Client due diligence measures are becoming more rigid, and the Ultimate Beneficial Owner register rollout is in full swing. It's more important than ever for multinationals to properly identify and screen all parties involved in their operations.
Today's international business market is constantly changing and so are the compliance needs of companies. Terrorism, identity fraud and money laundering are hot button issues that make compliance and Know Your Client (KYC) controls essential when dealing with everyone from partners to investors and suppliers.
The European Union's 5th Anti-Money Laundering (AML) Directive and Ultimate Beneficial Owner (UBO) register implementation were topics of great interest at this year's Ethics and Compliance Eastern Europe conference in Opatija, Croatia.
TMF Croatia spoke about these laws, and the need for companies to collect transparent data on individuals right to the top of their ownership structure.
The changes brought in by the 5th AML Directive require companies to take a stricter approach to due diligence when setting up in a new jurisdiction – from incorporating a legal entity to opening a bank account. When doing the latter for example, an entity must properly identify all beneficial owners before a bank account can be opened.
Of particular concern for compliance officers attending this year's conference was meeting Croatia's UBO register requirements due to the risk of large fines. The register will be available to the public from January 2020 and during the current data collection phase, all legal entities must collate the required information (structure charts, ownership details including identity documents) and submit it to the Croatian Financial Agency (FINA).
Supporting a giant
One client we have worked with extensively on KYC and UBO in the past year is Agrokor, now operating as Fortenova Grupa JSC following an internationally recognised financial restructuring. The largest private company in the Balkans, Agrokor's collapse would have had a huge impact on Balkan economies.
The result of Agrokor's restructure was shares in the form of new instruments (convertible bonds and depositary receipts) for the major creditors. However before receiving these new instruments, each creditor had to pass a comprehensive KYC screening which our corporate secretarial team performed over a period of six months, along with a detailed company structure analysis and final risk classification.
Creditor names and all related parties (board members, shareholders, controlling persons, ultimate beneficial owners) were checked against:
- criminal records
- open investigations
- sanction lists
- politically exposed persons (PEPs)
- other potential controversies.
The Agrokor screening was no small feat. It involved approximately 600 creditors worldwide with many different legal forms from limited liability and joint stock companies to limited partnerships, banks, funds, trusts, foundations, leasing companies and all kinds of state authorities.
Agrokor's need for KYC screenings and UBO registration is just one case of a multinational needing to comply with increasing transparency regulations. Companies that want to set up in new jurisdictions must be aware of the laws that require them to thoroughly check their partners and suppliers.
Talk to us
TMF Group's corporate secretarial teams in more than 83 jurisdictions can assist with more than simply entity incorporation. We can:
- register your ultimate beneficial owners in accordance with local UBO registry requirements
- screen, monitor and conduct deep checks of customers, suppliers, investors and/or business partners
- perform a semi-annual/annual review of client documentation
- report corporate changes in the company structure
- carry out enhanced customer due diligence at the request of a bank or other local institution
We can also change your authorised representative, seat or company address quickly and where required, in the local language.
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.