform to build a visual graph that reveals otherwise hidden connections to businesses, directorships, shareholders, residential addresses and business premises.
“Financial institutions and service providers rely on Companies House data as a source for conducting due diligence, preventing fraud, insuring against money laundering and terrorist financing. Until Companies House information is properly screened at the point of submission, and ongoing due diligence is undertaken to remove disqualified directors, it leaves a worrying loophole open to fraudsters, criminals and terrorists for them to exploit. Even more concerningly, we believe our current analysis of Companies House data just represents the tip of the iceberg.” said David Pope, Marketing Director at HooYu.