On the 20th of May 2015, the EU's Fourth Anti-Money Laundering Directive (the 4AMLD), was adopted. While continuing to pursue the general objectives set out in its predecessors, that of combatting the illicit transfer of money and terrorist financing, the 4AMLD also introduced some new provisions. Most notably the 4AMLD introduced the requirement for each Member State to set up a central register holding information on beneficial owners of corporate entities within their territory. In order to grant Member States time to properly incorporate these registers into their legal systems, the 4AMLD was accompanied by an extensive implementation deadline of 26th of June 2017.
Oversight of national implementation
National implementation of all EU law is overseen by the EU Commission through a two-step process; the Commission checks not only whether the relevant and required national laws exists, but also that these laws implement EU legislation correctly and as intended.2 This process is currently underway with regards to the 4AMLD.
As part of its monitoring function, the Commission is expected to produce a report outlining the extent and success of national implementation for each piece of EU legislation. The frequency of these reports depends on the legislation at hand. Originally, the Commission was required to submit a report on the implementation of the 4AMLD by June 2019, however, the amendments soon to be introduced push this date back to late 2020.
Despite the lack of an official Commission report, it is possible to already discern a general overview regarding the level of implementation of the 4AMLD, in regards to beneficial ownership registers.
As will be seen, this overview paints a rather dire picture, with over half of Member States failing to meet the given deadline, and many still lacking a central beneficial ownership register to this day.3
Furthermore, it also becomes clear that, even where registers have been established, their form and operation differ between Member States. This is primarily due to the level of harmonization required by the 4AMLD.
Form & content
The 4AMLD takes the form of a minimum harmonization directive. This means that it sets out a minimum standard, which national legislation must meet, while at the same time allowing Member States the option to exceed this standard. Ultimately, this entails that national provisions regulating beneficial ownership registers may be in compliance with the 4AMLD, while simultaneously varying across Member States.
In particular, the 4AMLD sets out the certain minimum standards regarding the definition of a beneficial owner, the form and method of registration, the information which is to be filed with the registers, the legal entities which may be exempt from registration requirements, and the persons who should be granted access to the registers.
Definition of beneficial owner:
According to Article 3 (6) of the 4AMLD, a beneficial owner is:
"a natural person who ultimately owns or controls a legal entity through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interest in that entity, including through bearer shareholdings, or through control via other means."4
More specifically, direct or indirect shareholdings or ownership interests exceeding 25% are deemed as indicative of ultimate control.5
As to the precise form and method of registration, the 4AMLD leaves a wide margin of discretion to the Member States, simply stating that beneficial ownership information should be held in a 'central register' such as a commercial register or companies register.6
The 4AMLD requires that the information held in the central registers is "adequate, accurate and current" but gives no more specific guidance, leaving each Member State to fulfil this requirement as they see fit.7
As per Article 3 (6), companies listed on a regular market, which are subject to disclosure requirements consistent with Union law, are exempted from the beneficial ownership registration requirements set forth in the 4AMLD. However, in line with the nature of minimum harmonization, Member States may choose to disregard this exemption.
The 4AMLD requires that the beneficial ownership registers are made accessible to, at least, three groups of persons:8
- Competent authorities and Financial Intelligence Units (unrestricted access)
- Obliged entities (within the framework of customer due diligence)9
- Persons who can demonstrate a legitimate interest (restricted access)10
Member States are entitled to make such access subject to registration and a corresponding fee.
When contrasting and comparing the beneficial ownership registration schemes that each Member State has, or intends to have, it becomes evident that each has decided to stay true to the beneficial ownership definition given in the 4AMLD, with none choosing to lower the indicative percentage of interest. Therefore, this particular aspect of implementation will not be further discussed. However, the remaining aspects regarding the implementation of beneficial ownership registers differ considerably and warrant examination.
1. Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC.
2. The commission is divided up into departments (officially known as directorates general or DGs), with each department being responsible for a particular area of EU policy. Generally, the area of money laundering is dealt with by the Department of Justice and Consumers, which is now the case for the 4AMLD (despite the department for Market and Services being responsible for the initial Commission proposal).
3. This has resulted in the Commission initiating 20 infringement proceedings against various Member States for their lack of, or insufficient, implementation measures in respect of the 4AMLD. Infringement decisions taken by the Commission are publically available and can be found via: http://ec.europa.eu/atwork/applying-eu-law/infringements-proceedings/infringement_decisions/index.cfm
4. Note that: if a beneficial owner cannot be identified, the Directive requires that the senior management of the relevant entity "keep[s] records of the actions taken in order to identify the beneficial ownership".
5. However, "this applies without prejudice to the right of Member States to decide that a lower percentage may be an indication of ownership or control."
6. Article 30 (3) of the 4AMLD.
7. However, if Article 30 (1) of the 4AMLD is read in conjunction with Article 30 (5) is becomes clear that the information must , at least, include "the name, the month and year of birth, the nationality and the country of residence of the beneficial owner as well as the nature and extent of the beneficial interest held".
8. Article 30 (5) of the 4AMLD.
9. A list of obliged entities is given in Article 2 of the 4AMLD and includes, amongst others, credit institutions, tax advisors, and independent legal professionals.
10. Here 'interest' refers to that in connection with the prevention of money laundering and terrorist financing. Note that, although access to this third category of persons may be restricted, it must nonetheless include access to at least the name, the month and year of birth, the nationality and the country of residence of the beneficial owner as well as the nature and extent of the beneficial interest held.
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.