Reporting Discrepancies in Beneficial Ownership Just Got Easier

The latter half of 2022 saw a number of updates to Money Laundering regulations – including the Economic Crime (Transparency and Enforcement) Act 2022 on 1st August and UK Money Laundering and Terrorist Financing (Amendment) (No. 2) on 1st September.

Unsurprisingly, several updates to registers and obligations have been introduced with these regulatory changes – in particular, Companies House reform and responsibilities around reporting discrepancies in beneficial ownership and persons of significant control (PSC) information.

Reporting Beneficial Ownership and PSC Discrepancies

The obligation to report discrepancies in beneficial ownership information to Companies House has long been part of EU Money Laundering Directives. Essentially organisations must report inconsistencies in names, dates of birth, nationality etc., that they discover when carrying out due diligence into the beneficial owners and controllers of customers or suppliers.

The reason for checking and reporting on these inconsistencies is an important one. Any incorrect or conflicting information could be an attempt by criminals to conceal money laundering or terrorist financing with false information. They could also just be admin errors.

The reporting process is currently very manual and laborious. Companies must file a separate report to Companies House for each individual discrepancy they find, which can take upwards of 10 minutes per report. Worth it if it’s uncovering financial crime, but frustrating if it’s a simple clerical error.

Once received, Companies House then write to the organisations responsible for the error, requesting that they update their filings – though there has historically been little obligation on organisations to make these changes. But now, new ‘query’ powers coming into force as part of Companies House reform, will force organisations to show proof that they have corrected errors, and Companies House will put the onus on firms to make sure they get filings right first time.

How Many Discrepancies Are Currently Reported?

We decided to investigate how many discrepancies are actually reported. We made a Freedom of Information request to Companies House for this data.

In the 12 months up to July 2022, there was approximately 61,000 discrepancies reported, just over 5,000 per month.

In the grand scheme of things, this is only a relatively small percentage (0.1%) of all firms registered at Companies House but it would take over a year (423 days) for one person to complete all these reports.

Fundamentally, organisations now only need to report on a real or significant change in name, date of birth, nationality etc. and not small tweaks or errors.
Neil Isherwood

What is Changing?

In addition to the increased powers bestowed upon Companies House to put pressure on organsiations to provide the correct information in the first place, compliance teams will be glad to hear that the UK Money Laundering and Terrorist Financing (Amendment) (No. 2) includes a subtle language change. Rather than reporting "any discrepancies" between beneficial ownership records, the responsibility is now on firms to only report "any material discrepancies".


But What Does ‘Material Discrepancy’ Mean?

Fundamentally, it means there must be a real or significant change in name, date of birth, nationality etc. Compliance teams will no longer have to report small tweaks or variations - for example an error in the spelling of the same name - that were likely just administrative errors in the first place.

What Does the Amendment Mean in Practice?

The good news is that - now that materiality has started to be considered, and Companies House are putting more focus on firms to get filings right when first filing their data - we should expect to see the number of discrepancy reports decreasing.

This will be a welcome change to compliance teams, who won’t have to report as many inconsistencies and can instead focus on conducting due diligence on the material risks and more serious issues.

If you need help in accurately identifying and validating control and ownership, Dun & Bradstreet can provide a trusted source of data. Our Data Cloud comprises global information on over 500 million shareholders, principals and controllers, uncovering 1.5 billion relationships and connections.


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