What it means
In finance, similar-sounding names are common. A word such as circle, capital or trust is easy to adopt, and regulators in different countries register companies independently, so two unrelated firms can hold almost the same name.
If a contract, invoice or email mentions Circle Financial Services Company, the first job is to establish which legal entity is meant. The legal entity is the party that actually signs, owes and gets paid.
It has a registered name, a registration number and a registered address, all of which appear on the official company register in its home jurisdiction. Matching those details against the document is the quickest way to rule out a lookalike.
If the company offers regulated services such as lending, payments, investment advice or insurance broking, you should also check the financial regulator's public register. The register shows whether the firm is authorised, what activities it can carry out and whether any warnings have been issued.
Authorisation for one activity does not cover others. For a business, this is part of counterparty due diligence.
Before you lend to, borrow from, invest through or pay a financial firm, collect the registration number, confirm the authorisation, verify the bank account details by a separate channel and keep the evidence on file. These steps cost little and prevent expensive fraud.
The nuance is that a name can be copied deliberately. Fraudsters sometimes imitate a genuine firm, using a nearly identical name and a convincing website, to collect payments.
If an instruction to pay arrives by email or a changed bank account is requested, call the firm on a number you already trust. Keep a simple counterparty file for every financial firm you deal with.
It should hold the legal name, registration number, registered address, regulator reference, copies of authorisations and the date you last checked them. Review the file annually or when the relationship changes, because firms can lose authorisation, change ownership or be renamed.
In practice
Real-world examples.
Example
A small manufacturer receives a financing proposal from a company called Circle Financial Services Company. The finance manager checks the company register for the registration number, confirms the entity's status and compares the address with the proposal before engaging. He rejects the proposal because the registration details do not match, and records the check in the supplier file.
Example
An accounts payable clerk at a charity receives an email saying a supplier's bank details have changed. She phones the supplier on a number from an earlier contract, learns the email was fake and stops a $42,000 payment. The incident is reported to the bank and the charity adds a call-back step to its payment process for every change request.
Example
A wealth adviser is asked to recommend a financial services firm for a client's escrow arrangement. She checks the firm's authorisation on the regulator's public register, confirms the permitted activities include the service required and records the result. She tells the client that the register is rechecked annually, since permissions can be restricted or withdrawn over time.
Case study
Seen in the real world.
Larkspur Imports is an illustrative, fictional wholesaler that was offered an invoice financing facility by a firm with a name similar to a well-known lender. The sales pitch was polished and the terms looked attractive.
Before signing, the finance controller asked for the registration number and looked it up on the company register. The registered entity had been incorporated only a few weeks earlier, held no authorisation for lending and had no connection to the established firm whose name it resembled.
Larkspur walked away and reported the approach to the regulator. The illustrative lesson is that a five-minute register check is the cheapest control a business has.
Watch out
Common mistakes.
- Assuming that two companies with similar names are the same business or part of the same group.
- Taking a firm's word that it is authorised instead of checking the regulator's public register.
- Accepting a change of bank details by email without verifying it through a trusted channel.
Questions
People also ask.
How do I confirm which company I am dealing with?
Use the registration number to find the entity on the official company register, then compare its name, address and directors with your documents.
Where do I check whether a financial firm is authorised?
Use the public register of the financial regulator in the firm's home country, which lists permitted activities and any warnings.
What if two firms share the same name?
Rely on the registration number and registered address rather than the name, and ask the firm to confirm in writing which legal entity will sign the contract.
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