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PSC: Person With Significant Control

Definition

A Person with Significant Control (PSC) is an individual or legal entity that ultimately owns, controls, or exercises substantial influence over a company or organisation.

PSC regimes mandate that companies disclose these controlling individuals to improve transparency, prevent anonymity in corporate structures, and deter the misuse of legal entities for money laundering, terrorist financing, corruption, tax evasion, and other financial crimes.

PSC rules generally capture persons who meet specific thresholds of ownership, voting rights, control via agreements, or the ability to appoint or remove senior management.

In AML/CFT frameworks, PSC identification is a cornerstone of beneficial ownership transparency, enabling institutions and regulators to look beyond surface-level corporate data and understand who truly directs or benefits from an entity.

Explanation

PSC frameworks were introduced to address a core vulnerability exploited in global financial crime: The ability to obscure true ownership behind shell companies, nominee directors, trustees, and multi-layered cross-border structures.

Many high-profile laundering schemes have relied on anonymous companies to move, layer, and integrate illicit funds.

A PSC regime requires companies to maintain accurate and up-to-date information on individuals who exercise significant control.

This information must often be filed with a central registry (for example, Companies House in the UK) and be accessible to competent authorities.

Institutions conducting KYC/EDD must verify PSC information as part of the beneficial ownership process.

PSC identification reinforces several AML/CFT obligations:

  • Understanding who ultimately owns or controls a client.
  • Assessing ownership and control risks within complex legal structures.
  • Detecting misuse of opaque or nominee-controlled companies.
  • Complying with FATF requirements for transparency and beneficial ownership registries.

The PSC concept aligns closely with beneficial ownership frameworks but introduces jurisdiction-specific thresholds and reporting obligations that institutions must integrate into onboarding and ongoing due diligence.

PSC in AML/CFT Frameworks

PSC requirements directly support AML/CFT frameworks by enhancing visibility into control structures and reducing anonymity risks.

Institutions must incorporate PSC identification into CDD, risk assessments, and continuous monitoring.

Key AML/CFT connections include:

  • Identifying individuals with ultimate control over a customer entity.
  • Verifying PSC details through reliable sources such as registries and corporate filings.
  • Detecting discrepancies between declared PSCs and observed transactional behaviour.
  • Conducting enhanced due diligence when PSCs are politically exposed persons (PEPs), linked to high-risk jurisdictions, or using opaque legal arrangements.
  • Supporting suspicious transaction reporting when PSC patterns do not align with legitimate business activity.

PSC information forms part of the broader risk assessment around beneficial ownership, governance, and potential misuse of corporate structures.

Key Components of PSC Identification

Thresholds for Significant Control

PSC criteria vary slightly by jurisdiction but generally include any person who:

  • Holds more than 25 percent of shares or capital in the entity.
  • Holds more than 25 percent of voting rights.
  • Has the right to appoint or remove a majority of directors.
  • Exercises or has the right to exercise significant influence or control over the company.
  • Exercises control through a trust or partnership that itself meets PSC thresholds.

Nature of Control

PSC identification may involve measuring:

  • Ownership (equity interests).
  • Voting influence.
  • Board-level control.
  • Indirect control via subsidiary chains.
  • Control through contractual agreements or shareholder rights.
  • De facto influence that, although not legally codified, results in material decision-making power.

Risks & Red Flags Associated With PSC Structures

Although PSC disclosure enhances transparency, criminals attempt to bypass these mechanisms through complex structuring.

Key risks include:

  • Use of nominee shareholders or directors to obscure true PSCs.
  • Layering ownership through multiple jurisdictions with weak registry transparency.
  • Sudden changes in PSC filings inconsistent with legitimate business events.
  • PSCs located in countries with high corruption or poor beneficial ownership controls.
  • PSC individuals using trusts, foundations, or bearer shares to hide influence.
  • Non-response or delayed response by clients when asked for PSC clarification.

Red flags for institutions include:

  • PSCs who cannot demonstrate a credible link to the company’s operations.
  • PSC details differing from information obtained through independent sources.
  • PSCs declining to provide identity documentation or proof of control.
  • Unusually young or elderly PSCs without clear business experience.
  • Entities with no declared PSC despite ownership clearly exceeding thresholds.

Common Methods & Techniques for Misuse

Criminal networks may attempt to hide PSCs and beneficial owners through techniques such as:

  • Nominee arrangements: Where a person is paid to appear as the PSC.
  • Layered shell companies: Across secrecy jurisdictions to obscure control.
  • Trusts and foundations: Used to mask the controlling party.
  • Circular ownership structures: Making it difficult to identify the ultimate PSC.
  • Bearer shares: Enabling anonymous transfers of ownership.
  • Use of intermediaries or gatekeepers: (Lawyers, accountants, formation agents) to manage PSC declarations.

Each of these techniques increases opacity and weakens the ability of institutions to assess the true risk of the customer.

Examples of PSC Scenarios

Misdeclared PSC Through Nominee Shareholding

A company declares a nominee as its PSC, while the true beneficial owner directs operations behind the scenes.

The entity is used for cross-border transfers that lack a clear economic purpose, indicating potential layering activity.

Complex Multi-Jurisdictional Control Chain

A company is owned by several offshore entities.

Each holds less than 25 percent, but collectively they are controlled by one individual.

Without adequate EDD, the true PSC remains hidden, enabling tax evasion or laundering.

PSC With Oversight of High-Risk Transactions

A PSC with significant influence directs a company’s financial dealings and authorises unusually large transfers to high-risk jurisdictions.

Their background reveals links to previous financial misconduct, heightening AML/CFT concerns.

PSC Embedded in a Trust Structure

A discretionary trust holds 30 percent of an entity’s voting rights.

The trustee acts as the declared PSC, but the settlor retains influence, prompting enhanced due diligence to identify the true controlling individual.

Impact on Financial Institutions

PSC-related failures expose institutions to substantial regulatory and operational risks:

  • Fines or sanctions for inadequate beneficial ownership identification.
  • Inability to detect structuring or layering conducted through opaque ownership chains.
  • Reputational damage from facilitating anonymous or illicit corporate activity.
  • Inefficiencies in monitoring due to incorrect or incomplete PSC data.
  • Legal exposure stemming from misreported or insufficiently verified PSC information.

Institutions must ensure PSC data is accurate, current, and verified through reliable documentation.

Challenges in Detecting & Preventing PSC-Related Abuse

PSC verification is not always straightforward. Core challenges include:

  • Complex ownership chains involving multiple jurisdictions.
  • Inconsistent registry standards and limited access to foreign corporate data.
  • Use of trusts, nominees, and intermediaries to obscure influence.
  • Frequent changes in PSC structures, especially in shell or shelf companies.
  • Difficulty correlating control rights with operational realities.
  • Limited documentary evidence in jurisdictions with weak corporate governance.

Institutions must therefore:

  • Perform enhanced due diligence when PSCs are difficult to identify.
  • Cross-verify PSC information against external data sources.
  • Implement ongoing monitoring to detect changes in ownership or influence.
  • Apply adverse media screening and network analysis for high-risk PSCs

Regulatory Oversight & Governance Expectations

PSC oversight is strongly supported by global AML/CFT standards. Key expectations include:

  • Alignment with FATF Recommendations on beneficial ownership transparency.
  • Maintenance of updated, accurate PSC registers accessible to competent authorities.
  • Verification of PSC identity through reliable documentation.
  • Ongoing monitoring for changes in shareholding, voting rights, or control.
  • Clear governance assigning responsibility for PSC reviews and escalation.
  • Use of EDD where PSCs are foreign, politically exposed, or associated with high-risk industries.

Regulators increasingly scrutinise institutions that rely solely on customer declarations without validating control structures through independent checks.

Importance of Addressing PSC Risks in AML/CFT Compliance

Accurate PSC identification is central to financial integrity.

Strengthening PSC frameworks enables institutions to:

  • Prevent misuse of legal entities for criminal activity.
  • Reveal the individuals who ultimately benefit from or direct transactions.
  • Maintain compliance with regulatory expectations for transparency.
  • Enhance intelligence-led AML programmes through deeper ownership insight.
  • Strengthen cross-border cooperation and due-diligence reliability.

PSC transparency supports national and global efforts to combat illicit finance, ensuring companies cannot serve as vehicles for hidden criminal control.

Related Terms

  • Beneficial Ownership
  • Nominee Director
  • Shell Company
  • Ultimate Beneficial Owner (UBO)
  • Trust and Foundation Structures
  • Company Registry

References

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