4MLD: stricter UK transparency rules & EU to follow UK’s lead on PSC registers?

The European Commission has proposed Fourth Money Laundering Directive (4MLD) amendments and early implementation.

As we have discussed in previous blog posts, as of 6 April most UK companies and LLPs have had to maintain a “register of people with significant control” (PSC register). From 30 June the information on those PSC registers is starting to become publicly available, as the time comes for the relevant company or LLP to file its “confirmation statement” (which replaced the annual return) at Companies House.

Not all EU member states had been planning to follow the UK’s public register approach to beneficial ownership disclosure. Proposals to amend 4MLD and the First Company Law Directive, announced on 5 July, look likely to change that. The proposed amendments would also mean that the corporate transparency regime in the UK would become stricter for certain corporate entities.

Public registers

4MLD currently requires member states to implement certain beneficial ownership disclosure measures in relation to corporate entities and trusts by June 2017. For example, member states must ensure that beneficial ownership information is held in a central register and be accessible to certain categories of people, including those who can demonstrate a “legitimate interest”. The current version of 4MLD does not require fully public registers. The Commission plans, however, to amend the First Company Law Directive to require member states to ensure that beneficial ownership information is made publicly available through the system of interconnection of registers referred to in that directive.

Stricter requirements for certain companies

The Commission proposes to amend the definition of “beneficial owner” in 4MLD to include beneficial owners with a 10% ownership in certain companies that are at risk of being used for money laundering and tax evasion in ownership registers (compared to the 25% threshold that would still apply to other companies).

Trusts

The amendments proposed to 4MLD also include a requirement for member states to ensure that information relating to the beneficial ownership of certain “business-related trusts” and other types of legal arrangements having a similar structure or function is also publicly available. For trusts not carrying on business, access to beneficial ownership information will only be available to persons and organisations that can demonstrate a “legitimate interest”.

Early implementation of 4MLD in the UK

The Commission’s proposal would mean that member states would have to implement 4MLD by January rather than June 2017. The UK has not yet triggered Article 50 of the Lisbon Treaty and so has not yet triggered the two-year process for withdrawal from the EU. Until that process is complete, the UK is required to continue to implement European directives in national law, including the provisions of 4MLD.