The Fifth Anti-Money Laundering Directive has just come in to force in the UK by way of the Money Laundering and Terrorist Financing (Amendment) Regulations 2019 (the "Regulations").
Beyond the development of the anti-money laundering regime, it has had a further effect on reporting information at Companies House, with effect from 10 January 2020.
Companies House: discrepancies reporting for 'obliged entities'
The Regulations require 'obliged entities' to inform Companies House if there is a discrepancy between the information held on a beneficial owner of a legal entity in the UK, and the information that's on the public People with Significant Control ('PSC') register. A legal entity is for these purposes, any corporate body registered in the UK that is subject to the PSC regime, including Scottish limited, and qualifying partnerships.
What are 'obliged entities'?
'Obliged entities' include, amongst others, credit and financial institutions, financial advisors including auditors and accountants, legal professionals, and trust and company service providers. Essentially, these are all bodies that might already be required to obtain due diligence on clients in the course of their business. In this context, a legal entity subject to this process will have become a client of the obliged entity in some way and will be undergoing the usual due diligence process as a result.
Beneficial ownership vs PSC
The definition of 'beneficial owner' is narrower than that of a 'PSC' (under the Companies Act 2006, and noting not just the ownership and voting rights, but the 'control' element as well). Furthermore, the reporting requirement under the Regulations is based on that definition of PSC. Any person charged with reviewing the information must be aware of the different requirements.
What constitutes a discrepancy?
A 'discrepancy' is not defined in the Regulations, but it is understood that it should relate only to material differences, through clear factual errors, rather than through typos. Essentially, a discrepancy will exist when the legal entity has information in its private registers that indicates that the public information on the PSC register at Companies House is inaccurate. If a discrepancy is discovered (or thought to have been discovered), a report must be made as soon as reasonably possible; bulk reporting, by 'saving up' discrepancies and then reporting a number at once or periodically, is not permitted.
Companies House has set up a page on its website for reports to be made. Companies House will then investigate and notify the company in question for its comments and to request a resolution of the matter; the company will not be told that a report has been made, but the obliged entity will be informed of the outcome.
Keeping your statutory registers up-to-date
What this development emphasises is the need for both obliged entities and companies to be aware of their own PSC status; while it is common for this to be outsourced to service providers, supporting evidence should always be maintained and cross-referenced on a regular basis. Given that it arises in tandem with the money laundering checks, it would seem sensible for the checking and comparison of the beneficial owner(s) and the persons of significant control to be done both regularly and simultaneously.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.