The Chameleons in Companies House:
How 1 in 8 disqualified directors are abusing the commercial register and are still active directors
Research by fraud investigation technology provider HooYu has identified loopholes at Companies House that enables individuals to register as a director despite being disqualified. Enabling disqualified directors to continue to operate unimpeded, helps them avoid detection, frustrates enforcement actions, and allows them to hide assets.
Research into Companies House data conducted by HooYu showed that of the 6,700 currently disqualified directors, there are over 800 (1 in every 8) that still appear to have an active directorship.
The analysis also uncovered over 500 so called “chameleon” directors who have been disqualified as a director, then subsequently made changes to their name or date of birth in order to register a “clean” directorship.
The criminals, termed “chameleon fraudsters”, have been uncovered using graph theory and data visualisation technology in the HooYu Investigate platform to find disqualified directors who illicitly hold an active directorship. This is despite the fact that “chameleon fraudsters” obfuscate their new directorships by subtly altering their date of birth, or the spelling of their name in an attempt to avoid detection.
The current registration processes undertaken by Companies House are enabling criminals to evade detection, commit tax avoidance, obfuscate themselves from police investigations contributing heavily to the estimated £96bn in losses to consumers, businesses and the public purse alike.
Currently, when regulated firms use Companies House data, they are unlikely to spot chameleon fraudsters as directors are not verified when they register. As a consequence, HooYu is calling for there to be more identity verification and ongoing due diligence to be conducted to eliminate chameleon fraudsters who are currently able to operate undetected.
Richard Osborne, founder of the lobbying group Robust, commented, “Last year I formed Robust to raise awareness of how criminals are abusing Companies House data and our YouGov survey revealed that 84% of business leaders would want to see more robust identity checking procedures carried out by Companies House. This data analysis from HooYu reveals the level of abuse of records at Companies House and underlines our call for the Government to act”.
In light of the nature of how criminals are obfuscating their identity, many financial service investigators use the HooYu Investigate platform to build a visual graph that reveals otherwise hidden connections to businesses, directorships, shareholders, residential addresses and business premises.
“Professional Services firsm rely on Companies House data as a source for Customer Due Diligence and for building client insight. With such a large number of disqualified directors being able to register, the data is compromised. Until Companies House information is properly screened at the point of submission, and ongoing due diligence is undertaken to remove disqualified directors, it leaves a worrying loophole open to fraudsters and criminals for them to exploit. Even more concerningly, we believe our current analysis of Companies House data represents just the tip of the iceberg.” said David Pope, Marketing Director at HooYu.
