The 5th Anti-Money Laundering Directive is the latest in the series of instruments introduced by the European Union in its efforts to prevent the use of the Union’s financial system for the purposes of money laundering and/or terrorism financing.
One of the most impactful new measures is the introduction of the national Ultimate Beneficial Owner (“UBO”) Registers. These registers are introduced as a measure to improve transparency and access to information. They will gather information relating to the beneficial owners of corporate and legal arrangements. In all Member States of the European Union, the UBO registers will include, at a minimum the name; month and year of birth; nationality; country of residence of the UBO; and the nature and size of the beneficial interest held by the beneficial owners.
The registration obligations lies with the entities themselves and the UBOs; noncompliance can lead to the imposition of administrative or even criminal sanctions.
The information in the registers will be made available to: competent authorities, and Financial Intelligence Units (“FIUs”); entities falling under Customer Due Diligence (CDD) obligations; and any person or organization that can demonstrate a legitimate interest.
As this is a European Directive, it means that it must be transposed into the national law of the Members States. This means that the Member States have a certain degree of flexibility in how they implement the directive, as long as the minimum requirements are met.
Consequently, we see that the countries have diverging requirements regarding to, for example, the UBO percentage threshold, the registration deadline, and information access. To name a few examples, Bulgaria applies the threshold of 25% as opposed to more than 25% ownership for the UBO definition. In Sweden, the Register is open for any person with a personal e-identification; while in Germany access is granted by application only. Some countries have already passed the registration deadlines, while others have them set for 2020.
From the perspective of the efforts against Money-Laundering, this is a welcomed development. The centralized, publicly available data will help authorities and entities with CDD obligations in the fulfillment of their obligations. Nonetheless, it is expected that the practical implementation might create a few hurdles for the Member States and for the parties in scope.
If you have questions or would like to know more about your UBO registration obligations, or the ones affecting your investors, please contact us at firstname.lastname@example.org.