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The Fourth Money Laundering Directive – Beneficial Ownership Information (Article 30 and 31): How will it affect you?

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The Fourth Money Laundering Directive – Beneficial Ownership Information (Article 30 and 31): How will it affect you?

07 Jun 2017

The EU 4th Money Laundering Directive (4MLD) is due to be implemented into UK law on 26 June 2017. The aim of 4MLD is to strengthen the EU’s defences against money laundering and terrorist financing.

Article 30 – beneficial ownership information relating to corporate and other legal entities

Article 30 requires each member state to ensure that corporate and other legal entities incorporated within its territory obtain and hold adequate, accurate and current information on their beneficial ownership, including details of the beneficial interests held. Each member state must ensure that the information on beneficial ownership is held in a central register in that member state.

The Department of Business, Energy and Industrial Strategy (BEIS) is proposing to transpose the provisions by introducing new regulations to amend Part 21A of the Companies Act 2006. On 3 November 2016 it published a discussion paper on implementing Article 30 of 4MLD and is currently considering the public feedback on that paper.

The UK already has in place an obligation on companies to maintain a register of people with significant control (“PSC register”) and provide this to the Companies House. See our previous article on PSC Registers: are you compliant?

BEIS considers that, the UK’s existing PSC regime is consistent with the MLD4 requirements in most respects, but proposes that the following amendments are necessary:

1. An extension of the scope of the existing PSC regime to all entities which are incorporated in the UK and are constitutionally capable of legitimately having a beneficial owner. This would include, Scottish limited partnerships, Scottish partnerships, unregistered companies and open ended investment companies (amongst others).
2. BEIS intends to retain the existing approach to adequate and accurate information but proposed introducing a new obligation for the PSC information filed at Companies House to be updated within 6 months of any changes occurring. This means that, where there is a change to a Company or LLP’s PSC Register, the information at Companies House will need to be updated within 6 months of the change (rather than annually under the current rules). Update: the regulations that came into force on 26 June stipulate that companies must record changes to their PSC register within 14 days of obtaining the information and to file the information with Companies House within a further 14 days.
3. BEIS is also considering that it may be necessary to bring companies listed on markets, such as AIM and ISDX (exempt under the current PSC regulations as they are already subject to their own reporting requirements), within the scope of UK PSC register. Update: From 26 June 2017, PSC requirements now apply to AIM listed companies, companies listed on other prescribed markets such as NEX and unregistered companies.

It is not yet known when the regulations to transpose Article 30 of 4MLD will be introduced but the government have stated they will be brought into force by the deadline of 26 June 2017.

Beneficial ownership information relating to trusts and similar structures (Article 31)

Under Article 31 of 4MLD each member state must ensure that trustees of any express trust governed under its national law obtain and hold adequate, accurate and up to date information on beneficial ownership of the trust (which should be in a central register where the relevant trust generates tax consequences).

The Government’s views on the implementation of the Article 31 requirements in the UK are as follows:

• the new rules will apply to trusts administered in the UK and non-resident trusts with a UK source income;
• the trustee is to obtain and hold adequate, current and up-to-date information on trust beneficial ownership;
• the trustee is to provide the trust beneficial ownership information to also be held in the central register when the trust generates tax consequences;
• tax consequences means trusts that are liable to tax in the UK and are required to submit tax returns to HMRC, such as for income tax, capital gains tax or inheritance tax;
• the trustee, in all cases, must give HMRC and the Financial Intelligence Unit (FIU) timely access to the trust beneficial ownership information. This will be achieved through an appropriate notification to the trustee; and
• timely and unrestricted access to the central register, without alerting the parties to the trust concerned, will be given by HMRC to the FIU.

The proposal is that trusts will be required to have a PSC Register similar to companies and LLPS, and the information on the beneficial ownership of the trust will include:
– the identity of the settlor;
– the trustees;
– the protector (if any);
– the beneficiaries or class of beneficiaries; and
– any other natural person exercising control over the trust by means of direct or indirect ownership, or by other means.

If you have any queries regarding your PSC requirements or want to discuss anything raised in this article please contact Anne-Marie Coles in our corporate department on 0161 838 8141.

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