U.K. formation agents facing crackdown over organised crime links
04 Feb 2021

The government and the National Crime Agency are planning a crackdown on company formation agents amid growing alarm at the industry’s links to serious organised crime and money laundering.

The law enforcement agency’s National Economic Crime Centre, which co-ordinates efforts to prevent fraud, is working with the Treasury to “drive down the risks” associated with the industry.

It is understood that a range of potential tactics are being considered, such as stricter regulation and greater enforcement, after an official review uncovered the extent of formation agents’ links to crime.

There are about 20,000 trust and company service providers in the UK assisting with the creation of corporate structures. While there are many legitimate reasons to use a formation agent, the sector also helps individuals and businesses to establish complex and opaque corporate structures that are abused by criminals.

The NCA is concerned that in some cases, formation providers may be complicit in illegality, or at least may be operating in breach of anti-money- laundering laws.

HM Revenue & Customs has limited supervision of about 1,500 formation agents, which are not subject to regulation elsewhere. There are concerns about the quality of oversight of the independent sector and from accounting and legal regulators.

Over the past 12 months the National Economic Crime Centre has been working with the government, fraud fighters, HMRC and private sector partners to identify vulnerabilities in the company formation system and risks posed by formation agents. As a result, the Treasury and Home Office raised the risk level applied to the sector with regards to money laundering and terrorist financing from “medium” to “high”.

An NCA analysis of money “laundromats” originating in Russia and the former Soviet Union revealed that a “disturbing proportion” involved British corporate structures, Graeme Biggar, of the National Crime Agency, told MPs on the Treasury committee last week.

By James Hurley, The Times, 4 February 2021

Read more at The Times

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