Guidance Note: Understanding Ownership And Control From A Sanctions Implementation Perspective

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On the 31st of May 2024, the Sanctions Monitoring Board ("SMB") issued a Guidance Note, outlining the obligations in determining ownership and control from a sanctions implementation perspective.
Malta Compliance
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On the 31st of May 2024, the Sanctions Monitoring Board ("SMB") issued a Guidance Note, outlining the obligations in determining ownership and control from a sanctions implementation perspective.

The Guidance Note emphasizes that, under Article 3(5) of the National Interest (Enabling Powers) Act (Chapter 365 of the Laws of Malta), strict compliance with sanctions is mandatory for all individuals and entities in Malta, including both subject persons and non-subject persons.

The SMB highlights in their guidance, that the legal obligation not to transfer funds or make funds or economic resources available, directly or indirectly, to a designated person, also extends to entities owned or controlled by such individuals.

Determination of Ownership and Control

The SMB identifies the first step towards ensuring compliance as determining ownership, defined as possessing 50% or more of the proprietary rights or a majority interest in a legal person, group or entity. Additionally, the SMB stresses the need to consider joint arrangements and aggregated ownership by designated individuals during ownership determinations.

If ownership is excluded or inconclusive, the SMB emphasizes the significance of determining control. Control may involve the ability to influence the entity's decisions significantly, which can manifest in various forms, such as, inter alia, the right to appoint a majority of the administrative body, control of voting rights, or the power to exercise a dominant influence.

Furthermore, the SMB advises careful evaluation of minority interests to determine control, especially in cases where designated individuals hold significant but not majority stakes.

Both subject and non-subject persons are advised to thoroughly document their assessments of ownership and control concerning their client companies.

Trusts and Foundations

The Guidance also extends to trusts and foundations. In instances where beneficial owner(s) are directly sanctioned individuals and/or entities, the assets of the trust and/or foundation must be frozen and notified to the SMB.

Best Practices

The SMB also highlighted key best practices for economic operators in Malta emphasizing the necessity of robust due diligence procedures, including ongoing monitoring, conducting comprehensive risk assessments, and maintaining detailed documentation of ownership and control assessments, to prevent any sanctions violations.

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.

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