The 4th Anti Money Laundering Directive (EU 2015/849) (the ‘Directive’) (replacing the 3rd Anti Money Laundering Directive (2005/60/EC)) being transposed into Irish law will no doubt cause privacy concerns for individuals who are the beneficial owner, but not registered as the legal holder, of shares in Irish companies.
In the first instance Article 30(1) of the Directive introduced the obligation on companies to maintain an internal ‘Beneficial Ownership Register’ which shall, as the Directive provides “hold adequate, accurate and current information on … beneficial ownership, including details of beneficial interests held.”
In the case of corporate entities beneficial ownership is defined as any natural person who ultimately holds a shareholding/controlling interest or ownership interest in excess of 25%.
Such a register must contain, at a minimum, the beneficial owner’s name, month and year of birth, nationality, and nature and extent of ownership. Clearly this will remove the benefit of anonymity and privacy that the beneficial owner has enjoyed to date.
Article 30(3) of the Directive however goes further than simply requiring the maintenance by companies of an internal register and obliges each EU member state to create a central register of beneficial interests accessible by:
Competent authorities and European financial intelligence units, without any restriction
Obliged entities (i.e. financial institutions) conducting their customer due diligence
Any person or organisation who can demonstrate a “legitimate” interest in gaining access to the information
Exemptions may be provided in cases where access would expose the beneficial owner to the risk of fraud, kidnapping, blackmail, violence or intimidation, or where the beneficial owner is a minor or otherwise incapable. But these exceptions are to be granted on a case by case basis and in ‘exceptional circumstances’.
Article 30(1) has been transposed into Irish law in advance of Article 30(3) to allow the CRO to compile the central register of beneficial ownership. From June 2017 (allowing existing companies up to September 2017 to comply) there will be an obligation on companies to return the information of the beneficial owners of their shares to the Companies Registration Office.
Given the impending loss of anonymity and the exposure of potentially sensitive ownership information, the effect of the transposition of Article 30(3), will no doubt have unwelcome consequences for individuals who may have good reason to seek to maintain privacy around their involvement or ownership of shares in a company and indeed may consider the loss of privacy to have adverse consequences on the very profitability of their interests as beneficial owners.