Independent Trust and Corporate Services Provider
European Union Anti-Money Laundering Regulations: Beneficial Ownership of Corporate Entities

European Union Anti-Money Laundering Regulations: Beneficial Ownership of Corporate Entities

Summary

On 15th November 2016, the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations (SI 560 of 2016) (the “Regulations”) came into effect, requiring corporate and other legal entities incorporated in the State, (a “Relevant Entity”) to obtain and hold adequate, accurate and current information in respect of its beneficial owners and to put in place their own beneficial ownership register. The purpose of the Regulations is to give effect to the European Union Fourth Anti-Money Laundering Directive (the “Fourth Directive”).

All companies, (including companies limited by guarantee) and other legal entities incorporated in Ireland (“Relevant Entities”) must now comply with the Regulations. The failure by a Relevant Entity to comply with any of the foregoing obligations is a criminal offence.

Background

On 15th November 2016, the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations (SI 560 of 2016) (the “Regulations”) came into effect, requiring corporate and other legal entities incorporated in the State, (a “Relevant Entity”) to obtain and hold adequate, accurate and current information in respect of its beneficial owners and to put in place their own beneficial ownership register. The purpose of the Regulations is to give effect to the European Union Fourth Anti-Money Laundering Directive (the “Fourth Directive”).

What is the impact on Irish Companies

All companies, (including companies limited by guarantee) and other legal entities incorporated in Ireland (“Relevant Entities”) must now comply with the Regulations.

All “Relevant Entities” are now obliged to complete the following steps:

  1. Take all reasonable steps to obtain and hold adequate, accurate and current information in respect of its beneficial owners. This is to include their names, dates of birth, nationalities and residential addresses and a statement of the nature and extent of each beneficial owner’s interest;
  2. Enter that information onto a new beneficial ownership register (the “Register”), along with the date the details of a natural person were first entered and the date on which the natural person ceases to be a beneficial owner;
  3. To give notice, requesting the information set out in the Regulations, to any natural person whom the relevant entity has reasonable cause to believe to be its beneficial owner;
  4. To give notice to the natural person entered in the Register where it knows or has reasonable cause to believe a change in ownership has occurred seeking confirmation of this and the date of any change.
  5. Exhaust all possible means to identify the natural persons who are the beneficial owner; Note: If no natural person is identified or there is any doubt that any natural person is a beneficial owner, then the company must enter the name(s) of its senior managing officers in the Register. The relevant senior management, (i.e director and CEO) will be a natural person(s) who has relevant knowledge of the entity’s money laundering risk exposure policies and sufficient seniority to take decisions in relation to them;
  6. To keep a record of the action taken to identify the beneficial ownership of the company;

The failure by a Relevant Entity to comply with any of the foregoing obligations is a criminal offence.

What Relevant Entities are out of scope?

These Regulations do not apply to a company or other body corporate that is:

a. Listed on a regulated market that is subject to disclosure requirements consistent with the law of the European Union; or

b. Subject to equivalent international standards which ensure adequate transparency of ownership information. European Union Anti-Money Laundering Regulations: Beneficial Ownership of Corporate Entities

Who is a Beneficial Owner?

An individual can be a beneficial owner of an entity if they directly, or indirectly through other companies, hold >25% of the shares in that Relevant Entity, or otherwise directly, or indirectly through other companies, control >25% of that Relevant Entity.

In the event where the beneficial owner may not be identified or there is a doubt about an individual who has been identified, then the prescribed information about one or more persons holding senior management positions and in the entity may be entered into the Register.

Member states do have discretion to decide that a lower percentage than 25% should be used as a threshold, but Ireland has not done so.

Why is “beneficial ownership” a key area?

The beneficial ownership’ provisions of the Fourth Directive are aimed at ensuring that the individuals at the top of the complex ownership structures can be readily identified for Customer Due Diligence (“CDD”) purposes.

Are obligations imposed on individuals?

A person who is a beneficial owner is under a duty to notify the Relevant Entity that they are a beneficial owner if:

I. the Relevant Entity’s Register does not contain the relevant details regarding that person; or

II. the person has not received a notice from the Relevant Entity requesting this information.

A beneficial owner’s duty to notify the Relevant Entity arises where these circumstances have continued for at least one month. This individual then has one month to provide the Relevant Entity with the necessary information so that it can alter its Register to reflect the change.

What are the consequences of non compliance?

Where a Relevant Entity or a beneficial owner or any other individual who has received a notice requesting information fails to comply with their obligations under these Regulations, they may be liable to a Class A fine (i.e. a fine not exceeding €5000).

Who may access this Register?

The Regulations make no provision for the public to be able to access the Register, but following the transposition of the Fourth Directive into Irish Law on or before 26 June 2017, Ireland must ensure that information on the beneficial owners of Relevant Entities is collated onto a Central Register and be made accessible by:

I. competent authorities;

II. entities required to carry out CDD; and

III. others with a legitimate interest in enforcing money laundering legislation.

Currently, EU member states have discretion on the extent of accessibility of the central register.

If you would like any additional information, please contact Máiréad Lyons, the Head of Legal and Compliance of Cafico International, on +353 1 905 8579 or at