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Trust and company agents facing crackdown over organised crime links


The government and the National Crime Agency are planning a crackdown on company formation agents amid growing alarm at the industry’s links to serious organised crime and money laundering.

The law enforcement agency’s National Economic Crime Centre, which co-ordinates efforts to prevent fraud, is working with the Treasury to “drive down the risks” associated with the industry.

It is understood that a range of potential tactics are being considered, such as stricter regulation and greater enforcement, after an official review uncovered the extent of formation agents’ links to crime.

There are about 20,000 trust and company service providers in the UK assisting with the creation of corporate structures.

While there are many legitimate reasons to use a formation agent, the sector also helps individuals and businesses to establish complex and opaque corporate structures that are abused by criminals.

The NCA is concerned that in some cases, formation providers may be complicit in illegality, or at least may be operating in breach of anti-money- laundering laws.

HM Revenue & Customs has limited supervision of about 1,500 formation agents, which are not subject to regulation elsewhere.

There are concerns about the quality of oversight of the independent sector and from accounting and legal regulators.

Over the past 12 months the National Economic Crime Centre has been working with the government, fraud fighters, HMRC and private sector partners to identify vulnerabilities in the company formation system and risks posed by formation agents. As a result, the Treasury and Home Office raised the risk level applied to the sector with regards to money laundering and terrorist financing from “medium” to “high”.

An NCA analysis of money “laundromats” originating in Russia and the former Soviet Union revealed that a “disturbing proportion” involved British corporate structures, Graeme Biggar, of the National Crime Agency, told MPs on the Treasury committee last week.

Formation agents filed only 31 suspicious activity reports to the NCA last year, compared with the hundreds of thousands sent to the NCA each year by other industries, including banks and estate agents.

Biggar said that these service providers “crop up repeatedly in our investigations” and a core of about 100 trust and company services providers created hundreds of thousands of new companies each year and were associated with few addresses in the country. “All those things can have legitimate purposes, but that is a real challenge and an area where . . . we need to focus more supervisory effort and criminal investigation effort.”

The plans are expected to result in more supervision of, and more enforcement against, company formation agents.

The NCA is also expected to ask for greater control over the ability for company formation agents based overseas that set up companies that serve to disguise the true ownership.

The government is planning reforms to Companies House, Britain’s corporate registry, such as compulsory identity verification and greater powers to query, investigate and remove false information, but Biggar said that formation agents must be “fixed” at the same time. He added that it was “too easy to set up companies” in the UK. “We need to weed out the crime and the criminals from this.”