CICM and EFTA success in fight against short-firm and long-firm fraud
09 April 2019
Companies House to put warning on website that its data is not verified
The Chartered Institute of Credit Management (CICM) and The European Freight Trade Association (EFTA) are claiming victory after Companies House added a warning to its website that the information available on its site has not been independently verified.
Philip King, the Chief Executive of the CICM, the world’s largest recognised professional credit management body, and James Campbell, Secretary of The European Freight Transport Association (EFTA) succeeded in their representations to Companies House to challenge the alarming increase in short-firm fraud, when companies file deliberately false accounts and use credit to fraudulently obtain goods that are delivered to third-party addresses.
Companies House has now taken steps to display a more prominent warning throughout its website regarding the efficacy and accuracy of the information it holds, confirming that such information has not been verified. Companies House has also created a dedicated email through which businesses can raise concerns over bogus accounts firstname.lastname@example.org.
Philip King says he is delighted with the way that Companies House has responded to their approaches: “We raised the issue, they listened to us, and they have taken action, and they should be commended for it.
“Credit managers use information at Companies House on which to base risk decisions, and need to be aware that the information cannot always be trusted. Companies House data is useful as one part of the decision-making process when it comes to granting credit, but should never be relied upon as the only source of information.”
Short-firm fraud is closely associated with long-firm fraud. With the former, there is no attempt to establish a credit history before a fraud is attempted. Bogus accounts are simply filed at Companies House to obtain glowing credit reference agency recommendations to be used to trick unsuspecting businesses to supply goods and services on credit with no chance of their being paid.
With the latter, the criminals set up an apparently legitimate business intending to defraud its suppliers and customers. The business buys goods and pays suppliers promptly to secure a good credit record before executing its ‘sting’, sometimes taking companies for many tens of thousands of pounds that they cannot recover.