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Find out how the Economic Crime and Corporate Transparency Bill might affect you
In an early warning, Companies House has highlighted reforms to identity verification which result from new legislation that is currently making its way through Parliament.
The Economic Crime and Corporate Transparency Bill introduces new measures that include:
- introducing identity verification for all new and existing registered company directors, people with significant control, and those who file on behalf of companies
- broadening the registrar’s powers so that it can become a more active gatekeeper over company creation and a custodian of more reliable data
- improving the financial information on the register so that the register is more reliable and accurate
- providing Companies House with more effective investigation and enforcement powers
- introducing better cross-checking of data with other public and private sector bodies
- enhancing the protection of personal information provided to Companies House.
The identity verification process
There will be two types of identity verification, with the Authorised Corporate Service Provider (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 Providers (ACSP) ACSP are intermediaries such as accountants, legal advisers, and company formation agents.
ACSP 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 of 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, People with Significant Control (PSCs) and anyone else filing with the Registrar.
There will be a transition period for existing directors and their equivalents, and for PSCs to verify their identity in. This transition period will provide existing directors and PSCs time to comply with the new requirements, whilst ensuring the integrity of data already on the register.
For new directors, identity verification must take place before an application for the formation of a company is delivered to 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. Relevant Legal Entities 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. The events that will trigger the requirement to reverify will be set out in secondary legislation following Royal Assent.
Bill requirements
The bill is still progressing though Parliament and contains several specific requirements including:
139 (29) Documents to be delivered by authorised corporate service providers
- An individual may not deliver a document under a provision listed in subsection (4) to the registrar on their own behalf (and, accordingly, any delivery of a document under such a provision must be made on the individual’s behalf in accordance with subsections (2) and (3)).
- An individual may not deliver a document under a provision listed in subsection (4) to the registrar on behalf of another person unless— (a) the individual is an authorised corporate service provider, or (b) the individual is an employee of an authorised corporate service provider and is acting in the course of their employment.
- The document must be accompanied by— (a) a statement that the individual is an authorised corporate service provider and that they have the person’s authority to deliver the document, or (b) a statement that the individual is an employee of an authorised corporate service provider and is acting in the course of their employment and that the authorised corporate service provider has the person’s authority to deliver the document.
1098E Updating duties of authorised corporate service providers
- A person who is an authorised corporate service provider 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.
- Where the change is the result of an agreement under regulation 7(2) of the Money Laundering Regulations, for the purposes of this section the change is not to be treated as having occurred until the authority that has agreed to act notifies the person or publishes the agreement under regulation 7(3).
Consequences of non-compliance
An individual who was under a requirement to verify their identity with the Registrar, and failed to comply with it, could be subject to:
- criminal proceedings – which could result in a level 5 fine
- civil penalties issued by the Registrar of Companies
- incorporations/registration of a new company being rejected
- being unable to file statutory filings
- the public register being annotated to show the individual’s status as ‘unverified’.
For directors, failing to verify could also result in being prohibited from acting as a director.
There will also be a new offence which applies to the director or equivalent of an ACSP, of failure to notify the Registrar of changes to their supervisory body/bodies within a period of 14 days following the change.