This memorandum is about the upcoming mandatory registration of ultimate beneficial owners of legal entities established within the European Union in a special register (hereafter: the UBO register).
FOR WHOM IS THIS RELEVANT?
- Following a EU directive (2015/849), all member states of the European Union need to set up a register in which information is filed regarding the legal and ultimate beneficial owners of legal entities established in EU Member States.
- All ultimate beneficial owners (hereafter: UBO’s), i.e. individuals having a ‘certain important’ (in)direct interest in the above mentioned EU legal entities need to be registered.
The Directive gives an interest of at least 25% as an indication of what is an important interest. However, member states may also implement a lower amount in their internal laws. Any (foreign or domestic) legal entities, trusts or similar structures interposed between such individuals and the relevant EU entity, will need to be ignored for the purpose of the UBO register. Any individual, whether resident within but also outside the EU (!) having such an direct or indirect important interest in a EU member state legal entity, will therefore need to be included in the UBO register.
- The legal entities (therefore the board of directors) will need to provide the information on the UBO’s to the UBO register. All authorities with a role in the prevention of money laundering and financing of terrorism will have a right and/or obligation to update and correct the UBO register.
Furthermore, all persons involved in the legal or financial advisory business (e.g. notaries, lawyers, tax advisers, banks, etc.) will need to report any inconsistencies or incompleteness of the register they are aware of. These persons need to verify the identity of any UBO’s of all legal entities that are clients. They will therefore need to check the information available to them against the information filed in the UBO register and report any differences.
WHAT WILL REPORTED ABOUT THE UBO?
It has not been decided by eache EU country what information will be filed on each UBO, but the following minimum information will need to be filed for every UBO:
- Name of the UBO
- Date and place of birth
- Nature and amount of the interest in the respective legal entity.
WHO MAY CONSULT THE UBO REGISTER ?
The member states will grant access to their UBO register to:
- Competent authorities and European Financial Intelligence Units, without any restriction;
- Cerain legal/financial service providers, within the framework of customer due diligence in accordance with Chapter II of the Directive; and
- Any person or organisation that can demonstrate a legitimate interest.
The persons or organisations with ä legitimate interest” may have access to at least:
- the name,
- the month and year of birth,
- the nationality;
- the country of residence of the UBO; and
- the nature and extent of the beneficial interest held.
However, access to the information regarding beneficial ownership in the UBO registers by such persons shall be in accordance with data protection rules and may be subject to online registration and to the payment of a (minimal) fee.
The Directive does not contain a definition of who may have “a legitimate interest”, but we fear that this will be very broadly interpreted and will for example include journalists for the purpose of investigating the (background of) their news reports.
THE UBO REGISTER WILL GO LIVE ULTIMATELY ON JUNE 26, 2017
All EU member states need to implement the Directive in their internal laws and have their UBO register up and running ultimately by June 26, 2017. Especially the obligation for legal and financial service providers to mandatorily update the register is very burdensome for EU service providers and can potentially damage the client relationship.
NEED TO KNOW MORE?
For further information and updates on the implementation of the UBO register, please feel free to contact us directly.