The Council of Ministers on 16 December 2020 has decided to implement the provisions of the Prevention and Suppression of Money Laundering and Terrorist Financing Law 13(I)/2018 (the "AML Law") in relation to the establishment of a central UBO Register.
In this respect, the Council of Ministers has decided the following: -
- To appoint the Registrar of Companies and Official Receiver (the "Registrar of Companies") as the competent authority responsible for the establishment and maintenance of the UBO Register of companies and other legal entities; and
- To authorise the Registrar of Companies to proceed with the collection of information in relation to the beneficial owners of the companies and o
In accordance with the provisions of the AML Law, a "eneficial owner" means any natural person who ultimately owns and/or controls the relevant entity and includes at least:
1. Cyprus corporate entities
Τhe natural person who ultimately owns or controls a corporate entity through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interest of 25 plus one share in that corporate entity or via control by other means.
- the settlor;
- the trustee;
- the protector, if any;
- the beneficiary, or where the individual benefiting from the legal arrangement, the class of persons in whose main interest the legal arrangement or entity is set up or operates;
- any other natural person exercising ultimate control over the trust by means of direct or indirect ownership or by other means.
Due to the different characteristics of trusts and similar legal arrangements, Cyprus will have to determine the level of transparency in conjunction with the data protection rules of the individuals in relation the beneficial ownership information.
However, rules that apply to trusts and similar legal arrangements regarding the operation and access to information relating to their beneficial ownership should be comparable to the corresponding rules that apply to corporate and other legal entities. In this respect, further regulations will be issued in relation to the access of the beneficial information of trusts to persons able to demonstration of legitimate interest.
3. Legal Entities
Legal entities such as foundations, and legal arrangements similar to trusts, the natural person holding equivalent or similar positions to the person referred to the trust section above.
Cyprus companies and other legal entities can submit the required information in relation to their beneficial owners from 22 February 2021. The Registrar of Companies has granted a period of six (6) months, whereby the companies will have to submit to the temporary system that has been developed the required beneficial owner information.
4. Who will have access?
For the time being, only competent authorities of the Republic, such as the Customs and Excise Department, the Inland Revenue authority and the Police, will have access to the temporary system, following the submission of the relevant request to the Registrar of Companies. The UBO Register, once developed, will be accessible by the competent authorities stated above as well as obliged entities in the context of conducting customer due diligence and any natural or legal person who can demonstrate legitimate interest within the context of the AML Law.
5. UBO Register
The UBO register will be finalised by the end of the second semester of 2021. The deadline is inconclusive though, due to the pandemic.
The Registrar of Companies has announced that further regulations will be issued governing the submission of the beneficial ownership information. The UBO Register will become accessible as per the provisions of the EU Directive (EU 2018/843) (the "5th AML Directive"). It is noted that the deadline for the transposition of the 5th AML Directive was on 10 January 2020.
With regards to what will constitute a trust liable to be only declared in the trust registry, the matter remains unclear. Theoretically speaking, the declarations of trust that are routinely used in corporate entities, constitute an express trust within the meaning of the regulation and thus theoretically, the beneficial owner of such declaration of trust should not be declared with the Registrar of Companies for corporate entities. It remains to be seen whether additional requirements will be set by the Cyprus authorities with regards to express trusts, such as for example the payment of stamp duty.
In general, the UBO Register should be proportional and also a fine balancing act between privacy and transparency. In this respect, interpretation as well as implementation of the AML regulation, by the authorities remains unclear. Having in mind though, recent socio-political circumstances, it is likely that there will be a broader interpretation of the Directive having as an effect, broader disclosure. Broader disclosure may or may not have a real effect with regards to transparency, as the greater the data to be disclosed, the more difficult would be to interpret such data. Taking into account other recent attempts at transparency, it may be fair to say that information to be disclosed may become soon obsolete and unreliable.
We are not in a position to responsibly suggest a specific method of managing the said directive or suggest specific actions, as there are no guidelines. Generally speaking, it seems that 3rd country structures, will have a greater onus of transparency compared to EU or local structures. Other than that, we expect that even following the publication of the guidelines, there will be long period of amendments, conflicting interpretations and even court cases that would seek to ascertain applicability. In this respect, it is our suggestion that clients should revisit their corporate structures in general and proceed to re-evaluation/ rationalisation of the structure and the mechanisms used (such as trusts, corporate shareholders etc.)
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.