Cyprus: Cyprus Section Of Nautadutilh's Status Overview UBO Register Europe

Last Updated: 13 September 2017
Article by Kyriaki Stinga

Most Read Contributor in Cyprus, July 2018

INTRODUCTION

The directive EU 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (the Fourth Anti-Money Laundering Directive, hereinafter referred to as the Directive) will affect virtually all enterprises and entities in the European Union (EU) and the European Economic Area (EEA), as well as their ultimate beneficial owners (UBOs and each individually, a UBO). As a result of the Directive, UBOs will have to be registered in a centrally held register (UBO register) in each member state. This will not only impose an administrative burden on enterprises and entities, but will strongly impinge upon the privacy of their owners.

The Directive does not only relate to registration of UBOs, but also contains other anti-money laundering measures. This overview only covers UBO registration, as that aspect of the Directive will likely have the most impact for our clients. The obligation to be registered as UBO will not only apply to business owners who reside in the EU or the EEA; a UBO who resides elsewhere will still have to be registered as such in the EU or EEA member state(s) where his business(es) operate(s) through legal forms that fall within the scope of the Directive or national legislation implementing the Directive.

This overview is the result of a survey conducted by NautaDutilh during the summer of 2017 among leading independent law firms in the EU and EEA. Although 26 June 2017 was the deadline for member states to implement the Directive into national legislation, most member states did not yet fully do so. We expect that the majority of the member states will adopt legislation for implementing the Directive in the course of 2017. For member states which have not yet implemented the Directive in their national legislation, the answers are based on draft legislation to the extent this was available at the time of the survey.

On the basis of the responses to the survey, we deem that the following observations are noteworthy.

  1. Of the 32 European countries covered in this survey, only Germany, the United Kingdom and Denmark met the implementation deadline. In many other countries legislation has already entered into force, but specific rules regarding the introduction of a UBO register must still be issued, for example by means of a separate decree. Here is a sampling of the answers:
    • Denmark: Rules on the registration of UBOs were introduced on 23 May 2017. The registration deadline is 1 December 2017.
    • Finland: Legislation implementing the Directive entered into force on 3 July 2017 save for certain provisions, including the UBO provisions, which will enter into force on 1 January 2019. Technical details of the UBO register will be laid down by separate decree. The provisions requiring registration of UBOs with the relevant registers apply to entities established on and after 1 July 2019 and existing entities must register the information by 1 July 2020.
    • France: A decree introducing the UBO register entered into force on 1 August 2017. Specific rules will be laid down by a separate decree, the draft of which is not yet available.
    • Germany: Legislation implementing the Directive (including the provisions on UBO registration) entered into force on 26 June 2017. Technical details of the register are laid down by separate decree. UBO information has to be filed by 1 October 2017.
    • Hungary: Legislation implementing the Directive entered into force on 26 June 2017. Details of the UBO register will be laid down by separate decree, the draft of which is not yet available.
    • Ireland: Legislation implementing a part of the Directive entered into force on 15 November 2016. Specific rules on the UBO register are expected to be published in the last quarter of 2017.  A decree introducing the UBO register entered into force on 1 August 2017. Specific rules will be laid down by a separate decree, the draft of which is not yet available.
    • Germany: Legislation implementing the Directive (including the provisions on UBO registration) entered into force on 26 June 2017. Technical details of the register are laid down by separate decree. UBO information has to be filed by 1 October 2017.
    • Hungary: Legislation implementing the Directive entered into force on 26 June 2017. Details of the UBO register will be laid down by separate decree, the draft of which is not yet available.
    • Ireland: Legislation implementing a part of the Directive entered into force on 15 November 2016. Specific rules on the UBO register are expected to be published in the last quarter of 2017.
    • Italy: Legislation implementing the Directive entered into force on 4 July 2017. Separate legislation providing further details about the UBO register will beenacted in the next 12 months.
    • Slovenia: Legislation implementing the Directive entered into force on 19 November 2016. More detailed rules on the content and implementation of the UBOregister will be laid down in separate legislation.
    • Sweden: Legislation implementing the Directive entered into force on 1 August 2017. Details of the UBO register will be laid down by separate decree.
  1. 14 countries seem to have chosen to implement some of the Directive's UBO-registration rules in legislation that is separate from the legislation implementing theother provisions of the Directive, and to lay down more detailed rules in implementing regulations.
  2. Although the Directive provides that the UBO register will only be accessible to persons who have a legitimate interest (e.g. financial intelligence units or taxauthorities), the following countries are expected to make certain information in the register accessible to the public, irrespective of whether or not a person has alegitimate interest to obtain such information: Denmark, Estonia, Finland, Lithuania, the Netherlands, Poland, Portugal, Slovakia, Slovenia and Sweden. The draft billfor implementing the UBO register in the Netherlands that was published for consultation purposes on 28 March 2017 received a large number of responses, themajority of which strongly advised against making UBO information publicly available. The Dutch legislator has not yet published a new draft bill to date. We sincerelyhope that the Dutch legislator will reconsider its earlier proposal to make certain information in the UBO register accessible to the public, because this has a majorimpact on the privacy of UBOs and is not in line with the Directive and the proposed legislation in numerous other countries that will implement the Directive.
  3. Austria, Croatia, Cyprus, the Czech Republic, France, Germany, Italy, Liechtenstein, the Netherlands, Norway, Portugal and the United Kingdom limit access tocertain information in the UBO register or provide for the possibility of doing so, e.g. in the case of minors or persons who are legally incompetent. Finland andHungary have announced their intention to do the same, but the relevant legislation has not yet been adopted. In Bulgaria, Denmark, Poland, Romania and Slovenia itwill not be possible to preclude or limit the disclosure of certain information. The other countries do not disclose any information on this matter yet.
  4. Article 3(6) of the Directive sets out a definition of the term "beneficial owner". EU/EEA member states may either adopt that definition or formulate one of their own. Inthe latter case the definition must encompass, at a minimum, the persons described in the Directive. In other words, it may be broader but not narrower than thedefinition in the Directive. Most countries have simply adopted the definition in the Directive, which boils down to the following: UBOs are natural persons whoultimately own or control a legal entity through direct or indirect ownership of at least 25% plus one of the shares or voting rights or an ownership interest of more than25% in that entity. Croatia, Ireland, Norway, Portugal, Romania and Slovenia use a definition that is virtually identical to the one in the Directive. Hungary, Italy andSlovakia have changed the definition but only minimally, the only difference being that the cut-off is set at exactly 25% (as opposed to 25% plus one of the shares orvoting rights, or an ownership interest of more than 25%).
  5. Most countries have chosen to impose the registration obligation on the enterprise or legal entity itself. In Austria, Liechtenstein, Portugal, Slovenia and Sweden registration may alternatively be carried out by the enterprise's or entity's professional advisers. In Slovakia, professional advisers instead of the enterprises or legal entities are required to carry out the registration.
  6. According to the Directive, companies that are listed on a regulated market which is subject to disclosure requirements consistent with EU law or subject to equivalent international standards which ensure an adequate transparency of ownership information, are exempt from the obligation to register UBO information. Most countries have chosen to implement this exemption, but not all; some countries have clearly made no exception (yet) for listed companies or do not mention anything at all. For example, Austria and Poland explicitly mention that there are no exceptions made for listed companies to register their UBOs, while the draft bill in the Netherlands does not refer to an exemption for listed companies.
  7. In the Netherlands, Portugal and Sweden, a reporting obligation will apply to certain institutions and professional advisers (e.g. banks and notaries) that consult the UBO register. This obligation entails that any incorrect information they encounter in the register must be reported to the authority in charge of maintaining the register. Most countries do not impose such an obligation. In Romania this obligation will apply to authorities responsible for supervision and compliance. In Austria the reporting of incorrect information is possible but not mandatory.
  8. Fines for non-compliance with the registration requirements vary substantially: from EUR 30-EUR 1,450 (Lithuania) to EUR 1,000,000 or twice the amount of the economic advantage gained by repeated or systematic non-compliance (Germany). The amounts differ depending on the seriousness of the offence and whether an individual or a legal entity is responsible for it. Besides fines, penalties such as the suspension of licences, the freezing of assets and even the issuance of a public statement disclosing the seriousness of the offence and the identity of the responsible individual or the relevant legal entity can be imposed (Romania). In short, non-compliance with the registration requirements can have serious consequences.
  9. There is still much uncertainty about the introduction of a specific register/registration obligation for trusts. In a vast majority of the EU and EEA countries a registration obligation for trusts will be introduced. It is not yet clear whether this will entail the creation of separate registers or if UBOs of trusts will be registered in the same registers as UBOs of other entities/enterprises .

We are pleased to present the results of this survey and thank all participating firms for their valuable input. We will continue monitoring the developments with respect to the registration of UBOs in the EU and EEA and will update you going forward. This overview is not intended to provide specific legal advice and special rules may apply in particular situations. We would be happy to assist you with questions about the UBO register and the Directive and its impact on enterprises and their owners.

THE DIRECTIVE AND UBO REGISTRATION

The Directive was adopted on 20 May 2015 and had to be implemented in national law by 26 June 2017. The Directive has brought several modifications to the Third EU Anti-Money Laundering Directive. These modifications primarily relate to ongoing monitoring, risk-based approach, customer due diligence, politically exposed persons and of course beneficial ownership. The modifications brought by the Directive will affect the privacy of business owners because, according to article 30 of the Directive, companies will be required to disclose the details of their UBOs in a central register; a so-called 'UBO register'. Article 31 of the Directive states that this new obligation to register information with respect to beneficial ownership relates to trusts as well.

According to article 3(6) of the Directive, a UBO is any natural person(s) who ultimately owns or controls the relevant entity and/or the natural person(s) on whose behalf a transaction or activity is being conducted and includes at least:

For corporate entities:

  • the natural person(s) who ultimately owns or controls a legal entity through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interests in the relevant entity;
  • the natural person(s) with a shareholding of 25% plus one share or with an ownership interest of more than 25% in the relevant entity;
  • in the case no persons can be identified based on the two grounds above, the senior managing official(s) can be identified as the UBO.

For trusts, legal entities such as foundations and legal arrangements similar to trusts:

  • the settlor;
  • the trustee(s);
  • the protector, if any;
  • the beneficiaries or the class of persons in whose main interest the relevant entity is set up or operates;
  • any other person exercising ultimate control over the trust, either directly or indirectly.

Based on the Directive, the UBO register is accessible to competent authorities and EU Financial Intelligence Units, obliged entities and any other party that can demonstrate a legitimate interest. Under the Directive, member states are allowed to deny access to persons with a legitimate interest in exceptional circumstances, such as when access would expose the beneficial owner to the risk of fraud, kidnapping, blackmail, violence or intimidation or where the beneficial owner is a minor. However, it is up to the member states how to deal with such cases.

Hyperlink to the Directive

Questions from the survey:

  1. What is the status of the implementation of the Directive introducing the UBO register?
  2. Who qualifies as UBO under the local legislation whereby the Directive is implemented?
  3. Which information and documents relating to UBOs shall be registered?
  4. For which enterprises/companies/entities will UBO information have to be registered? Are there any exemptions, e.g. foreign entities that have a branch office in your jurisdiction, listed companies or contractual partnerships?
  5. Where and how does UBO information have to be filed?
  6. Will it be mandatory to file documents which evidence why and how a person qualifies as UBO?
  7. Which persons/parties are obliged to file UBO information, e.g. the board members of an enterprise, UBOs themselves, professional advisers (financial institutions, lawyers and/or notaries)?
  8. On which date should UBO information be registered?
  9. What is the reference date for determining who is/are the UBO(s) of an enterprise in your jurisdiction?
  10. Is the reference date the same as the implementation date of the legislation, or is the reference date the date on which the UBO information is actually filed? If there is a period of time (the "lookback period") between the reference date and the filing date, should changes in the ownership structure/UBOs of a company that occurred during the lookback period also be filed on the filing date?
  11. Who will have access to UBO information? Is there a distinction between information that is accessible to competent authorities, banks and other financial institutions, and the public/persons who have a legitimate interest to access UBO information?
  12. Is it possible to restrict access to UBO information, e.g. in the event of a juvenile UBO or if there is a risk of kidnapping, fraud, etc.
  13. If so, please explain the procedure for restricting access.
  14. Will the exact ownership percentage of a UBO be visible, or will there be ranges such as 25-50%, 50-75% and 75-100%?
  15. Is there an obligation for professional advisers to notify the UBO register if they suspect that the information published in such register is incorrect or incomplete?
  16. What are the legal consequences of infringements in respect of the filing requirements?
  17. Are there simplified filing procedures or exemptions for companies within the same group, or is each company in a group individually obliged to file UBO information? If there are simplified procedures or exemptions, please explain.
  18. Are there other compliance obligations in respect of UBO information, e.g. an annual review?
  19. Other information deemed relevant.

1. AUSTRIA

1.1. What is the status of the implementation of the Directive introducing the UBO register?
The Austrian law on the Register of Economic Owners (Wirtschaftliche Eigentümer Registergesetz, "WiEReG") provides that its main provisions shall enter into force on 15 January 2018. It includes certain transitional periods:
  • filings have to be made for the first time before 1 June 2018; and
  • access to UBO information shall be available for the first time from 2 May 2018.

1.2. Who qualifies as UBO under the local legislation whereby the Directive is implemented?

''Regular entities'':
  • direct economic owners are natural persons who:

    • hold 25% plus one share, or more than a 25% participation of the entity or the respective votes in the company; or
    • control the management of the company, whereby "control" is defined as holding - directly or indirectly – 50% plus one share or more than a 50% participation of the company or the respective votes in the company or under the same circumstances applicable for drawing up consolidated accounts (Art. 244 s 2 Austrian Enterprise Act; Unternehmensgesetzbuch).
  • indirect economic owners are natural persons who control an entity which holds directly or indirectly 25% plus one share or more than a 25% participation of another entity or the respective votes in such entity. If more than one entity is controlled by the same natural person and cumulatively the thresholds in another entity are exceeded, then such natural person shall be regarded as the economic owner of such entity.
If no such "economic owner" can be identified: the senior management of such entity is considered the UBO. Partnerships and limited partnerships The managing shareholders, unless there are reasons to believe that another natural person is directly or indirectly controlling the entity.

Cooperative and economic societies

The members of the senior management, if no member holds a participation of more than 25%. Unless there are reasons to believe that another natural person is directly or indirectly controlling the entity.

Entities with no owner (e.g. associations, savings banks, mutual insurance associations)

The members of the senior management, unless there are reasons to believe that another natural person is directly indirectly controlling the entity. Trusts* If their administration is in Austria: the settlor/trustor, the protector, the beneficiary/beneficiaries, any other person controlling the trust by other means. Foundations* Natural persons who have similar functions as the economic owners for trusts, in particular the founder, the beneficiary/beneficiaries, the directors of the foundation, any other

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