UK entities that are required to carry out client due diligence (CDD) will have to refer to the people with significant control (PSC) register and trust registration service (TRS) under changes to anti-money laundering rules due to come into effect in 2020. The changes were outlined in the government’s consultation on its implementation of the 5th Money Laundering Directive (5MLD) (see our article here for a look at the implications of 5MLD for crypto-assets).
CDD – the requirement for businesses to verify the identities and beneficial owners of their customers before establishing a business relationship or carrying out a transaction – is widespread, applying to banks, accountants and law firms amongst others. The PSC register is a public register held by Companies House which records beneficial ownership information for UK companies, limited liability partnerships and other corporate legal entities. And the TRS is a private register held by HMRC which records beneficial ownership information about certain types of trust (see our article here for the other changes to the TRS under 5MLD). The link between CDD and the PSC register and TRS is a natural one but this the first time the regimes have been formally joined.
Under the new requirements, when a business is carrying out CDD on a new customer which is subject to the PSC register regime or to registration on the TRS, it will have to collect proof of the customer’s registration or an excerpt of the PSC register as part of its CDD measures (as the TRS is not public, it will not be possible to collect an excerpt of that register). However, neither the PSC register nor the TRS are definitive for CDD purposes: businesses may utilise them as part of their CDD process but they cannot rely solely on that information.
Significantly, under the new requirements, if the business carrying out CDD finds a discrepancy between the beneficial ownership information available to them and the beneficial ownership information on the PSC register, they will have to report that discrepancy to Companies House. (It is not clear whether discrepancies in respect of the TRS will have to be reported.) At a minimum, Companies House will then contact the relevant entity to bring the issue to their attention and ask it to amend the data on the register or reconfirm that it is accurate. The government is also considering whether other steps should be taken, for example, a public warning being entered on the PSC register. And no doubt businesses carrying out CDD will be cautious about entering into the customer relationship if they do find a discrepancy.
All this leads to businesses which carry out CDD in effect becoming enforcers of the PSC register regime. We anticipate that this will result in the PSC register becoming much more rigorously interrogated and potentially more accurate, perhaps meeting concerns about the accuracy of the information on the PSC register which have been raised almost since the register went live in June 2016.
Entities which need to register their PSC information who have not given sufficient consideration to the accuracy of their filings may find themselves coming under the spotlight when the new regime is in place.