Data analysis of the PSC Register: early insights and flaws

16 May 2017

L_crumley

UK companies have been required to keep and maintain a register of people with “significant control” over the company (“PSCs”) since 30th June 2016.

The PSC register is filed upon incorporation of new companies and updated when the company delivers a Confirmation Statement (which replaced the Annual Return from 30th June 2016) to Companies House. The PSC register information is freely available on the Companies House website and allows any member of the public to view the beneficial owners of UK companies and limited liability partnerships.

In November 2016, Global Witness (a non-profit investigative organisation) in collaboration with DataKind UK, OpenCorporates, Spend Network and OCCRP carried out an analysis of the data collected to date which has shown some interesting trends.

Over the course of a weekend in November 2016, thirty volunteer data scientists, including the head of software for a Formula 1 team, an astrophysicist and a former consultant to the UK tax authority were keen to see what insights into UK Companies might be discovered through the analysis of the data.

At the time of the exercise, 1.3 million UK companies had already filed their PSC Register information, the results of this can be viewed HERE. A few key points include:

  • The majority of beneficial owners (1.2 million) are UK nationals. The second largest nationality is Irish, followed by a mix of European countries (Italy and Poland) and China and India. 13% of beneficial owners live overseas.
  • Under 10% of companies recorded they have no beneficial owner. Under the PSC conditions, a PSC or RLE must hold more than 25% of the ownership of the shares in order to qualify. Global Witness suggested this threshold may be too high and may have the potential to be exploited by those who wish to avoid being recorded as a beneficial owner by keeping just under the required percentage.
  • Only 2% of companies were still in the process of collecting their beneficial owner information.
  • Global Witness potentially identified 76 people from the U.S. sanctions list and 267 disqualified directors were listed as beneficial owners.

The exercise also exposed weaknesses in the method which data is collected and recorded at Companies House, namely;

  • Companies House permits free text entry for a number of fields within their forms rather than standardised text and the impossibility of their reviewing each submission.
  • It was discovered that there were over 500 different ways individuals recorded their nationality as “British”.
  • Almost 3,000 companies listed their beneficial owner as a company with an address in a country or independent area where taxes are levied at a low rate (such as the Channel Islands), which is not compliant with the legislation.

Global Witness have forwarded the details of these companies to Companies House for further investigation.

The inaccuracy of the data submitted by companies, whether due to a lack of knowledge of the legislation or deliberately avoiding the disclosure of information regarding beneficial owners may potentially affect the integrity of the register at Companies House. The government consultation on Money Laundering Regulations 2017 (which you will find HERE) acknowledges that consideration should be given to the accuracy of the data on the register and of the benefits of introducing verification measures.

The government’s position that having a register, open and freely accessible by all “is a powerful tool in identifying false, inaccurate, or possibly fraudulent information” which will be challenged and reported by the variety of users viewing the data. However, they continue to consider other means of improving the accuracy of the register.

If you have any queries or wish to have more information please get in touch with Louise Crumley at [email protected], a director of Sarcon Compliance Limited.

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