In April, one of the UK government’s much discussed initiatives, which was designed to increase corporate transparency and combat fraud and money laundering, the Persons with Significant Control (PSC) register, came into force. Pre-empting the requirements of the incoming EU Fourth Anti-Money Laundering Directive (MLD4), which is due to be fully implemented by all EU member states by 26 June 2017, the PSC requires all unlisted UK companies to disclose individuals that hold – directly or indirectly – more than 25 percent of a company’s shares or voting rights; hold the right to appoint or remove a majority of the company’s directors; or have the right to exercise, or actually exercises, significant influence or control over the company.

At first glance, the PSC appears to be an important step in the government’s stated plans to make it harder to use UK entities to hide criminal activity. However, the crucial question is whether the PSC register makes any actual improvements on the current system?

Since its announcement in 2014 and throughout its consultation, the PSC register has come under intense scrutiny and, arguably, some very justified criticism. From the perspective of counter-fraud and compliance professionals and investigators, two concerns about the implementation of the register were immediately apparent, both of which seriously call into question the effectiveness of the PSC register in achieving the government’s aims.

First, the new regulations place the burden of compiling the information in the PSC register on companies, which “must take reasonable steps to find out who owns the beneficial interest in their shares”. Second, the PSC register has been established without changing one of the key weaknesses of the current regulatory framework governing UK corporate registrations – the lack of independent verification of any information provided to Companies House.

Jan-Mar 2017 Issue

The Risk Advisory Group