A rising trend in illegal identity factories buying specialist equipment to produce counterfeits of credit cards and government-issued documents such as passports and driving licences triggered the Home Office proposals.
It is estimated that there are around 10,000 organisations within the UK’s specialist printing industry.
The proposed new law would make it a criminal offence for businesses to supply equipment to fraudsters with intent or without carrying out reasonable checks.
Identity crime costs Britain £2.7bn a year and helps criminals to enter the country illegally, commit benefit fraud and evade criminal records checks, Ministers said.
Criminal information Minister Lord Taylor of Holbeach said: “Whether it is a cloned credit card or fraudulent passport, organised gangs use specialist equipment to extort money and identities from millions of innocent people each year.
“Not only do the public suffer from billions of pounds worth of fraud each year, but false identity documents also help criminals to avoid the law and safeguard their ill-gotten gains.
“The Government has listened to the specialist printing industry and police. Now is the time to clamp down on rogue firms and put robust penalties in place for those who supply specialist equipment to fraudsters.”
The new laws would build on an industry-wide voluntary code of conduct which encourages companies to maintain records of transactions and profile customers.
Despite 880 referrals and 19 prosecutions since 2007, identity crime is growing and industry representatives and the police have asked for further and more robust action.
A consultation over the proposals has now begun with the specialist printing industry and legislation could be introduced later this year.