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The EU Fourth Money Laundering Directive adopted in June 2015

The EU Fourth Money Laundering Directive (4MLD) was adopted in June 2015.

One of the main requirements which are an enhancement over the 3rd directive is that it requires all Member States to hold central registers on company beneficial ownership information from 2017. The UK has been ahead of other Member States in creating its own central register. The directive draws heavily on the UK model although there are some minor differences between the two regimes.

One difference is that the current UK Small Business and Enterprise Act only covers companies. The 4MLD covers all corporate and legal entities. Implementing the 4MLD will require the UK to extend the scheme to Scottish Limited Partnerships and some other entities. The UK will not bring these other entities into the UK regime until required to do so by the 4MLD. The UK Government will consult on this in 2016 in order to implement by 2017. The Treasury will be consulting separately on the other elements of implementing the 4MLD that fall within its remit, including the treatment of other legal entities.

Another difference as compared to the Small Business and Enterprise Act (SBEE) is that the 4MLD requires the entries on the central register to be current, rather than submitted (at least) on an annual basis as the SBEE Act does12. The will implement this change in 2017, having consulted on the detail in 2016.

People with significant control

The SBEE Act sets up the framework for a register of people with significant control: the PSC register. A person with significant control is defined in the SBEE Act as a person that meets one or more of the following conditions for a single company:

i. Directly or indirectly owns more than 25% of the shares in the company;

ii. Directly or indirectly holds more than 25% of the voting rights in the company;

iii. Directly or indirectly has the power to appoint or remove the majority of the board of directors of the company;

iv. Otherwise has the right to exercise or actually exercises significant influence or control over the company. The definition of this will be set out in statutory guidance.

v. Has the right to exercise or actually exercises significant influence or control over a trust or firm that is not a legal entity, which in turn satisfies any of the first four conditions over the company.

Companies must hold their own PSC register from January 2016. From April 2016 onwards they will need to send the information to Companies House with their confirmation statement (that replaces the annual return) or as part of the incorporation package (for companies incorporating after 6 April 2016). Companies House will maintain the information from companies in a central public register.