BVCA has responded to Treasury’s consultation on MLD5 implementation. Its key observations are:
- where the underlying CDD obligation involves subjectivity or judgement, the concept of taking “reasonable measures” is important because without that firms might be forced to take a disproportionately conservative approach;
- in practice, where a firm has tried, but been unable, to identify the beneficial owner of a customer who is a body corporate, the firm would usually not proceed with the transaction, rather than treating the senior manager as the beneficial owner, so extending the requirement to state that, in such cases, the senior manager should be identified both makes sense and would have little impact on firms;
- if Treasury introduces an explicit requirement that firms understand the ownership and control structure of customers, this needs to include an element of reasonableness so as not to create a disproportionate burden for firms. Firms consider the “reasonable endeavours” requirements set a high bar in any event, so little if any practical benefit would result from this being an absolute requirement; and
- BVCA has concerns about the requirement to report discrepancies between beneficial ownership information a firm holds against that held on a public register. It says only fundamental and self-evident differences should be reportable, as firms in the funds market in particular will spend large amounts of time and money on CDD. It suggests the requirement might be framed so as to require reporting if the obliged entity has reasonable grounds to suspect the information is false and has been registered with an intent to mislead.