May 2018 – The 4th AML Directive (EU Directive 2015/849) has recently been transposed to the Slovak Act on Money Laundering (the "AML Act"). Most of the changes brought by the amended AML Act introduce new obligations for "obliged persons" – banks and other financial institutions, lawyers, auditors, tax advisors and others – in order to specify details of their customer due diligence measures and notification duties toward the relevant Slovak authorities.
In this document, however, we outline several new obligations brought by the amended AML Act that apply to all Slovak companies regarding the identification of their ultimate beneficial owners ("UBOs").
Who is a UBO?
A UBO is a natural person ultimately owning or controlling, directly or indirectly, a company or other legal entity or on whose behalf such an entity carries out its business activities. In most cases, a UBO will be natural person who:
(i) holds (directly or indirectly) at least 25% of the voting rights or a 25% share in the registered capital of the legal entity;
(ii) has the right to appoint or recall a statutory body, executive body, supervisory body or other controlling body of the legal entity or any of its members;
(iii) actually controls the legal entity other than described above;
(iv) has at least a 25% share of economic benefits from the legal entity's business (dividends and similar payments).
UBOs may also include members of a company's Supervisory Board, if the Supervisory Board appoints and/or recalls the Board of Directors, or any other persons having such power under articles of association or under shareholder agreements in case of joint ventures.
If there are no natural persons who meet the above criteria, members of senior management of the company are considered to be UBOs.
Companies must maintain internal evidence of UBOs
Companies must keep internal evidence with information about their UBOs with effect from 15 March 2018 (in hard copy or in electronic form). This internal evidence must include:
(i) name and surname;
(ii) birth number or (if birth number not assigned) the date of birth;
(iii) address of permanent residence or address of other relevant residence;
(v) type and number of personal ID document;
(vi) reference to the definition of a UBO under AML Act, according to which the person enjoys such status; and
(vii) supporting documentation proving that natural person indeed meets criteria of a UBO.
Information listed under points (i) to (vii) above shall be continuously updated and maintained during the period that a person is a UBO and five years after the termination of such status.
Companies must provide the above information to certain public authorities upon request, e.g., to courts, prosecutors, police, tax authorities and the financial police, and also to "obliged persons" (banks, lawyers, auditors, tax advisors, etc.) performing due diligence duties under the AML Act.
Commercial Register will require identity of UBOs
The AML Act establishes a new Register of UBOs (the "Register"). Please note that this is different from the register of Public Sector Partners, which we described in more detail in this article. The Register will be administered country-wide by the Slovak Statistical Authority; however, information to the Register must be filed by companies via their local Commercial Register.
Information about UBOs listed in the Register will not be publicly available. Registered information will be directly available to certain state authorities, courts, financial police, tax authorities and "obliged persons" during the performance of due diligence duties under the AML Act.
Companies that have issued securities admitted for trading on a regulated market that is subject to disclosure requirements consistent with EU law or subject to equivalent international law requirements will not be obliged to register their UBOs with the Commercial Register.
All new companies established after 1 November 2018 must register information about their UBOs upon their incorporation, i.e., registration with the Commercial Register.
Existing companies, i.e., those registered with the Commercial Register before 1 November 2018, must file information about their UBOs with the Commercial Register by 31 December 2019.
The following fines may be imposed for breaches of the AML Act:
- up to EUR 200,000 if the company does not keep internal evidence of UBOs
- up to EUR 3,310 imposed on directors, if the company does not register its UBOs with the Commercial Register.
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.