New Regulations have come into force that impose additional record-keeping obligations on corporate entities. The Regulations therefore apply to certain charities and require them to maintain a register with details of their "beneficial owners". We outline what entities the Regulations apply to and how to meet the requirement.
The European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016 (the "Regulations") came into force on 15 November 2016. The Regulations apply to a number of corporate entities and other legal entities incorporated in the State, including companies limited by guarantee. The Regulations do not currently apply to charitable trusts or to charitable unincorporated associations.
If the Regulations apply to your charity, you are now required to establish and maintain information about the charity's "beneficial owners" in a beneficial ownership register (the "Register").
Who is a "Beneficial Owner"?
A beneficial owner is a person who owns or controls your charity. A person or entity will generally be recognised as having "control" if they have at least 25% of the shares or voting rights in the charity. Most charities that are companies are incorporated as companies limited by guarantee which do not have share capital or voting rights (other than in most cases one member, one vote). Therefore, identifying the beneficial owners can sometimes be a challenging task, particularly if no individual holds in excess of 25% of the voting rights.
If a charity has three (or fewer than three) members, the beneficial owners will be those members. If a charity has more than three members, those who have "control by any other means" of the charity must be identified.
If you cannot identify your charity's beneficial owners, you must instead enter the details of those who are the senior managing officials (defined as including the CEO and the directors) on the Register.
Notification of the Beneficial Owners
If a beneficial owner notifies your charity of their relevant ownership or control, their name and details should be entered in the Register.
If the beneficial owners do not identify themselves, your charity must do the following:
- Give notice to each person that you reasonably believe to be a beneficial owner requesting them to confirm whether they are a beneficial owner and to confirm their details; and
- Give notice to any person / entity that you have reasonable cause to believe knows the identity of the beneficial owners of your charity and ask them to confirm whether they have such knowledge.
What Details Must the Register Contain?
All charities to whom the Regulations apply must take reasonable steps to record "adequate, accurate and current" information on the Register. This includes the following information:
- date of birth;
- nature and extent of the beneficial interest;
- date the beneficial owner was first added to the Register; and
- date of cessation of beneficial ownership.
There is also an obligation to keep this information up to date.
Access to the Register
At present, the Regulations do not require a charity's Register to be publicly accessible. However, the introduction of the Regulations is just the first step in a larger anti-money laundering legislative programme. The next step in that process will provide for the establishment of a national register, but this is not yet in place.
Sanctions apply for breach of the Regulations. Therefore, it is imperative that you understand how to meet the requirements of the Regulations and take immediate steps to establish your Register if you are a charity that falls within the scope of the Regulations.
For charities, identifying whether or not the Regulations apply can be difficult. It is clear that the Regulations apply to charities that are established as a company limited by guarantee, and do not currently apply to a charitable trust or charitable unincorporated association. However, if your charity is established as another form of corporate legal entity, you need to consider whether or not the Regulations apply to you.
In addition, for charities, identifying the beneficial owners may not be as straightforward as for other types of entity. The Regulations were introduced in November 2016 without accompanying guidance and it is hoped that an explanatory guidance document will be forthcoming. In the interim, the establishment of a Register is, however, a legal obligation for those charities to which it applies.
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.