Has the bank secrecy era really come to an end? Who will have access to the information on the ultimate beneficial owner (“UBO”)? Who will verify the information provided to the registrar? These are the types of questions asked in response to the news about the 4th EU Anti-Money Laundering Directive (“4th AMLD”). Announcements have been sent by Sweden, Australia, Greece and other prestigious jurisdictions about them joining the UK-led initiative to automatically share beneficial ownership information for companies and other legal entities. Furthermore, the recent “Bahama Leaks”, which disclosed information on half a million offshore accounts and businesses, as well as the data published in previous leaks such as the “Panama Papers”, raise the question whether the global movement towards information sharing has become a reality.
The story of public registers of UBO began in June 2015, when the EU Commission published the 4th AMLD. According to its provisions, all 28 member states must transpose the 4th AMLD into their domestic systems until 26 June 2017. But what exactly does the 4th AMLD entail?
Member states will be required to maintain information on the UBO(s) of all companies, trusts and other types of legal arrangements, incorporated within their territory, in a national central register. Competent authorities, the EU Financial Intelligence Units, obliged entities (such as banks, notaries and lawyers conducting their “customer due diligence” duties), as well as any person demonstrating “a legitimate interest” (a term not defined by the Directive) will have access to those registers. The interconnection of national registers is expected to be put in place by June 2019. Thus, it will allow the public to access the beneficial ownership information across the EU.
The 4th AMLD defines a UBO as any natural person(s) who ultimately owns or controls the client (i.e. a corporate entity or other legal entity) and/or the natural person(s) on whose behalf a transaction or activity is being conducted. In regards to corporate entities this definition of a UBO is further specified as a natural person who ultimately holds a shareholding, controlling or ownership interest exceeding 25% of the shares or voting rights in a corporate entity. If no UBO can be identified, the natural person(s) holding the position of senior managing official are in principle registered as UBO. A definition of “senior management” is introduced in the 4th AMLD as being an officer or employee with specific knowledge of the institution’s exposure to AML/CTF risk and sufficient seniority to make decisions affecting its risk exposure.
All legal entities will be obliged to maintain accurate and up-to-date information on their beneficial owners, in addition to basic information such as the company name and address, proof of incorporation and legal ownership. Trusts will be obliged to maintain information not only on its beneficiaries, but also information on the identity of the settlor, trustee(s), protector(s) (if any), and any other natural person exercising effective control over the trust.
The UK has already implemented this initiative into its domestic legislation. As of 30 June 2016 all companies are obliged to submit information on their UBO(s) to the UK Companies House, and in fact the information on person(s) with significant control is already available and searchable online via the UK Companies House web site.
The Netherlands has also confirmed its intention to implement registers with information on UBO(s) of companies incorporated there, which will be publicly available. Anyone will have access to the name, month and year of birth, nationality and country of residence of the UBO(s), as well as the nature and extent of the beneficial interest held.
Meanwhile, in June 2016, the EU Commission proposed to change the date of the implementation of the 4th AMLD from June 26 to January 1, 2017. Additionally, the Commission offered to reduce the reporting threshold of ownership for UBO(s) from 25% to 10% as well as to include a rule on constant updating of information on UBO(s) of Passive Non-Financial Entities.
This means that in less than 3 months, we will likely see public registers with information on UBO(s) within the EU. Thus, UBO(s) of businesses operated within the EU must be ready for such information becoming public. Eurofast is ready to advise whether information on your beneficial ownership will be available, to whom it will be available, to what extent, and to assist in any other related matter.