On 26 June 2015, the Fourth Anti-Money Laundering Directive ("AML IV") came into force and must be implemented into EU Member States' national law by 26 June 2017.
AML IV requires each Member State to establish and maintain central registers - such as a commercial register, companies register or public register - which contain certain information about beneficial owners of corporate and other legal entities and certain trusts, although different rules will apply to trusts.
This measure was brought about due to calls for better access to beneficial ownership information to prevent the circumventing of regulatory restrictions by conducting transactions through a corporate vehicle.
Under AML IV a "Beneficial Owner" is defined as any natural person(s) who ultimately owns or controls the customer, ie a corporate/ legal entity, and/or the natural person(s) on whose behalf a transaction or activity is being conducted. In the case of corporate entities this definition of a Beneficial Owner is specified as a natural person who ultimately holds a shareholding, controlling interest or ownership interest of at least 25% plus one share in a corporate entity.
Beneficial Ownership Registers
The beneficial ownership register in respect of corporate/legal entities will be accessible to the following:
- competent authorities and European Union financial intelligence units, without any restriction;
- obliged entities, ie financial institutions conducting their customer due diligence; and
- any person or organisation who can demonstrate a "legitimate interest" in gaining access to the information. These persons or organisations will have access, at a minimum, to certain specified information on the beneficial owner, including name, month and year of birth, nationality and the nature and extent of the beneficial interest held.
Member States are given the discretion to allow access to the beneficial ownership register beyond the categories listed above, for instance to the public without restriction.
In Ireland, the Department of Finance and the Department of Justice and Equality are currently carrying out a consultation process on the transposition of AML IV into Irish law. The consultation, among other issues, has asked whether the information available in the beneficial ownership register should be open to the public. Nineteen submissions were made in response, however this issue has not yet been finalised.
For trusts, a separate arrangement will apply. This beneficial ownership register will apply to trusts that generate "tax consequences". However, the meaning of the term "tax consequences" has not been defined in AML IV.
The information provided in this trust register should include the identity of:
- the settlor;
- protector (if any);
- beneficiaries or class beneficiaries; and
- any other natural person exercising effective control over the trust.
The introduction of the beneficial ownership registers will have far reaching consequences for the privacy of the beneficial owners of any entities based in the EU.
EU entities will be required to ensure their current information on beneficial owners is adequate, accurate and up-to-date. One of the issues from an Irish perspective is what data protection and sensitivity will be applied when disclosing beneficial ownership information on a public register when AML IV is transposed into Irish law.
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.