AML: PSC – a pain, but don't ignore it

Q. How does the register of Persons with Significant Control fit into the AML regime?
A. Somewhat awkwardly, but it can’t be disregarded.

Q. Is a PSC register helpful for AML?
A. Kind of. The register of “Persons with Significant Control” was brought into UK law in 2016 in an effort to make ownership of UK companies more publicly accessible and transparent. It requires UK companies to identify certain individuals who have significant control over them, most often by way of holding more than 25% of shares in the company, holding more than 25% of voting rights in the company, or having the right to appoint or remove the majority of the board of directors.

Q. Ah, like a register of “beneficial owners”?
A. Kind of, but no. A PSC listing, generally governed by the Companies Act, might not be a beneficial owner (“BO”) per the UK Money Laundering Regulations.

Q. But they have the same meaning?
A. Kind of, for the most part, but the mechanics of choosing who must be listed in the PSC register are different. The most obvious example of this is that having a UK parent company that is also subject to the requirements means you may only have to list that parent, instead of looking all the way through to a beneficial owner. As long as the parent above has its own reporting requirements (called a relevant legal entity or “RLE”), the ultimate beneficial owner may not be shown on the PSC register. In the image shown here, each company need only list the parent above until visiting company C’s register would yield the beneficial owner.

Q. So, if the company goes offshore, the ultimate beneficial owner/PSC will be on there?
A. Kind of, but not always. Where a person holds an indirect interest in a UK company, through layers which go offshore, that person must generally hold a majority stake in order to be listed. If you followed an ownership structure through UK shareholdings and arrived at a company on some far-flung beach, and the owners were deadlocked as 50-50 shareholders, they may not (depending on certain other particulars) actually appear on the PSC register at all.

Q. That doesn’t sound as useful as we’d probably hoped for. I think I’ll just ignore the PSC register for AML purposes.
A. Not allowed. The Money Laundering Regulations (reg 30A) create an obligation on firms to check the register for discrepancies between the PSCs listed and what you find in your beneficial ownership checks.

Q. That can’t be right? Since the PSC regime under the Companies Act is different from the beneficial ownership regime under the Money Laundering Regulations, there may well be differences which are entirely legitimate.

A. It’s true that they are different. Your compliance with that area of the Money Laundering Regulations now obliges a review of the nuanced differences at play between those regulations and Companies Act legislation and guidance.

Q. Ouch: a sort of AML stealth tax on resource, using the Money Laundering Regulations to prop up the Companies Act. Anything else?
A. Yep – you must also file a report to Companies House if you find a true discrepancy.

Q. Terrific! Is there more, or is that it, having to report all of these true discrepancies?
A. Not all of them…

Q. But you just said…
A. I know, but there’s a whole other thing about “material discrepancies”.

Q. What’s a mat–
A. Don’t. I only get 800 words for this. (Guidance is available from Companies House.)

Q. So, hang on. There are BOs and there are PSCs. BOs are probably PSCs, but PSCs aren’t always BOs because the PSC register might show RLEs as PSCs; and even going offshore, which would ordinarily mean a true BO should be listed, doesn’t actually guarantee transparent listing as a PSC since they might not meet the requirements, but we have to check the PSC register and see if it aligns with our understanding of BOs even though it might legitimately not, and if it doesn’t align we have to report that?
A. Yes.

Q. Well, there’s a lot going on there. But at least the PSC register is something we can now rely on, with all the work put into it?
A. Actually, the Money Laundering Regulations make clear (reg 28) that you cannot rely on the information in the PSC register– not solely anyway.

There are several nuances and twists in the PSC/RLE regime, and I have obviously not covered everything that could have been covered above – no letters, please. The UK is working its way towards a place of greater safety, and all good solicitors and compliance staff will be on board with that while the framework remains reasonable. If you could use a hand understanding things, drop me a line or check out the Law Society of Scotland’s own AML course for legal professionals.