In a mere few weeks, Companies House will bring into force one of the most significant identity verification changes in its history. From 18 November, any company director or Person of Significant Control (PSC) will be required to verify their identity either directly with Companies House or through an Authorised Corporate Service Provider (ACSP).
If any of the UK’s six million registered directors fail to comply with these changes, they could face operational restrictions and financial penalties. The impact of the new rules will be particularly pronounced for ACSPs – businesses or individuals who are authorised to verify their clients’ identities with Companies House. Accountants, solicitors and other firms supporting directors will face a surge in identity checks and need the tools to process clients efficiently while continuing to adhere to anti-money laundering (AML) regulations too.
There’s no sugarcoating that the risks of not getting their houses in order for the changes will be disruptive; Companies House can impose financial penalties, reject filings and disqualify directors for non-compliance.
There is a bit of grace for existing directors or PSCs in the form of a 12-month transition period. But they won’t be able to submit their annual confirmation statement in this period until all directors and PSCs are verified. Crucially, any new directors will have to verify their identity after the deadline. Such looming deadlines can be accompanied by a sense of dread: “It’s too late to sort anything now anyway?”
Yet there’s still time. For now, manual processes can fill the void until the right identify and verification (IDV) technology is chosen and implemented. But you don’t want to be pedalling backwards. Without technology, the process of verifying an influx of identities manually will be too great. And that’s why demand for digital IDV platforms is likely to skyrocket.
It’s a new era for identity verification that follows a growing trend for strengthening IDV processes.
A new dawn for identity verification
These changes fall under an umbrella strategy by the government to tackle fraud and financial crime. In 2023, IDV was introduced into UK company law and bestowed Companies House with new powers to fight economic crime.
Ultimately, Companies House will have more accurate oversight over who is forming and controlling companies in the UK. For companies themselves, it will create greater transparency and enable compliance teams to more proficiently conduct processes like customer due diligence and AML.
While directors can verify themselves, ACSPs provide an easier way for individuals to comply. And – for all its good intentions – given question marks have been raised over the security of the GOV.UK One Login, they potentially offer a more secure way too.
The role of ACSPs
With the deadline imminent, ACSPs will need to perform the necessary IDV steps. This encompasses collecting, verifying and maintaining a record of data from clients and then registering it with Companies House. In particular, there are two key verification steps. The first involves validating whether the supplied evidence is authentic. The second involves checking if, one, the identity is genuine, and two, that it belongs to the person who is claiming to be it.
It’s definitely possible and acceptable to do this in person, especially if ACSPs don’t have technology implemented yet. There will be clients who prefer to do this too – that’s fine. But this requires the ACSP to manually contact all of their clients, gather ID documents, and then verify them, as well as prove to Companies House that they have staff trained to perform this process in person.
Here’s the pitfall with the manual approach: as soon as the deadline hits, a backlog could quickly build. The more manual checks required, the more time and energy spent on verifying identities. That leaves greater room for error, non-compliance and delays in processing clients – and that leaves firms susceptible to rising costs and reputational damage.
The other option, however, is to adopt IDV technology.
What to look for in IDV solutions
The deadline doesn’t just represent an impending surge in IDV activity for ACSPs – they also have to meet existing AML regulations too. Compliance is already a complex and time-consuming activity, so this makes the appeal of using digital IDV solutions even stronger. But what are the key features to look out for?
Priority number one is to look for IDV technology provided by a certified IDSP – the tech won’t be approved to perform the IDV process otherwise. With weeks left, fast implementation is also crucial – platforms need to integrate into existing business systems efficiently.
Tech providers will be aware of the new regulations, combining the new Companies House rules with existing AML regulations to help streamline the compliance process. For example, given ACSPs need to contact their entire client base, features like ‘bulk invites’ could enable them to automatically contact each director with a verification request in one go. You also want the ability to remediate false positives easily, due to the influx of IDV checks that will be needed.
More broadly, solutions should be embedded with capabilities such as facial biometric recognition, NFC technology (to read chips in passports), and integration with public databases like sanctions lists. This means ACSPs can conduct IDV checks alongside AML tasks. And this dual compliance capability will limit any disruption to operations while lowering the admin burden and cost of the new changes too.
Time to verify
With the deadline about to hit, directors and ACSPs need to take action. Directors only need to heed a simple warning: verify now to minimise any non-compliance risks. For ACSPs, there’s more to consider. They need to find the sweet spot between managing an influx of IDV checks while maintaining existing AML processes.
While manual processes can suffice, the best way to get their house in order is to adopt the right digital IDV solutions. As the Companies House changes take hold, those using technology will be best-positioned to seamlessly verify their clients’ identities while minimising their own operational and compliance risks.
By acting now with solutions designed exactly for these changes, companies need not fear the looming deadline.
Tim Barnett is CEO of Credas Technologies
