Directors Digest June 2005

‘Corporate identity theft – what can you do about it’

Identity theft is one of the fastest growing crimes in the UK. But it’s not only individuals whose identities are being stolen: companies can also find that suddenly they are ‘controlled’ by fraudsters.

It is surprisingly easy to pass yourself off as a director of a company. Since Companies House have no means of checking the authenticity of returns, they are accepted in good faith. By filing a false return, a fraudster can get himself recorded at Companies House as a director of almost any company, perhaps using an individual’s stolen identity. He could also change the company’s registered office and certify that resolutions have been passed to change the company’s name or share capital.

Commonly, the fraudster simply uses the company’s creditworthiness to obtain goods which are never paid for. Such rip-offs are estimated to cost industry at least £50 million a year. But the more sophisticated fraudster could also change the company’s bank mandates, empty its accounts and even sell its assets. In a recent case, fraudsters sent forms to Companies House purportedly recording their appointment in place of the existing director and secretary and then executed documents to sell the company’s overseas subsidiary, which owned a large office block in Moscow. The fraud was only discovered when the genuine company officers were prevented from entering the building by armed guards.

Protecting your own company

To help combat such frauds, Companies House has introduced two new services. These are supported by the Metropolitan Police, who recommend that companies:

• Check their file at Companies House regularly to ensure that all changes have been authorised. For a nominal fee, Companies House ‘Monitor’ service will alert companies to any changes that are made to their file or the file of any other specified company
• File their documents on-line through Companies House’s new PROOF (PROtected Online Filing) service. This is a free, password protected, on-line system under which Companies House will only accept annual returns, and forms relating to changes in directors and registered office, that are filed electronically by an authorised user.

Dealing with other companies – some tips

Some common sense steps to ensure that the person you are dealing with actually is who he says he is, and that he actually has authority to act on behalf of the company, include:

• Most importantly, remember that records filed at Companies House can be false. Even if they are correct, they may be out of date or incomplete
• Look for suspicious signs: if the director you are dealing with has only recently been appointed, it may be worth finding out more. Ask for corroboration from other directors or, if necessary, from shareholders
• If you do suspect something may not be right:

1. Ask to see the company’s statutory books or other key documents: a fraudster may well not have them
2. Ask the police to check whether anyone with the same name as your contact has reported their passport being stolen
3. If the registered office has recently been changed, visit the old address and see if anyone there knows about the change
4. If you’re buying a business or valuable asset, make sure you visit it during business hours accompanied by the ‘director’ you’re dealing with

• Remember that nearly all documents can be forged, and that even fraudsters can have their own legal and financial advisers!

This article originally appeared in Directors’ Digest (June 2005) – a CMS Cameron McKenna publication.