Since the 5th Anti-Money Laundering Directive (5th MLD) came into force on the 10th January this year, there has been some confusion around reporting information to Companies House. As this is a common question raised by clients, I have created a brief blog on what you need to know regarding the effect of the 5th MLD on beneficial owner reporting and what you need to do if you find inconsistency in your data.
5th Money Laundering Directive
The (5th MLD) now demands that all regulated entities report any discrepancies that they find between the beneficial owners of a company identified on the People with Significant Control (PSC) register and their own research.
This rule applies to any company, limited liability partnership, or Scottish limited or qualifying partnership recorded at Companies House.
There are many different types of regulated entities in the UK, ranging from the better known estate agents, auditors, financial and credit institutions, to art dealers in galleries and free ports, gambling services, custodian wallet providers and services that exchange virtual and fiat currencies. All these sectors will need to start reporting discrepancies on beneficial owners and on the People with Significant Control in their records.
What is a discrepancy?
Although the word ‘discrepancy’ has not been defined in the 5th MLD, it has now been clarified by Companies House as when information about beneficial owners on the public PSC register is factually incorrect. Companies House is not interested in typing mistakes, which should be reported separately.
A discrepancy could arise for a number of reasons for example:
- A person incorrectly listed as a PSC
- A missing PSC
- A PSC exemption
- A PSC type
- An incorrect address
- An incorrect place of registration
- An incorrect date of birth
- An incorrect legal form
- An incorrect company statement
When to make a discrepancy report?
Regulated entities must report a discrepancy as soon as possible after they identify it – reporting them in bulk is not allowed. The PSC register is required to be as up-to-date as possible, which bulk reporting would prevent.
Regulated entities have been advised to pay attention for potential discrepancies during client onboarding.
Reporting a discrepancy is not the same as submitting a Suspicious Activity Report (SAR), which is a separate and ongoing requirement.
What you need to include in the discrepancy report
A discrepancy report can be made here
1. The name, postal address and type of business of the regulated entity filing the report
2. The full name, email address and phone number of the person filing the report
3. The date that the discrepancy was first noticed
4. The company name and number of the organisation being reported
5. The type of discrepancy (from the list above)
6. Further details of the discrepancy
Once the report is processed?
Once Companies House has ascertained that the report is valid, it will contact the business to ask for comments and for the discrepancy to be corrected.
Regulated entities need not worry about privacy – reported parties will not be told who filed the discrepancy report about them. Companies House will report it as the result of an internal investigation.
In Summary
This new development highlights the need for regulated companies to be more aware of, and mindful of, their own client’s ongoing beneficial owner status.
At NorthRow we offer an automated monitoring solution that alerts our clients to any changes in their customers’ risk profile including in beneficial ownership changes.
It’s great to see Companies House taking a more proactive approach to verifying the PSC register, but it’s disappointing to see that, yet again, they have put the onus on regulated companies to monitor for inaccuracies. I look forward to the day when Companies House verify and monitor the data they hold, and are given the appropriate legislative teeth to deal with misreporting.
If you have any questions or concerns about the 5MLD, compliance, client onboarding or monitoring processes please do not hesitate to contact our team. We can support you with the digital transformation of your processes to mitigate your risk profile.
