Implementing the fifth Anti Money Laundering Directive: PSC register
Legislation to amend the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the 2017 AML Regulations) became effective on 10 January 2020. An earlier article by David Menzies details the key areas affecting accountancy firms.
One of those key areas concerns the requirement for firms taking on a client to check that the client has filed details of people with significant control with the registrar (i.e. Companies House) and to report any discrepancies identified.
New CDD requirements
The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 introduce regulation 30A to the 2017 AML Regulations. This introduces two new requirements which will affect Client Due Diligence (CDD) procedures.
The first requires that before establishing a business relationship with a company, unregistered company, LLP or Scottish Partnership, a relevant person (as defined in Regulation 8, subject to the exclusions in Regulation 15) must obtain:
1.proof of registration, or
2.an excerpt of the register from the company, unregistered company or LLP (as the case may be) or in the case of a Scottish LLP, an excerpt of the register from the registrar.
The new regulation 30A also imposes a second obligation to report to Companies House any discrepancy between information about the beneficial ownership acquired by them during their due diligence and the information that’s on the PSC register.
This obligation to report to Companies House any discrepancies relating to beneficial ownership and the information held on the PSC register is extended to discrepancies discovered at any other time while carrying out duties under the AML Regulations. It is likely that this will be most relevant when carrying out reviews of AML information held (which must be done at least annually or when other information becomes available which might affect the AML risk assessment.)
Discrepancy is not defined in the fifth AML Directive or the 2017 Regulations, but guidance issued by Companies House advises that the UK government’s interpretation of the intention is for material differences to be reported. The guidance provides examples which might include:
- a person listed as a PSC [who should not be]
- missing PSC
- PSC exemption
- PSC type
- place of registration
- date of birth
- legal form
- company statement
Spelling differences, such as Jon Smith instead of John Smith, would not be considered a material discrepancy. In such instances, it is suggested that relevant persons should encourage the company to contact Companies House to resolve the discrepancy.
The guidance also advises that when the relevant entity holds information that goes beyond (or is of a different nature from) that required for the PSC register, then that is not a discrepancy and does not require to be reported.
When and how to report
Discrepancies should be reported as soon as reasonably possible. This means that bulk reporting on a periodic basis is not permitted.
It should also be noted that a discrepancy report is not a substitute for a Suspicious Activity Report (SAR). The requirement to submit a SAR where appropriate continues.
Reporting of discrepancies should be made via the newly created online reporting tool. This requires the input of some basic details along with the information about the nature of the PSC discrepancy. It has been noted that Companies House have omitted Insolvency Practitioners from the list of relevant persons making the report. This has been raised with Companies House but in the meantime, we would suggest reporting under the category of Auditors, external accountants and tax advisers.
When making a report, the following information should be included:
- name and type of business of the obliged entity making the report
- date when the discrepancy was first noticed
- full name, email address and contact telephone number of the person making the report
- business address of the obliged entity making the report
- company name and number of the entity being reported as having a discrepancy
- the type of discrepancy - for example if it relates to a person, an RLE, a statement or a missing PSC
- details of the discrepancy - such as an incorrect address or an invalid PSC statement
The requirement to report discrepancies is based on the Companies Act definition of a PSC. However, the definition of beneficial owner under the 2017 AML Regulations and the definition of Persons with Significant Control are different. It is not therefore a straightforward comparison which requires to be carried out.
Guidance on the identification of PSCs is available from Companies House in relation to companies and LLPs and Scottish partnerships.
For AML purposes, the definition of beneficial owner is given in Regulation 5 and 6 of the 2017 Regulations. Further explanation of beneficial ownership is also given in the CCAB AML guidance for the accountancy sector (paragraphs 5.1.14 – 5.1.17)
What happens after a report is submitted
Companies House will investigate reports of discrepancies received. If it is valid, they will contact the company to ask for their comments and request that they resolve the discrepancy to make sure the PSC register is up to date.
The company will not be informed that a discrepancy report has been made about their PSC register information. Companies House will however provide the reporter the outcome of their investigation.
The feedback provided by Companies House is likely to be information which should be considered against the requirement to carry out CDD under Regulation 27(d) – receipt of information which cast doubt on the veracity or adequacy of documents or information previously obtained for the purposes of identification or verification
ICAS has a strategic partnership with Amiqus ID which provides electronic AML services that aid compliance with the new AML requirements and reduce risks associated with non-compliance.