The UK government recently announced several measures to tackle money laundering, kleptocracy and sanctions evasion including introducing the Economic Crime and Corporate Transparency Bill.
One of the aims of the Bill is to prevent the use and abuse of UK corporate entities for criminal purposes. This follows other measures such as the introduction of the People with Significant Control register and the overseas entities register.
We look at how the Bill applies to LLPs and the key aspects UK professional services firms should take note of.
Application of the Bill to UK LLPs
Although the government intends that any entity which registers at Companies House falls within the scope of the reforms, the Bill will not make substantial amendments to the legislation that underpins UK LLPs.
Instead, we expect the Bill’s enactment to be closely followed by secondary legislation adapting the newly enacted company law to the specific provisions governing UK LLPs.
Because of this, it would be prudent to assume that the new rules applying to directors and beneficial owners of companies will, in due course, apply to the members of UK LLPs as well.
Identity Verification
The Bill will require all individuals who register companies, or file with the Registrar, to verify their identity. This will include directors, persons with significant control (“PSCs”) and those who deliver documents to the Registrar on behalf of a company.
New directors and PSCs will need their identity to be verified before notifying the Registrar of their appointment or interest, and, in the case of existing directors and PSCs, verification will need to occur before the company submits its first confirmation statement after the legislation comes into force.
Verification will either take place directly via Companies House, which will use matching technology to compare a photograph or facial scan with a primary identifying document (such as a passport) or indirectly via an “Authorised Corporate Service Provider”, described in further detail below.
Failure to comply with these new verification requirements could result in a number of potential consequences, including criminal proceedings against the relevant director, PSC or corporate entity, civil penalties and/or rejection of statutory filings.
Directors who fail to comply could ultimately be prohibited from acting as a director (or equivalent) of any UK entity.
Our expectation is that secondary legislation following enactment of the Bill will impose the verification requirements outlined above on all members of an LLP, who would need to be notified to the Registrar, and that they will face the same consequences as individual directors or PSCs if they fail to comply.
Although not currently formally proposed, it is also possible that the government will seek to extend these verifications to LLPs formed under foreign laws and other overseas entities operating in the UK in due course.
Authorised Corporate Service Providers (ACSPs)
As noted above, people might decide to use an ACSP to verify their identity. An ACSP can also be instructed to file with the Registrar or form a new registerable entity on another person’s behalf.
ACSPs are often intermediaries such as accountants, legal advisers, and company formation agents (so our professional services contacts reading this briefing note could be using or acting as an ACSP, or both).
An ACSP will need to be able to demonstrate to the Registrar that they are registered with a supervisory body for anti-money laundering purposes and have an existing obligation to carry out customer due diligence checks on all of their clients. The identity verification they are required to carry out to meet the new requirements under the Bill will build on these existing checks.
The government intends that the verification checks undertaken by ACSPs will achieve the same level of assurance of identity as those undertaken through the direct verification route.
In addition, ACSPs will also be required to declare that they have completed all of the necessary identity verification checks on their client when they interact with the Registrar and Companies House. Under AML regulations, all ACSPs are required to retain records and the Registrar can request further information on identity verification checks if necessary.
Professional firms that are eligible to become ACSPs will need to consider whether they are willing to assume the additional risk and compliance burden involved in carrying out these services for their clients.
Registrar’s powers
The Bill will give the Registrar greater powers to investigate, check, remove or decline information provided to it, enhancing its role as ‘gatekeeper’ over incorporations and the information maintained on the public register.
Companies House will also be encouraged to actively share data with law enforcement bodies and other public authorities if they suspect fraudulent filings or other suspicious behaviour.
We expect these powers to extend to all entities required to make filings with Companies House, including limited liability partnerships, limited partnerships and registered overseas entities.
Other reforms
Other reforms expected to be introduced by the Bill include:
- Tightening registration and transparency requirements for limited partnerships and enabling the Registrar to register such partnerships when they have ceased to carry on business or whether the court otherwise considers it to be in the public interest to do so.
- Strengthening anti-money laundering powers, including by disapplying civil liability for confidentiality breaches in respect of information shared to combat economic crime (making it easier for businesses to share information for the purposes of preventing or investigating or detecting economic crime) and strengthening the National Crime Agency’s Financial Intelligence Unit’s ability to obtain information relating to money laundering and terrorist financing.
Contact us
If you have any questions about these issues in relation to your own organisation, please contact a member of the professional services team or speak to your usual Fox Williams contact.
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