Under the 4th anti-money laundering directive of the European Union, all European countries are obliged to introduce legislation that will create a register of the ultimate beneficial owners (UBOs) of structures. What information will be collected? Who will have access to the data?
Introduction
The 4th Anti-Money Laundering directive entered into force on 26 June 2017. Each member state should by now have transposed the directive into their national law. What follows is a discussion of the provisions of the directive itself at EU level.
Who qualifies as a UBO?
The directive defines a UBO as the natural persons who ultimately owns or controls a structure. Control could be through ownership of shares, voting rights or other means. A company listed on a regulated market and is subject to similar disclosure or ownership transparency is exempt. Normally a shareholding of 25% plus one share is considered to be an indication of direct ownership. Member states may also set lower percentages. In case of trusts, the UBOs are considered to include the settlor(s), the trustee(s), the protector, if any, the beneficiaries, or where the individuals benefiting from the legal arrangement or entity have yet to be determined, the class of persons in whose main interest the legal arrangement or entity is set up or operates, and any other natural person exercising ultimate control over the trust by means of direct or indirect ownership or by other means. This approach also applies to foundations and the equivalent parties.
What information will be recorded in the register?
The ownership details of the UBOs must be included in a central register– such as a Commercial Register, company register or some other public register. Under the 4th anti-money laundering directive of the European Union, all European countries are obliged to introduce legislation that will create a register of the ultimate beneficial owners (UBOs) of structures. What information will be collected?
Who will have access to the data?
The obligatory details on the UBOs of legal persons are, in any case:
- Name
- date of birth (month and year)
- nationality
- state of residence
- nature and size of the interest.
- In the case of trusts, the following details will be obligatory:
- settlor
- trustee(s)
- protector
- beneficiary(ies)
- all other persons who have control of the trust.
To whom does the directive apply?
The following European enterprises are under an obligation to trace the identity of clients: banks, auditors, tax advisors, notaries and lawyers, trust and company providers, asset managers, insurance companies, funds, brokers and agents, and any person trading in goods where payments are made/received in excess of €10,000. The directive also applies to the European branches of nonEuropean entities.
Who will have access to the register?
Besides the entities listed above, the register will also be open to parties who are able to show that they have a ‘legitimate interest’ in inspecting the UBO register. The European Union left it to the member states to define what a ‘legitimate interest’ is. Any such request would have to be in relation to money laundering, terrorist financing or the related basic offences, such as fraud and corruption. Journalists are likely to succeed in demonstrating such a legitimate interest. The directive creates an exception to the registration of the details of UBOs who are minors or are vulnerable for any other reason, such as those UBOs who are or will be the target of fraud or kidnapping, blackmail, violence or intimidation. The UBO will have to demonstrate a threat to personal security as a result of disclosure under the directive.
What information will be shared?
The following information will be shared:
- the name of the beneficiary (or beneficiaries)
- date of birth (month and year)
- nationality
- country of residence
- nature and size of his/her financial and/or controlling interest.
The UBO will not be informed when information is shared from the register.
Collection of the information
Corporates, foundations and trustees will have to collect information and submit this to the designated local authorities.
Next steps
UBOs will have to consider the local laws which transposes the directive, since the local laws may deviate from the directive. Following “Panama Papers”, the European Commission have already proposed changes to the directive, which are in the process of being negotiated. UBOs will also have to deal with the potential conflicting picture that emerges from reports under this directive, the Common Reporting Standards/ Automatic Exchange of Information reports and the data contained in their tax return filed with their local tax authorities.
