The Fourth Anti-Money Laundering Directive (the “Directive”) was adopted by the European Parliament on 20 May 2015. The Directive aims to prevent the use of the financial system for the purposes of money laundering and terrorist financing. One of the features of the Directive is the introduction of beneficial ownership registers. Beneficial Ownership
Currently in Ireland companies are only required to record and make public details of legal ownership. Under the Directive, EU Member States must ensure that corporate and legal entities obtain and hold “adequate, accurate and current” information on the beneficial ownership of shares. Beneficial owners are defined as all natural persons who ultimately own or control a corporate or legal entity through direct or indirect ownership of more than: 25% of shares; 25% voting rights; or a 25% ownership interest. Companies must provide information to the competent authority (likely to be the Companies Registration Office in Ireland) to compile a centralised beneficial ownership register (the “Register”) which will then be made accessible to competent authorities. Access to the Register must be in accordance with data protection rules and may be subject to an online registration process and a fee.
Upcoming Amendment to the Directive
The European Commission have recently proposed an amendment to the Directive. If adopted the following provisions will apply:
- Member States will be required to make the details of their Registers publically available.
- There will be direct interconnection of the Registers of Member States to facilitate cooperation between them.
- Beneficial owners, who have 10% ownership in certain companies, that present a risk of being used for money laundering and tax evasion, will be included in the Register.
How Beneficial is a Beneficial Ownership Register?
The Law Society of Ireland considers that the introduction of a Register runs contrary to Irish company law which enables a company to treat the registered shareholder as the owner of the shares for all purposes. Additionally it may place onerous administrative and financial burdens on companies without providing any effective benefit in reality, as anyone who wishes to hide beneficial ownership information will simply not inform the company.
Implementation in Ireland
The Directive must be implemented into domestic law by EU Member States by 26 June 2017. Following recent terrorist attacks in Europe, Member States have committed to implementing the Directive by year-end 2016. It remains unclear what the extent of public access to the Register in Ireland will be. The Department of Finance and the Department of Justice and Equality concluded a Consultation Process canvassing views on the level of public access to the Register in March of this year, with the outcome expected in due course.
To ensure compliance in time for the full implementation and to avoid administrative sanctions, corporate and legal entities should consider the key changes under the Directive as soon as possible.