Ireland: AML Update: New Rules On Information About The Beneficial Ownership Of Corporates By Individuals

Last Updated: 22 November 2016
Article by Robert Cain, Dr. Thomas B. Courtney and Maedhbh Clancy

BACKGROUND

The Fourth Money Laundering Directive (MLD4) was published in the Official Journal on 5 June 2015 (see our Briefing: Fourth Money Laundering Directive published in the Official Journal).

MLD4 is currently due for transposition into Irish law on 26 June 2017, despite the European Commission's recent proposal that it be transposed early (see our Briefing: MLD4: Earlier transposition?).

Certain provisions regarding beneficial ownership (by individuals) of corporates and other legal entities were transposed into Irish law this week.

This affects all Irish companies (including companies limited by guarantee) and other bodies corporate (including, for example, ICAVs and industrial and provident societies).

It is important to note that the concept of "beneficial ownership" in MLD4 differs significantly from the commonly-used and understood concept of "beneficial ownership" in company law. Under MLD4, an individual can be a beneficial owner of an entity if he directly (or indirectly through other companies) holds > 25% of the shares in that entity, or otherwise directly (or indirectly through other companies) controls >25% of that entity. Further, individuals who have no legal or beneficial interest in shares in an entity, but are directors or the CEO of that entity, may be deemed to be its beneficial owners if the entity cannot identify, with certainty, any other individuals who may be its beneficial owners.

EARLY TRANSPOSITION OF CERTAIN PROVISIONS

With effect from 15 November 2016, Article 30(1) of MLD4 has been transposed into Irish law, 7 months in advance of the June 2017 transposition deadline, by way of the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016.

Article 30(1) requires that corporates and other legal entities incorporated in a Member State obtain, and hold "adequate, accurate and current" information on their beneficial owners.

Corporates (including companies formed and registered under the Companies Act 2014, or the previous Companies Acts) and other legal entities incorporated in Ireland (Relevant Entities) now must comply with this obligation, and each Relevant Entity must set up a beneficial ownership register (the Register).

When the remaining provisions of MLD4 are transposed into Irish law, the information on beneficial ownership must be accessible by competent authorities, Financial Intelligence Units (FIUs), entities carrying out customer due diligence (CDD) under MLD4 and others with a legitimate interest (most likely via access to the Central Register – see further below).

WHO IS A "BENEFICIAL OWNER"?

For the purposes of MLD4 and this new obligation, a beneficial owner is an individual who ultimately owns or controls the Relevant Entity.

If the Relevant Entity either cannot identify an individual who is a beneficial owner, or identifies an individual who may be a beneficial owner, but cannot be certain of this, the Relevant Entity must instead list its "senior managing officials" (i.e. its directors and CEO) in its Register as being its beneficial owners. It must also keep a record of the steps that it took to identify its beneficial owners.

WHY IS "BENEFICIAL OWNERSHIP" A KEY FOCUS AREA?

At EU level, access to accurate information regarding beneficial ownership is seen as critical to the effective deterrence of criminal activities that could be shielded by corporate structures. The 'beneficial ownership' provisions of MLD4 are aimed at ensuring that the individuals at the top of complex ownership structures can be readily identified for CDD purposes.

WHY HAS ARTICLE 30(1) BEEN TRANSPOSED EARLY?

  • Central Register

When MLD4 is transposed into Irish law (this is expected to happen in June 2017), Ireland must ensure that information on the beneficial owners of Relevant Entities is held in a centralised register (the Central Register). It is not yet clear what form the Central Register will take. The information on the Central Register must be capable of being accessed in a "timely and unrestricted" manner by competent authorities and FIUs, without alerting the Relevant Entity, and those carrying out CDD under MLD4 must also be able to access the Central Register in a timely manner.

  • Populating the Central Register

To ensure that the Central Register can be populated with information on the ultimate beneficial ownership of Relevant Entities from June 2017, Relevant Entities are being required to start collating that information now.

How that information will be passed by Relevant Entities to the operator(s) of the Central Register remains to be seen, and it has not yet been confirmed who will operate the Central Register. The set-up and operation of centralised registers, together with the preparation of related guidelines, can be a lengthy process (as has been the case with the Central Credit Register – see our Briefings Credit Reporting Update Vol 1/2016 and Credit Reporting Update Vol 2/2016).

WHAT RELEVANT ENTITIES ARE OUT OF SCOPE?

Relevant Entities that are:

  • listed on a regulated market and subject to disclosure requirements that are consistent with EU law (i.e. the Transparency Directive); or
  • already subject to equivalent international standards in respect of the transparency of information on beneficial ownership,

are not within the scope of this development.

This development also does not affect express trusts governed by Irish law. A separate provision (Article 31) of MLD4 deals with the beneficial ownership of trusts, and has not yet been transposed into Irish law.

HOW IS BENEFICIAL OWNERSHIP/ CONTROL ESTABLISHED?

In establishing whether an individual is a beneficial owner of a Relevant Entity, MLD4 contemplates ownership or control existing as a result of an individual holding (whether directly or indirectly) a sufficient percentage of shares, voting rights or other ownership interests, or other forms of control, in a Relevant Entity.

As mentioned above, if the Relevant Entity either cannot identify an individual who is a beneficial owner, or identifies an individual who may be a beneficial owner, but cannot be certain of this, the Relevant Entity must instead list its "senior managing officials" (i.e. its directors and CEO) in its Register as being its beneficial owners, notwithstanding that they may have no ownership interests (legal or beneficial) in the Relevant Entity.

  • Indicators of direct ownership

If an individual holds 25% plus one share in a Relevant Entity, or another form of ownership interest exceeding 25% in a Relevant Entity (perhaps by way of controlling voting rights in a Relevant Entity that does not have a shareholding structure, such as a company limited by guarantee), that will indicate direct ownership and that individual will be a beneficial owner.

  • Indicators of indirect ownership

If a company or companies controlled by an individual together hold more than 25% of the shares, or other ownership interest exceeding 25%, in a Relevant Entity, that will be indicative of indirect ownership (i.e. indirect interests can be aggregated) and that individual will be a beneficial owner.

While Member States have discretion to decide that a lower percentage than 25% should be used as the threshold, Ireland has not done so.

To view the full article please click here.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.