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What Corporate Service Providers need to know about the UK’s new identity verification rules.

The UK Government’s introduction of new ACSP legislation through Companies House is a transformative step aimed at reducing fraud, enhancing transparency, and ensuring compliance with anti-money laundering (AML) regulations.
CSPs and UK's new legislation overview

For Corporate Service Providers (CSPs), these changes bring both challenges and opportunities. This legislation marks a pivotal shift in corporate governance, and we’re elated to share that SQR’s award winning digital identity verification and eKYC solutions can help CSPs navigate the upcoming UK compliance changes seamlessly.

The new ACSP identity verification requirements, set to roll out from February 2025, represents a significant step in improving corporate governance and compliance. By mandating identity verification for individuals setting up, owning, or managing companies, the legislation seeks to:

  • Deter illegal activity: By ensuring all directors, persons with significant control (PSCs), and other key individuals are verified, Companies House is cracking down on the misuse of companies for fraudulent or illegal purposes.
  • Enhance transparency: Identity verification introduces accountability and reduces the anonymity often exploited by bad actors.
  • Strengthen AML regulations: ACSP legislation ensures that the highest standards of AML compliance, align with global best practices.
  • Improve trust in the UK business ecosystem: A robust verification process fosters trust among investors, stakeholders, and the public, reinforcing the UK as a credible and secure place to do business.

With CSPs playing a crucial role in company formation and management, this legislation aligns their work with global best practices, fostering trust among investors, stakeholders, and the public. Starting February 25th, 2025, firms and sole traders supervised under AML regulations can apply to become Authorised Corporate Service Providers (ACSPs), and from March 25th, 2025, identity verification will become mandatory for directors, PSCs, and others acting on behalf of companies. This means:

  • Mandatory Identity Verification: CSPs must conduct identity checks that meet Companies House’s strict assurance standards.
  • Compliance Requirements: CSPs must be AML-supervised and adhere to the new identity verification guidelines.
  • New Role as ACSPs: CSPs will not only be service providers, but also key players in ensuring compliance and governance under the ACSP framework.

With accreditation under the UK Government Trust Framework, we are trusted leaders in digital identity services, providing comprehensive solutions tailored to address the requirements of the new ACSP legislation.. Here’s how we solve CSPs:

  • Enhanced Security and Fraud Prevention: SQR’s Digital ID and eKYC Compliance Dashboard conducts robust identity verification and AML checks, ensuring only verified individuals can set up, manage, or own companies.
  • Streamlined Compliance: Our platform simplifies the identity verification process, meeting Companies House’s standards while reducing administrative burdens. With real-time KYC and AML checks triggered through our frictionless app, CSPs can stay ahead of regulatory requirements without compromising efficiency.
  • Improved Data Integrity and Security: SQR’s solutions ensure that sensitive customer data is securely managed through a reusable, free-to-use account. Individuals retain control over their information, while CSPs benefit from enhanced data integrity and reduced risk of breaches.
  • Transparency and Accountability: Our technology fosters transparency by providing controlled access to real-time customer information. This ensures CSPs can easily demonstrate compliance and maintain accountability.
  • Scalable and Cost-Effective Solutions: SQR’s cutting-edge tools are designed to optimise resources and deliver measurable ROI, enabling CSPs to focus on growing their businesses while meeting regulatory demands.

Our commitment to security, efficiency, and inclusivity ensures CSPs are equipped to meet the evolving compliance landscape with confidence. As the new ACSP framework approaches, staying ahead of compliance is essential. SQR’s expertise and technology make us the ideal partner for CSPs looking to navigate these changes seamlessly.

To learn more about how SQR can help you save time and money, while meeting regulatory requirements and supporting your compliance journey, get in touch with our team by emailing hello@sqr.id or visit https://sqr.id/contact-us/ today.

In this case study, we explore how digital identity verification can successfully address key challenges, demonstrating its impact in transforming public sector processes.

Solving Public Sector Pain Points: 

The need for independent validation of corporate ownership data has never been more pressing. As countries around the world intensify efforts to combat money laundering, tax evasion and financial crimes, understanding Ultimate Beneficial Ownership (UBO) has become a key global priority. Findings by the International Financial Accountability, Transparency and Integrity (FACTI Panel) estimates;

  • $500 billion losses to governments each year from profit-shifting enterprises;
  • $7 trillion in private wealth hidden in haven countries, with 10% of world GDP held offshore;
  • Money laundering of around $1.6 trillion per year, or 2.7% of global GDP.

One of the most effective tools in this battle is the beneficial ownership registry, but ensuring the accuracy and integrity of the information held within often presents a challenge. Certified digital identity solutions could provide the answer. 

What is a Beneficial Ownership Registry?

A beneficial ownership registry is a database that records the individuals who have significant control over, or who stand to benefit from, a legal entity such as a company or trust. The goal is to bring transparency to the ownership structure of companies, making it harder for criminals to hide behind complex corporate arrangements.

According to the Financial Action Task Force (FATF), the global authority on anti-money laundering and combating the financing of terrorism, a UBO is “the natural person(s) who ultimately owns or controls a customer or the natural person on whose behalf a transaction is being conducted.” This definition extends to those who exercise ultimate control over a legal entity, typically individuals who directly or indirectly own more than 25% of a company’s shares or voting rights.

The Challenges of UBO Disclosure

Identifying UBOs is not always straightforward. Ownership can be deliberately obscured through layered holding structures, spread across multiple jurisdictions with differing disclosure rules. This creates a significant challenge for authorities and regulators trying to track the real beneficiaries of a company. The International Monetary Fund (IMF) emphasised this critical risk in their 2022 whitepaper ‘A guide to Beneficial Ownership Transparency’, noting that countries should have mechanisms to ensure the accuracy of the data submitted.

FATF defines accuracy in the context of beneficial ownership information as having been “verified to confirm its accuracy by checking the identity and status of the beneficial owner using reliable, independently sourced or obtained documents, data, or information.” Given the complexities involved, independent validation of beneficial ownership data is critical. Without robust mechanisms, beneficial ownership registries run the risk of being inaccurate or incomplete, which leaves the system vulnerable to financial crime.

A Leading Example

One country that has made significant strides in beneficial ownership verification is Denmark. The Danish system integrates digital identity tools such as ‘MitID’ – a government-issued digital ID – with its beneficial ownership registry. MitID connects to an individual’s civil registration number, as well as their address in the Danish Address Register, enabling authorities to automatically cross-check all of the information submitted against trusted databases. This reduces the risk of both unintentional errors and fraud, ensuring a higher level of data accuracy.

However, while Denmark’s approach provides a model initiative in respect of the country’s resident beneficial owners, it does have limitations. Non-residents are ineligible for a MitID, necessitating an additional identity verification process for this group of beneficial owners. This adds complexity and relies on more traditional, less streamlined methods. 

Fostering an Inclusive Cross-Border Approach

Countries and jurisdictions without government-issued digital identity systems, or with foreign national UBOs, are increasingly turning to private sector digital identity solutions to validate their data. It is crucial however, that only digital identity providers certified to a recognised government standard – such as DIATF in the UK or eIDAS in the EU – are onboarded. This ensures that the verification process meets stringent regulatory and security benchmarks, providing a high level of trust and reliability. Find out how SQR’s certified digital identity solution is being leveraged in this way here.

This type of collaboration between public and private sectors fosters the creation of innovative, tailored solutions that meet the unique needs of each jurisdiction while also leveraging the advantages of reusability. For instance, individuals with a certified digital identity from an approved provider can seamlessly share their pre-verified identity information with the relevant authorities. This approach not only streamlines the verification process but also ensures adherence to stringent government standards, significantly mitigating the risk of fraud and enhancing the integrity of beneficial ownership data.

The Future of UBO Verification

Countries and jurisdictions without government-issued digital identity systems, or with foreign national UBOs, are increasingly turning to private sector digital identity solutions to validate their data. It is crucial however, that only digital identity providers certified to a recognised government standard – such as DIATF in the UK or eIDAS in the EU – are onboarded. This ensures that the verification process meets stringent regulatory and security benchmarks, providing a high level of trust and reliability. Find out how SQR’s certified digital identity solution is being leveraged in this way here.

The use of independent digital identity systems represents a crucial step forward in improving the accuracy and security of beneficial ownership databases. By fostering collaboration between governments and the private sector, countries can implement innovative, scalable solutions that address the growing demands of the global regulatory environment. Ultimately, these advances will empower authorities to better tackle financial crime, increase public trust, and enhance the integrity of beneficial ownership data worldwide.

A secure, efficient and inclusive digital identity system offers a wide range of benefits. By adopting certified digital identity solutions, governments and organisations can streamline operations, build public trust, and create a more secure and transparent digital ecosystem. 

The benefits of secure, efficient and inclusive digital identity

A certified digital identity solution provides a reliable and verifiable source of information, minimising errors often associated with manual verification processes. This is particularly crucial for company beneficial ownership data, where accuracy is paramount to ensure transparency and accountability. By verifying the legitimacy of ownership, digital identity systems ensure that only authorised individuals can access sensitive information or claim beneficial ownership. This significantly reduces fraudulent activity, protecting both individuals and organisations.

Governments around the world face stringent regulatory requirements for transparency, anti-money laundering (AML) and combating the financing of terrorism (CFT). Certified digital verification identity solutions also help meet regulatory obligations, by providing a secure and trusted method for verifying beneficial owners. Automating and standardising the identity verification process further ensures that organisations are compliant with complex regulations, whilst also reducing the risk of non-compliance penalties.

Managing large datasets manually is time-consuming and prone to errors. Thus, automating and streamlining data management and digital identity verification processes reduces administrative burdens and improves operational efficiency. This more accurate processing of ownership and identity data, in turn leads to better decision-making and resource allocation for governments and businesses. With a certified digital identity system, sensitive data related to ownership is better protected against breaches, thanks to robust encryption and authentication processes. These enhanced security measures ensure that sensitive information remains protected, and helps to maintain the integrity of ownership records.

In an increasingly interconnected world, the ability to verify identities across borders is essential for multinational organisations and cross-border transactions. Certified digital identity solutions have the ability to integrate with international databases, ensuring consistency and reliability in identity verification on a global scale. It further plays a key role in enhancing global interoperability, as they enable integration with international databases. This is crucial for verifying identities consistently across borders, supporting multinational entities and cross-border transactions.

Additionally, governments that utilise certified digital identity verification systems can strengthen public confidence by demonstrating their commitment to transparency and safeguarding ownership data integrity. Furthermore, collaboration between governments and certified identity verification service providers fosters innovation. By partnering with cybertech firms, governments leverage advanced technology to develop scalable, compliant, and secure solutions for managing beneficial ownership databases.

This synergy benefits both parties, allowing governments to implement modern solutions while enabling tech firms to design systems aligned with regulatory needs.

Rebecca Glassey, Product & Operations Manager at SQR:

“Certified digital identity solutions are the cornerstone of secure, accurate data management in the modern era. By collaborating closely with government entities, we ensure that our technology not only meets the highest regulatory standards but also delivers the scalability and security that public systems demand. It’s all about providing a seamless and trusted verification process, while reducing the risk of fraud and errors in critical government datasets like beneficial ownership registers.”

Steven Webster, Head of Strategic Partnerships at SQR:

“Our work with government agencies highlights the immense value of public-private collaboration in tackling complex challenges such as identity verification. By partnering with certified Identity Service Providers, governments can adopt cutting-edge technology that ensures transparency and security in managing beneficial ownership data. This level of cooperation fosters innovation and enables both parties to create solutions that are not only efficient but also adaptable to the evolving regulatory landscape.”

For more details on how SQR’s certified digital identity solution is being implemented in collaboration with governments, refer to this SQR article.

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