On 19 June 2018, the final text of the Fifth Money Laundering Directive (5MLD) was published in the Official Journal of the European Union. Member states will therefore have until 10 January 2020 to implement the directive.
Member states must follow UK's lead in making beneficial ownership registers public
5MLD makes various changes to the currently in force Fourth Money Laundering Directive (4MLD). From a corporate transparency perspective, however, the key change is that member states will be required to make their registers of beneficial ownership of companies fully public.
The UK's central register of beneficial ownership has already been public since June 2016, and since 2017 companies have had to update Companies House with changes to their own internal registers within 14 days: from our PSC registers briefing (June 2017).
Impact on UK legislation?
The introduction by the EU of the public registers requirement for the remaining member states is likely to mean that the UK's legislation in this area will need to be refined. The UK is expected to have withdrawn from the EU by January 2020, but anti-money laundering is one area in which the UK is likely to maintain rules that are at least equivalent to those required under EU legislation.
The UK Companies Act currently provides that either individuals or "relevant legal entities" may appear on a company's PSC register (and therefore on the public register). Broadly, a "relevant legal entity" is an entity that is "subject to its own disclosure requirements": it is currently defined to include UK companies, certain other UK corporate entities and entities that are publicly listed on regulated markets in the EEA and certain markets in the US, Israel, Switzerland and Japan. Private companies incorporated in other European member states do not currently meet that test: one must "look through" these entities to the ultimate controlling individuals. In the future, however, if a company incorporated in another member state in which 5MLD has been implemented "controls" a UK company, it would make sense if that controlling company could be entered on the UK company's register given that it will be subject to its own disclosure requirements. That would require the current definition of "relevant legal entity" in the Companies Act to be expanded.
Next steps and wider context
Given the ongoing uncertainty as to the final terms of the Brexit agreement, it remains to be seen whether and at what point the UK will update its legislation to cater for 5MLD's impact in the rest of the EU. It is clear, however, remains a key focus for the UK Government. In March 2018 the Government confirmed its intention to proceed with a register of overseas companies owning UK property (see our Transparency Update March 2018) and in May it confirmed that it would require Britain's overseas territories to establish public beneficial ownership registers for companies (see our Transparency Update May 2018).