Authorised corporate service providers: Risk management considerations
Miller Insurance Services outlines the implications of key changes introduced by the Economic Crime and Corporate Transparency Act 2023 for UK law firms, and shares advice on how to stay abreast of the latest developments in AML, sanctions and anti-corruption measures
Law firms are accustomed to setting up companies for clients and assisting with filing obligations. In recent years, Companies House has suffered from an increase in fraudulent filings of information. A 2022 BBC investigation identified 150,000 people/addresses falsely connected to companies, and to date, Companies House has not been able to verify the data submitted.
The Economic Crime and Corporate Transparency Act 2023 (ECCTA) addresses this lacuna among anti-money laundering (AML), sanctions and anti-corruption measures.
In the words of the UK government policy paper Economic Crime and Corporate Transparency Act: identity verification and authorised corporate service providers:
“Individuals who register and control companies or file with the Registrar will have to prove they are who they say they are by verifying their identity. This will make it much harder to register fictitious directors or beneficial owners, stopping the vast majority of fraudulent appointments from reaching the Companies House register.”
Upcoming changes
From February 2025, law firms carrying out identity checks on behalf of clients for Companies House need to register as an Authorised Corporate Service Provider (ACSP).
From spring 2026, law firms will also need to register their business as an ACSP to file any information on behalf of other companies.
The provisions are being introduced incrementally over a period, and Miller anticipates this to be an area of constant evolution over time, with increasingly strict regulation.
Much of the detail relating to the application of the measures already announced is yet to be published, and firms intending to undertake company formation, verification and Companies House filing work, even if ancillary to the principal instruction, will need to keep abreast of the latest developments.
Implications for your business
ACSPs found to be non-compliant may be suspended pending investigation, and in extreme cases where they are deemed unfit, their authorisation as an ACSP can be revoked.
There will also be a new offence, which applies to the director or equivalent of an ACSP, of failure to notify the Registrar of changes to their supervisory body/bodies within 14 days following the change.
False statement criminal offence definition broadened
Section 102 of the ECCTA (which came into force in spring 2024) amends the false statement criminal offence in s1112 of the 2006 Companies Act. Where previously the offence was committed where the false statement was made “knowingly or recklessly”, it is now an offence to deliver a filing or statement to the Registrar that is false, deceptive or materially misleading “without reasonable excuse”.
There is no guidance as yet on what may constitute a reasonable excuse. A clear, well-considered, and rigorously implemented process will ensure your firm does not commit this offence.
Reputational damage by association
Firms that file information on a company’s behalf are liable to be contacted by Companies House where issues arise. This is only likely to increase with the implementation of the ACSP regime. As with the Register of Overseas Entities, it may be that the ACSP is noted on the public register, which, in effect, is associated with that company. This brings the risk of public association with particular companies, which could be problematic if those companies come into the public eye for AML, sanctions breaches, or other controversial conduct.
AML and compliance risk
The SRA has identified trust and company service providers (TCSPs) as “at a high risk of being used for money laundering or terrorist financing”. The ACSP regime is only likely to increase this risk, which the SRA already considers one of the highest areas of AML risk for law firms.
Companies House filing is typically an ancillary activity for law firms. The risk is that these become seen as merely an administrative process, and insufficient regard is given to assessing the content. In most cases, it will be straightforward and fundamentally administrative, but being aware of potential outliers and accurately identifying them is the critical function. It is perhaps analogous to the difficulty that GPs experience in differentiating the rare cases when common symptoms (such as back pain) are indicators of a serious condition rather than one of the thousands of run-of-the-mill ailments.
Firms taking on an ACSP role must reevaluate their current processes and provide training for staff undertaking this work. There will also be cost and time implications; for example, company incorporations will require ID verification of all directors.
Action points for ACSP professional firms
- Ensure your AML and sanctions processes are up-to-date and effective. Do NOT treat identity verification and AML as administrative processes or become over-reliant on ‘technical passes’ from e-verification systems.
- Review your firm-wide risk assessment regularly, in the context of your ACSP work — bearing in mind the types of clients you deal with.
- Revisit your client and transaction vetting processes. They are critical risk controls in the context of the above listed risk factors. Miller can assist with this exercise.
- Have suitable triage processes in place to ensure that any complex or high-risk cases have a suitable degree of oversight prior to submitting documents to Companies House on behalf of a client.
- Provide relevant staff with practical training on the risk factors.
- Plan ahead — allocate a specific individual responsibility for ensuring that the firm meets relevant deadlines as elements of ECCTA 2023 come into force, and keeps abreast of and implements latest guidance as it is issued.
For further information, or to discuss anything relating to your insurance needs, please email solicitors@miller-insurance.com
