Weaknesses in global corporate reporting
THE SCALE OF INTERNATIONAL FINANCIAL CRIME REQUIRES REGULATORS TO BOOST COMPANY DISCLOSURE STANDARDS, REPORTS BRADLEY GERRARD
K
// 761 COMPANIES HAD BEEN REGISTERED TO A FLAT ABOVE A TAKEAWAY SHOP //
nowing who owns what is a vital component of international financial security. But exposés such as 2016’s Panama Papers and
2021’s Pandora Papers show that significant progress is still needed. The former unveiled a trove of legal records pointing to a secretive offshore web of companies that hid crime, corruption, and wrongdoing. The latter exposed a shadow financial system that benefits the rich and famous. Countries such as the UK are often
seen as legislative bastions, but questions remain about what exactly Companies House, the government body that companies must register with, can and should do. In February 2022, UK media widely
reported that 761 companies had been registered to a flat above a takeaway shop, with estimates that roughly 11,000 bogus companies were registered in the UK in the year to February by Chinese fraudsters alone. Fraud can even be in multicoloured,
plain sight, with Westminster Council recently dealing with a spate of US- themed sweet shops, whose owners have allegedly been avoiding tax and selling counterfeit items. These shops often close down before authorities can track the owners, followed by another opening nearby.
34 It’s the same story in many other
jurisdictions worldwide. Authorities need to act to combat economic crime.
Differing standards The UK’s recent efforts to prevent registration of fraudulent companies include 2020 legislation requiring registered firms to notify Companies House of any discrepancies between the information that the firms hold about their ‘beneficial owners’ and information on the Companies House register of people with significant control. A ‘person with significant control’
(PSC) is an individual who either owns or controls a company, also referred to as a beneficial owner. Ensuring this information is correct
and up to date helps improve the quality of public information on companies and speeds up anti-money laundering checks that must be made by banks and other financial institutions. The UK government confirmed in
November 2022 that it was, through the Economic Crime and Corporate Transparency Bill, seeking to expand the fee-raising powers of Companies House to enable the cost of investigative and enforcement activities that promote the integrity of the register, maintain a healthy business environment, and combat economic crime. The move is part of broader efforts by the government to tackle
THE REVIEW MARCH 2023
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