We are sharing this update from ACCA, our professional body, for the interest of clients and contacts. The content is (c) ACCA
Significant changes are coming to identity verification as part of major reforms
The Economic Crime and Corporate Transparency Act (2023) will reform the role of Companies House and introduces the biggest changes to Companies House since corporate registrations were established in 1844.
As highlighted in the recent policy papers, the government has outlined the transitional plan for the changes to be enacted. Key changes include improved data accuracy, identity verification for directors and enhanced enforcement powers.
These reforms, implemented over several phases until 2027, will involve new responsibilities for company directors, people with significant control (PSCs) and service providers. The goal is to create a more reliable companies register, boost national security and support UK business.
The planned timeline includes:
- March 2024 – data quality improvements, querying, removal of false information
- autumn 2024 – financial penalties
- spring 2025 – authorised service providers verify identity
- autumn 2025 – directors/PSCs identity verification
- 2026 – limited partnerships transparency; accounts reform
- 2027 – full implementation.
Identity verification is a major component of the reforms and involves significant system development for the more than 7m individuals who will go through these checks.
By spring 2025, all accountants, Trust and Company Service Providers (TCSPs) and other professional service providers (such as solicitors), who are registered for Anti Money Laundering with a supervisor in the UK, can register to become Authorised Corporate Service Providers (ACSPs). This will allow them to verify their clients’ identities and submit this information to Companies House.
A person who is an ACSP must notify the registrar of any change in its supervisory authority or authorities for the purposes of the Money Laundering Regulations within the period of 14 days beginning with the date on which the change occurs.
From autumn 2025, directors and people with significant control (PSCs) of new companies must verify their identities at incorporation. Existing companies have 12 months to submit this verification when filing their annual confirmation statement.
Verification process
There will be two types of identity verification, with the ACSP registration and verification requirements that will impact practitioners.
1) Direct verification via Companies House
If a person is verifying their identity directly with Companies House, identity verification will digitally link a person with a primary identity document, such as a passport or driving licence. The person undergoing verification will take a photograph or scan of their face and the identifying document. The two will be compared, using likeness matching technology, and the identity verified. If successful, the person will be notified in a matter of minutes.
Primary identity documents may also be checked against government databases as part of the identity checking process.
Alternative methods will be available for individuals without photographic ID and digitally assisted / non-digital identity verification will be available for users who cannot use the digital identity verification system.
2) Indirect route through an authorised corporate service provider
The indirect route will involve using an authorised corporate service provider (ACSP) – intermediaries such as accountants, legal advisers and company formation agents.
ACSPs will be required to register with the Registrar and demonstrate that they are supervised for AML purposes. They will be required to declare that they have completed all the necessary identity verification checks when they interact with the Registrar and Companies House.
Under AML regulations, all ACSPs are required to retain records and the Registrar can request further information on identity verification checks if necessary.
The identity verification checks undertaken by ACSPs will achieve the same level of assurance of the claimed identity as those undertaken through the direct verification route, and apply to all directors and people with significant control (PSCs).
Identity verification requirements will apply to all new and existing registered company directors, PSCs and anyone else filing with the Registrar.
If PSCs are not verified within a short time after the incorporation of a company, they will commit a criminal offence. Post-incorporation, a director must verify their identity as soon as possible and must do so before their appointment is notified to the Registrar by a company.
Individual PSCs will have a 14-day period after registering with the Registrar in which to verify their identity. For Relevant Legal Entities this period will be 28 days, and they will need to provide the name of their verified relevant officer.
Anyone wishing to file documents with the Registrar will need to verify their identity before they do so.
Once a person is verified, they obtain a verified status. However, there may be instances where re-verification is required, for example if someone changes their name.