Although the regime will soon be updated to comply with the Fourth Money Laundering Directive, the UK Governance and Compliance Institute has carried out a review of the data already captured. The report analyses the data and considers what it could mean for UK businesses.
Companies are often part of complex structures, and directors have sometimes found it difficult to identify exactly who the beneficial owners are, for the purposes of compiling the PSC register. Strict punishments of a fine or a prison term of up to two years were introduced for those in contravention of the PSC rules, meaning directors must be careful when filing details of those people with significant control. Directors need to consider whether a beneficial owner is using a complex corporate structure as a means to avoid being named on the confirmation statement, or indeed whether there is no beneficial owner because no single person or relevant entity owns 25% or more of the company (as was the case in 10% of the companies surveyed).
The PSC register’s flaws
As a new initiative there will inevitably be flaws. One key flaw that emerged arose from Companies House’s provision of free text boxes to file information. The inability to restrict the information being entered into the boxes has resulted in typing errors and the provision of incorrect information. This is evidenced by the 2,160 beneficial owners born in 2016, along with some who were born in 9988, the beneficial owners listed with a “Cornish” nationality, and more than 500 different spellings of “British”.
Despite this issue, there is an underlying concern that errors made in the confirmation statements may be due to companies seeking to hide their beneficial owners and their beneficial owners’ details. The recent review of data by the UK Governance and Compliance Institute found that nearly 3,000 companies listed their beneficial owner as being a company with a tax haven address, which is not permitted under current rules. Additionally 9,800 companies listed their beneficial owners as a foreign company. Whilst this is acceptable if the companies listed are also on a foreign stock exchange deemed equivalent to the UK’s, these companies will be more closely scrutinised if Companies House thinks they are attempting to avoid transparency and are not listed on an alternative stock exchange.
The PSC register’s strengths
Despite its flaws, there are signs that the PSC register is increasing transparency around the ownership and control of UK companies. Initial findings show that 267 disqualified directors were listed as beneficial owners, along with 76 individuals from the US sanctions list. Although these matches were based on people with the same year and month of birth – and additional investigations would be required to confirm their identity – the fact that these matches were identified at all demonstrates progress.
The register also serves an economic purpose as it allows reviewers to identify the origin and residence of beneficial owners, which in turn can help pinpoint the influence of foreign nationals on British registered companies. If sector-specific analytics were applied to this review, it could indicate potential investors for companies – and as the PSC register is an open data register, any individual could take advantage of this.
Moving forward
One difficulty that was not addressed by the review is whether people who have filed inaccurate information have done so intentionally or otherwise. The amount of inaccurate information damages the credibility of the register and hinders transparency. A key change many companies can expect is the move from free text boxes to drop down menus in order to reduce inaccuracy. Further punishments may also be ordered for directors who attempt to manipulate these drops down menus.
Should you have any queries in relation to the PSC Register, please contact one of the following people:
Sarah Ellis 01225 340 096 (Bath)
Nandeep Judge 0117 374 9507 (Bristol)
Jack Delaney 020 7766 5623 (London)
Louisa Smith 01793 412 657 (Swindon)