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Company Law Reform Bill [HL]

I would like to spend a moment on Amendment No. A191; not only does it concern the matters the noble Lord, Lord McKenzie, has been addressing but the issue has been raised with us by the Institute of Chartered Accountants in England and Wales. The amendments are intended to assist with the prevention, detection and correction of fraudulent filings with Companies House. In recent years, there has been a growing number of instances of corporate identity theft, generally involving a fraudulently submitted notice of a change of address of the registered office or a change of the directors—or both—of a company, followed by misuse of its credit history and its good name. We know that Companies House has implemented several reforms to try and prevent such fraud. We understand that these initiatives are helping to reduce the incidence of this class of fraud and will be supplemented by the new offence in Clause 719, entitled ““General false statement offence””. However, the notification system introduced by Companies House can currently be used only to monitor filings relating to a company. This means that it cannot be used by directors to monitor whether their good name has been fraudulently linked to an unknown company to improve the apparent standing of such company as the director is unlikely to have any knowledge of the company concerned. We note that there are measures in the Bill to assist in the detection of such director identity theft, where a reputable person’s name is fraudulently registered as a director of a company. Clause 694—““Allocation of unique identifiers””—contains an enabling provision allowing for unique identifiers for directors. This unique identifier could be used by directors to keep track of filings relating to them and thus check whether they are being registered for other companies without their authority. However, we are increasingly aware of reports of firms claiming that they have been victims of auditor identity theft, where the name of a registered audit firm is fraudulently added to a company’s accounts without an audit having been carried out by that auditor or, indeed, by any auditor. As with director identity theft, this can be used to improve the apparent standing of a company for fraudulent purposes. In these cases, as for a director, the audit firm is unlikely to have any knowledge of the company concerned. Therefore, the amendment extends to auditors the measures to enable directors to monitor fraudulent findings. We acknowledge that companies which add an auditor’s name illegally are committing an offence. However, we do not believe that this will deter those who set out to commit these frauds, which we presume is why the unique identifier is necessary for directors. Although cases of auditor identity theft are so far not as widespread as director identity theft, the accountancy trade press has reported many cases over the past 12 months. Given the current upsurge in identity-related fraud, we think that these enabling provisions should be included in the Bill, with consultation and regulatory impact assessment carried out if appropriate before implementing the new system for auditors to determine whether the potential benefits outweigh the additional bureaucracy.