As headlines go, this one – “Famous names falsely registered as directors at Companies House” – is hardly up there as the most striking.
The article told how businessman Kevin Brewer became the first person to be successfully prosecuted for false filings with the Companies House platform.
It disclosed how in 2013 he incorporated John Vincent Cable Services Ltd, naming former Business Secretary, Sir Vince Cable, as a director and shareholder.
In 2016, he established another company, Cleverly Clogs Ltd, this time listing Baroness Neville-Rolfe, the government minister with responsibility for Companies House, and the MP James Cleverly as directors.
He incorporated both companies through Companies House.
The article was generated by a press release issued by Companies House via gov.uk, which trumpeted the case as a triumph for both Companies House and the government.
It was argued that Brewer had planned to use the companies for profit and to further deceive officials. But the real story – the one devoid of spin – is far more compelling.
Far from being a victory for Companies House or the government, it is a failure.
In reality, the case exposes the shocking loophole which makes Companies House – and the UK – a soft-target for real criminals.
Unfortunately, the current system allows criminals to easily form shell companies and use them as part of structures to clean up dirty money. Companies House is not under the EU Anti-Money Laundering Directive – which would make it accountable for this problem – but it should be. It is a concern which has recently been debated in Parliament.
Brewer’s deliberate actions as a whistle-blower were to demonstrate just how easy it is to incorporate a fake company. Was he trying to sneak it through? No – he used the most obvious, outrageous names, knowing the system is so shattered that no one would pick them up.
Far from him being stopped, his actions only came to light when he wrote to the high profile figures concerned to tell them what he had done, and explain why. He had hoped to get their attention and facilitate a discussion to change things for the better.
Instead, he was prosecuted, and then ordered to pay £12,000 after pleading guilty at Redditch court. It is almost too outrageous to be true.
The fine he was hit with is, of course, a tiny fraction of the amount of dirty money being flushed through the UK through shell companies.
In a damning report, Transparency International said the UK is at the heart of global corruption because the country’s defence against illegal activity is “woefully inadequate”, with just six staff in Companies House charged with policing four million companies.
The dangerous lack of controls in place have been recognised as a fundamental reason why the UK is especially at risk to incorporation fraud.
The government may have shouted about its “landmark” prosecution with pride, but it scored only a Pyrrhic victory. It could prosecute a thousand similar cases and not get to the heart of the issue.
It should be working quietly to tighten up regulations at Companies House – and bring an end to the loophole which only serves to exacerbate the UK’s unwanted tagline as the world’s laundromat.