2017 already looks like being a busy year for
Tynwald, the Island's parliament, but one of the most important
bills likely to be introduced into the House of Keys in the next
few weeks is the Beneficial Ownership Bill, which is arguably the
most critical piece of legislation for the financial services
sector since the Financial Services Act became law in 2008.
A central register of corporate ownership
In April 2016, the Isle of Man Government made a commitment to
the UK that by the end of June 2017 it would introduce a
centralised register listing those individuals who ultimately own
legal entities incorporated on the Isle of Man. The Government
published a consultation document on 4 November 2016 which
contained a draft Beneficial Ownership Bill 2017 (the
"Bill") and invited comments from industry and the public
on the detail of the proposed legislation and its potential impact
on the Island's reputation as a responsible and
highly-regulated jurisdiction. The consultation closed on 16
December 2016. As the Bill only captures entities which have their
own legal personality, it is important to note that trusts are
excluded from its scope.
The main objectives
The principal purpose of the Bill is to ensure that the Isle of
Man meets acceptable international standards of anti-money
laundering and countering of terrorist financing by maintaining a
centralised database of corporate beneficial ownership which,
although not publicly available, will be accessible to UK law
enforcement agencies for the purpose of combatting financial crime.
The threshold of beneficial ownership is 25%. Each legal entity
must appoint a 'nominated officer' who is responsible for
submitting the required ownership information each year. Those
entities which already have a nominated officer pursuant to the
Companies (Beneficial Ownership) Act 2012 will not have to appoint
an additional nominated officer, although that Act will be repealed
when the Bill becomes law.
The Isle of Man is certainly not alone in addressing the vexed
issue of beneficial ownership. Many other jurisdictions are
considering the issue at the present time and some have already
introduced similar or equivalent legislation. The UK has already
introduced a register of 'persons with significant control'
which is publicly searchable on the UK Companies House website.
DQ's Adam Killip attended the Offshore Alert conference in
London in November 2016 and it was apparent from this conference
that due to the ever-increasing volume of information available to
tax authorities as a result of the exchange of tax information
under the Common Reporting Standard (CRS) and US FATCA, the number
of investigations and follow-up requests from foreign authorities
is only likely to increase. The Isle of Man must position itself at
the forefront of tackling financial crime in order to maintain its
hard-earned status as a professional and responsible place to do
business. This subject will be discussed further at DQ's
Tax Enforcement conference on 9 February 2017, and you can find out
more about the conference by clicking
Some issues for Tynwald to consider
Although DQ understands that Tynwald is keen to enact the Bill
in short order, there are several aspects of the Bill which are
unclear and which will need to be addressed in more detail in order
to provide more clarity to those who deal with corporate
structures. In particular, it is unclear how the 25% threshold will
apply in practice where there is a particularly complicated
corporate structure or where an Isle of Man company is ultimately
owned by a trust. In addition, as presently drafted, it is not
clear whether the beneficial ownership register will only be
accessible by UK law-enforcement authorities or whether equivalent
bodies in other countries will be able to request information as
well. Furthermore, there is ongoing debate about the
inclusion of collective investment schemes within the scope of the
Bill and it is not clear how some of the offences which pertain to
legal and intermediate owners of structures would be enforced where
these parties are not Isle of Man resident.
When will the Bill become law?
The consultation document envisages that the Bill will become
law by early summer and that the beneficial ownership register will
'go live' on 1 July 2017, with a phased introduction in the
first year to allow for nominated officers to submit the necessary
beneficial ownership information as part of each legal entity's
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The MFSA issued a Circular highlighting the importance for regulated entities to conduct an appropriate assessment in all instances prior to proposing the appointment of individuals to be involved in or to hold key functions in a regulated structure...
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