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The site is no longer accepting customers; the Mawsons said they had been completely unaware of the practice.

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The BIS, which is now known as the Department for Business, Energy & Industrial Strategy, and the tax authority HMRC, which Dowson said regulated his firms, declined to comment on the case.

Dowson, 35, said he helped online merchants whose transactions are seen by credit card firms as "high risk" to win approval to take credit card payments.

Many were overseas and needed a European company base.

As a result, he said, he agreed to dissolve BMI and promised EMB would stop using untrained people in and around Consett as company directors.

"EMB is no longer forming entities going forward," Dowson said.Some of the activity the companies lent their names to was illegal, but neither the directors nor the company formation agent involved have been charged with any wrongdoing.

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