In the budget, the chancellor announced the AML levy to be paid by firms subject to the Money Laundering Regulations to help fund new government action to tackle money laundering, and ensure delivery of the reforms committed to in the Economic Crime Plan.
Whether this will involve additional burdens on the regulated sector is not clear but let us hope that the levy, figures around the £100 million mark have been mentioned, will not be used to devise further tasks which will add to growing compliance costs of operating in the regulated sector.
The budget also announced £14 million to be allocated to Companies House to improve its anti-money laundering arrangements. We can be fairly certain that this amount will not be funding a scheme to audit the PSC filings at Companies House. This burden was cast on the regulated sector in the amendments to the 2017 Money Laundering, Terrorist Financing and Transfer of Funds Regulations which came into force in January 2020. The regulated sector is now the second pair of eyes in scrutinising the PSC filings of its customers.
This new obligation seems at the outset fairly straightforward. We know from looking at PSC entries that companies have had difficulties getting to grips with how to identify a PSC where the UK company is owned by an overseas parent. Various questions have been left unanswered. For example, if there is a discrepancy between the details at Companies House and the client due diligence information you collect, is there a problem if you tell this to the client?
Companies House have published guidance on the type of discrepancies which they want to be told about, which are ones that amount to a material difference between the PSC details and the client due diligence information. These can range from more major problems such as no PSC listed where there is a PSC; the wrong PSC being listed; the wrong control condition being listed to less fundamental but still important errors such as in the address or date of birth.
When Companies House receive a report, they will decide whether to investigate it with the client to see whether it is accurate and the PSC details are correct. They will not tell the client that a discrepancy report has been made. The Guidance makes it clear that a discrepancy report is not a suspicious activity report (SAR). If while gathering the client due diligence, you have concerns about money laundering, you should therefore make a separate SAR.
Where a SAR has been made or is being contemplated, the risk of tipping off should always be considered. In being helpful to a client, there may be a natural instinct for a professional service provider to tell the client that there is a problem with the PSC position and advise them to correct it by making the relevant filing at Companies House. Where an SAR is being contemplated the adviser should be cautious about mentioning the discrepancy report.
In circumstances where the PSC discrepancy is not suspicious, and the client (without briefing from you) sends corrected details to Companies House, would you still report the original discrepancy? Can you decide not to report because the discrepancy no longer exists?
If, without briefing from you, the client asks for legal advice on the PSC position, does that prevent you from reporting the discrepancy because the information is covered by legal privilege?
We are waiting for supervisors guidance on the new regulations. It is hoped that this will offer some insight into these issues.