The Fourth Money Laundering Directive, Scottish Partnerships and People with Significant Control
UK Implementation of the Fourth Money Laundering Directive The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the “Regulation”)… Read more
UK Implementation of the Fourth Money Laundering Directive
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the “Regulation”) came in to force on 26 June 2017, replacing the 2007 regulations. The Regulation requires “relevant persons” (i.e. firms to which the Regulation applies (e.g. credit institutions, financial institutions, legal professionals, estate agents, high value dealers, etc.)) to ensure that measures they take in meeting customer due diligence and ongoing monitoring obligations are based on an overall assessment of the money laundering/terrorist financing risks that such relevant person faces. This includes taking account of guidelines published by the European supervisory authorities, UK supervisory authorities and the UK Government’s national risk assessment.
The main changes to the existing anti-money laundering processes are as follows:
- relevant persons are required to carry out risk assessments and maintain adequate procedures to mitigate money-laundering risks;
- the focus on risk-based procedures means that the mandatory customer due diligence process will now vary between different customer types:
- – simplified due diligence may be warranted in low-risk cases which take into account types of customers, geographic areas, and particular products, services, transactions or delivery channels;
- – a relevant person is obliged to run enhanced due diligence in certain situations, such as, amongst others, the establishment of a business relationship or transaction with a person in a high-risk third country or if a relevant person has determined that a customer or potential customer is a “politically exposed person”;
- relevant persons are required to identify any beneficial owner who is not their customer and take adequate measures, on a risk-sensitive basis, to verify their identity. That includes measures to understand the ownership and control structure of a company, trust or similar arrangement; and
- trustees which are UK resident or, if not UK resident, are liable to pay UK tax will be required to maintain a register of beneficial owners in relation to the trusts which they administer and report to HMRC on the same.
Scottish Partnerships and People with Significant Control
On 26 June 2017, The Scottish Partnerships (Register of People with Significant Control) Regulations 2017 came into force. This ensures that a general partnership constituted under the law of Scotland that is a qualifying partnership under regulation 3 of the Partnership (Acccounts) Regulations 2008 (i.e. a limited partnership with solely corporate partners) (an “SQP”) will be required to deliver people with significant control (“PSC”) information to Companies House.
This means that all SQPs will be required to investigate their ownership and control structure. From 24 July 2017, all SQPs will need to file an annual confirmation statement at Companies House that sets out, amongst other things, its PSCs.
The new legislation may affect SQP’s desirability as investment vehicles, especially in private equity and property investment fund structures as the traditional advantages of SQPs – such as separate legal personality and tax transparency – will need to be weighed against the public disclosure of those individuals who hold a controlling interest, directly or indirectly, in the SQP.
An SQP can have more than one PSC. A PSC is a person who:
- directly or indirectly holds the right to more than 25% of the surplus assets on winding up of the SQP;
- directly or indirectly holds more than 25% of the voting rights in the SQP;
- directly or indirectly holds the right to appoint or remove the majority of those entitled to take part in the management of the SQP;
- otherwise has the right to exercise, or actually exercises, significant influence or control over the SQP;
- has the right to exercise, or actually exercises, significant influence or control over the activities of a trust and the trustees of the trust hold, directly or indirectly, any of the rights set out in a) to d) above; and/or
- has the right to exercise, or actually exercises, significant influence or control over the activities of a firm and the members of the firm hold, directly or indirectly, any of the rights set out in a) to d) above.