On 15 November 2016, part of the 4th EU Anti-Money Laundering Directive was passed into Irish law by The European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016.
Why was this introduced?
The aim of the Directive is to prevent the use of the EU’s financial system for the purposes of money laundering and terrorist financing. Included in the Directive are measures to identify persons with significant economic interests in companies.
One of the measures the Directive introduces is a requirement for EU Member States to establish a central register of beneficial ownership of corporate and other legal entities (including trusts).
What obligations arise?
The European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016 came into operation on 15 November 2016. Companies incorporated in Ireland must now
- take “all reasonable steps” to obtain and hold “adequate, accurate and current” information in respect of their beneficial owners,
- construct and keep a new beneficial ownership register,
- keep the information on beneficial ownership contained in the register up to date
- companies will in due course be required to file this information with a central beneficial ownership register. The central register is in the process of being established.
Who is a beneficial owner?
A beneficial owner is any natural person who ultimately owns or controls the corporate entity, through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interests in that entity.
In simple terms, a beneficial owner is an individual owning or controlling, directly or indirectly, more than 25% of the shares or voting rights in a company, or who has the ability to exercise dominant influence or control over a company.
What if the company doesn’t know who its beneficial owners are?
Each company is obliged to serve a notice requesting the necessary information on
- any natural person whom it has reasonable cause to believe to be a beneficial owner; and/or
- any other person (whether a natural person or not) whom it has reasonable cause to believe has knowledge of the identity of a beneficial owner. The recipient of the notice has 1 month to comply and provide the information requested.
If having exhausted all possible means the beneficial owner cannot be identified or there is doubt as to whether the person identified is actually the beneficial owner, the company must enter its “senior managing officials” (directors and CEO) as the beneficial owners. This means they are treated as the beneficial owners for the purposes of the Regulations/Directive. However, the company must have exhausted all possible means to identify the relevant individual and have records of the actions it took to identify the beneficial owner.
It is expected that a further Statutory Instrument will be introduced in late 2017 assigning legal responsibility to the Registrar of Companies for the Registrar of Beneficial Ownership (RBO) of Companies and Industrial and Provident Societies.
In advance of the establishment of the RBO the CRO has published on its website the following guidance note as to how it is planned to operate:
- There is likely to be a period of at least 3 months provided to file without being in breach of the statutory duty to file.
- Filing will be done through an on-line portal, there are no plans for paper forms and there will be no filing fee.
- The information to be filed with the RBO in respect of each beneficial owner (must be a natural person) will include the following:
– Forename & Surname
– Date of birth
– Residential address
– A statement of the nature of the interest held by each beneficial owner (e.g. controlling shareholder)
– A statement of the extent of the interest held by each beneficial owner (e.g. controller of 26% of shares in company)
– The date on which each natural person was entered in the register as a beneficial owner of the corporate entity
– The date on which each natural person who has ceased to be a beneficial owner of it, ceased to be such an owner
– If no natural persons are identified there shall be entered in the register the names of the natural person(s) who hold the position(s) of senior managing official(s) of the company.
- Details of the presenter making the entry in the register on behalf of the company will also be required, i.e. name and contact details.
Who will be able to see/inspect this Central Register?
Under the 4th AML Directive the general public will not have access to the Central Register, but it will be accessible by:
- a) competent authorities – e.g. the Central Bank of Ireland;
- b) entities required to carry out customer due diligence (e.g. banks, accountants, tax advisors, and solicitors); and
- c) others with a legitimate interest in enforcing anti-money laundering legislation.
A 5th Anti-Money Laundering Directive is currently being finalised in Europe and it proposes to amend the 4th AML Directive to enable the public to access certain information held in the Central Register.
It is a criminal offence for a company not to comply with any requirement of the new regulations regarding obtaining and holding information on beneficial ownership, creating and maintaining the Register, serving notice on individuals believed to be beneficial owners and confirming any change in a beneficial owner’s details.
A company that commits such an offence can be liable for a fine of up to €5,000 on conviction.
It is also a criminal offence for an individual to fail to comply with their obligations under the Regulations, to comply with the terms of any notice sent to them or makes a statement that is false in a material way, knowing or being reckless as to whether this is the case. A person that commits such an offence can be liable for a fine of up to €5,000 on conviction.
Companies, if you do not already have a beneficial ownership register, the first step is to create one without delay.
If you are a shareholder in a company and control by virtue of the fact that you own directly or indirectly more than 25% of the company you must notify that company of your status as beneficial owner unless you know your details have already been included or you have received a notice from the company requesting the relevant information and you have responded accordingly.
If you would like to discuss the impact that these new measures have on you or your company, please get in touch with Samantha Geraghty, Partner or Siobhán Durkan, Solicitor and they will be happy to advise.