Companies house in here in the UK has been available, in one form or another, since back in 1844. Now that’s quite sometime, and if that period of time doesn’t shock you, what may do is the fact that in 2018-2019 there were some 672,890 new company incorporations. The Companies House register is simply vast.
So what is the role of companies house, what does it actually do? Well, it primarily acts as a register of all companies incorporated within the UK, holding data relating to that company, including the individuals who direct and own it. This data is highly valuable when financial institutions try to asses the risk profile of a business, including assessing it in relation to Financial Crime related risks. The accuracy of this data is therefore becoming crucial, as to is access to that data in a digital world.
With the importance of this data in mind, what is Companies House actually doing about data accuracy and access? Well thy have a plan which is set over 3 years, that plan is to tackle data accuracy and access in this digital age, knowing that it is an importance source of KYC (Know Your Customer) for financial institutions.
It’s all about identity
First off, Companies House helps businesses form an understanding of the identity of a business, not just in terms of its name and company registration number, but in terms of what it does, the nature of the business and who are the individuals controlling it. It also helps understand the ultimate owners of a company, which at first may seem to be a simple task, but in reality can be one that is quite complex. In recent years, the Panama Papers coupled with the Russian Laundromat cases illustrate just what lengths individuals go to conceal their identity or the activities they may engage in.
Our financial institutions are now required to collect data on both individuals and companies tax residency, depending on the nature of the business or how/where an individual receives their income from. Companies house data plays an important role in attempting to determine the reliability of the tax residency of a company.
So exactly, what data is required to form a more accurate picture of a company, what’s companies house working on in terms of data and its quality being available on the register. Well here are a few points on just what the register needs to be better at:
- Verification of the individuals that direct the company, accurately identifying them
- Verification of the ownership structure, and ultimately the individuals behind those companies and verifying them
- Identity if an individual cannot be validly appointed as a director
- Collection of greater detail on the company shareholders
So, it all comes down to identity, the identity of a company, its nature, who directs it, who ultimately owns it, what tax residency should be attached to those identities and how they should therefore be treated. If it therefore all comes down to identity, the next point is that how are businesses access that identity based information, and how are they making risk based decisions upon that data?
Issuance of a true digital identity to improve accuracy and transparency
Let’s presume that the Companies House register does indeed hold all the information required to be able to asses a businesses risk profile accurately. The issue becomes how do you obtain that data consistently and how is it maintained. Right now, Companies fail to often update their details until an actual re-filing date, and that doesn’t necessarily mean within 12 months, that can be a longer period of time. Yes, Companies House now has an API (though it still is in Beta) that allows financial institutions to pull that data, but its not ensuring data is accurate. So what is the solution? Clearly, it’s a true digital identity that companies and individuals use for various use cases, therefore ensuring that data is up to date.
Issuance
When a company is incorporated all the data that is required on the company should be captured digitally. This includes digital identities on the directors and ultimately shareholders of the company. If there is a hierarchy, that hierarchy tree needs to be navigated to get to the ultimate individuals behind the shareholding. If an individual doesn’t have a verifiable digital identity, then they need to get one, and it should be one that has claims issued from a source that Companies House trusts. Once all data is captured, then Companies House when adding information to the Company Register should also issue a set of verifiable claims against that company, effectively issuing a digital identity that others can interrogate. These claims would include all the information captured on the register.
Verification
Since claims have been issued by Companies House, financial institutions that want to understand the risk profile of a company can do so by reviewing the verifiable claims issued by Companies House. All the information you now need is bundled in with the identity information of the company, which is being used digitally to onboard or re-assess that company. The beauty here is that time is not being wasted on verifying data from one source back to Companies House, and then working through the discrepancies.
Some thoughts to finish up with
If Companies House issued verifiable claims on behalf of companies, and it only accepted registrations from individuals and other companies that have true digital identities, then the entire register becomes accurate and transparent to companies that rely on that data.
Each relationship a business forms would then be verified by multiple sources, one of which would be highly trusted as it would be that of Companies House. Not only does this help financial institutions combat financial crime, it also helps other businesses and individuals verify just exactly who they are conducting business with, reducing certain types of fraudulent activities.
As we as individuals and businesses increasingly rely on the digital world, it is becoming imperative to start every digital journey correctly, and that means starting with a true digital identity that has verifiable claims issued for it by trusted parties, trusted parties such as Companies House.