The term beneficial ownership is used when a person or persons owns a company or property or has significant influence or control. These are called the beneficial owner or owners. Identifying the beneficial owners of a business and their corporate structure is very important, as there is a difference between a beneficial owner and a legal owner.
An example of this is. An overseas entity has registered and is the legal owner of a business registered with Companies House. The company's beneficial owners registered with Companies House control or owned the overseas entity.
This applies to the beneficial owners of properties where the property is owned by a separate entity in the UK or overseas. Identifying the beneficial owner and corporation structure outside the UK can take time and effort.
It is a legal obligation for a legal firm or a financial institution to identify the beneficial owner, and it should be part of their anti-money laundering compliance policy set internally with their compliance officers.
When a business is registered, it must declare the beneficial owner. The Beneficial Owner Declaration is a document signed by a director or legal representative of the company and the beneficial owner. The document is then submitted with any additional legal documentation required to verify the parties' identities.
It is possible for a registered business or a partnership to have more than one beneficial owner.
Companies will have the names of beneficial owners on their records and the documentation available to the public via publicly accessible registers with Companies House.
These people are registered as "persons with significant control" (PSC). It is important to remember that there can be more than one beneficial owner.
A company has a legal obligation to identify its PSC, also referred to as beneficial owners, as one or more persons. When a business is incorporated, the details of that company's PSC must be registered. The PSC identity must be verified, which can be done using legal documentation such as a passport and driver's licence to prove identity.
If a business does not have or cannot identify its PSC or beneficial owner, they must contact companies house and the UK government to inform them.
There are many ways to determine beneficial ownership or PSC in the UK. A PSC will meet one or more of the following conditions outlined as the nature of control.
It is important to remember that there may be other influences of control. For example, a director or board member's actions could be controlled directly or through other means.
This example is often seen in limited circumstances. However, UK Government has also set up complete PSC guidance, which can be found here.
When a trust is identified to have any nature of control, each partner, member, and trustee are People of significant control (PSCs), and their information must be registered at companies house.
Companies have a legal responsibility to record and register the information of their PSC and beneficial owners. This information is recorded at Companies House. The information a company will need is the following.
You must include the level of their shares and voting rights within the following categories:
For a complete detailed breakdown of all the information you need, visit the UK Government website here.
The People with Significant Control (PSC) Register was set up by Companies House in 2016 and was the first of its kind globally. Because of this, it has become a legal requirement for companies inside the UK to identify their PSCs and beneficial owners and register their details on Companies House; they are also obligated to keep that information up to date.
The objective of this register was to create transparency with ownership structure but also a tool used as part of the UK's Anti-Money Laundering strategy, preventing the misuse of corporate structures ensuring that AML regulations are followed.
It has always, however, been challenging to identify overseas entities when they are beneficial owners, as the requirements are for all within the UK only. However, in 2022 Companies House established the first-of-its-kind Register of Overseas Entities (ROE), making it mandatory for overseas entities which own UK property to identify and register the details of all beneficial owners or PSC's details with Companies House. With the sophistication of organised crime and money laundering increasing, the tools that the UK government and governments worldwide use must improve too.
After identifying individuals, it can prove quite challenging to verify them. With robust anti-money laundering AML compliance in place, it can be very time-consuming and costly to verify several individuals when dealing with commercial clients. Validient has developed automated verification software that identifies and allows commercial clients to onboard and verify their identities.
Operating with the highest level of due diligence, Validient performs Know Your Customer (KYC), Know Your Business (KYB), and Anti-Money Laundering (AML) checks, meaning Validient verifies individual and commercial clients. With a Companies House integration, Valdient monitors commercial clients, alerting any changes to their circumstances, from a change of address to insolvencies, giving businesses the tools to better deal with their clients and allowing them to make better judgments.
On top of this, Validient offers an Ongoing Monitoring system that alerts you in real time of any changes relating to a person with significant control (PSC).
To learn more about how Validient can improve your onboarding and verification services, saving you time and money and safeguarding your business AML and compliance fines, get in touch today and book a demo.