On 15 November 2016, the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016 (the "Regulations") came into force, requiring corporate and other legal entities incorporated in the State to obtain and hold adequate, accurate and current information in respect of its beneficial owners and put in place their own beneficial ownership register (the "Register").
The Regulations transpose Article 30(1) of the EU's Fourth Anti-Money Laundering Directive ("4AMLD"). 4AMLD is due to be transposed into Irish law on 26 June 2017. Among other obligations, 4AMLD requires that information on the beneficial owners of certain entities is held in a centralised register (the "Central Register"). The Regulations require Irish entities to gather and keep information in preparation for the transposition of 4AMLD.
What are the obligations of a Relevant Entity under the Regulations?
Every Relevant Entity must:
- take reasonable steps to obtain and hold adequate, accurate and current information in respect of its beneficial owners (that is, their names, dates of birth, nationalities and residential addresses) and a statement of the nature and extent of each beneficial owner's interest;
- enter that information into the Register, along with the date upon which the details of a natural person were first entered and the date on which each natural person ceases to be a beneficial owner;
- exhaust all possible means to identify the natural persons who are their beneficial owners;
- if no beneficial owner can be identified, or if there is any doubt about a natural person who has been identified as a beneficial owner, then provided that there are no grounds for suspicion for the lack of identification, enter into the Register the prescribed information about one or more natural persons holding senior management (eg director, CEO or similar) positions in the Relevant Entity. The relevant senior management will be persons who have relevant knowledge of the entity's money laundering risk exposure policies and sufficient seniority to take decisions in relation to them;
- keep records of the actions it has taken to identify its beneficial ownership;
- give notice, requesting information set out in the Regulations, to natural persons whom it has reasonable grounds to believe are beneficial owners or to persons whom it has reasonable cause to believe know who its beneficial owner or owners are and, in each of the above cases, the addressee shall have one month from the date of the notice to comply with the request. The Regulations contain a safeguard which will allow non-disclosure of information where a claim to legal professional privilege could be maintained in legal proceedings;
- give notice to a natural person if it believes that an individual has ceased to be a beneficial owner or a beneficial owner's particulars have changed; and
- keep the information on its Register of beneficial owners up to date.
Who is a 'beneficial owner'?
For the purposes of the Regulations, a beneficial owner has the meaning given to it in Article 3(6)(a) of 4AMLD. In brief, a beneficial owner of a Relevant Entity is a natural person who ultimately owns or controls the share capital or the voting rights or has control by any other means. 4AMLD states that a holding (direct or indirect) of 25% plus one vote will be indicative of ownership and control – a significantly lower threshold than that contained in commonly understood definitions of control. This concept includes indirect ownership by a person through a number of separate corporate entities.
Do the beneficial owners have any obligations under the Regulations?
Natural persons who are beneficial owners of a Relevant Entity are, in certain circumstances, required to notify that entity of their interest and any change to their details.
What are the consequences of breaching the Regulations?
Where a Relevant Entity or a beneficial owner or any other person (whether a natural person or not) who has received a notice requesting information fails to comply with their obligations under the Regulations, they may be liable to a Class A fine (that is, a fine not exceeding €5,000).
Who will be permitted to access the Register?
The Regulations make no provision for the general public to be able to access the Register, but following the transposition of 4AMLD into Irish law it is likely that the information in the Register will be collated in a Central Register and be made accessible by:
(a) competent authorities;
(b) entities required to carry out customer due diligence; and
(c) others with a legitimate interest in enforcing money laundering legislation.
While the Department of Justice and Equality sought views as to whether access to the Central Register should be open to the public, as this was part of the consultation process carried out earlier this year, the result of this consultation has not yet been published.
Every Relevant Entity must establish (or, failing that, take exhaustive steps to establish) and record the details of their ultimate beneficial owners or, in certain circumstances, their senior managing officials in the Register. This is an obligation already in force.
Given the high standards of obligations imposed by the Regulations, entities should be aware of their requirements when dealing with proposed investors and when drafting and negotiating investment agreements.
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.