Money Laundering Regulations 2007 12/12/2008 Information helpful for Know Your Client rules also helpful for fraudsters

A recent report from the Commons Business and Enterprise Committee has warned that information useful for compliance with the Money Laundering Regulations 2007 was also useful to persons attempting to commit fraud.

The details of companies registered at Companies House, while invaluable for customer due diligence or know your client checks, were shown to be providing avenues for fraudsters to commit identity theft using the personal details of directors available on the register. The committee also recognised criminal activity that sought to misappropriate businesses by changing their registered addresses and having goods delivered to the fraudulent address at the legitimate companys expense.

The security service offered by Companies House, Protected Online Filing, was mooted as a solution that could reduce risk of abuse. The removal of a police officer who had disrupted almost 500 examples of potential money laundering fraud was also noted with nervousness, and a further suggestion that this situation should be kept in review was made.

Another was the introduction of differing levels of access to the data, which could create a secure register that is only open to certain authorised agencies. The British Bankers Association, however, warned that its clients due diligence activity could be hampered by this solution, giving examples such as the increased difficulty of spotting fraud without access to addresses, a common link, and that without Director addresses it would be impossible to know whether they are dealing with potential clients from sanctioned countries, and thus at risk of breaching the Money Laundering Regulations 2007.

Concluding the report, the committee suggests that a review assessing the ability of Companies House to help prevent crime would be advisable. It also states that There is clearly a balance to be struck between making the register useful to those who are attempting to prevent crimes such as money laundering, while preventing it being useful to those attempting to commit other crimes such as fraud. This balance should be frequently reviewed and legislation amended as necessary.

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