PSC and TRS Registers: Joined Up Approach to Discrepancies on Beneficial Ownership
Upcoming changes to implement the 5th Money Laundering Directive (5MLD) will require regulated businesses preparing to contract with others to report discrepancies on beneficial ownership.
The Government has recently consulted on proposals which include amendments to the rules around the ‘people with significant control’ (PSC) register. The purpose of the PSC register is to facilitate greater and more accurate corporate transparency. The Trust Registration Service is a private register held by HMRC recording the beneficial ownership information for all express trusts incurring a UK tax consequence. This went live in 2017 and is a requirement under 4MLD.
The requirements of 5MLD will come into force in the UK by 10 January 2020 (in line with Article 4 of 5MLD) and will bring in changes to existing law to ensure full compliance. The consultation will, says government, play a key role in deciding how best to transpose 5MLD into UK law in a way that appropriately balances the need for a proportionate approach which manages the burden on business, with the need for regulated businesses to actively discourage money laundering and terrorist financing activity.
What’s changing?
Under 5MLD, whenever an obliged entity (those individuals and business covered by the directive) enters into a new business relationship with companies or trusts which are subject to beneficial owner registration requirements, they must collect registration data.
This means that once the proposed changes come into effect, UK entities who are required to carry out client due diligence (CDD) on such entities must obtain proof of their PSC by way of a ‘relevant excerpt’ and of its TRS registration. Importantly, these will not be conclusive in and of themselves though businesses will be able to use them as part of the CDD process. Notably, the obligation will be on the company or trust to provide the required information.
So what then? If the business spots a discrepancy in relation to the beneficial ownership information it has gathered and what’s reported, it will be required to report it to Companies House – which will then request the entity concerned to bring the issue to their attention and ask it to amend the data on the register or reconfirm that it is accurate.
The change should prompt a welcome measure of cautiousness on the part of the entity carrying out CDD, for instance, where the information gathered suggests that the other entity is not being transparent and truthful about its beneficial ownership.
The changes to the rules should also encourage those organisations who are required to keep a PSC register to ensure the recorded information is accurate and up to date. Otherwise, they are likely to attract unwanted attention from Companies House under the new regime - and potentially risk future business relationships.
What’s next?
The Government may bring in further measures. The consultation has, for instance, raised the possibility of entering public warnings on the PSC register where discrepancies are detected – though this could create tipping off issues.
The consultation has closed and when the amendments are finally published, we will report on them here.
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