Money laundering: Do you know of new Regulations kicking in just weeks away?

Are you ready for PSC (Person with Significant Control) registers?

I thought not!

Not one person I have spoken to has any awareness of them.

However, they are on the immediate horizon and are of huge importance to agents, from the way they operate their own businesses to the way they can check out buyers and sellers.

This may well be one of the driest subjects I shall ever write about on EYE – but, trust me, it is very important.

New Regulations

From April this year there are new Regulations regarding the control of companies that everyone in the property industry will need to take note of and, where appropriate, take action.

The property industry cannot fail to be aware that there is a huge focus on money laundering and HMRC have been increasingly proactive in their approach to compliance.

Fines applied in the estate agency sector for businesses that have failed to operate correctly are becoming commonplace and have been as high as £169,000.

New legislation will now add to the growing list of things that the property industry will have to comply with but which will, hopefully, make some aspects of money laundering compliance easier.

The Small Business, Enterprise and Employment Act received Royal Assent in March 2015 and introduced a change in company law with the aim of increasing accountability through transparency of corporate ownership, structure and control.

The new law introduces significant changes which will directly affect companies, shareholders and ultimate beneficial owners.

This new legislation has two major areas of impact for those in the estate agency arena.

  • For businesses that operate as limited companies and LLPs there will be a need to comply themselves by creating and maintaining a PSC (Person with Significant Control) Register
  • When carrying out identity checks under Money Laundering Regulation requirements, the PSC Register should significantly assist in identifying those that need identifying when a company is involved

For all those affected, it is important to understand the new law and the potential duties and obligations under it.

Who will be affected?

The new requirements will apply to all UK companies, except those which are subject to specified separate disclosure requirements (such as UK listed companies).

What is a PSC Register and when does this become mandatory?

Companies will be required to maintain a register containing specified particulars of any person with “significant control” over the company, together with details of the nature of that control (the PSC Register). Companies will need to hold their own PSC Register from this April.

In addition, any relevant legal entity (RLE) will need to be included on the PSC Register.

For this purpose a RLE is a legal entity (a body corporate, or a firm which under its governing law has separate legal personality) that would be a PSC were it an individual.

The PSC Register must be kept at a companies registered office (or other inspection address) and be available for inspection at no charge and, where copies of all or part of it are requested for a proper purpose, the company must supply the same and may charge a fee.

From June 2016 a company must also provide details from its PSC Register to Companies House, where most of the details will be publicly accessible. Under current plans, such details will be available online, free of charge.

This will tie in with the implementation of the European Union’s Fourth Money Laundering Directive in 2017 which will impose an obligation to keep the public register at Companies House.

This submission will be part of a company’s annual confirmation statement which will replace the annual return.

By April 2017, therefore, Companies House should hold a PSC Register for all UK companies affected by the new legislation.

Who is a person with significant control?

The concept of a person with significant control is broad and includes any person who:

  • directly or indirectly holds more than 25% of the shares in the company
  • directly or indirectly holds more than 25% of the voting rights in the company
  • directly or indirectly has the power to appoint or remove the majority of the board of directors of the company
  • has the right to exercise or actually exercises significant influence or control over the company
  • has the right to exercise or actually exercises significant influence or control over a trust or firm that is not a legal entity, which in turn satisfies any of the above first four conditions over the company.

Further guidance on what constitutes “significant influence or control” is expected in October this year – some months after the legislation takes effect.

In group structures, the new legislation includes detailed provisions to determine who is a “registrable” person with significant control in respect of a particular company within the group. There are often situations where company A is a subsidiary of company B who in turn is a subsidiary of company C for example.

In some circumstances, where relevant disclosure requirements (in the UK and under the requirements of regulated markets in European Economic Area States) create a visible chain of ownership and control, it may only be necessary to identify an immediate parent company on the PSC Register as a “relevant legal entity” (RLE). However, it will be important for companies to understand how the provisions operate in order to ensure compliance.

What information must be included on PSC Registers?

The particulars of registrable persons on the PSC Register held by the company must include their:

  • name
  • residential address
  • service address
  • date of birth
  • particulars of significant control over the company

Not all of this information will be made publicly available.

Protection of information

An application may be made to Companies House to omit material from the public register or to prevent disclosure of PSC Register information.

However, this will be limited to circumstances where there is a serious risk of violence or intimidation towards a registrable person or someone who lives with them. There will be no protection afforded for cases of commercial sensitivity or confidentiality.

While a successful application means PSC Register information will not be disclosed to the public or credit reference agencies, this will not restrict disclosure to specified public authorities.

The protection regime is complex and specialist advice should clearly be taken if an application is being considered.

Duties and penalties

The new legislation will impose proactive obligations both on companies and on persons with significant control.

Companies must take reasonable steps to identify those persons and legal entities which should be included on its PSC Register and must keep it up to date. If companies do not comply with their duties in relation to the PSC Register, they, and their directors, face criminal liability.

Registrable persons and legal entities must respond to notices and provide information, or volunteer such information where the company doesn’t contact them. Failure to respond to a company’s request for information will entitle the company, effectively, to freeze their interest until compliance. This may lead to a loss of dividend, voting and other rights while the interest is frozen.

The way forward

Because full guidance on “significant influence or control” is not being made available until October, the full impact on businesses is currently unknown.

However, given the short timescale to proposed implementation, companies should take steps to ensure they will be able to comply in time.

Whilst this topic is exceedingly “dry” it is clearly important.

Now for the plug!

My next Money Laundering and Consumer Protection course is taking place in London on March 1 and I will be incorporating the key points relating to PSC Registers in the updated programme.

Full details on the programme can be found here



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One Comment

  1. Woodentop

    So does this mean the current annual registration & fee under Money Laundering will be replaced by PSC?


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