Serving over 2 Million visitors each year

Search
Comprehensive Online Business Insurance
Tailored PI, Office, Public & Employers' Liability Insurance
Are you covered? Read our Essential PI Guide
Get a Quote and buy online in minutes

What is Company Identity Theft - How to beat it

print  e-mail 

The recent upsurge of media interest in personal identity theft has provided a reminder that company identity theft is still a major problem for UK incorporated businesses who are being encouraged to “take ownership of their own public record” to combat company filing fraud in a new white paper by accountancy software developer, Digita.

There are over two million company records held by Companies House which currently reports that of the 500,000 documents filed each month, approximately 50 are identified as false.

Company ID theft or company hijacking can involve:

  • The registered office is changed. Fraudsters file a form 287 to change the company’s registered office to an address, which is likely to be one to which they have access. Once this is done any communications from Companies House will be sent to the company at the new registered office, ensuring that the company itself doesn’t receive notifications from Companies House of any future changes.
  • The officers are changed. Fraudsters file forms 288 to notify Companies House of a change to the company’s officers. They will notify the appointment one or more officers of their own. These will either be completely fictitious persons or possibly they will use the stolen identities of real people. At the same time they will notify Companies House that the company’s true officers have all resigned.
  • Supporting documentation may be obtained. Once these notifications have been registered at Companies House the fraudsters effectively have the company under their control as far as third parties are concerned. In order to give credibility in their subsequent dealings with third-parties the fraudsters may request a Certificate of Good Standing from Companies House. This official document confirms the status of the individuals as being the company’s officers.
The White Paper, “Keeping The Record Straight”, reveals that since April 2005 identified instances of company filing fraud seem to have leveled off below the peak, but still at a relatively high historical level of approximately fifty incidents a month.

Report author, Digita’s Ian Manson said: “Although the numbers are not huge when compared to the two million plus companies on the register, it must be emphasised that according to the Metropolitan Police a single filing fraud could cost £1 million and could very seriously damage the businesses that fell victim.

“The trick appears to be gaining control of a company and its assets as far as third parties are concerned. This can include obtaining supporting documentation from Companies House and then approaching suppliers of high value, easily disposable, goods and placing orders apparently on behalf of the company, with delivery being made to the company’s “new” registered office."

“Assets may even be sold of as in the case of a Moscow office block where the true owners only found out it was no longer in their possession when they were barred from entering it."

” In another well known case taken up by the Federation of Small Businesses, the proprietor of a business was very surprised to discover that the registered office of his family business had been changed from the address at which it had been located for the last 100 years. Even the company’s nameplate was stolen from the front of the building."

Key to the success of the fraud is that the company itself doesn’t discover the changes at Companies House until the fraudsters have had time to complete their scam and vanish.

Other frauds include setting up bogus companies, falsely manufacturing accounts and even stealing the identity of auditors to ensure that these accounts appear to be credible.

Ian Manson added: “Calculations by credit ratings agency Graydon revealed nine auditors have had their details appropriated to legitimize a false set of accounts over the last nine months. Another 100 sets of accounts have been set up using completely fictitious auditor details over the same period.”

Companies House now offers a protected on-line filing scheme (PROOF) where only mutually approved documents are registered and a monitoring service advising companies each time a change of record has been made.

These measures, according to Manson, along with proactive company secretarial software are essential risk management tools for businesses and their professional advisors not only to combat company filing fraud but to protect against claims of negligence in the unfortunate event of fraudulent loss.

The new Companies Act will create a new offence under which a person who knowingly or recklessly delivers or causes to be delivered (to Companies House) a document that is misleading, false or deceptive in a material particular, will be liable to imprisonment for up to 2 years, or a fine, or both.

He concludes: “If every company were to opt in to the PROOF scheme tomorrow, and of course guard their company authentication codes as carefully as they guard their bank account PIN numbers, then the phenomenon of company hijacking would almost certainly disappear overnight.”

The free white paper can be downloaded from http://www.digita.com/

Posted November 1, 2006
Latest articles in Legal Guides
 
The Bribery Act 2010 and small businesses
One of the last Acts of Parliament to be passed in the dying days of the last Parliament was the Bribery Act 2010. And for once, it is quite a short statute – but one with a long reach as it is broad-ranging in its language and it specifically covers corruption abroad. [June 1, 2010]
 
Family businesses - A guide to governance structures
A family charter typically sets out how the family wishes the business to be run, the family’s goals and the long-term strategy for the business, as well as the family’s relationship with the business and an agreement as to how the family members should behave towards each other in the context of the business. [May 25, 2010]
 
How to manage and minimise the legal risks to small companies
We look at some key legal risks that can affect small businesses and how to manage and minimise such risks - ownership issues, employment issues and dealing with customers and clients. [April 30, 2010]
 
Companies Act 2006 - how it has affected small businesses
Following the final implementation of the Companies Act 2006, we look at the impact the changes have had on how small businesses operate in the UK [March 15, 2010]
 
Why are written contracts importance to businesses?
In this article, Andew Taylor explains why written contracts are both necessary and important to small businesses. [January 11, 2010]
 
The importance of intellectual property
What is involved in protecting your intellectual assets - including patents, copyright, brand names, trade marks, design rights, domain names and online content. [December 7, 2009]
 
Staying legal – how to ensure your web business is compliant with UK regulations
You often hear business people complaining about red tape, and unfortunately they are right. Like every area of business these days, ecommerce has its own rules, regulations and laws. In fact, selling online tends to be worse because of the international dimension. [November 4, 2009]
 
Small businesses should ask more questions when appointing solicitors
Small companies could be shelling out millions in unnecessary legal fees simply because they don't ask the right questions when they appoint solicitors. [August 18, 2009]
 
Furnished Holiday Lettings Scheme - An opportunity for overseas property owners
The repeal of the so-called “furnished holiday lettings” or FHL rules, and a very important change in the interim will allow owners of qualifying overseas property to benefit from tax advantages. But there's only a short window of opportunity to take advantage of the rule change. [July 24, 2009]
 
Seven leasehold property pitfalls for commercial tenants
Companies can often be faced with a nasty shock and a big bill when moving out of leasehold premises. In this article, we explore some common and costly mistakes often made by ill-informed commercial tenants. [July 8, 2009]
 
Guide to business libel in the Internet age
Over the years, what qualifies as libel has developed from the written word to include such things as radio broadcasts, and perhaps most importantly, the internet. How employee emails and personal blogs can be a cause for concern to employers. [May 27, 2009]
 
What is a confidentiality agreement or 'NDA'?
Non-disclosure agreements, or NDAs, are used to outline how two or more parties will share confidential information, without knowledge of such information going any further. [April 17, 2009]
 
What records are employers required to keep by law?
The three main areas where small businesses over-comply are - taking on new staff, the National Minimum Wage and the Working Time Regulations. But what records are employers required to keep by law? [October 24, 2008]
 
Guide to Copyright Law - What is protected?
Copyright law is one of the key areas of intellectual property protection. In the United Kingdom, protection applies automatically once the work is created. In this expert legal guide, we step through each different types of work that are protected, and explain the extent of the monopoly granted. [September 3, 2008]
 
Why it is important to have a Partnership Agreement
Graeme Jump from Mace & Jones looks at why it is important to have a partnership agreement when setting up a business with colleagues, following a recent case. [August 21, 2008]
 




Click Here
Our Partners
Key Services
Key Services
Legal Guides
Click Here

© Bytestart Limited 2005-2010 - All Rights Reserved | Terms of Use | Site List | Website Feeds | Rss Feed RSS Feed

Business Insurance, Business Bank Accounts, Public Liability Insurance, Professional Indemnity, Startups, Limited Company, Sole Trader