Driving Transparency: Key Regulations on Beneficial Ownership Across the Globe

Part 1: UK Persons with Significant Control and Beneficial Ownership Transparency

The United Kingdom has been at the forefront of promoting beneficial ownership transparency through its innovative legislation. The introduction of the Persons with Significant Control (PSC) regime has been a game-changer. Under this regime, companies are obligated to identify and disclose individuals who exercise significant control over their operations. The PSC register is publicly accessible, enabling stakeholders and law enforcement agencies to ascertain the true owners behind corporate entities. 

The main requirement is for companies to identify, maintain and update their PSC register, ensuring accurate and up-to-date information is available. A PSC is determined based on one or more conditions related to control. Typically, a PSC either holds more than 25% of shares in the company, more than 25% of voting rights in the company, or the right to appoint or remove the majority of the board of directors.

Once a PSC is identified, certain details must be provided, namely:

• name

• date of birth

• nationality and country of residence

• correspondence address - known as the ‘service address’

• home address (this must not be disclosed)

• the date they became a PSC of the company

• the date you entered them into your PSC register

• all natures of control which apply

The condition for being a PSC and the level of shares and voting rights must be included as well. 

Part 2: Caribbean Beneficial Ownership Reporting and Beyond

In the Caribbean, several jurisdictions have implemented measures to enhance beneficial ownership reporting. The Turks and Caicos Islands (TCI) have introduced beneficial ownership reporting requirements that mandate companies to maintain accurate records of beneficial owners. The information collected can only be accessed by a limited number of law enforcement agencies in the TCI with just cause. The Cayman Islands has implemented the Beneficial Ownership Secure Search System (BOSS), a secure platform that allows authorized entities to access and verify beneficial ownership information. These regulations emphasize the importance of maintaining accurate beneficial ownership records and facilitating information sharing to combat financial crimes.  

TCI and Cayman Islands requirements differ from that of the PSC. For example, in both Caribbean countries, the language in legislation considers indirect holdings as well as direct ownership. There is also specific language included in the reporting of trusts, partnerships, and other types of entities. Note that this is not an implication that the UK does not mandate reporting of similar entities, it is just not captured under the language for PSC reporting requirements.

Part 3: USA - Corporate Transparency Act

The United States has taken a significant step towards transparency with the passing of the Corporate Transparency Act (CTA). This Act requires certain corporations and limited liability companies (LLCs) to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). The main requirement under the CTA is for covered entities to submit annual reports to FinCEN, providing details about their beneficial owners, including names, dates of birth, addresses, and identification numbers. This legislation aims to prevent the misuse of anonymous shell companies for illicit activities by enhancing beneficial ownership transparency and providing law enforcement agencies with valuable information.  

It is important to note that the CTA does firstly classify companies as domestic and foreign, further, there are exemptions for certain companies that are not obligated to report. Similar to other jurisdictions, there are guidelines on identifying a beneficial owner. The definition includes any individual who, directly or indirectly, exercises substantial control over a reporting company, or owns or controls at least 25 percent of the ownership interests of a reporting company. The terms “substantial control” and “ownership interest” are also further defined. 

The CTA is more intricate due to the exemptions for companies and individuals, reporting entities should be prudent in complying with these rules.

Conclusion:

Transparency and beneficial ownership reporting are critical components in the global fight against financial crimes. The UK's PSC regime, the Caribbean's efforts through beneficial ownership reporting in the TCI and in the Cayman Islands, and the USA's Corporate Transparency Act highlight the commitment of these jurisdictions to combat money laundering, tax evasion, and other illicit activities. There are countless other countries that have also successfully implemented variations to the concept of beneficial ownership reporting. The main requirements of these regulations include maintaining accurate and up-to-date beneficial ownership records, facilitating information sharing, and disclosing beneficial owners to relevant authorities according to respective guidelines. By implementing robust measures, these jurisdictions contribute to a more transparent and accountable global financial landscape, promoting integrity and reducing opportunities for illicit activities.

There continue to be many concerns about the impact of the implementation of publicly available registers on privacy laws. Navigating this will be a major focus in the upcoming years as a balance between transparency and privacy is sought.