Fighting money laundering may end up helping it – John Binns writes for The Times

Fighting money laundering may end up helping it – John Binns writes for The Times

BCL partner John Binns discusses proposed reforms to Companies House aim to validate the authenticity of businesses, in his article published by The Times.

Here’s an extract from the article:

What has Companies House got to do with money laundering? Few, perhaps, will see any obvious connection between the dry formalistic requirements for information and documents, nowadays largely available for free on a neat and easily navigable website, and the murky world of hiding the proceeds of fraud and other serious crime. But in a sense that is precisely the point. The UK’s regime for requiring information from companies, which now extends to the details of their “persons with significant control” (PSC), carries with it an impression of transparency. The fact that companies are incorporated here will help those who encounter and do business with them feel confident that they are dealing with legitimate enterprises — even when they are not.

This has increasingly been recognised as a valuable service for money launderers, provided unwittingly by the UK state, which sits uneasily next to our generally strict anti-money laundering regime. Those at banks and others with anti-money laundering responsibilities know well that the heart of the problem is that Companies House relies entirely on information provided by the companies themselves; other than some purely technical issues, it does not make any checks.
The government now proposes to make an important change to this system. All directors of companies, and indeed everyone submitting information on their behalf — although not PSCs — will have to provide “know your customer” documents, such as driving licences or passports, to prove their identity. In most cases, the government envisages that these will be provided electronically and verified within 24 hours.

The plans raise various questions, not least about the efficiency and reliability of the verification process and who will run it. While such documents in the UK can in theory be checked with other agencies, it is less clear how the process will work with directors and agents who are based overseas.
Importantly, those who work with the anti-money laundering regime know well that the documents are only the first step of a due diligence exercise; simply knowing who company directors are does not guarantee that they, their associates or their sources of funds are clean.

This article was originally published by The Times on 24th Sep 2020. You can read the full version by logging onto their website here, or view here by pdf.

John Binns is a partner at BCL specialising in all aspects of business crime, with a particular interest in confiscation, civil recovery and money laundering under the Proceeds of Crime Act 2002 (“POCA”). His business crime experience includes representing suspects, defendants and witnesses in cases invoking allegations of bribery and corruption, fraud (including carbon credits, carousel/MTIC, land-banking, Ponzi and pyramid scheme frauds), insider trading, market abuse, price-fixing, sanctions-busting, and tax evasion. He has coordinated and undertaken corporate investigations and defended in cases brought by BEIS, the FCA, HMRC, NCA, OFT, SFO and others.