RegTech Intelligence 
FinCEN’s proposed rules on beneficial ownership due diligence, the incoming 4th Money Laundering Directive (AMLD IV) and now the UK’s Register of People with Significant Control (PSC) Regulation all push for more transparency in beneficial ownership or significant control of companies. The aim is to reduce acts of money laundering and tax evasion and to prevent companies being used as funnels to transfer funds for the purpose of terrorist financing.
UK PSC register
The PSC regulation is a new UK statutory instrument mandating that UK companies and limited liability partnerships (LLPs) identify and keep a record of those persons with beneficial ownership or significant control in a company, and for this record to be listed on the PSC register.
This sits alongside multiple global and EU regulations, including the incoming AMLD IV, which is required to be transposed into law by Member States by March 2017. The hope is that the new regulations and laws overseeing the identification and reporting of those who hold beneficial ownership in a company will increase transparency and help authorities and those entities required to undertake client due diligence to identify actual or potential money laundering, tax evasion and terrorist financing.
The new UK rules will apply to all companies, excluding public companies which are already required under the UK FCA Disclosure and Transparency Rules to make significant ownership information public. Those who fall under the scope will be required to maintain a beneficial ownership or persons with significant control register from 6 April and, as of 30 June 2016, will be required to submit the information to Companies House.
A company will need to record the names of the individuals with an interest that meets the 25% threshold of a company, including the names of legal entities in which the control is invested. Details of the nature of the control will also be required, as laid out in the prescribed statements of record regarding the type of control that exists.
The regulation further required companies that have not yet established a definitive answer as to who holds ultimate beneficial control to include certain prescribed statements confirming what steps have been taken to identify registrable persons or relevant legal entities.
Available information and data protection
The information submitted to Companies House will need to be refreshed every 12 months and will be made available to the public for inspection.
This availability has raised concerns that sensitive information will be inadvertently provided or acquired and used for wrongful means. As a result, the regulation provides protection for sensitive information, including date of birth and residential address.
Beneficial ownership/persons with significant control
Conveniently, the thresholds for the definition of beneficial ownership or persons with significant control reflect the thresholds in the proposed FinCEN CDD rules and the incoming AMLD IV. A number of other initiatives are also reflected, including the OECD’s Common Reporting Standard, the first phase of which kicked-off in January this year, and a number of mutual agreements between US and corresponding jurisdictions under FATCA.
Significantly, it appears the regulation mirrors the requirements of AMLD IV, which will need to be fully implemented by May 2017. However, the implementation may require the government to make some changes, such as the need to continually update controlling information, as will be required, as opposed to the current annual requirement.
As regulators step up their efforts for more transparency regarding beneficial ownership forcing financial services firms to undertake deeper due diligence, a question that is frequently asked at JWG’s Customer Data Management Group meetings is “can the new registry holding controlling information be relied upon when collecting customer data under customer due diligence requirements?” The answer remains unclear. Due to the new requirements coming out, firms onboarding teams are under increasing pressure to collect and verify data.
Beneficial ownership, due to its complexity, is an area frequently grappled with. This change may help firms who will be able to reference – and hopefully rely on – the data supplied and recorded on the register.